EP 271 – Re-Performing Notes: The Good, The Bad, And The Ugly

NCS 271 | Re-Performing Notes

NCS 271 | Re-Performing Notes

Jennifer Dagenhart, VP of portfolio management at We Close Notes, discusses some fun and exciting case studies they did on re-performing notes and their due diligence. Jennifer manages a huge chunk of the portfolio, especially on the stuff they bought in the last year, and they usually get about 70% of them re-performing with the borrowers. If you’re not an investor and don’t understand what it is you’re selling, you’re really just a joker broker trying to sell stuff. You don’t want to be a broker. Most people get burnt out and get blocked relatively quickly in this game, so that’s why it’s important to understand how you can raise capital and buy some of these deals yourself to make good money.

Listen to the podcast here:

Re-Performing Notes: The Good, The Bad, And The Ugly

I’m extremely backed up and excited to have our VP of Portfolio Management join us to share with you some case studies. Right, Jen?

Yes, fun and exciting case studies.

One of the great things is that every time we do a mastermind event, we put case studies together, what we bought these assets at, what did we find on the front end, talk a little about due diligence, and then we open it up to our mastermind, which is in round tables and each table bids on the asset. Then we share the bid of what we bought it at and what’s happened with the assets. Are all these case studies good, Jen?

No, not all.

What would you say on the portfolio that you’re managing? You manage a huge chunk of my portfolio, especially on all the stuff that we bought last year. You’d say about half of it, 60% of it re-performing with the borrowers?

I’d say 60% and now that it’s tax season, we’re working on maybe about 65% to 70%.

It takes time. You do a great job. I’m very lucky that we have a Jennifer in our office. We put a PowerPoint together and we’re going to work through this. While we have removed the addresses to make it a little bit of anonymous, we do have photos, we do have city states of where these assets are located. This one’s in Limestone, Tennessee. We see that what we pulled is the street view. The realtor’s photo wasn’t that much better. The unpaid balance on this one was under $44,500. BPO is $61,000 and some change, monthly P&I was $401.49. They paid 36 months in default, three‑bedroom, one-bath, 1,520 square feet, and then the market rent rate is $675. This is the first lien contract for deed. Most of these are contract for deeds. The beautiful thing is since these were non‑performing, most of the time, they will buying somewhere around 35%, 40%, 45% of the unpaid balance. It’s what we’ve seen when we purchase these a lot of times. What are some other things that we consider when we’re looking at buying the assets, Jen?

We’re going to look and see how recently the last payment date, we’re going to look as far as utilities, taxes.

Owner-occupied too?

Yeah, and the majority of them don’t have it listed multi. We can do name verification based on the information that we get, but the main thing we want to see is the percentage of ROI based on the initial and then the most recent paid. We usually filter that down to the past six months to a year and then filter through those and then start doing the fun stuff as far as utilities and stalking.

You were a little nervous the first time we submitted a big ordering because I said, “We’ll run it based on ROI, taking the principal and interest payment, figuring in roughly 30% to 35% ROI if we get them re-performing.” That was hundred plus assets, $1.6 million offering and you were like, “Oh my gosh,” right?

It was a little more than, “Oh my gosh,” because you were like, “Just throw it up there,” and I’m like, “We’re bidding at $1.6 million. Do we have that?” You were like “We’ll get it. Don’t worry about it,” and they’re all going to come back.

We made an offer for $100,000. I knew right off the bat we weren’t going to get 100%accepted. What happened?

We ended up getting $60,000 of those.

Then through due diligence, what did we end up finalizing them out at?

30% to 40%.

NCS 271 | Re-Performing Notes

Re-Performing Notes: The most part is a lot of the borrowers are more willing to cooperate.

Right about 39%, if I remember correctly. That’s the thing we reiterated with the mastermind. If we made more offers, we get more accepted versus making two or three and then not get anything accepted. Make a bigger pool offering and you’ll be happier because you’ll have plenty of time to kill the stuff doing the due diligence and we kill plenty of assets off for a variety of reasons.

Even if they come back accepted from the hedge fund or whatever, once we start going through them, just because they accepted doesn’t mean we have to purchase it. Even if they did accept all 100%of them, we can go back and say, “I’d rather have this and then that one. This is a better ROI, so take that one back,” or different things that we find out through due diligence. Even if we get 60% accepted, we could have killed off those 40% instead of the hedge fund doing it. It’s all going through and doing the process and doing your due diligence and you can get the number you want, so if you want to close on ten to twenty accepted, then you decide which ten you want.

We ended up buying this asset at $30,000. That’s a little high at the UPB. It’s about 65%UPB and about 50%of BPO, but we bought this in October.

This one we went ahead and agreed to purchase it at $30,000 because once we contacted utilities and taxes, taxes were current, utilities were on. It’s occupied. There was a vehicle there and it wasn’t completely rundown, so there is a sense of pride of ownership. We purchased it in October. We mailed out our ‘hello’ letter and they immediately contacted us in November. They were like, “I’ve been making payments. I stopped receiving your response, so I didn’t make a payment for the last two months.” Technically, they weren’t six months behind, they were only two months behind. Then they contacted us based on our ‘hello’ letter and we re-established payments with them. They paid a little bit extra, not significantly, very minimal, but they paid on time every month since November, and I don’t hear from them. I get the update from Madison saying they paid and that’s it. This is very easy based on the trial payment plan, everything’s gone as agreed. After a year, we’ll review it and see what we need to do.

After a year, payments will probably turn around and sell thing off at 85%yield. It is at 15% ROI based on the payments received and stuff like that, which is not bad. If we keep making payments, it is going to be even more phenomenal and will be rock and rolling on stuff. We got another one here in Newark, Ohio. What is funny is I think Bill Griesmer from the Mastermind said that he rides his bike in Newark and he rides a bike to this house.BPO on this one, broker price opinion, is $58,000. Unpaid balance was $31,000 and some change. Principal and interest is $274. The last pay date was February 2017, two bed and one bath, 1,600 square foot, rent rate is $800. What we need to know too, is some of the specifics of the notes. These are all rated roughly 9.9% interest approximately over 30-year amortization for most of the contract for deed of the buy.

