- July 1, 2019
- Posted by: august19
- Category: Podcast
As things are moving pro-consumer friendly, we start to see a lot of debt buyers in the mortgage world needing collection licenses. The need for a debt buyer license continues to increase in every state. Unfortunately, there is no national debt buyer license. In certain states, if you need to get a certain type of license, you need to register as a foreign entity. What far outweighs that problem though is that this shift will separate the people who are serious from the ones who are not. Join hosts Chris Seveney and Gail Greenberg as they get into the whys and hows of getting a debt buyer license.
Listen to the podcast here:
When To Get A Debt Buyer License
We’re here with our friends.
Gail, we haven’t talked for a while. What have you got going on? What’s new in Gail’s world?
We were talking about whether I could sell. I have a vacant lot that I want to build a duplex on and I need 1,700 square feet of lot per dwelling unit and I have just a little less than that. Instead of 3,400, I’ve 3,240. I’m trying to figure out which devious plan to try first. Do I do it straight up and go for a zoning variance? I already asked about this. Multifamily only needs 800 square feet per dwelling unit. Do I see if they will let me do a triplex and I only need 2,400 or I own the property next door where they let me carve off a chunk of the backyard and put it on the vacant lot so I have enough square footage? You doubted from your years of construction experience that they would let me chop off a piece of my backyard.
In my free time, at one point in time, I was also on the planning board for a township.
I loved the idea of taking a piece of the backyard because there’s a woman whose backyard abuts mine. I’m scared of her. This would create a buffer zone where she couldn’t throw dead chickens into my backyard easily. She’d have to lob them.
When I was on a planning board, typically if you own two parcels next to each other, a lot of times they wouldn’t want you to take a back slice or a back wedge. Usually, they would want me to move the lot line and then still try and stay compliant. You never know so it depends. Some jurisdictions don’t mind having odd-shaped lots like that.
This is my real question. Who is the person you go to who knows which strategy to try? Anyone of them is going to cost me a bunch of money to apply. Some I may have such a low chance of getting.
It’s the planning commission or the planning board. Probably somebody who runs the planning board could be the person who would do that. It would be them or the zoning. What I would do is I would Google or reach out to a few land surveyors that are in the area and talk to them because they’re the ones who work with the younger jurisdiction all the time. When I have this property in Fort Wayne, which are five lots, I didn’t realize all five were buildable. Basically, even though they’re worthless but he’s like, “Technically you have five buildable lots but the worth’s like $300 apiece.” I learned it from a surveyor.
I will do that. That’s a good idea. I don’t want to annoy them. I don’t want to waste my time. I don’t want to waste money.
I have a property in North Carolina that’s doing some Cash for Keys on and I had my North Carolina partner who the realtor/contractor went by. She texted me, “This one’s worse than the last one.” I was like, “How could it be worse?” The back of the house only has plywood on it. That’s pretty interesting. The guy who was living in it was a roofer and the roof is probably the worst part of the house. You always know there’s a problem when the whole ceiling is ready to cave in. Don’t poke a screwdriver or you’ll have whole running water in the house finally. It is sad because there are two little kids living with him as well.
Is it a contract for deed?
The little children are living in a horrible house that you would be owning?
That freaks me out.
He was married. He’s staying home with the kids and the wife was working at a gas station. She met a guy at a gas station and ran off with him. You hear the story and it’s horrible to hear these things. I’m trying to work with them on not having to pay for a few months and then Cash for Keys so they can get started again and so forth. We’re working through that but you feel bad.
This is one of those, “You can’t save everyone,” moments. I know it in my head but it is sad.
We have a question if she’s on the note as well. Yes, she is. She’s in prison right now. We sent somebody to the prison to have her sign the cancellation of the land contract.
Who is such that a person who has to do that and go there regularly?
I think it was him.
It doesn’t have to be a notary too?
All I know is I get the tracking number from Madison and it’s back in the mail. On the flip side, I was burning candles at both ends. I filed for forfeiture anyways. I let the borrower know ahead of time because at the time we won’t be able to find her. That’s the easiest way, “We’re doing this to speed up the process and so you will not be shocked when you get it.”
You should tell everyone why your one borrower couldn’t sign his paperwork. The one that wasn’t available because he’s gone on a vacation for a few weeks. For someone who hasn’t paid in six months, he’s going on a nice vacation.
It’s seven now by the way, “He will take care of it when he gets back.”
Did you find out where they’re going?
Here’s a story. I’ve been working with this borrower. I gave him a second chance to stay in the property. I worked out on a modification with the borrower. He made one payment since then or two payments and then stopped paying again. First, we were going to work out another mod or we make the land contracts but in Ohio, you can’t redo a land contract because of the current laws. We’ll talk about some of the new laws in Indiana and Ohio as well as Illinois for people looking to invest in Illinois and Michigan as well. We ended up looking to do a five-year lease option and on the lease option, 100% of the payments have to go towards the principal reduction.
