Do You Need An Attorney Or Not? When To Use One In Note Investing

GDNI 69 | Note Investing Attorney

 

The real estate business can be tricky. That is why, for some, it helps to be backed by a team of experts who can guide you in certain aspects of the job. In this episode, Gail Anthony Greenberg and Chris Seveney talk about one of the go-to people of every investor – lawyers. Gail and Chris dive deep into the things that you might use an attorney for such as reviewing collateral files, land contracts, demand letters, lawsuits, and more. Speaking from their own experiences, they also share some encounters that they may have needed one or not during their investing journey.

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Do You Need An Attorney Or Not? When To Use One In Note Investing 

Gail, we’ve had a lot going on. Why don’t we get rolling right into it? Why don’t you tell us some of the things that happened to you? 

I got off the phone with the recorder’s office in my own county. At the very beginning of my note investing career, I foolishly bought one note in my own county. I feel like this is the perennial note. I feel like I’ll have it forever. This was the borrower who is the serial bankruptcy declarer and probably holds the record. There were seven bankruptcies in six years. He keeps getting to declare it over and over again because he never completes one. If you have it dismissed, then there’s no restriction on filing again. This has been his annual routine as the swallows return to Capistrano routinely every year on the same mystical schedule. This guy right before tax sale files bankruptcy. That’s every end of September in my world. 

Does the property have equity in it? 

Not in its condition because it got so many liens on it. This is somebody with multiple properties all in the same distress condition, tons of code enforcement liens and back taxes. 

The reason I mentioned that was somebody on Facebook posted that they’re a broker who sells nonperforming assets at $0.90 on the dollar. I chuckled and said, I’ll sum it to you at $0.80 on the dollar and you can turn around and make a quick profit on them. He was saying that, “The properties have all this equity in them and it is no risk to buy a nonperforming note at $0.90 on the dollar.” Right then and there I was all credibility for the personspoke with whom, “What if the person continues to file bankruptcy and drags everything out for many years and then turns on to sues you because they think you did something wrong?” There’s no risk. For people out there, if anybody ever tells you there is no risk in this business or in any real estate business, walk away. 

I think a small child who would see through the notion of no risk in any situation in life. Of all the big promises I’ve heard, that might be the biggest. I have about $26,000 and years of my life invested in this situation. If it was fixed up, it would be worth maybe $65,000 and it’s got $15,000 liens in back taxes. It’s got $41,000, I’m on the hook forand it needs about $15,000 of repair. If I could sell it for anything between $41,000 and $50,000, I’ll be happy. That would mean either breaking even or making a few bucks. 

GDNI 69 | Note Investing Attorney
Note Investing Attorney: If you don’t know all the little city rules and laws in a state, have an attorney tell you what to do.

 

In the mail, I got a signed cancellation of land contract for one of my borrowers who wants to cancel because he turned it over lease option to a tenant who is a disaster. 

He’s commiserating with you because he has a non-paying person in his house. 

The good thing is when this occurs. They have no authority to sign any type of agreement, transferring any type of equity or title to the property. According to my attorney, all you have to do is send a ten-day to the individual let them know they need to vacate. I’ve been going back and forth whether or not to reach out to the guy, but I’m almost making it the land contract borrower’s problem that it’s like, “You created this mess. You tell the guy what’s going on.” 

That would be fine, but do you trust them to handle anything responsibly given his track record? 

If the person living there gets a ten-day notice saying, “You’re getting evicted because you signed a lease with somebody who doesn’t own the property. He’s probably going to call the guy who he signed the lease with. That’s what I would do. Why don’t we roll into our featured segment, which is when do you need, do you or don’t you need an attorney? First, I want to stipulate, Gail and I are not attorneys, nor are we providing legal advice. We’re providing our opinions. 

Worthless though they may be. 

They’ll probably differ. We’ll just confuse everybody. We will have a little poll up on Facebook of who believes Gail, who believes in Chris. 

Who wore it better? 

It was Andrew Yang who wants to give everybody $1,000 if he is the president. I’ll put a little kicker in there for everyone to vote for me. 

