To get even more education about note investing, check out the Paperstac Academy.

1. Mortgage Note: A legal document that outlines the terms and conditions of a loan, including the repayment schedule, interest rate, and collateral.

2. Note Investor: An individual or entity that invests in mortgage notes to generate income or seek returns.

3. Performing Note: A mortgage note where the borrower makes timely payments according to the agreed-upon terms.

4. Non-Performing Note (NPN): A mortgage note where the borrower has defaulted on payments or is significantly delinquent, typically 90 days or more.

5. Loan-to-Value (LTV) Ratio: The ratio of the loan amount to the appraised value of the underlying property. It is used to assess the risk associated with the loan.

6. Collateral: The property that serves as security for the mortgage note. In default, the lender can seize and sell the collateral to recover the outstanding balance.

7. Foreclosure is the legal process through which a lender takes possession of the collateral property due to a borrower's default. The property is typically sold at auction to satisfy the debt.

8. Due Diligence: Conducting thorough research and analysis to assess the risks and potential returns associated with an investment in mortgage notes.

9. Loan Servicer: A company responsible for collecting payments, managing borrower accounts, and handling administrative tasks for the lender or note investor.

10. Securitization: Bundling mortgage notes or other debt instruments together to create new securities backed by those assets. These securities can be sold to investors.

11. Discounted Payoff: A settlement arrangement where the note investor agrees to accept a lower payoff amount than the original loan balance, usually as an alternative to foreclosure.

12. First Lien Note: A mortgage note with the highest priority claim on the collateral property. In a foreclosure, the holder of the first lien note has the first right to the proceeds from the sale.

13. Second Lien Note: A mortgage note with a subordinate claim on the collateral property. In a foreclosure, the second lien note holder is paid from the remaining proceeds after the first lien note is satisfied.

14. Yield: The return on investment generated by a mortgage note. It is typically expressed as an annual percentage and considers the purchase price, payments received, and the note's remaining term.

15. Workout: An agreement between the lender or note investor and the borrower to modify the terms of the mortgage note to avoid foreclosure. Workouts can include loan modifications, repayment plans, or other arrangements.

16. Mortgage-Backed Securities (MBS): Securities created by pooling multiple mortgage notes and selling them to investors. Investors receive payments based on the cash flows generated by the underlying mortgage loans.

17. Note Servicing: The administrative tasks involved in managing a mortgage note, such as collecting payments, handling escrow, processing payoffs, and providing customer service to borrowers.

18. Due-on-Sale Clause: A provision in a mortgage note that allows the lender to demand full repayment if the borrower transfers ownership of the collateral property.

19. Balloon Payment: A large, lump-sum payment that becomes due at the end of a loan term. Balloon payments are commonly found in certain types of mortgage notes.

20. Default: The failure of a borrower to fulfill the obligations of a mortgage note, such as making timely payments. It can lead to foreclosure or other remedies by the lender.

21. Cash Flow is the amount of money generated by a mortgage note through regular payments from the borrower. Positive cash flow indicates that the payments received exceed the expenses of holding the note.

22. Servicing Fee: A fee paid to the loan servicer for managing the administrative tasks associated with the mortgage note, such as collecting payments and handling borrower communications.

23. Purchase Sale Agreement (PSA): A legal contract that outlines the terms and conditions of purchasing a mortgage note, including the purchase price, payment terms, and representations and warranties of the parties involved.

24. Note Valuation: The process of determining the current value of a mortgage note based on factors such as the remaining balance, interest rate, payment history, and market conditions.

25. Principal Balance: The outstanding amount of the loan, excluding interest and other fees. It represents the original loan amount minus the principal payments made by the borrower.

26. Credit Risk: The likelihood that the borrower will default on the mortgage note. It is assessed based on credit score, income stability, and past credit history.

27. Exit Strategy: A predetermined plan for selling or disposing of a mortgage note investment. It helps investors anticipate potential liquidity events and manage their investment portfolio.