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How Does A Private Mortgage Holder Manage This Valuable Asset?

Billions of dollars of mortgage notes, trust deeds and land contracts today are held by individuals. And more notes are being created every day due to the crisis in both mortgage lending and the housing market. Unfortunately, many note holders are unfamiliar with how best to manage this asset. Here's how to protect your valuable asset.

In today's tough housing market, property owners are having to act as the lender in order to sell their home or investment property, creating an asset they must manage and protect. However, many mortgage note holders aren’t schooled in this process, leaving them exposed to a potentially significant financial loss.

So what should you as a private mortgage note holder be doing in order to protect their valuable asset? Here are some key tasks that will help minimize your risk.

1. Check the mortgagor's property taxes annually to be sure they are paid current. If the borrower gets behind in property taxes, you could end up in the middle of a property tax lien sale. You would most likely want to intervene by paying the property taxes in order to avoid this.
2. Monitor the mortgagor’s homeowner's insurance to be sure it is paid current. If the mortgagor has not paid their homeowner's insurance and it has lapsed, you should take out a policy and have the mortgagor pay for its cost monthly.
3. Annually review the mortgagor’s homeowner's insurance coverage to be sure it is sufficient to cover the mortgage and that you as the note holder are the Mortgagee on the policy. This is particularly important in areas of growing house values.
4. Inspect the home from the street a couple of times a year, looking for serious signs of disrepair. Some note holders have discovered that the mortgagor is not even living there and is renting the home out to a friend or family member.
5. When the mortgagor exhibits a pattern of late payments, check to see if the mortgagor(s) are still employed (Check with your attorney on whether you can contact the mortgagor's employer. You may just have to ask the mortgagor.). If they are self-employed, stop by or drive their business to be sure they are still in business or are advertising a going out of business sign. This is particularly important if these rough economic times with hundreds of thousands of people loosing their job each month as well as thousands of businesses closing their doors or filing for bankruptcy.
6. Check the county tax records once or twice a year for new liens on the property. This could be in the way of a second mortgage, which may not be allowed per the mortgage note agreement, or a state or federal tax lien.
7. When the mortgagor defaults on the mortgage, contact a qualified real estate attorney immediately. Don't try to work something out between you and the mortgagor without the advice of a qualified attorney.
8. Be on the lookout for a pattern of late payments even if the mortgagor is not in default. If you see such a pattern, immediately research other potential problems as covered above and take appropriate action.
9. Be sure you are keeping detailed records of payments on the note, including date of payment, check number, returned check information, amortization schedule, etc. You will need this in case of a dispute or a default as well as documentation should you ever want to sell the note.
10. Did you purchase a title policy at closing? If not, you may want to purchase one now to cover your asset.
11. Lastly if you are about to create a mortgage note, consult with a mortgage note buyer so as to be sure the terms allow you to get top dollar should you ever need to sell a note. You also want to be sure and check credit on the borrower so you'll know their credit before you call to sell a private mortgage.

The above helpful hints are not given as legal advice. Please consult an attorney for all legal matters.

About the Author

Ron Stone has a note buying business. His company buys mortgage notes, including unseasoned and non-performing notes. Learn more about note buying and selling at his websites, Sell My Note and Mortgage Buyer

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You can actually buy leads. I am a note broker myself and I bought a file of 50 leads and got serveral deal done from them. I bought them from a company that sells them for 40 cents an address and it had a bunch of info on the file for each lead. Go to http://www.platfin.com and ask them about it. I don't think they really advertise this service but they are cool and they accpet paypal which means you can use a credit card to pay for them which was a big help for me.