None of them had been less than 9%. They’re usually 9%, 9.9% and 10%.

Usually, at least about two years since they were financed by the seller. We picked this one up for $13,144. We bought this in June.

This one, when we purchased it in June, it was saying that they had not made a payment since February. We ended up talking to them probably in August. We still have the whole transition with the servicing, the issues with that, and so they contacted us. The ROI was originally 25.07%based on that. When they started making their first payments, they paid consistent for the last seven months, but after sixth month, we agreed that they were going to start paying $50 extra a month, so I need to calculate the new ROI on that because effective April, they started paying $50 more per month to finish out to a year.

I made an offer of 30% yield, but still, I counted back, it’s roughly 25%. We said it is still a good deal. That’s what we look for. It is our baseline when we have joint venture partners where we can provide 12%return for our funding partners on cash flow. We can collect 12%. If they don’t pay, then we look to foreclose, evict them, and move on, but this person has been on time for seven months.

April was their last paying at their minimum payment and they’re starting to pay the $50 extra for that last six months and then we’ll do the modification after the year.

The UPB is $31,000. That’s still $18,000 between what we bought the note at roughly unpaid. BPO is higher, so they’ve got some pride of ownership. They reached out immediately for the most part and we would’ve had a faster payment except that the servicing transfer didn’t go smooth from the previous servicer to Madison Management.

They had already mailed in their payment. They mailed their payment into NAA, so we got that kicked back from NAA and applied it to their loan because there were two payments. They weren’t past due. It all was NAA.

They have been on time. They were behind previously, right?

NAA did not have their record straight. They were never behind. They were performing. They’d been billing payments. NAA didn’t have the records updated when we purchased it, so we got it at a very great price because we’ve got it as a non-performing when technically. they were a performing loan with NAA.

We get to move this asset if we want to as a performing note then. We can talk about. Figure 85% UPB is what? That’s roughly in mid$26,000. We could double our money based on what we paid relatively fast, plus we’ve gotten $2,000 plus in payments at the points, so that can be very much higher than 25%. The next one is in South Bend, Indiana, the Golden Domer. This asset is about two miles south of Notre Dame. BPO is $42,600. Unpaid balance is $22,000 and some change. P&I is $224.93. The last pay date was March of last year based on the spreadsheet when we bought this thing. It’s a small house. I don’t think that 616-square foot is accurate. Rent rate is $650.

If we ever had contact with the borrower, we can verify the square footage and everything. Madison has never received a phone call. We never received a phone call. We started receiving payments. Greg went by there whenever he and his father were in South Bend, take a picture, and let us know that it was still occupied. I don’t have a phone number. I don’t have an email address. I have his name. We’ve mailed out a trial payment plan based on the payments that he’s made. No signature, no return. We basically get payments every month.

He had gotten very good about making double payments.

He doubled up September and October. Based on the information, he was behind a couple of months, so he doubled down and then I’ve tried to make contact with him and have had nothing.

NCS 271 | Re-Performing Notes

Re-Performing Notes: I enjoy it and I know that we’re making a difference for these people.

The thing is we bought this as bulk deal because based on the realtor actual photos, it looked pretty good based on nice property. Worst case, we take it back because there’s such a ton of equity in there between $42,000 and we only paid $9,000 between UPB at $22,000. I will be honest. These are not get rich quick deals. This is the idea of building a portfolio of assets that are bringing in. We got two of these assets. They’re bringing in $300 or $400 a month. That’s residual over time. How many of those do you need to replace your bills and leave your job or to do this full time? Let’s get out of South Bend and move on to Urbana, Ohio.

This one is a cute little house. It’s one of those ones that you will totally get sucked into. It’s so cute and you want this one. The numbers worked out on this one well. This one, when we purchased it, this was our first batch, so it’s like in May or June. It was saying that they were about four or five months behind; 3,148 square feet. The rental rate has a decent rate in that area. It was well kept. The realtor came back with CMA, so that it would be easy. Even if it was vacated and needed some work, it would be an easy to turn around and sell because of the condition and the area. This one we literally got less than $9,600.

Immediately, the borrower reached out to Madison once they got the ‘hello’ letter. I turned around and got the information from Madison and contacted them. We set up a trial payment plan. If they were making their minimum payment, which is almost $201, our return on this one was 25.23%. They pay an additional $95 or $96 extra a month, so ROI on this one went up to 37.5%. She’s paid on time and she’s been consistent. If she has one hiccup, she’ll call me and tell me, “My paycheck was shorter this month on this pay period,” and I’m like, “Pay what you can on this one,” and then we’ll split the payment, and I will send Madison a note saying, “We’re going to split the two payments this month,” but she’s a great tenant. She’s very cooperative.

We do things a little bit differently here. Jen has got a ton of experience with talking to borrowers from her previous life WCN. We still have Madison Management dealing with things. We still have The Law Offices of Daniel A. Singer doing some heavy lifting for us. Since we’ve got an experienced person like Jen, one of the things that we do once we buy an asset, two weeks from the day that we close, we go ahead and send out our own ‘hello’ letter.

We will send out a friendly, “We purchased a property from Harbor” or whoever was coming from the servicing that is going to be transferred from NAA over to these people, you need to contact Madison at this address, phone number, this web page, or contact us so that we can work with you. Our main goal is to keep you in your home. It is a friendly letter and to me, it doesn’t come off as being like, “We’re coming after you. We want our money now. We own this loan. You have to pay this amount.” It’s more of like “What’s going on? Let’s talk.” I think it’s personable enough to where we can get enough return on it or at least to where they’re making the phone call and a lot of these people, they love to call me and not leave me a voicemail that their numbers still pops up. What I can do is I will pull that number and I’ll reverse phone number and then I can find who they’re calling. A lot of these people will call and say, “I’ve been trying to reach her, and I can’t make my payment because she hasn’t returned my phone call.” If you don’t leave me a voicemail, I have no clue who you are.

