What Does a Note Servicer Do? | Real Estate Notes Show

Episode: Melissa Bolling Allied Servicing Dave's Goals and Plans: - Managing assets is the most difficult part for him personally - Spent time last week reorganizing his desk and getting more organized - Has moratoriums scheduled to close at the end of the month - Emphasized that investors can control borrowers, their decisions, and what they buy Nathan's Goals and Plans: - Things have been really good, went through everything and reorganized desk last week - Excited about upcoming good weather in the northeast after cold spell Key Recommendations: - Servicers are a must-have, not optional - they are integral to note investing - Don't contact borrowers yourself - use servicers for all borrower communication - Servicers handle billing, tax forms, foreclosure management, and asset management - Note investing is not set-it-and-forget-it - requires ongoing management even with a servicer - Build a team including attorneys, realtors, and servicers before purchasing notes - Be creative with deal structures like partials rather than using one-size-fits-all approach Topics Discussed: - The critical role of servicers in note investing - Difference between servicers and property managers - Challenges new note investors face when starting out - Foreclosure timelines, costs, and licensing requirements for servicers - Importance of proper documentation and compliance - Evolution of note servicing and deal structures over time Guest Insights: - Melissa founded Allied Servicing in 2004 after working at Metropolitan Mortgage and Securities, which was the largest institutional buyer of private paper - Allied Servicing specializes in complex deals like partials and special assets - they've serviced 8 different kinds of partials - Experience with unusual deal structures from the Metropolitan days gives Allied Servicing an edge in handling creative note strategies - The note industry is word-of-mouth driven - Allied Servicing grew primarily through referrals and minimal advertising - Current market conditions (3-4% rates) make it harder to achieve 10% yields, requiring more selective and creative deal analysis Episode: Melissa Bolling Allied Servicing Guest: Melissa Bolling Summary: This episode explores the critical role of note servicers in real estate note investing, with Melissa Bolling from Allied Servicing explaining what servicers do and why they are essential for managing note assets after purchase.

Main Topics: Role and importance of servicers in note investing, What servicers do for note investors, Melissa Bolling's background in mortgage servicing and Allied Servicing, Managing note assets after purchase, Beginner challenges in note investing, Building a team for note investing (attorneys, realtors, servicers) Key Takeaways: Servicers are a must-have for note investors, not optional, functioning like property managers for rentals | Note investing requires active management even after purchase and with a servicer in place | Beginners commonly struggle with bidding/purchasing process and knowing what happens after offer acceptance | Servicers handle bill sending, borrower communication, tax forms, and can assist with foreclosure management | Building the right team (attorneys, realtors, servicers) is critical for note investors to scale operations Keywords: servicer, note investing, asset management, borrower management, foreclosure, private paper, loan servicing, real estate notes, team building hey fellow no investor are you looking to learn the basics of note investing so you can get started however you don't want to spend a few hundreds or thousands of dollars and hours online on some training program have you thought about attending a notes conference however you don't want to spend the money or the time away from your family well we have a tremendous beginners video series of 20 different topics with each video being less than 15 minutes this means each video is less fluff and direct to the content visit www.jkpholdings.com beginner dash series to learn more again www beginner dash series puts here from jkp holdings alongside me nathan turner hello what's up man it's a beautiful day in the neighborhood we're looking forward to some really good weather up here in northeast i'm excited last week it was a wash with terrible um we thought about last week uh downright cold yeah and now we're going back to the 90s which i'm kind of happy we didn't have soccer last weekend because it would have been crazy but uh we're getting back to the 90s it's gonna be a good weekend some barbecue and all that stuff how are things with you really good really good just kind of going through everything i took some time uh last week actually just kind of take a minute and and go back over my desk and kind of rearrange some things and and it's it's more organized i'm liking this this is good but yeah it's it's been uh it's been really good we've got uh some deals on the go moratoriums scheduled to clo to finish off the end of this month we'll see we'll see yeah yes and i know a couple states are extending them and all that stuff and then day we don't know what's going to happen when right um but what we do know is the fact that what we can control is the fact that we can control borrowers we can control what we do and how we make decisions and how we organize and what we buy um and for some people buying can be the most difficult um for me is managing the assets right um but for a lot of new investors they get nervous about buying and we i've talked a bunch of beginners this week and the most common question i get is either a i don't know what the bid and how to process do that or b they accept my offer now once right comes next yeah we talked last week about you know do i send a formalized letter and then what do i do with the servicer i don't have one and what can i do and where can i go and wait is a servicer what does a server do right yeah we spend a lot of time in the no world kind of talking about all the due diligence and everything that goes into you know choosing correctly and buying a good note and and which is all very necessary and information you have to have but yeah then the question is then what yeah and that's that's the point where it's like okay you got there done and it's like okay i'm going to look for the new no no no no no you kind of just gotta jump in and really start working with your team right and we talked about the team being the important part for us last week yeah we have attorneys we have realtors yeah and then we have services yeah servicers are absolutely like you must have yeah it's not even just like uh it would be nice if you had one no no it must have yeah that's an integral part of notes and the services has to be in place and what i explain to people with with servicing is it's like a property manager for rentals right they handle sending the bills they handle it all they issue the questions they go back to the landlord and say hey landlord what do you want to do in a situation if the renter stops paying they're reaching out they're doing the knocks and some of that so but the servicer can do a lot or they can do a little they can help manage your foreclosure they can help manage everything yeah so from start or not right so for a lot of the new investors and experienced investors servicers can be their headache and also their lifesavers yeah when you're managing multiple assets you don't want to be doing this stuff on your own even if you know how to which we don't advise you to go contact borrowers but managing the asset yourself can be overwhelming right yeah if you're imagining five assets you can handle it yeah sending that paperwork every year sending the tax forms out getting a phone call knowing what you can say or not say yeah how to stay out of jail right especially at the very beginning uh you know for most people they've still got some kind of full-time job in this household which is great uh but you you have to understand this is not just to set it and forget it there's management involved even with a servicer there's management involved you know you have to be on top of it in some way shape or form uh there's work involved after the fact so what we we've had a few services on before but we've heard a lot of great things about allied services so what we did was we're going to reach out to melissa right melissa bully is someone that you can turn to for advice you could turn to for you know helping guide you through the process let's remind her when she's not an attorney she's not going to play a tournament right um but and she'll tell you based on her experience and that's all she can do so today's focus is on learning about what a servicer can do for you as an investor what are some tricks and what's going on in the world servicing that we you know investors should be worried about you know licenses and things like that foreclosure timeframe and costs and be prepared yeah so well melissa welcome thank you so much for having me today yes can you give us a little bit about your background how you got in the space what brought you in and how long you been doing it you know i i accidentally i i answered a blind box ad in the 90s and ended up working for a metropolitan mortgage and securities and at the time they were the largest institutional buyer of private paper wow and i came in through their it department they were developing a system called brokernet that they were putting out there to really speed the process between the brokers to the contract buyers to closing it it was a really remarkable system for the time i really enjoyed working on it i provided a lot of support but then i ended up transitioning into supporting their servicing system and so i was working on the back side of that constantly well then i kind of fell into the servicing manager job so i did all their non-default servicing managements uh so we did documents we did we did all the loan adjustments it was customer service it was escrows things like that and i did that for years and at its height i boy i probably had 51 employees and of course i worked closely with sheila white who was their acquisitions manager so she managed all their different closing departments whether it was the note space or it was the origination space or any the structured settlements and not annuities lotteries all the things that they bought right and so we worked for together forever well when the parent companies had their difficulties and their um their broker dealer had their difficulties and they ended up having to uh file bankruptcy and the insurance companies pulled out i worked for one of the insurance companies briefly um same role but they basically said metro and summit said to us they said melissa and sheila we want you to find a servicer for this little tiny portfolio we have left and of course it was a super super special portfolio because they had sold most of the servicing to aquin by that time um they didn't really have anything that was normal remaining in the portfolio they had sold a bunch of loans uh later on they would have been selling a bunch of loans to security national who bought several but what really was the sticker was like the partials and the special assets and so we're looking and we're looking and we're talking to different servicers and we can't find one so originally it was a joke we're like ah we should go do this ourselves and then one day we're like no no we should go do this ourselves wow and so in 2004 we left our cushy corporate jobs and decided to do this and so we opened our doors and it actually worked out great metropolitan and summit were one of our first clients um security national turned out to be one of our clients because they wanted us to service the partials for them and so and then it just grew from there and as everyone knows this industry is so word of mouth yes it really is and we have done so little advertising you know we do a couple shows a year back when the world was still turning we would do a couple shows a year and that's all we've needed to do because this industry is so close knit everybody knows everybody of course we got a huge um influx of business when note school took off eddie of course has been a friend of ours for years because he was a metro client and that's the funny part is when people call up and they're like i knew you from metropolitan and i'm like okay does that mean you're coming with the torches and pitchforks because that's what happens here but you know but they know that you know they know that you've seen it when partials got big we were like all right we're already servicing them great you know and it was you know whenever they come up with the new shiny product wraps we were like great we can do wraps reps are no problem we've seen them before so i think that experience with metropolitan really gave us an edge in this industry in that i don't have clients who come to me and say i want to do this and i go i've never heard of that because i've seen so much already because metro did so many different and unusual structures i mean literally we had we had eight different kinds of partial at metropolitan i can't believe i'm saying that out loud because now people are gonna be like well what kind of partials yeah how do i do those but they were super flexible they were the kings of buying the deal in a way that worked for both the buyer and the seller the seller got what they needed but the buyer mitigated their risk by the way they purchased it so it was great to have that experience and to see it although i will admit when i first came into this industry i was like i came from originations and i was like you do not have enough paper in this file there's not enough paper here i how are you buying this and is this legal because it doesn't seem right and so but now i mean we've been doing this for we've been doing this since 2004 and it's amazing to have made it through 2008 and even through the pandemic and you know knowing that there's some challenges coming our way probably in the next 12 to 18 months we're just really looking forward to continuing wow that's really interesting that you're doing partials and special stuff before the crash we were doing them very much you learned something nathan this is great well we all we all like to think that you know we've we've figured yes yeah and then you met