Borrower Stopped Paying? Get Legal Involved—Fast

[Chris Seveney]

When a borrower stops paying, our legal team is engaged immediately (we send demand after borrower falls 3 months behind). This isn’t about being aggressive—it’s about protecting our investors and keeping the process moving.

We get calls all the time from note holders sitting on delinquent loans, unsure what to do, and often months behind on action. Their biggest mistake? Waiting too long and hoping it fixes itself.

Here’s what we tell them:

A. This is a business, not a charity.

B. Your loan isn’t just paperwork—it’s secured by an asset.

C. Every month you delay, you lose leverage and money.

In most cases, we walk them through:

1. State-specific legal timelines

2. Engaging foreclosure counsel

3. Negotiation strategies that don’t waste time

The goal? Resolve it quickly—whether that’s reinstatement, a workout, or taking control of the property.

Remember: emotions don’t belong in default management. You’ve got to make decisions that protect your financial future.

I am curious if you view this as aggressive. How soon do you take action when a borrower misses a payment? 

Curious to hear how others handle this.

[Jamie Bateman]

At 60 days we inform our servicer that we will accept reinstatement only; no partial payments. At 90 days we send a demand letter from our attorney. Not only is the time factor critical for our investors, but if your loan docs say one thing and you do another, you are establishing for the borrower that the docs are just suggestions and that you won't follow through consistently. It's a lot like parenting. 

And one of the best parts about note investing is that the investment is backed by collateral. Well, that perk is not real unless you are willing to take swift action. There will still be plenty of opportunuties for the borrower to keep their home if they communicate and make a genuine effort to work with us.