Legalities of Originating a Note | Real Estate Notes Show

Episode: Attorney Jeff Watson - Legalities of Originating a Note Full ‪@watsoninvested9034‬ Dave's Goals and Plans: - Buying performing and non-performing notes on a regular basis nationwide since 2010 - Marrying note originators with note buyers to create business opportunities - Planning to attend DME Live conference in Nashville one week from the episode date - Meeting with seller finance people and note originators in person at the conference Nathan's Goals and Plans: - Managing multiple screens and social media comments during the live stream - Encouraging note originators and buyers to attend DME Live Nashville conference - Promoting ax throwing championship tournament at the conference Key Recommendations: - Notes must be written correctly to maximize buyer interest and payment amount - Originators must comply with Dodd-Frank regulations to avoid legal ramifications - Proper documentation prevents portfolio seizure by trial lawyers or enforcement agencies (CFPB, FTC, Morgan & Morgan) - In-person networking at conferences provides better relationship building than virtual meetings - Note originators should focus on quality to enable faster cash-out and repeat deal cycles Topics Discussed: - Legal ramifications of improperly originated notes - Dodd-Frank compliance requirements for note originators - Performing vs non-performing notes buying practices - DME Live Nashville conference details and speakers - Subject to notes, seller finance, and note origination strategies - Attorney Jeff Watson's background in short sales and note investing Guest Insights: - Started investing through influence of uncle who became successful in real estate despite limited formal education - Transitioned from short sales to note investing after realizing he could be the bank instead of middleman - Co-founded RealFlow with Greg Clement in 2006-2007 to revolutionize back-to-back closing processes - Recognized the profitability shift from being average attorney to expert in notes through education and experience is there a legal ramification or what could have happened to them if they don't do this right okay there are two ramifications number one they're leaving money on the table hopefully I got their attention with that okay because most of them are cheap and greedy okay and I don't mean to offend anybody that's how most people work you're cheap and greedy so folks are leaving money on the table yeah oh let me tell you the other thing you're preventing the whole portfolio from being ripped away from you by an angry aggressive trial lawyer at Morgan and Morgan or some over eager enforcement agency officer from cfpb or the Federal Trade Commission or somewhere else because you didn't comply with Dodd-Frank because we've not even talked about the most essential component to these deals [Music] [Applause] hey everyone good afternoon hope all is well I'm Dave footson jkp Holdings Long Siding it's Nathan Turner how are you man very good very good happy Friday happy Friday hopefully everyone saw a holiday weekend getting excitingly fun and hope you have some good plans and spend some time with family lots of good stuff happening this weekend before we get jumped into all the excitement that we got going on today which is a big big event for those who are jumping in uh we appreciate it this will be recorded we'll be on our podcast I'll be on YouTube via Facebook we're streaming live on LinkedIn as well as Facebook live how you been not at all busy not at all you know things going on nothing like that everything's been just like super cool boring yeah yeah we are aware and I will be seeing each other for a time in a while live and I encourage all those who are watching us and tuning in please join us in Nashville so tell us a little bit more about the conference we got coming up that we're being played for a few months about yeah this is I am so pumped about this whole conference thing uh so we are one week out today seven days from today we will be doing uh DME live in Nashville we will have already by this point next week we have already had our ax throwing championship tournament we'll see who is the champion ax thrower in the note world and you will hold on to that title for at least a year until next time that we do that again we've got so much good stuff so many good speakers and such great content I'm really excited for that um yeah just looking forward to hearing from everybody and seeing what they've got to say some people that I've never heard speak before uh and and new information for me and so I'm I'm really excited to get to be a part of that yeah it's been it's going to be so much fun uh on top of great learning we've been going to conferences for a long time and for a little bit it kind of gets stale because I just wanted that new information and hear some of this speaker and speak to our um and every time is great content this time is a lot different I feel because what we're finding out is that we have a lot of note buyers who want assets and we have a lot of note Originators who are probably tuning in today who are excited about hey wait I can cash out my deal and these note buyers are not buying it and we're what Nathan's doing is kind of marrying the two I'm sure a lot of people who watches regularly we do this every two weeks but hard to say but the marriage is awesome better we can do a ton of business together I'm really excited about meeting some of these seller finance people and just getting getting to know them because you can meet online you can do a zoom meeting you can do all that stuff that's all great but there's no substitute for in-person you know shaking hands looking in the eye dinner together whatever it is we encourage you guys out there if you are a new original or no buyer um I put in the Facebook chat I can put in LinkedIn if you guys need it too um I'm managing multiple screens so if I look distracted I apologize um we're just managing all the comments coming through um so what we've developed or talked about last four or five months now is we've been talking a lot of the big time Originators some of those people are probably uh tribe members of those people tuning in right now with us who are following the Knicks in the marks and the the Brian's and everything else and bands out there who are running very large Facebook and social media groups talk about subject to rap notes seller finance and learning that aspect what we're doing now is saying hey we'd like to buy your notes as soon as you create them or a few months after and we'll cash you out and you can redo that and do what you do well over and over again yeah and and the more correctly they're written the sooner we can buy them and the more money we can pay and what we're talking today is the fact that if they're not written correctly at all we're never going to buy the notes and we would hope that you would correct it because you can gain legal as well as morality as well as business issues you can lose all your assets if you don't do it right so we want to make sure that what we know is correct and what we're going to talk about the conference as well today is what does that look like right so if we talk about performing in some major comment about performing words on the Performing and not performing notes we'll buy so for those who are new to our Channel or our lives me Nathan to buying new since 2010 I think maybe before I was we've bought non-performing notes for 10 years so number for me this is what we knew we're kind of big on the Performing side because there wasn't many back then so yes we buy performing and non-performing nodes on a regular basis um Nationwide yeah but the conference is gonna have a bunch of us there so we encourage you guys if you can or a week away go online I put my link in there just so you can get some tickets for yourself yeah yeah and use Dave's link you get 100 bucks off come and join us ax throwing there's still room it's limited but there's still a little bit of room there so make sure you register for that space is limited in the venue so that's that's the uh limiting factor there it's just they don't have room for everybody everybody so make sure you register and get there and a lot of you guys will see if you're following all the tribe groups you're gonna see a lot of the people you follow and watch regularly on on the channels speaking on stage so you can be able to handshake a lot of people that you really enjoy being around yeah well today is a really big day for me I felt that and they've been to bring on someone that I respect tremendously who's been around this space longer than I think the two of us together combined and feeling the fact that I'm gonna uh hit a button here to start bringing them in here uh Mr Jeff Watson is someone we respect tremendously um he's someone that can speak the topic you can feel comfortable around them he's been doing for so long he's comfortable talking anyone about anything um it's awesome right so we are really excited Jeff Watson to join us Jeff welcome just a wealth of knowledge here he comes it is it is fun to be here with y'all it really is um I'm just looking to see how well the stain on my t-shirt shows up it's there hey folks if you're wondering I'm real I am I am not a stuffed shirt I am just a just an average ordinary guy okay so yeah so Jeff we usually ask people when they get on here how'd you begin how'd you get started with this thing it's a story how did I get started how did I get started as an investor how did I fall in love with notes yeah which one do you want were you a landlord before did you were you a plumber what were you okay so back in undergrad I was an undergrad working on a degree in biblical studies knowing I was going to go to law school and I was heavily influenced by my favorite uncle on my mom's side of the family he had never gotten past the eighth grade he had a little bit of a speech impairment um dyslexic today we would label them special needs and so on but brilliant man brilliant man alive and well to this day um he and his he and his wife my favorite aunt and uncle they had made their first couple million in residential real estate as landlords in Southern California and then they had moved to daharan Saudi Arabia because he was a brilliant air conditioning Refrigeration man and they he heavily recruited to go over there and run the huge chillers and freezers that they needed there in Saudi Arabia and he he just one day sat down and just shared what was going on and it was 1983 1984 and he had to write a check to the IRS for 37 000 and he was on a campaign to get his money back and I listened intently to what he had to say at the same time that he's talking about it my stepdad uh the man that my mom was married to most of my most of my all my all my formative life uh he made the comment he says 37 000 that's how much I made last year you know in this 1983.