yeah i think you meet her so it's it's cool to hear about the background because you know nathan and i even though for most people we're 10 plus years in space you have people doing this for decades that just trump our knowledge and being around you guys and i talked to an investor who's been doing this for a long time too and like well my techniques don't work anymore actually your techniques are kind of what we all need because everyone's doing it a new way and you you're really losing out on the fact of reading collateral files and understanding the borrower instead of just taking a tape and then going institutionalized and just doing it partials one way there's only one way to do a partial we mean eight right and not being creative with things and that's how i think that this space is missing um moving forward and i think that's what's gonna happen because in social notes at three four five percent you can't buy them and get a 10 yield on it anymore where eights and sevens and sixes could lift up so creativity is gonna be a big thing and parcels may be something we we nathan talked about bringing on a partial conversation and i think we'll return that sometime soon so let's go base the back to basics here i'm a brand new note investor and a servicer someone i'm told i have to use what happens if i don't use one yeah why do i actually need a servicer what's there now so my thing is this if you don't use a servicer it means you like talking to borrowers constantly about their about their questions and these are unsophisticated borrowers so many times in this industry uh and you just like talking to them you like making sure they have insurance you like making sure that you're sending information to the irs and to them appropriately and that you're complying with all state laws as to what's in that year-end package you like sending them bills you like calculating payoff quotes yourself and most of my clients have real jobs i mean you guys mentioned that they have things that they do every day and this is not it and so the the level of involvement that you want to have with the loan is determined by the systems that you put in place and the servicers or the attorneys or the you know the property preservation companies whoever you're hiring to help you out and and keep your portfolio performing or bringing reperforming your non-performing portfolio however you've come into this space you can do it all yourself i don't do anything that's magic you know i i happen to have a great system that does a lot of things for me but if you're if you're excel savvy you probably can do most of the math i do in excel and be able to produce what you need to produce and the question is is it worth your time are you making money servicing loans or are you making money acquiring them working them out um turning them with partials or resales where is the best use of your time so let's explore a little bit more right um and i think that for most investors they don't even know what you said right what do you mean insurance why are we the insurance let's back up even farther than that yeah i'm a i'm a lender i just bought my first note and i'm going to move forward and i'm going to call the borrower and say hey i got a note that i own that's yours and the grandmother picks the phone up and then he's saying i can't reach him there i'm going to call the job and see if i can hold him there let me try him at nine o'clock at night because he's probably hit the front then can i do any of those three things and what if i say something on the phone is wrong is there legal consequences of doing that kind of stuff generally speaking so everybody talks about fair debt collection practices act absolutely that technically applies to third parties allied is the third party i don't know in the notes so i have to observe it but i will tell you if you as the holder are not very careful to represent the actual holder you have to say if you bought it in xyz llc you have to say hey i'm melissa with xyz llc you can't have a property or you can't have a a loan management company or a loan workout company you're a third party but even if you're calling as a representative of the holder if you are not observing those rules you are opening yourself up to to legal and because there are there are attorneys out there that pay their bills with violations of debt collection laws because there's also state laws and so if you don't know your state and federal laws just as great as you know you need to know all of them in all the states you're in you can violate it and maybe no one will notice maybe the borrower won't notice but you know you can't you can't like keep calling them we've had this experience a client will just call and call and call and call that's harassment or the client will text them and just text them and text them that makes sense right that's how you get ahold of them but that's that's harassment they have they they cannot not respond then you're supposed to take proper legal action um you can't you know you can't threaten them you can't you can't say i'm going to you know you can't be like if you don't send me money i'm going to take your house you know it's it's true but you have to do it right um you we had a collector back before the days when i was at metro the guy was like i'm having a garage sale this weekend i'm trying to raise money to make my payments and this collector said well you better keep your camping equipment because that's where you're going to be living if you don't make your payments this is a perfect example of what you cannot do especially these days and you cannot afford no one can afford a consumer protection lawsuit in any way shape or form none of us can granted servicers are a little bit more used to defending those and dealing with them but again you don't want to do that and if you're new it makes sense to have people in place that can save you from very expensive errors because those that's not the experience we want you to learn from that's those aren't the experiences we want you to learn from uh so there's just there's there's a lot of risk and so you have to determine how much risk you're willing to take and how educated you feel that you are it's not hard to become educated i'm not gonna i'm not gonna pretend that it is but can you remember you know each time each state some states have different breach notices because i have people who always like i'm just gonna send the demand notice myself i have one that my attorney did for this and i'm like okay you're in a different state and it might have a different timeline are you reviewing your documents do you know where to look to find out the breach timeline do you know where to look to determine if you even need a breach notice or whether you can go straight to foreclosure if you don't know these things that's why you need a servicer in place who can take those steps for you so let's go up we're going to definitely get some more topics here and i think that you know we also have people who want to contact the grow themselves when can we actually start doing that i'm sorry i missed that i had some feedback dave's working something out there it's like is it me it's me isn't it got something else going on so let's talk about the tr dave's back yeah my bottoms are good so i'm not sure what it was as a comedy i thought so when we were talking to a beginner one of the questions they ought to have is that you know this hello letter goodbye letter topic right what can i call borrow i just bought the note nathan i said why are the money i'm gonna call the borrower and get them on i'm gonna start process getting them performing i feel that it's a poor choice here's why here's why so there are there are two actual letters involved in in a note sale there is a letter that in this example nathan would send to the borrower saying i've sold this note and this is who i've sold it to and this is their contact information and that is commonly referred to as the tila 404 letter which is strictly a notice of loan sale it says i held your note i've sold it to this person effective this date and it gets mailed then there is the the goodbye letter which is the outgoing servicer says hey servicing is changing from xyz to allied and there's so there's two different notifications that have to happen in my experience most borrowers don't open either of those so fyi they throw them away then what happens is so the the the servicer goodbye letter sets a date that allied takes over after that date i have 15 days to get the loan into my system check all the documents make sure everything's correct do our qa and then i send a hello letter that says hi i'm allied i'm your new servicer this is how you reach us these are your options for making payments um please send us proof of insurance and here's our privacy policy so it's it goes out to them and it includes their coupon book and the idea is that now they know who we are and they can pay us that's great now the service transfer date starts a 60-day window where the borrower cannot be collected upon nor can we impose late charges it used to be known as the respa service transfer period but it's a 60-day period in which i do not recommend anyone make any calls to their borrowers it's designed to make sure that when the borrower set a payment to the prior servicer they have time to forward it to us and we get accredited so there's no collection occurring for interim payments that have been lost in the or not not lost but they are still going to the old servicer still going to the news servicer you know let's get them all in line get the borrower getting their insurance to us get all of that working through after that 60 days expires if the borrower is not current that's when the servicer is going to start their outreach did you get the goodbye letter did you get our letter we will send copies so again right after that 60 day period it's a very kind contact we make the assumption they didn't read the letters because most americans unfortunately don't read all their mail they don't open it all uh you know and i think it's because i've been in this industry that i find that amazing i open everything you just never know um but they they almost never they almost never receive it and or receive it they almost never open it so if we get returned mail we also you know during that 60-day period we may have to do a skip trace maybe we were given a bad mailing address maybe we don't have any phone numbers that happens commonly so we're going to be doing some of that research as well our boarding process of course is not just loading the data into the system we compare that data to the documents if they don't match now we're questioning was there a mod is there a forbearance is there a letter somewhere where someone said we're gonna do this thing for a while what why are they different if um we check bankruptcy records on all borrowers i cannot tell you how many deals i get that are not tagged bankruptcy and have a chapter 7 discharge that applies and once we've got discharges now those phone calls the new lender wants to make are prohibited you do not call borrowers with discharges if you didn't check that in your due diligence don't make a phone call until you have checked pacer pacer is super cheap i encourage people to have it yeah it's a double-edged sword because they don't understand what they're reading and they get a lot of questions as a result but yeah but just being able to see if there is a discharge that is after the date of your loan origination is huge because that's going to save you a lot because no one wants to be pulled into a bankruptcy court for contempt of a discharge order so you know and these are all things your servicer does as a matter of course but definitely not on the borrower let's cur let's just make sure we're clear on that so a borrower goes in bankruptcy they make all their payments they clean right through it and their loan is still active right they didn't get dismissed they got through it all everything went me through the bar is on the other side of it they default afterwards as a lender i can now call that borrower even though that loan so the loan is still active after bankruptcy if it was a chapter 13 discharge and this is default on post-petition payments after or post-discharge payments yes they are still obligated for those payments chapter 7 however eliminates all personal liability they can never be called ever again your only recourse is the property so if they are not paying post chapter seven discharge your only option is notice of demand and work through foreclosure unless the borrower makes inbound contact and requests a modification and then you want to make sure that your modification or forbearance contains special language indicating it is not an attempt it's voluntary you're saying it's voluntary you're restating their for their bankruptcy information and saying this is does not create new personal liability so just to be clear special language is required for any post discharge yeah just to be clear though you know if the borrower takes chapter seven and continue and retains the debt and holds the asset right and they get their bankruptcy and they retain the debt for you can reach out to them it's when they discharge the debt out of the system completely and they're no longer responsible for the debt itself if they did not reaffirm in the chapter seven you cannot call them they had to have reaffirmed the debt which is so rare most debtor counsels do not recommend reaffirmation for their clients uh we try and when they put that um when they put their intent to reaffirm in their in their chapter seven filing we will send a reaffirmation agreement immediately for them to execute but it almost never happens um but it's just safer to chapter seven post discharge do not make a phone call send start your legal action and let them contact you so go with that is that borrower the servicer can't make any contact or recommended contact for 60 days can i go to my attorney and say i want to file for closure immediately i wouldn't okay well just to answer that question if they are reasonably performing let's say they are less than a year delinquent and they've made payments in the prior year i would wait out the 60 days now if you've got a true non-performing that's six years delinquent they've never made a payment