In this episode, we talk about the different methods you can use to evaluate performing mortgage notes.
You want to start with asset value. You want to know what the value of this asset is. Why? Because, ultimately this could come back to a foreclosure.
They say plan for the worst, hope for the best. If they have a great payment history you’re probably going to wind up with a performing asset that continues to pay.
The next thing to look at is the terms of the actual note. That's going to come back to things like, what's the interest rate, what's the principal balance, how long is it, what's the term of the loan, is it a 300 month loan and we are on month 240 or is it a 300 month loan and we're 36 months into it.
It comes down to the payment history. Examine the payment history to create a narrative for the note. Your goal for this part is to learn as much as you can about the borrower and their payment habits.
You want to look at whether the real estate note is really a performing loan. Are they paying before the first of the month? Are they paying three days early?
Dive further into any payment inconsistencies by looking for patterns, like past dues or missed payments and try relying on the servicing notes to explain why the borrower is making payments slowly.
If you see something that's kind of spotty, the payments are not always there, they're just kind of fluctuating all over the place, you should factor that risk into your bidding. That’s why it is so important to look at the payment history.
Following that, you should consider what type of security instrument it is. Is it a mortgage or deed of trust? Are you in a non-judicial state? Do you have to foreclose on the property?
Why is knowing the type of security instrument important? It’s important because the type of security instrument impacts the foreclosure process.
Learn more about evaluating performing notes in this must watch episode of the Paperstac Podcast!
Chapters: 00:00 Introduction to Evaluating Performing Notes 00:27 Understanding Asset Value in Performing Notes 01:52 Analyzing Payment History for Buying Performing Notes 03:04 Assessing Security Type in Evaluating Performing Notes 03:37 Performing Mortgage Note Evaluation with Asset Type
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