How to Buy and Sell Mortgage Notes

Mortgage and Lending with Level 4 Funding NMLS 1018071 AZMB 0923961

Are You Interested in Learning How to Buy and Sell Mortgage Notes

When it comes to buying mortgage notes, there are not a lot of hard-and-fast rules about the process and how it has done. In fact, you can even buy notes with no money.

Buying a home is very standardized while buying notes is reserved for investors. Standard real estate transaction procedures and regulations do not apply when buying the real estate’s mortgage note.

A transaction’s participants largely determine the note-buying process, so details will vary with each purchase. In the end, you need documents that transfer lender rights to you.

Ready to begin on the path to note ownership? Use our simple, 5-step process. You will be buying mortgage notes in no time.

Step 1: Find Real Estate Notes to Sell or Buy

Finding real estate notes is easier when you know where to look. Your business strategy and experience determine where you should buy notes. Investors can buy mortgage notes online, build a lender network, or acquire notes from multiple sources, including:

Private noteholders, usually seller-financed property, or business sales

A hedge or private equity funds that buy in bulk from banks and servicers and then resell.

Note exchanges and marketplaces.

Special servicers

Banks and credit unions

Step 2: Note “Tapes”

A “tape” is simply a spreadsheet with a note’s loan numbers and other relevant information.

Once you have received a tape, you will have the note details you need to start the due diligence process.

Step 3: Note Buying Due Diligence

Mortgages note due diligence processes closely correlate with the note buying strategy you are pursuing. In all cases, you will want to see a title report.

Buying a multi-million dollar “loan to own” single, small-balance commercial note on which you intend to promptly foreclose requires a very different due diligence process than 100 non-performing junior liens that you’re buying for six cents on the dollar and plan to “rehab” and modify.

Want to shortcut the note due diligence? Contact our expert residential note evaluations partner, Dennis Love, who will do it for you. You’re welcome.

Step 4: Making an Offer to Buy Notes

Due diligence should also be part of the “Making an Offer” phase. Sometimes you will get a tape first, evaluate it, and then make an offer on it. Sometimes you will have to make an offer and then do your due diligence; often it is both.

You should always have an attorney involved in your note purchase. We are the property and note-buying experts, not attorneys. We are not qualified to offer you legal advice, but we can shed light on how to buy notes from banks.


The bank will usually hire an attorney for the note sales process. If you are involved in a transaction without a bank attorney, it is probably because you are buying the note(s) with a non-negotiable contract written and approved by the bank’s attorney.

The workout, or special assets, or secondary marketing manager that you are working with represents an organization worth between ten million and hundreds of millions (maybe billions) of dollars. These organizational reps are not shooting from the hip on legally binding contracts.

Dennis  Dahlberg Level 4 Funding LLC

Broker/RI/CEO/MLO NMLS 1057378 | AZMB 0923961 | MLO 1057378
9133 W Plum Road | Peoria | AZ | 85383

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