to the last three servicers i'm okay with i'm okay if you want to have your attorney start action or even our attorneys will start action during that 60 days because they are truly non-performing there are no payments that are getting lost there's no there's none of that they can't claim they didn't know where to pay although they will um and you know we still can't assess any late charges during that 60-day period but you can at least start that foreclosure action you can get that 45-day notice out then you can do your breach and then you can start the foreclosure but again same thing there are there are statutory notices that have to occur before you can start foreclosure and that's why you need to coordinate with your servicer you can't just buy the note go to your attorney and start foreclosure and you have to be careful we've had attorneys who didn't understand the moratoriums we've had attorneys who didn't understand who didn't know that there were statutory notices that had to go out before they could start so you know vet your attorneys as hard as you've got your servicer because you want someone who knows everything because today's environment is too complicated to simply have you know your brother who you know is a general purpose attorney sends you a percent a breach notice for you it's cheap but it's not a good idea and i don't understand i say allied uh we prepare breach notices here they're a hundred dollars i don't think that's too expensive there's a couple states that are more expensive but most states it's a hundred dollars and to have it done right you know but people are like oh no i'm gonna have my own attorney do it i'm like you must like paying bills because they're going to charge you three or four times that but you know we're pretty flexible at allied you want to use your attorney use your attorney you want to use our attorneys use our attorneys however they want to do it um not all servicers are flexible like that there are servicers that require you use only their approved attorneys and you coordinate through them um we have a blended philosophy and if you use your own attorney just keep us involved if you send a demand tell us so we restrict the account don't accept payments be great tell us what your fees and costs are that you've incurred you are going to have to send us the bills you cannot recover things like the cost of recording your own assignment you know we need to look we need to see what the bill says um so that we're accounting for it properly on the borrower's side so i got a question on on going back again to to this is a new note it's being transferred over to allied let's say that i did a bunch of uh postcarding and i found myself just a regular seller finance note so it's not it's not something that was previously professionally serviced it was just you know mom-and-pop service note so what information do you need in order to board that loan really the information we need is no different the absolute minimum the only thing i can't know from a review of the documents is the unpaid principal balance and the next due date any outstanding balances and the uh the borrower's information social security number um contact information etc but the information is generally the same i would never buy a note from an individual seller that did not either have a reasonable facsimile of a pay history that was itemized principal interest running principal balance especially accounting for escrow if that was involved all of that if they didn't keep anything formal i would i would get a pay history affidavit you want something in the file that you can stand on when the borrower says that's not my balance right so you know sometimes we just get a pile of uh cancelled checks and an excel sheet great that works too you know we've got evidence we can stand on that but the difference is is that i don't have a service transfer period basically there is a letter from the outgoing seller that says to the borrower it's addressed to the borrower it says i've sold my note to nathan and nathan wants you to make your payments to whoever your designated servicer is so would say make your payments to allied they send that to the borrower that's the party they know the borrower hopefully will read it and and do that and then they just include a copy in our package but they just have there has to be something in our package that shows the borrower has been made aware that allied's the new servicer we have deals where um clients have serviced themselves for whatever reason they've serviced themselves maybe they did it to take a non-performing and get it into a workout now that it's got to work out they want to engage a servicer we see this a lot we have a we have a letter we use we call it an election of servicer letter it's basically hey i've decided to use a servicer and make all your future payments to allied again no 15 day notices no 60-day transfer period it's simply i still own your note but i'm going to use a servicer now so there's a variety of notifications but the key is just notifying that borrower that you've brought a servicer on all right so we have a question uh from cody cox uh how often does a borrower respond with proof of insurance if they are not a land contract surprisingly often so our welcome package does say send a copy of your insurance here's our last payee clause do this we actually use a vendor down in dallas who then does the follow-up statutory notices you have to send x number of notices so many days apart before you can actually place insurance and assess premiums it's federal law we luckily we let them do that they also review the insurance to make sure it's appropriate that it lists us as lost payee that it covers either replacement cost or the unpaid principal balance whichever is less is the requirement and that it meets meets our other standards and then they will monitor that for us generally speaking if you're talking about a note indeed of trust that's been professionally serviced in the past chances are they're going to have insurance and they're going to they're they'll provide even if they only send us a copy or even if they sometimes they just write their agent name and number on the form and they send it back to our office great we'll contact them we'll get it updated that's awesome if it's a land contract most often the borrowers have been told or are laboring under the misunderstanding that they can't get homeowners insurance the key to getting homeowners insurance when you have a land contract is not to call your agent and say well i don't own the property but i need homeowners insurance that's really the key here the key here is to say i bought this house i need homeowners insurance and it's it's a pretty easy straightforward thing uh what we do what ally does is in addition to the outreach that our vendor's doing to get insurance is we do a lot of education on the phone too the first time we talk to them one of our procedures is to ensure do you have your own homeowner's insurance have you updated the last pay and sent it to us and if then they'll say something like well the seller had insurance and we're like okay that will continue here and you're going to get notices but it's really in your best interest to have your own insurance we try to educate them because they don't understand that force-placed insurance or lender-placed insurance is only going to in a best case scenario pay off your loan nothing for equity nothing for contents nothing for loss of use and in many cases the deductible is quite high and so for smaller losses there's almost no way because they don't have twenty five hundred dollars to start the work and they have to pay their deductible before any claim funds kick in um the slight advantage is that if they're delinquent and it's a smaller claim we can always apply those funds just to the loan because we can't really get in there and get the work done so it's a little more difficult to do that but borrowers can be surprisingly responsive if they've if they've been responsible borrowers in the past borrowers who didn't have insurance in the past it's really hard to get them to get insurance they don't like paying that first year that's really the key especially if they're escrowed they don't like to pay they don't like to pay that first year while they're paying escrow they're like you're double billing me and we're like no savings account think of it as a savings account because in a year we're going to pay that whole premium and you'll be done so we spend a lot of time on insurance education with the borrowers because they really either haven't been asked to be responsible and have insurance or they're under the impression that they can't be so so we had a second question uh from marco um what's your recommendation for setting a cutoff date when you're a performing loan sells or when in non-performing loan sales i guess if i'm the seller and i'm selling my loan to nathan what's your recommendation for sending a cut out date i guess marco correct me wrong based on when the contract sale date if i'm gonna sell a loan today when should my cutoff date be from your recommendation to ensure payments and whatnot so no loan sale is ever gonna be perfect because borrowers are unpredictable if you have a borrower who is uh maybe they're on ach with allied their payment comes out on x date every month every month then it's easy pick a cut-off date after that date you get that you get the you're going to get the july payment and they're going to start with august if they write a check it becomes more difficult that's why it's important that your new servicer sees the um the purchase and sale agreement because service transfer will have nothing to do with cutoff right basically funding is what starts the service transfer you fund the outgoing seller says hey allied we're transferring to fci and so then our clock is running on a whole different thing what your cutoff date was doesn't matter the lap we're going to send every payment we get until service transfer to our client and then after service transfer we're going to forward to the new servicer but they need to know you know who that might belong to so cut off is is great but it almost doesn't matter because it has to do with what when the borrower's gonna pay obviously with the delinquent with the delinquent or truly non-performing loan it doesn't matter the chances of money coming in are pretty low and that's really the only point of cut off is determine who gets payments before this date who gets payments after this date so those are familiar we're talking about here cutoff date is applying to the payment received from the borrower to who does it go to so to cut updates today when a payment comes in tomorrow technically the money goes to nathan if they set up the cut off days today that payment comes in today the money would go to me if i set the date two weeks in advance because i know the fact that pay on the 10th of the month i set it up with that i get that money nathan gets anything after that so that's what cut off date means when you're dealing with um buying a loan cut off date when you're looking at a tape of assets is different that's usually the time frame when the data was last updated so on on a non-performing most often it's it's whatever the funding day is yeah so if funding day is today then that's the cutoff date as well for a performer that like you say you can set it to whenever whatever makes sense and one thing to remember is so we we kind of refer them as interim payments there are payments that came to the prior servicer before the service transfer date but after the cut off what normally happens is the servicer is like not our job and they just send it to their client because normally they don't have any information for the new buyer so if it would loans come into allied and nathan you know wasn't my client at the time you know i don't know where to send the money so there are interim payments that you sometimes see where they've gone to in our example the payment was sent by the servicer to dave and dave's got to afford it to nathan that's kind of your job sometimes the servicer sends it to the new servicer we can't post that payment it's already incorporated into the history and balance in our system so we just have to like deposit and forward it to you we don't necessarily have a breakdown we don't necessarily know if there's any extra included believe me that servicer took their fees out so you're definitely not getting a whole payment so interim is tough there's a lot of confusion about the payments really all you can do is between the history that we get from the outgoing servicer and where we start boarding is to try to determine if there was a pre cut if there was a post cut off payment that went to the prior servicer that went to someone else it usually works itself out okay most sellers are pretty honest and they'll forward that money uh occasionally it doesn't happen but allie doesn't have a lot of power in that case so let me ask you two quick questions because we get these questions often is can an ally hold collateral files and um what's your typical fees per month right that's the most common question guys how much do you guys charge per month if i have a file that's coming i'm a brand new buyer and i have a file economy i don't have a lock box or a safe can i send to you will you hold the collateral and and one more on that is i'm a new investor will you just do one loan i just bought my first loan will you take care of one loan or do i need to send you 10 yes we will do one loan we have the bulk of our clients are single loan people or probably especially if you start looking at less than 5 or 10 then that number just gets exponentially bigger we have no problem if this is your first loan it's your only loan um we have no problem it's your only loan with allied let's say you're using someone else for your north carolina deals because we don't do north carolina so maybe you know maybe you're somewhere else with that but you you got a texas and you want to bring it to allied great one loan's not a problem we uh charge our setup fee is a hundred dollars for first liens and it's fifty dollars for juniors it's uh 18.50 a month for servicing on performing loans it's 15 per month on non-performing we do share any accrued and paid late charges 50 50.

