Buying notes from institutions

If I as an individual were to buy/assign a residential mortgage note from a bank, credit union, or other financial institution, and the interest rate on the note was higher than my state’s usury laws (9%), would I have to modify the note to bring the interest rate down to what is permitted in the state usury law, or would I be “grandfathered in” since this is an existing note?

Thanks in advance for your expertise.

Banks and lending institutions do not normally sell notes to private individuals.

There is too much culpability on their part that you will do something that can come back to cause them probllems.

Hi Bill,

If I buy the note and service the note what can come back to haunt the originator? How can the seller of the note be responsible for actions taken AFTER the sale?

Look at all the foreclosure mess that we are currently going througjh for examples of what can happen AFTER the note is sold.

I believe you are confusing ‘interest rate’ with ‘yield.’ The interest rate on the face of the note is where usury laws are enforced. If you negotiate purchasing a note at a discount, that does not change the interest rate on the face of the note, it only changes the yield on your investments…there are no usury laws regulating your yields…yields include interest rate and many other factors including your skill in negotiating.

Personally, I will rarely buy a mortgage on a home as I have found there are too many other folks negotiating for the same mortgage…bidding against other investors pushes the price up and the profit margins down. I prefer to create high yield debt instruments and then sell those, mostly to folks in their IRA and Pension Plans as there are some $7 Trillion available to fund the sale of these notes. Creating the instruments gives me an edge over my competition.

So, if you buy a mobile home for $3k and sell it for $600 down and $200/month for 5 years…do the math; you are getting a $2400 cash flow on a $2400 investment…100%…if you sell those payments for 18% discounted to a present value, you make a good profit (with no competition) and everyone wins…buyer gets private terms and a home for his family, I get a profit on my efforts, buyer of note gets 60 payments of $200 ($12k) for $7876.05.

There are endless deals to be done like this…with mobile homes, cars, business equipment, and much more. You are welcome to request my free 27 page e-book via email describing how to do this…you can also find online 2 great books on the topic; Invest in Debt by Jimmy Napier and Deals on Wheels by Lonnie Scruggs.

Hope this helps.


hey Rob
can I get a copy of your ebook? PM me and i will send you my email



There are a number of Dodd - Frank issues to contend with when you are buying / servicing notes from institutional portfolio's! 


What is the major difference between a yield or an interest rate?


Read my posting above and you will find the answer to your question regarding the difference between interest and yield.

Hope this helps.

Darn…what issues? Vaguely familiar with Dodd-Frank and the seller financing restrictions it caused but it didn’t click that it would affect notes too.

I can live without your sarcasm…perhaps when you gain knowledge, understanding, and wisdom from real experience, you might be a bit more respectful of postings from those of us who have successfully completed hundreds of transactions.