- April 8, 2019
- Posted by: august19
- Category: Podcast
Are you having a hard time deciding what servicing company is the best one for you? Gail and Chris are joined by Chad Urbshott and Cody Cox as they dive deep into the following servicing companies – FCI, Madison Management, and Allied. Learn what they like and dislike and the similarities and differences of each servicing company in terms of boarding, website portals, generating reports, and using attorneys for you to choose which one suits you best.
Listen to the podcast here:
Servicing Companies: The Things We Hate And Love About Them with Chad Urbshott and Cody Cox
We’re going to talk about servicing, what we like and dislike and the differences between some of the servicers that are being used. We’ve got Gail who’s going to talk about FCI. Chad will be talking about Madison Management. Cody will be talking about Allied. Many people use Madison but there are other options out there and that’s why we wanted to have this episode to discuss what those are. Get a roundtable discussion from the three of you who use these servicers somewhat on a regular basis. Get an understanding because each one has things they’re good at and things that they’re not great at.
We’re going to jabber away but please ask your questions along the way to give a little direction with things.
I figured we’d start with the outline of the lifecycle of a note and start out with getting signed up with a servicer and their contract that they have and forth. Gail will start with FCI. Do you mind sharing some experiences getting signed up with FCI?
Everyone who finds out that I use FCI, they always had the same question, “How in the world did you ever get them to sign you up to begin with?” It seems like a trial by ordeal. You try to get them to give you the paperwork and then you turn it in and you don’t hear from anyone. I can say from my experience now that I have many notes there, it’s much easier to talk to them and get them to respond. When I was new and looking to board my first notes, they totally ignored me too. I had an inside man was the only way I got in the door. I had someone’s name and it was this kind person. I would call him up and I would say, “Could you go over to so and so’s desk and ask them if they’re going to let me sign up to be a customer of yours?”
Was it a woman that starts with a K?
Whose initials are KJ.
I tried signing up with them and after a month of the loan not getting transferred, I gave up.
They want to see who’s going to stay the course. You have to have what it takes to be one of their customers.
Their paperwork is intensive. There are a lot of forms they have to fill out from what I recall.
I don’t remember but certainly every time you’re boarding a new one, it’s quite an ordeal. You’ll ask them, “Do I have to fill out this whole thing?” It’s a six-page, 9.5, many blanks and it’s like, “Put the address in and sign the last page.” They get a lot nicer once they know you, but it’s tough.
Chad, why don’t you talk briefly about Madison Management and the process?
I was with FCI prior to Madison. I was using them both at the same time for a while. I don’t remember FCI being all that cumbersome signing up with them but that was probably a couple of years ago. With Madison that is seamless as with probably a lot of people that are on here. I got together with Shante quick. She sent me the forms, filled them all out and I was up and running within a few days. I don’t remember exactly how long it took but I don’t remember it being that burdensome.
Are their forms mostly online to register with Madison?
They are now.
Cody, how about Allied? I’ve heard a lot of good things about Allied. I know they’re somewhat a little newer or they’ve been around.
Allied has been around for a long time. I signed up with them originally probably about a few years ago. I like Allied because they’re vanilla. They don’t have a lot of bells and whistles. They get the job done. Their signup procedure was a simple form. When I first signed up with them, it was on a manufactured home on a park that I bought a seller finance note. It was supposed to be a good deal but they serviced that well. The deal went sideways and the guy that sold the note to me flaked out on some guarantees that he gave me. Eventually, I gave up on it and they said, “No problem.” They shut the loan off and quit charging me. They seem to want to work with you. The contact there is a girl named Melissa and every time I try and get ahold of her, she’s always amenable.
They’re starting to get out a little bit more to some of the various conferences. They may even be at the Paper Source which is coming up soon. I saw them at Note Expo. They’re a plain vanilla thing and I like that. The one thing you do is when you have a loan you want to board with them. They’ve got their cover letter and you submit it all at the same time. Within a couple of weeks you get the email that says, “It’s boarded up.” They got a portal. They’d been around for a while but within the last few months have a portal that you can access with good information on it.
I’ve used those basically for loans that I have in my IRA’s either seller-financed notes or performing notes that are in an IRA that I own. I’ve got one loan left with FCI and then I’ve got several with Madison. I use Allied as that specialized little servicer that they seem to do the vanilla thing and remit payments to me every month either by check or they wire it in my account. That’s the way I want to go with it but I’ve been pleased with them. They answer the phone and they talk to you and they seem workable.
