Dealing with people can be tricky. Most especially when you are calling your borrowers about note deals. Scott breaks down the to-dos and what-not’s when doing your own borrower outreach. In this business, you will most likely be in the dilemma of choosing between “to call” or “not to call.” Either way, there are things you need to keep in mind when faced with these situations—from the legalities and authorization, up to the right kind of attitude when dealing with people. There is also the question of when not to waste your time with borrowers and why, at the end of it all, the best thing to do is not to call.
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Borrower Outreach: To Call or Not to Call?
Our topic is all about To Call or Not to Call? That is the question. I get phone calls all the time. I hear this all the time on the workshops. I also hear this at events and conferences and it comes down to the fact of people saying, “I want to make phone calls. I want to have that interaction with borrowers.” My overwhelmingly serious opinions about this is, “No, you don’t.” Most of the time, you don’t want to be talking to borrowers on the phone. You are not an expert. Unfortunately, we have a lot of people that can screw some stuff up because they think they want to be cool about it. I had a couple phone calls from borrowers. They’re like, “I got a phone call from a letter I sent out.” If the borrower is getting letters from the servicers they sure as hell know that they’re behind.
Most deadbeat borrowers know they’re behind and when they get a letter or a phone call from somebody else, they think it’s an opportunity often. That’s not always the case. Some borrowers are like, “I want to stay in my house. What do I have to do to stay there? I want to start paying.” We have about a 60% result when we send out, but we have a decade of experience. I’m not going to turn it over to my new person here in the office say, “You call the borrowers. She’s not going to know what the hell to do. If you’re brand new, you’re like, “What do I do?” If you have to ask “What will I do?” then you should not be calling. That should be the first rule.
If you don’t know what you’re doing, and you ask, “What do I need to do?” That’s the first sign. There are things that you have to do. You have to read the rights. “I’m a debt collector trying to collect a debt. Any information that you used in this call will be used to obtain that debt.” You’ve got to say that. If you don’t say that you’re in violation. Secondly, if you get the wife or the spouse or the girlfriend or the fiancé or the brother, a friend, whoever, if you don’t get your borrower on the phone and you haven’t gotten a release an authorization to release information to that person, you’re actually in violation as well. You can’t do that either. That’s the big no-no.
A lot of people like, “I’m just going to start talking to people.” What do you have to do to prove authorization? There should be a signed form. It’s like if you’re doing a short sale, that’s the first thing you need to present in the bank is to get the banks to give the permission to talk to you. Then of course, you’re verifying social security, maybe not the full social security but the last four, verifying birthday, verifying the address of the property. Those are things you have to ask every time. Another thing, you’ve got to be careful about stepping in because you can have too many chiefs, and not enough Indians.
Sometimes you need to be an Indian and shut up and not say anything and let the professionals handle it. That would be what my overwhelming advice. Turn it over to the professionals, the people that you’re paying to do this. The servicers, your special servicers, the people that have experience doing this. If you’re brand new, you don’t need to be calling. You’re not going to do anything better than the professionals can. All you’re going to do is end up causing grief because at some point, if that borrower’s smart enough and you’ve not read the Miranda or you’re in a state that requires you to be licensed or your servicers need to be licensed to talk to them in some cases. That opens up a Pandora’s Box plus taking off and use what you say against, they can say, “So and so said I could do this when they called the servicer or the special servicers call them,” then you have technically a note to triangle, not a love triangle, out there as well.
That can delay negotiations and trial payment plans. It is not a fun thing to do. My big advice is if you’re not prepared and you’re like, “What do I say?” if you’re asking that, you should not be doing it. There’s nothing wrong with sending a letter out to the borrowers. That’s a good thing, but you should have information in there where they can get a hold of somebody and that should either be to your servicer or to your special servicer or to your foreclosing attorney. The attorney you’ve got in mind to handle that. You don’t want to be involved because if you’re involved, you slow everything down. There are some people like, “Scott, I want to be involved. I want to get a letter out in the first week or two because my servicer takes forever to do a transfer.” I get that. I understand that. You still got to say you can confuse the borrower more so than you expect it. You still got to say, “I’m trying to collect on a debt. The information you provide can be used to collect that debt.” You still got to issue that you still got to get approval, authorization. You can’t say they’re shy, “My mother’s sick. I still got to get something. Can you fax that in? Can you email it in to me?” That authorization to release information to that one party? That’s a big no-no. The reason you want that is it’s a CYA, Cover Your Ass.