and the only other fee that's actually listed in our servicing agreement is if you choose to change services at any point um there is a fifty dollar deboarding fee so that's that's really it our our fee structure is pretty straightforward it um that buys you allied if you if we have to go outside of our office for a vendor so a door knock an inspection foreclosure action um bankruptcy attorney any of that then we're going to give you upfront notice via email you approve the fee and at that point it be incurred and then that's billed back to you straight across so the monthly fee gets you allied and then any other fees are only if we have to go outside for a vendor as far as collateral documents go i wish i held everyone's collateral document everyone's because it makes my life so much easier i have had events where we were talking before the video where i got a collateral file at payment in full and none of the assignments have been recorded okay well now i got to do all that before i can you know even do the release and i get files where the notes gone or i get files where they're not originals in the end if i get your collateral file at boarding first of all we're going to review it we're going to make sure it's complete and we're going to make sure that everything is assigned through to you we are going to make sure that it gets to you and we're also not going to record your transfer documents if something's already broken you know we're not going to make it more broken we image all of our collateral files they are held in fireproof storage there is no additional charge for document custody it also makes it easier in states where we have to surrender notes or other originals to the court or to the attorney to start the action it speeds everything up and the less that a file and its contents move through the mail or fedex the better yeah i mean everybody everybody's like oh it's fedex it'll be no problem i happen to know personally that there's a box of files that will never be recovered because it fell off a plane on a runway burst open and the papers went poof you're never recreating those files they're gone and the note still has magic i know there's a lot of movement towards e-sign and e-notarize and that's great but in some states the note has magic and you need it um everybody's oh last note affidavit that only works if you have a copy of the note to attach if you have nothing a lost note affidavit does you no good yeah right so but i love holding the collateral files i love being able to pull them and check things you wouldn't you you can't imagine how many times we get a question from an attorney yeah we're missing in a lounge and we look in our images and we're like well we don't have it turns out it was on the back of the note but we didn't have the original document so we didn't make the image so we didn't realize that was missing [Music] and if you are an individual if you don't have fireproof storage or if you plan to travel i had a client who said well i can't send you the original note because i'm in canada for the next 60 days well that doesn't work in real estate i need it today so um and even if you do have storage let's say you use a safety deposit box that's pretty common okay are you the only one who knows you have the box are you the only one who has a key who can open it because unfortunately the reality is we cannot predict how our lives are gonna go and a deceased seller deceased lender is a problem because especially if we don't know who your heirs are [Laughter] you know we we're good but we can't we can't just you know get all of this well he's like you know if you're if you're an llc and you're single member what happens if you're unavailable to sign yeah you know at least give someone a poa do something give ally to poa we have a standard form if you want to make us your limited power of attorney for purposes of your i've done that loan servicing and do you like signing documents because i can tell you this my clients who i have an lpoa on when it comes time and that loan pays in full and i print the document sign the document and send their wire and it's happening a week or less from payoff versus i have to produce the document i just send it to you you have to sign it you have to return it i have to have an original house hey you can get your money faster so it's an option and i don't know uh if all servicers have that option i know that it's an option here but it's definitely something to ask especially single member or an individual holding notes if there's no one else who can sign on your behalf that's that's gonna you know that's gonna save you some struggle going forward and it allows you to lead the life you want to lead you want to travel do you want to be out of the country do you you know what you want to do so um marco asked i'm not sure a statement a question that it's is it zero dollars for escrow i do not up charge for escrow i do not upgrade charge for multiple disbursements i do not up charge for partials bk no no our standard non-performing fee would apply it depends on the nature of the bk is it going to be a performing chapter 13 or whatnot it kind of depends on what was in place before it happened but we don't charge um the upcharge we the only thing you get is the is the legal fees for the filing of the preparing and filing of the proof of claim the review of the plan and any required objections and normally on the bulk of chapter 13 there's a big front loading of those types of costs but then once the plan is confirmed i mean in my opinion it's simply the posting of a payment we do the maintenance on our end to create the pre and post buckets and then it's just a matter of posting payments so we've never had a philosophy here at allied but it was that it was um special kind of like partials they're not special our system does it once we do the maintenance to match up to the to the plan and the proof of claim after that it's just posting checks and with the non-performing world are you guys doing the borrower outreach if we request it are you calling the borrower at your fee you know for for most servicers i'm sure you know this your fees are astronomically lower than most services which is great if i date a borrower or go default will you do the phone calls and all the issues and reach out to me for the problems at the same fee as you're charging for the monthly chart for the low dollars yeah we absolutely it's it's our collector has a standard list that's popping up um we are not calling them on day four we tell you right now we never call before the expiration of the grace period we rarely call before we're getting closer to that 30 or 45 day mark only because these are not borrowers who pay on time the ones who pay on time they're on ach and be totally honest if they're on ach they're going to pay on time the borrowers are unsophisticated they use every day of their grace period every second of it and in many times i have clients who pay their late charge every month borrowers pay their late charge every single month great love it you know and if we call them and if they're like oh i was just gonna mail you a payment we could be like we take that payment right over the phone we'll do it right now um so we do payments over the phone they can go onto our website and make payments if they don't like to talk to us a lot of borrowers didn't want to talk to you they just let's go online especially if you call they don't answer and then they go online and they make that payment you see it that it's going to post the next day it's it works kind of cool our website uh the portal for the borrowers they can actually opt in for a reminder it'll text them about four days prior hey your payments almost do and that actually works for some of our borrowers who are not if they don't if someone doesn't ask them to pay they don't pay but so because we are a small company we are not calling them every three days that's that's not happening um we are call and we are also we also review the loan a little bit we know these borrowers we know if this borrower's only is going to pay on the last day of the month we're not going to call them we know they're going to pay on the last day of the month some of our borrowers only pay if they get a notice of demand we call that the quarterly payment plan where every three months we send a demand and they reinstate and then they immediately re-default and three months later they like paying fees i mean they have to pay for that notice of demand and clearly you know that works for them but collections is a weird it is less a science more an art it is not more calls more letters gets more response it really has to do with knowing what that borrower's going to do or not do yeah um but we also try to make it really easy for them to pay like i said they can be on ach we'll pull their payment every month we'll pull their payment every two weeks how do they we we try to fit it to their paydays we you know we're not like you have to pay on on your due date the whole amount if they're paid every two weeks or twice a month we we can split it up we can help them out with that of course they can always call in a payment they can do the web payment they can use their banks bill pay um with borrowers who wire every month wow clearly people have more money than i do to pay bank fees because they are out there making use of that but you know it's a guaran at least it's it's not a payment that can go nsf so you know there's some there's some plus to that so and of course we still have borrowers who mail in a check every month yes mail it in they write it out they mail it in actually i think we do i we haven't done my wife does it she just likes doing it that way yeah yeah and i mean i just i've got everything on autopay because that's like my preference but people don't trust it you know we have people who will do a payment over the phone but they won't do it via our website because they don't trust that i'm like so you'd give a person your banking information but the website not doing that so borrowers are funny um but yes all of our outreach like i said the use of any allied employee is included in that fee so our collectors doing the collections our 45 day notices are run regularly that's a surprisingly effective letter they only read as far as the uh sentence that says the lender may start foreclosure and then they call because they're in foreclosure and we're no you're not sure but but it's an effective letter um one of the few the federal government has ever come up with that is actually has any kind of desired result yeah yeah so i'm not sure if we understand this question from well um i'm going to do my best to kind of translate it that there was a about i guess third-party vendors in their compliance with force uh with f d cpa um i'm positive i'm messing the question up do you want to share the questions in the chat i just wanted to i saw it as well i'm not familiar with this let me just read it the way it's real we'll see it says after reading about the hunstein versus preferred collection and management services case uh what measures does allied take when it comes to third-party vendors and compliance with fdcpa so we don't have any third party collection vendors okay other than our foreclosure attorneys and foreclosure attorneys are actually handled differently under fdcpa and they we're using we're using established firms that specialize in foreclosure and bankruptcy and so we can rely on um on their policies and procedures for any required notices that they send out i'm not familiar with this particular case so yeah it's not sure but it appears that's something the only thing i'm thinking about is maybe if if someone's doing a door knock maybe that's where it was going so door knocks actually a pretty good example we use a door knock firm when we first signed up with them they have they basically have a vetted letter that they will deliver so there's no custom letters with door knocks i get that question a lot can i send a special no you can't we have a special letter it's specifically written to comply with fdcpa and they continually update that letter to ensure that any new compliance requirements are included and based on the information that we um based on the information that we put into their web portal that's how the letters maintains its compliant situation i have to tell truthfully how much is owed what the outstanding balance is what the next due date is and so if there was a claim that it was false information that would come back on allied because i provided it but the text of the letter itself is you know we're trying to reach you because you know you're delinquent or whatnot i'd have to look it's been a long time since i've looked at the letter we've had the same vendor for years we have never had an incident relating to door knock letters so that at least has been great um but most other vendors don't really fall under that they aren't doing collection now if you're trying to send a realtor by and and ask them what you're trying to do like your own door knock yeah i don't know that that's that's the best idea realtors are definitely not fdcpa um experts yeah if you're just going there to find out who lives there okay you're probably okay and if you're they're gonna hand them a pre-approved letter maybe from your attorney okay maybe that works yeah i usually if i if i do do a door knock i typically say listen just knock on the door get someone to answer the door and see listen i would like you to call the lender would like