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Old 03-26-2016, 06:26 PM
jparkh81 jparkh81 is offline
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Default paying off debt with promissory notes

This may be an unusual question but I've run across a lot of people on the internet saying that you can potentially pay off a debt by writing a promissory note. They sight things like UCC laws and Bill of Exchange Act. As far as I understand the situation would go something like this:

You have a $100,000 traditional mortgage with say 25 years left to pay on it. You write a promissory note with the payoff amount that says you will pay it off with monthly payment of say $800. You give the bank the option to monetize the note by selling or trading it turning it into a negotiable instrument. These promissory notes can be sold or traded with an investor or to the market. Supposedly these are traded all the time. However, once sold or traded you are no longer obligated to fulfill the note and thus the mortgage is paid off.

I am looking for a banking executive or someone with expertise in this area to either validate this claim or tell me its false. Would or could a bank sell or trade a note like this. If they could I don't see why they wouldn't since they get their money all at once instead over 30 years but how would the note have any value to someone else since there would be no obligation once it is bought. The only way I can see someone buying it is if it is bundled together with a bunch of other notes and people buy the whole group at a time. Kind of like mutual funds or bonds that are made up of some good loans and they throw a bunch of bad loans in to get rid of them. Am I on the right track?
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Old 04-02-2016, 10:13 AM
Here2help Here2help is offline
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Default Re: paying off debt with promissory notes

Forgive me, I don't understand your question:

A loan is a promissory note.

You have promised to pay $800/mo payments for 25 years on an initial loan of $100,000.

You are the person paying whether or not bank XYZ sells off your loan to another bank or investor.

You still own whomever $800/mo for 25 years.

Banks sell of loans all of the time. Rarely are they the ones that hold on to the initial loans. Its a risk management thing with a bank. There was some loans before the bust where they were sold off so many times that the paperwork was not done properly where the it tied back to the original loan, nor the property. This is where some people were able to get out of foreclosure proceedings or not pay their debt.

After the whole 2008 mortgage bubble, things are all cross the "T" and dot the "I".
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Old 04-13-2016, 11:52 PM
micvanlen micvanlen is offline
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Default Re: paying off debt with promissory notes

The question isn't whether or not a bank could/would sell the note. The question is who the heck would buy it and why? When a bank, an institution that's in the business of lending money, tries to sell it's loans, that's a really bad sign about the borrower. Why would a buyer take on a risk that the bank isn't willing to take. I think this idea is dead on the vine.
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