When we buy a note, usually our main goal is the cash flow we will receive over the length of the term of the note. But what about when we change our mind and decide to sell the note before the term concludes? Keeping your papers in order and explicitly defining the note’s terms is a necessity. As they say, it’s all in the details. Here are a few ways you can protect yourself.
Have the original note’s documents that you purchased. In this day and age, electronic documents are convenient and a fast way to do business. If you ever run into any trouble later down the line, you will be glad you have the original note documents and not just the electronic copies. Certain intuitions had that problem in the past crisis and we should all learn from their mistakes. One of the biggest problems the banks had in the last crisis was when homeowners challenged them to produce the original documents. So to avoid that occurring to you, just keep the originals in a safe place.
Title insurance can be your best friend. A lender’s title policy can be a great way to protect your note investment. The policy will specify your loan priority over any future encumbrances. That is why it is called insurance.
Make your payments… Most would consider paying the taxes and insurance premiums common sense. But sometimes that doesn’t occur. If possible you should set up a impound account to have these paid by your servicer each month as the monthly deposits on your note are paid by the home owner. If not, this can be where the problem arises. If there is no impound account, you the owner must make sure you are on top of these payments and not just absorbed in the monthly deposits that are being wired to your account. You are the bank, so these matters are ultimately your responsibility.
These details are often overlooked by the everyday person because institutional banks take care of them behind the scenes. Remember, if you are looking to sell your note down the line, take care of these items and your ride will be smooth.
If you have a question about a note, contact us here