you to call the service freaking on the phone and just getting them in that contact where the servicer now can speak to the borrower and get the ball rolling it's just getting break through that door because sometimes you have the wrong phone number maybe the phone number changed maybe the people there just are kind of going whatever maybe it's a tenant that moved in the house who knows what the story smells and they're saying you get the tenant situation you have to be careful again because you can't tell the tenant that they're delinquent correct this is where this whole fdcpa and privacy laws take place if the wife is not on the note and she answers the door you cannot tell her the loan is delinquent you literally can't you can only speak to the borrower and the borrower are only the parties that sign the note there are no others it doesn't matter if the wife's on the deed of trust it doesn't matter if the brother's on the mortgage you cannot disclose that because they are non-obligated um on the note the note is is your key no modification can add i i've seen modifications where they have the husband and the wife sign even though one of them wasn't on the note you can't create personal liability that wasn't there having them sign is unless you're specifically indicating somehow that this is a non-obligated co-mortgage or i i guess you could do that but when you're modifying the note it should be signed by the people who sign the notes so you got to be careful but it also applies the phone calls too though right if i call it if you like life answers you have to ask for mr if she asks why you're calling you can say i'm calling regarding the property at xyz yep that's it you can't talk about the debt yeah no you can't do anything and that's again that's that's why you rely on your servicers or your attorneys to do these types of things because you know you don't want to make that mistake and you can't assume that the people listed in that that the prior servicer listed mr and mrs you cannot assume that they are both on the note we have that all the time they'll both be listed in the customer information and then we pull the note copy and by god one of them isn't on there yeah so we have to pull them off as a contact for the file now if mr gives us authorization yeah yeah right we'll we'll put her on there she will have a four-digit code so we can identify positively identify her when she calls and you can't take their word for it either if you're like hi i'd like to speak to mr smith and he this is he and you say hey mr smith this is blah blah and you need to say you know can you confirm the last four digits of your social security number for me or can you confirm your date of birth yeah just something to tell you how many times they lie they lie when they call i lie i've done that before he'll be like i'll be like oh and you'll be like what's last four digits social security long con you know we're like are you actually this person or are you the son or what not happens a lot um the spanish speaking community because they'll very often have their children call for them and it's really educating them that you can call either with your parent or your parent needs to confirm their identity and give permission to speak to you um you can't pretend i hear my collector saying that all the time you cannot pretend to be the borrower that's fraud yeah you just can't do it so what are some of the things that investors knew and experienced you seen that really something we that should be a takeaway point of something they can prove in their business something that you've seen that something either you're saying boys an investor i would do it differently or something you've seen it was wow that was really well done can you name an experience you have that maybe falls in that category well on the negative side i did have a client who bought several loans and then was surprised they were land contracts do not buy loans that you haven't seen documents on don't do it it's not smart if you don't see the the chain that shows and especially when you're talking land contracts you need from the vesting deed to the original land contract creator and you need everything you should not be surprised by your servicer saying oh i'm sorry you're in alabama this is a land contract and it's going to take forever to foreclose because it had you know because there's rules or west virginia where they don't even recognize them they don't even know what to do with them had to go through a contract breach lawsuit to foreclose out that land contract in west virginia because they were like we don't know what this is yeah so do not buy loans that you do not see the collateral on i i mean i see all of these due diligence talks i know you guys talk about this it seems so obvious to me but there is surprise there is surprise um so something good what was the event where you saw an investor that was really something savvy or success you know um or technique that you liked you know i really i really like um i i think probably i know tapes are big these days i i think i see more quality due diligence when it comes to the the one-offs or the small groups and i know there's a time crunch they don't give you a lot of time to determine your tape and determine i know this okay i get it um but really uh the smaller more focused investors i think investors who know who know their states who know and who know how to buy um pricing is huge um understanding that just because you paid a lot for a loan doesn't mean you're gonna get paid a lot for the loan it doesn't always work out that way and um and and i have some folks who who struggle who struggle you know they're like well i'm not gonna do this proposed deal because i paid x and i'm like it's our experience that reos are never the answer they really are the worst case scenario we tell borrowers this all the time nobody actually wants your house i definitely don't want your 24 000 roof problem house i want you to pay that's what the lender wants they want you to pay but if you don't pay you can't stay i mean we all know those that's basically how it works there's no there's no other option there's no in between um so i would say clients who know who know their states they know what they know what the worst case expenses are because that's what we're looking at here you have to buy with worst case mentality it's performing today but it might not be tomorrow are you prepared let's say you're buying in new jersey are you prepared for what's involved with a 500-day foreclosure action minimum minimum are you prepared for that are you prepared for those costs and if you're going to stand on your mountain and die there are you willing to pay the 14 20 30 000 in attorney fees to be right yeah right and property taxes right we're and property taxes yeah we're ten grand a year probably we're integrating a year property tax out here so i preach this all the time and i agree with you that i always base my bid based on the worst case scenario and i've had sellers to me but this thing was performing for 12 months and then my answer is what would originate children eight what happened before 12 months it number formed one period of time there's a chance it could do it again if it does not perform and i predicted and i bid my base base on yield alone and it defaults what will happen to my well you bought it as a yield great but now it defaulted what are you gonna do about it and most people say well it was perf i bought a performer i bid as a performer and that's the problem a lot of people don't take into account the states the time frames the cost the court plus the legal costs which are two different things everyone talk about fannie mae pricing here's the cost of auction um of you know in doing uh the the auction fee sometimes also the publication of it all those kind of things on top of the fannie mae fees and the time frames ohio new jersey to five boroughs chicago right these are the areas where our timeline are we have a huge calculator figures that stuff out where texas is different than new jersey completely different buy texas all day long unless the borrower dies in test date and then you're hosed that's the only bad thing in texas but we just don't know when a borrower is going to get divorced when a borrower is going to die when when they lose their jobs um and also when you're looking at purchasing that worst case scenario might not be taken back to the house they might be a reinstatement it might be a payoff yeah and so again worst case scenario being relative to that particular it could be selling at node you bought it and you're predicting it could perform and actually know you're foreclosing on it and you're like great i'll get the equity when i sell it and someone comes in and buys it and you're out there and then you're out yeah so looking at what's the worst case scenario for that particular node yes and that's really that's really the work that a client is supposed to be doing when i send them over a completed workout package we will solicit that we have a package and application we ask for a bunch of backup information then we will send it to the client and i i don't think all of our clients do this i mean some of their the whole process kind of a mystery we send them the package and i'll make a recommendation sometimes i'll be like look here's what i think would probably work for these guys but really that's what you've got to be doing you've got to be doing that net present value analysis you've got to be thinking okay if if i take the 10 000 they're offering as a discounted payoff what's my yield versus if i have to worst case foreclose and add a bankruptcy always out of bankruptcy you know what about that uh what about you know do i come back and offer a deed in lieu and then resell how you know taking a look at all those scenarios dean loser heart i have so many clients who are like okay if their delinquents listen them for a deed and lieu yeah if it's not a land contract and they've been there for a while adeenlu offends them because they're like this is my home i'm not giving you my home you know land contracts are a little bit different those borrowers seem to think they're tenants and they kind of disappear sometimes which is could be the best case yeah it could be the best case that they're gone and and understand for some people that didn't lose can go wrong because if there's other liens about property you're dealing you're in some states there are required disclosures and things that must be recorded to actually make this okay yeah i mean granted it's it was a mortgage or deed of trust and you took a deed in lieu and then you find out there's a problem if you haven't released the mortgage or deed of trust you could just foreclose on yourself and clean title but that's expensive and it's hard after the fact let's let's find out beforehand title is so underrated and i think people get title and they don't know how to read it or they just don't or they don't get a guaranteed title product um if you're doing something like a foreclosure you get a foreclo you know a trustee sale guarantee in many cases or you get a foreclosure title search there are guarantees there are warranties that come with that if you're gonna do a deed in lieu you're going to want to title commitment and best case best practice is pay to convert the commitment to a owner's policy when you finish your deed in lieu because then you can stand and say from this date i had clear title and this title company says so and if i don't they have to solve the problem that's one of the things that i don't see anymore that we used to see all the time at met with uh note acquisitions was getting getting either the lender's policy that this original seller got and having it endorsed over to you with the assignment or with land contracts metropolitan bought a new owner's policy on every single one and they got themselves insured um the current state right now where i'm seeing so many of these land contracts are unrecorded which is its own fraught with peril sort of adventure it would be more difficult to do so but i mean it at least a really good title search just so that you know where you're at because there's a lot of errors there's a lot of issues there's a lot of deed deficiencies that come up usually when the borrower wants to pay off and that's a hard time to fix some of that because these folks are gone you can't you can't work your way back through i mean some things can be fixed some things cannot yeah so so coming from the servicing side of things what's uh from what you've seen and what you've experienced and and you've been around at least as an allied company since 2004 so you've seen a few market roller coasters yeah what's your prediction what do you see coming down the pipe you mentioned 12 to 18 months meaning okay so crystal ball time we got it we've got a couple things going on here we've got the skyrocketing values going again and we all know that's it's great if you're selling your house right now that's awesome but it's not awesome going forward if there are people tapping equity again if we are a pre-2008 behavior where people are tapping equity and i think combined with the pandemic and some of the job issues there may have been some equity tapping to just just to rescue them and and low interest rates and ease of getting we have had so pandemic wise allied has not seen a marked increase in defaults related to covid we did not we expected it and we did not have it one of the things we also did was we made