so okay um so I had a quick you know moment of what which guy do I want to listen to the uncle that never got past the eighth grade that has a little bit of a stutter but has obviously pretty successful as an investor or do I want to listen to somebody else well I chose to listen to my uncle and it started with understanding how taxes impact investing that's where I got started and it just kind of sat there just quiet until I got out of law school had a decent job had some income and then we bought our first house and it was a it was an up and down duplex in Cleveland Ohio on the West Side still own that house to this day and um started adding other houses and portfolio realized that I needed to get some education I could not do this all by myself being a one-man band being a lawyer it was just a bad idea so I started getting some education and I sampled from lots of different troughs lots of different funnels and I found the ones that really work and the ones that really don't and you know so fast forward I'm doing this from I bought my first property in 94.

okay so 10 years later I'm sitting in an event in Nashville Tennessee and my then spouse elbows me in the ribs saying hey go buy this course on short sales that's something I think we can do together so on the third time the third time I took a shot in the ribs I finally got up and went and bought the course and we had some success doing short sets Okay but it brought me into a circle of influence with guys like Greg Clement who he and I co-founded realflow together in 2006 2007. and um I recognize that there had to be a completely different way of doing short sales for the back-to-back closings so I with the help of some really good people at a title company we brainstormed a way to do it I papered it all up and then the marketing engine that Greg Clement knows how to run just took it and it went viral and so I went from being just a just an average attorney in Northeast Ohio but a guy who knew short sales really well uh to now I'm an expert okay now I'm an expert all right so but I'm going to a point here um I got to the point where I couldn't stand short sales anymore particularly after I encountered this guy out of Mississippi who was then living in Dallas Texas who's got this funny accent but his razor sharp when it comes to notes and when I understood that I could be the bank instead of the boy standing there with the bull asking for more porridge from the bank I was like forget short sales I'm buying bad paper because I want to buy bad paper so so we start doing that a little bit and one of the first deals I did really of significance in the in that Arena was um my business partner who stole my business part of this day Greg Clement he and I co-founded realflow if I haven't mentioned that before I'll mention another nine times um he was chasing this one prized property in Brunswick Ohio and all of a sudden the bank which had had it in foreclosure decided they had to hit the gas because Bank Regulators were on them they needed to get this thing sold it's been with her uh been with a receiver for a year there wasn't enough time to do a short sale so I just approached the attorney representing the bank about buying the notes buy the notes by the default by the judgments buy everything we negotiated a price where we bought it at probably a number that would make everybody jealous today we bought about six and a half million for less than 1.7 okay we did this in 2011.

okay he has turned that property around because I orchestrated it and he you know I orchestrated the paperwork and the strategies and Greg executes and Greg is just a great Great Communicator with people uh today we we shortly backed our way into a favorable deed in lieu of foreclosure that I could get insured and then that led him six months later get an SBA loan in place the SBA attorneys were like how in the world do you do this we don't know how you did it but we're impressed we can fund this thing and Greg has now taken this thing that he put 1.7 into and it's probably worth about 15 million today and it is a cash cow and we've done it since then on other stuff so that's a little bit about how I got into notes and then it gets a little more complicated because short sales were getting harder and harder to do and I don't know if anybody on this call ever remembers Countrywide number 10.

in the short sale approval letters and that was the beginning of um me starting to have to work on policy at the at the national level and so number trips to Capitol Hill number of meetings with members of Congress finally we got fhfa which was then chaired by a republican member of Congress to uh put their put the weight on Freddie Mac Fannie man everybody else says Hey listen these 90 day these 180 Day short sale restrictions deed restrictions verbo no way we'll let you restrict it for 30 days then we can resell and after 90 days unlimited unlimited so we got that pushed through took a few years to get that done uh nothing happens fast in Washington DC except posturing in front of a camera man they're in a hurry to do that okay oh yeah and I mean I got a lot of guys that I think are friends good friends of mine on both sides of the aisle members of Congress but whatever so that got me involved in politics and the in the policy issues and then one day we're there for some meetings and um a friend of mine Chief Operating Officer National Ria says oh by the way I forgot to tell you we have a meeting at cfpb today they want to talk about land installment contracts you're coming because you're the expert looked at him when I spawned I said well thanks for the notice let's go so we show up at cfpb and it's a room of like 18 people there's myself my friend from National Ria and one other individual I can't remember and then there's 15 people from cfpb and they start hammering on all the things that they don't like about land contracts who don't know what is landstone contract and what is cfpb because some people have no clue we're talking about and what year was this that you sat down with those guys 15 2015 2014.

after Dodd-Frank has been brought in is as Dodd-Frank is showing up yes yeah yeah okay okay just for some contacts all right yeah land contracts land installment contract bond for D contract for deed all of these different terms where it's hey we have a written agreement that you make the payments and at the end I give you the deed to the property yeah okay and what is cfpb in Consumer Financial Protection Bureau created out of the housing meltdown yeah completely woke Progressive organization been operated pretty much by some very powerful liberals at the time I was there Richard cordray former Attorney General of the state of Ohio was running it you know and anyhow but at the end of the day at the end of the day with this day-long meeting at cfpb on land contracts I felt like we walked out of there having shown them that they did not have the regulatory Authority that they thought they would have okay because they ran into this thing that I had to remind him called the Tenth Amendment where every state has the right to regulate things within their own jurisdiction and every state has laws on their books regarding how real estate is bought and sold in their state and land installment contracts land contracts bond for deed whatever you call it is regulated in every state there's a statute in there well they still wanted to do some things and I and I I heard what they had to say and I agreed with some of their Concepts and I'll share some of those Concepts today because it applies whenever you're originating any kind of seller financing these are things that if you do these things you're going to have two results you're gonna have a better note you're gonna have a better deal and you're going to have less heartburn later on so you know we'll get into that uh but that's that's a long Meandering background on part of my life you know and just to just to bring everybody up to speed I still am involved in Washington DC I'll be there in a couple of weeks earlier this week I was in Columbus Ohio at the State House some meetings there once again on housing policy some stuff going on in Ohio that we've managed to Throttle Down I mean National Rio does more people does more for people than they realize um on this kind of stuff but uh last week my good friend Congressman Andy Barr out of Kentucky released a bill um it's another version of the bill we've been working on for years Vicente Gonzalez Henry Cuellar also friends of mine Democrats out of Texas and William Posey Republican out of Florida immediately jumped on as co-sponsors it's H.R 3464.

