I am not up on notes and was hoping someone could lend some advice. Why does one buy a note...how does one go about finding a note...what are the advantages and disadvantages?
People buy mortgages to get the money that is generated as the money that was loaned is repayed.
People also buy mortgages that are being payed back for the opportunity to forclose on these mortgages and perhaps get the property that the lien is attached to.
One of the primary reasons investors buy paper (notes) is that their yield on their investment can be quite good say 24% or more. Another reason is they are in most cases easier to manage than the property itself . When was the last time you called your lender because the hot water heater went out. Get the idea . No matter what happens to the property the lender generally has the upper hand and control. Plus as the previous post mentioned if the mortgagor dosen't pay as agreed ,then the note holder has the right to foreclose. If they paid less than the balalnce of the note (discounted ) and had to foreclose, they would still be in a good position and may still walk away from the foreclosure with and even better yield. Of course that also depends on what position the note was in as well as the type of foreclosure that takes place. [ Edited by bpteos on Date 12/05/2003 ]
the note is the promise to pay.
People buy mortgages to get the money that is generated as the money that was loaned is repayed.
People also buy mortgages that are being payed back for the opportunity to forclose on these mortgages and perhaps get the property that the lien is attached to.
One of the primary reasons investors buy paper (notes) is that their yield on their investment can be quite good say 24% or more. Another reason is they are in most cases easier to manage than the property itself . When was the last time you called your lender because the hot water heater went out. Get the idea . No matter what happens to the property the lender generally has the upper hand and control. Plus as the previous post mentioned if the mortgagor dosen't pay as agreed ,then the note holder has the right to foreclose. If they paid less than the balalnce of the note (discounted ) and had to foreclose, they would still be in a good position and may still walk away from the foreclosure with and even better yield. Of course that also depends on what position the note was in as well as the type of foreclosure that takes place. [ Edited by bpteos on Date 12/05/2003 ]