Mortgage Notes for Sale: Browse Non-Performing & Performing Notes

Where Are Mortgage Notes for Sale?

Mortgage notes are financial assets that trade on the secondary mortgage market. Banks, credit unions, hedge funds, and private investors sell whole loans — individual notes or bundled portfolios — through a variety of channels. Understanding where to find inventory is the first step to building a consistent deal pipeline.

Marketplace platforms like FIXnotes aggregate notes from multiple sellers into a searchable inventory. You can filter by state, lien position, loan status, and price range — then submit offers directly through the platform. This is the most accessible channel for individual investors because pricing is transparent and due diligence data is typically provided upfront.

Direct bank dispositions are another major source. Regional banks and credit unions periodically sell non-performing portfolios to clean up their balance sheets. These sales are often conducted through a bid process where the bank distributes a tape — a spreadsheet of loan data — to qualified buyers. Direct bank sales can yield better pricing, but they require relationships and the ability to evaluate and bid on multiple assets quickly.

Hedge fund dispositions represent some of the largest volume in the market. After purchasing portfolios of thousands of loans, hedge funds work through the highest-value assets and eventually sell the remaining inventory as bulk sales to smaller investors and pool buyers. These dispositions can range from a handful of notes to hundreds.

Note brokers act as intermediaries, sourcing notes from sellers and marking them up for resale. A good broker can surface off-market deals you would not find on your own — but the markup means you are paying a premium for access. Vet brokers carefully: ask for references, verify they have a track record, and always perform your own independent due diligence regardless of what the broker provides.

Industry conferences and networking remain one of the most effective sourcing channels. Events like NoteExpo, Paperstac Live, and regional meetups connect buyers directly with sellers, servicers, and attorneys. Many of the best deals originate from relationships built at these events — a seller who knows and trusts you will bring you deals before listing them publicly.

Types of Notes Available on the Secondary Market

The secondary market offers several categories of mortgage notes, each with different risk profiles, pricing, and return potential. Understanding what you are looking at on a tape is essential before submitting a bid.

• Performing loans — The borrower is current on payments. These notes trade closest to par value, typically 80 to 100 cents on the dollar, and generate predictable monthly cash flow. Performing notes are lower risk but offer lower yields compared to distressed debt.
• Non-performing loans (NPLs) — The borrower has stopped paying, usually 90+ days delinquent. NPLs trade at steep discounts — 20 to 70 cents on the dollar for first liens, 5 to 30 cents for seconds. Returns come from resolution strategies rather than monthly payments.
• Re-performing loans / re-performing notes — Notes that were previously non-performing but have been modified and the borrower has resumed payments. Pricing sits between performing and non-performing — typically 60 to 85 cents on the dollar. They carry re-default risk but offer current cash flow at a discount.
• Sub-performing notes — The borrower is making partial or irregular payments. These notes are not fully current but not completely delinquent either. Pricing reflects the uncertainty — typically 40 to 70 cents on the dollar.
• Scratch-and-dent — Loans with documentation defects, underwriting exceptions, or other issues that prevent them from being securitized. These trade at discounts driven by the specific defect — the note may be perfectly performing, but the paperwork does not meet agency standards.

Within each category, pricing varies significantly by lien position. First liens hold priority claim on the property and command higher prices. Second liens are subordinate — they can be wiped out if the first forecloses — but trade at a fraction of the cost, making them an accessible entry point for smaller investors.

How to Evaluate a Mortgage Note for Sale

Every note on a tape tells a story through its data points. Learning to read that story quickly is what separates profitable note buyers from those who overpay. Here are the critical evaluation criteria:

Unpaid principal balance (UPB) and purchase price. The relationship between the UPB and the asking price — expressed as cents on the dollar — is your starting point. A $100,000 UPB note offered at $45,000 is trading at 45 cents on the dollar. But UPB alone does not determine value — what matters is the relationship between your purchase price and the property's recoverable value.

Property value and loan-to-value (LTV). A note's equity position — the gap between total debt and property value — is the single most important variable in pricing. A $50,000 UPB on a property worth $120,000 represents significant equity protection. That same UPB on a property worth $40,000 means the loan is underwater and recovery options are limited.

Lien position. First liens have priority and multiple exit strategies. Second liens are subordinate and can be extinguished by a first lien foreclosure. Always verify lien position through a title search — never rely solely on what the seller reports on the tape.

Borrower status. Is the borrower making payments? Are they in bankruptcy? Are they occupying the property or has it been vacated? Payment history reveals trends: a borrower who paid consistently for years before stopping may be a strong candidate for a workout. A borrower who never made a single payment is a different situation entirely.

State and foreclosure considerations. The state where the property is located dramatically affects your resolution timeline and cost. Judicial foreclosure states require court proceedings and can take one to three years. Non-judicial foreclosure states can resolve in as little as three to six months. This difference directly impacts your hold time, carrying costs, and return on investment.

