Safekeeping the Original Mortgage Note

Can you easily locate the original mortgage note?

This important legal document should be kept in a safe place, and here is why!

The promissory note is a promise to pay or IOU from the property buyer. It spells out the amount due and terms of repayment. In legal jargon it is known as a negotiable instrument. Similar to a check, the original must be presented to collect or prove ownership.

If the seller desires to sell and assign the payments to a note buyer, the investor will ask for the original note to be provided at closing. The promissory note is then endorsed over to the investor. Similar to endorsing a check, the holder signs on the back of the note.

Sample Note Endorsement on Back of Original Mortgage Note

Pay to the order of, (Insert name of investor), without recourse.


Dated this ____ day of _______, 2011.

(Seller Signs and Dates)

Sometimes the note endorsement is executed on a separate piece of paper, also called an allonge. The allonge is then attached as a permanent rider to the original note. The endorsement enables the investor to prove they are a holder in due course, with the same rights of repayment as the original note holder.

An investor may also ask for the original recorded mortgage or deed of trust at closing. However, if this original is lost, an investor will usually accept a certified copy from the county recorder’s office.

A lost original note, on the other hand, can cause a problem. In most states the note is not recorded. If the original note becomes lost a note investor may ask for a duplicate or replacement note to be signed by the payer or maker. This means going back to the person that owes you money and asking them to resign. This relies on their cooperation and can cause delays.

The investor will also ask for a lost note affidavit from the seller or note holder, stating the note has been lost and it will be presented if found at a later date.

Some investors will consider accepting just the lost note affidavit with a copy of the original note.  However, this is increasingly rare as a lost original note can create problems foreclosing should the buyer stop making payments.

The best option is to avoid losing the note by keeping it in a safe deposit box or a fire and waterproof safe. Some sellers elect to have the original held by their attorney or a third party servicing agent for safekeeping.

Whatever method you choose, be sure to keep the original mortgage note in a safe place that is easily located!


Use Outside Closings To Sell Mortgage Notes!

Ready to sell mortgage notes?

Protect yourself with outside closings!

When an investor has performed their research and is ready to purchase a private mortgage note they will ask the seller to deliver original documents (note, recorded mortgage, etc.) and sign the transfer package.

The Note Buyer

The note buyer will want these original documents before the funds are released to the seller.

The Mortgage Note Seller

A note seller may understandably wonder,

“How do I know I will ever receive my money once I turn over the documents establishing ownership?”

The Note Buying Challenge

So the note buyer wants the documents before the money is released and the seller wants the money before the documents are released.

The Solution

Using an outside closing through a title company, attorney, or escrow company easily solves this impasse. The outside closer will act as an independent third party (or fiduciary) protecting the interests of both parties.

An outside closing is basically an exchange of money for documents. The outside closer will receive the proceeds from the investor into their trust account and also receive the documents from the seller. It is not necessary for either the investor or the seller to physically be present for the note closing with the use of overnight delivery and wire transfers.

The fee for outside closings average $200 – $400 and can be paid by either party or split equally. Any legitimate note buyer should be willing to participate in an outside closing through a licensed and bonded closing agent.

Outside closings offer protection and peace of mind to both sellers and investors when selling mortgage notes.

Why Sell My Mortgage Note?

Accepting payments on the sale of real estate might have made sense at the time, but circumstances change.

Many sellers discover they would now prefer cash today rather than the small amount that trickles in each month.

Here are just a few reasons people have sold all or part of their seller financed mortgage notes for cash:

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Can I Sell Part of My Mortgage Note?

Owner Financing doesn’t have to mean waiting years or decades to receive money.

Sellers have the choice to sell all or just part of their future payments for cash today.

Option 1 – When note buyers purchase all the remaining payments on a land contract, mortgage note, or trust deed it is considered a full purchase.

Option 2 – When the note buyer purchases just a portion of the remaining payments it is considered a partial purchase.

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Payment Histories Increase Note Values

Want top dollar when selling mortgage notes?

Increase the value with payment histories!

Keeping an accurate record of the payments received on a mortgage note is essential for knowing how much the buyer still owes.  This also establishes a record of their payment habits – with an added benefit.

The value of a note can be improved by presenting note buyers a verifiable payment history!

There are two main ways to keep track of payments on seller-financed mortgage notes: 1) outside serviced, or 2) seller direct.

Professional Mortgage Note Servicing

The first and easiest is to let a professional handle it. The payments are made to a third party servicing agent that keeps track of the balance and sends the money along to the seller. They will also send out the annual 1098 Mortgage Interest Statements and can hold original documents in safe keeping.

The DIY Approach to Collecting Payments

If a seller chooses the “Do-It-Yourself”’ method over a third party pro they will need to follow these steps:

1. Place original note and other original documents in a safe deposit box.

2. Make a copy of each check or money ordered received. Accepting cash is not recommended since it is hard to verify the payment history without a paper trail.

3. Deposit the payment and keep a copy of the bank record of deposit.  It is best to deposit each payment separately rather than combining with other checks.

