Sell non-performing notes.As is, disclosed, through escrow.
Lender Capital lets private and hard money lenders sell sub-performing and non-performing first-lien, business-purpose loans they originated. You disclose the default in full, capital partners that buy distressed loans review the file, and one buys the whole loan as is, through an escrow agent.
Key takeaways
- Private and hard money lenders can sell sub-performing and non-performing loans they originated and funded: whole, first-lien, business-purpose loans that are or were delinquent, past maturity or in default.
- You disclose the default in full: the payment history, the default date, the enforcement status (notices, acceleration, foreclosure, bankruptcy, forbearance or workout), the servicing notes and every default document you have.
- The buyer buys as is, subject to what you disclosed. There is no buyback for the disclosed default; your other promises (ownership, first lien, title insurance, accurate information, no fraud) still apply in full.
- Non-performing loans go only to capital partners that buy them. Prices are usually at a discount to the unpaid balance; you set an asking price and agree the final price with the buyer.
- Same sale fee as any loan sale: 0.75% of the purchased balance (Preferred 0.50%), $2,500 minimum, only if the sale settles through escrow. One payer per deal: you, or the buyer if the loan is listed buyer-paid.
Sub-performing or non-performing: what's the difference here?
The purchase agreement every lender signs uses three statuses for a loan sold after funding:
- Performing: no payment is or has ever been more than 29 days past due, and no default exists. See sell performing notes.
- Sub-performing: a payment is or has been more than 29 days past due, but the loan isn't in default. A re-performing loan, current again after a delinquency, is sold this way, with its history disclosed.
- Non-performing: the loan is in default: a payment default, a maturity default or any other event of default under the loan documents.
The status is set when you list the loan and printed on the purchase confirmation, so you and the buyer agree on what is being sold. See non-performing note and sub-performing note.
What you disclose
- The payment history: every payment due, paid, late or missed
- The date of default, and the current default and enforcement status
- Any notice of default, acceleration, foreclosure filing, sale date, borrower bankruptcy, forbearance or workout
- The servicing notes, and every default or enforcement document you hold
Everything you deliver through the platform before the buyer accepts becomes the disclosed default information, listed in the purchase confirmation. You promise it is true, complete and not misleading, and that you handed over every default and enforcement document you have.
As is: what that means for you and the buyer
A distressed loan sells at a discount because the buyer takes the default risk. So, for a sub-performing or non-performing loan:
- The buyer buys as is, subject to the disclosed default, after reviewing it.
- There is no buyback, cure or indemnity for the disclosed default, its payment history or what follows from it: the cost or result of a foreclosure, a borrower bankruptcy or a fall in the property's value. The early payment default protection doesn't apply.
- Your promises about the "no default", collateral condition, taxes and liens and litigation cover only what you didn't disclose.
- Every other promise applies in full: accurate information, ownership, business purpose, compliance at origination, licensing, enforceability, first lien, title insurance and no fraud, with the usual remedies if one is broken.
- From settlement the buyer makes every enforcement decision. If you keep servicing, you carry those decisions out under the default procedures in the purchase agreement.
How are non-performing notes priced?
A buyer of a non-performing note is pricing a recovery: what the property is worth, what a payoff, modification, deed in lieu or foreclosure would bring, how long it takes and what it costs. That usually means a discount to the unpaid principal balance, deeper the further the loan is from a cure. Sub-performing loans usually price between performing and non-performing ones. You set an asking price as a percentage of the balance; the final price is the one you and the buying capital partner agree. Lender Capital doesn't publish loan prices.
Who buys them?
Capital partners that buy distressed loans: credit funds, family offices and investors that work out or foreclose on loans as part of their strategy. A non-performing loan goes only to capital partners that have opted in to buying non-performing loans and whose criteria it fits; a sub-performing loan goes to every partner it fits. Each reviews the full file, including the disclosure, before committing. Lender Capital never buys loans with its own money: capital partners buy loans through Lender Capital. For the wider market, see the note buyers guide.
Sell a distressed loan.Disclosed, whole, through escrow.
- 01
Apply as a lender
Lender Capital reviews your lending business once: track record, underwriting and the licenses your states require.
