Have you ever thought about stepping into the world of mortgage note investing but felt unsure about how to approach banks? You’re not alone. Buying mortgage notes directly from banks is a strategy many investors are curious about, but it requires a thoughtful approach and a solid plan. Don’t worry—we’ll walk you through the process.
What Are Mortgage Notes, and Why Do Banks Sell Them?
Mortgage notes are legal agreements where borrowers promise to repay their home loans. Banks and lenders often sell these notes to free up capital, reduce risk, or clean up their balance sheets. As an investor, you can buy these notes—sometimes at a significant discount—and start receiving mortgage payments directly from the borrower.
Why Banks Are a Great Source for Notes
Access to Bulk Opportunities
Banks sometimes sell entire portfolios of notes, offering investors a chance to scale quickly.
Discounted Pricing
Banks often sell notes at a discount, especially if they’re non-performing or need to offload them.
Direct Relationships
Establishing a connection with bank representatives can lead to ongoing opportunities.
Diverse Investments
From performing to non-performing notes, banks offer a range of investment opportunities.
How to Approach Banks for Mortgage Notes
This is where strategy and relationship-building come into play.
Start Local
Smaller regional banks and credit unions are often more accessible and open to selling notes.
Find the Right Contact
Ask for the Special Assets, Loss Mitigation, or Secondary Marketing department.
Make a Strong First Impression
Prepare a professional pitch that explains who you are, your experience, and your goals.
Be Transparent
Clearly state your intentions and show that you’re serious about building a long-term relationship.
Stay Persistent
Banks may not sell to you right away, but persistence pays off.
What to Look Out for When Buying Mortgage Notes from Banks
While there are incredible opportunities, there are also risks to be aware of:
Property Value
Know the value. Verify the current value of the property backing the note.
Borrower History
Understand the borrower’s payment history and current financial situation.
Legal Issues
Mortgage laws differ from state to state—make sure you understand your responsibilities.
Exit Strategy
Have a clear plan for managing default ie: foreclosure, restructuring, or selling the note.
Steps to Start Buying Mortgage Notes from Banks
Get Educated
Dive into books, courses, and training programs about mortgage note investing.
Network
Attend real estate and note investing conferences to meet bankers and fellow investors.
Build Your Buyer Profile
Create a one-page document summarizing your experience, goals, and investment criteria.
Start Small
Begin with one or two notes to build confidence and experience.
Conduct Due Diligence
Research every aspect of the note and property before making an offer.
The Human Side of Note Investing
At the end of the day, mortgage note investing is about building relationships—both with banks and with your team of advisors. Banks are more likely to do business with investors they trust, and trust is built through clear communication, consistency, and professionalism.
Is This the Right Path for You?
Buying mortgage notes from banks can offer incredible financial rewards, but it’s not without its challenges. With the right mindset, strategy, and approach, you can build lasting partnerships with banks and grow a profitable note portfolio.
So, are you ready to pick up the phone, connect with a local bank, and start building your mortgage note empire?