You have to show up or did you release information to a stranger or a third party? You don’t want to do that. I had a tenant call me. They’d gotten some letters. They tracked down the lender like, “I know my landlord’s not paying the mortgage.” and I’m like, “I’m sorry, Sir. I can’t release that information. I appreciate that. If and when we are foreclosing, I don’t know. If we are, I can’t release that information to you. If whether he is on time or not on time. What I can do is if you’d like to, shoot me an email with the information that comes to the point where we can actually talk. Then I’ll give you a phone call.” You can’t release information, you end up screwing too much stuff up that your attorney is doing because you want it to hold that fire up.
You want them dealing with your Bulldog, not with your Chihuahua because most of you are Chihuahuas when it comes to talking. A lot of talk but then when somebody’s in it you’re going to cower behind, “I don’t know what to do. I’m scared.” If you’ve got to experience talking, you’ve done negotiations with banks, you come from a short sale background and you’re not afraid to talk to borrowers, that’s a different story. Many people are afraid to talk. I would not be calling after 8 PM and I wouldn’t be calling before 9:00 AM as well too. If they attorney up, then you’re stuck talking to the attorney or then at that point, just having your attorney to talk to them.
The thing is be careful of making phone calls. Be careful of being the person that has to touch everything because if you have to touch everything, you then become the bottleneck with a lot of things. In some cases, it’s good. I’ll give an example. Somebody called me saying, “The borrower, what if they want to make a payment?” I’m like, “If they want to make a payment, that’s great. If you’re a servicer who doesn’t have all the information from the previous servicer setup in their system yet they can’t accept the payment yet. One thing that we have done is, “Mr. or Mrs. Borrower,” especially if you’ve got somebody on the phone that it wants to make a payment or has money to make a payment. “It’s still going to be probably a week or two before they can set up in the system.
What I’d like you to do, if you’ve got money there, you need to get out. Go down and write me a check or a money order. I want you to make it out to my servicer.” In this case we said, “Make the check out to Madison Management. I know they can’t accept it yet, but send me your loan number, send me the full address and either send it into them or you can send it to me. Once it’s up in the system, we’ll mail the payment in directly to Madison.” We have done that a couple of situations in states that allow that. Not every state requires you to have a debt collector’s license to talk with your borrowers. Texas is one of those where you could self-service if you want to. I do not recommend this.
Do not self-service your own loans. People are like, “That’s $20 to $90 that I most likely losing.” If you’re not an attorney, you shouldn’t be talking to people. If you’re an attorney, then you have a different set of circumstances. You’ve got different things you can do but if you’re not an attorney or not an ex-attorney, you honestly shouldn’t be doing that. You’re like, “Here’s where you need to call. Here’s what is going on.” Very informational aspect of them. You don’t want them to call or email. That should be the last person they call. You want them calling the servicer or your attorney. Those are the two most important you need to have on your team, servicing company and attorney. That’s the most important thing and find out ease of access. Where does the bar you need to go?
Put anything under the letter. Put down the website, put down the 1-800 number, put down your account number if you’ve got it with a new servicer, but if that’s been transferred over you don’t have that yet. You’ll often have borrowers that are in limbo. They want to make a payment, but their old servicer isn’t accepting payments and the new servicer hasn’t yet set them up in the system. There’s always that limbo. The beautiful thing is often your servicers can take phone calls or they can send emails. “We talked to the such and such borrower,” that’s the thing. The most critical time is a time that you buy between the time that servicing gets transferred. That can be two weeks to a month sometimes. You’ve got to be very careful with that, otherwise you could be stepping in poo and you don’t want to do that. Somebody asked me that. “Scott, I want to set the trial payment plans. If I’ve got a borrower willing to do a deed in lieu with me or a cancellation of contract, I’d like to talk with them or like offer up the Cash for Keys.”
