Buying Discounted Mortgage Notes [VERIFIED ✭]

If a borrower has stopped paying (a "non-performing" note), the bank may prefer to sell the debt at a steep discount rather than deal with the lengthy and expensive foreclosure process.

These are loans in default. While riskier, they are sold at much deeper discounts. The goal is work-out or equity . An investor might negotiate a loan modification to get the borrower paying again (re-performing), or they may complete the foreclosure to take possession of the property at a fraction of its market value. Risks and Rewards buying discounted mortgage notes

The core appeal of this investment lies in the "discount." Banks and private lenders often sell mortgage notes for less than their face value for several reasons: If a borrower has stopped paying (a "non-performing"

These are loans where the borrower is making regular, on-time payments. The goal here is passive income . The investor becomes the "bank," collecting monthly checks. The discount provides a "buffer" and boosts the effective interest rate. The goal is work-out or equity