Caller ID and doing reverse background check can help us dramatically.

There’s a lot of them that are a little standoffish as far as that initial contact because it’s not some big company to where they can say, “I talk to A, B, C, D and E,” so it’s a different story every time because you have eight different people that you’ve talked to you at one company. Here, it’s just me, so when they call me, they’re not getting eight different representatives; they’re getting me directly and so a lot of the time, “I talked to so and so here and they said this.” No, you talked to me. That was me. There was one guy who didn’t remember talking to me. I was like, “We have a signed trial payment plan,” and he’s like, “That was you. I talked to you.” I’m like, “I’m the only one in here. Who did you think you talked to?”

The welcome letter, we get a lot of feedback off of that. When they do call, if they don’t leave a voice mail, I’ll pull it up and try to see and then I’ll call back and say, “I missed your phone call.” It surprises a lot of people, especially the ones that didn’t necessarily want to make the phone call, but they did and then we can go from there. At least it gives me a starting point because a lot of these people, we’re going off the information based off of their collateral file. It’s when they originated the loan, so we don’t know if it’s a current number if it’s not. That’s why we use a lot Whitepages and Facebook to stalk people. We’ll even jump on and see if they’ve got a LinkedIn profile and see where they work if we can find a work number. Our goal is to reach out to them not in a negative fashion. It’s more like, “Let’s work together to make this a win-win.” It’s not combative at all.

You’re starting with 35%of UPB. Are you also looking at a percentage cap on cost to value, especially if the property value is less than UPB?” If the property value is less than UPB, we’re not going to go off of UPB then. We can go off the lesser of the two, either the UPB or the value of the property. We don’t usually want to be above 50%of the value. Another is “If I’m not an investor, can I make money funding notes and selling them without having to buy them?” You could but if you’re not an investor and don’t understand what the heck you have, you’re a joker broker trying to sell stuff, but you have no idea what it is you’re selling. You don’t want to be joker broker. Most people get burnt out and get blocked relatively quickly in this game, so that’s why it’s important to understand how you can raise capital, buy some of these deals yourself and make some good money. This one’s in Freeport, Illinois.

For some reason, the way this house is, you can’t drive in front of the house. I don’t know what the realtor’s explanation is. Literally to go to the front of the house, you’d have to walk around, and since it was owner occupied, they didn’t feel comfortable at that time.

The BPO on this one is $52,000 and some change up. Unpaid balance was $31,750, P&I is $275 basically. Last payment was March 20th of last year. This is two-bedroom, one bathroom and 48 square feet, but I think that’s inaccurate. Rent rate is $825 a month and we paid a nice little chunk. We paid $13,400 for this one.

This lady tries every single month and she’s doing it, but it’s a struggle. We talk every single month. She has a program manager from the Home Ownership Counseling and Education, so they’re helping her go through her budget and finance to pay her mortgage along with her other bills, but mortgage is the priority, which is great, but this is after us working with her for about three months and the first three, she’d make a payment, make it on time, get kicked back as NSF, then she turned around and shooting with the payment on that one. She would go and make the next month’s payment, that one got kicked back because as NSF, and every single time it was a different story for whatever reason. We finally got her and we adjusted her due date. It wasn’t falling in line with when she was getting paid.

We pushed her due date back a little bit, but in doing so, I made her pay a little bit extra, so there was that cushion as far as, “For allowing you this, and it’s not going to go to late fees, you’re paying towards your principal.”This one, the original ROI would have been 24.59%. She is paying $404 a month, so she’s paying quite a bit more.ROI goes up to 36.18%. Anytime there’s an issue, she’s not only communicating with me, but she’s communicating with the program managers. There’s three different points of contact that we’re working on with this one loan. This is the one that you ended up talking to the program manager as well and told them that if she would pay for that full twelve months, that we’d forgive 100%of her remaining back payments and that we would drop her payment instead of paying the extra to her minimum payment due again.

NCS 271 | Re-Performing Notes

Re-Performing Notes: We’re going to look and see how recently the last payment date, we’re going to look as far as utilities, taxes.

The program manager was surprised that we were so easy to work with.

She specifically said that she wished there were smaller companies like us because with this area, a lot of the homeowners try to apply for the hardest hit funds and stuff like that and they don’t qualify because it’s the CFD. She was saying that there’s a lot of people that don’t have a resource that they can reach out to, like the banks and stuff aren’t willing to work. There’s foreclosures and evictions going through like crazy and so it was nice to have someone that came in looking for help and counseling that they’re able to show there is help out there outside of just the cut and dry. The case worker was surprised and impressed. She said that she has not heard of anyone like us doing what we’re doing.

There are so many like us in the mastermind group with people who are doing things. It is just that borrowers don’t reach out a lot of times, but we were giving the same thing to the borrower if the borrower reached out to us directly. We will try to do a loan model, like, “Let’s do this. Let’s cut straight to the point. This is what we want. This is what we do and let’s make it a win-win.” I don’t have a callous heart.

That’s what I mean. She is in good faith. After bouncing three payments to us, she went and sought financial education and counseling as far as how to help budget her money. I’m not going to knock her for that. How many borrowers have ever done that that we’ve dealt with? She is the only one. I think it was a great. It showed me that she has in her heart to do good by this even though she has small kids in the house and she’s a single mom, working as hard as she can and she’s trying to do it the right way. Everyone runs into hiccups, so we work with her. She has to split up a payment.

When she might fall a little bit short, as long as we can make it up within the next month, I adjust and send Madison an email and then I adjusted on our trial payment plan because I keep a copy of them all in their little folders and I file them every month, that they’ve paid and not paid and stuff. We’ve gotten a lot in the past couple of weeks and it’s a matter of getting them organized. A lot of them gave me the copies back, but I want the original so it’s a matter of going through. I have the scanned copy, but I want the original note back to me, so now I’m following up and saying, “Mail me back the original.” Some of them that we’ve mailed out, they haven’t signed period, either electronically or not, so it’s a lot of following up on some of these.

