Can I Buy My Own Mortgage?

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This is the no Closer show where you get the latest developments in distressed note investing and learn the secrets of how you can control millions of dollars worth of property for panties on the dollar. Get educated and entertained by someone who has closed thousands of deals and lives to support you in achieving the same. Now here's your host CEO of We Close Nodes, Scott Carson.

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Good afternoon and good evening everybody. Welcome this episode of the Note Closure Show. As always, Scott Carson. Excited to be here with you today and today's episode is in response to a question I got from a tick tock video that I posted on my TikTok account and I thought it was valuable. And I look back, I've never actually answered this question on a podcast episode. I've talked about it multiple times. But going back through the near, you know, 800 plus episodes or replays that we've done and videos, I've never actually made this its own unique video. And it needs to be because it's one of the most frequently asked questions I get. And I think I've answered it so many times and think one thing about it that I completely forget about. So this is for all you guys and gals out there who are new to note investing and listening about it. Because one of the things that people really ask and the first question that I ask when people hear about note investing and buying notes and buying mortgage debt and residential or commercial properties is the one question I get first. Can I buy my own note? Can I buy my own mortgage on my house? Or can I buy my parents mortgage or my relative's mortgage on their house? And the answer to that is probably going to be 99% of the time. A disappointingly no, you can't but that 1%. So you're saying there's a chance. There are some exceptions to the rule. So first and foremost it all depends. Number one, it all depends on who the lender is, who is the existing bank that's on your mortgage. Now if you've got bank of America, Chase, Citi, Wells Fargo, One West, IndyMac, Deutsche bank, some of these big, big institutions like that, the overwhelming answer 100 of the time is no, you can't buy your mortgage on your house. Now if you're on time or your family member or you're asking because of a friend for a friend, hint, hint, wink, wink, it's actually you. If you're still paying on time, no bank is going to sell you that mortgage. For the most part. They're definitely not going to sell it at a discount. There's no reason to. No matter what you owe or what the value of the property is, if you're way upside down or whatever, the bank has no incentive to sell you that note. There's no reason to. Especially these huge banks, they don't want to sell a one off note. They're trading in mortgage pools of 50 to 100 million. For them to go find that for that one little note, is it going to make sense at all for them? And they're not going to do it. Now if you're non performing, these big institutions are still not going to sell you a one off note because they're all wrapped up in mortgage backed securities for the most part. For them to go in there and try to pull one apart isn't going to make sense at all. Okay, now that's the 99%. We're just talking residential. We'll get to commercial in a second. If you have a lender who is not one of those big banks, you might have a possibility. If you aren't paying on time, you're behind by more than 90 days. Your family member or your friend that you're asking on behalf is behind by more than 90 days. You might have an opportunity to buy that note at a discount. If you do a couple things. First and foremost, I would reach out to me, pick up the phone, drop me an email, scottclosenotes.com and say hey Scott, do you know if such and such bank sells their debt? And I'll tell you yes or no if we've been successful or if they don't, I'll tell you what I know. I'm the first one. The second thing you need to know is if you call them up and say I want to buy my note, they're going to shut you down, they're going to put you the loan servicing. You need to know who to talk to in the right departments. If you just call customer service or loss mitigation, you're going to run into issues. So it's, it makes sense to get a third party like myself to talk to you about it and even make a few phone calls on your behalf. Okay, now here's the thing where it's got to be different. Now you could call but you'd want to make sure the last name, your last name does not match up with the borrower's last name, that you're not an authorized user on that account either. Okay, that's, that's first thing because they're still not going to sell to a family member for the most part. It just doesn't make sense in most cases. So you want a third party coming, third party buyer like a debt buyer like yours truly, the note guy to call and see about potentially buying if it's non performing. Now if it's not perform, if it's performing, there's not going to be a chance in hell. I'm going to just tell you that right now. Banks don't want to sell their performing notes off at all. That's the thing. That they're making their money on. That's the whole basis for the bank. Okay? Now if you have, if you're a lender, if you get noticed that your notes been sold and not sold to a bank, but maybe it's been sold to an LLC or a different company and you search and find the name of your borrower or find out the borrower is like an investment company, like you know, an LLC, like a note investor you see on LinkedIn, or you do a search by the LLC to track them down at the Secretary of State or stuff like that, and you're non performing, you may have a chance to be able to buy that asset at a discount. Okay. Or get somebody to buy that with your funds. Now here's the thing, I've had people call me and say, hey Scott, I'm behind, I have a smaller bank or it's an investment company that holds my note, can you buy the