them prove the hardship before they could have a forbearance which of course they didn't do that in your big servicers you literally could go on their website say i've been affected by covet and they gave you a six-month deferral okay that didn't happen here we told people that wasn't an option but we've had record payoffs these low interest rates are record payoffs and not all of them not and not all of them are refinances there's a lot of sales people are taking advantage of the high you know the high values as well but i think i think we're looking at a problem when the covid deferrals come due there there are there are no borrowers in my opinion who can afford to come up with 12 months of payments today for what they've deferred and what they've added to their deferral i think that's more an issue for your standard fannie freddie va fha you're guaranteed loans i think there's going to be a huge glut of uh of modifications which is great um but i also think you've got borrowers who have been permanently placed in a hardship where they will not be able to so i think we will start seeing some sales coming out of the big servicers of loans where the borrower has permanently lost their job or lost a spouse to covet or some other issue and they literally cannot afford to pay their mortgage those are the worst kinds of the most heartbreaking because they just you know they they literally can't afford to pay and if a borrower has no ability to repay you can't offer them a modification correct you can work with them for potential deed and low you can work with them for a sale you can try but you can't work it out because they don't have um they don't have the income and that's a big key to your underwriting process right but i think so i think there's gonna be some i think there's gonna be another wave of non-performing coming onto the market um i think it'll it'll be interesting i don't know i don't know if it'll be quite as extensive as what we saw in 2008 yeah um and all i can hope is that that happens before the values start tanking because then at least they have more options and we have more options as holders um to help you wonder if it's gonna be more commercial or residential right because the thought is gonna be more commercial than residential at this point you know my thing with the commercial and we do so little it's very peripheral to our business but my thing with commercial is just from what you see in spokane even in my in my area is that work from home has damaged the office space because a lot of companies just realized why do i pay so much for office space when clearly we can work from home and i think a lot of companies are going to take advantage of getting rid of that overhead cost for space and utilities and whatnot and maintain at least to a certain extent some work from home and i think that's been hard on the office space and of course commercials you know retail space has suffered as well restaurant space has suffered as well and the restaurants here they're struggling to recover because they can't even get they can't get any employees yeah i can't open up because i don't have weight staff or i don't have kitchen staff or they're new and you get a new waiter and waitress and it's just the people coming like i'm not going back yeah it's painful so it's it's gonna be interesting i think it's gonna be interesting to see what happens but definitely commercial you're gonna have to see some repurposing i think you really it's some creative repurposing yeah yeah yeah amazon help me out yeah or i'll tell you this our local mall right definitely struggling you know you can't run the theaters the stores had to be here they opened up that empty space in like hallways and brought in like an indoor farmer's market because that got them some income for bruce and it got people in the mall which got them into the you know other parts of the mall so you know i was like wow that kind of created it and it was early too because you know our weather in in the early spring is not nice and but if you still want to go and look at arts and crafts and you know soap and honey and whatever yeah yeah that was an option and it definitely brought people in and it got people out because you know we were you know we're all experiencing that um pandemic fatigue we just just want to go out i used to lament my son i just want to have brunch again you want to have friends so we're going to wrap it up there and turn off the facebook live feed guys i appreciate everyone jumping on here melissa thanks for coming on it's so early in the morning on a friday day i know uh we're dealing with some nice weather coming up both of your as well if you have any questions feel free to reach out to melissa um she's been real helpful um the cost for servicing is astronomically cheap compared to a lot of places um and as she said before and i'll vouch for a lot of people recommend it uh because the services are top-notch and you're not warmer-legged you're not actually not getting you know ding for every little thing you're dealing to which is a really nice change so reach out to reach melissa and uh allied servicing for any questions i do have the servicing uh fees on the comparison chart if you need them um but if you have any particular questions for melissa reach out to melissa and go from there so enjoy everyone thank you very much for watching and melissa thank you for joining us yeah absolutely it was my pleasure remind her when she's not an attorney she's not going to play a tournament right um but and she'll tell you based on her experience and that's all she can do so today's focus is on learning about what a servicer can do for you as an investor what are some tricks and what's going on in the world servicing that we you know investors should be worried about you know licenses and things like that foreclosure timeframe and costs and be prepared yeah so well melissa welcome thank you so much for having me today yes can you give us a little bit about your background how you got in the space what brought you in and how long you been doing it you know i i accidentally i i answered a blind box ad in the 90s and ended up working for a metropolitan mortgage and securities and at the time they were the largest institutional buyer of private paper wow and i came in through their it department they were developing a system called brokernet that they were putting out there to really speed the process between the brokers to the contract buyers to closing it it was a really remarkable system for the time i really enjoyed working on it i provided a lot of support but then i ended up transitioning into supporting their servicing system and so i was working on the back side of that constantly well then i kind of fell into the servicing manager job so i did all their non-default servicing managements uh so we did documents we did we did all the loan adjustments it was customer service it was escrows things like that and i did that for years and at its height i boy i probably had 51 employees and of course i worked closely with sheila white who was their acquisitions manager so she managed all their different closing departments whether it was the note space or it was the origination space or any the structured settlements and not annuities lotteries all the things that they bought right and so we worked for together forever well when the parent companies had their difficulties and their um their broker dealer had their difficulties and they ended up having to uh file bankruptcy and the insurance companies pulled out i worked for one of the insurance companies briefly um same role but they basically said metro and summit said to us they said melissa and sheila we want you to find a servicer for this little tiny portfolio we have left and of course it was a super super special portfolio because they had sold most of the servicing to aquin by that time um they didn't really have anything that was normal remaining in the portfolio they had sold a bunch of loans uh later on they would have been selling a bunch of loans to security national who bought several but what really was the sticker was like the partials and the special assets and so we're looking and we're looking and we're talking to different servicers and we can't find one so originally it was a joke we're like ah we should go do this ourselves and then one day we're like no no we should go do this ourselves wow and so in 2004 we left our cushy corporate jobs and decided to do this and so we opened our doors and it actually worked out great metropolitan and summit were one of our first clients um security national turned out to be one of our clients because they wanted us to service the partials for them and so and then it just grew from there and as everyone knows this industry is so word of mouth yes it really is and we have done so little advertising you know we do a couple shows a year back when the world was still turning we would do a couple shows a year and that's all we've needed to do because this industry is so close knit everybody knows everybody of course we got a huge um influx of business when note school took off eddie of course has been a friend of ours for years because he was a metro client and that's the funny part is when people call up and they're like i knew you from metropolitan and i'm like okay does that mean you're coming with the torches and pitchforks because that's what happens here but you know but they know that you know they know that you've seen it when partials got big we were like all right we're already servicing them great you know and it was you know whenever they come up with the new shiny product wraps we were like great we can do wraps reps are no problem we've seen them before so i think that experience with metropolitan really gave us an edge in this industry in that i don't have clients who come to me and say i want to do this and i go i've never heard of that because i've seen so much already because metro did so many different and unusual structures i mean literally we had we had eight different kinds of partial at metropolitan i can't believe i'm saying that out loud because now people are gonna be like well what kind of partials yeah how do i do those but they were super flexible they were the kings of buying the deal in a way that worked for both the buyer and the seller the seller got what they needed but the buyer mitigated their risk by the way they purchased it so it was great to have that experience and to see it although i will admit when i first came into this industry i was like i came from originations and i was like you do not have enough paper in this file there's not enough paper here i how are you buying this and is this legal because it doesn't seem right and so but now i mean we've been doing this for we've been doing this since 2004 and it's amazing to have made it through 2008 and even through the pandemic and you know knowing that there's some challenges coming our way probably in the next 12 to 18 months we're just really looking forward to continuing wow that's really interesting that you're doing partials and special stuff before the crash we were doing them very much you learned something nathan this is great well we all we all like to think that you know we've we've figured yes yeah and then you met yeah i think you meet her so it's it's cool to hear about the background because you know nathan and i even though for most people we're 10 plus years in space you have people doing this for decades that just trump our knowledge and being around you guys and i talked to an investor who's been doing this for a long time too and like well my techniques don't work anymore actually your techniques are kind of what we all need because everyone's doing it a new way and you you're really losing out on the fact of reading collateral files and understanding the borrower instead of just taking a tape and then going institutionalized and just doing it partials one way there's only one way to do a partial we mean eight right and not being creative with things and that's how i think that this space is missing um moving forward and i think that's what's gonna happen because in social notes at three four five percent you can't buy them and get a 10 yield on it anymore where eights and sevens and sixes could lift up so creativity is gonna be a big thing and parcels may be something we we nathan talked about bringing on a partial conversation and i think we'll return that sometime soon so let's go base the back to basics here i'm a brand new note investor and a servicer someone i'm told i have to use what happens if i don't use one yeah why do i actually need a servicer what's there now so my thing is this if you don't use a servicer it means you like talking to borrowers constantly about their about their questions and these are unsophisticated borrowers so many times in this industry uh and you just like talking to them you like making sure they have insurance you like making sure that you're sending information to the irs and to them appropriately and that you're complying with all state laws as to what's in that year-end package you like sending them bills you like calculating payoff quotes yourself and most of my clients have real jobs i mean you guys mentioned that they have things that they do every day and this is not it and so the the level of involvement that you want to have with the loan is determined by the systems that you put in place and the servicers or the attorneys or the you know the property preservation companies whoever