Scott discusses on this episode the current borrower outreach that WCN has been up to and some of the stories from their reinstatements.
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We’re excited to have you today, lots of great stuff going on here in the WCN office. It’s our Friday episode. For today’s episode topic, Jen is carrying a big stack of paperwork. We started a little bit on Friday afternoon. Jen, what did you do Saturday afternoon?
Mailed out 71 letters to the borrowers in their homes.
Stuff we’ve listed recently closed in roughly the last 60 days. We closed on six in the end of May. We closed on 40 something in end of June and for July we closed another 23. In July, 20, because I think we’re more wrapped up for our third trade, so roughly 70 assets there. You guys did a great job of identifying these assets especially on the first big chunk of the 50. I was actually out of the office when that take came in that you guys looked at stuff. If you guys ever listened to our previous episode that we did on Funding Friday, one of the first three or four episodes, we talked about the break down process that we’ve looked into this list of contract for deeds that were sent over by a seller. We broke it down by a couple of things. Greg, what’s the first thing we looked at on that spreadsheet again for those that want a recap of it?
To see when the last payment was made.
As far as when? In the last five years, three years?
It was really six month but if it was within a year, we went ahead and kept it in the running.
If we looked at it, it narrowed the list of 400 down to 100. Then, you and Nicole looked at a lot of properties online. If it was ugly, we got rid of it. If it looked pretty decent, we kept it in the running. Then we submitted offers. Then we ended up getting how many approved back originally on that first hundred? About 60, if I remembered correctly, right?
Not approved right off the bat, we got counters. 40 got killed off immediately. We got back on 60. We reviewed more and dug into you and then countered back.
We settled in the 40 range of that first round. The second round we did, we ended up finalizing at the 23 that we just closed on a couple of weeks ago. The great thing about that though, Greg, you ran numbers on it that we pulled by the first dates. Then what do we do also? We figured what kind of returns do we look at? What kind of scenarios do we run as far as the assets considering that they’re owner-occupied?
We wanted 25% ROI with the current payments that they have listed there.
You just basically added a spreadsheet column in there, right?
Yes, and just multiply their payment times twelve and divided it by the purchase price.
That gave us a rough idea that we get these people to reinstate, then we can hopefully see at least around 20%, 25% yield on the money. You guys also did a really great job of internet sleuthing.
Facebook and then you guys also called the counties and talk to the power and water. You guys also had fun talking to realtors. We’re finalizing the stuff that we thought was occupied. We finalize what we thought would be good ROIs. Then we closed on them and then it’s been a little bit of process. What have we been waiting on?
Collateral files and deeds.
Now we finally got everything, we got the borrowers, we look at the soft collateral before we close. We get the collateral in. Then we put in simple reinstatement letters, our own hello letters out to the borrowers. We’ve been waiting on it basically to get everything in so we could feasibly look at their collateral files, really track down the borrowers’ more specific information. The collateral files that we’ve got electronically did not include everything that’s in the collateral files. What are some of the things that you guys are seeing in the collateral files that weren’t included in the soft copies?
One, we have the whole history of the loan as far as originating all the way back from different transitions. What was not in our soft collateral file is the reach out as far as their name. Basically, a lot of these people still have the same contact information as far as whenever they originated their loan. I have their name, their emergency contact, their phone number, their address, their spouse’s name.
Relatives as well, too? Property inspection reports and some of these as well, too?
Some of them, I have their place of employment. Some of them were self-employed, so that was easy to pick up on some information on there and verify what they are telling me when I’m talking to them now.
We sent out letters. A simple one-page letter, “We have bought your loan in the last 30 or 60 days.” We sent letters out Saturday. We print out the letters and pay for the stamps and they knocked it all out. Sending letters is not that hard to do anyway. You had phone calls already come Monday from people that were already calling off of the goodbye letters from Harbour and NAA, correct?
No, because NAA has not sent out goodbye letters. They were calling because they were trying to make their payment and NAA rejects their payment and send them to me.
That is different then. They have not sent out the goodbye letters yet?
Out of the 25 people we’ve talked to today, not a single person has received a letter from NAA saying that they no longer service their loan. I’m talking about the ones we purchased in May and June.
This tells you sometimes companies just don’t have their act together, where we could step in and make some great returns and stuff. Let’s talk about some of these opportunities. Today, how many voice messages did you have?
