A mortgage note popped up for sale on my Facebook feed. I knew that note. And I knew the person selling it didn't own it.
The post that didn't add up
Months earlier, I had looked at this same note. A hedge fund owned it and was trying to sell it. The borrower had stopped paying, so the fund was foreclosing.
Then the note showed up in a Facebook post. A man I'd never heard of was offering it for sale, with his name and phone number attached.
Something felt off. So I picked up the phone.
I called the real owner
I called my contact at the hedge fund. He told me two things:
- They still owned the note. They were still in the middle of the foreclosure.
- He had no idea who the man in the post was.
Maybe that man was working with the homeowner to sell the house. That's possible. But he didn't own the note, and he had no right to sell it. One phone call told me what a nice-looking post never would.
How to check who you're dealing with
Here's what I'd do with anyone selling you a note, or asking you to lend them money:
- Search their name and phone number. Put both into Google. See what else that person has been involved in.
- Match the name to the number. Make sure they go together. Scammers often use numbers that tie to someone else.
- Look them up at the county clerk of courts. If you know what county they work in, search their name in the court records. You'll be surprised what shows up: lawsuits, judgments, foreclosures, and more.
- Call the owner of record. If you know or can find who really owns the note, ask them. That's how I caught this one.
More checks before money changes hands
- Check the county records. The mortgage and every assignment of it are usually recorded with the county. The chain should end with the person selling to you.
- Ask for the collateral file. That's the original note, any allonges, and the assignments. A real owner can show you.
- Confirm with the servicer. The company collecting payments knows who it works for.
- Close through a title company or attorney. Never wire money straight to someone you found online.
- Slow down when you feel rushed. "Other buyers are lined up" is a pressure tactic. A real deal survives a few phone calls.
Why this matters if you're a lender
The same rules apply when someone asks you to lend them money. Who are they? What does the public record say about them? Can they show you the documents behind the deal?
If they can't, or won't, walk away. Anyone you lend to should welcome these questions. I do.
General education, not legal or investment advice. All investing has risk, including loss of principal.