Why do most people sell their notes?

The reasons people sell their notes are as varied as the people themselves:

• They find a better investment
• They need cash for their children’s college
• They encounter unforeseen medical bills
• They no longer wish to deal with the hassles of servicing their note themselves
• They need cash for a new car, motor home, boat, etc.
• They just want to take that dream vacation

Will the sale of my note affect the borrower in any way?

• The terms of the note are not affected when you sell your note. The only thing that changes is where (and to whom) the borrowers send their payments.

What factors determine the price you can offer for my note?

• Several factors come into play: the interest rate on the note, the down payment at time of sale, the loan-to-value (LTV), the property type, property condition, the borrower’s credit and pay history all impact the value of your note.

Benefits of Selling a Mortgage

• You will convert a long-term investment into an immediate source of cash.
  When you have cash and are liquid, you can handle emergency situations, take advantage of quick investment opportunities and are in a better position to negotiate the purchase of anything you are buying.
• You will receive a substantial amount of money right now – enough to accomplish some major goals. You won’t have to worry about collecting monthly payments or servicing your mortgage; we handle all of that.
• You won’t have to worry about whether the property taxes or insurance premiums are being paid each year; we handle all of that.
• You won’t have to worry about whether or not the Borrower will continue to make his or her payments.
  You can pay off your home, car or other debts that may be charging you a higher rate of interest than your mortgage is earning.
• You won’t have to worry about the payments you receive each month slipping away on life’s little expenses. You will be able to retain this money to be used on something important in the future.
  You will have an opportunity to increase the return you earn from this asset by reinvesting the sale proceeds in better performing financial products.
• You will have an opportunity to decrease your investment risk by reinvesting the sale proceeds across multiple financial products.

Arms Length Transaction.

• This form may be required by the Lender for execution by the Seller as one of the terms of an Approval to Short Sale.

Authorization Letter

• A document that is signed by the seller that gives permission to, a third party vendor, realtor, and title agent to speak on their behalf.

Bankruptcy

• A Federal Court proceeding in which a debtor seeks relief to work out a payment schedule or erase debts.

Brokers Price Opinion (BPO).

• The Short Sale Lender hires a Real Estate Agent to view the property and provide the Lender with information on other sales in the area.

Closing/Escrow

• The coordination and conclusion of vendors and services of a real estate transaction including the execution of the deed, the signing of notes and mortgages for new financing, recording documents in the public records and the disbursements of funds necessary to the sale. See Settlement or Settlement Fees.

Closing Cost

• Any fees incurred as part of a real estate transaction including but not limited to Realtor fees, title fees, HOA fees, outstanding real estate taxes. These expenses are disclosed on the HUD-1 Settlement Statement for each transaction.
  Closing Statement ¿ An accounting of all expenses incurred in the transaction and a reconciliation of all funds received and dispersed by the Title Agent on the transaction.

Comparables (Comp)

• Properties that have recently been sold that are comparable to the property being negotiated for short sale in terms of si-ze, location and amenities, Used by the Lender and Investor to determine today¿s fair market value and their release price on the Approval Letter.

Contingency

• A condition or requirement that must be met before a contract is legally binding. An Approval from a Short Sale Lender may include contingencies.

Coordination

• Short Sale Coordination refers to the part of the process that involves getting all the required documentation from the sellers, realtors, and title agents and uploading that information to a Short Sale lender¿s database and having it recognized by the Lender.

Deed

• The legal document conveying title to a property and recorded in public records.

Deed-in-Lieu

• A deed given by a borrower to the lender to satisfy a debt and avoid foreclosure.

Deficiency

• The difference in what a lender gets paid for a loan compared to what is owed on the loan.

Delinquency

• Failure to make mortgage payment on time.

Equity Deficient

• A property is Equity Deficient when, if sold, sales proceeds would not fully pay off existing mortgage debt.

Fannie Mae (Federal National Mortgage Association FNMA)

• A company that acts as a source to lenders of financing for home mortgages that operates pursuant to a federal charter. In a Short Sale Fannie Mae may be the Investor.