Rolling into the boarding process and a lot of people, especially newer investors, may not fully understand the boarding process. It is a time-consuming process that can take up to a month’s time between a goodbye letter going out and a hello letter being sent by your servicer. Within the boarding process, Cody with Allied and I’m familiar with Madison that they have a form you fill out and stuff like that. Was it smooth for Allied in the boarding? Is it a form you fill out? Do they communicate with you on when it’s going to get transferred and stuff? How is that process?
I’ve found their feedback and their communication to be good. Uploading doesn’t seem to be onerous. They don’t seem to have any problem processing it. They get it into their system, they get their welcome letter and I’ve been pleased with them. They don’t have a lot of those ancillary services. If you’ve got an account that needs a lot of ancillary services such as the high-level collection and the high touch stuff to the borrower then they may not be the right ones for you. If you’ve got a performing CFD, that manufactured home I did a few years ago was in a park. It wasn’t even real estate. They were able to service that with any real problems. From that aspect of it, if you’re looking for a boutique servicer that is vanilla in flavor, I like those guys. They only charge me $18.50 a month for the payment. It’s not like it’s a huge $40 a month thing.
One of the most important aspects is the accessibility of reporting and information. Before Allied had a portal, how would you find out what the activity was on your loans?
You’d have to call them or email them and they have a little 24-hour service level agreement where they’ll get a response out to you within about 24 hours. They have boarding people that watch the boarding email. They have the servicing people that watch the servicing email. I don’t know how many overall loans they service. I don’t think they’re anywhere near the size of an FCI or Madison or anything like that. I do know the people they have on their staff are career mortgage folks. They understand the mortgage business because they had been in it for a long time.
It’s interesting because of all of FCI’s faults, the one place where they shine is the reporting. How interactive and how robust their portal is. I’ve had numerous conversations with Madison about, “Can’t you put this up? Can’t you make this report available?” I was trying for my own business purposes seeing what the total disbursements were to me in 2018 from Madison. They won’t give you that. Everyone probably asks them for that and their head won’t create that report for he says security reasons. As if that information is made up of other information that they do make available. Why that is a security concern where the other reports are not? I don’t understand. It sounds like an excuse to me quite honestly.
Going back to the boarding process, Chad with Madison, how has it been with your boarding the loans with Madison compared to what you hear or see in the industry?
It’s quick. It’s seamless as well. I don’t know how long ago they put that form out but when I first started with them I would email all the documentation and they would board it. They came up with that form or maybe I didn’t know it was there. That could be improved. It’s probably not that hard to set up an online portal to put all the information in that way it doesn’t have to be transferred over. I can do it. Chris, I know you can do it. I’m sure they could probably do it. We collect information from people. You set up a portal and people can log in. Here’s all the information, here’s the address, here’s the UPB. You can enter it all yourself as opposed to it being entered twice. It’s simple. I’ve had loans boarded within a couple of days. I’ve said to Shante, “We need to get this done ASAP. Can you get on it as soon as possible?” If she can’t do it then she’ll get someone to do it. It’s good in that respect.
One thing too with boarding that people need to realize is the most important player in it is the seller’s servicer. The seller servicer is somebody who’s slow or behind the eight ball, that can slow down the process. I’ve got some loans getting boarded that some of them were coming from NAA which is now boarded but it took over a few weeks to get them boarded because for them to get the documentation, get everything it took a long time.
If there’s one thing I can recommend to everybody is what I quite often do is find out who the servicer is and get their contact info and send it directly to Shante or whoever. I’ll ask the previous servicer email with Madison. Most of them do know each other but sometimes some of them don’t communicate whatever. If I find they don’t have their contact info, I’ll provide it as opposed to Shante or whoever Madison is trying to track down. That tends to help a little bit.
Email both of them, copy them on emails and create a circle.Some misconceptions with this industry are because we are so used to email. Click To Tweet
I’m going to add a little bit about FCI in that I got in with them and you guys talk about the setup process with them. I was a little fortunate because I bought several notes that already needed service by them. I let them routine the servicing on that and that helps feed my process through. Gail, FCI with the boarding. Cody mentioned the 24-hour email response with Allied. I know these individuals at FCI will get back to you in 24 hours as well but I think their clock must be broken. I’m coming up on about 700 days and they never responded to me.
It feels like both the strengths and weakness of FCI is they’ve got many people working there because there have been times when things have gotten lost. Somebody thought somebody else was doing it and it got dropped. I would say I have found similar boarding times between FCI, things at Madison and FCI that’s similar. When they’re busy things wait and Shante is accessible. That’s a big difference. There used to be people inside FCI and I remember talking about this in a webinar. When you know the people there, things can happen lightning fast but they’ve had a lot of turnover particularly in the person who monitors the lender request email. It’s the main way that you communicate about everything if you don’t know the people in the escrow department or the people in the transfers department or whatever. It’s patchy. It’s up and down.