H.R 3464 it will go into Dodd-Frank and truth and lending and the safe act all three of those obnoxious bills and find that ridiculously low number of three in a 12-month period of time and turn the knob from three to twenty four yes so now when is that happening so those are listening right now and I I hate the interrupt most of you guys don't know anything about the story you guys are probably originating 15 loans without using any kind of Licensing in rmlo and going what do you mean I can't do that and Jesse to get into why we can't do that but what Jeff's saying now is the rule has been three in 12 months he's now turn up that volume to be able to do 24.

so but however if you are creating those more than three a year you're violating federal law so the volume is being turned up yeah so we're going to get that now this we this is a bill that we have been pushing since 2015. in various forms Congressman Roger Williams Republican out of Texas was the first one to get on board so we've seen it um when the Obama Administration was in controls when we started on this throughout the entire Trump Administration we were so close at one point in time during the Trump Administration and getting this bill to move out of the house out of committee through the house off the floor and get it over to the Senate and we had a very obstinate abstinent obstinate and absent Republican member of Congress from New Mexico thwart us and it really frustrating but the good news now is the lead sponsor on this bill co-chairs a subcommittee on the financial services side and Republicans control that committee now since it's in the house and we're going to make this bill move and I believe we're going to get a senate companion bill because now previous members of Congress that you sponsor it in the house are now members in the Senate so we're going to get them to come on board so we're going to make this thing move um get it further than ever before I feel like instead of being on the 10-yard line with 90 yards to go I feel like we're probably just outside the red zone now wow that's fantastic so yeah and it's been guys this has been eight years of work congratulations eight years of work to do this I mean so yeah anyhow let's back into this well you know this is a huge number this isn't 12 which we thought we may get into we've doubled the expectations that I thought you had you get the 24 I'm I'm almost speechless because it just changes the gain flow of people um in regulations and whatnot for those people who are creating rap notes creating order Finance nodes what did they have to be for and what do they have to do after this bill hopefully passing goes through what does the change for those investors okay great question so let me give you some history before the housing meltdown and before the Bush Administration signed the Safe Act into law there was no limitation there was no federal or state regulation on seller finance transactions on the number okay SAFE Act took it from unlimited down to five but that wasn't good enough the progressives wanted to take that five and turn it to a misshapen three would say oh well you can only do three in 12 months but the first one you can do this way and the other two you got to do that way and blah blah blah blah blah so anyhow kind of it was kind of an eerie moment I was having a meeting with um congresswoman Gwen Moore out of Milwaukee Wisconsin in Barney Frank's Old office talking about this bill and why it was written the way it was it was kind of a kind of a weird moment but anyhow and she reminded me she says you know this used to be Congressman Frank's office and I'm like okay appreciate that but still let's talk about you supporting this bill because this really matters to Inner City buyers this really matters to Urban buyers that the banks I mean let's face it Dodd-Frank has been the greatest discriminatory redlining tool that we have ever seen since the Emancipation Proclamation was enacted what was job Frank for those people who we run into a lot of people me Nathan in the last six seven months who are creating 80 loans with a checkbook at a local Diner signing it off and going here we're going to make a deal with you they have a mortgage window and they have an owner financing I know they have an owner occupied member going in and they've created tens and hundreds and loans and people watch this feed right now who will have are trying to get it through this is what people were doing an owner occupied properties and either they never heard of Dodd-Frank or they heard about it and didn't care okay well okay so I can't we can't turn back time they've already done it so okay so let's let's talk about where we are and what to do dd-frank is part of the massive Financial regulatory stuff shoved down the throats of regional Banks small Banks private Capital holders all for the benefit of the large too big to fill Banks it was shoved down our throats as a result of the housing meltdown and financial crisis of 7 through 12.

um it was a sack it's a sacrosanct piece of piece of legislation in the eyes of the Democrats um because it was enacted during the Obama Administration and it is it has been a terrible destroyer of private capital now what we want to do is we want to take the restrictions in Dodd-Frank and we want to lift the volume restriction without changing any of the consumer protections and I want to be very clear about this if you are a predator a financial predator where you do what I call yo-yo loans on yo-yo houses put it out there knowing you're going to get it back put it out there knowing you're going to get it back and in the meantime you're just grabbing people's down payments and deposits and so on and you're just basically stealing from them I have a I have a simple request of you get out quit Beat It okay I just they that is what gives our industry such a bad name yeah instead I want you to focus on doing quality deals and let me out let me let's just get into some of the elements of a quality deal and you guys direct me where we need to go yeah okay um you need to and this is some of the bantering and feedback I took back from cfpb where they were pushing hard and I pushed back hard and so on when you're doing a seller finance deal if you want to really do this thing right where I feel like you've got a note that has got much about that's got more value on the secondary Market than otherwise here's some of the stuff I want you to do I want you to have an independent opinion of value of the collateral a BPR or an appraisal I want you to have an independent property inspection report what's the condition of the property at the time of the closing let's make sure we're selling good stuff and not a bunch of crap okay those are things that are important um let's use a standardized format for our notes and mortgages something standardized where we can look at it quickly and we can see who's the maker who's making the payment when's the payment due how much is the payment what's the interest rate what's going on with this let's do something standardized and simplify okay let's make sure in addition to that that we do not self-service these things let's board these things with a licensed servicer when I say license I mean license in the state we're in the property is located where the payor is residing okay so that they can collect the payments so that they can send out the appropriate notices so that they can do the correct Communications under the fair debt collection practices act and under resp and under Tilla and so on and so that most importantly they can accurately account for the money because they've got a great software program that based on the day they get the money they know how to put it into the amortization calculation they know how much is going to then principal how much goes to interest how much you use that escort for taxes and insurance so most Mom and Pops that create them at the diner with their own handwritten stuff Dave you know this Nathan you know this they can't do that no and then they can report it to the credit bureau reporting agencies okay so so for those people who we want to make sure that they're folks and those people who are doing this incorrectly and for no buyers to understand what they should be doing when they are creating these notes that's what a checkbook and saying Hey listen if you're going to find the bank to put down payment on there and I'm gonna collect it and I'm going to load it which we've seen with apartment.com which is the rental site the track is payments and it's free and easy and clear we all would want them to do it correctly but why is there a legal ramification or what could happen to them if they don't do this right okay there are two ramifications number one they're leaving money on the table hopefully I got their attention with that okay because most of them are cheap and greedy okay and I don't mean to offend anybody but that's how most people are you're cheap and greedy so folks you're leaving money on the table yeah oh let me tell you the other thing you're preventing the whole portfolio from being ripped away from you by an angry aggressive trial lawyer at Morgan and Morgan or some over eager enforcement agency officer from cfpb or the Federal Trade Commission or somewhere else because you didn't comply with Dodd-Frank because we've not even talked about the most essential component to these deals and here it comes folks if you're going to originate any sort of seller financing I don't care if you only do one deal a year most seller financers do two deals or less a year okay I've pulled the data it's it's uh it's amazing what's out there um you must document hear that Word document which means you've got to collect some written hard copy information and keep it regarding the maker borrower buyers ability to pay which means you have to underwrite what their financial situation is what do they make what's it going to cost them what's this mortgage payment a percentage of their income if you don't have that information you haven't documented their ability to pay you have broken the law and I got news for you I got news for you that you've created a note that I don't want to touch it's toxic yeah go put it in a nuclear waste landfill because I ain't touching it so if they go to court with this kind of paperwork and they're trying to foreclose because mostly people don't think they'll ever have to foreclosed because in the last three four years things are performing right yes thank you sorry that incoming GTI what could happen if they go in front of a judge with this paperwork that says the mortgage and Note and their down payment and they're tracking it internally and not seeing on monthly payments not saying a yearly statements and they go in front of a judge when they sing defaults because Hey listen the best borrowers in the world can die they can get sick Anything Can Happen what would a judge do with that asset well there's a couple of things that could happen and none of them are pretty none of them were pretty the best case scenario is that they're going to have to go back and actually do a real legitimate loan amortization calculation and really know what's owed because they probably don't have that accurate number so if you don't have an accurate number then you don't have really good legal standing you begin to foreclose the worst case scenario is that you're going to run into a borrower who contacts legal aid and then either the legal aid attorney or somebody else turns them over to some sort of consumer defense attorney and boy if you run into this in the state of Ohio you're going to go meet a friend of mine and he is and he's a friend of mine he is vicious on lenders that don't do it right okay former Attorney General Mark Dan that man has a passion we're going after unscrupulous lenders and he's dang good at it okay he is good at it um he's collected some large class actions in large multi-million dollar settlements from some of these lenders he's he's good at what he does okay fortunately he's a friend of mine so yeah um but that's what you're going to run into and then they're going to basically show how you violated the law and your Note is unenforceable and you've got to give back all of the interest that you may have collected and earned and you might be lucky just to keep the principal and oh by the way you better do a loan modification because don't you dare try and think you're going to foreclose on an illegal income non-compliant note yeah and so now what you've got is you've got a hostile borrower who knows they've got legal leverage over you for the rest of the term of that note and you be screwed and I don't think it's limited to that one borrower that attorney now sees the fact you have 8 10 12 other properties that you did the same thing and those borrowers who are performing many a little more information they might get phone calls they might get letters they might get personal visits just to make sure that their legal rights are protected by that same lawyer that's already taken into the woodshed once yeah so and then for the little guys that are doing two a year are they Untouchable because I'm too small no they're not Untouchable but they're a lot they're a lot safer okay if you're doing three or less you don't have to worry about a lot of stuff right except being able to prove that you've documented the ability to pay and that's a mathematical I talk a lot of people well again I saw that money in the bank I saw the bank statements it's good right there's the actual formula that's done to prove that Billy repay you can look it up there's a formula please if you're watching Youtube LinkedIn whatever you're watching it and this is why we brought Jeff on if you don't do this it can kill your business so not only do you need to do the formula but you need to keep the information that you use to calculate on the formula you need it so flat out I'm going to tell you what you've described is the guy that does these deals at the diner table they probably never collected a loan application right they probably never verified employment they probably never verified credit they probably never verified anything they have no idea how many other payments they've got they have no idea what their debt to income ratio is they have no idea what their overall Debt Service looks like they've got no clue and I'm going to put it like this I'm going to be very straight you are doing yourself the borrower and our industry a huge disservice when you do one of these deals with somebody who really can't afford to pay [Music] I consider you to be a form of a thief a white collar Criminal that's that you know and hey I'm I'm probably being a little harsh and I don't care it's my opinion sue me I don't care I wouldn't still be out of here right and and I I'm not looking for you today I'm actually Googling myself do you know the actual number of DTI Billy repay number I thought it was on 47 or 43 was do you remember what that number is off the top of my head no but I know I'm sure they are feeble I see three I see you know so I'm sure someone figured it out for me appreciate it you guys there you guys have collected some brilliant nerds they probably have that number right on their fingertips and they can send you links to all that stuff and I got it great you know that's not my job suggested we had a live call we have a for those who don't know we have a private Mastermind group where we talk I'm with it and Jeff was on kalisco thank you as well 38 to 43.