Basically, you have to work backwards of here’s the UPB and work backwards and stuff. When you think of five years of payments plus insurance, taxes, maintenance and everything else, you’ve got to plug numbers in. It’s a big number but they didn’t understand why the number was so big. I explained it to them and they were like, “It should be what the contract value is.” I’m like, “The land contract would be void. Forget that it ever existed.” It’s like buying a new house. What happens with the old one doesn’t matter? They didn’t get that, then they said, “We’re good, we will sign it.” I said, “Deadlines are coming up.” They’re like, “We’re going on vacation for a few weeks, so we’re not going to be able to take care of it.” It’s a continuous stall. I don’t think they’re going. What forced this was I had a home inspector to go inspect the property. It’s all scheduled and lined up the night before and they’re like, “He can’t come. We’re leaving.” I may send somebody there to see if they’re even still there. I’m seeing if they’re just pulling my chain.
You should find out where they’re going and you should send a mobile notary as long as they got their driver’s licenses with them.
They only have weeks to sign this. Do I go ahead and evict in that case? Unfortunately, here’s why I was trying to do a lease option. The land contract, they paid more than 20% down of the original land contract value. It would have to be a foreclosure.
This is Ohio.
Exactly and Chad’s on here. Chad, I will bid in Ohio for Pennsylvania any day. I’ll bid all my Ohio assets for everything you have in Pennsylvania. I guarantee you you’d have no hair left on your head.
I live in Pennsylvania and I hate them both.
I have a hearing with a borrower who bought the land contract from 2011 performing. All of a sudden in 2016, when the city had an adjustment to the taxes because they were putting street lights in or whatever so then a special assessment, he refuses to pay the special assessment. He thinks the lender should pay that because he believes his costs are fixed. That the escrow payments should never change on a mortgage. This person is a real estate agent. I will try and get the paperwork. Franco’s office is handling it so I will give you that one. That’s just the first one.
We will have Franco Barile from Sottile & Barile on the show. We have some interesting things going on in Ohio and Indiana so I definitely think people should join us for that as well. I don’t know if people saw our case in Pennsylvania talking about needing a debt buyer’s license. Chad and I were texting about this. I’d like to get your opinion, Gail, about the need for debt buyer’s license continues to increase in every state. Unfortunately, there’s not a national debt buyer’s license. I’m curious if you register for most states as a foreign entity and get that buyer’s licenses? Who do you use typically if you go through that process?
This is a terrible admission. I’ve never registered as a foreign entity in anybody else’s state. That’s probably not a good business practice. I have multiple entities. I don’t think anyone of them has the right number of properties that you need before you’re required to do it. Does that sound like an excuse?
It’s interesting for the foreign entity, it’s one of those things that in certain states, if you need to get a certain type of license, then you need to register as a foreign entity. I know I’m registered in Indiana, Michigan, Pennsylvania and Maryland. I’m in Virginia. I pretty much register in a lot of the places that are for foreign entities. The company I use is the state name and then RegisteredAgent.com. I started at VirginiaRegisteredAgent.com. Once you sign up for your home state, then when you go in there and they have like, “Registered new entity or Register a new state,” and you can register at any single state. It’s a foreign entity and they give you the address because they’re registered in every state and $49 a year for an entity. It’s the cheapest Registered Agent that I have been able to find. It’s very user-friendly. All the state notices from the state about updating come right to them. They will send you an email saying, “Your invoice is for renewing,” because mine’s renewed in July. “Your invoice is for renewing,” just popped up. You can go online and pay them the $49 and they take care of it for you. It sounds nice.
My former husband, I convinced him to start buying real estate and he has bought some properties in Indiana and there’s something new. In Central Indiana, the electric company is Duke Energy and I have a Duke Energy account from 2017. Now, they won’t open an account for an out-of state-entity unless you are registered as a foreign entity in Indiana. It was part of their sign-up process. They check to see if you are registered. He has had to register and I don’t know what you’re talking about because here’s the bill. It’s $107.36 and that doesn’t even count what he had to buy a subsistence certificate in PA to prove to these people that he’s an existing Pennsylvania LLC. It’s gotten pretty pricey here.
In Virginia, what you can do is on their portal, I can go in and print an Article of Good Standing, which is $5, which is a form saying you’re still licensed in the state as an LLC. When I registered as a foreign entity, typically I send that off to them.
You’re lucky because that’s cheap in Virginia but most of us don’t live in Virginia.
In Virginia, it’s $100 to open a new LLC and $50 a year to renew it. When I hear people pay $800 in California, I’m like, “You can register eight companies here.” Am I paying taxes in those states? I don’t pay taxes because my home office is not in those states. I don’t pay any state taxes on any properties in those states that I’m aware of.
The fact that this utility company has started to do that, I feel like everything is moving in those directions. It’s getting harder and harder to wing it. My days of bopping in and out could be coming to an end.