Bribe them with another one of your fabulous calculators. I have nothing to offer except my undying loveI proposed this, knowing that Chris would greet the idea with a mixture excitement and horror because he knows exactly where this is going to go. A reminder that old show point counterpoints. We had two of our JVon the open mic talking about how they JVed with us and then quickly went out and did their own deals. I thought it was an interesting conversation. I love hearing about people who make themselves do the hard and scary things. They both are enjoying themselves as note investors, which is great. One of them said that he’s so sick of the legal bills. 

This is the thing when you have not just non-paying borrowers, but nonpaying with a whole range of attitudes, some who are very sincerely trying to get themselves back in the saddle. Others who have said to our servicer, as one of our borrowers hasI will never pay a loan no matter what you do. That gives you a big range and it calls for a range of responses, some of which might involve an attorney and some might not. Maybe we should break it down in terms of things that you might use an attorney for and then would you or wouldn’t you?

The first thing that any of us do is have an attorney review the collateral file before we buy the thing, to begin with. I don’t know if everybody is in habit. It’s been a practice of mine or it was for quite some time that an attorney would always look. I don’t always turn to an attorney. It’s a combination of things. I would not suggest this to someone who is new, but I have enough experience looking at contract for deed files that I feel confident in my ability to see if everything is there, if the assignments of land contract are all present. If they appear to be correct. The reason that I don’t feel more afraid about doing that myself is that most things can be corrected. There’s a caveat, we have seen situations where all the paperwork might’ve been there, but mistakes were made in the recording. You always talk about a famous Ohio property where the land contract was recorded before the person giving the land contract had recorded their deed. That was a major and uncurable mess up. 

In certain states, if it wasn’t recorded, it might not be as big of a deal. When in Ohio you have to record the land contracts and the recorded out of order like that, it can get ugly. 

I don’t use an attorney necessary for a collateral review anymore because I think there are people who are better at it. We’ve talked about MetaSource. Those people look at things and they catch things in a way that a lot of attorneys would not. I’ve certainly had attorneys make major mistakes. In my view, what an attorney does when you ask them to do a collateral review is that they will look at the scanned collateral. Oftentimes, the scanned collateral is incomplete because the seller has other newer documents in the physical file that never got scanned. Mostly the attorney looks at the title report to see if there was no mortgage satisfaction for an old mortgage. There’s a judgment that is still on there from a previous owner or previous borrower. They probably are looking at the recorded collateral to make sure there’s anything missing. I have done proofreading in the past and there’s a certain kind of person who can be a proofreader because they are so good at catching things. They are natural-born proofreaders. I don’t feel most attorneys are like that. I feel like the people at MetaSource, the people I’ve worked with, they notice tiny little things that are wrong. 

My two cents on this are I have MetaSource review it. Typically, if they turn around quick enough, I’ll send those comments with the attorney in the title report. If everything looks clean, there are occasions when I don’t use an attorney, people starting out. I highly recommend it. A perfect example is in certain states, especially for land contracts. The reason I say that is in certain states you may have an occasion where a property was sold at tax sale. Somebody bought it, put somebody on a land contract and they default. If you go to sell the property, you may have to do a quiet title. It‘s good to know that up front so you can put that into your bid price. quiet title can cost a pretty penny. In Georgia, it can cost how much, Gail? 

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I was quoted $5,000 to $6,000. 

If you have a $5,000 to $6,000 expense that you weren’t thinking of, that can hurt. 

With $15,000 UPB. 

Once you get to a certain point, it’s a judgment call where if I’m buying a note and it’s been one lender that’s going to be the second one and you have the title insurance policy. It’s a judgment call whether or not, I probably don’t need to have this one reviewed. Land contracts are a different animal because you’ve got deeds, you’ve got the land contract. Should it have been recorded? If you don’t know all the rules and laws in that state until you’re comfortable with that, have an attorney tell you what to do. 

I want to add to that. I have the opportunity to review many collateral files more than my own. I’ve seen numerous instances where there’s more than one land contract because the first one fell through and other new set borrowers. I can tell you in 90% of those cases, I didn’t see any evidence of how they got rid of those first borrowers. I didn’t see a cancellation. 

