Can You Sell a Non-Performing Mortgage Note? Yes.
If the borrower has stopped paying, the note still has value. Here is what a buyer looks at, why the price is lower, and what to expect.
Can I sell a non-performing mortgage note?
Yes. A non-performing mortgage note can be sold to a note buyer at a deeper discount than a performing note, because the buyer takes on the cost and time of resolving the default through loan modification, deed-in-lieu, short sale or foreclosure.
Even if the borrower has stopped paying for a year or more, a buyer can still make an offer. With no payments to count on, the offer rests mostly on the value of the property and how long resolution takes in your state.
Why a Non-Performing Note Sells for Less
A performing note pays you every month, and the buyer is buying that stream. A non-performing note has stopped paying, so the buyer is really buying the right to resolve the default and the property behind the loan. That means taking on:
- Time. Resolution can take months, and the timeline depends on the state.
- Cost. Legal fees, servicing and property costs come out of the buyer’s pocket, not yours.
- Uncertainty. The outcome is not guaranteed, so the buyer prices in risk.
The discount is the price of taking that on. It is not a fee.
The Four Ways a Default Gets Resolved
Loan modification
New terms are agreed with the borrower so payments start again.
Deed-in-lieu
The borrower hands over the property in exchange for being released from the loan.
Short sale
The property is sold for less than is owed, with the lienholder’s approval.
Foreclosure
The lienholder takes the property through the legal process in that state.
What Sets the Offer
- The property’s value. This is the biggest driver, usually estimated with a broker price opinion (BPO) or an appraisal.
- Lien position. First-position notes are generally worth more than second-position notes.
- The state’s foreclosure timeline. A slower state means more time and cost for the buyer.
- The paperwork. A clean file and payment history make the note easier to price.
What a Buyer Typically Asks For
- The signed note and the mortgage or deed of trust
- The payment history
- Any modification, bankruptcy or foreclosure paperwork
- Any servicing notes and the borrower’s contact status
You do not need to have everything together to ask for an offer. Send what you have.
Talk to a Direct Note Buyer
JKP Holdings has bought notes since 2010 and has transacted hundreds of them. We buy directly in 17 states and place notes in other states through our buyer network, so any state is considered. There are no upfront fees, and you get a free written offer within 24 hours.
Common Questions
Can I sell a note if the borrower stopped paying?
Yes. A buyer can still make an offer on a note that is not paying. The offer is lower than for a performing note because the buyer takes on resolving the default.
Do I have to foreclose before I sell?
Not usually. Buyers regularly purchase notes before foreclosure and take over the resolution. If a foreclosure is already under way, tell the buyer where it stands.
How much less does a non-performing note sell for?
It is a deeper discount than for a performing note. How much depends mostly on the value of the property, the lien position and how long resolution takes in your state, so the only real answer is an offer on your specific note.
Does JKP Holdings buy second-position non-performing notes?
JKP Holdings buys first and second position notes. Second-position notes are reviewed case by case, based on how strong the collateral is.
What if the property is vacant or in poor condition?
The condition affects the value of the property, and the property value is the main driver of the offer on a non-performing note. Send what you know and the buyer will value it.
Does it cost anything to get an offer?
No. JKP Holdings does not charge sellers any upfront, application or evaluation fees. Standard third-party costs that may apply at closing, such as title search, recording and document preparation, are disclosed in the purchase agreement before you sign.
