Copyright © MMXV All Rights Reserved Mentor Group, LLC 1

Disclaimer
This publication is intended to deliver accurate and authoritative information regarding the
subject matter covered. This information contained here is up-to-date as of the date of this
publication.

By accepting this material, you recognize that the publisher is not engaged in offering or
providing legal, accounting or other professional services. The advice and strategies
contained herein may not be suitable for your situation. You should feel free to and are
advised to consult legal, accounting or other professional advisors. Neither the publisher nor
author shall be liable for any loss of profit or any other commercial damages, including but
not limited to special, incidental, consequential or other damages.

This publication is not and should not be considered an offer to sell securities, the sale of
which are regulated by state and federal laws and regulations.

PLEASE NOTE: THIS GUIDE IS INTENDED FOR INFORMATIONAL PURPOSES ONLY!

The reproduction, translation or copying of this work or any part of this work without the
permission of the copyright owner is unlawful. For more information on our services and on
the conditions of use of informational content please see [Link]

Contract Disclaimer
Any sample contracts contained in this guide are for example only. They should not merely
be duplicated without considering specifics and details of your particular situation. They are
not intended to cover each and every real estate transaction or situation.

Real estate contracts are important documents, so you should consult an attorney in your
state before making any contractual commitment or signing any agreement. State laws vary
and certain provisions in these sample contracts may not be enforceable. You may have a
specific situation not addressed by these samples, and the attorney can address that
particular issue for you.

By downloading and using these documents, you agree to indemnify and hold harmless Jerry
Norton, Flipping Mastery, JLN Group LLC and its directors, officers, employees, shareholders,
financial advisors, attorneys and accountants against any claim, liability, loss, damage or
expense (including, without limitation, attorneys’ fees and other costs of investigating and
litigating claims) caused, directly or indirectly, by your use of these documents.

Earnings Disclaimer
Use of testimonials and personal examples herein are for exemplary purposes only. Specific
discussions of earnings are not an indication that the reader will experience the same
results. Background, education, experience all play into one’s ability to generate profits. As
such results will vary.
 Table of Contents

Chapter 1: Is Flipping Notes For You? 4

Chapter 2: Introduction to Note Flipping 8

Chapter 3: Finding Note Deals 17

Chapter 4: Understanding the Note Buyer 26

Chapter 5: Analyzing Note Deals 29

Chapter 6: Building Rapport and Overcoming Objections 34

Chapter 7: Six Steps to Flipping Note Deals 37

Chapter 8: Catch the Vision 44

Glossary: Key Terms and Definitions 47

Copyright © MMXV All Rights Reserved Mentor Group, LLC 3

 Chapter 1:

Is Flipping Notes For You?

Copyright © MMXV All Rights Reserved Mentor Group, LLC 4

Congratulations on picking up this eBook!

My name is Jerry Norton, the nation’s leading expert on flipping real estate for huge
profits. After flipping hundreds of deals all over the country and teaching thousands of
investors just like you how to successfully do the same, I’d like to introduce to you a
“flipping” strategy that I’m calling…

“The best kept secret to making money in real estate.”

What am I talking about? I’m talking about flipping real estate notes. Most people have
no idea that you can flip real estate “notes” or how easy and profitable it is, which is one
of the reasons why I wrote this eBook.

So before we go any further, is flipping notes for you? It’s for you if you are…

- Interested in making extra money part time or to supplement your current income.
- Looking for new career path altogether that allows you to work from anywhere
you want.
- Or… if you’re a real estate investor, who is frustrated with how hard it’s become
to find good deals. (Did you know that according to Core Logic, foreclosure
inventory fell 29 percent year over year, which marks 44 consecutive months of
year-over-year declines?)

It’s really for anyone looking for a better way to make money with real estate. What if I
were to tell you that there was another way to make quick money in real estate without:

- Without fighting over deals with everyone else.

- Without owning rental properties.
- Without managing rehabs.
- Without needing capital and…
- Without taking on a bunch of risk and stress.

And what if there was an unlimited supply of deals to after that nobody else is even
looking at?

Welcome to Note Flipping!

You see…flipping notes is unlike anything you’ve ever heard of before, because you’re
flipping the NOTE not the house.

I call it the “best kept secret to making money in real estate” because:

- There is a virtually UNLIMITED pool of deals.

- You don’t need cash or good credit.
- You don’t need any special licenses or experience.

Copyright © MMXV All Rights Reserved Mentor Group, LLC 5

 - You can do deals in any market because you don’t have to see the properties in
person.
- And you can do deals from the comfort of your home or anywhere you want.

Heck, you can do this even if you’ve never heard of “notes” before! Now, before I go any
further, I have to warn you, this is NOT wholesaling. This isn’t even houses. What I’m
going to show you is something you’ve probably never seen before because hardly
anyone else even knows about it let alone is showing how to do it.

Note Flipping in a Nut Shell:

So before we get started, let me give a brief description of the notes industry and how it
works.

When a homebuyer takes out a loan to buy a house, there are two legal documents that
are created. One is a mortgage or deed of trust (depending on the State) that is secured by
the property. The other is a “promissory note” that lays out the terms of the loan.

What most people don’t know is that these “notes” can be bought and sold just like any
other asset WITHOUT dealing with banks. That’s right…there are millions of private
party and seller financed loans out there totaling over $100 billion.

The problem is most people have no idea where to get started. That’s where this eBook
comes in.

In this eBook, you’ll learn:

- An overview of the notes industry, including key terms and definitions.

- Why right now is the best time in history to flip notes.
- Why you’ll NEVER deal with banks (you’re flipping private & seller financed
loans).
- The top 19 ways to find note deals.
- The 8 criteria to analyze note deals and pick the winners that will make you the
most money.
- The 6 simple steps to flipping notes and getting paid BIG referral fees over and
over again.

This eBook cuts out all the B.S. and tells you in simple terms exactly what you need to do
to get rich flipping notes. It’s all laid out in plain English and you don’t need a college
degree or any experience with real estate to understand it.

A few final thoughts before we get started….

*TIP – NOT Flipping Bank Notes

Copyright © MMXV All Rights Reserved Mentor Group, LLC 6

For the sake of this eBook and the note flipping strategy I outline herein, I am
specifically referring to real estate loans from private individuals and/or entities and seller
financed loans and NOT bank loans.

While it is possible to buy, sell and flip traditional bank paper, the process is highly
regulated and follows a very stringent process. Whereas, private loans can easily be
bought, sold and flipped. And, as you will soon learn, there is no shortage of private loans
to go after.