It’s a cancellation when they signed the deed back to you or they have quitclaim deed back? 

Yes, there’s nothing. 

Sometimes they may surrender. 

You’re left wondering like, “They got out of that land contract, but how?” The problem for me is my great respect and belief in the infallibility of lawyers died the day I realized that an attorney had signed off on a collateral file for a land contract. He didn’t notice there was no land contract. 

What about an attorney who forecloses for somebody on a borrower when that person didn’t even own a home? 

I know we’ve seen that too. I don’t want to tar all attorneys with the same brush. What we’re talking about here is who’s going to be better at something, you or them? The answer varies a little bit. I know you don’t like to hear that, Chris, because you still believe in lawyers and Santa Claus, but I have to say it. What’s the next thing you would use an attorney for, a demand letter? 

Yes. 

We were all very surprised to learn that you don’t have to have an attorney send your demand letter, you can send it to yourself. 

Here’s one where there are different areas. For example, if I have a loan where it was a non-owner occupied, an investor or something acquired it and they are no longer performing. In that instance, I have no problem sending a demand letter because if it’s not owneroccupied and investor, you get to skip out on a lot of the Dodd-Frank compliance things because it’s not owner-occupied. It’s a lot more latitude but on others, you as the lender can send a demand letter as your servicer can send it. It does not have to be from an attorney. will send it if it’s owner-occupied, I have the attorney do it. I’ve been going back and forth with it. In that way, the first call sometimes they’ll call the attorney first and an attorney can give me a little background about how the borrower’s attitude was. 

The thing as a practical matter about doing your own demand letter is if it expires as they seem to almost always do without response from the borrower. If you then go to an attorney to take the next step and file whatever the next document is, the attorney I could imagine finding fault with the letter and maybe wanting to redo it so that they have authorship of the whole process. I had an attorney charge me $497 for a demand letter in Alabama. I have never charged $75 to $250 for a demand letter, to get a bill for twice that amount. These are the moments when you’re very tempted to decide who needs them. 

GDNI 69 | Note Investing Attorney
Note Investing Attorney: Nobody cares as much about getting things solved as the note investor whose livelihood depends on working things out in a timely fashion.

 

It’s funny you mentioned that because I had an attorney send a demand letter on a non-owner-occupied property in Virginia. When I sent it to the attorney to foreclose on the property, they’re like, “This demand letter doesn’t meet the regulations for the state.” The attorney who I used, I went back to them and forwarded them the email and they said, “That’s complete BS. That’s not true. They just want it under their letterhead.” It’s an internal thing where probably they only foreclose if they start the file and don’t want to take it over from somebody. He goes, “It’s complete BS but it’s up to you what you want to do. 

They can confound you, whether there’s a basis for it or not. They can make your life difficult and there does seem to be a fair amount of turf wars among attorneys. They don’t miss an opportunity to do billable and they are very possessive about their role in the process. I feel like as consumers of legal services, we have to find where we can advocate for ourselves and push back a little. In the case of the $497 demand letter, I wrote back to them, I’ve never paid that much for a demand letter. I did not say this but in my mind, I think this is a boilerplate letter. You pulled off a shelf and stuck a few numbers into and put the right address on it. I have a lot of properties in Alabama. Many of them teetering. If you’re going to be twice as much as everybody else, I can‘t use you. I feel I’m talking to a borrower, “If this is the way you’re going to behave, I’m not going to be able to work with you.” They’re all like unruly children. You have to deal with them all the same way. 

I don’t think I even told you about this email I got. I have a friend who, like many of my friends, is also a note investor. The subject line was in all caps, “I AM GOING TO THE DARK SIDE, I think we can all agree that is an email you need to stop what you’re doing and read. I opened it up and she started telling me that she’s going to take a page from my book and be like me. Instead of being the good girl that she’s been her whole note investing career, using attorneys to do everything, she is now going to reach out directly to borrowers and try to negotiate resolutions or situations. I said, “Is this my brand? I’m on the dark side and I cut lawyers out of everything I do.” I thought about it, “That’s my brand. I guess I’m okay with that. 