you suggested not to go to the top right don't yes the numbers 43 don't go to that 43 number go below it to make it appear that something goes bad Hey listen I didn't hold me to the highest level I gave them margin I gave them room to breathe how many of you are guys and you've had to wear a collared shirt button so tightly to wear a necktie that it's hard to swallow or breathe and you feel like you're choking that's what you're doing to a buyer homeowner when you max out their L when you max out their DTI right okay and here's the thing this is this is one of these things that gets me a little fired up because there's a little bit of truth to it but then it gets contorted and let me explain when you offer seller financing on a Quality Property did I say Quality Property yes I did and I meant it not some piece of junk that you wouldn't live in okay but when you offer seller financing on a Quality Property yes it has a greater value to some extent but don't get greedy and stretch it all the way out because it doesn't have that okay we're selling the market value pardon me or sell it above market value just because you're offering terms yeah that's wrong I've seen it to me that's wrong I agree could you if someone sold it say it probably worth 200 000 they sold for 205 or 210.

where is that line are you saying flat 200 no I'm saying if the if the marketplace says that it's worth 200 if I go get a traditional bank loan and all that other stuff fine I'd push it to maybe 205.27 leave it at that okay yeah I think it's worth I think it's worth a you know a three to five percent bump and that's about it sure but it's only worth more than that so we have a lot of people doing this the incorrect way and a lot of them don't know right because they're being taught by people that we won't make comments about right now doing right teaching about just doing it and just getting involved we hope that those people can collectually get together but yeah you know these people who have been creating land contracts meaning that's all they can actually have to get underwritten which they get right or creating notes a mortgages right so when they're creating these things and they've done it incorrectly for those who are watching and listening what should they do right now with the old notes because they may be getting scared right now so if they've done something that was sloppy or incorrect there's the first thing you have to decide the first thing you have to know is did you do it because you did too many without using an rmlo or did you do it because you just use bad paperwork and you're only doing two a year because if you only did two a year or three a year or less then okay that's a different easier fix okay go back and modify the deal collect a new loan application get and document their ability to pay and modify the deal and do a modification and restart the clock so to speak okay that's the way to clean that up if you did more than three a year then you're going to have to go back and do that modification but you're gonna have to run every one of those borrowers through an rmlo to make sure that they have verified their ability to pay and then go back and modify the paperwork modify the terms and restart it with standardized documentation and I would tell you if it was me and I was representing you I would say give them a couple thousand dollars off principle in exchange for them signing a release and waiver for any previous discrepancies or errors in the earlier version of the deal you did with them or half percent off I give them something something that's a material consideration right okay something not not 20 bucks right not 20 000.

