Do I need a 1-800 number if I plan to work out my own notes?
Investor · Jefferson City, MO · Member since 2013 · 309 posts · 100 votes
I recently purchased some non-performing notes. I was wondering if a 1-800 number was an absolute requirement or if I can just have a dedicated phone number for borrower contact? Of course, I recognize that the 1-800 number conveys a bit more professionalism but I am just wondering if that is something I need to invest in early on in my note career or not. If a 1-800 number is a requirement, can someone recommend a cost-effective company?
Many thanks,
Sandra
Pinged again.
I wasn't going to say anything, but I'd never buy a seasoned note without the payment history file, you can't audit the file! Just take the holder/broker's word for it as to the amounts due?
Even loans in default have a record and that tells a lot about the circumstances. Like can it be brought current or reinstated or is it trash from a scumbag borrower?
If they can't produce the entire loan file, sell it back to them. :)
Sandy, I suggest you contact a servicer.
There are exceptions to, portfolio size, types of notes, but some basic servicing requirements apply to any note. If a borrower obtained an institutional loan, they are generally entitled to treatment expected of that institutional level of of servicing, this becomes an issue of lender's and servicer's liability. A privately originated note does not carry those levels of care and diligence.
Institutional loan compliance requires a toll-free phone for borrower inquiries. Further, there are requirements for all phone conversations to be recorded with proper notice and those recordings to be kept on file. This is basically for audit purposes if there is a complaint filed.
There are also notice requirements, accounting requirements, tax notifications, giving borrowers ample time to meet obligations, there are filing requirements for these matters as well. Collection efforts need to be detailed and kept on file, basically, all communications with a borrower.
Buying notes is one thing, servicing them is another. I owned a mortgage company that serviced loans, in today's world, I wouldn't touch servicing unless I had a trained staff and a portfolio of about 25M making the brain damage worth while. That's just me.... :)
RingCentral is a good provider. They offer both metered plans with a couple thousand minutes free each month or you can have unlimited inbound toll free for $5 extra per user per month.
A toll-free number is also a must when you're trying to purchase your notes or doing any other direct-to-consumer marketing. You want to be able to capture the inbound telephone numbers. When you pay for the call you're entitled to the actual number even if they block their caller ID.
For a low tech, very cheap system use Twilio with OpenVBX. The 800 number will cost you $2 per month plus an amount based on usage. Since you're not going to have a lot of inbound calls those charges will be minimal. You can configure it to do all sorts of things like menus, different voice mails for different people etc. Don't forget to include mini-miranda type disclosures.
It really doesn't matter whether it's a government regulation or not. If you want to be taken seriously you have to build a professional infrastructure especially for things like these which have high visibility and low cost.
Absolutely, a servicer is a top priority. I understand that some of them even will act similar to a 1-800 number and forward borrower calls to your phone, I am having a terrible time getting the notes boarded with a servicer. Either they charge a huge fee up front or they don't provide service for notes in some of the state that I have notes in, NY, for example. I am trying to get the notes boarded with FCI but they are requiring a pay history that were not provided to me beyond the last payment made and next payment due. Seems I'm at a standstill until I can get over this hurdle and I certainly don't need the 1-800 number until I have a licensed servicer and the appropriate letters sent out from the servicer.
@Bob Malecki might have some advice for you. He has been trying to board a note of ours with FCI and has run into some issues. Also @Mike Hartzog might be able to help. He has a different services that he seems to like. Both guys are experienced note investors and would be worth talking to. Hope this helps.
@Dion DePaoli has a servicer @Sandy Uhlmann :)
I use ringcentral, and it works wonders for me. Thats what I would suggest. Its a cloud based PBX service, plus its fully scalable. It will work well for you.
I use grasshopper
Well Bill pinged me so I will chime in.
You as a mortgagee/investor do not need an 800-number at all - ever. As Bill pointed out most investors will not be able to accommodate all of the servicing requirements and nobody should even be thinking of self servicing.
Every servicer in the market charges a boarding fee - which is the fee per loan to setup the loan with the servicer. I wouldn't call it huge but it is in the $80 to $75 range - per loan. Then default servicing costs somewhere between $75 to $100 per month per loan depending on the servicer.
I do not fully understand the file erosion here. A payment history "past" the last payment date on a defaulted loan is nil. If a payment had been made then the last payment date would move forward in time but the gap between LPD and now is nil for a defaulted loan - ergo the "[payment] default".
