Seasoning on a note - Posted by Reg(TX)


#1

Posted by Ken on January 07, 1999 at 23:18:12:

They are going to Dallas in March.


#2

Seasoning on a note - Posted by Reg(TX)

Posted by Reg(TX) on January 06, 1999 at 10:35:59:

At what point does seasoning matter when buying a note. should an inverster shy away from a newly created note and only stick with notes seasoned one year or more? If I were to consider newly created notes what should I consider important as to how secure it is or how secure I could make it?
Reg(TX)


#3

Less important than it used to be - Posted by John Behle

Posted by John Behle on January 07, 1999 at 12:36:34:

10-20 years ago seasoning was very important. Many investors wouldn’t even consider a note that wasn’t seasoned for 6-12 months. With the competition among funding companies the requirements have loosened up among funding sources.

As was mentioned, pre-paying the seasoning will help in many cases.

As far as buying for your own account or through local investors, seasoning puts a different light on things. A seasoned note carries it’s own credit history and track record. There is a greater safety factor. The Payor has demonstrated the two crucial elements - both the “Ability” and “desire” to pay.

Most notes that go bad do so in the first year. An extremely high percentage that go bad do so within the first two years. So, if you have a note that is seasoned over 1-2 years, you have a high confidence factor.

Yet, seasoning is not that big of a deal. LTV is the key factor and always will be. People are starting to recognize that fact.

The “due-diligence” is different with an un-seasoned note. It is more like a new mortgage loan and a higher focus needs to be put on both the payor and the property value. You have to establish the Payor’s ability and desire to pay. Financial data demonstrates the ability. On an un-seasoned note a loan application should be taken and ratios should be analysed. Use a FNMA 1003 Residential Loan Application for this purpose. Some states are actually pushing for this type of “due-diligence” in all seller financing. Utah is way ahead in this realm. Agents MUST comply with many requirements when involved in seller financing.

The “desire” to pay comes through credit reports. It’s very simple to pull credit. Less than a minute - and you have the right to do so. Checking the credit is absolutely crucial in new transactions. Most do it in all transactions.

As a new investor, I wouldn’t tackle un-seasoned paper at the first. Before doing any “Table funding” or buying notes right out of escrow, I would recommend taking some classes in conventional mortgage brokerage to understand the process more.


#4

If You Had To Take Back The Property… - Posted by Marvin Seawood

Posted by Marvin Seawood on January 06, 1999 at 23:43:44:

…would you be happy or sad?

Reg,

Seasoning is important - but so are a lot of other
factors. Grab yourself broker packages from a few
different note buyers. Study how the seasoning (as
well as other factors) affects the yield they require.

Best Regards, Marvin


#5

Re: John your help is greatly appreciated - Posted by Reg(TX)

Posted by Reg(TX) on January 07, 1999 at 13:06:49:

John,
I just want to say thank you for taking the time to help me and others on this site. You answer just about every question that people post. I know it takes a lot of time away from doing deals and what is most important for you. It has really been frustrating for me to not have someone that I could just call and talk to about this business and the million questions I have. However, you have been a bright light in my otherwise dark and confused state on this site.:-)Are there any classes that you can recommend in Dallas area or elsewhere? I will go anywhere that I could get to in a days drive that you could recommend.
Reg(TX)


#6

Pre-pay seasoning? - Posted by Lynn (AL)

Posted by Lynn (AL) on January 07, 1999 at 07:16:46:

Is it possible to pre-pay payments, to meet the seasoning requirements? Isn’t this what JP is talking about doing in one of her articles?

Lynn (AL)


#7

Classes near Dallas - Posted by John Behle

Posted by John Behle on January 07, 1999 at 14:48:17:

Other than the CREonline convention and another in the area I don’t have any classes planned in Dallas. I will be holding some 5 day classes in Provo, Utah in the next few months, but nothing outside Utah at the moment.

I’m not aware of any other courses happening in Dallas. Hank Harenberg is in New Mexico and would be worth the drive if he has anything local. He teaches all around the nation and I have heard nothing but good about him and his courses. I would recommend him highly. He teaches a lot in conjunction with Jon Richards who I would also highly recommend. You can check out any of their upcoming seminars at www.noteworthyusa.com


#8

Yes - see the post to Reg - Posted by John Behle

Posted by John Behle on January 07, 1999 at 12:38:33:

(nt)