Sourcing & Vetting Sellers

All Courses How to Invest in Mortgage Notes Sourcing & Vetting Sellers

Sourcing & Vetting Sellers

Now that you have a high-level understanding of the process and different investment options, it’s time to focus on the most important step prior to purchasing your first note – vetting your note seller. Before we focus on how to weed out bad brokers and sketchy loan dealers, let’s touch on a few sources of mortgage notes:


There are many online loan exchanges to review mortgage notes from. These are platforms to connect buyers and sellers so you’re not necessarily dealing with a credible company. The guide below on vetting a seller is just as important whether you’ve found the buyer on a loan exchange or through another source. Here are a few in alphabetical order (no affiliations).


Before you click through and start looking for loans on any of these sites, read the rest of this module to get a better understanding of some of the preferred sources of mortgage notes for sale.


Going direct to the bank is the goal of most note investors but it comes with a few trade-offs. For starters, most banks require a vetting package consisting of state-specific debt-buyer licenses, loan management procedures, previous trade history and references from other major sellers among other things. Furthermore, cherry-picking individual loans is typically out of the question. Most banks are looking for bulk buyers to purchase a large portfolio of blended assets. If you decide to pursue banks directly, start with local banks or credit unions and remember – it’s all about the relationship!

Purchasing loans from a note fund offers several advantages over buying directly from the bank. Most note funds allow investors to purchase loans individually. They typically have completed most of the due diligence already. A few of the most prominent note funds include:

*FIXnotes has an exclusive relationship with US Mortgage Resolution to offer individual loans for sale at bank-direct prices. Sign up to review assets here: FIXnotes Buyer Intake


Private sellers have many reasons for liquidating their personal note inventory. Some note investors operate on the fix & flip model – buying non-performing loans, coming to a payment plan resolution with the borrower and then selling the re-performing loan to a passive investor. Others liquidate non-performing loans to recapitalize for other opportunities. Whatever the case may be, as long as you you vet your seller and complete your due diligence properly, there are deals to be made.

Brokers are an interesting source of notes when they’re doing business the right way. Unfortunately, Note Brokers include some of the most unsavory characters in the industry. Many brokers attempt to sell anything they can get their hands on, regardless of whether they even have a relationship with the principal seller. Daisy-chains of brokers are a major red-flag. Read on and we’ll discover how to identify & eliminate this problem.

Good brokers offer much more than an introduction to a seller. Find a broker that knows the industry and will help you find answers to your questions about the assets. A broker can be a key member of your team, hunting down loans that fit your purchase preferences.

FIXnotes operates a loan brokerage the right way. We have direct relationships with all of our loan sellers and make sure the assets we list for sale are properly represented. There are never any fees to our buyers and it’s always free to review assets, make offers and close deals. Get started here: FIXnotes Buyer Intake.


Review assets for sale on the FIXnotes Inventory


Before you spend any time analyzing loans for sale, the first step is to make sure your seller is a legitimate source. The questions below will help you determine whether or not you can trust your loan seller to provide complete, enforceable documentation for the mortgage notes you intend to purchase. Pose to the seller to protect yourself from getting burned:

Do you own the loans you’re selling?

An obvious first question to ask, this will help weed out any brokers who are misrepresenting themselves as the principal seller. The next question will dig a little deeper to catch them in a potential lie:

Are your assignments recorded? Into what entity?

Since the assignment of mortgage is recorded in the public records, this is a great question to ask because you can verify it yourself. Make sure that the company (or one of their related “Funds”) owns and has their assignments in order (preferably recorded). We’ll cover how to review the public records in the Due Diligence section of this guide.

Where are the original collateral files currently located?

In the note business all you’re really buying is paper. That paper (the Note, Mortgage, Assignment & Allonge) is critically important to enforce the note owner’s interest in the property. Some sellers flip loans that they’ve put under contract but haven’t yet received collateral for. Others pay a custodian to hold their files in a secured facility off-site. Either way, you need to know where those documents are and when you can expect to receive them should you close a deal. A follow up question – do you have scanned images of all of the documents & other records I can review prior to funding?

Can we fund the deal through escrow? 

Funding through escrow means that a third party will facilitate the transaction. A title company or attorney typically serves as the third party. The note buyer sends the funds, the seller sends the files and the attorney or title company makes sure the files are in order before releasing funds and files to their respective entities. This is a great question to ask because it cuts through all the crap. If you’re dealing with a legitimate seller that is motivated to make a deal, there’s no reason why they would say no to this request. The cost of escrow will fall on the buyer but the additional expense is a great insurance policy when working with a new seller. The majority of buyers don’t end up using escrow, but it’s a good idea to ask the question to see what the seller says.

You now know many of the sources available to purchase assets from and the best approach to ensuring your working with a reputable counter-party. Let’s move on to the good stuff – Due Diligence: how to analyze and price mortgage notes before making an offer.

If you’re confused or need any clarification, feel free to leave a reply below with your question or comment. We will do our best to review your comment and reply!


  1. KeninSD says:

    How much time do you request for vetting note packages from banks and funds?


    1. robbieMAX says:

      Thanks for the question Ken! It depends on the provided data, asset volume & terms but typically 7-10 days is sufficient.

      The most time consuming part of the due diligence process is typically vendor research. It takes a week or longer to receive completed title/BPO orders.

      If the seller has provided acceptable/updated research (title, credit, BPO, etc), the amount of time required for vetting a package will be much less.

      Volume is self-explanatory, if there are thousands of assets in a tape, the trade will be more involved than a dozen or even several hundred loans.

      The most important terms to consider are the seller’s representations & warranties. If the seller has requested an “AS-IS” trade, you will likely require a longer due diligence period in order to get comfortable with the assets in question. On the other hand, if the seller’s contract includes warranties for secured status, complete collateral, etc – the due diligence process can be shortened because of the possibility of loan refunds after the sale if necessary.


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