It depends on your level because of your experience on things. Even on borrowers, some people want the servicer, some people have an attorney and some people do it themselves. The question is do you need an attorney to do it? The answer is no, of course not. 

I think you should stop and tell people where to go for that course on how to not break any rules, speaking to borrowers.

ACAInternational.org, the Association of Credit and Collection Professionals. It’s a great website. I recommend signing up to their blog as well because there’s a lot going on in Congress with CFPB, texting and emailing borrowers and a lot of things. When you’re the Association of Credit and Collection Professionals, you’re on the pulse of that. They put out a lot of great information. Every morning I get daily email from them that has cool articles. Sometimes I share them and they have a lot of training. I think it was $150. 

They have an actual training course of several modules telling you what you can and can’t do when you call a borrower.  

thought it was good because even if you’re not calling a borrower, if they call you because at some point in time, a borrower’s going to pick up a phone and call you. It’s like, “What do you do? You shouldn’t completely ignore them. You can either let the servicer know, “This person called me, handle it.” It’s nice though to have an understanding of what it is that you should do or say.  

I’ve had several moments where I was waiting for an attorney to solve something for me and they just couldn’t. They got to a certain place and they couldn’t go any farther. They’re like kids who aren’t tall enough to go on the ride. Obviously, they want to do a good job for you, but nobody cares as much about getting things solved as you do as the note investor whose livelihood and standing with your JV depends on working things out in a timely fashion. In this case, I had bought a CFD and all our outreach efforts went nowhere. The people just never got back to us. With regret, we started the forfeiture process. It was in Indiana. We were able to serve the first notice. I don’t remember why this was. 

I guess we sent a demand letter then there was a first notice that had to be served in more than just male. I was able to find someone. He kept going back to the house over and over again to find the people. Even though he was allowed to post it on their door, he waited and revisited until he found the people and handed it to them. That was great. After that, there was another notice that had to go to them. Bthe time that was ready to go, they had moved out and disappeared. The attorney’s view was we have no choice at this point, but to advertise the normal legal advertisement. I think they have to put it in a newspaper three times over a certain period of time in the legal notices. In some cases, these are very expensive ads because you literally have to put the entire text of the summons or whatever it is. The REIT has to go in the paper, which I thought like, “That’s very embarrassing for people to have published in the newspaper. 

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It was going to be $700. We had already put in more money on this than I was comfortable with, given that the people had abandoned the house. I felt like if they’ve abandoned the house, I think there’s a very good likelihood that they don’t want the house anymore. They would prefer to be off the hook with this. I said, We’re not going to advertise it. I’m going to go find them and I’m going to get them to sign a cancellation of the land contract. The attorney was rather taking it back like, “You would take matters into your own hands? I don’t like where this is going, but there’s nothing I can do. Indeed, the people had moved. It was a little tricky to find them, but I have very good skip tracing access and I found them quite easily. The guy who was the only one on the land contract, he was absolutely delighted for me to find him and offer him an escape hat through the cancellation of a land contract. I thought that if this is spending $700 only to then move to the next square on the board and do the next costly legal thing, I would’ve had to do in the forfeiture and then deal with a redemption period. I found the guy, I paid the notary $100 to meet him and get the document signed. 

I’ve always gone by to philosophy when I see these frivolous lawsuits. I had somebody who used to work with this. We used to joke together that the legal system in this country should work as a lawsuit, the losing attorney gets put to death. He goes, “That way you would get rid of every frivolous lawsuit out there. Your worry would only be true lawsuits coming up.” He used to joke, “Have the losing attorney put the debt, then we’ll see what happens with that and how quickly the court systems would resolve some of these issues. 

That’s a little extreme, but maybe we could come up with some punishment. That would be the living hell version of that. It could be tailored to the person if they absolutely hate a particular performer, say they hate Cardi B. They have to be tied to a chair and listen to her continuously for 24 hours. 

don’t know who Cardi B is. 

