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Working With Your Borrower

GDNI 79 | Working With Your Borrower

 

Hard times befall anyone, including your borrowers. As the property owner, would you work against your borrower or with your borrower? Gail Anthony Greenberg and Chris Seveney put a touch of humanity to note investing as they share actual stories of how they managed a variety of circumstances, including a fraudulent deed and an accident. Each is an example of how you can be flexible to help people and still have a profitable business.

Listen to the podcast here:

Working With Your Borrower

How are you, Chris?

I am wonderful, Gail. How are you?

Chris has had a dealing with lawsuits. None of them of his own making. This is what happens when you’re popular. You become a target.

It isn’t actually against me, but other than that, everything is going well. Gail, how are you? How was your trip?

Very good, I went to see my broke down palace down south. It’s gone from being a broken down wrecked hulk of a house to a broken down wrecked hulk of a house with a very nice roof and some interior framing. It is now laid out as rooms and such.

The roof looks lovely.

The goal is to bring the rest of the house to the level of the roof. I’m reminded all over again what a process it is going to be. I don’t know what is more traumatizing, building a new house or taking a wrecked house and rebuilding it as a new house.

I would say the rehabbing. The reason why is when you’re building new, you shouldn’t have as many surprises if you plan it accordingly. When you are renovating, every time you open up a wall or something, there is a lovely surprise waiting for you. If I have my choices, I always would rather build new versus renovate. Sometimes, I don’t have that luxury.

I understand. I experienced this when they pulled the shingles off the roof. That was the second layer of shingles. It didn’t seem that way because the first layer is a very hot place. The first layer had fused onto the plywood. That’s where there was plywood. There were plenty of places that there weren’t. There was a giant hole in the roof that looked like a meteor crashed through it. It was quite a box of surprises, just the roof. My contractor assures me that since everything else is down to the studs and it’s only a wood frame house, the only thing attached to the studs is the disintegrating wood siding. We’re pretty much out of things that we could still be surprised about. I’m hoping that that’s the case.

If it got completely gutted, that should be all. Is that what just happened or do you have something else?

I guess it is. I have to also say, there are four fireplace chimneys in this place right down the center of this duplex. They told me that they had tilted the wall that separates the two units slightly it aligns up with the slight tilt of the chimneys. I meant to ask you if that was a good idea or if that’s something I should tell them not to do because they were like, “Do you want it this way or you want it the other way?”

Note investing is one of the avenues where you can make money helping people. Click To Tweet

I keep everything flush level.

It’s a pretty wonky house. This is only the beginning of the tough choices that will be made about stuff like that.

It’s been a little slow for the last few months in regards to trying to acquire assets. The good news was we got a response back where we’ve got 30 more accepted offers that we’ll be starting due diligence on. People may have heard, we closed a fund where we went out and raised a bunch of money for a fund. We bought the first round of assets in that fund. The second round will essentially close out. We’re going to use the remaining funds to buy these remaining assets. We will be starting due diligence on those to wrap that up. In the meantime, we got 68 loans that are being transferred from an acquisition after we had another more than 30 ordered. We’ve been busy.

Things are a little crazy. I wasn’t even on vacation; I was working. I did have this fleeting thought that I would run away and not come back.

Every time you go to get on a plane, I’m like, “We’ve got these other 20, 30, or 50 assets we’re buying.” She’s like, “I’m getting on a plane.” I’m like, “I’ll let you know how it works out when you get off.”

I can’t start the due diligence until the plane lands, I’m sorry. I’m not buying the expensive and bad wifi they have in planes. You got to do it yourself.

We wanted to go back to our roots a little bit.

We talked about the note investing side of Good Deeds Note Investing. We wanted to talk about the good deeds side. There are a lot of pretty nice stories that a lot of people who are attracted to note investing like that part of note investing, particularly nonperforming note investing.

It is part of this business. Our goal is to always try and work something out with the borrower if something can be worked out like any type of arrangement. There’s got to give and take on both sides. People got to be wanting to work towards a neutral resolution on things. If you can work towards that, it can be beneficial for both sides. We wanted to share stories of things, especially a lot of recent events that we’ve had where it’s been a win-win for both sides.