You can create a very pretty simple trial payment plan. It doesn’t mean anything fancy. If you get a borrower calls you, it’s like a two-page, three-page and a servicer will provide that, some people will do that. We create our own here and it’s something we have the borrower sign off on. Don’t get it notarized. Don’t waste the time, all they do sign it, fill out, when you come to an agreement of you’re going to make your first payment this month and the such and such date. This payment this month, if more than three days late, it’s a cancellation of your trial payment plan and we will go straight to foreclosure. You’ve got plans where you send those out, people will sign them and send it back or they won’t.
Some people will start making payments. In some situations, we’ve had borrowers make six months of payments at one time because they didn’t talk to us, but they went out and started making payments, which is great. They’re still default, so it’s up to you as a decision maker. Do I want to keep them in the house or do I want to go one person who was the absolute ass? He was actually rude cussing. When you get those, don’t want to deal with those. That’s the time to definitely not waste your time with them and then turn those over to the servicer. I will not talk to this person. Let’s get that eviction letter. Let get a cancellation of contract letter written and sent out or that 30-day demand letter with exactly what they owe and move on from there.
Let The Experts Do It
That’s a couple of things I would highly recommend you look at doing when you’re buying assets. That’s the thing to call or not to call? That is the question. In most situations, you should not be calling. Let the experts do it, let them take care of it and go from there. I know that some love the idea, “I want to send my borrower a text message to let them know when mortgage is due. Some people like, “I want to do a slight dial.” “Your mortgage payment’s due.” You can do that, too if you want to. I don’t like to recommend it. We’re all adults here and if you have to do extra work to get the borrower to mail a payment and be productive and stay in their house, they probably should not be in the house to begin with.
I’m a big advocate in sending out my own hello letters. The seller should provide the hello letters. Sometimes, the sellers aren’t you doing that, unlike contract for deed, sellers aren’t providing those hello and goodbye letters. They’re not doing it. Your servicer needs to see that so they can identify, “How do I need to edit my hello letter?” Madison is like, “Do you approve our hello letters?” “Yes.” NAA or whoever the servicer is, FCI, do you approve these goodbye letters?” “Yes. That’s accurate information.” Who they need to talk to, when they can call, payment arrangements, that stuff, that’s a transition letter. If you’ve ever had a mortgage, if it’s been sold, you’ve got a hello and goodbye letter. In some situations, you’ll buy a note and the servicers have goofed up on the payment history and it’s a performing note. They’ve been paying on time or maybe they’re still behind a year because they were behind by two years now. They got back up, but they’re still behind but they’re paying on time for the last twelve months. At that point, you can almost adjust some things and turn it into a reperforming note and sell it off at that point. We’re starting to see people starting to buy performing notes that have been paying for six months, for twelve months.
Promises Aren’t Promises Unless They’re Written Down
It’s important, too, if you’re buying a note and the borrower comes and says, “Such and such promised me this.” Promises aren’t promises unless they’re written down. That’s one thing you have to look at is if you’ve got copies of that or the borrowers go, “I’ve been making payments. What do you mean I’m not on time?” Basic information we provided you were on time, do you have copies of your payments? Do you have copy of your stubs? You have canceled checks. What do you have to prove that you pay? You got to hold on those receipts. If you don’t have the receipts, then I can’t approve you of anything. That’s important to keep in mind. I’ve got to give you a credit to Matt over at Singer Law Group. Matt sends me an email that says, “Here’s what I’ve got the borrower to approve to do. Do you agree with this?” I’ll say, “Yes, I’m good with that.” They’ll sign off on this payment plan. Then they send it to Madison. Madison has a copy of that so they know what to expect when the borrower calls them.
Trial Payment Plans
That’s one big thing. Your trial payment plans, if you are getting borrowers to sign off on those, make sure you keep a copy of those and get those over to your servicer so they know what agreement you’ve agreed to. They can talk with your asset manager and, the servicer and they know, “What’s this? What’s that? What’s this payment go to?” People asked me, “We have this payment, what’s that mean?” I’m like, “Here’s the situation, did you not check the TPP that we sent over to you?” “No, I didn’t.” “Check it and I guarantee you that outlines everything.” You don’t want to get a fair debt collecting action against you. You don’t want the borrower sue you for not being accurate or harassing. Never ever cuss at your borrowers either.