If you’ve got assets that you are going to have a legal action on, I would strongly recommend that you make sure you’re registered in that state. I know it’s Cuyahoga County, my favorite county here, if you’re not registered within the state, they charge a huge fine with it.
That’s Ohio for people who aren’t aware, Cleveland.
A person who puts out some good information on stuff like that is an attorney by the name of John Hyre, he’s the third. I believe he might move to Puerto Rico, but he was an attorney up in Ohio. He’s a CPA or a tax attorney, but he’s very familiar with a lot of those. He follows a lot of those laws.
He’s overkill though, wouldn’t you say, with the belt and suspenders?You always know there’s a problem with a house when the whole ceiling is ready to cave in. Click To Tweet
There are certain things that I know he talks about in regards to taxes and modifications. First of all, I am not an accountant or a CPA or anything. There are certain things that if you treat all your income as ordinary income, you net some of this other stuff from what I’ve been told that is not necessary for that sense because you’re treating it on a Schedule C, not Schedule D. No question on his intelligence. He’s super smart.
He went to Puerto Rico though. That’s where he’s at.
We have a question, “Do you need to have a DBA in those states too?” I don’t do DBA in those states. I register as a foreign entity under my name. If there’s another name that matches, honestly I’m not sure how you would treat that, but I don’t know anybody else that has the name Seveney.
Here’s why having a checkbook IRA is tricky though because I have multiple entities. Am I going to register them all in all these states and everything? This is what has discouraged me so far.
Here’s where the business is going in and it’s where this episode is going is in regards to licensing. You’re going to start to see a lot of debt buyers in the mortgage world start to need debt collection or lender licenses. I know in some states, there are minimums of three or five. You talked about Illinois. You talked about Georgia. You talked about some of these other states. I truly think you’re going to start to see a shift of it moving in that direction because everything is moving pro-consumer friendly. In a lot of states, maybe not in the District of Columbia, but in a lot of these states they are. That’s where they start to see that shift is. They’ll start buying assets and notes and stuff. You’re going to start to need a lender license or some type of license, unfortunately.
That will certainly separate the people who are serious from the ones who are not. I look like someone that’s not that serious at this point because I haven’t done all these things.
They will probably put a limit to it. The question is, is it a limit in the state or is a limit nationwide? Will it be in the mortgage loan originator? There’s a nationwide limit as well as the state limit and things like that. You got to be careful and make sure. In some of these instances, I was looking to take some CFDs in Michigan and convert them into notes. Franco and I convert one of them and he realized we’re going to do the whole MRO process for this. I’m like, “If I was making a new land contract, they would have had to do it anyway.” He’s like, “You’re right.” Converting a bunch of CFDs to notes, you need to start to crack down or niche so many jurisdictions. You might not get caught on it, but if the borrower turns around and claims you did something wrong and you didn’t use a loan originator to originate that loan, you’re in violation of CFPB and could cause trouble if you try and take the property back.
I haven’t bought many newly originated notes. If I was buying performing notes or even nonperforming, I would want to know if they had followed all the rules. I don’t know to buy it as a second party, I would certainly assume that they would still hold you responsible, the way it’s done when it was originated.
That’s why some people start to shift over to the commercial side because on the commercial side or non-owner-occupied side, you don’t have to worry about this fair debt collection and all that stuff because it’s not considered a consumer loan. It’s an investment/commercial loan. I was talking with my favorite attorney about demand letters. A question came up and I said, “I’m tired of paying $100 every time I need to send a demand letter.” He’s like, “Then don’t pay it. You realize you can send your own demand letter. You can file an eviction. Sometimes it has more teeth when it has an attorney’s name on it.” He goes, “If you send the demand letter, that clock started.” Every bank sends its own demand letters. Every fund that he works with typically sends their own demand letters. Servicers sometimes send the demand letter for you and they’re not an attorney. That’s a little food for thought there for people. I don’t want to take any business away from attorneys, but when you’ve got a good amount of notes and you’ve got to start sending demand letters, you look at sending 30 of them a year or something. That’s $3,000 that you can keep in you and your partner’s pockets.
Everyone wants to know what license you’re getting.
I’m starting to get some debt collection licenses in some certain states. The states that are leaning more towards those big wired in those states. In certain states, I’m looking at also getting lender license as well, but I don’t invest in Georgia or Illinois, so I’m not looking at those. With it being halfway through the year, it’s almost foolish in a sense because typically you pay full price for the calendar year. To get one in June, you’re wasting half the year. Some states will credit you back but not all of them do. We have a question, “What states are you doing that in?” Indiana and Pennsylvania are two that I’m getting the debt collection licenses in because I hear some rumblings about Indiana. Pennsylvania had a lawsuit that you need to have a debt collection license if you have distressed debt. It is odd because when you go on the NMLS, which is the storage for all these licensing things, there is nothing about it. Even if you talk to some of these companies that help you with debt collection licenses, none of them will say you need something in Pennsylvania. I’m curious if it’s going to shift after this lawsuit decision that came out.