One of the glorious aspects of this business is when you buy a nonperforming note and you can rehabilitate the borrower and turn them back into performers. Not only is it a huge benefit to them, but that’s a very lucrative exit strategy on a note. You can buy a nonperformer at one price and if you can get it reperforming, you can collect the cashflow for some months whatever you decide is the right amount of seasoning. You can resell it for a good deal more than you paid. It’s a pretty quick timeline. Usually, it takes three to four months to connect with a borrower and hash out the details. For someone who is receptive to the idea of reinstating, that’s been a typical timeline for me. If you season it for eight to twelve months, you’re talking about twelve to sixteen months before you can sell it. It’s pretty amazing. In the world, there aren’t that many things where you can make money helping people. I think that’s amazing. That’s something that we should never forget to talk about once in a while.

That’s why we sent a list back and forth of fifteen topics that we could be talking about. This one was what we wanted to move to the top of the list. We haven’t talked about it in a little while. We may have mentioned it in our Notes and Bolts in what’s happening, but we wanted to spend an episode because it’s going to be an educational experience for people reading the blog. As an investor, if you haven’t been on the other side, especially when you’re dealing with a contract for deeds, it’s very eye-opening. Over the last few months, I’ve had a lot of eye-opening experiences in dealing with these borrowers. That’s some of the stories I’m going to share in regard to understanding what it is they signed.

GDNI 79 | Working With Your Borrower
Working With Your Borrower: When you buy a nonperforming note and you can turn them back into performers, that’s a very lucrative exit strategy on a note.

 

A lot of these contracts for deed were created after the crash since 2008. Do you think borrowers are more aware now of what they’re signing or they just know, “Somebody said I could pay about the same as I would pay for rent, but I would own it eventually?”

I think it’s worse now. The reason why is it’s much easier to get your hands on a property as a borrower in the sense of in 2008, the iPhone had just come out, but the internet on your phone hasn’t been that long. Those Blackberry times had a very slow internet many years ago. It was difficult in that sense or there wasn’t the availability. Nowadays, you can go on Craigslist and find somebody who’s saying, “Own and finance a house.” Somebody is like, “I’m going to own and finance this. I’m going to work directly with that borrower or the homeowner.” That homeowner may not even own the house and they have no clue that they don’t own this. That’s one of my stories that I am going to talk about. I’ve got three occasions in several weeks where that has occurred.

I thought it was only one. Why don’t you start telling us about it?

The first one I’ll start with is a property in Indiana where the land contract borrower puts the house up for sale online. He was also offering it as owner finance.

Let’s call him Joe because I have a feeling this is going to get complicated.

Joe is trying to sell the house. He’s using an agent, Jane. I was trying to get in touch with Jane to be like, “Hello, Joe doesn’t own that house,” which is a big no-no for agents. The first thing an agent should do is check and make sure that the person selling it owns it. Joe decides to sign a lease option contract to Bob and Beth, which is a young couple who are like, “I will be able to get to own this thing in so many years.” In the meantime, Joe is like, “I want nothing to do with this property anymore. I was going to live in it and now I’m not.” I finally got in touch with Joe and said, “Sign it back to me.”

I didn’t know about the deal he had with Bob and Beth. He signed it over and said, “I got renters in there.” I’m like, “Send me the lease agreement.” Technically, if it was the lease agreement, I’d have to honor it, but it was a lease option agreement that gave them the ability to buy the house at a value that was twice the amount it was worth. They were paying twice what the house was worth for the property. Also, they were never qualified or gone through the RMLO process. The whole thing was a complete cluster.

I reached out to Bob and Beth and explained it to them. Beth is pregnant. They are going to be having a baby in the near future and they’re freaking out like, “What’s going on? What is going to happen? Am I getting thrown out? We want to stay in the house. We started fixing up the house thinking that it was ours.” What I did is send them over to the RMLO and collected the information. We’re in the process of getting them approved for a land contract on the property, not a lease option. The value is going to be significantly less than what it was. They’re almost rejoicing because they are paying twice the amount for the property and now, they’re getting it for almost half the price that they would have. For me, it’s still a deal. I’m going to keep somebody on the property. It’s not going to be vacant. I’m not going to have to worry about hoarders. They were completely blown away. They’re like, “The guy posted it. He had the keys to the house. I didn’t realize that he didn’t own it. How would I have known that stuff? He says he owned it and signed documents that the lease agreement says he owned the property.” Technically, it was fraudulent. Is anyone going to go after him? No, but what you’ll find is that it happens a lot.