*TIP – Terms a d Definitions

In order to successfully flip notes, it is imperative that you understand the instruments
used in real estate and private lending. At the end of this book is a glossary of key terms
and definitions along with examples to use as a reference throughout this eBook. This list
is not all-inclusive but does cover the most widely used terminology.

*TIP – Excuse Editorial Errors

Please excuse any typographical, spelling, grammar or any other editorial mistakes you
may find in this eBook. While I’ve made every effort to be grammatically correct, I am a
construction worker (who barely graduated high school) that became a millionaire real
estate investor. I’m more interested in providing you with valuable information than
pleasing my elementary-grade spelling teacher (sorry Mrs. Kirby).

Copyright © MMXV All Rights Reserved Mentor Group, LLC 7

 Chapter 2:

Introduction to Note Flipping

Copyright © MMXV All Rights Reserved Mentor Group, LLC 8

The first thing you need to know about the private mortgage notes industry is that it is a
multi-trillion dollar industry. While its difficult to know for sure, estimates are that about
6% of all residential real estate sales involve some sort of seller financing.

Seller financed and private loans increase whenever it’s difficult to obtain transitional
bank financing and it’s also more common for hard to finance properties (land, mobile
homes, etc). It’s also becoming a more widely accepted lending practice amongst buyers
and sellers.

So what does 6% equate to anyways? While that may seem like a small number, let’s
take a closer look at how that pencils out.

In 2014 alone, there were 4.93 million home sales with a median price of $208,500
[Source: National Association of Realtors®] If you apply the 6% seller financing
average, that results in roughly 61.6 billion dollars in just one year! That number grows
substantially when you combine it with the notes created on new homes, land, mobile
homes, business notes, and others not included in the National Association of Realtors®
report.

In fact, according to Advanced Seller Data Services, 2014 marked 5 consecutive years of
growth in seller financed loans with a 4.7% increase over 2013.

What does this data mean for you and me? More private notes mean more
opportunities to flip notes in a growing niche industry.

Copyright © MMXV All Rights Reserved Mentor Group, LLC 9

I hope you catch the vision and are excited to learn the note flipping business!

Note Flipping Make Easy

The best way to break down how flipping notes works is to use illustrations. When a
homeowner needs a loan to buy a home, he goes to a lender and asks to borrow the
money to buy the home.

In its simplest terms, if the lender likes the home and the borrower, he loans him or her
the money to buy the house.

When that loan is made there are 2 very important legal documents that are created - A
promissory note and a mortgage or deed of trust (depending on the state where the
property is located). Most people don’t know the difference between the promissory note
and the mortgage or deed of trust so let’s discuss each.

A promissory note is simple a promise to repay. It lays out the terms of the loan such as
interest rate, due date, etc. The mortgage or deed of trust is what pledges the property as
collateral for the loan. In other words, if the buyer defaults on the note, the lender or note
holder can seize the property to sell it and repay the loan.

Copyright © MMXV All Rights Reserved Mentor Group, LLC 10

The important thing to understand here is that when a lender loans the money to that
homeowner, the homeowner begins paying back the loan with interest thus creating
income or cash flow for the lender.

For example, on a 30-year loan for $150,000 at 7%, that homeowner is paying almost
$1,000/mo in principal and interest to the lender. And once that loan is created, the note
along with the mortgage or deed of trust is now a valuable asset. And again, I’m NOT
talking about the actual property; I’m talking about the note or what’s often referred to as
the “paper.”

Copyright © MMXV All Rights Reserved Mentor Group, LLC 11

And when it comes to real estate loans or paper, there are 3 types to consider…

1. Traditional Bank Loans including the big banks like Chase and Wells Fargo as
well as smaller banks like credit unions and community banks.

2. Private Party Loans, which are loans from private entities or individuals.

3. Seller Financed Loans that are created when the owner of the property sells to a
purchaser and allows that buyer to make payments to them instead of getting a
loan from a traditional mortgage company.

These lenders or investors who create these loans are what we call “Note Holders.”
Remember how a minute I ago I said these loans were valuable because they are cash
flowing assets? Well just like any cash flowing asset, these loans or real estate paper can
be sold to what we call a “Note Buyer.”

So what is a note buyer? A note buyer is an investor who will pay cash to buy that cash
flowing paper or note. Once they buy the paper, they now own the paper making them the
new lender or note holder and they start collecting the cash flow on the loan from the
borrower.

You may be wondering why in the world would a note holder sell their paper to a note
buyer? There are lots of reasons but the number one reason is to free up cash. Good
examples of this are big banks. They sell their loans everyday. Have you ever had a loan
with one bank and all of a sudden you get a letter in the mail that says a new bank now
owns your loan and you need to start making your payments to the new bank? That’s
because the bank sold your paper to another bank. Why? To free up cash so it can make
new loans and charge borrowers new fees for generating those new loans. Private sellers
do the same thing.

Copyright © MMXV All Rights Reserved Mentor Group, LLC 12

In some situations, rather than wait for the borrower to pay off the loan over time by
collecting monthly cash flow, a note holder might rather get their money back sooner to
re-invest in another deal or another investment.

Now that you understand how notes are bought and sold between note holders and note
buyers, I want to share with you a tremendous opportunity right now and it’s not to be the
note holder nor is it to be the note buyer. In fact what I’m going to show you actually has
nothing to do with note investing.

I’m going to show you how to become the middleman (or woman) who bridges the gap
between note holders who have valuable paper with note buyers who have cash to buy
that paper.

*TIP – Note Flipper™

Be sure to check out my 3-step simple system called “Note Flipper™.” Using this
system, all you need to do is find notes using my ultimate marketing funnel, submit them
to my nationwide note buyer network, and then get paid $4,500 to $9,000 on average per
deal. This system takes all the hard work out of flipping notes and practically does it for
you, allowing you to tap into this booming trillion-dollar industry. Click here to register
for a FREE online training to learn how you can get my Note Flipper™ system.

Flipping Notes

Now, here’s what makes flipping notes unlike anything else you’ve ever seen. Unlike
with traditional real estate, there’s no licensing required to flip note deals. In other words,

Copyright © MMXV All Rights Reserved Mentor Group, LLC 13

you can get take a note deal to a note buyer and if that note buyer makes an offer that is
accepted by the note holder, you can get paid a “referral fee.”

With traditional real estate you can’t do that because you have to be licensed. The only
way to be a middleman with traditional real estate is to structure a wholesale deal. Let me
show you how this is different than traditional wholesaling.

If you were to wholesale a note deal which you can, here is what it would look like…

- First you have to find a note holder interested in selling.