It’s interesting, I know Chad is tangling a bit with the Attorney General in Pennsylvania about his contracts for deed. My best friend lived kitty-corner to him. I could throw a rock through his window and maybe I will if he keeps this up. It’s always got thuggish looking guards standing around. That’s what’s kept me so far from walking over and knocking on the door. Chad must not be in his usual charming self with them because other people have said when their attorneys call and explain very nicely that we’re trying to keep people in their houses and we’re nice to them and we didn’t set the interest rate. The seller we bought it from did and were open to tweaking it a little bit. They then chill right out and they’re like, “Okay.”
I find it hard to believe Chad was not his charming self.
I know, but Chad’s been having issues with the code enforcement guy in Missouri and now this. He strikes me as devilishly charming.
I see Chad like myself. I can sit here and smile and be all nice and happy. You get me on a certain day and all of a sudden, I’m being in the construction industry and so forth. It is a cutthroat business and people try and bully me and be intimidating. Sometimes you let go off on people and you have to have that side of you.
Chris is endlessly kind, accommodating and reasonable but when the switch is flipped, release the Kraken.
We have a question, “What does getting a license entail?” A lot of booze, that’s the first thing I would say. Stock up on booze first before you try getting licensed because you are going to need that after dealing with some of these definitely. I got them in Virginia just to have one in case I wanted to do it. At one point, if I was going to look to originate loans, I have it sitting there. It only took a few months to get. In one form, I filled out one thing wrong in the system. I had to go restart it and do it all over. As part of doing it all over, I had to pay $50 again and I’m like, “Can’t you just change it in the system?” They’re like, “No.” What was wrong was the entity I used was owned by another entity because a holding company owns the entity, not me personally. They put the owner as the entity and they’re like, “It can’t be an entity that is the owner.” I’m like, “It is but you have to put who the officer is then.” I’m like, “Okay but it said the entity.” I had to go in and I had to redo it and put myself in as the officer who took a few months to tell me that and 50 hours later.
I had something similar when I was trying to register a new Pennsylvania LLC and they asked the question on the docketing statement, “Who is responsible for reporting taxes?” It was an IRA. I put down the IRA custodian and the same thing, it can’t be an entity. It’s got to be you.
In other states to get licensed then, when you’re talking to your attorney if you got an attorney that’s licensed in few states, just ask them, “I registered as a foreign entity. Do the other clients need to have a lender license or debt collector license?” If you Google NMLS, that’s a state-by-state licensing.
You already said there was nothing about Pennsylvania.
There’s nothing for Pennsylvania there but other states, they can give you information about Georgia, how to do it in Georgia. Illinois, if you need to do it in Illinois. Give yourself time if you’re going to do those states.
I don’t know about everyone else but I’m going to wait until I’m pinned to the wall to do any of this. There is no prophylactic licensing. This Armageddon may never materialize. That is my view. If it does, I’m going to say I’m just a woman from Pennsylvania, I did not know.
Here’s a story and this one is interesting. It was about a car debt. A company bought it. They tried to repossess it and sued the guy. The guy countersued them and it sounds like he won. The guy countersued in one that, “Not only can you not take the car that the debt is no good. I’m suing you for all this money because you were negligent and weren’t supposed to collect that and you came after me on a debt that you couldn’t collect.”
Why was the debt considered illegitimate?
It’s because they didn’t have a debt collection license, “Not only can you not collect a debt, but we’re also going to go after you for it as well.”
I don’t know about a car loan if that’s treated differently or whatnot but the interesting thing is you got certain areas saying what a debt collector is, what is not a debt collector and stuff. I know there was a Supreme Court decision that made some comment about debt collectors. I’m going to tell everyone here. If you’re buying notes that are distressed, you are a debt collector. That was very specific to one small section.
Didn’t it say that if you were collecting your own debt, you weren’t a debt collector, those third-party debt collectors?
Only for that one specific section, but then you go back and look at another section, you are a debt collector. In most states if it is your own debt, you don’t need to get the license. That’s what also you need to look into. States are starting to change and even though it may say you don’t need it, it’s being left up to the courts to decide in these instances, which all of a sudden it’s like you’re rolling the dice.
