Earlier this year, I wrote about a mortgage Note buyer’s “buy box”—the criteria a seller has to meet in order for a buyer (or even a broker) to become interested in purchasing (or brokering) a Note.
For us, at Faller Financial, we focus on 6 things when evaluating a Note:
1. Property value
2. Loan to value (LTV)
3. Yield
4. Payment history
5. FICO score
6. Whether or not there’s been a modification or bankruptcy
That isn’t the extent of our evaluation but that’s basically our “box.” And right up there in the order of importance is payment history.
Buyers like to know if a borrower has a history of making mortgage payments on time…or late.
Now, let’s be real: sometimes late payments happen, by accident or by necessity. Sometimes…okay occasionally, every 100-200 years or so, a pandemic will happen, crippling the economy and causing massive layoffs and all kinds of financial carnage. Occasionally. When that happens, some borrowers can find it hard to make payments on time. That’s just one example of how some extenuating circumstances can impact payment history, which a good Note buyer will consider. The questions are simple:
1. What’s the payment history?
2. If there have been late payments…why?
3. How much risk does a less-than-stellar payment history present?
An experienced Note buyer will be very specific, indicating whether or not it’s okay for the borrower to have ever been late. Most often, buyers like to see 12 straight months of on-time payments, regardless of the circumstances. The industry jargon for this is “a clean 12×12,” “0 times 30 the past 12,” or “a perfect pay.”
Keep checking in at fallerfinancial.com/note-resources to learn more and get smarter.
Call 844-433-6683 or email info@fallerfinancial.com to sell your mortgage Note, or request a consultation at fallerfinancial.com/contact.
Photo by Rusty Watson on Unsplash