- Then make an offer to buy the note as if you’re the cash buyer. The contract with
have a stringent due diligence period, a looming closing date and don’t forget,
giving the seller earnest money.
- Then you have to find a cash buyer within the small due diligence window of a
few days and get him to agree to buy the note for more than your contract price
with the seller.
- Finally, sign an assignment with the cash buyer and hope like heck it all works
out.

With wholesaling there is risk and it’s stressful and let’s face it, in most cases you need
funding or capital to do the deal. Did you know that nearly 75% of all wholesale
transactions are double closings? That means if you tried to wholesale a note deal, most
likely you would need short term financing called “transactional funding” to close on the
note purchase and then turn around and sell it to the end buyer, just like you do when
wholesaling houses.

But here’s the thing…

There’s a much faster, easier and better way to flip notes…

Let me explain how it works using another diagram. Instead of signing a contract as if
you’re the cash buyer with earnest money, you sign a simple Referral Fee Agreement.
This agreement states that if you find a buyer and the terms are acceptable to the note
holder, you get paid a referral fee, which is typically 3-6% of the sale price.

Once they sign the agreement, you take the deal to a note buyer who will give you an
offer to buy the note. Once the offer is accepted, a closing is scheduled, just like any
other real estate transaction and at closing you get paid your referral fee.

Traditional real estate requires licensing to get paid a referral fee (called a “commission”)
but not when it comes to flipping notes because you’re flipping the paper not the
property.

Copyright © MMXV All Rights Reserved Mentor Group, LLC 14

Let me use an example to further illustrate how this works.

Example:
- You find a Note Holder that has a note for $150,000.
- You sign a Referral Fee Agreement to find a note buyer for a 4% referral fee.
- Next, you present the deal to a note buyer who offers to buy the paper cash at
face value of $150,000.
- Finally, the note holder accepts the offer and at closing you get paid $6,000 (4%
of $150,000).

Copyright © MMXV All Rights Reserved Mentor Group, LLC 15

Here’s why this is the most exciting real estate and money making strategy I’ve
discovered in a long time….

There’s no risk: You’re not signing a purchase contract as the buyer. You’re not
putting down earnest money. You’re not even agreeing to a price!

There’s no capital: You’re not buying and re-selling the deal so there’s no cash
or transactional funding needed at closing.

There’s no stress: There’s no due diligence period, no backing out of deals, no

pissing off anyone. Once you get a signed Referral Fee Agreement from the note
holder, you are free to shop the deal to get the best price for the deal from a note
buyer and you get paid for making the deal happen. It’s that simple.

And you can earn $4,500 to $9,000 or more on average per deal. Why? Because like I
mentioned earlier, the industry standard for flipping notes is 3-6% of the sale price. That
means on an average note deal of $150,000, if you flipped the deal for 3%, you’d earn
$4,500 and if you were to get as high as 6%, you’d earn $9,000, paid to you right at
closing. And that’s just on one $150,000 note deal.

Copyright © MMXV All Rights Reserved Mentor Group, LLC 16

 Chapter 3:

Finding Note Deals

Copyright © MMXV All Rights Reserved Mentor Group, LLC 17

A marketing plan targeted solely to the needs of note holders is what will get your
pipeline full of deals. It’s a waste of valuable time and money to market your note
flipping services to the 94% of the population that don’t hold a note. To find note holders
you need a powerful “call to action.”

Call to Action:

Your call to action is your marketing message that motivates interested note holders to
contact you regarding flipping their notes. The most effective call to action I’ve tested is
a website where a note holder can “request a free quote” to sell their note. All of my
marketing drives interested note holders to a dedicated website where they fill out the
form.

Click here to learn how you can get your very own custom website with lead capture
form.

Whatever your call to action is, all of your marketing efforts must prompt your prospects
to take action.

Let’s discuss the top 5 preferred methods for finding deals.

1. Ads – Using ads to find people receiving payments on real estate notes.

2. Direct Mail – Sending letters or postcards to a verified list of note holders.

3. Referrals – Networking with professionals to obtain referrals.

4. Online – Building an online presence with websites, directories & SEO.

5. Building Your Brand – Establishing yourself as an expert in your local area.

Over the last decade I have used a combination of all five methods. Let’s discuss some of
these in more detail.

Print Ads

Print ads have been around for decades for one simple reason – they work. Here are 12
tips for doing print ads

Tip 1 – Small Not Big:

Don’t place ads in large daily papers because it’s not cost effective. Use weekly
community papers in smaller markets. They have a higher percentage of seller
financing.

Tip 2 – Less is More:

Copyright © MMXV All Rights Reserved Mentor Group, LLC 18

 Avoid expensive display ads or pay for additional words. Keep word count to 20-
25 words. If you decide to pay for upgrades, use capital letters, bold headlines
and/or a border.

Examples:

Tip 3 – Advertise in Want Ads:

Want Ads are shopping guides distributed in racks outside grocery stores or
mailed directly to residents (i.e. penny saver, county shopper, thrifty nickel, etc).

Tip 4 – Run Ads Long Enough:

Running an ad for a few weeks isn’t long enough. Commit to at least 90 days
(preferably 120 days).

Tip 5 – Track Leads:

Be persistent about finding out where leads come from. My website lead capture
form asks, “Where do you hear about us?” Always follow up and ask.

Tip 6 – Verify Ads Running as Promised:

Don’t ever assume ads are being run. Request a “tear sheet” or proof that the ad
was printed.

Tip 7 – Don’t Just Run Ads Locally:

Test different markets. Flipping notes works in every market.

Tip 8 – Run Ads in Low Activity States:

Do the opposite as everyone else. Go after notes in states that have the least
private and seller-financed notes.

Copyright © MMXV All Rights Reserved Mentor Group, LLC 19

 Tip 9 – Compare Pricing:
Request savings for running bundled ads offered through regional and national
networks.

Tip 10 – Ask for Specials:

Often discounts are available (i.e. “buy 3 weeks, get 1 week free”). Sometimes
you can get free online ads with print ads or free bold in the headline. In some
cases, you can get extra runs when there is surplus space.

Tip 11 – Find Out Competition:

Ask how many similar ads are running. Some is good (healthy market) but too
many (10 or more) equals too much competition.

Tip 12 – Choose Correct Category:

- The most popular are:
- Contracts Bought/Sold
- Mortgages Bought/Sold
- Financial Services
- Items Wanted
- Money to Lend
- Mortgages

Online Classified Ads:

Follow the same concept and tips as running print ads. There are multiple online
classified ads that allow for free ad posting (or close to it). Google search:
“Online classified ads” or “Free classified ads.”