The meat and potatoes component to this is their online portal systems. Most of my loans are with Madison, which I would probably rate their portal as a C-minus. The servicer who I saw that has the best portal is NAA because I’ve gotten access to loans I bought through NAA. If you’ve never seen their portal, it is awesome. I’ve never used them but they send out email alerts with taxes due and stuff like that. They keep all the collateral files on their portal which I know Madison doesn’t do. Let’s start with Chad this time and talk about Madison’s online portal because most people will find it a little subpar.
C-minus is probably about my rating as well. If we could merge FCI’s portal with Madison’s customer service, it would be the best. It would be an A-plus by far. The portal is okay. Finding stuff takes a little bit of navigation but does FCIs. As far as finding the notes, I find that could definitely use a little bit of tweaking. They’re easy to find but they may have straightened it out now. At one point, they weren’t in sequential order but I think they are now. I go in and the dates are all jumbled together and there’s no sorting feature on it. It was driving me nuts for a while but it is fixed now. It seems to be better but then they put emails in with the conversations but that’s a little bit of nitpicking. It does serve its purpose. It could use more reports such where you can try to get your disbursements that were paid that would be a big help to compare it with the accounting at the end of the year. Another servicer, I never use them but I was in a previous partnership with SN Servicing. Theirs was unbelievable. I thought FCI’s was good and I took a peek at theirs. It might have been before I saw it.
I’ve used them as well and I still would put NAA’s above theirs.
NAA was one of my first servicers because I bought a harbor note and a more experienced person said to me, “You should leave it out to NAA and have that experience.” They’ve merged or they’ve changed names.
The simple things too like what they do and I’m hoping other servicers read this. If you send out somebody for $20 every quarter to take pictures of the house, they upload all those reports in there or show the photos. Madison, I use them, they’ve got nothing. You can’t even find the old collateral or anything like that. They get all these images and documents from thousands of documents from private product servicers and they don’t even put it in a reporting folder or anything so you can see some of those. That information is important.
When I was with FCI, that information is all there. I was shocked one day when I was still using both of them. All of the seller data is here. I’d be going through it one day and be like, “I wish I had known this months ago,” but the stuff was there. If there’s anything that I do about Madison’s is when you log in, you get the dashboard and you can see all your loans which I found FCI’s especially cumbersome trying to get to that point. Maybe I didn’t have it set up properly but it is nice when they log in and you can see them all on what you want to find.
What I like about FCI is that if you have multiple entities, everything is in your dashboard. If you have multiple entities at Madison, you have to log out and log back in under the new one like this. There are many things and I did my bookkeeping and you get these amalgams of either money or servicing fees. You have to unravel it and like how easy or difficult is it to unravel in FCI’s case. I can run a report of all disbursements from one date to another and I get a big list and I can look at the loan numbers and know exactly. It would be much easier if they would put people’s names on instead of the loan numbers too. Who knows what the loan numbers are? On Madison, you have to log into their Citrix data portal, their accounting portal, which is not the regular portal. You have to go rummaging around because the dates of the invoices and the payments don’t match the actual dates that either the money was put in your account by direct deposit or taken out. It’s always your best guess like, “This happened on this date. Which of these dates might be the one that explains what it was for?”
Two things I like about Madison are one is you can a report to show their conversation log over a certain date. If you want to see who they called the last few days you can run that. The other is you can run reinstatements and payoffs. When your attorney says, “Give me a reinstatement up to May 1st.” I can go in and do it instead of emailing somebody and waiting a couple of days to get it. I can go and take it and send it right off.
FCI has that about the reports also.
Make sure you do yourself, because I got nabbed several times from them running that report for certain lawyers. It was $15 a pop.
Madison, if you ask them to do it, they’ll charge you $15 for each. It will cost you $30. If you go in and do it, it’s free. Cody, do you want to talk a little bit about Allied? They got an online portal. What do you like about it?
It is a new portal but I’m looking at one of my accounts and all the pertinent information is right up front. I can see everything, last payment made, due dates, amounts, all that service stuff is right there on the dashboard as you look into it. You can flick over between different loans quickly and they have mobile loan numbers which also you can have multiple entities with them. That’s easy to navigate between them all. I’m still trying to figure out. I’ve only had some things going with them. The other one has been gone for a while but since the portal came out, it’s new that I haven’t experimented yet to find out what other various reports they may have. There’s still a lot of stuff they need to bring up on this and that’s it. It’s still plain at this point in time but I’m sure they’ll develop it because they’re trying to build their servicing portfolio as well.
