Virtual Online Meeting!
Hypothecating notes has become a “Thing” lately—and it’s a thing that a lot of lenders are REGRETTING just recently.
In case you don’t know, a hypothecation is using a note and its security instrument as collateral for a loan. It’s like borrowing against a property, except that instead of real estate being collateral, it’s the note + security instrument that’s the collateral.
In English: A has a $100,000 note that he’s collecting payments on. He wants some cash, so he goes to B and borrows $50,000 cash against the NOTE, agreeing to make B payments at a certain rate of interest and ultimately pay off the note against the note.
And if A doesn’t make those payments? Well, in theory, B can “foreclose”—that is, take full assignment of the note that’s the security, and collect the payments from the borrower on THAT note, or if the problem is that that borrower isn’t paying, foreclose on the property for repayment.
What could possibly go wrong. Other than everything, if the hypothecator and the hypothicatee don’t BOTH understand things like:
- What documents protect a lender when the collateral is “paper”?
- What best practices matter most?
- What makes a hypothecation a good investment – or a bad one?
At the January 22nd Nothing but Notes meeting, we’ll try to make sure you truly understand hypothecations (they’re NOT the same as ‘partials”, no matter what the person trying to sell you this “passive investment” tells you…) and walk through how to set up hypothecations the right way, so the lender is protected, the paperwork is solid, and the deal holds up even if things don’t go as expected.
Don’t guess your way through these deals. We’ll show you how to avoid common mistakes that cause problems later.
What we’ll cover:
- How to structure a hypothecation with the right documents so the lender is truly secured
- How hypothecation loans can give lenders two layers of protection
- What to look at when judging the collateral: the property, the payer, and the paperwork
- Using escrow to protect the lender
- The importance of loan servicing
Join us and learn how to structure hypothecations that protect stakeholders and stand up under pressure.