Direct Mail:

Direct mail is the art of sending mailing pieces (letters and/or postcards) to a targeted list
of prospects. There are 2 components to doing a successful mailing campaign:

1. Targeted List
Obtaining a quality list of note holder prospects will greatly affect your mailing
outcome. Targeted list are not easy or free to obtain. There are services that
gather private mortgage data from public record that can be obtained. Average
fees vary for approximately $.20/lead.

Click here to learn how you can get my Note Holder Finder Tool.

*TIP – Be Realistic
Direct mail can be expensive and requires a serious commitment. Trust me, over the past
few years I’ve mailed over 2 million pieces! The industry standard is a 1% response rate.
Although that may seem very low, if you send 10,000 pieces, 1% would be 100 leads. If
you convert 10 of those leads for an average fee of $7,000, you’d earn $70,000!

Copyright © MMXV All Rights Reserved Mentor Group, LLC 20

 2. Converting Copy
In order for a mailing piece to evoke a response, it must have compelling copy
and a strong call-to-action. As I’ve mentioned earlier, my call to action on all of
my marketing is for the prospect to go to a website to request a free quote to sell
his or her note.

Click here to learn how you can get my Push Button Direct Mailer software with
proven mailers.

Referrals

Building a strong referral based note flipping business has 3 primary benefits…

1. No/Low Cost
2. Little to No Competition
3. Repeat Business

The key is building strong relationships with people who prospect with your ideal clients
(note holders). To be effective you must help referral sources feel comfortable and trust
you. Remember, how you perform is a reflection on them.

Referral networking is most effective in person with either one-on-one meetings, group
presentations or at networking organizations. Developing referral relationships is a
serious commitment and requires a long-term perspective but repeat business is well
worth the investment. Think about it this way…

If you were to get 5 referrals per week, that would equal 21 per month or 260 per year. If
half of those referrals resulted in just 1 deal/year, that would equal 11 deals per month!

WIIFM Principal:
WIIFM stands for “What’s In It For Me.” In other words, what benefit is there for a
referral source to send you leads? It could be that it helps them close another transaction,
provide assistance under an advisory role or they will get paid a referral fee.

Paying Referral Fees

By the way, nothing is more motivating than getting paid referral fees so always let
people know you pay referral fees. My standard marketing materials include: “We pay
referral fees.”

Referral fees can be as low as $100 up to a percentage of your fee. Regardless, always
send a gift of gratitude for leads (even if no deal resulted).

Here is a list of the top 19 Referral Sources…

1. Real Estate Agents

Copyright © MMXV All Rights Reserved Mentor Group, LLC 21

 Due to a steady increase in owner financing, agents know that more sellers will
carry paper if they have a way to sell that paper later after closing.

2. Escrow Servicing Companies

Many private lenders use 3 rd party service companies to collect payments from the
buyer, apply principal and interest and disburse funds to the lender.

3. Business Brokers
Many business transactions are difficult to finance through traditional banks
making seller financing more common. Business brokers specialize in selling
businesses with and without real estate. Google search: “___________(city/state)
business brokers.”

4. Mortgage Brokers/Loan Officers

Mortgage brokers and loan officers originate new loans and have clients that are
declined for a loan who then consider purchasing with owner financing. They also
work with note holders that need to sell an existing note to qualify for new
financing on another property. Many note holders contact mortgage brokers
looking for a note buyer.

*TIP - Remember to reciprocate! As a note flipper, you will get leads that are
borrowers who are looking to refinance and pay off the private note. Referring
them to mortgage brokers/loan officers is the best way to build trust.

5. Rehabbers
Fix and flip investors that fix up properties to sell to retail buyers often provide
seller financing to their buyers. It is also common for them to sell on lease/option
arrangements that can be converted to owner financing. They also purchase using
seller financing.

6. Real Estate Investment Clubs

Found locally and often meet monthly, real estate clubs are popular forums for
investors to discuss strategies on buying, flipping, financing and renting
properties. They often allow introductions.

*TIP – Quick Elevator Speech…

“I’m an owner financing specialist working with note buyers. I help people safely take
back financing and then structure the deal for top dollar offers from note buyers.”

*TIP - Get Noticed!

Talk to the group organizer and ask to give a 10-15 minute presentation. You could speak
on safe seller financing tips or how to buy and sell notes with your self directed IRA tax
free or tax deferred. (Go to: [Link] for a list of clubs near you.)

7. Title/Escrow/Attorney Closing Companies

Copyright © MMXV All Rights Reserved Mentor Group, LLC 22

 These agencies perform closings for the purchase and sale of real estate.
Typically, a closing officer prepares documents for owner financing and
maintains a database of county recordings and may be willing to provide you a list
(for a fee). If you receive a referral, use them for the closing.

8. Insurance Agents
When a property is owner financed, the seller is on the policy as the
mortgagee/loss payee. These types of policies stand out to insurance agents.

9. Mobile Home Dealers/Park Managers

It’s typically more difficult to get traditional financing on mobile homes and as
such, dealers commonly sell land and homes via private/seller financing. They
also work with purchasers who are buying new mobile homes but need to sell
their existing homes first.

10. Land Developers

It is very common for land developers to offer in-house financing.

11. Builders
Homebuilders and contractors often provide seller financing. Most do not want to
be lenders and are eager to sell their paper.

12. Accountants/CPAs
Tax accountants and CPAs are familiar with their clients’ needs to sell notes for
outstanding tax liens or other reasons. Some provide 3rd party escrow services as
well.

*TIP - Remember to reciprocate! When you have a note seller asking about tax
implications when selling their note, refer them to a referral CPA.

13. Financial Planners

Familiar with clients income/expenses and selling a note may be part of their
investment planning.

14. Probate Attorneys

Heirs who inherit a seller-financed note often prefer lump sum cash over
payments.

15. Bankruptcy Attorneys/Trustees

A note holder may be ordered to sell in order to satisfy a creditor. Also, a
borrower in bankruptcy often motivates the note holder to sell.

16. Divorce Attorneys

Common in divorce, an asset needs split and a seller-financed note is created from
one spouse to the other. This note can be sold to a note buyer.

Copyright © MMXV All Rights Reserved Mentor Group, LLC 23

*TIP - Go to: [Link]/lawyers to learn more about divorce liens.

17. 1031 Exchange Specialists

1031 exchange is a way to defer capital gains tax by exchanging one investment
for another. The IRS tax code requires the exchange be facilitated through a
“Qualified Intermediary” and some 1031 exchanges involve owner financing.

*TIP – go to: [Link]/[Link] to learn more.

18. Retirement Facilities/Nursing Homes

Administrators often help their note holder clients who need to sell in order to pay
for medical expenses.

19. Networking Groups

These are often local groups that meet regularly to network. Present your services
and exchange leads.