This comes back to life philosophy thing. Everything is arguable. Anybody can sue anybody at any time for anything. It’s a roll of the dice, whether there’s one set of rules but judges get to interpret them. Everything is up for interpretation. I am completing a two-year process in theory. Monday is the sheriff sale for the only asset I’ve ever owned in Pennsylvania, in my own state. It’s a note, not a contract for deed. This asset is somebody’s rental. It’s not their house and it’s got many things on it. It’s taken so long that not only were all the original liens on it, but now all these omnibus judgment liens from other properties that this guy owns are on it, plus there’s a $7,500 Pennsylvania income tax lien on it. I’m discussing the bid with my attorney. I say to him, “The income tax lien comes after my lien and that’s only if there’s surplus will that get paid.” He’s like, “No, Commonwealth of Pennsylvania lien comes before anything else.”If you've got assets that you're going to have a legal action on, make sure you're registered in that state. Click To Tweet
The fun and interesting part were that I had written to that same Attorney General’s Office that doesn’t like Chad. I asked him what the position of this lien was and what would happen when this house is sold if my complete debt was not covered, which there’s no way. If half my debt were covered, I would be delighted. If anyone makes any bid, I’d be super excited. Here’s my own attorney who in theory does this all the time but doesn’t know this. We’re this close to being done so I didn’t confront him. I wanted to say to him after forwarding the email from the District Attorney’s Office told me, “No, you don’t have to worry about the income tax lien.” I want to say to my attorney that it’s a huge disappointment to me that he doesn’t know this stuff. Therefore, you have not been a counselor to me at all on this. There’s been no strategy. There hasn’t even been any accurate information coming from you. I don’t know how I deal with my feelings about this. I have to do something with this lawyer. I need to express myself.
The same people we’re sharing some challenges with Pennsylvania. For everybody, if you’re looking to buy anything from home opportunity in Pennsylvania, pretty much don’t because three counties that I had assets that I bid on all have significant liens on them that the seller will not pay in their state liens against the entity. I was talking to John. I’m like, “I had nine assets and only two of them now are going to close.” He’s like, “It’s only two.” I’m like, “John, I want to close on these two because unfortunately, I wasted $2,000 in due diligence because your seller has all these assets that they’re marketing out there. They have liens on them that are worth more than property and honestly it sucks.”
I see big additions to the toxic assets list though on both sides.
There are conditions to that list for everyone that’s out there. It was Beaver County, Butler County and just one to the southwest of it as well. Here’s a question that I will throw out there and I’m not going to get specific by any way, shape or form. Who is more challenging to manage, your attorney or your servicer? We’re asked about liens against the home opportunity that you acquire. Yes, those were their state tax liens that are tied to the property. When they quitclaim deed it, it’s still tied to that property, unfortunately. Let’s see, servicers, but it’s close. Here’s one for you. I have another note that has a mediation hearing as well. I’ve been trying to chase down this attorney and he is like, “It’s coming up,” and stuff. He sends me an email, “The court will call you on Wednesday for the hearing. I’m not going to be able to make it. The attorney’s not going to make it. We have to have a fill-in attorney go. We will be on the phone though. They’ll call you to discuss the mediation.”
I’m like, “Okay, but this is a borrower who doesn’t agree to anything and I’m not comfortable having myself and an attorney who knows nothing about this case involved.” I came up with plan B. Unfortunately, I can’t disclose it at this point in time what plan B is. I may have a friend sitting next to me potentially who may know one or two about this stuff. Back to the quiz that we have or our poll question, it looks like the audience is mentioning servicers. Let’s dive a little more on that, what’s your biggest complaint with the servicers? Is it the workout, the reach out, the accounting side of things, the transfer process? I’m curious to hear what people’s opinions are. Is it their portal that you can’t get information off of? I’m curious to hear what people’s comments are.
I’m trying to try out Allied on two loans that I’m keeping out of a bunch of that spot. I felt like Allied has not heard from the current servicer like we’re all confused. I find out that instead of sending those two to Allied and all the others to Madison as I requested, they sent all of them to Madison. The Hello Letters have already gone out. It turned out it was because of the seller, although they had an actual spreadsheet saying which servicer I wanted each one to go to because I was sure that they were going to mess it up. All they had to do was send that to the current servicer. They didn’t do that. They completely screwed it up. The current servicer comment to me as, “Would you consider keeping them at Madison since this got all messed up?” I don’t know if this was the right answer but I said, “No, I want you to fix it. I want you to write to those borrowers and say, ‘We messed up. We sent you a letter a couple of days ago that said this is your new servicer,’ but in fact it’s these other people, Allied Servicing in Washington.”
Sylvia mentioned about the workout and being slow. Here’s the challenge with that. Servicers could do a better job communicating this. When they’re doing a workout, they make a phone call. If they get voicemail, they may make a call the next day but then they put in their system, you will see, “Follow up date change,” if you use Madison as an example. That’s them putting a task in their system for the following week of one back to reach out. They’re only allowed to reach out three times per week anyway. They’re not reaching out every single day. Maybe once or twice a week is what they do. It’s going to be slower.
They should set the expectation. They should tell you up front, “We’re going to call. This is how it’s going to go,” then you can be like, “Okay.”