If they cuss back at you, the best thing I can tell you because we had this happen multiple times and I’ll get on the phone and I’m like, “Mr. or Mrs. Smith, cussing at me is not going to help. If you’re going to be unprofessional like that, I can very easily get my attorney involved and you can deal with him.” The idea is to have a conversation. What happened? If you are going to call, “What happened? Did you lose your job? Did the grandma got run over by a reindeer? Did your dog die? Did your wife, husband, whatever passed away, get sick? What the heck happened? Tell me the story so I can see what goes on.”
Come To An Agreement ASAP
Somebody asked me, “Don’t you want me to fill out like financials?” I’m not a big believer in financials because they end up going to be probably going to lie about it to begin with. They’re going to probably adjust it. One of the big things I know that a lot of people have done if they’re talking with people and you get the one spouse talking about it, and often get them back and another spouse on and talking about the financials as well. A lot of times those numbers will be wrong. I’m a big advocate of those, let’s come to an agreement ASAP. I have to send out financials to you for you to fill out and send back to me. I know people are used to that with short sales going up, but let’s get into an agreement and get it done. “Can you start paying your existing payment? Yes or no?” “Are you living in the property? Yes or no?” If they say no, they’re not living in it. They’re probably not going to pay.
Are you working? Yes or no? Can you start making your existing payment? Yes or no? Let’s get you reinstated. What can you bring extra to the table towards the twelve months that you’re behind? The six months behind the two years are behind?” It’s got to be something. How much extra can you pay? They get caught up with that. Got to be a lump sum. If you don’t get a lump sum of some sort, it’s probably not going to stay re-performing. It’s probably going to end up failing again. There are situations where the borrower pays two months ahead. Let me know that you’re making two months of the payment at the time, so if they’re making extra so we can adjust this the second amount after the extra amount towards next month. They’re like, “I wanted to make an extra payment because I know going to be short.” We’ll credit that extra towards this month. I was pretty excited, “We got some extras coming in.”
The Most Important Thing Is Conversation
The most important thing is conversation. Treat people with respect even though they don’t treat you with respect. If you do talk to him and they get ugly, it’s best to nip it in the butt and say, “I’ll have you talk to my attorney.” Turn it over to the experts because your time is worth a lot more than what you’re doing. Especially if you’re working fulltime at another job, you shouldn’t be calling on. You don’t have the time to do it. Trying to do that in between lunch breaks or after hours, before hours is not a smart thing to do everybody. It’s a horrible thing to do and you can end up in a lot of trouble if somebody gets word of it.
I’ve heard of situations where people were calling and stuff like that and they had a bunch of assets in an area and one person finding an attorney and the attorney went out and found other borrowers are default and then when he went out and got all the other people to sign up trying to fight you, and then you’re in court doing something that you shouldn’t have been done to begin with trying to save $90 or $100 in the frontend. Having asset managers at your servicers, special servicing guys or gals to make phone calls on your behalf to do borrower reach out is what you want. There’s nothing wrong with getting on the phone with the asset managers and having a weekly conference call every two weeks. “What do you need? What are you missing? How are we doing with these assets?”
You should be doing that. You’ve got to dictate where they’re going. You’ve got to give them some direction to make things happen and if they don’t have any direction, they’re not going to make a decision for you. They’ll sit there in limbo waiting for you to decide something and then you’re going to be stuck shock and not be able to do it. Hopefully that makes sense. There have been times when I’ve had the staff that we did it. We had a good staff that had experience in borrower reach out. There are other times when that staff left that we had to turn it over to our special people. Some are good, some are better.
If you have people in your office that are doing this, hired they’re doing it, trust me at some point they’re going to get burned out and talking to people. It’s rough sometimes talking with people. You have great people, you have bad people. There’s a whole gambit of good borrowers, bad borrowers, and everybody in between. The people that you can help are awesome, but then the people that are horrible, ugly, you turn it over to somebody else, swap it off and go from there. Best thing I can tell you is you get people calling you and wanting to help you and reaching out to you, be careful. Make sure, “Let’s talk about this. Let’s get a form signed and get an email, or fax it back to me or if you’ve been making payments and then, I need copies of your checks and cancel stubs. If you don’t have those. I’m sorry, I have nothing to prove. There’s no proof that you made a payment.”