*TIP – Common networking groups include:

- Chamber of Commerce
- Rotary Club
- Lions Club
- Kiwanis
- Jaycees
- Toastmasters
- Le Tip
- Business Networking International (BNI)
- Professional Associations (Mortgage Banker Assoc, Assoc Realtors)

Getting Prepared

Prior to meeting with a possible referral source, research their profession. Understand
common problems and possible solutions. Understand objections and prepare responses.
What are their needs? How will your services benefit them? Will they close more deals to
make more money? How can you help their clients? Will they get a referral fee?

*TIP - If Stumped Script

“That’s a great question, let me get with my note investors to assure an accurate
response and get back to you.”

Getting referrals is all about presenting your services. Start small (1 person). Use correct
terminology for your market. Get comfortable with your “elevator speech” (a quick,
simple way to tell people what you do and how it benefits them).

*TIP – Elevator Speech Scripts

- “We pay top dollar to buy private and seller financed real estate notes. Get a free
quote to sell your future payments for cash today. We pay referral fees!”

Copyright © MMXV All Rights Reserved Mentor Group, LLC 24

 - “I work with owner financing real estate investors. My network of note buyers
pays cash for real estate notes. Get a free quote to sell your note for top dollar!”

*TIP – Keep Presentations Short

Quickly cover who you are, what you do, what’s in it for them (WIIFM) and how they
can participate.

Copyright © MMXV All Rights Reserved Mentor Group, LLC 25

 Chapter 4:

Understanding the Note Buyer

Copyright © MMXV All Rights Reserved Mentor Group, LLC 26

In order to flip notes to note buyers, it’s imperative that you understand how a note buyer
analyzes a deal and determines the price he or she is willing to pay to buy a particular
note.

Note buyers, like all investors, are looking for a return on investment with minimal risk.
They will look at the value of the property, amount of down payment (equity), borrower’s
credit, seasoning (length of time borrower’s been paying) and the terms of the note
(interest rate, payments, etc).

Note Buyer Risk Assessment

All note buyers consider risk when buying notes. When considering purchasing a note
they ask:

- What is the likelihood I will be repaid?

- What is my recourse or security if there is a default and the borrower stops

paying?

- How much can I pay and still be sure to recoup my investment if I have to take
back the property?

- Will the resale price of the property cover my investment including additional
costs (legal, repairs, foreclosure, etc)

When it comes to note investing, every note buyer has their own preferences but all note
buyers follow a 2-step process:

Step 1: Determine the remaining balance and future cash flow to be collected.

Step 2: Calculate their buy price based on their desired return on investment
(ROI), taking into consideration risk (more on risk this later).

The bottom line is…

The higher the risk, the lower the buy price and the lower the risk, the higher the buy
price.

Discount

Ideally, a note holder would get 100% face value for his note but the reality is in most
cases there is some type of “discount.” The discount is the difference between the buy
price and balance due.

Example:
- Balance Due = $100,000

Copyright © MMXV All Rights Reserved Mentor Group, LLC 27

 - Buy Price Offer = $87,000
- Discount = $13,000

Discount is calculated by taking the difference between the face rate of the note (how
much the seller is earning in interest) and the buyer’s yield or ROI (how much the buyer
wants to earn on the note).

Example:
- Note buyer’s yield = 10%
- Face Rate of Note = 8%
- Discount is based on time value of money

Even if the note deal is the perfect deal, most note buyers have a minimum discount to
cover closing costs (appraisal, closing fees, title fee, recording fee, document prep fees,
etc) and investment of time.

Copyright © MMXV All Rights Reserved Mentor Group, LLC 28

 Chapter 5:

Analyzing Note Deals

Copyright © MMXV All Rights Reserved Mentor Group, LLC 29

When it comes to flipping notes, it is not necessary to understand everything that goes
into the analysis process of buying notes. Remember, you are not buying the note, only
flipping it. However, it is important that you understand the basic criteria a note buyer
uses to evaluate a potential deal.

Let’s take a closer look at a note buyer’s analysis process. There are eight Criteria that
every note investor looks at to determine if they will buy a note and at what price works
for them.

1. Property Type
The first consideration is the type of property. Here is a breakdown of the top 11
types of properties from least risky to most risky:

- Single-family metropolitan
- Single-family Rural
- Townhouse
- Condo
- Single family with acreage
- Manufactured home
- Land/lot
- 2-4 units
- Apartment complex
- Mixed use (residential and commercial)
- Mobile home with land/lot

*TIP – Occupancy:
All note buyers view owner occupancy (living in the home as primary residence)
as less risky than non-owner occupancy (not living in the home and using the
home as an investment).

2. Equity
Note buyers look at the equity in the property or in other words, the amount or
value of the property above the total liens owed.

Example:
- Home purchased for $100,000 with $15,000 down payment.
- Balance of $85,000 carried on a note.
- Equity is $15,000 or 15%.
- Mortgage is 85% referred to as Loan-to-Value (LTV).

Equity Through Amortization:

When a borrower makes payments, some is applied to interest and the balance is
applied to principal. The more the principal is paid down, the more the equity
goes up.

Example:

Copyright © MMXV All Rights Reserved Mentor Group, LLC 30

 - Using the previous example, after 3 years, principal balance of $85,000 is paid
down to $82,000.
- Equity went from $15,000 up to $18,000.

3. Note Payment History and Seasoning:

Seasoning is the number of monthly payments a payer has made in accordance
with terms. The longer the seasoning, the lower the risk because the borrower has
established a solid record for paying on time. Most note buyers will discount price
based on: 0-2 months, 3-6 months, 7-11 months, 12-24 months, over 24 months.
Many note buyers have a min 2 months seasoning and almost all note buyers
require proof of payment history.

4. Credit History
A consumer’s past is a good indication of how likely they are to pay timely in the
future. The credit history determines the borrower’s ability to eventually refinance
and payoff the note. Credit also dictates the interest rate (the worse the credit, the
higher the interest rate).

Here is how credit is typically rated:

- 720-850 - excellent
- 700-719 - great
- 675-699 - good
- 620-674 - fair
- 560-619 - poor
- 500-559 – terrible

Here is how the score is typically determined:

- Payment History 35%
- Amounts Owed 30%
- Length of Credit History 15%
- Types of Credit Used 10%
- New Credit 10%

*TIP – Don’t Pull Credit:

Consumer Protection (Federal Fair Credit Reporting Act) has rules about pulling
someone’s credit. My policy is NOT to pull credit and let the note buyer do it
during his due diligence.

5. Income/Employment
In order for a note buyer to feel comfortable with the borrower, he will most
likely want to know income, assets, debts, employment history, rental and home
ownership history, etc. This information might not be available and will need to
be obtained from the payee as part of due diligence.

