What are the Steps involved when I purchase a non-performing note from a big bank?
Whenever a got wind of a non-performing note or a bulk REO list made it across my desk with a property that was worth pursuing - I immediately found a way to communicate with the Asset Manager. We inquired about what protocol works best with their lending guidelines. The result was that they prefer “one-offs”, which means purchasing ONLY individual notes, not pools.
Outlined procedures included submitting a spreadsheet (or tape as they say it) with loan number, property address, borrower name, and offer price for their review. Something else that they require before discussing each specific case is a NDA (nondisclosure agreement). All of the above is quite status quo.
Once they accept the offer, they will send us a contract for the note purchase, along with an updated title policy, electronic and hard copy of the actual note, payment history, notes about the file, etc. At that point, we review what they have submitted to , sign off and schedule a wire transfer of funds. According to this institution, this whole process takes up to 3 weeks. This bank notifies the homeowner in writing that the note has been sold, and that future payments are to be made to the new note holder. We also send our own “Dear John” letter explaining where the new payments are to be made and when.
The banking institution handles the recording details and the specific assignment of collateral. And, we are now the “bank”!