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NPRO
H & P Capital Investments LLC
Issue 29
November 2007

WIN a CD of the NOTE PROFESSOR NOTEBOOK

Would you like to win a CD of THE NOTE PROFESSOR NOTEBOOK, packed with some of the best real estate note techniques of Tom Henderson, a.k.a. the Note Professor (a $99.95 value). Forward to a friend and share this newsletter with anyone you think will benefit from the educational articles. The person who forwards the most names by December 24th, will win a CD version of THE NOTE PROFESSOR NOTEBOOK. Remember, although I will have a record of who forwards this letter, the recipient will remain anonymous to protect their privacy. Also you are not signing anyone up for the newsletter, simply sharing a good source of wealth building information? The winner will be announced in December 29th's newsletter.

Forward to a friend.

Real Estate Note Buying Traps and Horror Stories
by Tom Henderson
scary story

Last month I received a call from a note seller who had what appeared to be a quality note. We agreed on price and were about to move to the next step. To my surprise, there was an obstacle. The seller did not want mortgagee insurance, no matter who purchased it, and was adamant about NOT closing at a title company. NOT having mortgagee insurance is a deal killer for me. We went our separate ways. What is the point?

Three times in the last year private note holders have called me to explain they had purchased a fraudulent note and asked me what could be done. All had a common thread, none had purchased mortgagee insurance, and only one had closed at a title company. This is not good due diligence because of the amount of fraud in the real estate and financial paper industry. I thought I would share some specifics and hopefully prevent others from being ripped off.

My latest call was from an investor who purchased a non-performing note from a lending group with whom he was somewhat familiar. This lending group had made a loan using the borrower's house as collateral for the note. No mortgagee insurance had been purchased at the origination of the loan. Now the note was going into default, and this investor decided to purchase the non performing note from the lending group, with the agreement the group would repurchase the note if it became a "bad" note.

Here is where the deal starts getting complicated. The note had been signed using a power of attorney, not the borrower's personal signature. When the investor contacted the borrower demanding payment, the borrower claimed he had never received a loan from anyone, plus the signature on the power of attorney was not his .

Handwriting analysis indicated the signature on the power of attorney did not match the borrower. The investor then contacted the original lending group, which sold him the note, and demanded his money back, as per the agreement. The group's attorney informed the investor, that the lending group was not going to repurchase the note at this time, regardless of what their agreement said.

Are you beginning to see the legal web being formed? If the note was fraudulent, who is responsible if the lending group made the loan in good faith? Moreover, since the investor was purchasing a note in default, the investor has lost his position of holder in due course. (Basically this means the investor cannot come back on the borrower since he knew there were problems with the note from the start.) And if the lending group made the loan in good faith, who is going to be left holding the bag. This is not meant to be a legal opinion, but to merely show how the web is forming. No one is claiming responsibility, and if the investor is to recoup his money, it appears he is going to have to use the courts and sue. Who wins in this scenario?

How could all of this been avoided? By purchasing mortgagee insurance at the loan's origination. If the original lending group had purchased mortgagee insurance , this policy could have been transferred to the investor, and it would have been the title company's responsibility to untie all these knots. It has been my experience that title companies are very cautious in using a power of attorney, and go to great lengths to prove the validity of the power of attorney. It appears none of this due diligence was completed. The investor who bought the note has promised to keep me informed as to how this deal plays out. Real life situations are educational, so I will keep you informed.

The lesson to be learned from this is when using owner financing as an exit strategy, obtain mortgagee insurance at closing. The cost is minimal. But more importantly, when purchasing an existing note, DEMAND a mortgagee insurance policy. If the note is fraudulent, the title company will pay you off, and take on the problem.

Was the note I was offered, where the seller did not want mortgagee insurance purchased, nor to close at a title company ,fraudulent? I will never know. I do know that mortgagee insurance is required, not requested when I purchase a note. I sleep a lot easier, not to mention the risk vs. reward.

If you have questions or have a note to sell, or know of someone who wants to sell a note let me know.

Copyright H&P Capital Investments LLC
All rights reserved

To buy a note or sell a note, contact me at www.hpnotes.com
Tom Buys Your Real Estate Notes
Tom Henderson BUYS Owner Financed Real Estate Notes
22

If you have a note to sell, contact me or click note buying quote below.

An investor was trying to sell several condominium units he had rehabbed. One of his buyers was having credit issues, even though they were putting 20% down. The buyers were willing to work with a credit repair company to clean up their credit, but this would take several months. The investor decided to take an owner financed note from them, but needed to pay off his underlying liens.

H&P Capital Investments was able to quote on buying a partial of the investor's note. The end result was the investor got an immediate lump sum of cash to pay off his underlying liens. The note would revert to the investor in a few years, with a hefty balance Then he can either keep the remaining note balance for cash flow or sell it again. for another lump sum of cash Or even better, if the buyers refinance in the near future, that would pay off the partial and payoff the investor who would receive a final lump sum of cash. Not a bad deal, especially, for a property that had subprime buyers.

In today's environment, I am getting several notes where all that is lacking is for the payors to clean up their credit. If you know of a good credit repair firm, please contact me. Owner financing, along with credit repair is an excellent exit strategy in today's market.

Real Estate BUY Note Quote
Definition
Federal Discount Rate

Interest Rate the Federal Reserve charges member banks for loans, using government securities or other ELIGIBLE PAPER as collateral. This provides a floor on interest rates, since banks set their loan rates a little above the discount rate.

Note Professor Notebook
by Tom Henderson
np

If you have not attended a Note Professor "How To Get Rich with Notes" class, be sure and purchase the Note Professor Note Book manual to enhance your knowledge of creative real estate financing and note buying and selling.

Owner Financing Notes Education
Tom's Speaking Schedule
in Dallas Texas
noteworthy3

November 28 2007 , Wednesday, 7.00pm
POINT COUNTER POINT
DFWREIN offices: Stemmons and Valley View Dallas Texas.

Tom will be discussing the latest developments of the sub prime meltdown. What caused the meltdown, and what to expect next in the Dallas/Ft. Worth area, as well as nationally. Learn how to profit and survive in any market condition with single or multi-family strategies. Tom will be covering "business cycles" myths and the nature this down turn is taking If you have any questions call 972-671-7346.


Tom Henderson
H&P Capital Investments LLC

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H & P Capital Investments LLC | P.O. Box 821236 | Dallas | TX | 75382

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