Here’s one for you, Gail, because I am starting to look at some of these performing loans I have from a lower balance and moving them over to Allied because with the costs and the escrow, Madison is pricey. I started looking at if I moved X amount of loans over to Allied, I could save over $1,000 a month. I’m like, “Okay.” Let’s find out if anyone on here uses Allied. I sent Mary Lou an email. I’m like, “Can you show me what your portal looks like?” She’s like, “No, you need to have an account with us.” I’m like, “You don’t have a demo account or something?” I’m curious what their online portal looks like so I can go in and see what’s going on. Bill says, “I’ve used them in the past. I like them.”
Did you stop using them, Bill, after using them? I found out somebody I know uses the Notes Service Center too, which I’ve never met anyone. Pricey? What is the point of that?
Note Servicing Center, Land Home is another one. They’re all about the same. You’re going to pay $40 a month.
What about Evergreen? I know we’re not prepared.
I thought they used to be cheaper. I got their pricing and I had their pricing from 2017 to now, it doubled like $40 a month. It’s the same thing. They’re all around the same. They’re all $20, $25 for the loan but it’s the escrows where they crush you. I had a tutorial with the software that a lot of servicers use. How the loan management software works and stuff are so intuitive. It does everything for you like the escrow that they charge you and stuff like that for the escrow letters and everything. You put in the tax amount and insurance amount and it spits out the compliant letter for them. It’s automated and you hit the button. If they’re managing 1,000 loans, they can do everyone. Hit the print button and print them all out and then they send it to a company to mail out. It’s not like somebody is there with a calculator figuring it out.
We are this close to self-servicing, would you say?
Not that close. People go back to compliance and everything. I’ve got a few loans that I have that are more hard money type where I sold them to an investor who’s like a fix and flipper to have them because those also have to be compliant. If I pull the trigger on the software, then I could service those. The reason I’m looking at the software too is multiple reasons. One is it’s very good for reporting to investors and printing reports, as well as ACH payments can go directly to them and also can tell them what their yield has been for the year and stuff. It’s pretty cool. Pricey but I’m getting to the point now where I’m trying to use a bunch of systems into managing everything where I could.
It’s good for lease options to another one where you don’t have to. I talk to Chris down out of a tree weekly when he discusses starting a servicing company.
Certain states don’t need a license. Other states do. Indiana, it’s $300 to get a license to service loans.
I wanted to warn you too that Allied does not do North Carolina for some reason.
I bet they don’t do Wisconsin either.
There were only three: New York, New Jersey and North Carolina.
I looked at that extensively, Gail and I keep going back. I was talking to an investor and he has an interesting model where he’s like, “I used to service my own and then I turned them back over to Allied for $18 a month or whatever it is.” He goes, “I do all the workouts. All they do is collect payments. That’s the only thing. They collect payments. I can go into the system and see if it’s not performing. I send out the demand letter.” It was interesting, his philosophy was, “I’m not chasing the borrower. It gets boarded. They get the Hello Letter. Thirty days, 45 days come along, I send the demand letter. If they want to call me about the demand letter, we work something out, great, we will. I may make a phone call or two and then after the demand letter expires, I send a notice of default and take it from there.” He’s like, “You spend too much time chasing these people when you could be looking at other opportunities or whatever it may be.” You reach out and he waits for them to come to him.
I have been very proud about getting people back in the saddle, only to have them fall out again. It feels like people need to want it they need to be the one who calls you. That’s a good indication that they want it. If you’re chasing them like children, you can’t make them.
In that question, I would do it all day long if there weren’t legal compliance issues. If you’re doing your own loans, it’s one thing. If you’re doing someone else’s, forget it because then you have to have a compliance officer and you have so many licensing and it’s too expensive because of the bond and everything. Whereas if you’re servicing home loans, typically some states you still would need the license, but it’s not as challenging if you’re doing a lot of your own. The moment you started doing everyone else, because I was looking at the software and I’m almost like, “I could service mine.” I’m joking like, “Gail, you could access the system and service your own within the system as a user.” People do that. I still might go back up to the top.
We’ve been talking about this for so long.
It sounds like I’m still considering it. Nothing ever gets taken completely. I wake up at 2:00 in the morning and send a note saying, “Gail, what if we could do this?”
I’m grateful that you also have Brian Gallagher so that I don’t get every single message and phone call. I tell you when it sounds crazy or not a great use of time. Chris is obsessed, which is part of his genius.
I want our audience to know this about Madison, in case you don’t know. They moved. They are in Reno, Nevada. Some staff is still in Jersey. I think they’re starting to bring people over to Reno. If you don’t have ACH with them, make sure you change your address in your bill pay system.
I already had a borrower contact me because something came back, which I don’t even know why wouldn’t it get forwarded, but it was the other phone number. I’ve definitely changed. I’m like, “You’re a grown man. You have a house. I’m not looking up the phone number for you. I’m sorry.” This is the new angry me. I’ve had it with everyone. All on my last nerve but not you people.
It’s like a potpourri episode almost.
Did we even have a topic? Before we started, we had a topic but that never happened.You can send your own demand letter and file an eviction, but sometimes it has more teeth when it has an attorney's name on it. Click To Tweet
We have a question, “Why did that happen with the assets in PCPA you bid on? Are there more owed on them and then disclosed?”