This one is in Toledo, Ohio. This one has an interesting long story. BPO at $23,000. There’s a detached three-car garage next to this asset that’s a part of it plus a vacant lot next to it, which is included with deal. Unpaid balance is $31,000 and some change. P&I is $222.27. Last pay date was March of last year, three-bedroom, one-bath, 1,530 square foot. Rental rates are $850 and this one bounced around on lists for over a year I know that I had seen stuff.

We almost killed this one off. This is my little Easter egg that I found. It was hiding in the bushes and we kept walking around it, but it wasn’t spoiled yet. It was still good.

That’s the least analogy that we will ever describe a deal, a non-spoiled Easter egg.

You know how you hide it and you forget where you hid it and then you find it like a year later, but this one wasn’t spoiled. This happened to me one too many times with the kids. I’m like, “What happened with the money egg?” We always hide the money egg, like a golden egg, and we could not remember for the life of us where we hid it and then we found it a year later when we were like replaying bushes and stuff and I was like, “There’s that $20.”

There’s a vacant lot.

It has a real small lot, half a corner, a bunch of overgrown bush because of where it’s at. It’s not even the right street if you’re paying attention when you’re doing the Google images. You have to turn the corner and the way the street still stays the same name, but the address number has changed, and so you have to go around that corner. That’s why everyone kept missing it. It looked like a vacant lot that there’s no home. There’s overgrowth and nothing’s there. You couldn’t even see, so you don’t know if there is just a bunch of junk or if it was empty or what. This one you, you pay attention to the directions on the map and there’s a little house.

It’s not such a little house. 5,930 square foot, but we bought this one. We made offer as part of the bulk deal and it turned out to be a nice deal.

This one has probably been one of our golden eggs. This one we purchased in June. The borrower took a little bit to get all the details worked out and get contact with them. We didn’t hear anything from them for the first two months and so we did some digging and Facebook stalking and come to find out they have their lawn care business that we found through some of the contact names that we had, so we contacted the lawn care business and asked them basically who she was, the same names matched up and everything like that, so I re-mailed the letter out to her and I addressed it on the outside to her lawn care business, but on the inside it was addressed to her and courtesy of whatever.

Then she finally made contact with us because she wasn’t receiving her personal mail. She was only receiving her business mail at that address. She started making payments. She never was behind. She was never in default. NAA didn’t have her records up to date, story of NAA. Through NAA, she was having her water and her taxes and her insurance everything escrowed along with her payment. Since she came on board with us, we’ve filtered through some of the debris of NAA because she had records and payment histories and receipts, and Shante was good with us on going through the history on this one and then figuring everything out.

The borrower is paying the water bill directly now instead of it being escrowed into her account. She’s also paying her taxes directly to the county as opposed to have that service. She pays on time. She pays more than what she’s supposed to, so our ROI on this increased by 20%. She pays on time. There’s ever been an issue. She owns her own business. She showed us proof of tax returns, everything like that, when we were setting her payments. This one’s going to be a good return. She should be paying off of her original balance and everything she’s doing, I see her as being one that will regain ownership of her home.

One of the things that we’re looking at doing with this borrower, once we’ve had it for a year is getting her refinanced out the loan and put in an additional loan. We can convert this one to a mortgage or we sell off, but the point is this lady’s been responsive. She had not paid the water bill once?

What was happening was since it was being escrowed, the water bills are being sent to NAA. We had no clue because we weren’t receiving them. They were still being sent to NAA. The borrower wasn’t receiving them, so the only thing she received a disconnect notice and it was December 23rd. She reached out to us. I was home sick with the flu. I used email to you and said, “Her water’s going to be shut off on Christmas Eve. We do something.” You turned around and paid like $260 something?

NCS 271 | Re-Performing Notes

Re-Performing Notes: The main thing we want to see is the percentage of ROI based on the initial and then the most recent paid.

$374. She’s reimbursed us for that. She’s making payments on time. This is a technical billing issue. It’s not her fault. Since then, she’s switched the water over to her name.

I spoke with her because taxes and everything were paid, but I guess there was one back in 2016 that is passed to you that Madison won’t pay and so they sent it to me. I send it over to her and she said paid it. It’s taken care of. All taxes are current now. I have that to upload into Yardi and get on there, but she is the only borrower that I can say I know in my heart of hearts I feel 100% that she will regain her homeownership and be better off. Some of these, they’re doing great, but I don’t know, but this one, when she’s squared away to a tee. She’s got everything down. She’s working hard for it.

That’s good thing. That’s a good feeling. Probably hundreds of people saw this asset and passed on it because they looked at it wrong on the Google maps. We almost killed it twice. Greg almost killed it and Nicole almost killed it as well too. Didn’t they?

They killed it twice on tapes before and then when we were going through our final because this is one of those ones that was at 1.6 that we’re looking at and we were going through. Each one was doing different due diligence, and every time, they’re like, “This one,” and I was like “Don’t.” They would put it in red and then I would review it and I was like, “Stop putting this one in red” and I get all mad and like make it bold green like, “We’re going with this one. Stopped doing that.”

This one is a little bit different story. Not such a good story. This is little house is worth $67,000, unpaid balance is $36,000, P&I is $319 a month. Last pay date is March of this year, three-bedroom, two-baths, 2,100 square foot, rental rate is $1,035. We bought it for $15,000in June. ROI based off the original plan was 25.12%. Take it away, Jen, because you’ve talked with this borrower.

It started off great. The borrower was very cooperative. They made double payments. They missed the first payment, said that they had an emergency coming up and then with the holidays and kids and so it was like, “When can you make your first payment again?” “I can make it January after the holidays.” “Let’s set up a new trial payment plan” because I’m not going to let you skip two months and then get credit for that. We’re starting a new trial payment plan over again. They disappeared after October. I made phone calls, I get a phone call back but no voicemail. I would send emails with return receipt requested. You’d see that they read it but no contact. I even reached out to them and said, “We understand things happen that you may have fallen behind. Let’s start over afresh. Let’s see what we can work out,” and no response. They are still living there. It still occupied, but they forfeited their trial payment plan for whatever reason.

