Negotiating with the borrowers

16 Replies

Hello BP,

If I have a non performing 1st lien note, may I contact the borrower to negotiate a payment plan or workout plan without having a mortgage broker license? Would I be able to change the terms of the original contract if it were to benefit the borrower? thanks in advance

Adrian Zamora

Hi Adrian,

Have you boarded this note with a professional servicer which is licensed in the state where the property is located?

Mike

Mike,

I'm currently don't have the note. I'm asking the question for my information. If I buy the non performing note should I boarded with the licensed servicer first and work with them? Or can I first try to make it perform again, and once is performing set it up with the servicer.

Adrian

Adrian,

I would, without a doubt, seek the advice of an attorney before having any discussion with  the borrower regarding flexibility or amendment of the loan's terms.  When considering to take advice regarding this matter make sure they are familiar with your states laws. 

I understand you are trying to find a viable solution for the other party and I suspect you have their best. Interest in mind, but unfortunately such discussions may render the terms of your loan unenforceable or at the very least allow the other party to make that claim. 

There are several sites online that will allow you to post your question and an attorney will reply with an answer at no charge. They hope that you will use their services if you decide to use an attorney. 

Good luck

Chip

Adrian,

I would, without a doubt, seek the advice of an attorney before having any discussion with  the borrower regarding flexibility or amendment of the loan's terms.  When considering to take advice regarding this matter make sure they are familiar with your states laws. 

I understand you are trying to find a viable solution for the other party and I suspect you have their best. Interest in mind, but unfortunately such discussions may render the terms of your loan unenforceable or at the very least allow the other party to make that claim. 

There are several sites online that will allow you to post your question and an attorney will reply with an answer at no charge. They hope that you will use their services if you decide to use an attorney. 

Good luck

Chip

I wold first board the loan with a servicer.   There are specific communications that, by law, have to be made before you contact the borrower.  You can contact them but that could very well get you sued if you don't know the laws involved.

Your best bet is to let the servicer handle the communications.

@Chip Towner   Thanks for response I will consider the lawyer.

@Bob Estler  Thank you for your response as well. I guess it is best to leave to servicer and avoid making a costly mistake.


Why don't you just foreclose, and you want to have to go the servicer route?


Joe Gore

Agree with Bob.  Loan servicing is the first step because you need to stay RESPA compliant with your activities, and it is relatively inexpensive.  Generally when you purchase a note it is already boarded with a servicer, so you could either leave it there or have servicing transferred to your own servicer.  If you transfer servicing, you will need to wait for the "goodbye" and "hello" letters to go out before attempting to contact the borrower.

There are a handful of states where you need a license for debt collection, but most are not that way.  I contact (or attempt to contact) borrowers regularly as part of my workout strategy, but if I am working in a new state I check with the servicer since they know the state laws better than I do.

Regarding the loan modification question, you don't need a mortgage brokers license. You can change the terms of the loan within limits and your servicer should be able to do the loan mod on your behalf.

@Joe Gore I currently don't have this NPN. I'm just asking a general question for my education. So if this was my note, you suggest I foreclose instead of trying to work out a payment plan?

@Mike Hartzog   I agree like Bob mentioned; Servicer is the way to go.

Originally posted by @Joe Gore:

Why don't you just foreclose, and you want to have to go the servicer route?


Joe Gore

That makes sense in Texas, but in some states you will wait for over a year to get a foreclosure completed.  Loan mod or DIL can be much quicker exit in many states. 

One of the services I was talking with the other day recommended doing "Cash for Co-Operation".  Basically you pa them to help do a short sale and skip the DIL.  

Of course the risk here is that they play you like a piano and then don't sign the sale doc.  This would be lower risk in a situation where the borrower had already moved out.

Originally posted by @Bob Estler:

One of the services I was talking with the other day recommended doing "Cash for Co-Operation".  Basically you pa them to help do a short sale and skip the DIL.  

Of course the risk here is that they play you like a piano and then don't sign the sale doc.  This would be lower risk in a situation where the borrower had already moved out.

I like the idea.  Haven't tried that.  If you have a FCL in progress I think that would help to mitigate the piano music.  Another thought is to get a DIL signed as part of the contract which could be executed if a purchase and sale is not signed by a certain date.

Originally posted by @Adrian Zamora:

Mike,

I'm currently don't have the note. I'm asking the question for my information. If I buy the non performing note should I boarded with the licensed servicer first and work with them? Or can I first try to make it perform again, and once is performing set it up with the servicer.

Adrian

 Also be aware that if there are any bankruptcy filed or the borrower had a BK discharged, there are specific limitations for contacting the borrower, so be sure to include this in your due diligence findings. 

Hi Bob, I just wanted to add to this discussion, that laws and this industry is constantly changing.  Joe Gore mentioned just to foreclose on a note. I would always go through a servicer myself to show a judge if I have to foreclose, that I at least tried to work soemthing out with a borrower.  I also just registered with one of the largest servicers in the country to buy notes from them, and I had to sign a document stating I will try to work something out with the borrower and that I can't just foreclose.  This is going to be a game changer in the future.  Banks have been sued and they don't want people just foreclosing right away so they won't sell notes anymore to people that do that.

Originally posted by @Ian Barnes:

Hi Bob, I just wanted to add to this discussion, that laws and this industry is constantly changing.  Joe Gore mentioned just to foreclose on a note. I would always go through a servicer myself to show a judge if I have to foreclose, that I at least tried to work soemthing out with a borrower.  I also just registered with one of the largest servicers in the country to buy notes from them, and I had to sign a document stating I will try to work something out with the borrower and that I can't just foreclose.  This is going to be a game changer in the future.  Banks have been sued and they don't want people just foreclosing right away so they won't sell notes anymore to people that do that.

 Interesting but must of the NP notes I see have not paid in years so I don't see this being much of an issue.

If you don't own the note yet, you can not in any way contact the borrower until you own it. As others have suggested, it has to be put with a servicer licensed to do business in that state, and after all that is done, and the Goodbye/Hello Letters are sent, I am of the opinion only then can you contact them. When you do contact them, phone or mail, you have to put in a mini miranda stating you are attempting to collect a debt to cover you from any FDCPA issues. Good luck!

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