California NoteBuyer LLC November 2014 If You Don't Like the Discount - Don't Sell Your Note! Sell Some of It - Not All of It! Let's say you are collecting payments on a home you sold 6 months ago. You agreed to carry back the note. The transaction looks like this: Sales Price                       $100,000 Down Payment                $10,000 Initial Note Amount         $90,000 Interest rate                      6% Amortization                    360 months Monthly Payment            $539.60 Payments Received            6 Payments remaining         354 Current principal Balance  $89,456.41 Buyer's Credit Score          Unknown I talk to hundreds of sellers every year, and this scenario is pretty commonplace. We have a low down payment, a long amortization period, a relatively low interest rate, and no idea of the "buyer's" credit score or credit worthiness. Not a very appealing circumstance for a note buyer who will be cautious about the amount of capital he is willing to invest. So, I explain to you the nature of discounting in the secondary market. I explain that currently, sellers are receiving roughly 60%-80% of their current principal balance. The stronger the terms of a particular transaction, the closer the pricing is to the top of the market. The poorer the terms, the closer to the bottom. I gently tell you the "weaknesses" in your transaction. I advise that you are not close to the top. You are not happy! Fair enough. We keep talking. There has to be a reason you called me. You probably want or need cash for some reason. Maybe your note is the best place to get that cash. Maybe it isn't. I ask you "Why are you thinking about selling?" You indicate you have your eyes on another property and you are a little short on the cash you will need. So I ask, "How short are you?" You say "I need about $40,000." "Do you have other sources to get the $40,000?" "I have some cash, maybe sell another property and net out close to that, but I prefer not to do that or wait that long." I understand. We all like options. Why don't you consider this. Don't sell your note - not all of it, anyway. Why don't you consider selling enough monthly payments to give you the $40,000 you need today. Then, after the note buyer receives his final monthly payment, the note will revert to you and you pick up all the remaining payments.  We'll assume your buyer has so-so credit in the 620 range. It would look like this: Sell - 144 payments Receive Today - $42,000+ Your Principal balance when payments revert to you - $70,055.78 If your buyer's credit is better than expected, say 700, you will get a boost of a few thousand dollars more. You now have a viable option to consider. $42,000 today and a $70,000 balance waiting for you when you pick up the remaining 210 monthly payments. You can compare this option to the others available to you and decide which is the smartest, fastest way to access the cash you need to take advantage of an opportunity you have. You may feel that selling your entire note at a big discount pushes you into a corner. You don't like that feeling, no-one does. So consider the option of selling some of your note. Then make the decision that best suits your needs. Thanks to my funding partner Chris Sexton, Freedom Financial, for the number crunching.                                           UNFORGETTABLES I attended a Business Conference last month and shared a table with a very interesting man. His name is Tim Evans, and he co-founded an organization called The Unforgettables Foundation. While we were talking, he received a phone call informing him that someone he knew had just lost a child. The significance of the phone call is that Tim's Foundation provides the funds needed for the last expenses of a child, targeting parents who just don't have the financial resources to deal with this catastrophic and overwhelming experience. Heart wrenching stuff. If you live in Southern California, you can learn more by visiting Tim's website at www.theunforgettables.com. You can email him at tevans@theunforgettables.com.                              Home Loans Remain Tough to Get The above headline appeared on the front page of the Los Angeles Times on October 27, 2014. The article gave an example of a couple who went through a four month torturous ordeal of getting a bank approved loan, with endless rounds of paperwork and intense scrutiny of their lives - financial and otherwise. Why this extreme caution? According to Paul Leonard, California Director for the Center for Responsible Lending, we essentially have gone from a marketplace "devoid of any rules and standards, to Dodd-Frank legislation, new oversight from the Consumer Financial Protection Bureau, and a true lack of clarity about what the new rules really are." So, if the rules aren't clear, banks just want to make bulletproof loans. It appears lenders fear so called "putback rules." According to the Mortgage Bankers Association, these rules can force banks to buy back mortgages they've already sold off their books if regulators find even minor errors in loan documents that run hundreds of pages. A $400,000 loan might net the lender $1,500, but errors can cost hundreds of thousands of dollars. The result? Lenders fixate on credit