They’re not even attempting to cooperate, which is not in their best interest. The foreclosure is in process and that’s unfortunate because they were cooperative and willing and able to. What happened? I don’t know if they thought that they could not make payments, and nothing would happen like what happened when they were with their previous servicer because it sat for so long and their payments were scattered throughout on that one. If you go look back at their payment history with NAA, they’d pick it for a couple of months and then it would dissipate and then a couple of months and then dissipate. I don’t know if that’s their MO and they’re used to doing that without repercussions but they’re with WCN now, so we want our house, or you pay.

They have a lot of equity there too. That’s what’s been used on this one. We never root for the homeowner not to pay, but if they don’t, it’s an even bigger payday for us.

This one, we gave you a chance and if you’re going to take advantage of that, we got plenty of equity on this one where we will roll with it.

Even if we do list if for sale with full payoff and so the foreclosure option is a nice payday of about $20,000 plus for us to. We don’t but it just happened. It’s not all good everybody. You got to foreclose and start to contract cancellation is quite difficult.

Here is one in Laketon, Indiana. BPO $34,000, UPB $35,000 and some change, P&S is $333. Last pay date is March, three-bedroom, one-bath, 1,900 square foot, rent rate is $825. This is one of your favorite borrowers. We bought this $14,800 in June. ROI, if they’ve made the original payment, would have been about 27% ROI, but as of April, we’ve collected some payments which have been good. They’ve got NSF payments that’s $1,300. We collected it and we’ve withdrawn the TPP. The borrower has got to remit three months of payments by this week. Did they do that?

This was one where I was like, “I am handing this one over to you.” This is Rosemary’s baby. Every other day, this is one of those ones that she would call me on Monday, twelve to fifteen times a day and I would talk to her maybe six of those times and it was frantic. “It had to be resolved that day. This is what was going to happen.” “Then two days later, “I haven’t heard from you. I’ve been trying to call you for two months.” I’m like, “I talked to you two days ago.” “No, I haven’t talked to you. This is what’s going on.” Completely different story than what she told me two days before the six times I talked to her. It literally got to the point to where it was like my phone would ring twenty times, and nineteen of those times it was her, so I would have to literally agree to answer one time a day because it got to be to where it was too much. It went from she’d be friendly, and I was baby sugar honey and then it would be, it was like in tone, I don’t even know what she was calling me. It was very not pretty.

Every time it was very much a different story and it was very bipolar. I didn’t know who I was talking to. It was the same lady, but it was different stories and different personalities every time I talked to her. This went on for a good three months and then it finally got to where it was like, “You’re making a payment, you’re bouncing it, you’re making a payment.” They’ve had four NSFs. On those, when I had them remit payment for the NSF, I have them repay the NSF, plus they have to pay the fees that Madison has charged and incurred. We usually try to make them pay a little bit more additional, so their last payment was April 5th. It was not the three months worth of payment by April 15th, but I was talking to Madison about them because they have past due insurance as well. We’re tweaking it as we speak on this one because they didn’t make it by the deadline. They made a payment on April 5th, but they didn’t do the triple payment.

We could either keep it if she’s making a payment on time or we reject the payment and bounce and send it back to her and start the eviction process.

We’re not just dealing that with the three payments behind. Now we’re dealing with some insurance past due to insurance that Madison does not escrow. We’re dealing with the additional fees that are due, so it’s a matter of what we want to do on this one and look at the financials on it to see if it’s worth it.

NCS 271 | Re-Performing Notes

Re-Performing Notes: It’s all going through and doing the process and doing your due diligence and you can get the number you want.

This one is in Sidell, Illinois. The date of the photo is July 6th, last year. BPO of $54,000, UPB at $38,000 and some change, P&I $334, four-bedroom, one-bath, 1,500 square foot, rent rate is $650. The reason we put a rent rate on here is it’s a bargaining chip. If somebody can’t pay $334 a month, then at least, they’re probably going pay, getting bounced out or evicted is at$650 a month, so it’s the borrower’s best interest to try to stay because it’s still 50%cheaper for them to stay versus to bounce off and they start making payments on time. Let’s talk about this one. Purchase price is $16,000.We bought this in June of last year. ROI off the existing payments would have been 25.52%. They’ve not established a trial payment plan but makes monthly burying payments.

He’s a little bit older. He has limited income on disability. I know that he lost his spouse and so he doesn’t have the funds that he was receiving prior and so he pays consistently every month. It’s a matter of how much he’s paying. We’ll receive $100 week one, we’ll receive $150 two weeks later, we’ll receive $85 in between that next week, and the week is very sporadic. There’s not any rhyme or reason or schedule available.

Maybe it’s what he’s got left available. He’s working, so we’re not canceling the contract on this one because we do have a heart

He is making the effort. He calls me, and he’ll tell me he paid $100. Then he went through and he got his medications and he paid whatever else, other bills, his water and utilities. Then he got his next payment and so he paid a majority. He paid the $250 payment. After he paid his rest of the bills, he bought his groceries and did his budget. He had $100 left over, so he mailed us additional $85. His is very much very budget tied, a very to a tee budget and he adheres to it well. It is unfortunate that he doesn’t have enough income monthly to where he can conveniently do it all in one and he has to budget around.

We’re working with the guy. It’s not going to be the greatest of returns on this one, but still paying. The fact is that we’ve got a portfolio, we’re still getting something which is better than nothing and we’re still doing some good because let’s face it, if we started foreclosure, where will the guy go? Nowhere.

He’s made it seven months. He’s only technically paid three, but if you figure if he can pay one actual payment every other month at least we’re doing something and he’s still making an effort, but he did turn around and paid his own taxes. Instead of having it escrowed, he paid that. If we had known that he was doing that, we probably could have worked with him, escrowed him in and then had his payments to where he was not paying such a large chunk out to taxes to where it would have been applied all the way around, but I mean he did so it saves us from having to advance any escrow.

