Frequently Asked Questions - NNG Capital Fund
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Residential property, specifically 1-4 family houses, condos and mixed use properties
Primarily in five New Jersey Counties (Essex, Hudson, Passaic, Bergen and Union) where Principals, Fuquan Bilal and Gerald Lucas have over 30 years of combined real estate operating experience
Will NNG Capital Fund sell property it buys or maintain and manage property in a portfolio of rental properties?
In order to maximize profit, some properties purchased will be sold and some will be maintained and managed in a portfolio of rental properties
A note is the document used to promise the repayment of the loan and a mortgage is a lien against the property to secure the loan.
We purchase discounted notes and mortgages from industry wholesalers at sizable discounts. By sharing the purchase discount with the homeowner, we are able to create a payment workout and convert the note into a performing asset.
Notes are created as an IOU. The benefit of a real estate note is that the lien is collateralized by real property.
NNG prefers to buy second mortgages because of the lower price point and higher upside potential. This way, we diversify our risk amongst many assets.
We have a system in place to turn that non-performing note into a performing note. After working with us, the property owner wants to make their payments because they now have equity in their property. One of the biggest reasons people stop paying is because they are upside down in their property and see no way out. We have a full time staff that knows how to deal with this by turning a negative situation into a positive one.
When you buy the property, you are responsible for the repairs, maintenance, etc. With a note, you collect the payments and do not have to get your hands dirty. You control the property without the negatives of owning the property. Another advantage of owning paper over property is amortization over appreciation. In these volatile times, real estate amortization is a much more secure position.
The first rule is to work with the homeowner to design a payment plan and loan terms that work for their financial situation. The key is to engage the homeowner, build trust and keep their best interest at heart. We have found that many times there are short term circumstances such as a health issue, job loss or divorce that prevents homeowners from making full payments on their mortgage loan. By purchasing the notes from the bank at such deep discounts, we are able to create a “win-win” scenario until they get back on their feet. Other strategies are payment plan re-instatements, reinstatement with discounts, refinancing, seller assistance, deed-in-lieu of foreclosure and foreclosure as a last resort.
Many note buyers get money through equity lines of credit on properties, cash savings and retirement accounts/self directed IRA’s, HSA’s, CESA.
Yes. They can be more secure than the stock market or actually owning the physical property. We deal with notes where a strong equity situation has been created, so if we have to foreclose on the property, the deal will still be profitable.
Performers purchased through NNG are covered by our warranty, and otherwise the note buyer would proceed to foreclose.
When you own the note, you control the property and the property owner pays you just like paying the bank (You are the Bank). In today’s market, with all the bad debt and upside down properties, many notes can be purchased at a discount. Being a property owner, you have to deal with the repairs, tenants, problems, etc. which can be costly and can eat into your profits. With notes, you collect the payments and if the homeowner chooses not to pay, you move to foreclose on the property. We deal with notes that have a good equity spread. If the property has to be foreclosed on, there is still money in the deal which, in many cases, can turn a higher profit. We use foreclosure as the last resort though. We only take possession of someone’s property as a very last resort.
They are discounted for a variety of reasons, such as performance, borrower status, and property value, condition, and status. Banks do not have the personnel to attend to and process defaulted notes resulting from interest rates on mortgage loans adjusting, natural disasters, fraudulent loans, unqualified buyers, housing price declines, and personal catastrophic losses to the borrower. Banks are in the business of lending money. They can lend out approximately 10 times the amount on a performing mortgage loan balance, depending on the institution’s financial strength. For example, a non-performing mortgage with a balance of $250,000 results in a lost lending opportunity to the bank of up to $2,500,000. Due to this regulatory requirement, economics prove that a discounted note today will reap far greater returns for the bank tomorrow by allowing it to put money back into loan circulation sooner rather than later. This is known as the Time Value of Money (TVM).
The borrower pays you as the owner of the note like they would pay the bank. You also control the property by owning the note. Those who control the debt control the property. You can also resell the note, if you choose (just like the banks), and reinvest that money into another note, or walk away with your profit!
We cannot promise you an exact yield because every situation is different. We can share that we consistently have investors calling in to tell us they are receiving much better than expected returns and are now going to refer friends and family. They also tell us they are doing better with notes than any other investment they’ve had in the past, including the stock market.
You will get the collateral in about 15 days. If you purchased a performing note, the original assignment is sent to the recorder’s office for recording on your behalf. If you buy a non-performing note YOU are getting a signed notarized assignment that you must then send out for recording to the county recorder’s office for the property referenced in your note. (There are times when the assignment is not included and that is usually when we are waiting for a previous assignment in the assignment chain to come to us, so that the recording is completed in order).
What part of the collateral file goes to the IRA custodian if purchased through a retirement, health savings, or college education fund?
Copies of: note, mortgage, workout letter (CAMA only), NSA, original recorded assignment after it comes back, purchase asset directive (CAMA only). If you have any questions about what these documents are please visit our glossary.
No. All property values are figured at today’s fair market value (FMV). We check many sources to come up with the actual value of the property in today’s market, including BPOs or appraisals. No one should use just one source. We use many sources to give all involved a more realistic value.
Yes, you can borrow against it as well (which is known as a collateral assignment and note and mortgage
The application goes to the servicer immediately at funding and takes approximately four days.
Depending on the investment structure and the amount, your investment is either secured by a single note, several notes or a portfolio of notes – with instant equity due to the purchase discount.
We buy notes in such a way that allows our investors multiple exit strategies for returns. By investing in a mini-pool of notes, you diversify your risk and allow for more exit strategies to work for your portfolio. Watch our videos or contact our Acquisitions Department for inormation about the exit strategies.
There are circumstances where we initiate foreclosure on properties in our portfolio. However, we make every attempt to help the homeowner keep their home. Foreclosure is generally a result of the homeowner avoiding discussions with us or where they have already vacated the property. If necessary, we make apartment deposits, provide travel money, and pay administrative fees, etc. on their behalf to assist in their transition.
Usually, a promissory note is acquired instead of the desired cash during a real estate transaction. If retained long enough, many notes will eventually pay off. However, late payments, insurance liabilities, tax problems and foreclosure may soon plague some mortgage note holders. Even when these problems do not arise, many people would still prefer to have their cash right now!
Other reasons include: to pay off high-interest debts, to invest in a business, real estate or stocks, to pay tuition, to remodel a home, to buy a new car or boat, to settle an estate, to provide for relatives or the inability to service the mortgage. Some people did not want to carry back the note in the first place, or have grown tired of collecting the monthly payments.
From NNG or other banks and servicing companies.
At NNG we warranty your principal. If your loan defaults, please notify us and we will start working on your behalf to try to get the note to reperform. If the loan stops performing for six months we will give you a note credit.
Three to five days.
If your note defaults we need the Power of Attorney in place to work on your behalf to get the borrower back on track.
That it is a valid lien and in second position.
NNG offers workshops on performing and non-performing notes and a coaching course. These are offered at NNG Note Academy. In addition, you may contact us with questions via the Contact Us page.
Since you are not allowed to contact the borrower before purchasing the note and NNG will be releasing confidential credit information before said purchase, this information must be kept confidential.
Yes! We buy balloons too.
Yes, we buy new mortgages. (A seasoned mortgage is one that has been partially paid down and has therefore a payment history.) Price varies depending on how seasoned the note is.