6. Property Value and Condition

Copyright © MMXV All Rights Reserved Mentor Group, LLC 31

 What is the “As-is” current market value (CMV)? Some note buyers will obtain a
“desk review appraisal” (drive by) or broker price opinion (BPO) from an agent
and others may require a full appraisal. Most want to at least see current pictures
of the inside and outside.

7. Loan-to-Value (LTV) Vs. Investment to Value (ITV)

LTV equals the percentage of debt owed on the property compared to the value of
the property. The higher the LTV, the less equity the payer has to protect so the
greater the risk of default.

ITV equals the note buyer’s price compared to the value of the property. ITV is
the amount the investor pays for the note by the value of the property.

Example:
Value = $100,000
Investor Buy Price = $85,000
ITV = 85% ($85,000 / $100,000)
Rule: The higher the risk to but the note, the lower the ITV

8. Note Terms
All note buyers look at the terms of the note such as interest rate, amount of
payments, frequency of payments, time period to be paid in full, etc.

Think Like The Note Buyer

Remember – it’s all about the note buyers risk tolerance and expected ROI. Following the
eight criteria outlines above, what you really need to remember is that every note buyer
follows these 2 steps when analyzing a deal:

Step 1:
Determine the remaining balance and future cash flow to be collected.

Step 2:
Calculate the buy price based on desired return on investment (ROI), taking into
consideration risk.

Time Value of Money:

As the saying goes, “Money Now is Worth More Than Money Later.” A note with a
higher interest rate equals a higher buy price. A note with a shorter term (balloon) equals
a higher buy price. (Balloon Payment – loan is due and payable in full in 5 to 10 years.)

Pricing:
So how does a note buyer determine their buy price? As mentioned already, every note
buyer is different. Here are the three most important factors:

[Link] or ROI

Copyright © MMXV All Rights Reserved Mentor Group, LLC 32

[Link] ITV
[Link] Discount

Final Considerations

It’s not you job as a note flipper to analyze the deal and anticipate what a note buyer will
pay. Your job is to find motivated note sellers and put their deals in front of note buyers
and then let the note buyers determine their buy price.

Remember, every note buyer has his or her own risk tolerance. The better you understand
that, the more successful you will be. Try and think like the buyer.

Copyright © MMXV All Rights Reserved Mentor Group, LLC 33

 Chapter 6:

Building Rapport and Overcoming Objections

Copyright © MMXV All Rights Reserved Mentor Group, LLC 34

As a note flipper, you get paid a referral fee (typically 3-6%) from the note holder for
successfully locating a note buyer who buys the note. Therefore, overcoming objections
and building rapport is paramount to getting the note holder to work with you.

When talking to note holders, the biggest objection that usually comes up in the first 5
minutes is: “How much will you pay for my note?” Of course, you have no idea (for
reasons discussed earlier). However, how you answer this question will determine your
ability to build rapport and move forward with a Referral Fee Agreement. Let’s discuss
the five strategies for answering this question…

Strategy #1 – Rule of 5:

“That’s a great question. Pricing is determined by 5 criteria:

1. Current value of the property

2. Equity in the property
3. Payer’s credit
4. Seasoning
5. Terms of the note (interest rate, payments, etc)

These 5 criteria determine the buy price and fair market value for your note…”

Strategy #2 – No Set Price

“That’s a great question. There is no set price. It really just depends on your note
because every note is different. They all have different payers, interest rates, and
values.

My job is to get some basic information about your note and then provide you
with the best price based on its fair-market value. Remember, there is no
obligation to sell your note.”

Strategy #3 – Give Options

“That’s a great question. Although there is no set price since every note is slightly
different and my buyers have different buying criteria. The good news is that I
will provide several options for you to decide which is best and most acceptable
to you, if any.”

Strategy #4 – All Cash Comparison

“That’s a great question. Pricing varies but it’s not much different than if you had
just sold your house for cash instead of carrying the note. I’m guessing that if you
are like most people, you would have accepted less for your home if someone
would have made and all-cash offer that did not require you to carry the note.
This is much like going back to the cash-out scenario. My job is to find you a

Copyright © MMXV All Rights Reserved Mentor Group, LLC 35

 buyer who will pay you cash for the fair market value of your note instead of
collecting payments over time.”

Strategy #4 – Risk Factor

“That’s a great question. Often there is a discount due to the fact that your note is
what we call a ‘non-conforming note.’ In other words, it’s not a traditional bank
loan. As you know, banks require a lot more paperwork and requirements. In fact,
banks cannot even buy private loans like this. The discount is simply the fair
market value that is determined to take over payments and assume the higher
risk.”

Final Thoughts on Overcoming Objections

Focus on helping them understand that your job is to get them the best price based on the
fair market value. It’s better to be realistic that in most cases there is a discount from the
original principal. Show confidence not desperation.

Copyright © MMXV All Rights Reserved Mentor Group, LLC 36

 Chapter 7:

6 Steps to Flipping Note Deals

Copyright © MMXV All Rights Reserved Mentor Group, LLC 37

In this chapter, I’m going to put it all together and outline the process for flipping notes.
There are actually six steps:

1. Phone Consultation/Gather Info:

Assuming you follow my lead capture model outlines in this eBook, all of your
marketing drives prospects to a website with a simple form to “request a free
quote.”

When a prospect submits for a free quote, the following information is filled out:

Note Holder Contact Information:

- Name
- Company
- Phone
- Email

Real Estate Information:

- Street Address
- Current Estimated Value
- Based on

Type of Real Estate (choose one)

- Single family
- Townhouse
- Condo
- Manufactured home
- Lot/land
- 2-4 units
- Apartment complex
- Mixed use
- Mobile home with lot/land

Occupancy (choose one)

- Owner occupied
- Rental
- Vacant

Description of property and area (fill in the blank)

Historical Information
- Date of sale
- Sale price
- Down payment
- First lien
- Second lien

Copyright © MMXV All Rights Reserved Mentor Group, LLC 38

 Note Information
- Date of note
- Amount
- Terms in months
- Payment amount
- Balloon amount
- Balloon date
- Interest rate
- Due date first payment
- Number of payments paid
- Number of payments left
- Next payment due
- Balance

Prior Mortgage Information

- Yes/no
- Please explain

Payer Information
- Name
- Address
- Credit score

Sellers Motivation (fill in the blank)

This list is not all-inclusive and is designed to get interested prospects to come
forward and fill out the form. Once a prospect fills out the form, give him or her a
call to introduce yourself and verify you have all of the information. Use a quote
worksheet to review/verify all of the information. Remember- the main purpose of
the call is to build rapport.