I want to ask you first. I know you haven’t owned up to it in this episode, but I know compared to me you are an all lawyers all the time guy. You have less time to get into the mischief I do. Also, I think you probably have more respect and you appreciate the guarantee. Not that they’ll get a particular result, but that in using them you have crossed the t’s and dotted the i’s. Has there been a moment, where you said to yourself, I’m done with these lawyers, I’m going to do this myself? What did you do? Tell us what happened. 

It’s not that exciting. I was having an attorney generate a mortgage and note for me because I was swapping a CFD to a mortgage and note, and I had the attorney do it. In Word documents, you can go file and it says who the document was from. The document was from Fannie Mae, which most people don’t know this, but Fannie Mae has on their website, you can download a mortgage and note for every single state at state compliant. Because if you’re getting an FHA or loan that’s going to be bought by Fannie, they want them all to be the same. They have a template. My attorney charges me $1,000 to pull that template and put a few names inWhen I started originating more in this state, I’d still use the MLO check the people and they would do the same thing, “Do you want me to create the mortgage and note? I’m like, No, I’m good with that. 

When I had this one utility issue that I had, I even had my attorney involved in that dealing with it because it was more in the sense of time and trying to make sure that somebody didn’t complain about a utility being shut off or something along those lines. I wanted my attorney to be the one involved. It was not made it look like, “I’m the bad lender who went and turned off the utilities on somebody because of some extravagant bill.” It was, “My attorney knows a lot and knows what I can and can’t do and I let him handle it from that standpoint.” Unfortunately, I don’t have anything sexy out there that I can think of where I said, “Screw it with the attorney. 

I’ve used attorney’s names in vain many timesThe only time I’d say another instance is if I’m negotiating with a borrower and the attorneys were in the middle of something, it’s more complex on certain issues. I’ll tell the attorney, “Let me feel the borrower, I’ll handle it and try and work it out. I’ve had where the attorney’s on the phone with another attorney and I’m like, “This is mediation. I’ve been to mediation before for work. It‘s just mediation for foreclosure. Let me on the line because I want to be the one doing all the talking.” 

Most of my first experiences of taking jobs away from people, it comes out of utter frustration about the pace or the results that are happening. There are many times where obviously no one’s invested in the outcome as we are. I’ve told this story before. I had an outreach person in the same situation where there was no land contract in the file folder. I had my borrower outreach person get in touch with them. I was like, Ask them if they have a copy.” He is like, “I think we have to tread very lightly here. Maybe I should say we’re going to offer them a new land contract with better terms. I’m like, I didn’t interfere with his process.” After, he came back to me and said like, I don’t know what to do, they rejected the idea of a new land contract with better terms because they’re okay with the one they have.” I was like, Ask them for it. What is the problem?” That guy wasn’t an attorney, but I fired him also. I called them up and I said, “I don’t have your land contract. Without it, I don’t have any proof that you are land contract borrowers. You could be tenants for all I know. Could you please give me your copy? They faxed it right over. People have their own weird ways of going about things. I’m much more of a straight to the goal person. I don’t like all this meandering. I have short patience and the flopping around. 

GDNI 69 | Note Investing Attorney
Note Investing Attorney: You have to cancel in some way when you make an offer to a borrower that you have to eject in some way his rights.

 

I like to use my attorneys, but I also can sometimes get a little aggressive with them. They’ll test me sometimes. I have the utmost respect for them, but I also want to hold their feet to the fire and make sure they deliver as promised. 

That’s a big thing. When I’m an attorney doing anything, I put reminders on my phone at the deadlines. One’s mind wanders like a busy attorneys. They have a lot going on. I wanted to say also, here in this Indiana situation, there was an attorney working on it. I stopped them and I took over. What my friend was saying about the dark side was she always went by the book. People are not performing, you can get a response. You hire the attorney. You go all the way through. I’m demonstrating a different approach here. You hire the attorney, but if things bogged down, you don’t necessarily go all the way through with them. Maybe you take over just to complete the thought before I get on to you. One of the people talking has an Ohio asset that is over the limit where it’s a CFD, but it’s old enough that he would have to foreclose, which is a $5,000 to $6,000 proposition in Ohio. I’ve never done it. 