Are you sure it is "only" the payment history the new servicer doesn't like? As I just gave you the payment history.
Can we ask what you purchased and from where? - second liens from one of these workshops or something?
Who was the Seller of those assets using as a servicer and are they still boarded with that servicer?
I have seen some of the files that are passed around to newbie loan investors thanks to some of our clients. They suck. They literally have nothing in them. Most of the ones I had seen were serviced by the investors not a real servicer. None of them had any data to work on let along a payment history gap as noted here.
I hate to make a teaching point out of your pain but that is exactly what is wrong with these types of files and all newbies need to take note. There are liabilities trying to work on these loans and improper history and lack of data increases those liabilities a lot.
This would be a fantastic time to have a buyback clause. If you have one, stop playing with this issue and have the Seller buy them back. If not, a couple of us can see if we can help you with your issue as best we can but something missing in a file that is purchased is forever missing when you buy the file.
Like I said, who was ( and is currently doing your interim servicing) on these loans?
@Bill Gulley
Absolutely, a servicer is a top priority. I understand that some of them even will act similar to a 1-800 number and forward borrower calls to your phone, I am having a terrible time getting the notes boarded with a servicer. Either they charge a huge fee up front or they don't provide service for notes in some of the state that I have notes in, NY, for example. I am trying to get the notes boarded with FCI but they are requiring a pay history that were not provided to me beyond the last payment made and next payment due. Seems I'm at a standstill until I can get over this hurdle and I certainly don't need the 1-800 number until I have a licensed servicer and the appropriate letters sent out from the servicer.
Pinged again.
I wasn't going to say anything, but I'd never buy a seasoned note without the payment history file, you can't audit the file! Just take the holder/broker's word for it as to the amounts due?
Even loans in default have a record and that tells a lot about the circumstances. Like can it be brought current or reinstated or is it trash from a scumbag borrower?
If they can't produce the entire loan file, sell it back to them. :)
Actually, with the exception of this little snag, I am very happy with National Note Group and Fuquan and the mastermind class that is through NNG. NNG does have reps and warrants and have even replaced a note for me (and let me keep the original) because I purchased a second thinking that it was behind a performing first and after doing some due diligence, the first seems to be delinquent. They have been great and I have no regrets about purchasing notes from them or taking the class(which was free when you purchased a pool of notes) Fuquan makes it clear that he doesn't want to make money off the education, he would rather teach people the note business so he can sell more notes. I think the issue is with FCI-not NNG. These notes are from 2007. Most have last payment dates around 2011. We do know the UPB, last payment date and next payment due date. They are obviously non-performing so I have no payment history beyond that. We have provided all that information to FCI. Should I have a servicer history of payments from 2007-2011? Nonetheless, currently, FCI seems to want that information in order to board. All the collateral is intact. As much as I would have liked this process to be smooth and easy, we learn a lot from the bumps and bruises we get along the way.
For further reference, we've rarely if ever received "payment records" from previous servicers except for the standard information Sandy already has. It's never been an issue with FCI, nor with FC attorneys, nor with borrowers' attorneys.
Following the advice on this forum we would have had to sell them all back I suppose.
I would reconstruct the payment history using an amortization schedule and see if the numbers match. If they do, then that is my payment history. As agreed up to last payment date, and 0 every month since. If the borrower objects saying he paid XYZ months? Great, it was an administrative error, credit him for it and try to negotiate a win-win solution.
I was going to say the same thing as @Patrick D. but he beat me to the punch. I have bought numerous 1s position non-performing notes and only once received the complete payment history (from FCI FWIW). All the other times I have had either a partial history or I recreated myself. Be aware that when you file a foreclosure most attorneys want to see that payment history in case the judge eventually asks for it - many borrowers will fight the amount owed. I have had that happen 3 times but a simple amortization schedule like mentioned aboe has sufficed.
Not interested in a conversation about the crap that people buy from these mastermind groups right now. It's your money if you want to light it on fire then go right ahead.
A servicer not wanting to board one of these assets speaks for the quality of these loans pretty straight forward. Not having any type of servicing file - which is the REAL reason FCI is struggling with this loan not a payment history (as I described the history in my last post) speaks to what we have warned the masses about in terms of continuity of collection.
Four years of no proof of collection is a huge issue and in every legitimate trade in the market those loans would trigger buybacks. (In many states 4 years expires the ability to collect if there is no continuity - but these groups don't tell you that, do they? I digress.)