Click here to learn how you can get my Quote Worksheet.

Copyright © MMXV All Rights Reserved Mentor Group, LLC 39

 Example Quote Worksheet:

Copyright © MMXV All Rights Reserved Mentor Group, LLC 40

 2. Obtain an Executed Referral Fee Agreement

Before ending the initial consultation call, be sure to get the note buyer to agree to
your Referral Fee Agreement. This is a simple document that basically states that
if you locate a note buyer who’s terms and price are agreeable to the seller; he
will pay you a fee (paid at closing).

The industry standard in the notes industry is 3 to 6 percent of the note sale price
but is completely negotiable.

Example:
Note Sale Price = $200,000
Referral Fee = 4%
Total fee paid at closing = $8,000 ($200,000 x .04)

Click here to learn how you can get my Referral Fee Agreement.

*TIP – Referral Fee Script

“Now in order for me to take your note deal to my network of investors, I need to get a
simple agreement in place between us that if (and only if) I find an acceptable buyer for
you, that you’ll pay me for placing your deal. I’ll send that right over for you to sign,
date, scan and email back. Once I get it back, I’ll get right to work on your deal.”

*TIP – Always Get the Agreement

Email the note holder an already signed/dated copy of your agreement and have him or
her sign, date and email it back. Never work a deal without first having the Referral Fee
Agreement in place!

3. Shop Deal to Note Buyers

Once you have your agreement in place, you are now free to shop the deal to note
buyers. Use the same marketing strategies previously outlined to find note buyers.

Click here to learn how you can submit your deals to my network of nationwide note
buyers.

A note buyer will have the same general questions about the note that you
previously gathered. They will look over the information and provide what’s
called a “soft quote” or in other words a quote to buy the note pending due
diligence. At this point, they are assuming the information provided is true and
accurate. If however, during due diligence the actual information is different,
obviously the price is subject to change.

*TIP – Gather Accurate Information

Convey to your note holder how important it is to provide accurate information. If the
note holder is unsure about something, it’s better to be open and clear about it rather than

Copyright © MMXV All Rights Reserved Mentor Group, LLC 41

guess or assume. You could spend a lot of time working on a deal just to have the deal
killed off at the very end when the real information comes to light.

4. Present Offers to Note Holder and Get a Non-Disclosure Agreement

Once a note buyer provides a soft quote to buy your deal, contact the note holder
and let them know. Do not reveal the source (note buyer) yet as I’ll explain
shortly. If the note buyer is interested in selling at this point, move forward. If
not, you may decide to keep working with other note buyers for a better offer.

But if the note holder is interested in selling after receiving the soft quote, the next
step is to get an executed Non-Disclosure Agreement (NDA). This document
basically states that the note holder cannot go around you directly to the note
buyer source on this deal (or any deals until the end of time). This document
protects you and ensures you get paid and not cut out of the deal.

Click here to learn how you can get my NDA.

*TIP – NDA Script

“Good news, I received a soft quote to buy your note (discuss offer). The next step to
move forward is to get in place my NDA, which I just emailed to you. I need you to sign,
date, scan and email that back to me. Once I receive, we can get an official purchase
agreement in place, start working on due diligence and proceed to a closing.”

*TIP – Always Get the NDA

Email the note holder an already signed/dated copy of your NDA and have him or her
sign, date and email it back. Again, never reveal your buyer source without first having
the NDA in place!

5. Sign Purchase Agreement/Perform Due Diligence

Once the NDA is in place, you need to get an executed Note Purchase Agreement
in place between buyer and seller. Of course, the purchase will be subject to due
diligence, as discussed earlier. Once executed, provide the note holder a due
diligence checklist, obtained from the note buyer.

As already stated, each buyer will have his or her own due diligence checklist but
here is what can be expected:

-Executed purchase agreement

- Appraisal
- Recorded security instruments (mortgage, deed of trust)
- Signed note
- Payer credit report
- Payer payment record (pay history, cancelled checks, deposit slips, etc)
- Tax and Insurance information

Copyright © MMXV All Rights Reserved Mentor Group, LLC 42

 - Pictures
- Copy of previous title policy
- Copy of deed

Click here to learn how you can get my Note Purchase Agreement.

*TIP – More or Less Involved?

Technically, once you have the NDA in place, you can step out of the way and let the
buyer and seller communicate directly, however, I highly discourage this. The more you
can be the go-between, the more you validate your fee and ensure you get paid at closing.

6. Schedule Closing/Get Paid

Be sure to order title work while due diligence is being performed. Pending no
changes to the offer price, schedule the closing. Email the closing agent your
executed Referral Fee Agreement to ensure your fee is added to the closing
documents. As you get closer to the closing, verify, you fee is included in the
disbursements.

Finally, you get paid out of closing proceeds!

Copyright © MMXV All Rights Reserved Mentor Group, LLC 43

 Chapter 8:

Catch the Vision

Copyright © MMXV All Rights Reserved Mentor Group, LLC 44

I hope this eBook helped you catch the vision of flipping notes!

Remember, your role is to manage the process. You are the orchestrator of the model.
You job is build a strong marketing funnel that generates leads and then spend your time
converting leads into deals.

Filling the Pipeline

I want to make sure that you catch the vision of what flipping notes can do for you. There
are basically four different phases of the note flipping process or what I call The Pipeline:

1. Finding Deals
2. Structuring Deals
3. Performing Due Diligence on Deals
4. Closing/Getting Paid
A novice investor will focus all his energy on one phase at a time. This is what I call a
“onsie-twosie” investor. He or she may only do one or two deals in a given year. If that
fits your goals, than great, go for it! But what I want you to understand is that if you
systematize the process and keep the pipeline full, you will be able to do numerous deals
in the same amount of time.
Build a Million Dollar Pipeline
I believe it takes 20 deals at various stages in the pipeline to consistently close 5 deals
each and every month…

- 5 deals in the finding stage

- 5 deals in the structuring stage
- 5 deals in the due diligence stage and
- 5 deals in the closing stage

Now think about this: If you made an average net profit of $7,000 per deal and you
closed 5 deals per month, that’s $35,000 a month or $420,000 per year flipping notes
with risk, without stress and without capital! Do you see the income potential? Do you
see how huge this could be? Can you do this? I’m here to say that you can! You can do
the exact model that I’ve outlined for you in this eBook.

