Non-performing note
A non-performing note (or non-performing loan, NPL) is a loan in serious delinquency or default: the borrower has stopped paying, the loan is past maturity, or another default is uncured. Buyers price it on what they expect to recover, not on the note rate.
How non-performing notes are priced
A buyer of a non-performing note is buying a recovery: a payoff, a modification, a deed in lieu, a foreclosure or a sale of the property. It estimates the value of the collateral, the time and legal cost to get there, senior claims such as taxes, and the chance the borrower cures. The price is usually a discount to the unpaid balance that pays for that work and risk. Many lenders and buyers call a loan non-performing once payments are 90 days or more past due, but each agreement sets its own definition.
Public sellers sell such loans too; the FDIC, for example, sells performing and non-performing loans from failed banks by sealed bid.
Why it matters to a private lender
A private lender with a defaulted loan usually chooses between working it out, foreclosing, or selling the note to an investor who specializes in distressed loans. Each has a different cost and timeline; talk to counsel before selling a loan in default.
On Lender Capital
Lenders can sell non-performing loans through Lender Capital, as is: the default is disclosed in full (payment history, default date, enforcement status and documents), there is no buyback for the disclosed default, and the loan goes only to capital partners that buy non-performing loans. See sell non-performing notes. On Lender Capital, private and hard money lenders sell whole, first-lien, business-purpose loans they originated and funded, performing or not (no seller-financed notes or land contracts): a capital partner buys the entire loan and the sale settles through an escrow agent. Lender Capital never lends or buys loans with its own money. See sell your loans.
Where Lender Capital fits
Lender Capital places first-lien, business-purpose real estate loans with capital partners. You apply once, then submit each loan with the full file. We send it only to capital partners whose criteria it fits, one partner funds the whole loan at closing and it is assigned to them. You keep your points (less the placement fee), earn the spread above the partner’s rate and service the loan. You pay a placement fee only when a loan funds.
Lender Capital is a business-to-business platform. This page is general information, not legal, tax or securities advice. Terms of warehouse lines and other funding sources vary by provider; confirm them with each provider and your counsel.