They will tell you up front about the liens. You find out.
Taxes and stuff, I can look up. It’s called the prothonotary. It’s an office has a lot of information and you go run a title report and O&E report and those start popping up on them from the state. It’s like a state tax lien and there was over, with interests, they were probably about $18,000. The two assets that I bid on were an average about $10,000 apiece. At that point in time, if they want to give them to me, fine. He’s like, “I’m not going to give them to you.” I’m like, “They’re going to continue to accrue taxes and never be able to buy anything in there again.”
Speaking of deals, I’m not going to talk about how I know things that we know. We were talking about NPER, which is the formula for calculating how many payments are left on a loan based on the UPB and interest rate, etc. Everybody, go back and review that the next time you get a big tape from John. I am aware that someone bought a loan that has a $2,400 UPB, which you have to be careful of these little balanced ones because they always have mistakes in the thing. The monthly payment is $150 and according to the tape, there were 131 payments left. You don’t have to be a math genius like Chad and Chris to realize that’s not true. This gentleman paid $3,200. We already paid more than the UPB. The tape said there were 131 payments left. If you do the calculation, there are eighteen payments left. The gross payment of 150 times 18 is $2,700. He’s already lost money. He hasn’t even paid for the servicing, the boarding, probably the insurance and transport. He already lost $500.
He’s not going to get the property because you mentioned the borrower has been making payments.
That’s what I was thinking. Maybe he thinks he’s going to get the property. The borrower made a payment in April, that’s not going to happen. It’s South Carolina where a CFD has to be foreclosed on for the full price like $3,600 or whatever. Come on people, this is a well-known figure in note investing. That’s I want to say. No one is immune. Pay attention. Go back to that episode. That was a good one. We did a show on top. It was good.
Speaking of assets, Gail, we will be releasing a tape whenever I can hit the send button on it.
You are too busy figuring out how to have a servicing company to hit the button on the tape. What number episode was that, Chris? The episode has a pretty good title.
I’m trying to look it up and I can’t see it. I’m just laughing because one of them is titled Marketing and Putting Up Houses for Sale on Facebook.
For $500, you mean? I put one up for $500, there was frenzy bidding and I got $750 for it.
We will check and also I will start putting some of these episodes on Thursday nights up as well. One of the things that I’ve slowed down doing is I used to post them the next day. Some of the topics we talk about or stuff that we put out to investors or talk about people who have joined us, I’d rather give them a little head start up on things or get information before other people. I’m waiting until they get posted on iTunes and the podcast episode, then I can take the graphics from it as well and use that to post on.
Remember how we took the big 600 asset tape that had the number of payments left on it. We created a column and put in the formula to show how many payments were left. There were a number of shocking ones. We should put that tape up. Are we allowed to do that or not?
This episode’s going on YouTube. You can go on YouTube and there will probably be three or four episodes getting uploaded on the YouTube channel.
I’m sorting if we give the formula then. Could we put it in the comments?
We put it in the comments, but it’s a pretty simple formula. The first thing is you put =NPER (the interest rate that the loan is)/12.
What you’re doing is you’re selecting the column.
It’s on iTunes and YouTube. We’re about a two weeks delay. I used to put the YouTube up faster, but some of the stuff that we put out there, I want to get people who watch this. If you’re on this episode and said, “Can you send me a link to it?” I put it on YouTube as a hidden link. I will send it to you because you were on but certain things, we have been talking about an asset or something that we might be selling or certain things. I want to give the people who were on the episode a little bit of a head start on things sometimes and because you’re a loyal audience joining us where somebody who doesn’t join us watch it on Friday evening or something. I prefer someone says, “I’m going to watch NBA draft,” thinking they can pick it up tomorrow. It’s like, “No, I’m going to make you wait two weeks.”
We have a question about the interest rate. This is performing only. I’m starting that performing only, see an interest rate you desire, number of periods, which we showed you, payments and the future value, which is zero. That is the formula. The payments should be a negative I believe. I have to check that, but can play with that. Here’s the thing with the payment is do you take into account the service and costs? The rate shouldn’t be divided by twelve. The payment should be a negative number. You put present value, which is the value that if you want to get a 10% interest rate over the next 100 months and a $300 a month payment and then the loan’s paid off, what is that value you should pay? That’s how that formula works but only for a performing note would you use that formula.
The real magic and a calculator would be how to figure out the magic where you would know the lowest number that the seller would accept. It’s not the lowest number you want to pay, but the lowest number they would accept.
We have a question, “Is there a way to cross check it?” Can you use a financial calculator online? TI-58 or whatever they’re called.
The one I use is the EZ Calculator app. You go in there and it’s the TVM calculator.