note for me? And then here's the thing, say no, because if you're currently behind, I'm out to make money. No offense, this is going to sound really bad, but I'm just going to tell you the case here, all right? If you are behind on your mortgage and you can't pay your existing mortgage responsibilities, yeah, I'll look at it. All right. If you got it astronomically high mortgage rate, you know, above 9 or 10 or 12, maybe you've got stuff laying around from back in 2000 if you don't have any equity or stuff like that. I'm still going to evaluate the borrower to see if they're going to be a good borrower because I'm not going to, if I'm buying something, if I'm going to pull money from investors or my own funds or our investment portfolio, my investors are going to expect to make a return. All right? We don't run a charity and I know some people are looking for charity on this because they need help because they're facing foreclosure. It's not going to work that way. I had a guy reach out to me just last week who's got a, a distressed borrower who's behind on some things, their hoa, their taxes, and they just need eight grand to do it, but they can pay back the eight grand over five years. And I'm like, listen, what kind of return is that going to be? Oh, it's going to be like 7%. Like nobody wants to tie up that. Even that small amount of money for five years for a small interest rate just doesn't make sense. Plus they're in a junior lien position behind a first lien that's non performing. Well, it'll be re performing like yeah, but there's no incentive for that investor if the borrower stops paying to the second lien holder, the person that bailed them out. There's, there's not really any foot for the second lien holder to foreclose on. They've got to take over and it's just a big, big mess. So don't call me asking, hey, can you buy my note and then I'll pay you my monthly mortgage payment at 7 or 8% or can you modify. I'm not going to modify, no offense. I'm going to say I'm going to buy this at a discount and I'm going to treat you just like one of our borrowers. Can you reinstate? And you probably can't reinstate. That's why you're in a pickle to begin with. I know this sounds horrible, but I'm. Some people just need to have a come to Jesus meeting that you shouldn't, probably shouldn't have a mortgage, shouldn't have a house right now. Look, I get. Bad things happen to people. We all have gone through financial hiccups. Now if you've got a tremendous amount of equity and you do have the opportunity to pay something, maybe we add on to the face amount of your note or we put the, the property into a land trust that I control and you stay in the house. There's some things to look at or you've got a ton of equity, you need some time to sell the house off and we take a, a portion equity might be willing to do that. But most people, they don't want to sell their house otherwise they just sold it already. Especially they had equity. All right, but they don't want to lose on that mortgage in a lot of cases. And I'm not going to just throw up 100, 200, 300, half a million dollars so that your family member, you can just live in a house for free and not follow up. I know it sounds bad, but you know me, I don't blow smoke up anybody's ass around here. But if you got to give me an example, let's say you got a family member though and you've got the money, you are fine. Hey, I've got some money. I want to buy that mortgage. By all means, that's totally fine. We negotiate on people's behalfs before we've been able to do it. A couple times on some, you know, when it's a smaller bank LLC called on a behalf or knew who the seller was or knew who the note holder was, was able to negotiate something and make it happen. I'm still going to take a fee. You know, it may be one to three points of whatever the funding amount is or whatever the the ultimate settlement price on that mortgages. And if you're willing to cash that and carry one of your family members then you're the bank. I don't care what happens after the fact. But you got to make sure you don't have the same name. That's the biggest thing now talking commercial assets. Let's talk about commercials. We've actually been successful in buying a few commercial notes from some of our investors in the past because the bank was ready to move stuff in. And you know you got to realize that a mostly a bank loan most of the time is going to be in an LLC or an entity of some sort. So we had an investor out of South Carolina whose loan that they had. It wasn't a loan that they were. They're also personally responsible. It's a loan that they took over subject to the existing financing. It was on a self storage and mixed use property that had a meeting space and self storage units attached to it. Out of actually was Palmetto Bank, S.C. and lo and behold I reach out to the bank, my student, it's his loan that he's taking over. There's they're upside down a little bit. There's. He's having a hard time paying this because of cash flow being down and the balance of the note was kind of high and the interest rate was kind of high. So he was barely getting by. So I called Paul Mado bank and say hey, do you have any commercial notes you're looking to sell? And sure enough they sent me a list and guess what? Lo and behold, there's Ed's note on that spreadsheet. And I have to chuckle, I have to laugh because it's in the name of a different LLC that Ed's not the wasn't the member for. So the bank just sent it over to sell. Well, we were able to negotiate. Ed had some investors locally who were willing to come to the table and pay. I think it was 4 or 5 million bucks if I remember correct. I think it was four and a half somewhere around there as many things to buy. That seven million dollar loan now it was seven million was more than the property's worth. I think was worth more. More about 6 bank was willing to sell it at a discount to get off their books. Ed had already agreed with his investors at a decent ROI