We’ll keep working with this guy. Here’s a nice little property in Belleville, Illinois. It’s A-frame looking Hollandish-looking house with a garage next door to it. BPO on this one came back at $81,000, unpaid balance was $34,000 and some change, P&I is %288. Last pay date was March, three-bedroom, one-bath, 1,204 square foot. Rent rate is under $1,000 a month for this asset and this is not bad. We bought it for $14,000 in June.

They have made contact with us once and that was whenever we established that we sent out the ‘hello’ letter. They called us and said, “We’ve been informed that you’ve taken over our loan. What do we need to do to get caught back on track? We have money saved up to make our payments. We didn’t like the servicing company before, NAA. We had an issue with them recording our payments and missing payments, so we haven’t made a payment. We figured we would wait until we were contacted with whatever suit. If they were going to file eviction, we have the cash to throw down whatever the case may be.” We spoke. We got the expenses figured out, what they could afford to pay monthly. They’re paying an additional $72 a month, so they’re paying right at about $350-ish based off of they were paying $280 to $290, so our ROI went up to 30% on that one. They put down a substantial first payment when they made it and then they signed a trial payment plan for $350 a month and they paid every month since then. This one alone is $2,200 and they started paying in September or October.

They go on time. It’s going to be a good deal for us. This one, UPB is $34,000. They’ve got some equity there. Definitely it’s worth for them to pay and they’ve been pleasant. We had one conversation with them because they’d been paying on time ever since.

The initial conversation we had, everything worked out that first conversation. I sent out the trial payment plan, they signed it and sent it back, and I have not talked to them since then. Every month when I run the report from Madison, it shows that they paid, so I mark them off the list and we’re done.

Here’s one in Paoli, Indiana. BPO $57,000 and some change, UPB $25,000, P&I is $217. Last pay date was January of last year. This is a two-bedroom, one-bath, 1,600 square foot house. It’s a much bigger house. She threw in a couple of photos and you see a lot of pride of ownership with hanging plants and a pottery in the front yard. Rent rate to this is $750 compared to the $217 P&I. We bought this for under $11,000.

It’s a couple. They have been great. No issues with them whatsoever. They’re doing some home repairs that we are in the process of sending off since I guess it’s the contract for deed and they don’t have actual ownership of it. We have to send some paperwork for whatever contractor, so they’re going to be doing some home remodeling, which is great on our end, so that’s going to increase, but we purchased it at $10,600, and we had a good ROI to begin with off of it. We were looking right at 24% to 25%. We set up payment plans to where they’re paying the additional $48.45, so we’re looking at 30% ROI. They pay as agreed. They signed the TPP and they sent it back to us. No problems. They’re paying their own taxes, they’re paying everything as they’re supposed to. On this one, he’s doing some home remodeling and some upgrade, so if that ever comes back, great. If not, then they’re increasing their own. This one is the highest interest rate that I’ve seen, and it has 12%. That’s the only one I’ve seen that high, his additional payments, and that’s what we’re trying to do is getting to bring down his principal because so much is going to his interest.

He’s at the point that his value being closer to the $60,000, he might be able to go out and do a traditional loan, but it is often cash out, pull some equity out of the deal and then pay us off in full and then still have a decent interest rate. Actual payment is about the same with the equity out because it’d be a lower interest rate based on him doing some good stuff. This one is in Columbus, Ohio, Buckeye Nation. BPO of$30,000, UPB of $34,000 and some change, so it is upside down, P&I is $295. Last pay date is February of last year. A three-bedroom, one-bath, 932 square foot house. This is OTSC house, “Oh, that’s so cute.” Rent rate is under $800 a month.

No contact with the borrower. They started paying Madison. We purchased this one in August. They had a payment to Madison in September. They’re paying the extra on their own, so I like to do a pay history. In October, November turned around and did the trial payment plan. I’d had to put a trial payment plan based off of what they were paying to Madison already, mailed it out to them, they turned around and signed it, sent it back to me and they keep paying.

NCS 271 | Re-Performing Notes

Re-Performing Notes: Our goal is to reach out to them not in a negative fashion. It’s more like, “Let’s work together to make this a win-win.” It’s not combative at all.

Which is exactly what we want. That’s not the highest of ROIs, but 20% even on small little house is not bad. I paid $17,000. This one’s a little bit higher than I would have normally, but the house is in good condition. We had people drive by the property. It’s been a nice little home, and I’ll take 22%on that deal any day.

Not only that, but honestly one single mail out and then trial payment plan and after a year we can do this as reperforming, so that in itself is huge. They are paying the 33. I’m sure after the year if I reach out to them or even if I didn’t, if I said they had to increase, but I’m not going to change a good thing that’s already happening. I’m not going to turn around and say, “You need to pay an extra $80”and then they stop paying. This is what I know that they can afford because they are paying it comfortably on their own every month. We’re going to agree and roll with it.

Here’s one of the Springfield, Illinois. This one’s $73,000 and some change, unpaid balance is $32,000,P&I is $281. Last pay date was March of last year, three-bedroom, one-bath, 1,100 square-foot house, rent rate is $850 a month.

We purchased this in August around when summertime ended. They weren’t selling enough ice cream because they stopped making their payments and they forfeited their trial payment plan. He made his first payment on it and then we haven’t heard anything. I’ve sent numerous letters in the mail. I’ve sent emails, I made phone calls. Madison sent out their late notices and escrow information and no contact whatsoever, which is odd because he was very determined and adamant, made that first payment. I talked to him on the phone. He called that same day. He made his payment online to Madison and then ghost. We haven’t heard anything.

There’s a lot of value there. If we foreclose, we’re still going to make out like a bandit if he did not get full pay off based on the BPO on it, so it’s unfortunate for him and it’s fortunate for us, so that’s a big thing. Keep in mind everyone, it took us roughly 60 to 90 days depending on when the servicing transfer took place for a lot of these to be able to even start the payment plans. Even though we bought it in August, we didn’t get the first month payment until November.