Federal Housing Administration.

• An agency of the U.S. Department of Housing and Urban Development (HUD). FHA mainly insures residential mortgage loans made by private lenders. In a Short Sale FHA may be an Investor.

FHA Home Loan

• A mortgage home loan that is insured by the Federal Housing Administration (FHA). Also knows as a government insured loan.

Financial Documentation

• The documents required by a Lender before a Short Sale will be acknowledged in their database. Which includes; proof of income, banks statements, tax returns, a breakdown of items paid and income flow mapped out on a worksheet, and a letter describing the hardship of the household.

First Mortgage

• A loan that is the primary lien against a property.

Foreclosure

• The legal process by which a borrower¿s interest in mortgaged property is taken away because of a default on the loan. This includes a forced sale of the property at a public auction with the proceed of the sale being applied to the mortgage debt.

Freddie Mac (Federal Home Loan Mortgage Corporation)

• A federal agency within the Department of Housing and Urban Development (HUD) which in sure residential mortgage loans made by private lenders. Freddie Mac can be the “Investor” on a short sale.

Government National Mortgage Association (GNMA or Ginnie Mae)

• A government owned corporation within the U.S. Department of Housing and Urban Development (HUD) created by Congress to assume responsibility forthe special assistance loan programs formerly administered by Fannie Mae.

Gross Monthly Income

• Pre-tax income including overtime that is regular or has a reasonable expectation of being guaranteed. Salaries are generally the principal source but other income may qualify if it is significant and stable.

Hardship

• An event (death, divorce, loss of job) that affects above rower’s ability to make a mortgage payment according to the terms originally agreed to.

Hardship Letter

• An explanation to the Lender that states your specific hardship(s), and asks them to approve a short sale for your property.

Home Equity Line of Credit (HELOC)

• A mortgage loan that allows the borrower to obtain money based on the amount of equity in the property. Often, a second mortgage on a property is recorded in the public records behind the first mortgage lien. Most Lender’s will require a deficiency if the 2nd mortgage on a Short Sale is a HELOC.

Homeowners Association

• An association that manages the common areas of a planned unit development, also known as (PUD), or condominium project.

HUD-1 Settlement Statement

• An accounting of all expenses incurred in the transaction and a reconciliation of all funds received and dispersed by the Title Agent on residential transactions. Also see Closing Statement.

In Review

•  Refers to the time in a short sale when the Servicing Lender as sent all required documentation to the “Investor” and is waiting for are response in regards to a release price on the property.

Investor (on current mortgage loans)

• In a Short Sale, Investor most often refers to the government agency or private company that insured residential mortgages so Lenders would lend money for purchase of real estate. A release price must be obtained by servicing lender from an investor on most short sale transactions.

Lender

• In a Short Sale the term Lender most often is referring to the Short Sale Lender.

Lien

• A legal claim against a property that must be paid off when the property is sold. A lien is created in the public records by the mortgage when money is borrowed to buy a home and/or the property is used as collateral on additional loans.

Loss Mitigation

• Home mortgage lenders look to limit losses on delinquent mortgages by working out solutions with borrowers through their Loss Mitigation Departments.

Modification

• The act of the Lender changing any of the terms of the mortgage.

Monthly Debt

• A borrower’s monthly expenses including food, credit cards, car payments, food, insurance and other expenses. See Required Seller Documents.

Mortgage

• a legal documentation that a property is used as security for payment of a debt.

Mortgagee

• The lender.

Mortgagor

• The borrower.

Note

• A legal document that obligates a borrower to repay a mortgage loan at a stated interest rate during a specified period of time.

Notice of Default (NOD)

• An official notice filed and recorded by a designated trustee at the request of a lender indicating lender has commenced foreclosure action.

Notice of Default Purchase Agreement (NODPA)

• The NODPA is used by investors purchasing a seller’s home on which a Notice of Default has been filed.