you're hiring to help you out and and keep your portfolio performing or bringing reperforming your non-performing portfolio however you've come into this space you can do it all yourself i don't do anything that's magic you know i i happen to have a great system that does a lot of things for me but if you're if you're excel savvy you probably can do most of the math i do in excel and be able to produce what you need to produce and the question is is it worth your time are you making money servicing loans or are you making money acquiring them working them out um turning them with partials or resales where is the best use of your time so let's explore a little bit more right um and i think that for most investors they don't even know what you said right what do you mean insurance why are we the insurance let's back up even farther than that yeah i'm a i'm a lender i just bought my first note and i'm going to move forward and i'm going to call the borrower and say hey i got a note that i own that's yours and the grandmother picks the phone up and then he's saying i can't reach him there i'm going to call the job and see if i can hold him there let me try him at nine o'clock at night because he's probably hit the front then can i do any of those three things and what if i say something on the phone is wrong is there legal consequences of doing that kind of stuff generally speaking so everybody talks about fair debt collection practices act absolutely that technically applies to third parties allied is the third party i don't know in the notes so i have to observe it but i will tell you if you as the holder are not very careful to represent the actual holder you have to say if you bought it in xyz llc you have to say hey i'm melissa with xyz llc you can't have a property or you can't have a a loan management company or a loan workout company you're a third party but even if you're calling as a representative of the holder if you are not observing those rules you are opening yourself up to to legal and because there are there are attorneys out there that pay their bills with violations of debt collection laws because there's also state laws and so if you don't know your state and federal laws just as great as you know you need to know all of them in all the states you're in you can violate it and maybe no one will notice maybe the borrower won't notice but you know you can't you can't like keep calling them we've had this experience a client will just call and call and call and call that's harassment or the client will text them and just text them and text them that makes sense right that's how you get ahold of them but that's that's harassment they have they they cannot not respond then you're supposed to take proper legal action um you can't you know you can't threaten them you can't you can't say i'm going to you know you can't be like if you don't send me money i'm going to take your house you know it's it's true but you have to do it right um you we had a collector back before the days when i was at metro the guy was like i'm having a garage sale this weekend i'm trying to raise money to make my payments and this collector said well you better keep your camping equipment because that's where you're going to be living if you don't make your payments this is a perfect example of what you cannot do especially these days and you cannot afford no one can afford a consumer protection lawsuit in any way shape or form none of us can granted servicers are a little bit more used to defending those and dealing with them but again you don't want to do that and if you're new it makes sense to have people in place that can save you from very expensive errors because those that's not the experience we want you to learn from that's those aren't the experiences we want you to learn from uh so there's just there's there's a lot of risk and so you have to determine how much risk you're willing to take and how educated you feel that you are it's not hard to become educated i'm not gonna i'm not gonna pretend that it is but can you remember you know each time each state some states have different breach notices because i have people who always like i'm just gonna send the demand notice myself i have one that my attorney did for this and i'm like okay you're in a different state and it might have a different timeline are you reviewing your documents do you know where to look to find out the breach timeline do you know where to look to determine if you even need a breach notice or whether you can go straight to foreclosure if you don't know these things that's why you need a servicer in place who can take those steps for you so let's go up we're going to definitely get some more topics here and i think that you know we also have people who want to contact the grow themselves when can we actually start doing that i'm sorry i missed that i had some feedback dave's working something out there it's like is it me it's me isn't it got something else going on so let's talk about the tr dave's back yeah my bottoms are good so i'm not sure what it was as a comedy i thought so when we were talking to a beginner one of the questions they ought to have is that you know this hello letter goodbye letter topic right what can i call borrow i just bought the note nathan i said why are the money i'm gonna call the borrower and get them on i'm gonna start process getting them performing i feel that it's a poor choice here's why here's why so there are there are two actual letters involved in in a note sale there is a letter that in this example nathan would send to the borrower saying i've sold this note and this is who i've sold it to and this is their contact information and that is commonly referred to as the tila 404 letter which is strictly a notice of loan sale it says i held your note i've sold it to this person effective this date and it gets mailed then there is the the goodbye letter which is the outgoing servicer says hey servicing is changing from xyz to allied and there's so there's two different notifications that have to happen in my experience most borrowers don't open either of those so fyi they throw them away then what happens is so the the the servicer goodbye letter sets a date that allied takes over after that date i have 15 days to get the loan into my system check all the documents make sure everything's correct do our qa and then i send a hello letter that says hi i'm allied i'm your new servicer this is how you reach us these are your options for making payments um please send us proof of insurance and here's our privacy policy so it's it goes out to them and it includes their coupon book and the idea is that now they know who we are and they can pay us that's great now the service transfer date starts a 60-day window where the borrower cannot be collected upon nor can we impose late charges it used to be known as the respa service transfer period but it's a 60-day period in which i do not recommend anyone make any calls to their borrowers it's designed to make sure that when the borrower set a payment to the prior servicer they have time to forward it to us and we get accredited so there's no collection occurring for interim payments that have been lost in the or not not lost but they are still going to the old servicer still going to the news servicer you know let's get them all in line get the borrower getting their insurance to us get all of that working through after that 60 days expires if the borrower is not current that's when the servicer is going to start their outreach did you get the goodbye letter did you get our letter we will send copies so again right after that 60 day period it's a very kind contact we make the assumption they didn't read the letters because most americans unfortunately don't read all their mail they don't open it all uh you know and i think it's because i've been in this industry that i find that amazing i open everything you just never know um but they they almost never they almost never receive it and or receive it they almost never open it so if we get returned mail we also you know during that 60-day period we may have to do a skip trace maybe we were given a bad mailing address maybe we don't have any phone numbers that happens commonly so we're going to be doing some of that research as well our boarding process of course is not just loading the data into the system we compare that data to the documents if they don't match now we're questioning was there a mod is there a forbearance is there a letter somewhere where someone said we're gonna do this thing for a while what why are they different if um we check bankruptcy records on all borrowers i cannot tell you how many deals i get that are not tagged bankruptcy and have a chapter 7 discharge that applies and once we've got discharges now those phone calls the new lender wants to make are prohibited you do not call borrowers with discharges if you didn't check that in your due diligence don't make a phone call until you have checked pacer pacer is super cheap i encourage people to have it yeah it's a double-edged sword because they don't understand what they're reading and they get a lot of questions as a result but yeah but just being able to see if there is a discharge that is after the date of your loan origination is huge because that's going to save you a lot because no one wants to be pulled into a bankruptcy court for contempt of a discharge order so you know and these are all things your servicer does as a matter of course but definitely not on the borrower let's cur let's just make sure we're clear on that so a borrower goes in bankruptcy they make all their payments they clean right through it and their loan is still active right they didn't get dismissed they got through it all everything went me through the bar is on the other side of it they default afterwards as a lender i can now call that borrower even though that loan so the loan is still active after bankruptcy if it was a chapter 13 discharge and this is default on post-petition payments after or post-discharge payments yes they are still obligated for those payments chapter 7 however eliminates all personal liability they can never be called ever again your only recourse is the property so if they are not paying post chapter seven discharge your only option is notice of demand and work through foreclosure unless the borrower makes inbound contact and requests a modification and then you want to make sure that your modification or forbearance contains special language indicating it is not an attempt it's voluntary you're saying it's voluntary you're restating their for their bankruptcy information and saying this is does not create new personal liability so just to be clear special language is required for any post discharge yeah just to be clear though you know if the borrower takes chapter seven and continue and retains the debt and holds the asset right and they get their bankruptcy and they retain the debt for you can reach out to them it's when they discharge the debt out of the system completely and they're no longer responsible for the debt itself if they did not reaffirm in the chapter seven you cannot call them they had to have reaffirmed the debt which is so rare most debtor counsels do not recommend reaffirmation for their clients uh we try and when they put that um when they put their intent to reaffirm in their in their chapter seven filing we will send a reaffirmation agreement immediately for them to execute but it almost never happens um but it's just safer to chapter seven post discharge do not make a phone call send start your legal action and let them contact you so go with that is that borrower the servicer can't make any contact or recommended contact for 60 days can i go to my attorney and say i want to file for closure immediately i wouldn't okay well just to answer that question if they are reasonably performing let's say they are less than a year delinquent and they've made payments in the prior year i would wait out the 60 days now if you've got a true non-performing that's six years delinquent they've never made a payment to the last three servicers i'm okay with i'm okay if you want to have your attorney start action or even our attorneys will start action during that 60 days because they are truly non-performing there are no payments that are getting lost there's no there's none of that they can't claim they didn't know where to pay although they will um and you know we still can't assess any late charges during that 60-day period but you can at least start that foreclosure action you can get that 45-day notice out then you can do your breach and then you can start the foreclosure but again same thing there are there are statutory notices that have to occur before you can start foreclosure and that's why you need to coordinate with your servicer you can't just buy the note go to your attorney and start foreclosure and you have to be careful we've had attorneys who didn't understand the moratoriums we've had attorneys who didn't understand who didn't know that there were statutory notices that had to go out before they could start so you know vet your attorneys as hard as you've got your servicer because you want someone who knows everything because today's environment is too complicated to simply have you know your brother who you know is a general purpose attorney sends you a percent a breach notice for you it's cheap but it's not a good idea and i don't understand i say allied uh we prepare breach notices here they're a hundred