After you buy a defaulted note, you could always contact the borrower and act like a traditional bank, but if you do, expect the conversation to go adversarial rather quickly. What do you expect when you tell someone, “If you don’t pay up, we’ll just Foreclose and you’ll have to get out\u2026”?<\/p>\n
Yes – but there is a better way.<\/p>\n
Want the \u201cmagic formula\u201d for talking to a borrower who isn\u2019t paying his or her note. It\u2019s simple, just ask:<\/p>\n
I\u2019ve always had much more success – financially and emotionally – when I understood the financial situation of a borrower. Think about it, when you know your tenant has a good job and a happy home, don\u2019t you worry less? Doesn\u2019t that make you feel safer when you think about cashflow?<\/p>\n
For us, the initial conversation with the borrower generally sounds like this: \u201cDo you want to stay or go? I think I can help you with either decision. Look at me as your advocate. \u00a0If nothing else, I think I could save you from having a foreclosure on your record.\u201d I\u2019ve always felt that it\u2019s good to stress that \u201cour legal department will be moving forward until something is worked out,\u201d so the borrower knows foreclosure isn\u2019t something you want to happen, merely that it\u2019s the only option left on the table if there is no communication or if a favorable deal for both parties can\u2019t be agreed upon.<\/p>\n
If the conversation is strained in the beginning, we train our asset managers to say, \u201cListen, even if we agree to disagree, just give me five minutes to show you how I’ve helped other families in situations like yours and if you don’t want to talk to me after that I’ll never bother you again.\u201d This usually gets the borrower to start listening, which is sometimes the hardest part.<\/p>\n
Once a dialogue is established, we then proceed to go over some of the homeowners’ options by telling them stories of how we’ve helped other families, utilizing solutions like the following:<\/p>\n
This is a major strategy employed by low equity note buyers.The conversation with the homeowner might go something like this: \u201cThere\u2019s a family I helped in Oregon where they were able to access their 401K penalty-free because they were in Foreclosure.\u201d What if the person doesn\u2019t have a retirement plan? Then we could say, \u201cMaybe you\u2019re qualified for the friends and family program.\u201d Then I would go on to tell a story of a family in Delaware I helped where they didn\u2019t have a retirement account, but the borrower\u2019s uncle offered to pay the discounted loan payoff amount.<\/p>\n
If they don\u2019t have ANY friends or family that could help, the next option might be more practical\u2026<\/li>\n