In the hour that I was in your office, I came back and I had eighteen voicemails and about 23 missed phone calls.
Not too bad, 23 missed phone calls, eighteen voice messages. You’ve been a very busy person today talking to all these borrowers, right?
Yes. By the end of today, I’ve talked to probably about 30 borrowers and we’ve probably had about 60 phone calls because some of them just don’t understand voicemail systems.
That’s good. Getting a 50% response rate roughly is what we’re seeing and you’re contacting them. You’re still making phone tag back and forth because you’re leaving messages and they’re calling you back and vice versa. Out of those so far, how many of those have shown interest in reinstating and wanted to stay in their house?
Every single one of them that I’ve talked to. Actually, we just added another one from the time that you left my office. We are up to twenty reinstatements today.
That’s pretty good. What are we finding though? We are finding that a lot of these people have been making payments according to what they’re telling you?
Based off the information that we received on the spreadsheet, it was saying that the most recent payments on a lot of these were January, February and March. I’ve talked to them and I’m already getting several emails with proof of their receipts. Last payments were made July, some are even more made on August even though NAA don’t even have the loan but they accepted the payment from the borrowers. NAA is going to be sending us a hefty check back on these.
Payments from July and August they’ve accepted on our behalf after we’ve already funded on the deal. That’s a great extra part of what we’ve got going on. Somebody has got a question online. The question asked is, “With the quitclaim deed, is that a deal closer? Should we buy a title policy?” We check title. Some of these that were still included in the due diligence files. Quitclaim deed, you see that happen a lot of times with contract for deeds where it’s a quitclaim deed from Harbour Portfolio to Inverse Ventures or Inverse Asset Fund or whatever. That’s just an easy way to transfer over. That’s not a show stopper.
The biggest thing that we looked at was borrower motivation. Do they want to stay in their home? Do they have some pride of ownership? That’s the biggest thing, these people are our biggest motivation. If they made payments in the last year, we’re assuming. In this case, I think we found a pretty good winning formula. In the conversations you’re having, Jen, those that didn’t know who to pay in August or July, they’re ready to make payments right now?
Yeah, they called flipping out. “I have a payment ready. I called them to make my payment. They wouldn’t accept my payment. I want to pay you.” Then we start having our conversation. Almost every single phone conversation has not started off very friendly.
Are they a little aggressive?
“I just got this letter from you. What do you mean? No one has told me you bought my loan. Why are you buying my loan? What does this mean for me now?” By the end of it, we’re getting payments. We’re getting emails. We’ve gotten a lot of good responses and a lot of good relationships started today. Granted, how much this actually goes through? Honestly, the people I’ve talked to have sincerely been very honest. They followed it up with their documentation to me. I had to admit for the most part, a lot of them have had a few choice things to say as far as what’s going on with their prior servicer. They like the fact that they’re actually having a contact directly to the owner of the loan as opposed to just going through some servicer. I told them, “We’re here basically to touch base and find out life happens. We have a phase as well. We go through the same struggles. We understand, let’s work on it together.”
I talked to one, he has been unemployed. He got in a car accident. He had broken both legs. He wasn’t able to work. He just started work three weeks ago. We have set up a payment and a system to where we’re going to work with him. It’s not going to be as much as what he should be paying but it’s also going to cover his minimum payment that he needs to do. We’re not going to have that extra, which is fine to begin with. But once we get him on track, then we’ll start working with him a little bit more until he’s back on track as far as his pay schedules since he’s back to work.
We are finding that many of these borrowers were making more than what we had on the spreadsheet.
Honestly, we’ve only had two that legitimately have not made payments since May. He was one of them as well another person. The person that I talked to, they mailed their payment literally yesterday. She’s already emailed me the receipt and said, “I’d literally just mailed this.” For the fact that it’s going through mail, then NAA will have it. We have that reflection. He’s the only that has not been making the payment since May and he can’t afford to pay extra. He can only do that minimal and we’ll be working on that as well.
That’s okay. Some people have been making modified payments or extra payments along the way. Their reinstatement or forbearance is coming to an end for the next month or two. Make your payment, we’ll keep you on the existing payment that you’re supposed to be on. Some people are just paying extra. They’re trying to get caught up. We’ll take the extra and keep you on time. Just show us the cancelled checks in the payment history so we see what’s going on. Nicole, somebody else asked another question?