I’m really surprised. This has never happened to me though. I don’t have any special immunity. I’m sure it will eventually if I keep doing this. I wanted to clear up a couple of things that came up with that. Here’s the vocabulary, RMLO is a Residential Mortgage Loan Originator. That’s the Dodd-Frank compliance person where you have to qualify a borrower and make sure they have enough income to afford the terms of the loan that you’re offering. It’s a federal requirement. You must do that even though your guy did not do it, he’s not worried. He’s a bit of a cowboy. I want to say you’re like the fairy godfather. How cool is it that you swooped in and waved a wand and made their house half the price and sort all the paperwork problems.

Imagine getting the nursery ready only to find out you’re getting it ready in a house that the person who sold it to you, doesn’t own it. Imagine having to sit and having that conversation, I would be flipping out. As the investor, you also have to realize the whole situation. Put yourself in their shoes. At first, I was like, “I’m going to sell the property.” When I started talking to this person and then hearing the story, I was like, “They can afford it. The RMLO is going to confirm that based on the numbers I have seen. They should be able to.” I was sitting there and thinking, “Why would I sell this? I’ve somebody who can afford it. They can pay. It’s at a number that works and they’re already in the place. Why do I want to disrupt their life? There’s no benefit for anybody.” I was like, “Let’s get this process done.”

That was good. I was taking back a house. I said to the attorney, “Under the terms of this land contract, would they be able to sell this house and pay me off?” He said, “Yes.” How is it that you are totally sure that Joe did not have the right to sell the house? Let’s say he was selling it outright. Would he not have had the right to do that and met you at the closing?

It's always easier and less expensive to work things out with somebody than to involve an attorney. Click To Tweet

Here’s the million-dollar component that comes up. He can’t enter into a contract to sell a property he doesn’t own. He would need to get the money first from the person to pay me off. If I was going to buy a property from you, whether there was somebody else that owned it, I would go to that individual to buy it from them, not from you. What if you took the money and did not give it to me or in another situation, what if there was an IRS lien against you? I had this occur at one point in time where a seller was trying to sell the property. They had an IRS lien against them in a land contract. The money would have never made it to me because it would have gone to the IRS. That person would have given them the money. That would have never made its way to me because of the IRS lien.

The IRS would have grabbed it when it was floating in the air between him and you. I was very surprised by the attorney to have told me this. As a purchase agreement, how does that land contract borrower of ours, Joe, even sign a purchase agreement with Bob and Beth since he doesn’t own the house? It doesn’t make sense. If all the parties were in agreement, Joe could bring you a buyer. You could sign the purchase agreement if everyone has agreed on the terms and then it can happen.

He’s going to cancel it. The other thing too is in every land contract it should state that they are not allowed to assign it or sell the property without your permission.

I don’t remember seeing that. We have bought the majority of our land contracts from two sellers. Every seller uses the same contract over and over again. Is that clause in there?

In this instance, it is. It is probably in these other ones as well. I’ll look it up while you go with your story.

This was an easy one for me because I got a text from a borrower. My borrowers have my phone number and mostly I don’t send it to them. If you’re not paying your servicer the higher servicing rate for them to be in constant touch with your borrowers, if a borrower calls in, they will give whatever phone number you have left. This happened to be someone that I’ve spoken to before. She’s a very nice young woman and her partner, a nice young guy. It turns out, he is the one who supports the family and he was hit by a car. He’s a truck driver. I hope that means his truck got hit by a car. If it had, he wouldn’t be as disabled as he apparently is. This happened in 2018. They have continued paying. They’ve got to a point where she cannot keep all the balls in the air anymore. They’ve depleted their savings keeping up with all their bills because he hasn’t earned a paycheck in a year. She texted me to ask if they cannot pay their mortgage for three months while they put a game plan together or maybe he is now able to start possibly working again. I’m not sure what the three months mean.

