Posted by phil fernandez on November 21, 1999 at 07:57:41:
Michael,
I think American Note might have asked you that question about how much you were making to gather clues on how to structure and package your deal. American Note is interested in purchasing mortgages. I don’t think they care how much profit you would be making.
I did sell a note to American Note in October. Deal went smooth and they did come through.
As far as them being abroker for Metropolitan, who cares. I don’t. Your concern here should be to get your mortgage sold to someone and realize your profit. Then on to the next deal.
Posted by michael on November 21, 1999 at 02:44:54:
Hello. Let me tell you about my experience with american note.
I called them regarding a $500,000.00 home. The owner was transferred and wantd to sell his home for around $395,000.00. A nice payday for me. I called American Note and spoke with them about a possible simultaneous closing on an owner financed sale.
They said they would be happy to help. The first question they asked me was “How much did I stand to make?”… I told them I would rather not say. They said they could find out any way. I did not deal with them.
I might be jumping the gun, but what kind of questions were those? I was making enough to be involved!!
Be careful when dealing with American note. I have some information, from a very reliable source, that American Note is just a broker for Metropolitan Mortgage & Securities…
If you can get the note quoted from Metropolitan for a better price, what are you worried about? There is nothing wrong with buying a note and reselling it. It’s the way this and the loan industry operate as many people have already said.
There are some problems when a person has a list of so called note buyers that include wholesale portfolio buyers, as well as warehouse line resale type buyers. Especially if the warehouse resale buyers are reselling to the wholesale buyers on that list. You may submit the deal to “Jazzy Note” and also “First Nationwide Big Time Note” at the same time. Then “Jazzy Note” gives you a quote and “FNBTN” gives you a quote. There may be questions from “FNBTN” about having already seen the deal. Then if you go with “FNBTN”‘s quote “Jazzy Note” might start gripin’ about circumvention.
My point is only that it would be nice if those warehouse buyers would let “brokers” (not one time note sellers)know if they are planning on reselling the note should the broker ask. In other words if I call American Note and tell them that I’m going to be submitting this deal to “Metropolitan Mortgage” and “Fiduciary Funding” and “Private Mortgage Investment Services” and “The Associates” and “Grand Bank” and “Riverside Mortgage” and “First National Security Corporation” and “FSB Mortgage” and “Note1” and if I choose to take the deal to one of those companies, I don’t want any flack about circumvention if they got a quote from one of those guys on my same note.
The other problem is with pricing and daisy chaining. Metropolitan has a wholesale minimum discount of $1000 on notes less than $100,000 and the greater of 1% of amount purchased or .5% above the note rate for notes above $100,000. That .5% above note rate translates to 2% to 4% of the note amount usually 4% unless there is a short or mid-term balloon. Plus the cost of appraisal, title insurance, credit reports and closers fees. These costs will range from $800 to $1500 dollars. Now if you are dealing with a warehouse buyer who is reselling the note they also need to work in a profit which will be at least as much as the minimum discount it’s being bought for, that’s another 2 to 4%. If you are a broker selling the note to that warehouse funder you also need to work in a profit. Which should fairly be as much as the warehouse guy will make when he resells. Another 2 to 4%. So the “minimum” discount on a note to the actual holder will be from 7%(best case scenario) to 18%(worst case scenario). The average will be about a 10% absolute minimum discount. This is usual in the industry. The problem is when the brokers selling to the warehouse resellers want to pose as funding sources and buy notes from other brokers for 85 to 90% minimum discount and the other broker takes another 2 to 6 percent, and then he gets the idea to find other brokers to send him deals who will work in 2 to 6 percent for themselves. These other brokers in my opinion have the same right to buy and resell notes and pose as a buyer as “Jazzy Note” the warehouse buyer does. Really the example that “Jazzy Note” set is what leads to the end note seller getting shafted in the end by getting 70 to 80% for a note he rightfully should have received at least 90% for.
I really think that those “Own Funds” buyers who are on Metropolitan’s leader board ought to be leaders and set a better example.