- 02
Submit the loan with its status
Choose “Sell a loan I already funded”, mark it sub-performing or non-performing, and enter the default date, default stage, payment history and servicing notes.
- 03
Disclose the default
Upload the payment history, notices of default, any foreclosure filing and the rest of the file, and confirm the disclosure. The buyer sees it before it can commit.
- 04
Matched to buyers who opt in
A non-performing loan goes only to capital partners that buy non-performing loans and whose criteria it fits. A sub-performing loan goes to every partner it fits.
- 05
Settle through escrow
A capital partner commits to buy the whole loan as is. It funds the escrow agent; you deliver the endorsed note, the assignment and the default documents, and receive the proceeds.
What does it cost?
The same sale fee as any loan sale: 0.75% of the purchased balance (0.50% for Preferred lenders), with a $2,500 minimum, paid through the escrow agent at settlement and only if the sale settles. There is one fee and one payer per deal: you pay it by default, or you can list the loan as buyer-paid, in which case the buying capital partner pays it on top of the price. Both sides see who pays and the dollar amount before either accepts.
What isn't handled
- Foreclosed property (REO): loans are sold, not real estate
- Second or other junior liens
- Consumer or owner-occupied loans
- Participations or partial interests
- Loans not originated by a lender: seller-financed or carry-back notes from individuals, and land contracts (contracts for deed)
- Land and purely commercial property (not on the current platform list)
Frequently asked questions
Can a private lender sell a non-performing note?
Yes. On Lender Capital, approved private and hard money lenders sell whole, first-lien, business-purpose loans they originated, including sub-performing and non-performing ones. The default is disclosed in full, capital partners that buy non-performing loans review the file, and one buys the whole loan as is, through an escrow agent.
What is the difference between sub-performing and non-performing?
In Lender Capital’s purchase agreement, a sub-performing loan has had a payment more than 29 days past due but is not in default; a non-performing loan is in default, including a payment or maturity default. A re-performing loan is sold as sub-performing, with its history disclosed.
Do I have to buy the loan back if the borrower keeps not paying?
Not for the default you disclosed. A sub-performing or non-performing loan is sold as is, subject to the disclosed default information: there is no buyback, cure or indemnity for the disclosed default or what follows from it. Your other promises, such as ownership, first lien, title insurance, accurate information and no fraud, still apply.
What do I have to disclose?
The payment history, the date of default, the current default and enforcement status (notices, acceleration, foreclosure filing, sale date, bankruptcy, forbearance or workout), the servicing notes and every default and enforcement document you hold. The buyer sees it before it can commit.
Who buys non-performing notes on Lender Capital?
Capital partners that opt in to buying non-performing loans: credit funds, family offices and investors that work out distressed loans. A non-performing loan goes only to them; a sub-performing loan goes to every capital partner whose criteria it fits. Lender Capital never buys loans with its own money.
How are they priced?
Usually at a discount to the unpaid principal balance, reflecting what the buyer expects to recover, how long it takes and what it costs. You set an asking price as a percentage of the balance; the final price is the one you and the buyer agree.
What does it cost?
The same sale fee as any loan sale: 0.75% of the purchased balance (0.50% for Preferred lenders), $2,500 minimum, paid through escrow only if the sale settles. One payer per deal: the seller by default, or the buyer if the loan is listed buyer-paid.
Where Lender Capital fits
Lender Capital is a business-to-business capital platform for private lenders: capital partners fund whole first-lien, business-purpose real estate loans at closing or buy whole loans lenders have already funded, performing or not. Capital partners buy loans through Lender Capital; it never lends or buys loans with its own money.
Lender Capital is a business-to-business platform for lenders. Capital partners buy only loans originated by lenders through it; it does not work with borrowers or with individuals selling seller-financed or carry-back notes or land contracts, and it does not sell foreclosed property. This page is general information, not legal, tax or securities advice. Prices, terms and acceptance are set by each capital partner; confirm the terms of any sale, and your obligations as seller, with your counsel.
Sell a loan that stopped paying.
Apply once. Every lender is reviewed before submitting loans.