4. Create a ledger or spreadsheet reflecting the date and amount of payments received.

5. Calculate the amount applied to interest, principal, late fees (if any), and the resulting principal balance. An amortization schedule or financial calculator can be helpful. Once calculated, record in the ledger.

6. Send out an annual statement to the buyer or payer along with the IRS1098 Mortgage Interest Statement.

7. Verify the real estate taxes and property insurance are being kept current. Consider establishing a tax and insurance escrow where the buyer pays 1/12th of the annual amount into a reserve account each month.

8. Send collection letters as necessary for late payments, lapsed insurance, or delinquent real estate taxes.

Why Note Buyers Want Payment Histories

When an investor agrees to purchase a note they will request a payment history. A verifiable payment history can improve the value of a note as it provides proof of timely payments. A payment history is considered verified when it is either provided by a third party or is backed up by the documents and records outlined above.

Unfortunately many sellers fail to keep track of the payments received. When they go to sell the note, contract, or trust deed they try to recreate the history from memory. Without any proof of payments received, a note buyer has to go on faith. Sometimes a payment history affidavit can substitute for a payment record but it still doesn’t add the value of verifiable proof.

Protect the value of your mortgage note! Set up a payment tracking method today.

Learn the Value of Your Mortgage Note

Wondering just how much your mortgage note is worth?

The value of a note or contract is affected by many factors including the:

  • Down Payment
  • Terms of the Note
  • Buyer’s Credit Rating and Payment History
  • Type of Property Sold and Its Current Value

Since each transaction is unique, we offer a free note analysis based on your individual situation.

Fortunately it is easy to obtain a free evaluation in 3 easy steps:

Step 1 – Gather Copies of Documents

The first step is to gather copies of the documents. The primary documents utilized in the quoting process are:

  • Settlement Statement
  • Mortgage (Deed of Trust, Real Estate Contract etc)
  • Promissory Note, and
  • Payment Record

Hopefully copies are easily accessible with the originals located in a safe deposit box or other secure location for safekeeping. If a seller later decides to sell the payments then the investor will ask for a few other documents plus the appropriate originals at closing. But for now these copies will be reviewed for an accurate quote.

Step 2 – Complete the Quote Request Worksheet

The Quote Request Worksheet, also known as a Mortgage Submission Worksheet, is a simple single page form. This worksheet summarizes the transaction with most of the information obtained from the document copies. It includes details on the property type, buyer, repayment terms, and current balance. (Please visit the Quote Request and Free Note Analysis page to print a PDF version of the worksheet or to submit online).

Step 3 – Send for Review

The third step is to submit the worksheet and the document copies to an investor for pricing. Depending on the investor this might be submitted via email, fax transmittal, or an online submission process.

Most note buyers will provide a free no obligation quote within 48-72 hours. The quote is generally good for 30 days and is subject to due diligence, which includes review of the title, appraisal, insurance, buyer’s credit, and other underwriting items. The more information an investor has up front the fewer “subject to” items they will include with the evaluation.

Click Here to Request a Free Note Analysis!

How to Sell Your Mortgage Note

Want freedom from collecting payments for the next 10, 20, or even 30 years?

Prefer a lump sum of cash today?

If you sold property with seller financing chances are you’ve wondered about selling the real estate note. Here’s how to sell a mortgage note, trust deed, or contract in 7 easy steps.

Step #1 Request a Quote

- Just complete a short informational worksheet to receive a free no obligation quote. This can be submitted online, by fax, or over the phone.

Step #2 Provide Document Copies

- To get started note buyers like to see copies of these three documents:

  • Settlement Statement
  • Promissory Note
  • Mortgage, Trust Deed, or Contract

It is also a good time to be sure you know where the originals are located, especially the Promissory Note, as they will be requested at closing.

Step #3 Accept Offer & Agreement

- Once an offer is accepted it will be outlined in a written agreement. In addition to stating the price, the agreement will specify conditions of closing and who pays costs.

Step #4 Note Buyer Review

- The mortgage note buyer will perform a detailed review of the transaction, known as due diligence. This includes a review of the buyer’s credit, current tax and insurance status, payer interview, and other important items. They may also request copies of additional documents including a payment history, insurance policy, and existing title report.

Step #5 Appraisal

- The note investor will order an evaluation of the current property value. This usually takes the form of a Broker’s Price Opinion (BPO) or Drive-by Appraisal. The investor wants to be sure the property value is still equal to or greater than the sales price. If the value comes in low, the note investor may present a revised offer for consideration.

Step #6 Title Search

- The title search verifies ownership of the property and the mortgage note. It saves time and money to work with any title report that might exist from the original sale date. If the title search shows money is still owed on a prior mortgage it will usually be paid from proceeds.

Step #7 Closing

- When all steps are complete the note buyer will send the final closing documents for signature. The title company is often used to handle the exchange of money for the original note and transfer documents. Funds are typically paid in the form of a wire transfer or cashier’s check. You are also encouraged to have your attorney review and advise with the closing process.

We are Here to Help!

Selling your mortgage note can be a simple process when you work with an experienced note buyer. Just take a few minutes upfront to gather your information and documents and we will handle the rest for you!

Click Here to Request a Free Note Analysis!