The Note Holder's Protocol: Valuation & Liquidity Mandate
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The Note Holder's Protocol Valuation & Liquidity Mandate
Selling a mortgage note is the liquidation of a secured financial asset. This protocol is the definitive framework for profiling your note, valuing it like an institutional investor, and executing a sale to qualified buyers via private treaty.
Market Intelligence: The High-Yield Environment
The primary force driving the mortgage note market today is the high-interest-rate environment. Notes originated when rates were at historic lows (2-4%) are now being valued in a market where the baseline yield is significantly higher (7-9%).
This creates the "discount" effect: to be attractive to a new investor, an old, low-coupon note must be sold at a discount to its Unpaid Principal Balance (UPB). The price is not what's left on the loan; the price is what an investor is willing to pay for its future cash flow in today's rate environment.
Key Note Valuation Factors (Q4 2025)
The Valuation Calculus: How Much is Your Note Worth?
Competitors offer generic "spot prices." We utilize a forensic calculation to determine the precise Net Present Value (NPV). Your payout is determined by three specific vectors:
If your note has a 4% coupon but the market demands 10%, the asset must be discounted to bridge that 6% gap. We minimize this spread by marketing to Family Offices with lower cost-of-capital requirements than standard debt buyers.
Investment-to-Value (ITV). The more equity the borrower has in the property, the safer the note. A note with 40% equity coverage commands a premium price over a note with only 5% equity.
A "Seasoned" note (12+ months of on-time payments) trades as a financial instrument. An unseasoned note trades as a speculative bet. We audit payment history to prove velocity and increase the strike price.
The Divestiture Protocol: A Three-Phase Mandate
Amateurs list a note on a public auction and succumb to "bid fatigue." A professional executes a disciplined, multi-stage protocol to preserve the asset's integrity and command the highest possible strike price through a confidential process.
1 The Asset Profile (Due Diligence)
We conduct a forensic audit to create an institutional-grade file. This signals to buyers that you are a professional seller. Key components include the original Promissory Note, the recorded Deed of Trust, and a defensible Fair Market Value (FMV) of the collateral. We assess the borrower's creditworthiness and verify the seasoning (pay history) to underwrite the true risk.
2 The Valuation Matrix (The Price)
We calculate price based on four vectors: Yield Spread, LTV Equity Coverage, Seasoning, and Borrower Credit.
| Asset Class | Definition | Est. Price (% of UPB) |
|---|---|---|
| Performing (A-Paper) | High Equity (LTV < 70%), 700+ FICO, 12+ Months Seasoning. | 85% - 95% |
| Re-Performing | Previous default, currently paying for 6+ months (often modified). | 70% - 80% |
| Non-Performing (NPL) | 90+ Days Delinquent. Priced for workout or foreclosure scenarios. | 40% - 60% |
3 The Disposition (The Execution)
The final phase is the execution of a private treaty sale. We engage our vetted network of institutional buyers and funds to run a confidential bidding process. The closing is handled through a licensed title company, converting your future monthly payments—and their associated risks—into immediate present capital.
Technical Appendix: Note Market Mechanics
What is a note in finance? It is a debt security that obligates repayment of a loan. In our context, mortgage note investing involves purchasing this debt secured by real estate. When a mortgage note is created, the note holder makes an initial investment to receive a steady stream of passive income via monthly payments.
However, if a borrower defaults or fails to meet timely payments, the note becomes a liability. Selling mortgage notes allows the holder to avoid the foreclosure process and active property management.
What is a note loan? Simply put, it is the asset side of the lending equation. Evaluating mortgage notes requires analysis of the loan terms, interest rate, and the underlying property value.
We also advise on complex structures like note on note financing (hypothecation). Whether you are asking what is a note in real estate or seeking to divest performing notes with a fixed interest rate, our thorough due diligence ensures that legal documents are intact for financial institutions and individual investors.
Discipline Equals Dollars
Amateurs chase shortcuts. Professionals follow the protocol. If you are ready to convert your note into capital at maximum exit value, initiate a mandate today.
Direct Mandate Access:
Jeffery Hartman Director of Portfolio Liquidity & Asset Disposition