They’re listening to folks and trying to enhance it but all this stuff is right there and I’m pleased with it. When you’re doing a full-time day job, you become homely with that three-hour gap to try and get stuff done. You don’t want to look and make sure the payment is made and move on to the next thing. One of the things I wanted to say here is that in my day job that I have, I manage a portfolio of 2,000 loans at $375 million worth of UPB. We’re in the process of trying to upgrade our system because the one we’re using is like a mid-1985, 1989 system. As I’m out there trying to find out what’s going to be the right servicing system for what I do with my day job, there are a lot of things out there.
When we look at the servicing systems that we’re talking about, there’s a lot of stuff these servicers have to do from a compliance standpoint as well as reporting and borrower information, call logs, payment logs and all these things they have to put together. The year-end statements and Social Security numbers, whether they’re transferred, all these things. They’ve got a heavy load and it’s interesting for me to be on that side of the fence as well as be a servicer as I’m going through looking at it a whole lot of systems trying to figure out which one we want to purchase.
One of the things we talk about portals and some systems is some of the ancillary services of servicers. A lot of times many of us deal on the nonperforming world. Certain services are restrictive on using their attorney versus allowing you to use your own. The types of documents they may do as assistance. Allied is bread and butter but I know other servicers might do a real mod and type that out for your forbearance plan. Does Allied stay away from that stuff and say, “Let your attorney do that?” A lot of note investors prefer to allow them to take control of that versus having the servicer do it.
All that side of things is on me. They might have some options. I never looked into that because I’m more of get my own stuff down and I’m more of a control freak. There are certain things I want to make sure I handle either through the attorney or a loss mitigation attorney stuff. I haven’t looked deep into Allied doing that from this point. I’m not sure that they have that capacity. They’re growing and they’re trying to bring a larger presence into the marketplace for specialty servicing like this. If they get more of a call for it, I’m sure they’ll look at it. If I’ve got a loan that’s paying every month like I want it to, this is the place I want to put it and I’ve been happy with that so far.
$18 to $20 and that includes the escrow too.
I’ve got it set up so if there’s an escrow, the borrower is paying for that. Cutting the check, taking the payment, and doing all the paperwork for the payment history and the year-end statements, $18.50 is what I’m being charged on that.
Chad, with Madison have you used their foreclosure attorneys? Do use your own? If you had forbearance plan or a mod or anything like that?
I’ve never used them for any of that.
It’s the reason why you see Chad and people like Cody are not using them.
I did give them a chance once to do one and it was a deed in lieu or Cash for Keys or something. They emailed me or called me up and said, “This person wants to get out of their owner mortgage. They want to do Cash for Keys.” I said, “We’ll get a local counsel to draft it up.” It wasn’t even about a couple of weeks and I was like, “Where’s this going?” They’re waiting for a fee approval or something from local counsel. This local counsel came back to them a couple of weeks later saying they wanted a retainer. I’m like, “Done. It’s over. Thank you very much.” A couple of weeks later the borrower completely changed his mind and said, “Foreclose on me.” You’ve got to take action immediately when you hear that. That was my first and only chance I gave them. I use a loss mitigation firm, a borrower outreach firm, a third-party. Everybody knows who they are here. Cody uses them as well. Cody, you call them your crack loss mitigation team. They handle a lot of stuff for me and even with them when it gets to the point where there’s Cash for Keys deal. I’ll let them initiate foreclosure sometimes but if it’s an estate that I’ve already got a good set of attorneys then I take it over from there. I’m a bit of a control freak in that regard too because I like to know what’s going on directly. I don’t like getting third-party info.
The other thing that’s a little awkward about letting them do things, I had one of the first lens that I boarded at Madison was a little contract for deed in Michigan. The person got a few months behind, something like that. I let Damien do a full collection. He calls the guy up and the guy forgot to pay for a few months. He immediately wrote a giant check for $4,700 in a short period of time and almost brought it current completely. Madison immediately charged me $500 for reinstatement, working and lurking on this guy. I finally got him to do it and I was like, “You made one phone call, it’s right there on the logs and the guy started paying it.”
There are a lot of fees out there and you’ve got to read because there’s a short payoff. Typically, these firms will take 3% or $1,000. The forbearance plan is $500 and a trial payment plan is $300 and you can charge it back to the borrower but you’ve got to know.