Notice of Trustee Sale

• An official notice that is posted, mailed,published/advertised and recorded by trustee at the direction of lender indicating lender’s intention to sell the property at public auction. The notice includes a specific date, time and location.

Postponement

• Trustee Sales may be postponed by the first at the direction of the lien holder. Notice may be given in advance or at the time and location specified for the intended sale.

Preliminary net sheet

• An estimate of net proceeds from sale with expenses, including unpaid loan balances and fees, subtracted from the sales price.

Private Mortgage Insurance (PMI)

•  Borrowers buy this insurance to protect the lender from non-payment of the loan. If your loan has PMI, the Short Sale Servicing Lender will negotiate with the PMI company to release the PMI.

Pre-Qualified

• A borrower that has written evidence, that the lender of their choice, has analyzed their financial situation and preliminary determined the borrower’s ability to repay a loan. Written Pre-qualification for buyers of Short Sales seeking new financing is required by Short Sale Lenders.

Pre-Foreclosure Sale

• A procedure in which the Investor working with the Servicing Lender allows a borrower to avoid foreclosure by selling the property for less than the amount that is owed to the lender, another term for Short Sale.

Notice of Default Purchase Agreement

• NODPA) – The NODPA is used by investors purchasing a seller’s home on which a Notice of Default has been filed.

Preliminary HUD

• A common term used for HUD that is submitted to the Servicing Lender to help determine the Approval amount of a Short Sale. A Preliminary Hud in a Short Sale must include all expenses to be considered for an Approval amount.

Primary Residence

• The place someone lives most of the time.

Principal

• he amount borrowed or remaining unpaid balance on a mortgage. The part of the monthly payment that reduces the balance on the mortgage. The principal does not include payment for escrows such as taxes or insurance.

Promissory Note

• A written promise to repay a specified amount over a specified period of time. Often required of Sellers by a Lender when the 2nd mortgage is a HELOC in order to short sale instead of foreclose.

Public Auction

• A meeting in an announced public location to sell property to repay a mortgage that is in default.

Release Price

• The figure the Investor gives the Servicing Lender for the written Short Sale approval.

Recording

• The entry into the public records of the terms of a legal document affecting title to real property such as a Deed, a Mortgage, a Lien, a Satisfaction of Mortgage.

Second Mortgage

• A mortgage that has a lien position behind a first mortgage.

Servicing Lender

• A company commonly referred to as “the Lender” that collects principal and interest payments from borrowers and manages borrower’s tax and insurance escrow accounts if applicable. A ServicingLender is paid a fee to service mortgages that have been purchased by an Investor in the secondary mortgage market.

Settlement Statement

•  A common term for HUD-1.

Short Sale

• A procedure in which a lender and the investor allows a mortgagor to avoid foreclosure by selling the property for less than the amount that is owed to the lender.

Title

• A legal document evidencing a person’s ownership of a property.

Title Insurance

• Insurance that protects the Buyer and/or the Lender against loss arising from disputes over legal ownership of a property.

Title Search

•  A review of the public land title records to ensure that the seller is the legal owner of the property and to find out what liens,if any, need to be satisfied to transfer clear title.

Transfer Tax

• State and local tax payable when title to a property passes from one owner to another.

Truth In Lending

• A federal law that require lenders to fully disclose, in writing, the terms and conditions of the cost of the mortgage, including the Annual Percentage Rate (APR) and other charges associated with a new loan. FORECLOSURE VS. SHORT SALE Home owner Consequences Issue Foreclosure.

Primary Residence (effective May 21, 2008)

• A homeowner who loses a home to Foreclosure is ineligible for a Fannie Mae backed mortgage for a period of 5 years. A homeowner who successfully negotiates and closes a short sale will be eligible for a Fannie Mae backed mortgage after only 2 years. Future Fannie Mae Loan.

Non-Primary Residence (effective May 21, 2008)

• An Investor who allows a property to go to Foreclosure is ineligible for a Fannie Mae backed investment mortgage for a period of 7 years