The brokerage industry - as it really is. - Posted by John Behle
Posted by John Behle on November 22, 1999 at 12:10:34:
MOST people out there are brokers for the major funding sources. It didn’t use to be that way, but that is the story right now.
Many of the “funding companies” out there are also just “mega brokers” for the top few funding companies. That isn’t necessarily bad. Most of the time they have preferred rates, so using them doesn’t necessarily cost you. It can save money by closing deals that you might now have closed alone.
Some brokers have some “Table funding” and the ability to actually buy some of the notes and broker them later. In that sense, they are dealing with their own funds. Some package and pool notes and then sell the portfolios.
The small buyer out there that actually has their own funds or a few select investors and buys for their own account is very rare nowadays.
As to American Note, I can tell you they are some of the most experienced people in this industry. As far as their source of funds, I don’t know. I don’t re-sell notes, so I don’t deal with the funding sources like them and Metro.
If J.P. says they have their own source of funds, I would believe that. I have never heard anything different. It may be that they sell some “pools” to Metro and others. That is far different than many of the others out there “pretending” to buy notes with their own funds - which can result in frustrations, delays and failed deals.
Most of the “controversy” here has to do with the note industry and how it works - and yet has been “blamed” on American Note. A large part of that controversy has to do with mis-representation and mis-understanding on the part of the potential note seller or broker. Some people thrive on controvery and like to try to make their own rules. Others like to do deals and get things done. That works best when they learn what the rules are and how things work.
American Note is a DIRECT Funder - Posted by J.P. Vaughan
Posted by J.P. Vaughan on November 22, 1999 at 08:09:42:
Everyone is entitled to make an error, Michael, but
gossip and innuendo are not welcome here. Saying things
like, “Be careful when dealing with American note. I
have some information, from a very reliable source…”
is GOSSIP.
I know for A FACT they are DIRECT funders. I know for a
FACT they keep some of the paper they create. I would
imagine they also sell off some of it.
I’ll need to jump on this one too. I’ve known those folks for five years, and they are some of the best in the business. I’m not sure what your concerns might have been, but it looks some other folks have discussed possibilities. Just felt like I had to put in a good word for some good people at American Note.
Hope you get things resolved to your comfort zone.
Posted by MN~Chicago on November 21, 1999 at 23:34:40:
You can be touchy, if you choose,
over a question, but how are you
in a position to issue a caution
about doing business with an entity
you know nothing about!?
Posted by Joe Kaiser on November 21, 1999 at 12:23:35:
Michael,
You’d be surprised, nearly all the note buyers in my newspaper are brokers for Metropolitan Mortgage . . . I suspect it’s probably that way everywhere.
Posted by Mark-NC on November 21, 1999 at 11:42:54:
Michael,
I can understand your concerns about you divulging to american note what your profit would be. But Like Phil said it’s information they need to present the deal.
You have to understand there has been a lot of fraud in this business. If you are buying low and selling real high they are going to want that justified.They want substansiated appraisals and reasons why you bought it so low or the value is so high now. Also consider the fact that your particular deal fits in the jumbo loan or Note catagory. They and anyone else is going to scrutinze it more than most. To put it bluntly they don’t want to buy the loan back if it goes bad and if they do they want to be protected.
I Broker deals myself, and you have to understand, who ever you go to, a good experianced broker is worth every bit of commision you pay them. Whether American Note sells to Metropolitan or not should not be an issue as long as they can package it to make it fund. That is the key.
If you could go directly to metropolitan and didn’t know how to package it you would more than likley kill the whole deal.I have seen this happen many times for this very reason. This is one of the reasons why the note business gets a bad rap.
American Note has no problem in defending themselves. Who did you get to do the deal? The bottom line is who can help by getting the deal done. Many people sell pools of notes to Associates or Metropolitan. They buy those individual notes at prices better than you can get by going directly to them.
Sorry to question your motives. I just don’t like unsubstaniated inuendos.