There is no substitute for diligence. One of my favorite verses from the book of Proverbs says, “The slothful man roasteth not that which he took in hunting: but the substance of a diligent man is precious.” (Proverbs 12:27)
In a note class I was attending, a friend of mine gave an example of an investor who bought a note, and after waiting four months, he had not yet received the collateral file. The investor finally began asking questions about where the missing information was. My friend teaching the class said he responded to this new investor by asking, “Why in the world did you wait four months to begin asking these questions?”
Yes, there is a bit of lag time that’s acceptable to wait for collateral files, but four months is totally unacceptable for you to wait before asking the party that sold you the note to submit the collateral file to you.
I’m beginning to see a growing and dangerous trend as more and more bottom-tier notes are entering the market. After tapes have been sifted and sorted at multiple levels, the leftovers that no one else wanted are being repackaged and pushed out in a new way attracting money from new and unsuspecting investors who do not know how to do their due diligence.
Please don’t let that be you! Doing a bad deal is worse than doing no deal at all.