|
|
|
|
|
FAQ: Note Brokerage |
How Much Is My Note Worth?
|
This depends on several factors:
|
||||||||||||||||||||||||||||||||||||||||||||||
|
__________________________________________________________________________ Increased
Value |
Decreased
Value |
Equity
position of 20% or more |
Limited
equity/Small down payments |
First
mortgage |
Second
mortgage. These are often worth only 50% of the current balance due to
the increased risk of total loss if there is a default on the first. |
1-10
year maturities, or longer term amortization with balloon |
Long
term fully amortizing obligations (no balloons) |
Good
borrower credit |
Bad
borrower credit |
Seasoned
note with satisfactory payment history |
Unseasoned
note or simultaneous closing |
Mortgage
payments current |
Mortgage
in default and/or in foreclosure |
Market
interest rate for risk involved |
Below
Market interest rate for risk involved |
Late
charge provision in note |
No
late charge provision on the note |
Due
on sale/right to approve Assumptor clause |
No
due on sale or Assumption/Approval right |
Financial
statement on borrower |
No
Financial statement on borrower |
First
mortgage or large second mortgage relative to first |
Large
amount of debt senior to subject debt (on junior liens only) |
Step
rates which increase interest rate over time (not usual) |
Fixed
rate note |
Timber
cutting clause on acreage properties |
No
timber cutting clause on acreage properties |
Flood
insurance required and maintained if property is in flood zone |
Property
in a flood zone without flood insurance |
Professional
note collection by third party |
Seller
collects own payments |
Cross
default clause in junior liens (default on first mortgage is grounds to
default the second, even if current) |
No
cross default clause in junior liens (default on first mortgage can mean
second is wiped out and holder of second has no right to default the
second, if it is current) |
Credit
report on borrower available and up to date |
No
credit report on borrower and no right to pull one |
Reasonable
sized mortgage compared to the property value |
Small
size note or contract |
Well
written and structured note and Deed Release provisions |
Badly
written note |
Title
insurance available and no exclusions |
No
title insurance |
|
Subordination
clause that could force the note into lower priority |
Mortgage
on single family home, owner occupied |
In
reducing order. Second home. Tenant occupied home, apartments, offices,
warehouse, industrial, vacant land (least desirable) |
| |
| Table provided courtesy of www.mortgage-investments.com |
