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What You Can Do to Improve the Value of Your Note

1.      Keep all original documents in a safe secure place within your possession, such as a safety deposit box at a bank or at the very least a locked firebox. Including:

·        The Original Note (CRUCIAL)

·        Original recorded Deed of Trust or Mortgage (depending on state)

·        Title insurance policy

·        Closing Escrow statement

·        Hazard/Fire insurance policy

·        Information on any senior liens (amount, rate, monthly payment)

·        Appraisal of property – if available

The original signed note is crucial.  Without the original note, you will not be able to sell it, and it can be very difficult for you the note holder, to enforce your rights in collecting the debt. If it is lost, stolen or destroyed, a copy will not suffice.

Keeping a complete file of these documents and any other relevant paperwork also makes it easier and less expensive to sell the note in the future, or to foreclose if that becomes necessary.

2.      Keep an accurate record of payments, amount paid, and date received. Deposit payments promptly and make sure the check clears.

3.      Enforce the note promptly if borrower defaults. This will encourage them to pay on time in the future. Delaying foreclosure can cause the equity in the home to be chewed up by the accumulating interest.

4.      Make sure the hazard insurance is kept current.  If it is not, you can ask the borrower to provide proof of insurance or “force-write” a policy and bill them for it. A lapse in policy combined with a freak accident can be very bad for everyone involved. The borrower is required to maintain fire insurance on the house. It is in the note holder’s best interest to make sure he does, that it is current, and that it covers the value of the note.

5.      Be aware of any senior liens which are in default.  Do not ignore this! If they foreclose and sell the property at a trustee sale, you will be holding a worthless piece of paper. If a senior loan defaults, you are in default, and should immediately begin foreclosure. In addition, you may have to make payments to the senior lien holder to bring them current and to stop them from holding their trustee sale until after you have your trustee sale. Senior liens must notify all lien holders of foreclosure proceedings by mail using the address on the recorded Deed of Trust or Mortgage (so if you move, keep your address updated by filing a “Request for Notice”)

6.      Encourage the borrower to make larger payments than required; it will increase the equity in the property.  Even if he makes larger payments to senior loans!

This information can be useful to:

Note Holders, Note Buyers, Home Sellers, Attorneys, Accountants, Financial Advisors, Real Estate Agents, Business Brokers.


I am not an attorney, laws vary from state to state, and any legal advice implied by this paper should be checked with an attorney.

About the Author:

I am a real estate broker licensed in the State of California as well as an investor of real estate and debt instruments. We buy real estate notes and real estate contracts nationwide and make private and hard money loans on real estate in California.

I hope you find this information useful, feel free to contact me with any feedback, or if you are contemplating selling your note.

-James MacArthur

JMAC Funding
PO Box 91472, San Diego, CA  92169
(619) 846-1550 voice
(815) 572-5600 fax
©Copyright 2006 JMAC Funding

Licensed by the California Department of Real Estate, DRE# 01440161