scores. CoreLogic reports that the "average borrower getting a purchase loan today has a FICO score of about 740. That number was abut 650 in the late 1990's and early 2000's.' Clem Ziroli, CEO of First Mortgage, said banks "need to get back to good underwriting - actually reading applications in depth to analyze the difference between real risks and a borrower's one-time mistake. When you get accustomed to serving buyers with 700 credit scores, and then you get one at 580, you don't know what to do with it. There's been so much reliance on FICO scores and automation that the industry has gotten weak with its ability to analyze credit." This article just reinforces the opportunity we have in this business- giving a buyer a chance to buy a home because the seller is willing to carry back the note. And, that seller and buyer agree to strong terms that protect both of them. And, that seller has a desirable note for a note buyer to purchase with a fair price that makes both parties happy. This is the freedom of our marketplace at work, and owner carry back playing a small but vital role in our economy and housing market! "Limit all politicians to two terms; one in office, one in prison. Illinois already does this."...... Bill Mencarow, Paper Source.                                 Bicycle Traffic Deaths Soar A group called the Governors Highway Safety Association reports that 722 bicyclists were killed in 2012 as a result of collisions with motor vehicles, a 16% increase over 2010. California, my home state, had 338 deaths between 2010 and 2012, most in the country. Why do I bring this up? Two reasons. First, I like writing about stuff that has nothing to do with the note business. Second, I ride my bike 5 times a week around my town and have had two close calls where I was paying attention but the motorist was not. In each instance, a motorist approached an intersection, did not come to a full stop, went into the intersection, looked to his left, started a right turn, then looked to his right and discovered to his surprise that I was there. Thankfully, I had stopped in time, watching the driver all the way. The Association says this is one of the most common scenarios in car-bicycle crashes. I suffered a slight concussion from a bicycle crash earlier this year, but that resulted from my own stupidity. I won't talk about that! If you ride a bike, please don't assume the car driver sees you. He may not. "He'll give you enough rope to hang yourself, then put you in the casket."   Deion Sanders, NFL analyst, talking about Jerry Jones, Owner of the Dallas Cowboys.                            Soaring Equity and Negative Equity We all know that "equity" has returned to the American housing market. The big numbers - $1.6 trillion increase in the past year; $10.84 trillion total U.S. equity holdings, up from $6.4 trillion in 2011. This according to the Federal Reserve, and hopefully this has been your personal experience as well. These increases have been powered by post-recession gains in home-selling prices and by homeowners paying down mortgage principal debt owed to banks. Realty Trac states that roughly 1 in 3 homes have no mortgage at all, owned outright. And, about 11 million homeowners have equity stakes of at least 50%. However, there is a flip side. Approximately 8.1 million homes are considered "seriously underwater", making them difficult to sell or refinance. What does this mean? Realty Trac says 15% of all homeowners with mortgages owe 25% or more on the home than it is worth. States that are suffering the most? Nevada(31%), Florida(28%), Illinois(26%), Michigan(25%), Rhode Island(22%), and Ohio(20%). My home state, a leader in most things negative, is conspicuously absent from the top 5!                                                   Holidays If you are a veteran, as I am, November 11 is a solemn day for us. It is a day filled with conflicting emotions, proud memories, painful memories, thoughts of good friends, some alive, some dead. I will make a phone call that day as I have done every year for many, many years. And when Charlie picks up the phone and says hello, we will talk and laugh and maybe get emotional.  Before I say goodbye, I will tell him I love him, and he will tell me he loves me. We spent time with each other for just a few months way back in 1967, and yet the bond I have with him is stronger and deeper than any I have with another human being, excepting my immediate family. If you are not a veteran, and you happen to be around someone on November 11 who is acting a little strangely, he is probably just a different version of Charlie and the guy writing this. Try to understand. Happy Thanksgiving to you and your family. Let's be grateful for what we have - not what we don't! If you enjoy this Newsletter, please pass it on to a friend. If I can make it better, please tell me how. Thanks for reading. Denny Stanz, Note Broker CA#01915404 www.CaliforniaNoteBuyerLLC.com dennystanz@verizon.net 760-245-5366 760-245-5367 fax If you enjoyed this Newsletter, please forward it to a friend. If I can make it better, please tell me how. Thanks for reading. Denny Stanz, Note Broker  CA Broker License # 01915404 www.CaliforniaNoteBuyerLLC.com 760-245-5366 760-245-5367 fax