“You’re doing borrower outreach. Do you have a mini-Miranda?”
Yes. Jen isn’t giving the mini-Miranda, “Yes, we’re a debt collector.” People calling us first and then we’re following up with that and Jen is repeating that with the script that I gave her. The beautiful thing about that is it’s always easy when people are calling you versus you having to call them and stuff like that. They know they’re calling in, very simple little quote that you got to give to make things happen so it’s not a bad idea. Especially if you’re doing this yourselves, that’s one thing, “I am a debt collector. Any information can be used to collect that debt,” and it goes from there.
Laura asked if we were servicing this in-house. We’re not servicing this in-house. We have the borrower outreach first and then we’ll be kicking over to our servicer and getting everything established based off of what I’ve talked to the borrowers with.
We’re not. We’ve got Madison Management on it. We’re also using ClearSpring as well. We’ve got a little bit of different portfolios with some of our vendors. That’s an easy conversation. You’re just picking up the phone, dropping an email over to Madison. You’re literally just going straight to Madison’s website too and downloading their payment information, where to mail the check, how to log in to that and send it out to the borrowers. Didn’t you have a borrower who was not able to email you for some reason?
I had a very lengthy and funny conversation with one of our borrowers. When I started asking her to provide me with her proof of receipts as well as I wanted to send her information where to make her payments and everything like that. She said that she didn’t have access to email and I was like, “What’s the best way?” She goes, “You can send it to me via Facebook.” We’re building the relationship here and all but no. I was like, “You have to have an email to log in to Facebook.” She’s like, “I never logged out of Facebook. I don’t remember what my email address is.” Then she logged out of Facebook and had a little bit of meltdown because she can’t remember her password to get back in. She had to log out so that she could see what her email address was for me to be able to email her. I sent an email to her and I’m waiting to see if she actually can open her email if she remembers that password.
One of the things with those types of clients, it might be best for us to literally overnight FedEx forms.
That’s my backup plan. I told her I would send the email and then she’ll have a paper mail to follow up with it just in case we couldn’t get in and settle just the email account.
That’s scary. I don’t think that one will be performing on time going forward but that’s okay.
Another question. “When you call out, how do you verify that you’re speaking to the actual borrower?”
When you’re making a phone call out, you got to ask a specific question. You use the mini-Miranda and then you ask some specific questions. “Can you verify your date of birth? Can you verify the last four of your Social?” Those are the easy things to verify that you’re dealing with the correct borrower. “Give me your Social Security number. Give me your date of birth. Yes, I can verify that I’m talking to the right person.” If somebody has the birth date and the Social Security number that is not the borrower, it could be a family, I agree. Actually most of the cases, there’s co-borrowers on everything. Jen has got the collateral files there with the husband’s files, everything like that as well.
One thing too we had coming, we had a letter returned that time had expired for the mail to be forwarded to the new address. We immediately got a realtor out there as well to secure that property and we’ve re-mailed the letter out to the borrower with the new address, trying to expedite. Do they want to move back in? We’re willing to work with them of some sort of fashion. I’m surprised we only got one return of letter so far now.
They all went to the right addresses because I’m hearing them.
What would you say each of you guys been your biggest a-ha moment? There has been a lot of stuff the last 48 hours, but biggest a-ha moment for you? I’ll tell you one, we’ve got one it is trashed out. It’s not going to be a mod. It’s not going to be a reinstatement that needs some work. Our biggest goal with that one because we bought that asset in a very cheap, cheap price is that the fact that we’ll find a local investor through the meet-up groups and real estate clubs to get that thing sold and still make a profit on it. Our goal with that one is to get that thing moving ASAP.
The realtor was really great; sent a lot of great photos on the property, gave it some valuations. Asset is probably around on a 30k asset. Luckily, we’re quite a bit below that so it gives us some flexibility to move it quickly to somebody, it can be a win-win and get our investor their money back and get a good annualized ROI on the deal. It may not be a homerun on that one, maybe it’s $2,000 or $5,000 in profits but when you annualize it out, that you could flip their money four times, it then becomes a real phenomenal return for them. One of the borrower’s neighbors called us on a property and wanted to buy it as well. She’s like, “I’m the one that’s been mowing. There’s a boat in the front yard. What are you doing with a boat?” Buy another boat.