I walloped with one. I have a CFD in Michigan. I bought it right around Christmas or after January. The reason I bought it was the place was for sale and there’s a ton of equity. Mobile UPB, I wouldn’t normally buy it. The seller was not negotiable but ended up paying 6%. It’s still not a bad deal. It was semi-performing and I thought this is a no brainer. They’re going to sell the property and I get a full payoff. I let Madison do the full collections. They’re a few months behind. This is an easy one.
I got an email, “The borrower is ready to settle on the debt.” I was like, “What is their plan? Is it to sell the property?” They were like, “We’ll get back to you but in any event there’s $1,000 fee for this and a minimum of $150 for documentation.” I was like, “What documents? Why are you charging for these documents? Do you know what documents are required?” They said, “We have to confirm with our attorney, they may be more than that.” I was like, “I’ve done two of these already. I’ve got the documents. You don’t need to charge me.” I got an email. The borrower was ready to settle the debt and they basically offered half of what the UPB was $1,000 off. Your net will be $1,000 and $150 for the documents. They had the place listed for sale for three times that amount. I want a full payoff to the cent in any event.We have compressed time when we're trying to get stuff done. Click To Tweet
Gail, I do want to touch on one thing with FCI because if you have to foreclose, don’t they make you use their attorneys?
FCI used to feel a lot lighter and breezier back in the heydays, the high times of 2017. They’ve gotten super rules bounds, dogmatic. They always excuse it by saying that they’re under all this compliance pressure but I don’t see other servicers having all the rules that they do. It seems random and annoying. If you are going to do anything legally, you have to use one of their vetted attorneys. I’ve found this out in the middle of something where I wasn’t using a vetted attorney and they started immediately giving me a hard time. If you have an attorney you like you have to get them to be vetted in order for everything to go smoothly. I don’t think it’s a huge hassle but they have a huge compliance paperwork thing that your lawyer has to go through.
A number of attorneys I’ve worked with have done it because they hope to get other referrals. They thought they were signing up for a referral program at FCI. They don’t realize they’re going to sit and wait for someone to ask for the list of who’s on their approved list. They have a lot of rules that are difficult. If someone declares bankruptcy, FCI insists on supervising your end of the whole thing which they justify it by saying they’re going to have to supply all of this paperwork, basically a payoff statement. They charge an immediate $225 or $250 and then they also make you have the full collection. I don’t even know because I’ve never done it but it’s $90 a month instead of $40 for a normal nonperforming note or $30 for servicing. It’s such a power grab.
Let me interject something there because being a servicer myself, there are some reasons for that. It goes down to the interpretation of their in-house attorneys. They all have to comply or they all have to comply with the Dodd-Frank legislation and things like that. The interpretation of their in-house attorneys is what causes them to do that and what they feel their risk or liability might be. FCI may look at it from a conservative perspective on that and want to try and manage all those aspects of it. Some of the other servicers don’t and hopefully they run into any problem that these other servicers run into down the road. They’re not going to be pinched by the legislation and the regulators.
FCI at one point in time was a large servicer. One of my prior positions with the state of Oregon is I was on the hardest hit funds team. I was the single primary point of contact for 225 servicers across the country that we were making payments on our behalf. Most of them were the standard Wells Fargo, Nationstar but we had about three of those that were specialty servicers and FCI was one of those because they have a large portfolio. They take that from a conservative perspective. That’s one of the things to think about it. If you’re going to buy a nonperforming note in a certain state then what is Madison going to think about it? How are they going to treat it? If you’re going to buy one that’s already in bankruptcy that would be no one to transfer to FCI. Those are all the decisions we have to make as note investors.
They made this role. This was not a long-term thing with them. Why was it suddenly necessary? It seems to me like it’s a new income stream for them. I’m sure they all want to avoid liability for things but when you have your higher net. I don’t think any of us are representing ourselves in these bankruptcies. We all have real attorneys doing it. What value is FCI adding other than covering themselves? If that’s the case, why are they charging us to do it?
One of the big benefits with Madison is they’ve got their standard servicing. You can do for $40 a month, it would be nonperforming but you do the outreach and then I think it’s $90 and $95 for nonperforming. What I like with them is if a borrower makes three consecutive payments, they’ll kick it back to performing. I know other servicers, unless it’s basically up to that paid date or not 30 days behind, they consider it nonperforming. Madison, they could be a year behind but they made three payments. You’re not paying $95, it’s back down to the $20. That’s a big bonus with Madison.
The other thing that’s annoying about FCI is they won’t escrow unless a loan is current. People who aren’t current, they are the ones who need to be escrowed more than anybody else.