In a situation like that, I think it pays to reach out with a Cash for Keys offer. This is what she was saying to me, I’m not going to keep hiring attorneys and letting them pat me on the head and be a good little girl about the whole thing. I am going to aggressively offer other escape options to the borrower that are going to be way cheaper for me and way faster and less complicated. She is aggressively offering Cash for Keys, cancellations, sweetening the pot. She offered a small amount of money on an Ohio note that was old enough that it was going to be expensive. She only offered $500 Cash for Keys. I would definitely throw a lot more bait in the water than that. In a situation where you’ve got $5,000 to $6,000 at stake, I would definitely offer a thousand or more. You cautioned me at one point about once the legal process is over, not getting involved with the borrower, but I want you to share what you said to me. I don’t think it was about making a Cash for Keys or offer. I think it was about negotiating anything less than a full reinstatement with someonif you’ve already demanded a full reinstatement amount. Do you remember that? 

What you’re referring to is accepting payments after you sent out the demand and requested a full restatement. You do that and it depends on the jurisdiction as well. Most states, if you accept the payment after that, say the reinstatement i$5,000 and someone sends a check for $500, you except that. What I mean by accept is have your servicer take it, deposit it and be like, “Here’s the payment and apply it. In a lot of areas, you’re wiping out your demand in default because you’ve accepted that. What you can do is if the servicer deposits and say, I didn’t want you to do that or you screwed up, send it back to the borrower.” The other thing I thought you were going towards, as well as Cash for Keys thing, is sometimes we will give them cash by time and say, “I’ll give you 45 days to move out. A lot of times they move out faster and say, I’ll give you the option. I’ll give you $500 if you’re out in two weeks or you can stay for six weeks and get nothing. Try to be flexible is what I like to do. 

Making an offer to a borrower that you have to eject in some way in his rights, you have to cancel in some way. Making Cash for Keys offer short circuits the whole legal process and voids your need for an attorney. In that sense, I am a huge fan of that. 

That was the other thing you brought up too. You can’t be foreclosing on somebody. This is what my attorneys told me, “I won’t foreclose. I’ll give you $1,000 if you sign this over because it can be considered predatory. If they come to you and say, “I don’t want to lose this house,” you can come up with this much, if you can’t, it’s a rule for foreclosure. If they asked for something, then you can give them a reply. You can’t say, I’m foreclosing on you or I’m foreclosing on this.” Once you’ve started that process, the attorney says, Let it go. If they come to the table, that’s when you can start having communications. Don’t start offering them the day before foreclosure with money or a week before because you can get yourself in trouble. 

In terms of the money, a week before the foreclosure, you would have pretty much spent everything anyway, so there wouldn’t be a whole lot of point in calling it off. What is the fail-safe point? If you sent a demand letter, can you reach out to them then or no? There’s no reaching out if there’s something legal. 

I don’t know the answer to that. I’ve got one where the demand letter went out, then the ten-day notice after that has gone out. The final complaint hasn’t been filed yet, which gets filed with the court. The borrower got the ten-day notice and then picked up the phone and called me. I was like, “What do I need to do?” It says my reinstatement is $7,000. I said, “Yes.” He said, “What do I need to do to keep the property? I said, “Do you have $7,000? He said, “No. I commented and said, “Come up with a plan for me and then I can take it to the investor and review it. Either we accept it, deny it, counter In most instances, there’s never a flatout denial if this is the first time you’re asking for this. If this was the third time, it could be a different story. The first time typically will be accepted or they may counter depending on things. It all depends. The borrower sent me an email with their offer and I have to call them to finalize the terms of that. 

This was a borrower where you hadn’t made any progress trying to reach out to and get some payment plan worked out ahead of timeYou had to go with the demand letter and everything. 

Yes, because the borrower’s mother died. His wife’s mother died, his sister’s mother died. His wife’s sister’s mother died. 

They had to go on vacation to Maine. That’s another seemingly more common excuse for why they can’t pay you. They have to go on vacation. 