We didn’t start seeing payments come through. A lot of them were November or December. The ones that we had purchased in June, we had a couple that trickled in September that was three. Everything else mainly in October or November timeframe.

We’ll foreclose on this one. It will be a little while, but still going to be a win-win for us on that. Moving on here to Alton, Illinois. BPO is $32,000, UPB is$27,000 and some change, under $28,000, P&1 is $234. Last pay date was February of last year, two-bedroom, one-bath, 745 square foot house, rent rate is $650. I paid $11,000 for this one. We bought this in June of last year.

This one started working out great. We went into a trial payment plan, they made their first payment in our top payment plan and didn’t even ask for the $100 additional. That’s something they did on their own because I’ll tell them like we’re having you pay this extra amount but if you ever can pay any extra more than what I’m even asking you to pay, every little penny counts because it starts bringing down your principal. They made their first payment. They paid $100 additional on top of what we were already asking them to pay, but it was returned as SNF. They made the next month’s payment, it came back fine and then they turned around and missed two payments, no contact, no phone calls.

You sent a warning letter out.

I made a phone call and it got ignored, so I sent an email and I didn’t get a response. I sent the physical hard copy saying, “We’re filing. We’re going to proceed with the cancellation of contract,” basically foreclosure. “Expect to be hearing from our legal team and decide. If you have any questions, please feel free to contact me. If not, you need to contact Daniel Singer’s office,” because this is one that I already had sent over. Before Daniel’s office could even board it, the borrower had turned around and contacted us and we reestablished a trial payment plan and they have been good to go since then.

This one is in Flint, Michigan. UPB of $36,000, BPO $26,000, upside down. Last pay date is March, three-bedroom, one bath, rent rate is $675. We bought this for $15,000,they entered into a trial payment plan, paid three months and stopped, refused payments unless we made repairs on the roof.

He didn’t just request. He was demanding, harassing, borderline crazy about it. This was the one that I heard from every single day at least three times a day and then he started blowing up Madison and he would contact both of us at the same time and then he would start contacting you, so it was the group of all three of us that he was contacting several times a day. He was not even the borrower listed.

He was the co-borrower. It was his brother-in-law or something like that. We basically said, “At this point, it doesn’t make sense if we’re going to fix the property up and do all the work and you’re not making payments with the right borrower. We’re going to offer it up, cash for keys and cancellation of contract,” and that was sent out to them.

I’ve talked to him five times already, so they did a trial payment plan. He paid the three months and then he refused unless we made the repairs, and you said, “We’re not going to do it because you haven’t been making your payments,” so then he made one payment and he’s like, “I made a payment. You guys do the repairs.” Every time you make a repair, I’ll make a payment. It doesn’t work that way and he tried to play the hard ball. It was back and forth. He was saying that he was going to go to the news and all this other stuff, so he wouldn’t make a payment, but yet he felt free to call and harass Shante and he went to the point where he was like, “You guys are blocking my emails. No, we’re getting them. We’re getting all twelve of them a day.” Shante and I would talk back and forth about it, but he was very much where he tried to play one against the other and whatever he could, so finally, I told him that enough was enough.

That’s when you and I talked. We got a cancellation of contract, draft it up, and then I sent a very blunt email and said, “We’re not fixing your home. This is part of your responsibility. You’re not making your payments. This is what we would like to agree, just to call a means to an end. Here’s a cancellation of contract. Feel free to go on your way and we’re going to go on ours.” That got dragged out because that was “How long do I have to move out? What are my repercussions? I have a family to move and I can’t just move out. When can I move out?” Then the man would email me five times a day and call me, then when he would get a response, I didn’t hear from him for three or four days. “I need a response from you because you’re supposed to be vacating the house.” “No, we’re in the process.” Then I would hear from him, so he drew it out.

The original vacate date was supposed to be March 30th, then he drew that out to where the vacate date was supposed to be April 16th. I did get the cancellation of contract signed by both him and the co-borrower. They agreed to vacate. The last update I had is that he’s not fully out of the house. He still has a couple of boxes. That house that they’re moving into is still being made ready, so he should be out by Monday, the 23rd. I’ve already told him that we’ve already filed the paperwork with the county, that I need to call and let the clerk know and update on the vacate date, so that they’re not going out to serve the papers if he’s not there. He said he was still there, so I told him to be expecting a constable to becoming, inserting the papers because we’re not pushing any further than what we already have, and so we’ll see if he’s out by Monday. Can I do that with a constable? No, but borrowers don’t know that.

NCS 271 | Re-Performing Notes

Re-Performing Notes: You want to be decent, but then some of them, you have to draw the line.

What we need to do is sent a realtor out and a locksmith and change the locks.

He already knows that we have a locksmith on standby waiting to secure the property, so I need to know, but I’m trying to light a fire under his butt and tell him that basically the constable is waiting on my phone call. The constable and I are in cahoots over there.

If we are going to drop a bunch of money to fix your roof on it and you’re not paying, we’re not going to sit there.

It wasn’t just the roof, it was the basement too. There was no pride of ownership because he let it deteriorate and brought to that point to where it started as a simple mishap. He even said it was a small plumbing issue. The thing is, he owns his own plumbing company. Remember, the one with roofing bed, that’s one of his friends that gave us the bed that was supposedly the better price and everything, so he’s his own handyman. He was trying to get us to foot the bill and once I started digging around. I was like, “You can’t tell me that you need this amount of work done on the plumbing when you’re a plumber yourself.” None of it made sense.

This one is Loyal, Wisconsin. It’s a good looking little house, two bed, one bath, 1,100, rent rate is $780. Last pay date was February, P&I is under $300 a month. BPO on this is $61,000 and some change. UPB is $33,853, purchase price is $14,000. Bought this in June.

The sweetest little old lady I’ve ever talked to with the cutest Wisconsin accent. She tells me that I don’t sound like I’m from Texas and I told her she definitely sounds like she’s from Wisconsin. Elderly lady has limited income, but she’s had enough collected and saved up that she’s affording to make her payments. She had gotten a couple of months behind with NAA because her husband had passed away, which is understandable. We happened to purchase the property right about the same timeframe that she was ready to come out of her shell in her grieving period.