Before we get to what a lot of people want to hear is in the actual borrower outreach and some insight from people. Before we get to that, one last thing I want to touch upon is the servicers with how often they pay you and send you money your way in the reporting side of that. I’m curious to get your feedback because I’ve had one servicer that I’ve used. I’m not going to name their name where if we’re in March, March payments will come into the door say March 1st or March 30th. I wouldn’t see that money until May. They would hold the money for a long time because it would not hit the reporting deadline and they would pay once a month. If you miss that date, you’re done. I’ll let you all talk about their payment stream stuff and then we’ll start hitting on the outreach portion. Why don’t we start with Chad?
Madison implemented a once a week payment stream. It’s probably within a few weeks I would say of the borrower paying, you’re getting that money. They were every couple of weeks before which I thought was more than adequate but it’s even better now that it’s once a week because you get the money into your account that much quicker. It’s better for accounting too. I find you’re not at the end of the month or every couple of weeks updating tons and tons of payment streams. It’s nice having it broken down every week where you don’t have as many payments coming in but you have to break out between the principal interest and all that.
That’s one thing that my bookkeeper who I use has mentioned to us. She works with a lot of other servicers. She does with Madison and good kudos with a lot of that stuff. Gail, why don’t you talk about FCI? How often do they pay?
They send payments on a wallowing basis. I was going to tell you to ask Cody and I’ll look up exactly how many days.
Cody, let’s jump to you with Allied. How are they with their payments and stuff?
Allied pays once a month and they pay individually at this point. I’ve got a couple of accounts with them and they send me a check on each one of those accounts generally about a week after the borrower’s made payment. I can set it up that they can wire it. I still like to touch jet but that’s what I have found with them. They remit it to me once a month, generally about a week after the payment was made by the borrower. Not exciting but the check is there in the mailbox when I go out there.
Chad, do you want to touch base with Madison if you have invoices like your servicing and so forth and so on? Do you have your setup where they automatically take it up or they deduct it from some of the payments and show it on that report?
Originally, they were deducting any of the expenses from the payments but they were never on the same invoice and it was driving me bonkers. I got with their accounting departments to like, “Can you send the payment separate from taking over my account so that I have traces of where everything is going?” It was mind-boggling trying to figure out where you get that and that was back when they’re doing every couple of weeks. It was tough trying to figure out where the money is coming from and where it’s going to. Sometimes they will combine three or four different withdrawals all into the same withdrawal and I have no idea where that’s coming from. Sometimes they’ll get an invoice and it would be a few months later for collateral storage. I’m like, “Splitting up my expenses into my accounting system and why is there this extra $30? Where did that come from?” I’ll dig in through the invoices on their portal. I’m like, “This one is from a few months ago. They finally took it out. That must be where it came from.” For all test purposes, it’s decent now that I’ve had them separate the payments from the expenses.
The two biggest things that drove me bonkers where you had a $500 invoice and they would take $300 out of one and $200 out of another payment to you. When your bookkeeper goes, “How do you separate that?” The other thing is I’ll get an invoice that they took $800 out of the account and I’m like, “It says multiple invoices. I’ve got 70 loans with you. I have no clue. Show me what invoices so my bookkeeper can put this in,” which they’ve gotten better at and they can still improve it. Cody, with the payment stream to Allied, payments coming in versus having to pay the servicing fees and stuff. How do they do it at Allied?
They get it right out of the check they send me. It’s easy. They send me a separate check on each separate account. It’s easy to monitor it that way. Those are IRA accounts. I’m not quite as specific and particular on that. The ones are for our general businesses. They did switch and didn’t tell us. For a while they were withholding them from the remittance that was coming to us and you try and match it up then and all of sudden they change. I’ve got a separate invoice for the servicing fees and the check comes separate and I don’t remember them ever telling us they were changing the methodology.
It was probably me that forced that.
It probably was you.
Not me, it was probably other people as well.
We need to coordinate our efforts because I send Shante in the accounting department emails all the time like, “You can’t do this. It drives me nuts.” Gail?
I’m trying to detect a pattern in what they do here. The first one I looked at, they pay literally the day after the money arrived. I was like, “That can’t be they do that every time.” Indeed the next one I looked at, the borrower paid on March 12 and they gave it to me on March 22.
Why don’t we hit the last topic? It’s why everyone goes to these servicers and so forth. How would you rate their borrower outreach on nonperforming assets if you use them or even nonperforming or semi-performing if they have to contact the borrower? What has your experience been? Talk about how you manage them as well. Let’s start with Gail.
I have never used the borrower outreach function at FCI. I’ve tried everything. I hire people. Sometimes I call people. I can’t figure out what is the one thing that works.
Have you heard other people comment about FCI and their borrower?