She asked me and I could demand paperwork, proving that they are having a problem and that he is injured and everything else. I originated this contract for deed. These people have paid every month. Not always on the right date, but even the fact that he was disabled in 2018, there’s been no interruption in payments, I instantly said, “Yes, whatever you need.” I told her also that I’m going to write to the servicer to make sure they don’t get late fees, nasty letters, anything else accruing in the meantime. I said, “We’re going to suspend. We’re going into frozen statutes on this until January 1st.” That doesn’t even sound realistic because who has money right after the holidays? It’ll probably go into the spring. Even if he does get back to work, they’re going to need time to catch up. I do have to break the news to the JV. It happens that he owns other loans with me. They are paying very consistently. I made an executive decision and I will also get his permission to do it before we lock it down.

That’s the thing that I’ll mention too. The decision you made, if somebody gets in a little trouble and they’ve been paying, your expense is to try and seek legal action, all you’re doing is adding salt on the wound. If it’s somebody who wants to stay and in two to three months you help them, it’s going to help you in the long run as well in the sense of the overall management of the note as well as the financials of the note. It’s going to be much better than trying to get somebody out and have all the legal fees, try and sell the property, or get somebody else on the property. If you can keep things as a status quo, sometimes you may have to give up payment and book it to the end of the loan for a month or two months. Stuff happens to people in life and when it does, that’s something that you should take into consideration. Also, based on the borrower’s history, if it’s been a good borrower, why not? Whatever you do though, just make sure you have it in writing.

We can agree it’s always easier and less expensive to work things out with somebody person to person than involve an attorney. It took me a long time to find these people for this house. There was no way I would dump them out. Where’s the humanity in that? That is why we do this. I get to feel I got to help somebody up. It does make me feel good. It’s gratifying.

This is another interesting one. I’m going to call them Pat and Pat. They were two years behind. When I bought it, they were in the middle of a payment plan. They made the payment plan. It was a twelve-month payment plan that they made all the payments in eight months. They paid it early, believe it or not. I’m in the process of negotiating a new loan with them and they roll in the past two into a new balance. Because they’ve been there for more than ten years, I want to move it from a mortgage in a note. It is a land contract. I was talking to them on a conference call and going through the terms. What I did is I send them their original payment which was $300 a month and their modification payment or payment plan was $600 a month. I said, “Where do you want to be at? They said, “$600. We really can’t afford it.” I said, “Okay.” They asked, “Is that okay?” I’m like, “If you can’t afford it, why am I going to put it?”

I told myself, “It needs to be more than $300, but it can be less than $600.” What I did is I send them a spreadsheet that had $25 increments that went from $350 to $600. The UPB was the same because it’s not changing. The only thing I changed was the payment in the long term. With $500, you’re going to have a lot shorter period then it’s $350. I sent it to them and they picked one in the middle, which I’m fine with. Anything within that range I sent to them was suitable. They want to get it paid off sooner rather than later. They put something they were comfortable with. When I was explaining it to them and saying, “This is a land contract, not a traditional mortgage and note,” they said, “What do you mean?” I was explaining to them it’s like financing a car. When you finance a car, you don’t have the title. You’re responsible for everything, but you can’t sell it until you get the payoff or pay them off. I’m explaining that to them and they were blown away.

GDNI 79 | Working With Your Borrower
Working With Your Borrower: In life, people get into difficult times. As the investor, you can choose to seek legal action or be considerate. Just make sure you have everything in writing.

 

This isn’t the first borrower I’ve talked to. They were like, “I had no idea. I thought I was buying the house like every other person buys a house and stuff like that.” I’m trying to explain to them the land contract. “You’re not on the title. You’re not on deed. It’s something that you can’t sell without my permission.” They were completely blown away. The guy made a comment. He goes, “Let me tell you, if I had somebody walk up, knock on my door and I was trying to sell it then realize I couldn’t sell it, I would be ticked.” He’s put in the equity and stuff into the property, which happens a lot when we have been there for a while. I’ve explained it to them and their response was, “That’s what I would want.” From that standpoint, I believe it gives the borrower more protection. People would be like, “Why would you do that if you’ve given the borrower protection?” I go back and say, “They’ve been in there. They’ve been making their payments. If there’s equity in that property that they created, then that should be theirs.” Some people would question about fiduciary responsibility to my investors. I do have fiduciary responsibility for my investors. By having it as a land contract, you’re taking on so much greater risk than you are as a mortgage in note. I believe you’re doing yourself a benefit by putting it as a mortgage in note versus keeping it as a land contract from a risk perspective for responsibility.