yeah okay somewhere it's a couple thousand dollars that's like hey you weren't harmed you didn't miss a payment I've not cheated you but yeah thank you for your cooperation this is one of the other documents we need to sign is a release and release and hold harmless for anything in the past you know I'm gonna not chase you for anything you're not gonna chase me for anything we're going to start with the fresh slate because I'm aware that now I've got to do this a little bit better and I've got to prove that you're making the payments and oh by the way now I've got to ship this note over to a Servicing Company and they're going to be the ones now collecting your payments because now they're going to be timely correctly calculating the payment and the amortization and they're going to be the one reporting your timely payments to the credit bureau yeah yeah so it's fixable all those things well for the most part it's fixable um but it's going to take as long as everyone is still friendly right if they're friendly it's fixable right now if it's not friendly it's still fixable but it's going to cost you had a client that bought a paper bought paper in Pennsylvania that wasn't originated correctly the Attorney General's office got involved the Attorney General's office cut him a little bit of a slack because they realized he wasn't the guy that was the bad actor it was the person before him yeah it still cost him he had to give up like 10 15 000 in equity you know reduce principal by 10 or 15 grand yeah so Jeff how many people listening to are are buying subject twos right and then wrapping the note it's a little bit different conversation than the owner finance what is your thought on that process which I for my understanding you're fine with somebody twos but then talk about that part and then the part B is I want to buy that wrap note can I do it and what would you suggest me buying it at a legal point of view what I should or should not be doing wow we have 15 minutes we have how much time 15 minutes right okay yeah because yeah I've got a launch date with my daughter in like 18 minutes so I guess okay okay so first of all I'm a fan of subject two done correctly okay I'm a big fan of it done correctly I'm not a fan of the way it's being taught by other people out there and there's some people that are I'm just going to say this there's one guy running around that did it in the past and let a hundred and eight of them go to foreclosure and screwed up 108 different families lives because he wasn't a person of his work okay that person should not be teaching subject to ever again in my opinion Billy makes all 108 people correct makes them whole uh there's other people who are brilliant marketers that have not got the experience in the industry to really understand what they're doing and I watch them they pair it with some of the experts who are clients of mine say my client says that on Monday they're parenting they're parroting it you know repeating it on Thursday so let's get into this um there's something I like being done in the subject to space and there's something I really despise in the substitute space I'm going to talk about what I despise first when you get a property under contract and then you sell it or assign it to somebody else for them to step in your shoes as the sub 2 buyer and they pay you some money and then walk away and you walk away okay XNA I don't like it you have taken a struggling homeowner put them in contact with somebody else that doesn't have the same depth experience and knowledge that you should have should have and now you're the only one that's profited out of the deal and you're out bad I've decried this in the past there's a guru out of Texas that has sued me over it didn't have the guts to get me served but he just filed the lawsuits you know impugning my name but whatever that didn't matter you know so I've been on I've been against that method for a long time what I do like is if you're in this business and you're acquiring subject two and you want to resell I want you to resell on a rap all-inclusive basis because you're fully disclosing what is the underlying debts that you're selling it subject to you're fully disclosing the difference between the two okay so yes part of the financing on this is that we Bank of America is still owed 489 000 on this 700 000 house and I'm getting paid the difference but when we sell it on a wrap we're doing it in a way that legally and from a tax standpoint is the most compliant because we stay in the middle of the deal we stay in the middle of the deal now these are things that you set them up right these are like crock pots you can just set them and forget them and the money shows up every month if you do it right I'm I'm a big fan of that okay I'm a big fan of money showing up every month whether I got out of bed or was in the states or not okay I'm a big fan of that um so that's what I like now later on down the road can you resell that can you resell that position yes you can but whoever's buying it it better understand and better be smart enough to understand well how did you underwrite the deal what's been the payment history and oh by the way the underlying debt yeah that means I'm still going to be I'm going to be stepping into this thing where I now have a moral responsibility to make sure that underlying debt is paid that gives you some pause and makes you want to think about when you want to step in and buy these things I wouldn't even think about it until I've seen a couple years really good pay history on it then I'd be like okay so we got the bank loan that we bought subject to is just purring along everybody's happy they're taking their payments Auto rip great love it and my end buyer who's occupying the property who I underwrote who qualified clearly can make the payments we're good there they've got a pay history of 24 months okay great now let's talk about maybe I'm going to sell a partial off of it maybe I'm going to sell the whole thing but boy I better be prepared to fully disclose everything in the deal all of the disclosures that I made between the seller and I all of the disclosures and Arrangements between the buyer and I the whole bit you better be able to lay it all out because if you can't ixnay it's it's a it's a bad deal you better you better Shepherd it across the rest of the Line open this all trust when you do a subject too how would you regulate that put that sub-existration that it's okay yeah I love using trust and subject to in fact I taught a class on that last night um and you know so anyhow I will always set it up where I form a trust I is the investor buyer will form a trust I will be the trustee I'm going to then buy the property subject to as the trustee of that trust that trust is owned by my buy and hold multiple member LLC that then means that the LLC gives me the asset protection and gives me the financial backing for that trust I'm not personally obligated now but I'm staying in the deal I have a real problem with doing deals and then stepping out of them and not being involved anymore where there's somebody you know where the sellers who sold the property Fred and Wilma sold me the property subject to I want to stay in that deal for as long as I'm paying First National Bank of bedrock once First National Bank of Bedrock is gone oh well then that's a lot easier deal for me to feel comfortable about reselling somewhere else yeah I want to I want to buy a wrap loan but I don't first of all I I'm a first guy so I want to be in first position just out of principle and nothing else you've got to get rid of First National Bank of Bedrock right so in I mean I could just do that right like I could just buy the wrap loan included in my price is paying off the underlying first yep and then that puts me the first position everybody's you know it's just a far simpler structure and I know a lot of people we talk to are all Wednesday was why you give up a great situation where the First National Bank is at three two four percent and you want to pay it off can you talk about the legal side I don't know if it's legal more morality but I'm with Nathan like me and they may not make Financial sense to give up three percent cash right however we didn't make that agreement with the subject to borrower at that time can you speak a little bit about that so besides it's three percent plus I'm paying my investors so it really doesn't make sense if it's my own money maybe but if I'm borrowing money to go and buy the notes in the first place then the borrowed money plus what I'm paying to the underlying Bank of Bedrock then it doesn't make sense maybe math-wise it doesn't make a lot of sense but otherwise it does okay so I took down some subject to stuff about a year and a half ago and one of the underlying deaths was a loan being serviced by Wells Fargo now I'm doing well right now to say the name and not have a nervous tick because I just despised that institution one of the first things I did is I just found the extra cash and I got rid of them yeah because I just don't like them I don't trust them I believe that Wells Fargo lies every time they move their mouth okay I just want nothing to do with them yeah so was it from a from an Arbitrage math sense did it make sense no from avoiding a hassle and headache sense from RE from limiting people that can Yap at me and dogs that can bite me it made a lot of sense okay and so this is one of the things that I some of you some of you loving I love some of you note nerds but you only look at the math and you only look at your calculator and you don't look at the human dynamics and you've got to look at both you gotta look at both and getting rid of a pain in the neck Bank lender is worth it I mean I will readily pay eight and nine percent to a private lender instead of six or seven percent to an institution how about the fact that absolutely you've made a promise to as the original subject you buyer now I'm gonna buy the note they didn't make a guarantee that I make the payments right right is there a legal thing or is that more of a morality thing you would say that is a moral thing because there is because when I buy stuff too I make it very clear I'm not promising I'm gonna make your payments but at the same time I'm proving to you hey based on the amount of money I gave you for your Equity both down and in payments and based on the amount of money I've put in to continue to maintain and run these properties as rentals it would be financially irresponsible of me to not make the payment right it would be just why aren't I why didn't I just compile the money up in the bank hit in the driveway hit it with the lighter fluid flick a match on it and go can you legally transfer a power of attorney that you did in the first situation to the new loan buyer yeah no a power of attorney cannot be transferred or assigned so but go back to what Nathan talked about you want to buy that deal in the secondary Market go ahead and fund it with enough money when you buy it to get rid of the institutional debt then the seller's gone their debt's gone the deed's been out of their name they're gone you don't need a power of attorney anymore for them you don't need anything out of them anymore they're gone they're out yeah that's that's the only way that I would want to do that I I don't want a Smart Way Nathan it really is yeah yeah I don't want to be attached and it's too messy people yeah we got a lot of feed uh back uh some questions all the stuff um I put in the chat too you can uh we have a little form you can fill out and if you're looking to get a hold of Jeff and learn more about the stuff he does have classes um he's not bringing up nothing we asked me to but he wants to focus on giving content today uh which Jeff has always done I've run situations that Jeff bailed me out of because I didn't know and that happens to everybody out there and that's why it jumps around yeah and Dave I don't even remember what it was I mean whatever it was and it was 15 or 16.