There's never a flat-out denial during the first time you're asking for something. If it was the third time, it could be a different story. Click To Tweet

I had one who couldn’t make a $400 payment and said they could make $1,000 payment but apologizes they couldn’t get in touch with us because their cell phone was shut off because they didn’t pay their bill. I’m like, “You can’t pay $100 or a $50 cell phone bill and you can’t pay your $400 mortgage, now you’re going to pay $1,000? 

It‘s very interesting that we are so restricted in terms of who we can give a mortgage to initially by the mortgage loan originator’s standards. Who created the standard? Is it Dodd-Frank that sets what the limit is?  

It’s been out there for a long time. I think it might be Fannie and Freddie or HUD. I think it’s one of those agencies because it was based on what the criteria for what they would buy the loan at because most mortgages get bought out by the government. These banks go and some keep them in-house, but others take them, they pull them all together, sell them off to the government so they can get their money back so they can keep lending. think it was the government in some instance set the guidelines based on what they would buy. What’s interesting and drives me nuts is, which we’re going to do an episode on a borrower going into bankruptcy, you get to see all their information and a BK judge will approve a payment plan that if I was in MLO who gave that person a mortgage based on that payment plan, I’d be carried away in handcuffs. It’s okay for a federal judge to let somebody who makes $20,000 a year come up with a payment plan where they have to pay $3,000 a month. 

That’s what I was going to say. We are so constrained when creating a mortgage. When you’re modifying a loan, you can go way beyond the income limits. 

There’s a court case where the borrower can never make them. They’d be almost held the lender liable for predatory lending on the modification because they approved it without knowing that it wasn’t going to work. I think it’s personally a stretch and the history has shown it’s gone both ways but more in favor of the lender because it’s the borrower who defaulted and was the one who proposed those terms. 

I don’t even understand setting up a borrower for failure that way unless there was a big upfront payment involved. I don’t understand other than that what the motivation would be. Obviouslyit’s not a good thing to do. It’s not a longterm strategy for sure. In fact, you and I, if we don’t think that if it’s not a sustainable payment, people come to us all the time and offer these ridiculous numbers with an upfront payment. We actively discouraged people and we say to them, “Iit doesn’t look like you’re going to be able to do this. If that’s the case, I do not want your $2,000 upfront. Save your money, figure out what you’re going to do, where you’re going to goUse the money to move, get set up someplace else.” I think that is the good deeds thing to do. I would encourage people of good conscience to consider doing that themselves. 

Gail, I think we’ve had a great discussion on some of the do you or do you not use an attorney conversation. I think we should go into the last segment of what’s your note and bolt? 

My note and bolt relate to this conversation. If you are having a collateral review done, particularly in a case where there are a lot of assignments and allongeslike you got a note that’s changed hands many times. Consider not having an attorney do it, but have MetaSource do it for you because they are eagleeyed and have made some extraordinary catches for me. 

My note and bolt are in regards to contract for deeds. Certain states, buying a property, what you buy that deed for is a recorded document. If you’re researching and doing due diligence on an asset, a lot of times what I’ll do is I’ll go back and get an idea for what did the seller pay for it. I’ll usually do that when it’s not an everyday seller. If it’s a one-off person who’s a main street investor like myself. The reason I do that is because I’ve seen instances where I’ll ask people, “What are your pricing expectations?” They’re like, “We haven’t set any.” I’ll see that there’s a $40,000 UPB and they bought it for $32,000 and it’s nonperforming. I’ll know that they’re in it for $32,000 already. A lot of times I don’t spend too much time after that because most people probably aren’t looking to take the loss on it or haven’t come to conclusion yet that they’re going to take a loss on it. A little food for thought that information is readily available. On mortgage notes, it isn’t, but on contract for deeds because you’re buying the property, in certain locations that’s public record. 

You have to let them reach the resignation stage about it. Just like I’m trying to reach on a couple of things that I might only break even on. It’s not easy but as long as you got to do it. 

Gail, as always, for our audience, thank you for reading to this episode of the Good Deeds Note Investing. If you could please leave us a review on iTunesStitcher, Google Play. Also, highly recommend you join our Facebook group, Notes and Bolts From the Good Deeds Note Investing. As always, we always recommend that you go out and do some good deeds. Thank you. 

Bye. 

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