When I have that conversation with funding partners, they’re typically on board with it as well. Fortunately, this one I owned by myself. I had to look myself in the mirror and have a conversation with me. It does take some time to go through. This is one that I could have stuck them and say, “You still got to pay $600 a month and everything else.” Working with the borrowers and explaining it to them and having that dialogue and conversation with them that understands. Most of these borrowers think we’re some big bad bank executives. That we’re some evil individual. We’re human beings and I want to work with the person and not be, “This is what the protocol is for every single thing and this is how I must do it.” There is flexibility and the more flexible you can be, it goes back to that conversation we had about the perfect note. You don’t buy the perfect note, you create the perfect deal. That plays into that.

People would think when we tell these stories, we’re being softies and it’s not business-like and everything. This whole world is about getting results and you can fight upstream. You could have kept that payment at $600, probably foreclosed on these people or done a forfeiture, tossed them out and looked for a new buyer. You could do all that, but financially a year down the road, was it worth it? I don’t know what it is. Particularly, if you consider that your time has value also or the cost of your time. You may not feel inclined to be mister nice guy in these situations but recognize that there could be a very solid business basis for making a decision like that too.

In 2018, I bought a note, not a land contract that was down South. It was in bankruptcy and this is a smoking deal. I paid $27,000 for it. The PI payment is $858. The unpaid balance is $85,000 on a house that’s worth probably $59,000. In this particular case, it’s not a super rural area, but it’s a little country lane a little bit. The guy who lives in this house, the street is named after him and his family. We’re talking about probably a family homestead that goes back before him and has real significance. This gentleman, although he’s older, he’s in his 60s, I don’t think that he’s working. I think he’s got health issues. For eleven months, he paid like clockwork through his trustee.

This bankruptcy was started in 2015. They usually last five years of BK 13. He’s pretty close to the end. He’s counting on it to wipe out a bunch of other debts that he had accrued. We get to the eleventh month; we’re putting it up for sale. At that particular moment, he stops paying. Since he was in bankruptcy, we couldn’t call him or do anything to find out what happened. I have not seen this happen so swiftly before, but the minute he stopped paying, his trustee filed to have his bankruptcy dismissed even though it’s a very seasoned bankruptcy at this point. It turned out, once his bankruptcy was dismissed, I was able to call him to say, “What happened?”

It turned out that he had gotten sick. He’s got some pretty profound health problems. He was in a coma. This is the not good deeds part of the lending world. Nobody came to court to explain the situation. His attorneys don’t seem they’re particularly on top of things. When he stopped making his payments, the trustee was like, “That’s it, done.” It took a few months for the notices to arrive. They went to him and he was in a coma. He didn’t raise the alarm about what was happening. His attorneys finally figure out that his bankruptcy has been dismissed. He’s ill. It’s not his fault. We need to get it reinstated.

They did three months after it was dismissed. They filed and it was granted that it be reinstated. Here’s the other thing. I’m not a bankruptcy expert, but you live and learn with these things. When it was reinstated, he needed to file an amended Chapter 13 plan. This guy is a simple country guy as most of our borrowers are. They’re not necessarily all country, but these are not shrewd operators who know all the best practices in life to get the best deals and manage their credit. By definition, the kind of borrowers that end up in our portfolios, they struggled to understand their situation. They struggled to know what to do about it. These people did not file the plan. The attorneys did not follow the amended plan and his reinstatement was dismissed.

He’s still not back on track with this bankruptcy. Hopefully, they can get it reinstated still. In the meantime, I’m having a conversation with him because he hasn’t paid for three months. My investors were like, “What’s going on? Should we start legal?” I’d spoken to him before. I was pretty sure the answer to “Should we start legal?” is no. The first time, I talked to him about his situation and I said, “This $800 plus payment a month, is this something that you can do long term? He goes, “It’s not. I’ve got all these other bills. I will get the slate quite a bit in the bankruptcy, assuming we get to the end. I will then be piling up new bills because I don’t have enough money,” particularly for his medical things. I said to him, “What’s a comfortable payment for you?” He said, “$700.” I said, “Let me go talk to my company.” We always act like we’re representatives of very large companies so we don’t have to answer on the spot.