and it was literally sitting sitting on node Expo I think it was and I came just for that fact I want to learn about us it was self-directed I erased up and didn't know a partner could be disqualified participant and he fixed it for me so guys we all walk around thinking we know everything and we believe we've learned everything but sometimes you haven't and we realize that as an investors that we always there's always something we learn and we grow so we encourage you guys not only do this for a legal sense which we've talked about today but morality sense of listen can you sleep tonight knowing what you're doing right and if you can't sleep or if you're a person who just does this normally it's gonna come back to haunt you it happens I promise you so um I appreciate the people in the feed or answering questions while I'm we're just no negotiating that uh I appreciate that and always learning is a key thing um and you don't want to value your time or we're just taking three minutes so I'm gonna ask you one question and Nathan always gonna ask the last question um so are you be speaking where soon or I know we have the uh link inside the once you fill up a form you're going to get all your information or you can speak anywhere soon that people could be coming to or see you we finally hit the summertime I'm my brain is a little numb because I just got done with a 40-day stretch of pretty constant pretty much constant travel where I couldn't even remember some days what day of the week it was or what city I was in or what I was supposed to talk about that day um so I've wrapped that up um I don't have anything on the horizon right now um I know where I'm going to be next I know the next events I'm going to be at as an attendee learning is going to be an Acquisitions class in Tampa Florida being taught by Pete Fortunato cool yeah please look them up pardon me no one knows who Pete is or don't hire is please look them both up you better look them up I mean both those guys are good friends of mine I they're they're brilliant men brilliant men um I've if you're if you're curious about what I'm teaching I'm doing a lot more stuff virtually and online so go ahead and register for my email newsletter and I will be emailing you and sending you hey when I'm going to do a free to attend zoom on whatever like I did one last night on using trusts a primer on using trusts in subject to and creative Finance deals I walk through what does a trust look like how does it operate how do you set it up what do you do with it and so on I walked through all that last night for about an hour and just you know go for that and I do that I do that maybe once a month a minute left before you have one for your daughter my man so I'm gonna let us need to ask last question and we'll wrap up with live and we'll just cover a few minutes with you go ahead Nathan what's your so well first I'll suggest that one a little bit further out in the Horizon we've missed out on have any idea me this year but love to have you next year and buyers um happening next week it's in the comment thread I'll put it back up there and into Nashville next week maybe next week we're in Nashville where in Nashville it's the Hilton uh by the airport okay yeah okay yeah Nashville Nashville is a great place I I really like the city of Nashville I really do yeah yeah we're very much looking forward to it all right Nathan you got a question yeah so where do you see with everything that you're seeing and included in that with your visit to DC and everything what do you see coming up on the horizon where's where's the economy going where's the housing market going what's your crystal ball I'm gonna give you some stuff that probably no one else will say Okay um we have a war being waged against private capital and it's very hard for small mom-and-pop institutions to compete in this market it's making hard on Community Banks and Regional Banks that's one of the things going on um the FED is still fixated on unemployment and doesn't feel like they've got unemployment high enough yet to where they can back off on raising rates so I expect to see rates go up I expect to see more and more consumers get literally tapped out before they can't handle it so keep an eye on uh credit card delinquencies keep an eye on auto repossessions when those start to move up higher then we know we're really going to go into a bad problem um I would tell people keep some powder dry because there's going to be some great deals in fact I'm working on a great deal right now because the Market's freezing we've got a bunch of investors standing around like deer in the headlights and now is one of those times this is one of those key times to buy is when no one else knows what to do act decisively if it's a great deal if it underwrites well grab it okay um I think we're gonna see I think we're going to see a very interesting situation we're going to see we're still dealing with what happened three years ago when the federal government began jamming trillions of dollars out of thin air into the economy we're still dealing with the ramifications of that when it relates to the labor force Supply chains inflation housing costs stock market a little bit I mean everything got distorted by the trillions of dollars that got shoved in there yeah um we're still we're trying to figure out how that's going to sort itself out the FED has no clue what it's doing in my humble opinion um but that's just my humble opinion because they're using a bad system based upon faulty demographics um I would tell you that we're going into a very interesting period of time where we're now going to find out who really is an investor and who was just a tag along enjoying the falling interest rate rising market were you a buy-in breather or were you an investor and the area that's going to get hammered the hardest the fastest is going to be the wholesaling industry is just it's com it's going to its knees right now um residential Apartments they're freezing up there's some great deals out there I'm going after one right now but there's a lot of people who are scared to death and don't know what they're doing and that Wall Street Journal article earlier this week was not a kind article okay um just perpetuating fear yeah the next thing out there is if you've got good deals with good people on your seller finance stuff be prepared to work with them on modifications if they get in trouble stay in touch with them make sure that they know that they can reach out to you because it's going to be relationships that are going to get us through this bumpy spot um houses too because it's gonna trickle down eventually oh this is great underwriting we've been doing for 10 12 years now it's still people are in the Falls yeah and people are not going to default because we made bad loans people are going to default because the economy pulled the rug out from underneath their feet because Congress spent way too much money in the last three years and that includes book two that includes not one but two different presidents in that time frame by the way folks so don't think I'm being I'm being a bat on one guy okay um this debt ceiling issue is going to be an interesting thing to watch I think that's going to give us a big clue as to who really who really is going to control things going forward I pray that speaker McCarthy stands firm he's got a house he's got the House Majority behind him that's going to not back down um he's got some moderate moderate Democrats are going to come with him on this stuff the question is will reality sink in in the administration into people like Pelosi and Schumer that's where we've got to see reality sink into their heads that we cannot continue to spend like drunken sailors yeah wow well Jeff we're gonna let go of live feed right now we'll wrap up with you for 30 seconds and uh let you go to your lunch we appreciate you have it on having on a live feed yard it's my pleasure I've enjoyed this conversation and time flew man time flew thank you so much thank you [Music] is there a legal ramification or what could have happened to them if they don't do this right okay there are two ramifications number one they're leaving money on the table hopefully I got their attention with that okay because most of them are cheap and greedy okay and I don't mean to offend anybody that's how most people work you're cheap and greedy so folks are leaving money on the table yeah oh let me tell you the other thing you're preventing the whole portfolio from being ripped away from you by an angry aggressive trial lawyer at Morgan and Morgan or some over eager enforcement agency officer from cfpb or the Federal Trade Commission or somewhere else because you didn't comply with Dodd-Frank because we've not even talked about the most essential component to these deals [Music] [Applause] hey everyone good afternoon hope all is well I'm Dave footson jkp Holdings Long Siding it's Nathan Turner how are you man very good very good happy Friday happy Friday hopefully everyone saw a holiday weekend getting excitingly fun and hope you have some good plans and spend some time with family lots of good stuff happening this weekend before we get jumped into all the excitement that we got going on today which is a big big event for those who are jumping in uh we appreciate it this will be recorded we'll be on our podcast I'll be on YouTube via Facebook we're streaming live on LinkedIn as well as Facebook live how you been not at all busy not at all you know things going on nothing like that everything's been just like super cool boring yeah yeah we are aware and I will be seeing each other for a time in a while live and I encourage all those who are watching us and tuning in please join us in Nashville so tell us a little bit more about the conference we got coming up that we're being played for a few months about yeah this is I am so pumped about this whole conference thing uh so we are one week out today seven days from today we will be doing uh DME live in Nashville we will have already by this point next week we have already had our ax throwing championship tournament we'll see who is the champion ax thrower in the note world and you will hold on to that title for at least a year until next time that we do that again we've got so much good stuff so many good speakers and such great content I'm really excited for that um yeah just looking forward to hearing from everybody and seeing what they've got to say some people that I've never heard speak before uh and and new information for me and so I'm I'm really excited to get to be a part of that yeah it's been it's going to be so much fun uh on top of great learning we've been going to conferences for a long time and for a little bit it kind of gets stale because I just wanted that new information and hear some of this speaker and speak to our um and every time is great content this time is a lot different I feel because what we're finding out is that we have a lot of note buyers who want assets and we have a lot of note Originators who are probably tuning in today who are excited about hey wait I can cash out my deal and these note buyers are not buying it and we're what Nathan's doing is kind of marrying the two I'm sure a lot of people who watches regularly we do this every two weeks but hard to say but the marriage is awesome better we can do a ton of business together I'm really excited about meeting some of these seller finance people and just getting getting to know them because you can meet online you can do a zoom meeting you can do all that stuff that's all great but there's no substitute for in-person you know shaking hands looking in the eye dinner together whatever it is we encourage you guys out there if you are a new original or no buyer um I put in the Facebook chat I can put in LinkedIn if you guys need it too um I'm managing multiple screens so if I look distracted I apologize um we're just managing all the comments coming through um so what we've developed or talked about last four or five months now is we've been talking a lot of the big time Originators some of those people are probably uh tribe members of those people tuning in right now with us who are following the Knicks in the marks and the the Brian's and everything else and bands out there who are running very large Facebook and social media groups talk about subject to rap notes seller finance and learning that aspect what we're doing now is saying hey we'd like to buy your notes as soon as you create them or a few months after and we'll cash you out and you can redo that and do what you do well over and over again yeah and and the more correctly they're written the sooner we can buy them and the more money we can pay and what we're talking today is the fact that if they're not written correctly at all we're never going to buy the notes and we would hope that you would correct it because you can gain legal as well as morality as well as business issues you can lose all your assets if you don't do it right so we want to make sure that what we know is correct and what we're going to talk about the conference as well today is what does that look like right so if we talk about performing in some major comment about performing words on the Performing and not performing notes we'll buy so for those who are new to our Channel or our lives me Nathan to buying new since 2010 I think maybe before I was we've bought non-performing notes for 10 years so number for me this is what we knew we're kind of big on the Performing side because there wasn't many back then so yes we buy performing and non-performing nodes on a regular basis um Nationwide yeah but the conference is gonna have a bunch of us there so we encourage you guys if you can or a week away go online I put my link in there just so you can get some tickets for yourself yeah yeah and use Dave's link you get 100 bucks off come and join us ax throwing there's still room it's limited but there's still a little bit of room there so make sure you register for that space is limited in the venue so that's that's the uh limiting factor there it's just they don't have room for everybody everybody so make sure you register and get there and a lot of you guys will see if you're following all the tribe groups you're gonna see a lot of the people you follow and watch regularly on on the channels speaking on stage so you can be able to handshake a lot of people that you really enjoy being around yeah well today is a really big day for me I felt that and they've been to bring on someone that I respect tremendously who's been around this space longer than I think the two of us together combined and feeling the fact that I'm gonna uh hit a button here to start bringing them in here uh Mr Jeff Watson is someone we respect tremendously um he's someone that can speak the topic you can feel comfortable around them he's been doing for so long he's comfortable talking anyone about anything um it's awesome right so we are really excited Jeff Watson to join us Jeff welcome just a wealth of knowledge here he comes it is it is fun to be here with y'all it really is um I'm just looking to see how well the stain on my t-shirt shows up it's there hey folks if you're wondering I'm real I am I am not a stuffed shirt I am just a just an average ordinary guy okay so yeah so Jeff we usually ask people when they get on here how'd you begin how'd you get started with this thing it's a story how did I get started how did I get started as an investor how did I fall in love with notes yeah which one do you want were you a landlord before did you were you a plumber what were you okay so back in undergrad I was an undergrad working on a degree in biblical studies knowing I was going to go to law school and I was heavily influenced by my favorite uncle on my mom's side of the family he had never gotten past the eighth grade he had a little bit of a speech impairment um dyslexic today we would label them special needs and so on but brilliant man brilliant man alive and well to this day um he and his he and his wife my favorite aunt and uncle they had made their first couple million in residential real estate as landlords in Southern California and then they had moved to daharan Saudi Arabia because he was a brilliant air conditioning Refrigeration man and they he heavily recruited to go over there and run the huge chillers and freezers that they needed there in Saudi Arabia and he he just one day sat down and just shared what was going on and it was 1983 1984 and he had to write a check to the IRS for 37 000 and he was on a campaign to get his money back and I listened intently to what he had to say at the same time that he's talking about it my stepdad uh the man that my mom was married to most of my most of my all my all my formative life uh he made the comment he says 37 000 that's how much I made last year you know in this 1983.