I don’t even know who does that at FCI. FCI is the servicer for people who have a lot of performing loans. Nonperformers, you’re in the muck at FCI in one way or another, did these ridiculous lawyer rules or extra fees or they’re not letting you escrow.
I can comment a little bit on FCI and that’s one of the reasons I left too was I got no feedback whatsoever. It wasn’t until I found the note section after hours and hours of navigating the portal which was fantastic but no one gives you a demo. They should have a demo set up where you can watch a demo and you can find everything but we were with them for a few months and finding the note section like, “They’re doing something but no one ever notified me.” The communication there is boring. I had a couple of bankruptcy loans with them and those were even worse. I tried to get a proof of claim and to get them to give me the information for proof of claim. They said, “Your lawyer is supposed to do that.” I was like, “I know but they need the data. Those are proof of claim out.” They never did give it to me. Somehow, they were already doing the foreclosure and it was a turn into bankruptcy and they already had the majority of the data. They did their own amortization tables and worked backward and pulled some magic and I couldn’t believe they didn’t charge me extra.People who aren't current are the ones who need to be escrowed more than anybody else. Click To Tweet
The thing about them too was when I was taking back a contract for deed, they were like, “It’s already in your name. You don’t have to use one of our attorneys. You already own the house.” This is something different and they’ve gotten incredibly tight about that now too. Whatever you’ve got, if there’s a lawyer involved, they’ve got to be involved.
Regarding proof of claims, I had a case where the borrower filed bankruptcy in January, got dismissed because he did not do the credit counseling. Turnaround, we filed in February. During that time, the prior owner of the note filed a proof of claim, call it for $140,000. I had Madison send me the documentation and had the attorney file it. The documentation they sent me for the proof of claim showed the proof of claim to be $84,000. Let’s say three conference calls with Madison and showing them the math on what was off but it was over $50,000.
I think too about FCI and maybe they are conscientious but they make such a big deal about how they’re by the book and they’re careful about everything. The one time I was sued by a borrower, I haven’t sued myself. They sued FCI for not responding to a qualified written response request on time. They missed their deadline and because of that I got dragged into a lawsuit defending the indefensible at FCI.
Chris, that was one of your first questions is what things do you look for? That was the normal thing I look for is making sure they’re taking the liability for any of their errors and omissions, however it’s worded.
Who does that? Does Madison do that?
If it’s their fault, of course it is. Indemnification, that’s what I was looking for.
That’s an important aspect of those servicing agreements. You get one of those to sign and there are many pages. A lot of situations, you’re not familiar with what all these terms and conditions are talking about but still it takes time to go through those things and you’ve got to do that. You’ve got to find out if they mess up on one of those qualified written request, who’s going to cover the cost on that lawsuit? For the folks that are wondering what services you’re going to go to, it’s important to read those documents before you sign them and print some of that.
Cody, for your outreach on your nonperforming stuff, it sounds like you use Allied. Do you use somebody else for your nonperformers?
I’ve got all my nonperformers with Madison but because of my background, I do all the outreach on it. I’ll have the specialty servicer, the loss mitigation attorney to do that stuff for me. It depends. If it’s a CFD, I feel a lot more comfortable when making that call myself. If it’s a real note and mortgage and those people are entitled to the property. Oftentimes because of the Fair Debt Collection Act, even though I can do that again and I’ll probably do more of that if I ever find a way out of this but that’s why we hire those folks. It’s to do that stuff for us and as long as we’re properly allocating the cost when we’re making our note purchase and our bid, that’s probably the better and safer way to do it is hire those folks to do it.
I recommend everyone start out hiring them and then you get to understand more of the business. Chad, I don’t know if you use Madison for outreach. I use them. I don’t contact borrowers. I rarely do. It’s one of those things where you’ve got to remember you can’t expect them to be calling that borrower every single day. They typically will make one or two phone calls a week and the best way to see what’s going on is in the report section under each loan. With Madison you can see what is going on and then I ping them once or twice a week saying, “With these loans, have you heard or what’s the status?” Usually, once or twice a week you get an email back.
Some misconceptions with this industry are because we are also used to email. Even my full-time job, someone will send me an email at 1:00 and stop by my office at 1:30 and say, “What are you doing about my email?” I’m like, “I haven’t gotten to it yet.” Everyone expects such an instant response where you almost have to think of servicing as going back to the days before email. They’re making phone calls. When I started my full-time job, I’m still a young guy but there weren’t a lot of emails, everything was done by phone. Things took a few days to transpire and servicing is that archaic way where it’s going to take a few days to transpire. I’m curious if the rest of you agree or disagree.