I called the investor and I said, “What do you think? He’s been a great payer. The street is named after him. I don’t think he’s going to move. If he leaves this house, we’re never going to get this monthly payment.” We’re not going to be able to sell it for $85,000 to a new borrower. It’s a great deal even at $700. Credit to the JV, he said, “Yes, let’s do it.” I’ve sent the gentleman the paperwork to be on a temporary payment plan and assuming he performs for six to eight months of getting what it is, we will permanently amend his loan. We’ll modify it so that $700 is his payment going forward. We’re even going to forgive some of the UPB because it is a $59,000 house with an $85,000 mortgage on it. It is still a great deal. Everyone’s happy.

It goes back to being flexible and the ability to work with the borrower and create a win-win situation.

We need them to succeed. That’s what makes it work for us. I’ve had enough deals. I don’t want to end up with any more houses at the moment. I’ve got a couple of real borrowers.

Picking up the phone and talking to people reduces confusion and prevents costly legal actions. Click To Tweet

This is a similar example when you’re talking about taking back houses. I’ve got one where we’re going to call them Chris and Chris. I haven’t dealt with the husband, only the wife. I had a land contract that the borrower was making spotty payments and wasn’t paying the taxes. There are two years of taxes that I had to pay. There’s about $5,000 in taxes on this property. Aside from that, they’re spotty, I’m like, “Let’s try and force the issue.” I sent a demand letter because they were non-responsive to try and work something out. The borrower had two addresses, one went to the house and one went to another location. I come to find out, the actual borrower on the land contract sold it off to somebody else. This couple who were in their 70s told me, “You could take over the payments and you give me the money. I’ll make sure everything gets paid.” He didn’t pay or what he was doing was they were paying him, but he would miss a payment here and there and he wasn’t paying any of the taxes. I was like, “I got this extra money and my principal and interest is only $350. I’ve got them at $500. I’m making $200 a month.”

That’s a total wrap around. You’ll see that in real estate seminars that you can do that, but you still have to pay all your bills.

These borrowers had got the property because they wanted to leave it for one of their children. They were in the process of renovating it and updating it. They’d done some renovations to the property and pretty much almost doubled the value of the property. When I got the BPO, I was like, “Thank you.” The more I was talking with them, I was like, “If we can get the borrower to sign off and sign the cancellation, I’ll put you on a new deal.” It’s the same thing. It was a land contract that I’m supposed to close. That’s going to be a mortgage in note for these two borrowers.” I did not Jack up the price, which I could have done. I left everything as to what the UPB was, plus my advances and added that in and the cost to create the mortgage in note.

Did you charge them for the taxes you had to pay?

Yes, I charged them to make myself whole in the sense of any advances that I made, but the UPB calls it $35,000. The house is worth $80,000. I didn’t say, “Let me pick $50,000 or $60,000 because I can.” I left it the way it was because, for me, it’s still a good deal. Even if that was the case, I couldn’t see how it wouldn’t have been a good deal based on when you buy a nonperforming. Even I did have to put about $5,000 for tax and advancements. Once they start paying, we’ll start getting cashflow and we’re good. I could now if I want it turned around and sell the thing in a year, the borrowers have great credit. The first conversation with this woman was very interesting. She was almost in tears thinking that we’re going to jack up the price or we’re going to turn around and sell the property or what they’re going to do. She had talked to a friend who let her know that the person they worked the original deal with was conniving with them, not doing what he should have been. They were really at my mercy. In most of these instances, they are at your mercy. That’s where it comes into being a good person, which I like to think I am. I’m trying to work with the borrower when the borrower is trying to work with you.

I’m curious. Since you say these borrowers have great credit, why don’t you encourage them to get a loan and buy it from you?

The value of what they want to get the loan amount for. It is under $50,000.

You don’t think they’d be able to get a loan.

Could they have? Maybe, but I want to get them under something first and then if they want to go refinance, I can help them do that later on. Let me get them on a contract for the property for which they’re not.

