You’d Better Sweat the Small Stuff

You’d Better Sweat the Small Stuff

In Promissory Note Investing, there is a lot of small stuff.

Investing in non-performing promissory notes secured by real estate has a lot of moving parts. It can be a real jungle. I encounter snakes and tigers every day. There are many phases the note investment safaris through to get to the end goal. Even then, the end goal can vary, based on the portfolio manager’s model, the investing intent of the joint venture partner, plus the desires and capacity of the homeowner.

For this emailer, I want to talk technical. There are many technical items associated with the path of a promissory note, but one of the most common, and vital processes involves the recording of an Assignment of Mortgage. But first, let me back up just a bit ~~~~ I posted some photos on my company face book page a few days back that showed a couple of collateral files that I received. Essentially, when I buy a NPN, I am buying the paper in the collateral file. The essential documents in a collateral file, in no specific order, are:

• The original recorded Mortgage, or Deed of Trust, signed by the original borrower
• The original promissory note, signed by the original borrower
• The original title insurance policy issued by the title company when the loan originally closed
• Any and all endorsements or Allonges to the promissory note that shows the paper trail of previous owners of the note
• Any and all Recorded Assignments of Mortgage (AOM) that shows the paper trail of previous owners of the mortgage or Deed of Trust
• The unrecorded AOM assigning the mortgage from the selling hedge fund or bank to my company
• The original Modification Agreement signed by the original borrowers, if a modification had been previously executed
• Hopefully, any servicing notations from the previous loan servicer

Holding the collateral file is essentially your proof that you own that note, provided that all the previous documents were properly executed. The recorded AOM is the notification to the world of who owns the note/mortgage at that moment in time. The AOM is public record.

If you click on this link, it will take you to my Facebook business page and you can see my post on the receipt of some collateral files:

https://www.facebook.com/pg/TrinityHoldingsLLC/posts/?ref=page_internal

Almost always, one or two of the previous AOMs in the collateral file are not recorded. Sometimes, the hedge fund holds the loans so briefly with an intent to resell, the time to have an AOM recorded would delay them reselling the note. So, in that case, in order to properly show the preceding transfer or ownership, I have to record the AOMs, in the proper order. Most of that is fairly easy. I use a service called Simplifile to process my documents needing to be recorded. I am able to upload the original AOMs that are in the collateral file into the Simplifile portal, and they electronically route the document to the respective county recorder’s office for recording. I am then notified that the AOM has been recorded and a copy is available to download for my collateral file.

Well, almost easy. Here’s the crux of the message today. Below is an image from a recent AOM. I’ve redacted some loan level information that isn’t pertinent to this scenario. Hopefully this image is large enough on your side to see. If you notice the area inside the red parenthesis, you’ll see a remark about an “Attorney-in-Fact”. What this means is that this particular mortgage was part of a much larger pool transfer of loans, and these loans are all subject to terms written in a Power of Attorney document. The problem with this AOM is that it doesn’t reference what and when this POA was recorded with this respective county. We would be unaware of what POA is affecting this specific AOM.

If I was to attempt to record this AOM as it was originally provided from the hedge fund, the county would have rejected this document. On this file, this was the middle of three AOMs that needed to be recorded. Without properly referencing the POA, this AOM, and every AOM after this one, potentially was not recordable. (Is that a new word?) However, I know what to do. (That’s why you hire me.)

Many counties across the country provide access online to their public records. I was able to put on my super sleuth cap, search deep into the county records, and locate the exact POA recorded back in January, 2016, added the reference on this document, and upload to Simplifile for recording. Greene County, Ohio accepted the document and it was electronically recorded and back to me the next day.

Don’t try this at home. Leave this to a trained professional.

This is just one example of a myriad of processes that are involved with investing in promissory notes. Fortunately, I have 35 full years in the mortgage industry. Every day remains a learning opportunity. In fact, I just sat through 3 full days of virtual note training. I do this at least once a quarter. This is like Continuing Education. If you are a Realtor, you have required CE classes you must take to retain your license to sell real estate. If you are a loan officer, you must take CE classes to retain you NMLS number to originate loans. Many professionals have structured CE classes they must periodically attend. There are no real formalized CE requirements for a promissory note investor; I do it voluntarily. I want to be the best at this craft. Many of you have entrusted a lot of money with me, many from your IRA account. I’ve got to be continually learning to bring you the best and safest returns on your investments, so I continually engage in ongoing education. Not only for me, but also for you.

Thanks again for reading. This was kinda a long one, with some teaching involved. If you have any questions on what you read or would like to hear more about what I do and how you can become involved, please email or call me. I appreciate your trust and support.

Cody Cox

Portfolio Manager

Cody@TrinityNationalHoldings.com

866–285–2729