You speak a good point there, Chris. I know in my own self and we’ve talked a little bit about being control freaks especially when we have some compressed time when we’re trying to get stuff done. I know in my case as well, a lot of stuff on my mind and when something flashes in your mind, you want to try and deal with it right then and there. If I want to follow-up on an email and to go back and one of the things I like about my Gmail account is that it will tell me when I last sent that email. If it was 22 hours ago, I probably don’t need to send another one to follow-up on it because if they’re an attorney or servicer or any these other professional folks out there, they may not have time. If they’re going to call the borrower, you’ve got to offer some borrower response time too. Probably each one of us internally thinks, “If I don’t get an answer within a certain timeframe, when do I need to follow-up on that?” I might generally say about a few days.
Especially with Shante too, you send her an email at 10:00 and then at 4:00 you’re sending another email.
The crazy thing though is you’ll get emails from her on the weekends, late at night. She obviously takes work home with her.
Chad, I’m curious about your thoughts.
I don’t use Madison too much. I probably maybe half-a-dozen they’re going to borrower outreach. There’s a reason I use the third-party loss mitigation team. They are a lot more reactive. They make a lot more phone calls I find and they tend to get things done a lot quicker.
Which third-party do use?
Daniel Singer Law Office. A lot of people use them although my main guy left.
I’ve used that as well, that same guy. They’re picking up right where they left off. The hard thing is when you have a string of emails with that one individual and all of a sudden somebody else’s involved to try and get those emails back. That’s why I’m going out right now with Chad. Chad, the same thing you’re experiencing.
They’re picking up the pieces. It was a little bit of quiet time there a couple of weeks but there’s another guy on there now. He’s been here for a while. They’re totally on the ball. I’m getting updates from them daily almost, not if there’s nothing going on but if there are hot button issues on any loans, they’re keeping me updated. I’m satisfied and they have Notes@Equigrowth.com, a great party contact is probably the highest I’ve seen. They’re within days sometimes contacting.
I’ve never used Daniel Singer but I was looking at a group of loans that I say were over a few months old that were nonperforming with Madison and I use Madison for their workout. 31 or 35 were performing. Part of it is what I focus on to buy but it may take a little longer but at the end of the day, they typically do a good job. I’ve never used Daniel Singer. Also on my hairier ones I will admit I use Polaris. I feel Madison is a little softer gloves and Polaris would be a little more of put the boxing gloves on a little bit.
When I was a new investor, an experienced investor told me he starts legal as soon as he buys any nonperforming note. I thought, “That is harsh and cruel.” In my mind, he was taking it all the way to the end. He was merely saying, “I sent a demand letter. That does seem to focus the mind and get the response where you could be chasing someone and leaving courteous voicemails for a long time.
That’s my new tactic now. I’ll give it one a month and if there’s no response, I get the demand letter out.
I typically get it boarded two weeks. If Madison can’t contact them, I send a door knocker. If the door knocker isn’t successful, the 30-day mark.
The same thing, send a demand letter.
We want to thank Chad and Cody for joining us. Tell people how they can reach out to you if they have more questions because I know Cody had some things about Allied.
It’s Cody Cox, you can reach me at Cody@TrinityNationalHoldings.com or my cellphone number is (503) 784-1417 and I’m happy to chat with anybody about this.
You can find me all over Facebook in the Notes and Bolts Group, WCN Crew. There are tons of groups out there that you can find me easily. You can email me. I’ll give you the short form for email is Notes@EquiGrowth.com. My phone number which is a US-based number so don’t worry about calling it. You’ll get a long-distance charge in Canada. It’s (561) 240-4255.
That’s a Florida number?
Yes, it is.
I want to thank everyone for joining us on this episode. Gail, any last thoughts?
It’s been an honor. Thanks so much.
Thank you all for joining us on this episode of the show.
- Madison Management
- SN Servicing
- Daniel Singer Law Office
- Notes and Bolts – Facebook group
- WCN Crew
About Cody Cox
In addition to leading the OrVet Home Loan program in Oregon, I also run Trinity National Holdings, a boutique mortgage investment company. We purchase non-performing, first mortgage paper secured by residential 1 – 4 family dwellings for our own portfolio. Our intent is to rehab the borrower, looking for quality solutions for the homeowner to retain their property.
About Chad Urbshott
Chad has been involved in real estate and construction nearly his entire life. He spent the first several years of his career engineering significant buildings such as an airport terminal and several casinos. From there, he moved into the construction and development aspect of the business for a prominent multi-billion dollar Constructor, working with developers to substantiate the viability of real estate developments who then oversaw their design and construction.
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