Develop Your Plan

- Make a plan
- Decide your target market
- Decide your call to action
- Decide your marketing plan
- Organize your paperwork and tools
- Decide how much time you are going to dedicate

Copyright © MMXV All Rights Reserved Mentor Group, LLC 45

The Real Purpose

In closing, I want you to know that the note flipping strategy and real estate investing in
general are a means to an end. Really, it’s not about the money. I know I’ve talked a lot
about the income potential. But it’s more than that:

It’s about having the time and the freedom to DO, BE, HAVE
and GIVE everything you want in life!

I hope you realize that. I hope you achieve your dreams and goals and I hope to see your
success and grateful to be a part of that success.

To your success,

Jerry Norton

P.S. Be sure to check out my 3-step simple system called “Note Flipper™.” Using this
system, all you need to do is find notes using my ultimate marketing funnel, submit them
to my nationwide note buyer network, and then get paid $4,500 to $9,000 on average per
deal. This system takes all the hard work out of flipping notes and practically does it for
you, allowing you to tap into this booming trillion-dollar industry. Click here to register
for a FREE online training to learn how you can get my Note Flipper™ system.

Copyright © MMXV All Rights Reserved Mentor Group, LLC 46

 Glossary:

Key Terms and Definitions

Copyright © MMXV All Rights Reserved Mentor Group, LLC 47

Promissory Note:
A legal instrument in which the borrower promises to pay a determined sum of money to
the payee, at a future time under specific terms.

Mortgage/Deed of Trust:
A debt instrument, secured by the collateral (property), that the borrower is obliged to
pay back with a predetermined set of payments.

Private Mortgage:
No different than a regular mortgage other than it refers specifically to a mortgage from a
private individual or entity rather than a federally regulated bank.

Seller Financing:
A loan provided by the seller of a property to the purchaser. Usually, the purchaser will
make some sort of down payment to the seller, and then make installment payments
(usually on a monthly basis) over a specified time, at an agreed-upon interest rate, until
the loan is fully repaid.

Deed:
Transfers the legal title of the property from the seller to the buyer and should be drafted
and signed by the seller at the closing and is filed with the appropriate government
agency, such as the county clerk in the county where the property is located.

Title Insurance:
A form of indemnity insurance, which insures against financial loss from defects in title
to real property and from the invalidity or unenforceability of mortgage loans.

Current Market Value (CMV):

The as-is appraised value of the property.

After Repair Value (ARV):

The future appraised value of the property assuming repairs are made.

Loan Amortization:
A loan where the principal is paid down over the life of the loan (amortized) according to
an amortization schedule, typically through equal payments.

Example:
$50,000 loan amortized over 30 years

Balloon Mortgage:
A mortgage, which does not fully amortize over the term of the note thus leaving a
balance due at maturity. The final payment is called a balloon payment because of its
large size.

Copyright © MMXV All Rights Reserved Mentor Group, LLC 48

 Example:
A mortgage that is amortized over 30 years but is due to be paid off in full after 5
years.

Loan-to-Value (LTV)
LTV is a comparison between the value of your loan and the value of your home. To
determine the LTV, divide the loan amount by the home's appraised value.

LTV Ratio = Loan / Appraised Value

Scenario 1:
Note Buyer Jim buys notes for 75% LTV.
Note Holder Sam owns a first lien note with a principal balance of $127,500 with
a CMV of $150,000.
If Sam sells, will he make or lose money?
How Much?

Scenario 1 Answers:
Step 1: Determine Jim’s Buy Price (75% LTV of $150,000).
$150,000 x .75 = $112,500 buy price

Step 2: Subtract Sam’s Note price from Jim’s buy price.

$127,500 - $112,500 = $15,000

Sam would have to sell for a $15,000 discount.

Scenario 2:
Note Buyer Kathy buys notes for 80% LTV.
Note Holder Bob owns a first lien note with a principal balance of $205,000 with
a CMV of $300,000.
If Bob sells, will he make or lose money?
How Much?

Scenario 2 Answers:
Determine Kathy’s Buy Price (80% LTV).
$300,000 x .80 = $240,000 buy price

Determine the difference

$240,000 - $205,00 = $35,000

Bob would make $35,000.

Lien Priority:
When a property is foreclosed, lien holders are paid back first based on lien priority.

Example:

Copyright © MMXV All Rights Reserved Mentor Group, LLC 49

 A property was foreclosed on and sold for $100,000. There was a 1 st lien for
$80,000, a junior or 2 nd lien for $30,000.

Land Contract/Contract for Deed:

For buyers who either don't qualify for traditional lending options or who want a
faster financing option to purchase property. The buyer makes regular payments to
the seller until the amount owed is paid in full or the buyer finds another means to
pay off the balance. The seller retains legal title to the property until the balance is
paid; the buyer gets legal title to the property once the final payment is made.

Owner Occupied:
The borrower is living in the property as his/her primary residence (home owner).

Non-Owner Occupied:
The borrower does not live in the property (investor).

All Inclusive (Wraparound):

A type of loan that enables a borrower who is paying off an existing mortgage to obtain
more financing from a second lender or seller. The new lender assumes the payment of
the existing mortgage and provides the borrower with a new, larger loan, usually at a
higher interest rate.

Wraparound Scenario:
A seller has a house valued at $400,000 and he owes $250,000 at 6% interest. His
payment is about $1,500 a month. He sets up a wraparound deal with a buyer,
who will put $20,000 down and finance the balance of $380,000 at 7% interest.
Every month, the buyer sends the seller a check based on a $380,000 loan at 7
percent interest. That's about $2,500 a month. So the seller makes his own
payment and then pockets the extra $1,000. In effect, the seller is earning the
difference between 6% and 7% on the first $250,000 of the mortgage, and the full
7% on the next $130,000.

Payoff Statement:
A statement prepared by a lender showing the remaining terms and loan balance on a
mortgage.

Re-Conveyance:
A document issued by the holder of a lien indicating that the borrower is released from
the debt. The deed of re-conveyance transfers the title of the property back to the
borrower. It is most commonly issued when a mortgage has been paid in full.

Performing Note:
When the borrower is current on payments and loan terms.

Non-Performing Note:
When borrower is NOT current on payments and/or loan terms.

Copyright © MMXV All Rights Reserved Mentor Group, LLC 50

Default:
The failure to promptly make payments or meet other terms of the loan.

Loan Origination:
The process by which a borrower applies for a new loan, and a lender processes that
application. Origination generally includes all the steps from taking a loan application up
to disbursal of funds (or declining the application).

Seasoning:
The length of time one has been on the loan or on the title of the property. Lenders have
different requirements for seasoning depending on the program or lender itself. One
lender may not have any seasoning requirements and another might have 6 months or a
year. It can also apply to how long someone has owned a property before they sell.

Copyright © MMXV All Rights Reserved Mentor Group, LLC 51