Value-Rite Appraisals Inc Blog

1. Verify the outstanding balance due on the note and the actual repayment terms of the note. I cannot stress enough that you MUST review the actual documents that were executed!
   
   

2. Verify with the seller of the note (the Assignor) the interest paid through date (or last paid date)
   
   

3. Verify the next payment due date.
   
   

4. Ascertain that the mortgage (or trust deed) is an insurable FIRST lien position loan (assuming you are buying a 1st lien). This is where a review of the existing mortgagee/lenders title insurance policy comes into play. Such a loan title insurance policy was probably issued when the loan was originated.
   
   You also want to establish the status of the property taxes, whether they are current or delinquent, and any impound escrow funds that might be held and be transferred to you for such payment as taxes and fire hazard insurance premiums.
   
   

5. Confirm the value of the collateral property that secures the note (that is today's fair market value). You can do your own evaluation, or have an Appraisal done, this can be a formal drive-by, exterior only appraisal, etc.
   
   

6. Get the actual mortgage (or trust deed) security instrument assigned over to you or your entity. The assignment, once executed and recorded, will accomplish this and transfer all rights, title, and interest in the instrument to you; the assignee.
   
   

7. Have the original promissory note instrument endorsed over to you or your entity (making sure the assignment of the security instrument and endorsement of the note match one another). The endorsement can take place right on the actual original promissory note instrument or via a separate note allonge (an attached endorsement).
   
   

8. Have physical possession of the original promissory note instrument given to you. This is the negotiable instrument you are purchasing and whose rights you will be able to enforce for non-payment of the debt.
   
   

9. You may want to obtain an estoppel affidavit from the Assignor. They will affirm for you the actual balance and terms of the note and might be useful in a later dispute with the debtor.
   
   

10. Obtain notification letters to both the note payor and fire hazard insurance agent notifying them of the transfer of the note account. (These are often referred to as so called "goodbye," "welcome," and change of loss payee letters).
    
    

It would be wise to further consult with your own attorney to make sure that what you are purchasing is what you bargained for. Once you own the actual debt instrument (the note) there are a number of options available for you to pursue in an attempt to collect or get the note instrument performing.