All Forum Posts by: Johnathan Norman

We have tried a number of different approaches and have found that in non-performing scenarios, using servicers is not as effective as talking directly with borrowers.  I think servicers can be very effective in performing and sub-performing scenarios when a borrower misses a payment, but for borrowers who have not paid in many months, the servicer is going to come across a lot like a bank does.   In other words, the same type of thing the borrower has ignored for months.

For NPNs, we typically board them as "client managed" so that if the borrower calls the servicer, they are directed to contact us directly.  We kick things off by having our attorneys send a demand letter which starts the legal process and let's the borrower know that we are serious.  At the same time, we engage in borrower outreach with a soft and friendly tone.  We use a 3rd party who specializes in borrower outreach to do the skip tracing and make some phone calls.  We also send a letter which is informally worded and does NOT read like it comes from a bank.  If we get no results within a couple of weeks timeframe, we follow-up with a door knock.  In many cases, the demand letter alone will get the dialogue going, but sometimes it takes the full combination of carrot-and-stick approaches to get the conversation started.  While this approach works for us in the vast majority of cases, there are always those that simply refuse to talk, and we have the legal process to deal with that.  

Regarding staying out of trouble, my simple rule is to follow the rules/laws, be nice, be respectful, and never use threats or coercion of any kind.  The tone should be more along the lines of  "Hey, we have a problem here which is headed toward a legal solution.  Let's talk and see if we can find a better solution which works for everyone.  We have helped others and we want to help you too if we can."  This type of approach goes a long way toward building trust and mutual respect, and this can help keep things on track down the road after a successful workout is achieved or even in cases where a workout is not possible and the borrower has to surrender the property.

Hi Jonathan, we use FCI and they do perform a "collection call" function to reach out to the borrower, but we also call our non performing borrowers in parallel which provides a more intimate approach and most borrowers are receptive to our direct call. 

Fyi we have a distressed debt meetup group in Seattle and our next meeting is this weds. the 20th downtown. Just search meetup.com for us and you can chat with me and other note investors if you can attend. 

Bob

Hello Jonathan. I'm looking into investing in outside markets as well. Because you mention you invest in multiple markets, which market do you feel is among the top tier for appreciation?