Collateral file completeness. A complete collateral file includes the original note, mortgage or deed of trust, all recorded assignments, and payment history. Missing documents — especially a missing original note or broken assignment chain — can create serious enforceability issues and should be reflected in your bid price.

Mortgage Note Pricing: What Determines the Price?

Mortgage notes do not trade on an exchange with standardized pricing. Every transaction is a negotiation influenced by the specific characteristics of the loan, the property, the borrower, and the broader market. Understanding the pricing mechanics helps you identify opportunities and avoid overpaying.

The foundation of note pricing is the discount to face value. A performing note with strong payment history might trade at 85 to 95 cents on the dollar. A non-performing first lien with equity might trade at 40 to 70 cents. A non-performing second lien with limited equity might trade at 5 to 20 cents. The discount reflects the risk, effort, and time required to convert the note into a return.

The bid-ask spread — the gap between what sellers want and what buyers will pay — varies by market conditions. In a buyer's market with ample inventory, spreads widen and buyers have leverage. When inventory is tight, spreads compress and sellers command higher prices. Understanding where the market sits at any given time helps calibrate your bids.

Lien position has an outsized impact on pricing. First liens carry priority and multiple resolution paths, so they trade at significantly higher prices than second liens. A non-performing first lien at 55 cents on a $100,000 UPB costs $55,000. A non-performing second lien at 10 cents on the same UPB costs $10,000. The second is cheaper because the risk of total loss is higher — if the first forecloses, the second may recover nothing.

Equity is the other major pricing driver. The more equity in the property relative to total debt, the more valuable the note — because there is more recoverable value backing the investment. A note with strong equity commands a premium; a note on an underwater property trades at a steep discount or may be unsaleable.

State risk also factors into pricing. Notes in judicial foreclosure states with two-to-three-year timelines trade at lower prices than comparable notes in non-judicial states where resolution can happen in months. Borrower situation — active bankruptcy, occupancy status, willingness to communicate — further adjusts pricing. And the completeness of the collateral file matters: missing documents mean additional cost and risk, which should translate to a lower bid.

Due Diligence Checklist for Buying Mortgage Notes

Due diligence is where note deals are won or lost. Skipping steps to save a few hundred dollars on a $30,000 investment is a false economy. Here is the complete checklist:

1. Title search. Confirm lien position, identify all encumbrances, check for judgments, lis pendens, and other liens. This is non-negotiable — a title search reveals whether the note you think you are buying is actually what the seller is selling. Order title insurance for additional protection on larger investments.
2. Property valuation (BPO or appraisal). Get a current, independent property valuation. A BPO costs $75 to $150 and is sufficient for most note purchases. A full appraisal ($300 to $500) is warranted for higher-value first liens or when you need a more defensible valuation. Never rely on the seller's property value estimates.
3. Collateral file review. Verify the file contains the original promissory note (or a certified copy with lost note affidavit), mortgage or deed of trust, all recorded assignments forming a complete chain, and the allonge or endorsement transferring the note. Missing collateral documents create enforceability risk.
4. Payment history review. Examine the full payment history from the servicer. Look for patterns: when did the borrower stop paying? Were there prior modifications or workout attempts? How much is owed in arrears? This data informs both your bid price and your resolution strategy.
5. Borrower status (bankruptcy and occupancy). Search federal bankruptcy records (PACER) to determine if the borrower has an active filing. A Chapter 13 or Chapter 7 case triggers an automatic stay that halts all collection activity. Verify occupancy — an owner-occupied property with an engaged borrower presents different resolution options than a vacant property.
6. O&E report (ownership and encumbrance). This detailed title history shows every recorded document affecting the property — transfers, liens, satisfactions, and encumbrances. An O&E report provides deeper insight than a standard title search and is recommended for notes with complex histories.
7. Tax, HOA, and lien search. Verify the property's tax status — delinquent taxes create a super-priority lien that can extinguish your mortgage. Check for HOA liens, municipal liens, code violations, and any other encumbrances that could affect recovery.
8. State-specific legal review. Every state has different foreclosure procedures, borrower notification requirements, and redemption periods. Consult with a real estate attorney licensed in the property's state before closing — especially if you are buying in a state where you have not previously invested.
9. Servicer setup. Before closing, confirm your loan servicer can board the note and begin servicing immediately after transfer. Identify any servicer restrictions based on the loan type or state. A smooth servicer transfer is critical to maintaining communication with the borrower and beginning resolution work without delay.

Budget $500 to $1,500 for full due diligence on a single note, depending on whether you order a BPO or full appraisal and the complexity of the title situation. On a $30,000 to $60,000 investment, this cost is trivial relative to the risk it mitigates.

