Note Sale Agreement (Note Purchase Agreement)
The contract that governs the sale of a mortgage note — setting the price, the documents to be delivered, representations, and closing terms.
A note sale agreement — also called a note purchase agreement or assignment-and-sale agreement — is the contract that governs the sale of a mortgage note from the seller to the note buyer. It sets the price, the conditions to closing, what each party promises (representations and warranties), and how the collateral file and funds will change hands. It is the document that turns an accepted quote into a binding, enforceable transaction, and it is worth understanding before you sign.
What a note sale agreement covers
A typical agreement addresses:
- The note being sold — identified by borrower, property, balance, rate, and terms
- Purchase price — the agreed dollar amount, and whether it is firm or subject to due-diligence findings
- Documents to be delivered — the original promissory note with endorsement/allonge, the recorded mortgage/deed of trust, and all assignments
- Representations and warranties — the seller's statements that the note is valid, owned free of undisclosed liens, accurately described, and (where relevant) originated in compliance with applicable law
- Conditions to closing — clear title, acceptable valuation, verified payment history
- Proration and closing mechanics — including accrued interest proration and the escrow process
- Recourse / buyback provisions — what happens if a representation turns out to be false
Representations and warranties: read these closely
The representations are the heart of the seller's risk. By signing, you are typically affirming facts like: you own the note, the balance and terms are accurate, there are no undisclosed defaults or side agreements, the lien is in the stated position, and the note was lawfully originated. If one of these proves untrue, the agreement may give the buyer a remedy — commonly a price adjustment or a buyback (you repurchase the note). This is why accurate disclosure during diligence is so important: the agreement holds you to what you represented.
Whole sale vs. partial sale
The structure differs by deal:
- A whole-note sale transfers the entire note and all future payments.
- A partial purchase sells only a defined set of payments, so the agreement also specifies the reversion — when and how the note returns to you.
What to look for as a seller
- Is the price firm or can it be reduced after diligence — and on what grounds?
- What exactly am I representing, and could any of it be wrong?
- What are the buyback triggers, and how long do they last?
- Who pays closing costs (title, recording, servicing transfer)?
- How and when do I get paid — funds released from escrow on recording?
A reputable buyer uses a clear, fair agreement and will explain each provision. Mortgage Note Capital aims for straightforward terms and a clean closing; if anything in an agreement is unclear, ask before signing, and consider having your own advisor review larger transactions.