I think my biggest one was not many people know that there are loans that get bought and sold all the time. I didn’t know that other people didn’t know.
That’s true. A lot of people just don’t have a clue. They’re thinking that their notes are being cancelled. I think we had a couple of people that responded that way. “Why is my loan being cancelled? I want to stay.” That happened a couple of days ago. It’s one of the first ones. That’s a great point. Some people just don’t pay attention. They’re like, “It’s our first opportunity to buy a home.” They may not have the greatest credit scores. They’re not $200,000 assets but they’re working. They have the pride of ownership and they’re learning. We financially educate them with some of their options along the way as well. Greg, what’s been the biggest a-ha moment for you?
I guess my favorite one from the trade has been calling the utilities because that’s such a simple yet effective way to just find out. The fact that some of those people that work at the utility companies give out more information that they know the people, it’s just funny to me finding out more on borrowers and stuff just based on calling to see if the utilities are active on the property.
You actually went up to South Bend looking at a couple of assets that you and your dad owned and you dropped by one of the assets that was in this portfolio too. Two of them, right?
The vacant one with the boat, the lake station one, we drove by that one.
The other one on O’Brien Street in South Bend?
That’s one of the files that we still miss the collateral file on, Jen. Have we ever gotten that collateral file yet?
No, because that supposedly is coming from one of their servicers that’s slow.
If we don’t have that in the next week, we’re going to have to cancel that and ask for a refund back on it. The asset looked pretty good in South Bend though. Right, Greg?
Yes. The power was on. There were cars in the driveway. The property is well-kept.
Jen, what’s been your biggest a-ha with this?
I think honestly just how many of these people don’t flipping pay. Some of these people, their minimal payment is less than $500 a month. To be able to get your ownership back and to go through this and have this stress and headache of all these and everything, why not just pay? Not on this batch of them but some of these other ones that I haven’t had responses or I have had a good response from. Why put that on yourself? One of the other things is how these servicers just don’t get their crap together. Seriously, it’s like you’re messing with someone’s future and their ownership with their home and you can’t even reflect a current flipping payment. To me, just how they run their business and their ethics on that, it baffles me.
They can keep running business that way because we’ll keep stepping and buying assets like this.
That’s a shocker to me.
They can keep making their mistakes because we’ll keep buying the assets and keep turning them into positive returns. Some of these people have been paying for a while, two years, three years, four years. They’ve got some equity they want to stay, they’re slam dunks on that aspect of things. You talked about the guy that broke his legs. You also had a really interesting conversation with one of the borrowers regarding what had happened to her husband or boyfriend or whatever, right?
One of them was her and her boyfriend and their two kids. He went to prison. She was left to take care of her two kids and herself on her own so she fell behind. She was trying to do the best she could. She was making minimal payments, and then I got to her, she wasn’t making any payments. We’ve talked. She’s working at a grocery store up in New York, which we usually don’t really go to that area but this one, the property looks good. There’s pride of ownership. She’s still there. She’s going to pay. I got pay stubs.
If she makes her minimal payment then it’s not counting any $50 extra, $100 extra that pay period too. It’s going to be a win really.
On this one, we were still looking at 28% to 30% ROI.
Yes, if you take in her existing payment, lowball payment times twelve months divided by what we can purchase that asset at. The lender is wanting how much from her though?
She had to pay $6,000 in September and then they wanted another $6,000 by December to be able to keep her in her house and not file foreclosure.
They wanted $12,000 on that one by December, that’s crazy.
They wanted 6,000 in September, which they just informed her of this she said end of July, beginning of August. The boyfriend is out of prison. He’s working three jobs. She’s working. I have proof of pay stubs for all of them, even him. They only make about $1,700 a month between the two of them and the four jobs that’s going on. As of right now, their gross income is about $1,700 a month but her minimal payment, and we talked about budget and looked at numbers and stuff, and she’s going to be paying about an extra $100 a month than what her minimal payment is so that she can get caught back on track.
That’s something that we’re willing to do. There’s just somebody who reached out to us on something that we did. It falls on the same category. “Yeah, we’ll jump on that one. If you can start making those payments again and pay a little bit extra, it’s a slam dunk for us and our investors on that.”