They have no technical relationship to this property. They’re just paying. That’s very interesting. I hope this has been interesting for our readers and get your thoughts going about what we all do.

My notes and bolt is if you’re doing land contracts and you find out it is not owner-occupied, it might be worth having a conversation with the borrower. Get an understanding of, “How are we using the property? Is it a rental? Did you put somebody else on a land contract because they’re not allowed to?” The reason I mentioned that is I’ve had a loan that I was in the process of selling. When we went to go transfer the deed, I found out I couldn’t transfer the deed to the new buyer because the person on the land contract had somebody else on their land contract. He foreclosed on that other individual and got a sheriff’s deed. Somehow, he ended up getting a deed to the property that he should never have gotten. Now, we have to resolve that. My notes and bolts again is to find out if it’s owner-occupied and if it’s not, try and get an understanding of how and what they’re using that property. At the end of the day, you still own that property. That’s the one thing you’ve got to remember and make sure you have insurance on it. If they’re using it as a rental, you don’t know what’s going on in that property. You’re the owner, you should know what’s going on.

GDNI 79 | Working With Your Borrower
Working With Your Borrower: If your property is not owner-occupied, have a conversation with the borrower and get an understanding of how they’re using the property.

 

My notes and bolts are related. Don’t be afraid to talk to borrowers. We all learn I hope upfront that you have to be very careful when you’re talking to borrowers. There are definitely rules to follow. You can find out more about that. We’ve posted it in our Facebook group. We’ve certainly talked about it. We’ve given the web address of an organization that has created a multi-module training program on what you can and cannot say to borrowers. Even if you’re calling for reasons other than attempting to collect the debt or you’re calling to discuss something, you still need to be aware of the rules so you don’t run afoul of them by accident. Do you want to give that name again?

Yes, it’s ACAInternational.org.

It’s not expensive. It’s well worth it. You can even buy it and share it with friends, which is what we did. You and I are in a partnership. You allowed me to share the corporate. We live in a texting world where people enjoy the fact that they don’t have to talk to each other. There’s a lot of things to learn and discover when you pick up the phone and talk to someone. It eliminates a tremendous amount of steps and misunderstandings and it can also prevent expensive legal actions. I highly recommend them.

The other thing that you can do, as long as you get their permission because you have to mention this, depending on the state you’re in is record the conversation. If you do the Miranda and then record it, that can come in handy. I had an issue where a borrower made a promise to make all these payments on these certain dates. The conversation was recorded. He was aware of it and went to mediation. The story came out, “You just want the house back because this development is going in the neighborhood or whatever the case may be.” I told the attorney over the phone, “The attorney has the agreement we went.” I just want the person to honor the agreement, which it’s been three months that they haven’t made any payment. They said they’d have everything paid off in three months. They’ve made three payments in the last fifteen months. I’ve been trying to work with them.”

They played the conversation and everything he said prior to that was completely false compared to what he was saying that I was changing the dates on him and all this other stuff. I was listening to them and at the end of the conversation, I was like, “We’re on the same page. You’re going to make payments on June 1st of $500, June 15th of $300, July 1st of $500 and July 15th of $300.” He said, “Yes.” I said, “When you say, ‘make them,’ that is I received by that date, not mailed by that date.” He’s like, “Yes.” He even asked about setting up ACH. There’s nothing much he can do from that.

That brings to mind the phrase, “No good deed goes unpunished.” Hopefully, the good deeds we’ve talked about here will not be punished but will be appreciated. I think they already are. It makes us feel good to be able to do it. Is a bank going care that my borrower got hit by a car and he hasn’t worked in a year? I don’t know that they will. It’s not my impression that they do.

You’re absolutely right. It popped in my head, I had a borrower who missed four months of payments and he lost his cell phone, got shut off. We couldn’t reach him. We sent the demand letter. He finally called us from somewhere saying, “I lost my job and I’m going to retire. I’m waiting for everything to kick in.” He mailed in the letter noting all that when everything’s kicking. Instead of going after the property, it was like, “Just prepare the payments.” There you go. It’s much simpler that way. Gail, thank you for another great episode. Go out and make good deeds.

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