What is a Note Partial (a stream of mortgage note payments)? If I sell a Note Partial, is there an Allonge & AOM created to the Note Partial Buyer?

These are two questions that I get asked a lot.

Let's look at what a Note Partial is and break it down.

What is a Note Partial (a stream of mortgage note payments)?

It's an opportunity to buy and sell Partial Payment Streams, known as Note Partials. A Note Partial Purchase offer allows the Note Owner of an existing cash flow instrument, such as a Reperforming Mortgage Note, to sell a portion of the rights to collect future payments to a third-party buyer for a lump sum of cash.

Selling a Note Partial gives the Note Owner a great amount of flexibility. Partials are always a great tool to use when the Note Owner has an immediate cash requirement and only needs a specific amount of money to cover a specific situation or for a specific purpose, such as to buy another Mortgage Note.

A Note Partial minimizes the discount and frees up cash. It is the best of the best. The terms of the Promissory Note remain the same for the Promissory Note with the Borrower. The only thing that changes is the mortgage payments are directed to the Purchaser of the Note Partial. This works the best if the Note Partial Seller and the Note Partial Purchaser use the same Mortgage Loan Servicer.

The Agreement used for a Note Partial Sale & Purchase is a Note Partial - Receivable Purchase & Sale Agreement. This Agreement spells out the Terms that both parties agree to. This important document outlines the servicing arrangement along with what happens in the event of an early payoff or default by the Borrower.

If I sell a Note Partial (a stream of mortgage note payments), is there an Allonge & AOM created to the Note Partial Buyer?

I was recently asked a similar question. The answer is that it's not required, but it depends on what the seller and buyer agree to. My disclosure: I'm a 2nd Mortgage Note Investor. All my experience is selling 2nd Mortgage Note Partials. When I sell a Note Partial, I personally don't create an Allonge & AOM to my Note Partial Buyer. The reason I don’t create an Allonge & AOM is that I only sell some of my mortgage note payments, not all of them. It comes down to the language in the Note Partial - Receivable Purchase & Sale Agreement and what both parties agree to.

Note investors use "Partials" (contract template here for Mastermind Accelerator members) to sell a slice of the future cash-flow of a mortgage note.

Non-Mastermind Accelerator members → Apply for a 1:1 Strategy Session [free]

We’ll review your goals, deal criteria, and show you how to sell a slice of the future cash-flow of a mortgage note.

An example is, I own 200 monthly mortgage payments, and I sell 60 of those 200 mortgage payments. I will still own the remaining 140 mortgage note payments, when the 60 payment Note Partial is finished. I still want complete control of the deal. I have a great relationship with my investors (my Note Partial Buyers), so there's a lot of trust involved. That relationship and trust have been created over the years, by doing what I say I'm going to do. I have a clean 18-year track record of always paying my investors on time and making them whole. If I sell a Note Partial, I take a lot of responsibility if the borrower stops making their monthly mortgage payments.

When a Note Partial Seller creates an Allonge & AOM to the Note Partial Buyer, it's usually when the Note Partial Buyer buys all the Mortgage Note Payments from the Note Partial Seller. In this case the Note Partial Buyer takes on all the responsibilities as the Mortgage Note Owner.

1 comment