Long-Term Maintenance

Long-term note servicing and maintenance ensures that the note holder can always find any pertinent information.

Long-term maintenance, note holder basics:

Below are the essential items for long-term maintenance or successful servicing
of any private mortgage note or contract for deed. This information has been gathered
from time-tested experience in our company’s 25+ years of purchase and servicing notes, mortgages, and land contracts.

We’ll assume an escrow has been completed at a local title company/ or licenced real estate attorney.

Here are just a few reasons why a noteholder may need to access their records:

• Accounting and tax reporting.
• Insurance underwriting and homeowners insurance purposes.
• Estate planning or a death in the family
• Banking needs, such as refinancing or consulting with a financial advisor.
• Liquidating their asset with a partial or full note assignment.
• If a noteholder takes a few proper steps by correctly servicing and maintenance of their note.
  Finding any needed documentation for any reason will be quick and painless.

Below are six essential items of recommendation to maintain on a monthly or yearly basis:

1. Payment history — Monthly records should be accurately documented for payment verification. Retaining copies of checks or online bank records would be Ideal.
2. Hazard/homeowners insurance — Generally, this should be verified twice a year.
3. Annual property taxes need to be paid and verified to be up to date.
4. Deliquent county and state taxes take precesence over 1st lien note mortgage in all states.
5. Year-end personal taxes — Interest collected will need to be reported yearly.
6. HOA dues — Homeowners Association (HOA) dues need to be current. Some states allow HOA’s dues to step in front a mortgage 1st lein position. This allows HOA’s to foreclose on properties for nonpayment when they enforce the lien.

Why accuracy is crucial when servicing a note:

Only the note holder has access to the above items 1-5 above after closing escrow. The title company or or attorney’s office will not have access to anything that happens after the date of closing the sale of the transaction or be actively involved in servicing the note in the long term. Many noteholders mistakenly believe the Title Agency or attorney’s office will have continued access to their private records after closing escrow. This is incorrect.

Please retain the following escrow documents for easy reference:

• Closing or Settlement statement: This is prepared by the closing agent/Escrow Officer.
• Original Promissory Note held in a secure location.
• Homeowner’s insurance policy: The note holder should always be the loss payee as additional insured.
• Manufactured home title: Title work or transfer documents showing the note holder as a lien holder.
• Purchaser as registered owner.
• Payment history: Generally, the noteholder should document the payment records for each month.
• Maintaining a record of your payments is easier than you might think. Keep a copy of
  Each check or retained online bank or paper record shows monthly deposits. This simple step can go a long way in ensuring the accuracy of your records. Keeping these records will simplify end-of-year taxes when it is time to report interest.
• Property Tax – Access county records quickly with county info on hand. This will show
  the property parcel number or APN and property address. Keep the printout in the account folder.
• HOA – Retain the HOA contact info for a quick review to verify that dues are current and have been paid.

Note Servicers, third-party companies that specialize in mortgage note servicing:

We encourage that every note holder to engage a third-party payment collection
company to handle their payment processing.

The servicing agent will keep the original note and mortgage in a safe location and also provides the note holder with several benefits, including:

• Collecting and processing payments accurately.
• Reporting interest to the IRS by mailing the required 1099 at year end.
• Options to process monthly payments via ACH or auto-deposit
• Collect and pay required county property taxes, with mail notification to the note holder.
• Collection of and maintenance of hazard insurance for verification that the property has fire hazard coverage. Some companies may also offer the ability to force place insurance is necessary.
• Default collections as well.

A loan servicer will also handle other important related events, such as an early balance payoff.

Suppose the note is paid in full due to payor refinancing or property sale. In that case, the standard procedure is for an escrow officer to request a payoff balance. The final proceeds will be transferred to the servicer once the request is completed at the close of escrow. At this point, very little is expected of the noteholder. Utilizing a third-party note servicing agent allows the note to be on autopilot, as a professional team will handle the servicing functions.

Every month, we encounter a note seller who has failed to take basic steps to document their monthly payments, confirm the property taxes and hazard insurance are current and up to date. Searching for these items can up valuable time that slows down the note sale process.

Amortization schedules for accurate payment tracking:

The current balance of the note can be calculated and tracked using an amortization schedule.

Please note , if any payments received are more or less than required payment in the note, the amortization schedule would need to be redone for accuracy.

If you need help calculating your note’s principal balance or payments, we can help.

If needed, we will prepare an accurate amortization schedule Based on the payments received to reflect your proper note balance.

Feel free to call us anytime; we can prepare the schedule free of charge.

Toll Free (800) 819-0615.