We talked, she’s friendly, she’s in the garden club. She pays an additional monthly. She pays on time. She never calls me with any complaint. She’ll call to chitchat every once in awhile. She calls to tell me happy holidays, and then outside of that it’s a win-win on this one. She said she’ll pass away before she is able to pay it off, but she’s going to make her payments on time, which to me, is a little unsettling hearing that, but that’s what she said. She was like, “I won’t be here before I pay this off, but I’m going to try to in the meantime.”

One thing that we might want to do is help her prepare for that. Next time she says something like that, who’s she planning on leaving the house to?

She said it was going to be her granddaughter, but her granddaughter is quite young.

We need to figure out and have that ready in place for the family to take over payments and stuff like that for her daughter and then granddaughter for that aspect of it, but we’re glad to work with them and we’re always glad to help people out. This is a pretty decent return. 25%of the original payment. The extra $29 she makes a month gives us a nice yield of 27%, which is not bad. Another process is getting the payment sent over to us and stuff like that too.

This one we have established. We got that. Madison helped us do the change and got all set up, so that’s when we finalized. That’s why it’s sitting there so I can put all the paperwork together and get everything updated and whatever else I need to do on it.

What would you say, Jen, has been your biggest a-ha moment? You’ve been doing this with me for over a year, going on almost two years. How about this? If people don’t have experience, should they be calling borrowers?

No, don’t even attempt. That’s like sticking your foot into an alligator’s mouth or something like that. I have twelve years’ history with multi-family and cases like this, but there are still some that I can’t handle. It either pulls on my heartstrings too much because I’m a sucker for something like that or they’re PIA. ”Shante, I love you, but this is what you’re here for. Take this one away from me.” The most part is a lot of the borrowers are more willing to cooperate. It’s 50/50 because it’s like if these people were doing what they’re supposed to do and they’re paying how they’re supposed to you and they’re doing great and I have no issues with them. They’re paying us, this is great. Then you have the ones where it’s like they’re batshit crazy, like what’s going on to where it’s hard for you to work with them but you’re a human being.

You want to be decent, but then some of them, you have to draw the line and the a‑ha moment is how the mentality of some of humanity is and then how good hearted clash, but outside of that, it’s sad to hear how some of these people got roped into buying some of these houses. They’ve put a lot of equity into it and repairs and blood, sweat and tears and time and to see that their original loan started at $30,000. They’ve been paying on it for three or four years and their loan balance is still $31,000. It’s hard because it’s heartbreaking to them. They’re like, “I had been working hard and doing this and my balance has not come down.” That’s where when we come into play and we talk about it and that’s where it’s great when you step in because you’re like, “Forget this amount,” or “We’ll do this,” where it’s the best thing to hear the excitement in their voice and the thank you’s that we receive. People will send us pictures.

This one lady, she was so excited to send a picture of her trial payment plan with a smiley face and she was like, “I’m moving in the right direction.” Things like that, that’s what it’s all worth. Spending eight to nine hours a day on the phone with borrowers and 500 emails and a lot of paperwork and files is not glamorous, but I enjoy it and I know that we’re making a difference for these people, especially considering if they came from NAA, they had a bad situation so it’s nice to be able to give them finally some light at the end of the tunnel that they’ve been dealing with.

NCS 271 | Re-Performing Notes

Re-Performing Notes: They had a bad situation so it’s nice to be able to give them finally some light at the end of the tunnel that they’ve been dealing with.

You do a great job, Jen. We take good care of you. We are working out a flex schedule and things up there. You’ll be working from home for quite a bit.

When I am at home, because I’m not hearing my phone ringing and I get the voice mails to pop up, I can sit there and knock stuff out. I just turn on music in the apartment and start jamming out stuff, but I don’t hear my phone ringing. I’ll get the voicemail is popping up and so the instant distraction isn’t there to where it’s like, “I can knock out four hours.” I can time block and say, “These first four hours, I will knock this out and in the last hour at the end, I will return phone calls and stuff.” I get a lot more accomplished, but no one will be jealous when I’m at home, so it’s like whatever, I’m comfy.

A comment from the audience says, “Jennifer sounds like a real sweetheart.” She is, she’s great. She’s good with what she does. There’re times when I have to step in sometimes, but those are few and far between. We talk, “What’s going on with this deal? What’s going on with this deal. What we need to get done?” if she gets stumped, she asks me, but she’s good about being proactive and I wish I had a dozen Jen’s.

I have my moments to where I get a little hot headed and Scott has to tell me to wait 20 to 30 minutes before I call someone back. Let me vent and then I’ll call them back tomorrow.

Jen, thank you. We took some time out of your morning to do callbacks.

It’s a nice break. It’s nice to break up the routine. I’ve been thinking over here, so it was nice to do something a little different.

This is going to be a regular occurrence because I was looking back at what we’ve done. We’ve done a lot of great interviews, a lot of great guests on, we talk about a lot of great subjects, and I look back and we have not done a case study in quite some time.

We’re getting more and more and there are some that we’re going to be reaching that thresholds where we can go over the modification process or loan or whatever we’re selling off, whatever we’re going to be doing, so we’re about to hit that mark to where it’s a big step in that one year mark because a lot of these that are fulfilling their trial payment plans, it’s going to be life-changing, at least on their loan aspect.

We will be doing a lot of work of pre-pricing. We’ve got a few buyers for performing contract for deed and notes too, so will be doing some marketing and making some of these available for those that are interested. Thanks for asking questions on the Facebook Live. For the audience on all the platforms, thank you so much. We enjoyed this episode. Please do me a favor on iTunes and give us a five-star rating, two thumbs up rating, would appreciate that as well or share this with any of your friends or family or colleagues or peers that you think would find this valuable. Go out, listen, share, and like, and once again we look forward to seeing you at the top.

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