Established in 2015, Merit Holding is a mortgage note investing company. Our experience consists of investments from hard money loans to rehab/resell single family properties to tax liens to mortgage notes.
-What is a note and how does one invest in a note?
A note is a debt owed, in our case, a mortgage with a property as collateral. If you've ever gotten a letter stating that where you need to send your payment for a loan has changed, that’s because the loan has been bought by another bank. This happens on a daily basis around the world. Banks can buy and sell notes, but individual investors can buy notes, too.
-What kinds of mortgages do we invest in?
There are 1st mortgages, 2nd mortgages, performing (where payments are current), non-performing (delinquent in payments), residential mortgages, commercial mortgages, and more. We invest in non-performing residential 1st mortgages.
-Why invest in a non-performing note? Why buy bad debt?
The debt is backed by a piece of property and a house. If the borrower has not made payments for at least 90 days, that note could be bought for 30-55% of the unpaid principle balance and made profitable.
-How do we make money on bad debt?
While there are many ways, there are three ways that we use. 1st, we work with the borrower, understand what led to them not paying their mortgage, see if they still want to stay in the house, and see if they can bring the debt current. Since we now own the note, if the borrower cannot make the payments, but they want to stay in the house, we can modify the note for them. We can change the term and/or the interest rate in order to get it to a payment they can afford. If they can bring the debt current and begin to make payments again, there is income every month. After they make on time payments for a full year, we can either continue to take the monthly payments or we can then sell the note for 80-85% of the unpaid balance.
If they either do not want to stay in the house or if they financially cannot stay, a 2nd option is a deed in lieu of foreclosure. With foreclosure, it wrecks their credit and they still lose the house, so they can sign the house over to us and move out, while saving their credit.
When the bank still owned the note, the borrower was facing foreclosure. If we cannot help them to stay and they will not sign over the house, then foreclosure is the 3rd option. The borrower will not be in any worse position than they were with the bank holding the note.
This first option is the preferred option. Not only is it profitable, it is the compassionate thing to do for the borrowers.
-My personal mortgage is pretty big, how do you afford to buy a mortgage?
There are two ways we can afford to buy a mortgage. First, the mortgages we seek are valued between $25-100k. We buy them at 30-55% of the unpaid principle balance. Second, we form joint ventures with investment partners. Some use non-retirement money for investing, some use their self directed IRA, others have converted their old 401(k) or 403(b) into a self directed IRA. The investors have money looking for investments, we find investments for their money.
-What is a Self Directed IRA?
When most people think of investments, they think of stocks, bonds, & mutual funds. Did you know you can invest in a friend's business? Buy a rental property? Buy a tax lien? Make a loan? You can invest in virtually anything you can imagine, including notes, either as an active investor or a passive investor. If you have an old 401(k), 403(b), or other retirement account, you can roll it over into a self directed IRA. Send us an email to learn more.
Win-Win-Win-Win-Win: We want to create situations where the borrower wins, the investor wins, the bank wins, the note buyer wins, and we win.
Our borrower wins when we help them to stay in their house.
Our joint venture investment partner wins because we offer a good return with lower risk than they are currently exposed to. We offer regular updates so they know the status of their investment. They know what is being done to collect on the debt owed. They can contact us easily and as often as they wish.
Our bank wins because we help them to liquidate their toxic assets at a fair price.
Our reperforming note buyer wins because we have rehabilitated the borrower so they are making payments so our note buyers are buying a good investment.
Our company wins because we make a profit through helping others to win.