so okay um so I had a quick you know moment of what which guy do I want to listen to the uncle that never got past the eighth grade that has a little bit of a stutter but has obviously pretty successful as an investor or do I want to listen to somebody else well I chose to listen to my uncle and it started with understanding how taxes impact investing that's where I got started and it just kind of sat there just quiet until I got out of law school had a decent job had some income and then we bought our first house and it was a it was an up and down duplex in Cleveland Ohio on the West Side still own that house to this day and um started adding other houses and portfolio realized that I needed to get some education I could not do this all by myself being a one-man band being a lawyer it was just a bad idea so I started getting some education and I sampled from lots of different troughs lots of different funnels and I found the ones that really work and the ones that really don't and you know so fast forward I'm doing this from I bought my first property in 94.

okay so 10 years later I'm sitting in an event in Nashville Tennessee and my then spouse elbows me in the ribs saying hey go buy this course on short sales that's something I think we can do together so on the third time the third time I took a shot in the ribs I finally got up and went and bought the course and we had some success doing short sets Okay but it brought me into a circle of influence with guys like Greg Clement who he and I co-founded realflow together in 2006 2007. and um I recognize that there had to be a completely different way of doing short sales for the back-to-back closings so I with the help of some really good people at a title company we brainstormed a way to do it I papered it all up and then the marketing engine that Greg Clement knows how to run just took it and it went viral and so I went from being just a just an average attorney in Northeast Ohio but a guy who knew short sales really well uh to now I'm an expert okay now I'm an expert all right so but I'm going to a point here um I got to the point where I couldn't stand short sales anymore particularly after I encountered this guy out of Mississippi who was then living in Dallas Texas who's got this funny accent but his razor sharp when it comes to notes and when I understood that I could be the bank instead of the boy standing there with the bull asking for more porridge from the bank I was like forget short sales I'm buying bad paper because I want to buy bad paper so so we start doing that a little bit and one of the first deals I did really of significance in the in that Arena was um my business partner who stole my business part of this day Greg Clement he and I co-founded realflow if I haven't mentioned that before I'll mention another nine times um he was chasing this one prized property in Brunswick Ohio and all of a sudden the bank which had had it in foreclosure decided they had to hit the gas because Bank Regulators were on them they needed to get this thing sold it's been with her uh been with a receiver for a year there wasn't enough time to do a short sale so I just approached the attorney representing the bank about buying the notes buy the notes by the default by the judgments buy everything we negotiated a price where we bought it at probably a number that would make everybody jealous today we bought about six and a half million for less than 1.7 okay we did this in 2011.

okay he has turned that property around because I orchestrated it and he you know I orchestrated the paperwork and the strategies and Greg executes and Greg is just a great Great Communicator with people uh today we we shortly backed our way into a favorable deed in lieu of foreclosure that I could get insured and then that led him six months later get an SBA loan in place the SBA attorneys were like how in the world do you do this we don't know how you did it but we're impressed we can fund this thing and Greg has now taken this thing that he put 1.7 into and it's probably worth about 15 million today and it is a cash cow and we've done it since then on other stuff so that's a little bit about how I got into notes and then it gets a little more complicated because short sales were getting harder and harder to do and I don't know if anybody on this call ever remembers Countrywide number 10.

in the short sale approval letters and that was the beginning of um me starting to have to work on policy at the at the national level and so number trips to Capitol Hill number of meetings with members of Congress finally we got fhfa which was then chaired by a republican member of Congress to uh put their put the weight on Freddie Mac Fannie man everybody else says Hey listen these 90 day these 180 Day short sale restrictions deed restrictions verbo no way we'll let you restrict it for 30 days then we can resell and after 90 days unlimited unlimited so we got that pushed through took a few years to get that done uh nothing happens fast in Washington DC except posturing in front of a camera man they're in a hurry to do that okay oh yeah and I mean I got a lot of guys that I think are friends good friends of mine on both sides of the aisle members of Congress but whatever so that got me involved in politics and the in the policy issues and then one day we're there for some meetings and um a friend of mine Chief Operating Officer National Ria says oh by the way I forgot to tell you we have a meeting at cfpb today they want to talk about land installment contracts you're coming because you're the expert looked at him when I spawned I said well thanks for the notice let's go so we show up at cfpb and it's a room of like 18 people there's myself my friend from National Ria and one other individual I can't remember and then there's 15 people from cfpb and they start hammering on all the things that they don't like about land contracts who don't know what is landstone contract and what is cfpb because some people have no clue we're talking about and what year was this that you sat down with those guys 15 2015 2014.