She was in tears and elated by the end of the conversation. Honestly, she said, “I don’t know what to do.” I’ve had this sitting in my office for about three months. She’s had the letter from us for about three months that she’s been waiting to call on. When she got that information, she didn’t know what else to do. She didn’t know where to turn to, so she called us. She said it was a blessing in disguise because she was scared to contact us, and when she did, it all worked out.
We got a question here, “Are you just trying to get people paying again or you’re asking them to pay the back payments to reinstatement?” We are trying to get them ultimately start paying, reinstatement. Based on our numbers, we’re going to start paying the reinstatement, we’re coming out good. If they got extra, we do want them to bring some skin in the game. We’re finding a lot of them are already on forbearance agreements that weren’t initially in the due diligence files we got, which is extra. We’re having them pay extra. “Can you pay $100 a month extra?” It’s not going to pay off that $6,000 or the six months you’re behind in six months, but it’s a start. It helps them still have a little bit of time to get on their feet. I guarantee, if they’re behind us, they’re behind in a lot of other places too.
Honestly, every single person I made contact with, everyone except for the guy that had the broken legs, the one that wasn’t working, everyone has their payment that’s required and then they’ve been making that extra payment that’s going towards that past due and interest and everything like that, so not only that covering the insurance and everything as well in taxes. It’s not them just paying their bare minimum. We’re actually getting that extra. Even off of some of the agreements that we’ve made, they were paying this before, but now with us, they’re saying, “I’m going to do this. I’m going to up this on our end so that we can stay.” Basically so that we’re not going to be pushing them out the door. All aspects are covered as far as the income that we’re going to be receiving on that end.
We were checking taxes and a lot of taxes we’re all paying, which is a great thing. Obviously, you’re requesting the insurance, copies of their insurance, you want to make sure that’s changed over to our entity on this as the payee for the property insurance and stuff like that. I’ve got insurance on these as we went by the portfolio. The beautiful thing is that these people reinstating some of the statements. I can easily call my insurance company and say, “I need to remove this one,” and then I’ll get a refund back for that. It’s well-worth it to do even for $1,600, $1,800 to cover a lot of this per month initially. I don’t think they insured them for the full value of the property. They insured it for about half of the property because I knew we’d get a bunch of these that get reinstated. That’s the beautiful thing.
Natasha Hunter, congratulations, Natasha. Natasha looks like she’s getting ready to close in her first couple of deals, their first couple of private investors. Natasha has done a great thing, another lady who’s working hard down in South Florida. A realtor by trade for the most part. Ironside Investments is her company name but she had that brain block of dealing with raising capital and finally got out, did some marketing, got a couple of people that responded differently than the people that she’s working with. They’ve pledged some money. She’s got three or four assets accepted. We spent some time going through it. Congratulations, Natasha. You’ve got let us know when you definitely close on that deal so I can feature you and do some bragging on you.
The thing to keep in mind if we end up with 35 of these, that reinstated, it saves us such a tremendous amount of money because we can facilitate the stuff on the frontend, give it to our servicing company to really run with it and get it rock and rolling. Let’s say, we have half that don’t respond. Then, we’re going to be doing skip traces. Then we’re going to be reaching out a little bit more aggressively with the Law Office of Daniel Singer who’s a key component of our vending staff. Daniel Singer is an amazing attorney who’s done thousands of foreclosures over the years, a great bankruptcy attorney as well. Then of course, Joel Markovitz, our brother from another mother. Those guys will do a lot more aggressive borrower outreach, then there will be that letter from an attorney. Letterheads will often shake the tree a little bit to get things rock and rolling. If they don’t respond to them in roughly 30 to 45 days, then it’s a filling eviction, it’s filling foreclosures, getting a little nasty sometimes. You’ve got to play a little dirty and fast sometimes with this if you really want to accelerate the returns for your investors.
My biggest goal is if we’re buying twenty and we get ten reinstated, it’s a good day. Those are the long-term returns but ultimately we may hold for cashflow. We may sell a chunk of them off. Actually, some of these that had been paying for longer than twelve months, we could turn it around and immediately sell them off right now as re-performing once we have the pay stub. Some great opportunities there. I know the investors that jumped in on this are going to be extremely happy. Actually, some of these performing notes that we’ve had sent to us from some of these private sellers that want to move, they are being serviced with third party sellers and things like that. We look forward to that.
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