How to Buy Mortgage Notes From Banks (and Why Most Can't)

You can buy mortgage notes from banks, but rarely one at a time and rarely as an individual. Banks sell non-performing loans in pools to vetted buyers, and even the FDIC's failed-bank sales ask each registrant for a $1 million net worth. In my experience a first-time buyer does better one step downstream, and either way the edge is knowing which banks hold non-performing loans.

Can you buy a mortgage note directly from a bank?

Yes, if you look like the buyer the bank already sells to. There are two very different doors.

The first is an open bank selling its own loans. The bank runs its own process, sets its own buyer standard and picks its own counterparties. The second is the FDIC selling loans it kept from failed banks. That process is public, with a registration page, written requirements and sealed bids (FDIC loan sales).

Both doors expect a buyer with capital, paperwork and a track record. If you don't have those yet, you can still own a loan that started on a bank's books - you just buy it from whoever bought the pool. More on that below.

Why do banks sell non-performing loans?

A bank's problem with a defaulted mortgage is the balance sheet, more than the missed payment. The federal banking agencies' retail credit policy, issued through the FFIEC in 2000, says that for loans secured by residential real estate, "a current assessment of value should be made no later than 180 days past due." Any balance above that value, less cost to sell, "should be classified loss and charged off" (Uniform Retail-Credit Classification and Account-Management Policy).

Two things about that are easy to get wrong. The charge-off covers the shortfall, not automatically the whole loan. And it's an accounting entry. After a charge-off, the OCC notes, "the underlying debt obligations may remain legally valid" and the borrower can still owe the money (OCC Bulletin 2014-37).

Once the loss is booked, selling is one of the bank's options. The same OCC bulletin says banks can benefit "by turning nonperforming assets into immediate cash proceeds." It also cuts the internal work of collecting. Mortgages are on its list of what banks sell, next to credit card, auto, home-equity and student loans.

In my experience, a lot of bank paper also comes loose after a merger. The acquiring bank cleans up the smaller bank's book (that's why "successor by merger" shows up on so many assignments). For the full list of who else sells, from funds to private note holders, see who sells non-performing notes.

Where a loan came from matters when you negotiate. A bank that bought a book in a merger, or already charged a loan down, has taken some of the loss. A portfolio lender or private seller funded the loan at 100% of the unpaid principal balance. They usually want much more of it back (and are harder to move on price).

What does a bank look for in a buyer?

A safe pair of hands, mostly - price is only one factor.

OCC Bulletin 2014-37 tells national banks to do due diligence on a debt buyer before any sale. That covers the buyer's background, experience and past performance, consumer complaints included. Banks should also review audited financial statements "to confirm that debt buyers are financially sound and appropriately licensed and insured" (OCC Bulletin 2014-37). The bulletin dates from 2014 (the OCC struck its references to reputation risk in March 2025). It's written for sales of charged-off consumer debt by OCC-supervised banks, and it's the clearest public statement of what a bank's risk committee is checking.

The reason is who sits on the other end of the loan. Debt buyers "pursue collection from former or current bank customers," the bulletin says, so a bank should understand how a buyer collects before it sells. Nobody at a bank wants a sold loan to end up in a news story with the bank's name on it.

Here's what that looks like in practice. One bank's vetting checklist I've worked through asked for a disaster recovery plan and a cybersecurity program. It wanted anti-money-laundering and consumer privacy policies, debt-buyer licensing where it applied, and written collection procedures. Then came letters of reference, errors & omissions insurance and proof of funds.

Smaller banks can be stricter than big ones, especially if they've never sold loans before. Build that package before you ask for a tape, not after.

The other half is being easy to work with. Banks have their own file rooms, SFTP sites and closing checklists, and they won't redesign them for one buyer. In my experience the buyer who follows the process, answers fast and closes on the date they promised gets invited back. A slightly higher bid from a buyer who needs exceptions often loses.

Which loans a bank may hold back

The same OCC bulletin lists debt "clearly not appropriate for sale." That includes debt of deceased account holders and of borrowers who have sought or are seeking bankruptcy protection. It also covers debt in litigation with the bank and accounts lacking clear evidence of ownership. Banks should also "refrain from the sale" of accounts eligible for Servicemembers Civil Relief Act protections. The same goes for accounts in disaster areas and close to the statute of limitations (OCC Bulletin 2014-37).

That's supervisory guidance rather than a statute, and each bank's committee draws its own lines. So a tape you see may have the bankruptcy accounts stripped out, and a buyer who knows why sounds like someone the bank can trust.

How does a bank loan sale actually run?

The FDIC publishes its process, so it's the best public picture of how a bank-side sale works. It groups loans with similar characteristics into pools (a pool "may contain one or more loans"). Then it markets them on a "competitive, sealed-bid basis." From start to finish, a sale "takes approximately 120 days" (FDIC loan sales).

