Nonperforming Note?

got a broker sending me listings for Notes for sale, why would someone want to invest in a nonperforming note?

UPB $292,496, nonperforming, MTG loan, 1 story comm’l bldg, 1.92 acre land

what is UPB, can someone translate this for me!? HAHA

UPB = Unpaid Principal Balance


THX Keith, so much to learn

If you could buy the note up at a great price, and foreclose on the place, you might wind up with a nice piece of property. That sounds like it might be an interesting opportunity, but it’d definitely worth consulting with a real estate lawyer in your state first

wow this is way out of my league, i dont know anything about this arena and i just started wholesaling houses!

UPB stands for “unpaid principal balance” or what the borrower currently owes on the loan.

Buying the paper (loan/note) has it’s advantages over buying the real estate, especially if its a non performing note. You become the bank. If it’s non-performing, it means its delinquent in payments. The underlying collateral securing the debt is the real estate, you “the bank” have several options now to monetize the note. If you’re smart you aquired the note at a substantial discount because its “non performing.” Here’s an example:

You buy a 1st trust deed note (non-performing) from a broker, or ideally direct from the bank. You will most likely pay .25 - .50 cents on the dollar for that note, compared to it’s face value (UPB) say its a apartment complex. The borrower took a loan out in 2005 for $3 Million, he owes $2 Million today (the UPB) He ran into financial trouble, property lost value during the downturn (say its only worth $1.7 Million now) and he stopped making payments. The bank wants to get the distressed debt off their books, they want to dispose of the note. Why? because they have Millions of dollars of bad notes, and it would be cheaper to trade them then foreclose and resell. You negotiate and buy it for $800,000.

Now, here are your options at this point.

You can go to the borrower and negotiate a discounted payoff (He owes you $2MM have him pay you off at $1.2 and you keep the difference $400k)

Restructure the loan or have him refinance you out with a conventional lender at market value.

Foreclose and take the property back, sell it for a substantial profit.

Keep the property and collect the rents.

Re-trade the note for a quick profit (flip it)


:shocked wow i think i really like notes… what about if you want to get a private investor involved?? i have a few and would like to look more into this and get into the action of this with smaller notes…