The Note Buying Process: From Sourcing to Closing

Buying a mortgage note follows a structured process. Here is the typical lifecycle from finding a deal to beginning resolution work:

1. Source deals. Review tapes from sellers, brokers, and marketplaces. Use cherry-picking to identify the specific assets that match your investment criteria from larger pools. Focus on assets in states you understand and lien positions that align with your strategy.
2. Initial screening. Filter by UPB, geographic location, lien position, and loan-level data. Most experienced investors can screen a tape of 50 to 100 loans in an hour, quickly eliminating assets that do not fit their criteria and flagging the most promising candidates for deeper analysis.
3. Submit a bid. Once you have identified your target assets, submit a bid in cents on the dollar of UPB. Your bid reflects your assessment of the property value, equity position, resolution timeline, and target return. On marketplaces like FIXnotes, you can submit offers directly through the platform.
4. Due diligence period. After your bid is accepted, you typically have 7 to 30 days to complete due diligence. This is when you order your title search, property valuation, review the collateral file, and verify borrower status. If due diligence reveals material issues not disclosed in the tape data, you can renegotiate or walk away.
5. Negotiate final price. Due diligence findings often lead to price adjustments. Missing documents, title issues, undisclosed liens, or property values that differ from tape estimates are all legitimate reasons to renegotiate. The final price should reflect the actual condition of the asset, not the seller's original marketing.
6. Close the transaction. Closing involves executing the assignment of mortgage (which gets recorded with the county), the allonge or endorsement transferring the note, and wiring funds to the seller's escrow account or directly per the purchase agreement. Once funds clear and documents are executed, you own the note.
7. Servicer transfer. The seller's servicer transfers the loan data and documents to your servicer. Your servicer sends a hello/goodbye letter to the borrower notifying them of the change. This process typically takes 7 to 14 days and is critical — without it, the borrower does not know who owns the loan.
8. Begin resolution. With the note boarded on your servicer's system, work begins. For performing notes, you collect payments. For non-performing notes, your servicer initiates borrower outreach to explore resolution options: loan modification, discounted payoff, reinstatement, deed in lieu, short sale, or foreclosure as a last resort. The goal is always to find the resolution that maximizes your return while treating the borrower fairly — a process known as loss mitigation.

Your first note purchase will likely take 30 to 60 days from sourcing to closing. As you build relationships with sellers, servicers, and attorneys, the process accelerates. Experienced investors can evaluate, bid, and close on a note in two to three weeks.

Building a Note Buying Strategy

Success in note buying is not about finding one great deal — it is about building a repeatable system that consistently sources, evaluates, and closes notes that match your investment criteria. Here is how experienced buyers approach strategy:

Choose your niche. The note market is broad enough that specialization is an advantage. Some investors focus exclusively on performing notes for passive cash flow — buying notes at a discount to par and collecting monthly payments with minimal management. Others specialize in non-performing loans and earn returns through workouts: modifications, discounted payoffs, or deeds in lieu. Pick the approach that matches your capital, time availability, and appetite for active management.

Develop a geographic focus. Each state has different foreclosure laws, timelines, and costs. Learning the legal landscape in three to five states deeply is more effective than buying scattered notes across 20 states. Non-judicial states offer faster resolution timelines, while judicial states may have more available inventory at lower prices due to longer hold periods. Build relationships with attorneys, title companies, and property preservation contacts in your target states.

Scale from singles to pools. Start by buying individual notes to learn the process end to end. Once you can evaluate deals confidently and have vendor relationships in place, move to small pools of three to five notes for volume pricing advantages. The discount on a pool versus individual notes can be 5 to 15 percent — but you need the capital and operational capacity to manage multiple assets simultaneously.

Build your vendor team. Your results depend heavily on the quality of your vendors. At minimum, you need a licensed loan servicer who handles borrower communication, payment processing, and regulatory compliance. You need a title company for title searches and insurance. And you need a real estate attorney in every state where you invest. The best investors treat their vendors as partners, not commodities — paying fair prices, providing clear instructions, and maintaining consistent volume so they get priority service.

Track your returns. Measure every deal by its cash-on-cash return and yield — not just gross profit. Factor in all costs: purchase price, due diligence, legal fees, servicing fees, and carrying costs. Over time, your data will reveal which note types, states, and resolution strategies generate the best risk-adjusted returns for your operation. Let that data — not gut instinct — drive your buying decisions.

Stay disciplined on pricing. The biggest risk in note buying is overpaying. When inventory is tight and competition increases, the temptation is to stretch on price to win deals. Do not. Maintain your discount requirements and walk away from notes that do not meet your criteria. There will always be another tape, another deal, another opportunity. The investors who survive market cycles are the ones who buy right — not the ones who buy most.