Tweet
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?
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?
Comment