Always make sure if you do talk to borrowers and they start sending in money orders or cashier’s checks or whatever checks to you, make sure they put the address and the account number under the loan number. The reason you want both is if it’s going from like say NAA to Madison, they may run different account numbers. They don’t put the address on there, there’s nothing to track it down by. Yes, the borrower’s last name is good, but that’s not always legible. Some people are having making payments on behalf of other people. Always have them put the address and then their account number on it or the borrower’s name, if they’re making it on behalf of somebody. Be careful about that. Be smart, get on the phone.
Asset Managers Are Awesome
Most of the special service and people that I talked to, the asset managers are awesome. They’re glad to tell you their mentality, how they approach things and you’re not always going to get the notes. Some people are like, “I want the notes.” It doesn’t make sense to get the notes. You’re not going to do anything with it anyway. Just spend times, schedule conference calls every two weeks or every three weeks, at least once a month with your asset managers and go from there. Most of them are phenomenal people and are worth their weight in salt and they spend day–after-day making phone calls to borrowers. Some are good, some are bad, some are downright ugly. Best thing you can do, find out what type of alcohol or thing that your asset manager likes at the servicer or your special servicer and send them a bottle. It goes a long way in helping them push your assets files to the top of things that are getting done.
If you’ve got one, two, three files, don’t expect a weekly update from your servicers or your special servicers. They’ll have a day for it once a month. You got three files. They’re dealing with other people’s files. It’s not saying your files are not important, but understanding where they come. If you call them every week, you’re likely to get booted off their system and unfriended and had your files to return to you as you get cancelled. If you only got one or two files, let’s put it in professional hands. Let them get rocking through it. I know some people are like, “This person is horrible.” Yes, I agree but little things get off and be done very easily with a phone call, letter, all that stuff. Sometimes you need to send a letter and have them directed to call somebody. If the borrower’s not checking their mail or they’re deceased and their family gets around and doing it. That’s something that has happened on some our files.
That’s all I’ve got for you guys. I think it’s important. If you aren’t comfortable in that, turn it over to somebody else to do. Don’t be doing it. Pay the cost to do it. If you don’t have the cost to do it, you either overpaid or you didn’t get enough money funded. If you are dealing with little bits of money, you may want to reach out to investors, say, “I know that you are closing deals. I don’t have enough money to buy a deal, but how about I helped provide some special servicing costs or I loan you the $10,000 or $5,000 for a rehab loan on the property and in the second lien position or something like that.” Those are some things you want to get some money involved and still get going. You’re not going to get 50% of the deal, but a pretty decent return and maybe a way for you to help listen and learn from your investors or your JV partners were the servicers as well. Go out and make something happen.
Note CAMP 6.0 is coming up. We’re excited to have Laughlin, Quest IRA back as two of our sponsors. It’s always an honor to have them here and be a big part of Note CAMP 6.0. We’re doing something different. The reason I talked about this little bit of legal workout is at Note CAMP 6.0, we obviously have 30 plus speakers in two different rooms providing different topics. This time around, we’re going to do something a little bit different. We’re doing more of the Note CAMP labs aspect of things. What do I mean by that? What I mean by Note CAMP labs is one of the great things we will be doing is we are bringing on experts to provide deep dives into specific subjects like bankruptcy workouts, legal asset protection, collateral breakdown, business systems. We are really going to dive deep into the things that you are looking for.
One of the things we are working up as well is we’re going to bring on attorneys that are licensed in most of the space that you are seeing deals in and have them talk for 30 minutes. If you are buying assets, we’re going to bring an attorney licensed in most states and have them talk. I want to let you know, it’s half priced. We have a half price promotion going on right now for Note CAMP Live. You get 50% off tickets. The price is a little bit up this year. Instead of $397, it’s $599 because we’re doing a lot more deep dives and some various stuff as well.
For those interested in owner-financing and looking for that, we have more owner financing this time around. I’m putting together a list of all the licensed originators for you across the country so that we will have a master list that can do stuff in multiple states for you as well. Go to NoteCAMP.live. Use your half off. Early birds’ special coupon and we’re pretty stoked about that as well. Otherwise, go out and make something happen. We look forward to hopefully seeing you at Note CAMP Live. Kudos to those who are out making something happen. Have a great day and we’ll see you all at the top.