Answers to the most frequently asked questions.
Frequently Asked Questions (FAQ's)
- What are the rates of return that I can expect if I purchase a mortgage note?
- Why are purchasers willing to pay a premium over bank financing rates for owner financed notes?
- What types of mortgage notes are offered to investors?
- What is the average term outstanding for loans of this type, when one considers some are paid off early by resale of the property or paid-off due to refinancing?
- Can you describe the land that Landmark sells?
- How do I buy a mortgage note?
- What are the costs associated with the purchase of a loan?
- How can I see a copy of the Loan Purchase and Sales Agreement as an example?
- Please describe a Note, Mortgage Deed, and Warranty Deed as they relate to loan sales.
- What happens in the event of default by the consumer and foreclosure of the loan?
- How long does the Foreclosure and property resale process take?
- If I purchase a mortgage loan, can I assume the risk of foreclosure in the event of default, thereby assuming the total benefit from resale of the property?
Q. What are the rates of return that I can expect if I purchase a mortgage note?
A. Each note is different and rates of return vary according to a number of factors. Historically, investors have enjoyed rates of return on individual notes ranging from 7% to 12%. Your return on your investment may be different. If you wish to purchase a note, it is important that you contact LLS Capital Management, LLC directly to discuss the terms and conditions for individual notes that may be available for purchase at the time of your inquiry.
Q. Why are purchasers willing to pay a premium over bank financing rates for owner financed notes?
A. The reasons for this are many and varied and include:
1.) It's easy. All the buyer needs to say is "Yes." Every other aspect of setting up the loan (other than filling out a standard credit application) is handled for them.
2.) It's simple. The buyer needs only to sign the required documents and is not involved in dealing with multiple banks or their staffs. This makes the acquisition process not only straight-forward but less time consuming and less intimidating for many buyers.
3.) Not all purchasers could qualify under current banking rules for rural or recreational acreage. LLS Capital Management, LLC takes a written credit application and performs a credit check to verify the obligor's information. Remember, as a general rule, a higher yielding note has higher risk than a lower yielding note.
Q. What types of mortgage notes are offered by Landmark Land Sales to investors?
A. The mortgage loans offered for sale are notes secured by first mortgage positions on lots and acreage. Lot sizes range from approximately five acres to approximately forty acres with a few parcels of greater acreage. Title insurance policies are available with each mortgage deed. Each property is surveyed and plotted by a registered land surveyor.
Note Terms - Notes are typically written for terms of 7, 10, 15, or 20 years ( 84, 120, 180, or 240 months). A condition of each mortgage deed requires that no property can be resold by the consumer without repayment of the mortgage loan. This is known as an "acceleration" or a "due on-sale" clause and insures that the investor is paid back their full investment before any transfer of title can take place.
The original principal balances of the majority of the loans offered range from approximately $30,000.00 to $55,000.00. Many larger notes are often available. Smaller investments can be made by the purchase of a partial interest in a note.
A. Historical payoff data for the servicing portfolios described above indicate an average of approximately 65 months outstanding, and the majority ranging from 58 to 72 months. This includes past experience of company management.
Q. Can you describe the land that Landmark Land Sales sells?
A. The property sold by Landmark is generally located in southwestern New Hampshire, in Sullivan and Cheshire Counties. The area is bounded on the south by Keene, NH, on the north by the Hanover/Lebanon region, on the west by the Connecticut River, and on the east by the Lake Sunapee Region and Interstate 89.
Parcels range in size from five to forty acres. A purchaser generally buys for recreational use initially, with some properties being purchased for retirement. Traditional weekend buyers from Connecticut and Massachusetts are a strong market.
The property is generally located on a town secondary road, is rural in nature, and is mostly wooded. Properties are generally served by power and phone. Sites require individual septic systems and water supply to be constructed by the consumer.
Small parcels are sold at prices beginning at $35,000.00. The average sale price is approximately $65,000.00, and many parcels are now being sold in excess of $100,000.00. Care is taken to insure each lot is buildable, and in some cases the lots are further developed by Landmark Land Sales with septic and driveway designs already approved and completed.
Q. How do I buy a mortgage note from Landmark Land Sales?
A. First, Register with Landmark to be notified of mortgage notes that become available. Landmark will keep interested purchasers informed as to loans available terms, property information, and "Consumer Profile" information will be communicated to qualified loan buyers.
The actual transfer of funds by the loan purchaser to Landmark, and the corresponding transfer of the note and the mortgage deed by the company to the purchaser of the loan, will be handled by an attorney located in New Hampshire. This is done to facilitate the recording of the transfer documents in the Registry of Deeds in the county where the property is located. Transfer of the security interest is done by an "Assignment of Mortgage", which is recorded at the Registry of Deeds.
Q. What are the costs associated with the purchase of a loan from Landmark Land Sales?
A. Costs, including the legal expense of drafting of assignments, title insurance, and recording fees for mortgage assignment, are borne by Landmark. If the note purchaser requires an attorney other than the closing attorney to represent their interests, that cost will be the responsibility of the note purchaser.
Q. How can I see a copy of the Loan Purchase and Sales Agreement as an example?
A. A copy can be provided along with the "Consumer Profile". A competitive market analysis (CMA) can also be ordered from a third party land valuation expert for a fee. Please contact Landmark directly for more details if you are interested in receiving an independent valuation opinion.
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Q. Please describe a Note, Mortgage Deed, and Warranty Deed as they relate to Landmark loan sales.
A. Most commonly, when Landmark sells property, it conveys ownership of that property to the purchaser by delivery of a Warranty Deed. This Deed describes the physical location of the property and describes the quality of title being conveyed.
When the consumer chooses to pay for the property over a period of time, a promissory note is executed by the purchaser. This promissory note includes the terms of payment, including the number of payments required to fully amortize (payoff) the loan, the interest rate, the monthly payment, and the conditions of default.
Because this note is only a promise to pay, the promise is secured by a Mortgage Deed. The Mortgage Deed grants a security interest in the property to the party advancing the funds. This is possible since the new owner has acquired title by acceptance of the Warranty Deed from Landmark. The new owner is now able to transfer a security interest in property by executing the Mortgage Deed.
Q. What happens in the event of default by the consumer and foreclosure of the loan?
A. The property is acquired by the mortgagee (note holder) by foreclosure, and sold in the open market. The loan purchase and sales agreement with Landmark provides that the company will be responsible for sale of the property once it is foreclosed. See "Statement of Purpose."
It also provides that the company reimburse the note holder for any deficiency between the principal balance outstanding, including accrued interest, at the time of foreclosure, and the net proceeds received from the property sale. If the proceeds exceed the amount due the note holder, then the remaining difference is the property of the company and/or mortgagor.
Q. How long does the Foreclosure and property resale process take?
A. If a consumer becomes seriously delinquent in the payment process, the company first attempts to negotiate transfer of the property back to the mortgagee (note holder) by a deed-back in-lieu-of-foreclosure, in exchange for settlement of the balance outstanding. Generally this is quicker and allows for an immediate marketing of the property. In the event the foreclosure process must be completed, the total time from the first notice of default to ownership of the property by the mortgagee (note holder) can be nine months or more.
Q. If I purchase a mortgage loan from Landmark, can I assume the risk of foreclosure in the event of default, thereby assuming the total benefit from resale of the property?
A. Yes. The loan sales agreement that is executed by Landmark and the purchaser of the loan provides for conditions of default, the corresponding management of the foreclosure process, and which party assumes risk of loss.
The decision as to what party is responsible for management of this process, and the risk of loss, is made at the time the loan is purchased. The decision is up to the investor as to the desired approach. See "Statement of Purpose."