Step 1: Decide on the note to buy
See prior blog post (link below) titled“The 10 main factors to consider when buying performing notes” - https://www.incomestacker.com/post/10-main-factors-to-consider-when-buying-performing-notes
Step 2: Review and sign note sale agreement (NSA).
The NSA is also known as:
LSA (Loan Sale Agreement)
LPA (Loan Purchase Agreement)
SA (Sale Agreement)
MNPA (Mortgage Note Purchase Agreement)
APA (Asset Purchase Agreement)
A NSA is different that a PSA used when buying a house. The NSA contains information pertinent for a note purchase.
What information does the NSA contain?
Parties to the transaction
Price of note and closing and cut-off dates
How collateral docs transfer and when
Servicing requirement information
Seller representations and warrants
Buyers representations and warrants
Governing laws
Exhibit showing asset location, UPB, sales price, etc
Wiring instructions
Step 3: Wire funds
Funding usually occurs within 1-3 days from the date of signing the NSA.
The wiring instructions contains:
Bank name and address
Account name
Wire routing number
Account number
Reference information to be included on wire (loan#, address)
Step 4: Receive and review collateral documents.
What should the collateral package contain?
Original note
Original deed of trust or mortgage
Original chain of assignments
Notarized assignment from seller to your entity
Original note endorsements or allonges
Original title policy
Step 5: Setup servicing.
Overview of servicing:
Standard loan servicing (performing notes)
Costs $20-40/month (no escrow)
Costs $35-50/month (with escrow)
Specialty loan servicing (non performing)
Cost $40-$100/month (loss mitigation, BK, FC)
Servicer sends out RESPA letters - Hello and Good Bye Letters required by law.
Benefits of servicing:
Internet access to view your account(s)
Servicer applies payments
Servicer apply late fees
Servicer computes the interest and principal
Servicer prepares year end statements
Servicer processes payments via check, ACH, online, etc.
Servicer does escrow management
Servicer does tax reporting like year end 1098s
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