To cast the issue on to the servicer who is in the business of servicing loans and not the asset itself is pretty naive.
I get it though, when a licensed and compliant servicer doesn't want to service the loan for lack of content - it must be a good idea to do it yourself - you know - absent all that compliance and regulation "stuff".
Good Luck.
@Dion DePaoli Sandy this isn't about you! It's about the brokers.
I haven't dealt with FCI or NNG.
So I guess this NNG is the Amway type, like Eddie Speed's "groups" ?
I guess folks don't know what is in a payment history and collections file.
I've spilled coffee on amortization schedules, not a problem, run another one!
A note holder that fabricates payment records without an audit trail.....well, that's just fraud.
Now I'm guessing that these "Note Brokers" are buying notes without the files which reduces the last holder's liability significantly and the reason for better discount?
I can see where they don't mind buying such notes for pennies on the dollar since they have probably "taught" their buyers how to buy notes, omitting the little stuff like payment records, notices of demand and default, dates of collection attempts, collection disclosure......you know the little stuff that servicers do.
I guess, as you mentioned Dion, they don't tell their "students" what a "stale note" is and that it becomes un-collectible, but that can also means you can't foreclose since a foreclosure, taking the collateral is in satisfaction of a debt, LOL, there is no debt secured! It's okay, you can hope the borrower doesn't have an attorney 6 months out of law school. Now you have an unlawful foreclosure.
That's why you get a record of attempted collections, to keep an obligation from becoming a stale, abandoned note!
BTW, what happened to the requirement to give notice to a borrower of a note transfer? Anyway.....
Hey kids, I'm a note broker, I'll teach you how to buy notes (my notes) for free, yes free!
(Never mind that if I charged you for teaching investments and you bought from me and lost money you could sue my tail off for advising you) (any conflict of interest there?) So, yes, free, I'll teach you everything,maybe a bit more, but not everything you should know, because if I did, you might not want to buy the stuff I toss at you. All you need to know to buy notes in our little group is right here, in our 3 day seminar and podcasts.
Dion, do you have any idea how many worthless notes are being passed around by those thinking they are note investors?
Or, how many notes are sold without customary warranties and representations because those "student note buyers" don't know what to ask for or demand........buying a few back once in awhile is just good business I'd think, here, I'll trade you, happy now, now run along and be happy, happy investing. :)
@bill gulley "A note holder that fabricates payment records without an audit trail.....well, that's just fraud."
No clue where you got that impression from my comment - and is slanderous. I clearly stated I have recreated the amortization schedule, not the actual history. And I have attended the guru trainings years ago. Two of them. Each said using a servicer was a must. Each talked about the assignment chains, allonges, all of the required docs. I'm not defending gurus and masterminds as yes they all are selling something. Who isn't. I have passed on plenty of upsells and any thinking human being can smell BS when they see it. @bill gulley BP is a way for investors to learn from each other and if you don't have something useful to share it would serve all of the readers better if you don't say anything. Your post above added nothing of value for any reader.
I have an 800# for my primary business but it is not dedicated for loan servicing.
FCI services three of my own loan portfolios however I do not use their foreclosure services and handle the mitigation during foreclosure myself.
If I did have a dedicated number for problem borrowers, it would be 1-800-ITS-BUSY
Bill, you seem to have good intentions but I've said it before and agree with Wayne that you're not adding anything constructive to the conversations.
You point out theoretical issues that rarely ever come into play, scaring people into not investing.
1 - Everyone that I know "gives notice to a borrower of a note transfer". It's not like you pulled out something big and you just stumped people or something. Are you kidding?
2 - I haven't run once into the issue of the note not being collectable based on lack of collections efforts. Can it happen in the future? Possibly. Who cares? These kind of issues are baked into the prices that we pay for inventory. We tried to explain to you before that it's a numbers game, a statistical play. One note doesn't reflect the performance of your portfolio. It only affects the guy that will buy ONE terrible note and call it a day.
I'm working on a 2nd mortgage right now that has terrible collateral. It's embarassing. The mortgage is missing 2 pages. One of the sellers used a Lost Assignment Affidavit that's invalid and messes up the chain of assignments. Is it frustrating? Yes. Does it cause delays? Yes. Is it fixable? Yes, we're pulling out the assignments that we need to fix the chain of AoMs and clean up the collateral. So instead of taking 4 months to foreclose it might take 6. Again, so what?