Re: I’m Concerned About This Kind Of Partial Sale - Posted by David Butler ANN
Posted by David Butler ANN on October 30, 2000 at 10:49:11:
Mike has covered some good ground down below, but your post is loaded with several important issues, and Mike’s reply raises several others. I feel there is some clarification in order.
One real important issue is pricing. We have been spoiled the last few years during this most recent “easy-money” cycle. The major impetus for that was the rise of the subprime lending industry, fueled by securitization. And in the past six months, the Grim Reaper has come to get his due… these lenders have lost billions, and Billions, and BILLIONS of dollars on writing paper just like the note you are sitting on.
Almost every major subprime player has been whacked and whacked hard. Those that aren’t already in their graves, are hanging on to Chapter 11 ventilators - or
going through CPR by way of selling off assets or restructuring credit facilities as best they can.
The carnage has spilled over to the note industry as well - and we have seen the pinch in the institutional side of the game. Still, we see these incredible fliers and promotions coming through by mail, fax, and emails, with some new wonderful, nonsensical, program out there - like we always have in the lending game as well.
That’s been the nature of the business in the 23 years I have been out there, borrowing, lending, investing. So I’ll have to take issue with the “bait & switch” discussion. I’ve brokered loans, I’ve worked direct. I’ve seen the same things happen under both contexts.
As a note broker and investor, I have experienced a lot of the same as well. And I will have to say that as one of the original charter members in America’s Note Network, I have routinely received better deals working broker-to-broker, than I have from several of the prominent first and second tier institutional note buyers - especially on the tougher or more unusual types of deals.
In all honesty, I would have to say that up until about 10 years ago, it would have been almost impossible to sell that note of yours at just about any price. Now, we have the luxury of having a great deal more risk tolerance out in the note markets - and of course, the flexibility of partials. And from what information you have provided, it looks to me like you got a pretty good offer. For future reference, you might find it helpful to have a look at our FREE report, Note Grading/Pricing Guidelines at: http://notenetwork.com/at.cgi?a=118510&e=Reports/Note.Pricing.Guidelines.html
As to the partials themselves… Mike covered that almost to a tee. The two clauses and variations of them are usually in partials - a form of seller guarantee on an otherwise unbankable deal. But it is crucial to have backside protection by having a recorded interest remaining. Their are several ways to do that, and Mike has suggested one of the more generic simple ways to accomplish that in most jurisdictions. Simple is best. It helps to work with title company legal opinions if you have that luxury in the state you are in. And of course, you want the title company to get your interest on their Schedule B.
Hope this helps, and best of luck on putting this one together!
David P. Butler VP, Broker Relations
America’s Note Network