To see loan files, you register on the website of the loan sale advisor running that sale. Registration means signing a confidentiality agreement, having a minimum net worth of $1 million, signing an OFAC certification, and wiring a $50,000 refundable security deposit. The advisor may also charge a fee to vet you. To bid, you post an initial deposit, "typically in the amount of $100,000," and sign a Purchaser Eligibility Certification. Sales usually close "within 20 business days after a bid is awarded," and the FDIC makes no representations or warranties on the loans.

Pools offered before a bank fails run tighter still. The FDIC "does not publish lists of potentially failing banks." Buyers must apply and be approved before any opportunity is announced. Marketing "may be concluded within a couple of weeks" (FDIC).

An open bank's own sale follows a similar arc, minus the public page. It builds a tape, sends it to a short list of buyers it already knows, collects bids, picks a buyer, and closes under a loan purchase and sale agreement. If you're not on that list, you never see the loans.

How do I find banks that are selling non-performing loans?

I don't know of any public list of banks that are selling right now, and the FDIC won't tell you which banks are close to failing. What is public is the call report every bank and credit union files each quarter. Call reports show which institutions hold non-performing loans - not which are selling them. Holding is the precondition, so it's where a search starts.

FIXnotes reads all of them. For the quarter that ended June 30, 2026, that was 4,313 bank filings and 4,299 credit-union filings (Q2 2026 NPL Report). The NPL Explorer for banks ranks every FDIC-insured bank on non-performing loans, Texas Ratio and OREO, and the credit-union version does the same from NCUA filings. For banks, the non-performing figure is (nonaccrual + 90-days-past-due loans) ÷ total loans (see past due vs. nonaccrual). For credit unions it's loans 60+ days delinquent, so don't rank one against the other.

Two patterns stand out in the Q2 2026 data, and they point in opposite directions.

The dollars sit at the biggest banks. On the first-lien 1-4 family NPL leaders card, the largest holder reported $6.0 billion of non-performing first mortgages in Q2 2026. The top three held about $14 billion between them, and the tenth-largest held $806 million. Eight of those ten also sit in the 25 largest banks by total assets on the /banks page. Part of that is government-backed loans. The largest banks hold FHA and VA loans, "which count as noncurrent but carry little loss" (Q2 2026 NPL Report). These are also the banks least likely to take a call from a new buyer.

The trend is rising at smaller banks and credit unions. The outliers card and the rising 1-4 family NPLs card rank individual institutions against their peers. Read past the first few rows: the most extreme ratios often belong to very small or unusual institutions. At banks under $10 billion, noncurrent closed-end first mortgages rose from 0.54% of balances in June 2024 to 0.71% in June 2026. Credit-union first mortgages 60+ days delinquent rose from 0.60% to 0.83% over the same two years (Q2 2026 NPL Report).

That second group is where I'd spend my time. Community and regional banks often don't have a trade desk or a loan sale advisor, and some have never sold a loan. Here's how I'd work the list:

1. Filter /banks or /credit-unions to the states you want to own loans in.
2. Look for a rising 1-4 family non-performing ratio, rising OREO, or a high Texas Ratio - more than one signal beats one.
3. Find the person who runs problem loans or loan sales, and email before you call, so the call has something to refer to.
4. Go in with your vetting package ready, and expect a committee to take longer than you'd like.

Most of those conversations won't produce a trade this quarter. The ones that do can become a repeat seller, and that's the whole point (hurry-up & wait!).

When to go to a bank, and when to buy downstream

Go to a bank yourself, or register for FDIC sales, when all three are true:

• you can meet the published bar - a $1 million net worth and the deposits for an FDIC sale - or show a bank audited financials and proof of funds
• your vetting package (policies, insurance, references, licensing where it applies) is ready to send
• you want a pool, and you can close one on the bank's schedule

Buy downstream when any of these is true:

• you want to pick one loan at a time instead of taking a whole pool
• you haven't closed a trade yet and need a track record first
• your capital fits single loans better than pools

Downstream is where funds that bought bank pools resell what they don't keep. On a marketplace you can browse mortgage notes for sale, listed one asset at a time. On the Trade Desk, FIXnotes Mastermind members trade notes and pools directly with sellers, funds and each other. The sourcing guide on how to find and buy mortgage notes for sale walks through every channel. Never priced a loan? The free Note Investor Workshop has you analyze a training loan modeled on a real deal - then submit practice offers on loans that actually sold.

Either way, act like the buyer a bank would pick. Follow the seller's process, close on the date you promised and treat borrowers the way the OCC expects. The bank-side door gets easier to open once you've shown you can do that downstream.