after Dodd-Frank has been brought in is as Dodd-Frank is showing up yes yeah yeah okay okay just for some contacts all right yeah land contracts land installment contract bond for D contract for deed all of these different terms where it's hey we have a written agreement that you make the payments and at the end I give you the deed to the property yeah okay and what is cfpb in Consumer Financial Protection Bureau created out of the housing meltdown yeah completely woke Progressive organization been operated pretty much by some very powerful liberals at the time I was there Richard cordray former Attorney General of the state of Ohio was running it you know and anyhow but at the end of the day at the end of the day with this day-long meeting at cfpb on land contracts I felt like we walked out of there having shown them that they did not have the regulatory Authority that they thought they would have okay because they ran into this thing that I had to remind him called the Tenth Amendment where every state has the right to regulate things within their own jurisdiction and every state has laws on their books regarding how real estate is bought and sold in their state and land installment contracts land contracts bond for deed whatever you call it is regulated in every state there's a statute in there well they still wanted to do some things and I and I I heard what they had to say and I agreed with some of their Concepts and I'll share some of those Concepts today because it applies whenever you're originating any kind of seller financing these are things that if you do these things you're going to have two results you're gonna have a better note you're gonna have a better deal and you're going to have less heartburn later on so you know we'll get into that uh but that's that's a long Meandering background on part of my life you know and just to just to bring everybody up to speed I still am involved in Washington DC I'll be there in a couple of weeks earlier this week I was in Columbus Ohio at the State House some meetings there once again on housing policy some stuff going on in Ohio that we've managed to Throttle Down I mean National Rio does more people does more for people than they realize um on this kind of stuff but uh last week my good friend Congressman Andy Barr out of Kentucky released a bill um it's another version of the bill we've been working on for years Vicente Gonzalez Henry Cuellar also friends of mine Democrats out of Texas and William Posey Republican out of Florida immediately jumped on as co-sponsors it's H.R 3464.

H.R 3464 it will go into Dodd-Frank and truth and lending and the safe act all three of those obnoxious bills and find that ridiculously low number of three in a 12-month period of time and turn the knob from three to twenty four yes so now when is that happening so those are listening right now and I I hate the interrupt most of you guys don't know anything about the story you guys are probably originating 15 loans without using any kind of Licensing in rmlo and going what do you mean I can't do that and Jesse to get into why we can't do that but what Jeff's saying now is the rule has been three in 12 months he's now turn up that volume to be able to do 24.

so but however if you are creating those more than three a year you're violating federal law so the volume is being turned up yeah so we're going to get that now this we this is a bill that we have been pushing since 2015. in various forms Congressman Roger Williams Republican out of Texas was the first one to get on board so we've seen it um when the Obama Administration was in controls when we started on this throughout the entire Trump Administration we were so close at one point in time during the Trump Administration and getting this bill to move out of the house out of committee through the house off the floor and get it over to the Senate and we had a very obstinate abstinent obstinate and absent Republican member of Congress from New Mexico thwart us and it really frustrating but the good news now is the lead sponsor on this bill co-chairs a subcommittee on the financial services side and Republicans control that committee now since it's in the house and we're going to make this bill move and I believe we're going to get a senate companion bill because now previous members of Congress that you sponsor it in the house are now members in the Senate so we're going to get them to come on board so we're going to make this thing move um get it further than ever before I feel like instead of being on the 10-yard line with 90 yards to go I feel like we're probably just outside the red zone now wow that's fantastic so yeah and it's been guys this has been eight years of work congratulations eight years of work to do this I mean so yeah anyhow let's back into this well you know this is a huge number this isn't 12 which we thought we may get into we've doubled the expectations that I thought you had you get the 24 I'm I'm almost speechless because it just changes the gain flow of people um in regulations and whatnot for those people who are creating rap notes creating order Finance nodes what did they have to be for and what do they have to do after this bill hopefully passing goes through what does the change for those investors okay great question so let me give you some history before the housing meltdown and before the Bush Administration signed the Safe Act into law there was no limitation there was no federal or state regulation on seller finance transactions on the number okay SAFE Act took it from unlimited down to five but that wasn't good enough the progressives wanted to take that five and turn it to a misshapen three would say oh well you can only do three in 12 months but the first one you can do this way and the other two you got to do that way and blah blah blah blah blah so anyhow kind of it was kind of an eerie moment I was having a meeting with um congresswoman Gwen Moore out of Milwaukee Wisconsin in Barney Frank's Old office talking about this bill and why it was written the way it was it was kind of a kind of a weird moment but anyhow and she reminded me she says you know this used to be Congressman Frank's office and I'm like okay appreciate that but still let's talk about you supporting this bill because this really matters to Inner City buyers this really matters to Urban buyers that the banks I mean let's face it Dodd-Frank has been the greatest discriminatory redlining tool that we have ever seen since the Emancipation Proclamation was enacted what was job Frank for those people who we run into a lot of people me Nathan in the last six seven months who are creating 80 loans with a checkbook at a local Diner signing it off and going here we're going to make a deal with you they have a mortgage window and they have an owner financing I know they have an owner occupied member going in and they've created tens and hundreds and loans and people watch this feed right now who will have are trying to get it through this is what people were doing an owner occupied properties and either they never heard of Dodd-Frank or they heard about it and didn't care okay well okay so I can't we can't turn back time they've already done it so okay so let's let's talk about where we are and what to do dd-frank is part of the massive Financial regulatory stuff shoved down the throats of regional Banks small Banks private Capital holders all for the benefit of the large too big to fill Banks it was shoved down our throats as a result of the housing meltdown and financial crisis of 7 through 12.

um it was a sack it's a sacrosanct piece of piece of legislation in the eyes of the Democrats um because it was enacted during the Obama Administration and it is it has been a terrible destroyer of private capital now what we want to do is we want to take the restrictions in Dodd-Frank and we want to lift the volume restriction without changing any of the consumer protections and I want to be very clear about this if you are a predator a financial predator where you do what I call yo-yo loans on yo-yo houses put it out there knowing you're going to get it back put it out there knowing you're going to get it back and in the meantime you're just grabbing people's down payments and deposits and so on and you're just basically stealing from them I have a I have a simple request of you get out quit Beat It okay I just they that is what gives our industry such a bad name yeah instead I want you to focus on doing quality deals and let me out let me let's just get into some of the elements of a quality deal and you guys direct me where we need to go yeah okay um you need to and this is some of the bantering and feedback I took back from cfpb where they were pushing hard and I pushed back hard and so on when you're doing a seller finance deal if you want to really do this thing right where I feel like you've got a note that has got much about that's got more value on the secondary Market than otherwise here's some of the stuff I want you to do I want you to have an independent opinion of value of the collateral a BPR or an appraisal I want you to have an independent property inspection report what's the condition of the property at the time of the closing let's make sure we're selling good stuff and not a bunch of crap okay those are things that are important um let's use a standardized format for our notes and mortgages something standardized where we can look at it quickly and we can see who's the maker who's making the payment when's the payment due how much is the payment what's the interest rate what's going on with this let's do something standardized and simplify okay let's make sure in addition to that that we do not self-service these things let's board these things with a licensed servicer when I say license I mean license in the state we're in the property is located where the payor is residing okay so that they can collect the payments so that they can send out the appropriate notices so that they can do the correct Communications under th....