TVM, Time Value of Money. It’s funny you mentioned something like that. I’m going to digress, but I have a doctor’s appointment. This appointment’s been scheduled for a few weeks and I get there and stuff. The individual I was meeting with wasn’t too familiar with what we were meeting on. I like to go to MayoClinic.org and see what they have to say. I’m like, “You’re going to have me sit here for an hour while you sit here and read the Mayo Clinic website.” It will be fine because I’ve already read it and I’m like, “I can tell you what they’re going to say. Am I the specialist or are you the specialist?”
It’s like me telling the attorney about the tax thing.
It goes even better. I finally get some recommendations and it’s like, “You should run this by your primary care.” I’m like, “You were full of useless information.”
It was time well-spent. Did you at least bond over something else other than your health?
No, at least when I spent an hour plus at TD Bank, I was talking with the woman doing all my accounts and stuff for me. We were sharing stories and stuff like that. At least it made the time go by and stuff like that. Now it’s such a slow and painful process in opening an account in a bank. It’s like going to buying a car almost nowadays. It’s like, “Can you send me the information and have me come in and sign the paperwork?” At least that hour-and-a-half wasn’t as painful as the appointment that I had now.
I use TD. It is a good bank and they are easy for wires. I wire from home most of the time but you have to get them to give you a high enough limit that you can do it, which is some extra paperwork.
I’ve done CreditSense with Merrill Chandler and stuff. I made a point and I’m at the final throes of, “Now I open some accounts.” I’ve been using Wells Fargo who has been great for me because they have great wire limits and everything else and give me a little key card thing so I can wire from home. The challenge I’ve had is their ACH is $3 per ACH to each entity. If it’s a business account and it’d be nice to be able to pay JV partners and some of these things the ACH versus the whole bill pay thing. TD Bank is one that I’ve opened and I’m going to mix them all together anyway. TD Bank, PNC, Wells Fargo and another local community bank. PNC has something pretty cool where I’ve got multiple entities and they have $45 a month and you can have up to four entities and use it. It includes, instead of wiring, they can do same day ACH for $1.50 and then any other ACH is $0.15. I’m sitting there thinking, “I send two to three wires a month. There’s easily $60 to $90. I could do same day ACH and then also ACH all my JVs and everything like that.”
What’s the dollar limit though?
The dollar limit is $50,000 but you can get it increased after 90 days. It’s called their Pinnacle. They give you the third degree to open a business account.
It’s almost like anti-terrorism stuff or anti-money laundering.
To open a business account, typically you need to have your EIN, your Articles of Organization and your operating agreement. TD was the only one that required four forms of identification. Sitting here, I’m like, “Here’s a credit card account.” They’re like, “No, we need the statement.” I save my credit card and bank statements, thankfully on electronically. I go on my computer, I’m like, “Here’s my Capital One credit card with a billing statement. Here is my car paying with the billing statement. Here is my mortgage.” I had to pull them all up from email and I’m like, “This is insane. I live a mile from the bank.” I joked to them like, “I always drive to my house to buy a cup of coffee and my house even you owned.” Those are the ones. SunTrust, I tried but they were so painful on the phone.
It must be you, Chris, because my husband opened a business account at TD and it was not like that at all.
The one thing I will mention though is they’re like, “What do you do?” I explained to them note investing and they get lighted and I know that I should talk about doing investing and stuff. I’m telling this guy like, “I buy a note $0.50 on the dollar that’s distressed. I get it repaying and then you start paying and maybe I paid $20,000, $40,000 note. We started paying and stuff. I can sell a partial for $20,000, I get my $20,000 back and sell the first 100 payments. Basically, I got 100 payments on the back end for free and stuff like that.” The guy is like, “You can’t find anything for parking spaces for $250,000.” I showed him a house I bought for under $1,000. I’m like, “I bought this house for under $1,000.” He’s looking at me like, “WTF.”
I say to them, “You make the loans and you’re very careful about who you give them too, but all your mistakes, we buy those.”
We profit significantly. Hopefully, not all. Also, one last thing before we check out. Please let us know if there’s something you want us to cover on the episode, don’t just sit there and read.
We obviously shouldn’t be trusted to come up with it on our own.
We have no problem but if there’s stuff out there, send us a private email, if it’s something that you don’t want to post. You can also post stuff. If it’s a question that you’re not sure you should ask, if it’s something that shouldn’t be asked, we won’t. If you say, “Please don’t mention my name,” we won’t have to mention your name. We’re here to talk about what people want to hear about.
We share our life in note investing.
It’s not roses, unicorn, rainbows and everything else. There was this house in North Carolina when I said bulldoze it, she’s like, “It’s not as bad as the house I own that my tenant, who hasn’t paid me for a few months.” She sent me a picture and next to the refrigerator, there’s a wall. I’m like, “Is that black mold on the wall?” She goes, “No, those are all roaches.”
I don’t even want to touch the photo of it. I have a house down south I better get used to the giant flying roaches that you Texans are already used to, the palmetto beetles.
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