Mortgage Note Encyclopedia

An additional insured is a party added to a property insurance policy who receives coverage without being the policyholder — essential for note investors.

The bid-ask spread is the gap between a buyer's offer and a seller's asking price for a mortgage note, reflecting market liquidity and pricing.

A contingency is a contract condition that must be met before the buyer is obligated to fund. Contingencies protect note investors during the due.

A contract is a legally binding agreement creating enforceable obligations. Key note investing contracts include the LPSA, promissory note, and loan.

Cost basis is the total amount paid to acquire a mortgage note, including purchase price and transaction costs, used to calculate gains or losses.

Credit history is a borrower's record of borrowing and repayment. Note investors use it to assess senior lien status, payment patterns, and resolution.

A credit report shows a borrower's trade lines, payment history, public records, and FICO score. Note investors use it to verify senior lien status and.

The discount rate is the interest rate used to calculate the present value of future cash flows from a mortgage note — critical for pricing decisions.

An exit strategy is the planned method for resolving a note and recovering capital, including modification, DPO, deed-in-lieu, foreclosure, or note sale.

Good faith means honest, fair dealing between parties — a standard that applies to note acquisition, borrower negotiations, and regulatory compliance.

IRR is the annualized rate of return that makes the net present value of all cash flows from a note equal to zero — the standard note performance metric.

A note investor purchases mortgage debt on the secondary market, generating returns through borrower payments, loan workouts, or resale of performing and.

A lessee is the tenant occupying a property under a lease. Identifying tenant-occupied collateral is a key due diligence step affecting foreclosure and.

NPV is the difference between the present value of expected cash flows and the acquisition cost of a mortgage note — positive NPV means a profitable deal.

Paper is industry slang for promissory notes and mortgage notes traded on the secondary market, covering both performing and non-performing loan assets.

A partial sale lets a note holder sell a portion of future cash flows to recover capital while retaining ownership of the remaining payments.

Yield is the total return earned on a mortgage note investment, expressed as an annualized percentage and used to compare notes across different terms.

Yield to maturity is the total annualized return on a mortgage note if held until the borrower pays the full balance — the most common yield measurement.