that they'd be happy with. Plus the reduced amount, reduced interest rate to would allow him to cash flow his property quite a bit. So he was able to go in with that extra leniency in the cash flow basis to get it back up, make some improvements and actually rode that value up for a couple years and later cashed out as investors and they were a piece of pie. So that's something to think about. Commercial notes, if it's non performing. This one was in the process of non performing that we were able to negotiate that. If it's performing, like I said, probably not going to happen. I get people sometimes and you've seen this happen. Actually we've seen this happen sometimes now. And it's funny how history repeats itself. When I first got started years ago, I was buying commercial notes, right. I got stuff in from Capital One and others and it was a lot of small unit apartment complexes and they, they were over encumbered or they, you know, their, their loan matured or they didn't have the value there anymore. We were, or they were in defaulted so we were able to buy those at a significant discount. That's not saying I can buy stuff at a significant discount now, but I get the question. I want to buy apartment notes. Well, if you buy that apartment note you don't necessarily own the property now. It doesn't not saying you could not negotiate something with existing lien borrowers to walk away where if you did buy the note, you can do a deed and Luke, cash or keys? It all depends what's going on with that situation. But you have seen and we'll probably see more of it, you have apartment owners, commercial real estate owners just signing the property back to the bank and walking away. Or I'll give you a great example. There was a timeshare in Florida guy. There was a guy. There's actually a documentary on this and I had to chuckle the other night. Westgate Properties I believe is a big timeshare company and one of the guys that owns Westgate had a big event and big condos for timeshares in Las Vegas and all throughout Florida. And of course when everything hit in 2008, 9 and 10, he was negotiating with the bank, trying to get stuff. Well, he had his, two of his, you know, really beautiful landmark properties that he didn't want to see to sign back to the bank. And he was able basically at the Very end of the documentary they talked about it that he was able to get a group of investors to go in and that group of investors bought the debt from the bank at a discount and help him keep the properties and operate the property. So it's a possibility, it's more rampant in the commercial side being a buyer on mortgage if you're behind, you know, not on the residential side unless it's a very, very, a smaller bank, smaller institution or even a LLC or note investor like myself that may own the note. So something to keep in mind, it doesn't mean they're going to take a discount if they're, if you're, you know, not as big a discount as you may, they might. It all varies on the situation. But if it's a big bank, like I said, bank of America, Chase City, don't bother calling. When I was a note investor, when I first started as a note investor, we got aligned up with a, a group out of Florida who's doing a lot of short sales and they would tell their students, hey, when you're targeting short sales, one of the things they would say target your clients, say hey, we're going to try to buy the note first and if we can't buy the note, we'll do a short sale. Well, that didn't work. If somebody's trying to buy the note, they think you're going to keep them in their house, you know, and they were like, oh, you know, they were telling their, you know, students in class, oh yeah, call Chase. We can do, we can put a bulk portfolio together with Chase or. And I'm like, no, no, you can't do that. You can't say, come bring me 50 loans and say I want to buy these 50 loans from Chase or Bank of Americ because they're all securitized differently and Chase doesn't want to sell a one off note. So we had to literally like say you can't do that because you're just sending these bigger institution names. It's got to be a smaller or minimum sized bank and we need to know, we need to know the loan number, the address, borrower's name and how far they are behind to be able to work that. And I've got to work it like a third party. Hey, I'm calling to see do you have any notes for sale and hope that they send me that list now. I could always ask do you have anything in this area? You know, this is, you know, I don't like to ask zip code but have anything in like specific cities to.

See if they'd be willing to sell it.

And if it pops up, sometimes it can, sometimes it won't. But I would love it. Who wouldn't love to be able to buy their debt at a big discount and keep themselves in the house? So it's just if you've got cash and able to negotiate it. But like I said, it's got to be a smaller institution, smaller bank. So hopefully that answers your question. Feel free to always book a call with me if you have questions more.

About this or you have a scenario.

You'D like for me to run by. It's talkwithscottcarson.com if you're asking somebody to come in and buy your note and reduce it and then you just stay in the property scot free without making payments, it's just not going to work that way. I'm sorry ladies and gentlemen. I don't run. I don't own a charity. I donate to charities. I don't run one and my investors expect to get paid and I expect to get paid as well too through our hard work. But we're if you've got the cash to buy something and you know somebody is in trouble or you're asking on behalf of a friend, hint hint, wink wink, reach out. I'm always glad to talk with you, give you some options and show you where to go. So hopefully that answer questions can you buy your own note? Most of the time, no. A little the time maybe depend on the situation. But go out there, take some action buddy. Hope you enjoyed this episode and we'll see you at the top. Bye Sam.

Sa.