dollars i don't think that's too expensive there's a couple states that are more expensive but most states it's a hundred dollars and to have it done right you know but people are like oh no i'm gonna have my own attorney do it i'm like you must like paying bills because they're going to charge you three or four times that but you know we're pretty flexible at allied you want to use your attorney use your attorney you want to use our attorneys use our attorneys however they want to do it um not all servicers are flexible like that there are servicers that require you use only their approved attorneys and you coordinate through them um we have a blended philosophy and if you use your own attorney just keep us involved if you send a demand tell us so we restrict the account don't accept payments be great tell us what your fees and costs are that you've incurred you are going to have to send us the bills you cannot recover things like the cost of recording your own assignment you know we need to look we need to see what the bill says um so that we're accounting for it properly on the borrower's side so i got a question on on going back again to to this is a new note it's being transferred over to allied let's say that i did a bunch of uh postcarding and i found myself just a regular seller finance note so it's not it's not something that was previously professionally serviced it was just you know mom-and-pop service note so what information do you need in order to board that loan really the information we need is no different the absolute minimum the only thing i can't know from a review of the documents is the unpaid principal balance and the next due date any outstanding balances and the uh the borrower's information social security number um contact information etc but the information is generally the same i would never buy a note from an individual seller that did not either have a reasonable facsimile of a pay history that was itemized principal interest running principal balance especially accounting for escrow if that was involved all of that if they didn't keep anything formal i would i would get a pay history affidavit you want something in the file that you can stand on when the borrower says that's not my balance right so you know sometimes we just get a pile of uh cancelled checks and an excel sheet great that works too you know we've got evidence we can stand on that but the difference is is that i don't have a service transfer period basically there is a letter from the outgoing seller that says to the borrower it's addressed to the borrower it says i've sold my note to nathan and nathan wants you to make your payments to whoever your designated servicer is so would say make your payments to allied they send that to the borrower that's the party they know the borrower hopefully will read it and and do that and then they just include a copy in our package but they just have there has to be something in our package that shows the borrower has been made aware that allied's the new servicer we have deals where um clients have serviced themselves for whatever reason they've serviced themselves maybe they did it to take a non-performing and get it into a workout now that it's got to work out they want to engage a servicer we see this a lot we have a we have a letter we use we call it an election of servicer letter it's basically hey i've decided to use a servicer and make all your future payments to allied again no 15 day notices no 60-day transfer period it's simply i still own your note but i'm going to use a servicer now so there's a variety of notifications but the key is just notifying that borrower that you've brought a servicer on all right so we have a question uh from cody cox uh how often does a borrower respond with proof of insurance if they are not a land contract surprisingly often so our welcome package does say send a copy of your insurance here's our last payee clause do this we actually use a vendor down in dallas who then does the follow-up statutory notices you have to send x number of notices so many days apart before you can actually place insurance and assess premiums it's federal law we luckily we let them do that they also review the insurance to make sure it's appropriate that it lists us as lost payee that it covers either replacement cost or the unpaid principal balance whichever is less is the requirement and that it meets meets our other standards and then they will monitor that for us generally speaking if you're talking about a note indeed of trust that's been professionally serviced in the past chances are they're going to have insurance and they're going to they're they'll provide even if they only send us a copy or even if they sometimes they just write their agent name and number on the form and they send it back to our office great we'll contact them we'll get it updated that's awesome if it's a land contract most often the borrowers have been told or are laboring under the misunderstanding that they can't get homeowners insurance the key to getting homeowners insurance when you have a land contract is not to call your agent and say well i don't own the property but i need homeowners insurance that's really the key here the key here is to say i bought this house i need homeowners insurance and it's it's a pretty easy straightforward thing uh what we do what ally does is in addition to the outreach that our vendor's doing to get insurance is we do a lot of education on the phone too the first time we talk to them one of our procedures is to ensure do you have your own homeowner's insurance have you updated the last pay and sent it to us and if then they'll say something like well the seller had insurance and we're like okay that will continue here and you're going to get notices but it's really in your best interest to have your own insurance we try to educate them because they don't understand that force-placed insurance or lender-placed insurance is only going to in a best case scenario pay off your loan nothing for equity nothing for contents nothing for loss of use and in many cases the deductible is quite high and so for smaller losses there's almost no way because they don't have twenty five hundred dollars to start the work and they have to pay their deductible before any claim funds kick in um the slight advantage is that if they're delinquent and it's a smaller claim we can always apply those funds just to the loan because we can't really get in there and get the work done so it's a little more difficult to do that but borrowers can be surprisingly responsive if they've if they've been responsible borrowers in the past borrowers who didn't have insurance in the past it's really hard to get them to get insurance they don't like paying that first year that's really the key especially if they're escrowed they don't like to pay they don't like to pay that first year while they're paying escrow they're like you're double billing me and we're like no savings account think of it as a savings account because in a year we're going to pay that whole premium and you'll be done so we spend a lot of time on insurance education with the borrowers because they really either haven't been asked to be responsible and have insurance or they're under the impression that they can't be so so we had a second question uh from marco um what's your recommendation for setting a cutoff date when you're a performing loan sells or when in non-performing loan sales i guess if i'm the seller and i'm selling my loan to nathan what's your recommendation for sending a cut out date i guess marco correct me wrong based on when the contract sale date if i'm gonna sell a loan today when should my cutoff date be from your recommendation to ensure payments and whatnot so no loan sale is ever gonna be perfect because borrowers are unpredictable if you have a borrower who is uh maybe they're on ach with allied their payment comes out on x date every month every month then it's easy pick a cut-off date after that date you get that you get the you're going to get the july payment and they're going to start with august if they write a check it becomes more difficult that's why it's important that your new servicer sees the um the purchase and sale agreement because service transfer will have nothing to do with cutoff right basically funding is what starts the service transfer you fund the outgoing seller says hey allied we're transferring to fci and so then our clock is running on a whole different thing what your cutoff date was doesn't matter the lap we're going to send every payment we get until service transfer to our client and then after service transfer we're going to forward to the new servicer but they need to know you know who that might belong to so cut off is is great but it almost doesn't matter because it has to do with what when the borrower's gonna pay obviously with the delinquent with the delinquent or truly non-performing loan it doesn't matter the chances of money coming in are pretty low and that's really the only point of cut off is determine who gets payments before this date who gets payments after this date so those are familiar we're talking about here cutoff date is applying to the payment received from the borrower to who does it go to so to cut updates today when a payment comes in tomorrow technically the money goes to nathan if they set up the cut off days today that payment comes in today the money would go to me if i set the date two weeks in advance because i know the fact that pay on the 10th of the month i set it up with that i get that money nathan gets anything after that so that's what cut off date means when you're dealing with um buying a loan cut off date when you're looking at a tape of assets is different that's usually the time frame when the data was last updated so on on a non-performing most often it's it's whatever the funding day is yeah so if funding day is today then that's the cutoff date as well for a performer that like you say you can set it to whenever whatever makes sense and one thing to remember is so we we kind of refer them as interim payments there are payments that came to the prior servicer before the service transfer date but after the cut off what normally happens is the servicer is like not our job and they just send it to their client because normally they don't have any information for the new buyer so if it would loans come into allied and nathan you know wasn't my client at the time you know i don't know where to send the money so there are interim payments that you sometimes see where they've gone to in our example the payment was sent by the servicer to dave and dave's got to afford it to nathan that's kind of your job sometimes the servicer sends it to the new servicer we can't post that payment it's already incorporated into the history and balance in our system so we just have to like deposit and forward it to you we don't necessarily have a breakdown we don't necessarily know if there's any extra included believe me that servicer took their fees out so you're definitely not getting a whole payment so interim is tough there's a lot of confusion about the payments really all you can do is between the history that we get from the outgoing servicer and where we start boarding is to try to determine if there was a pre cut if there was a post cut off payment that went to the prior servicer that went to someone else it usually works itself out okay most sellers are pretty honest and they'll forward that money uh occasionally it doesn't happen but allie doesn't have a lot of power in that case so let me ask you two quick questions because we get these questions often is can an ally hold collateral files and um what's your typical fees per month right that's the most common question guys how much do you guys charge per month if i have a file that's coming i'm a brand new buyer and i have a file economy i don't have a lock box or a safe can i send to you will you hold the collateral and and one more on that is i'm a new investor will you just do one loan i just bought my first loan will you take care of one loan or do i need to send you 10 yes we will do one loan we have the bulk of our clients are single loan people or probably especially if you start looking at less than 5 or 10 then that number just gets exponentially bigger we have no problem if this is your first loan it's your only loan um we have no problem it's your only loan with allied let's say you're using someone else for your north carolina deals because we don't do north carolina so maybe you know maybe you're somewhere else with that but you you got a texas and you want to bring it to allied great one loan's not a problem we uh charge our setup fee is a hundred dollars for first liens and it's fifty dollars for juniors it's uh 18.50 a month for servicing on performing loans it's 15 per month on non-performing we do share any accrued and paid late charges 50 50.

and the only other fee that's actually listed in our servicing agreement is if you choose to change services at any point um there is a fifty dollar deboarding fee so that's that's really it our our fee structure is pretty straightforward it um that buys you allied if you if we have to go outside of our office for a vendor so a door knock an inspection foreclosure action um bankruptcy attorney any of that then we're going to give you upfront notice via email you approve the fee and at that point it be incurred and then that's billed back to you straight across so the monthly fee gets you allied and then any other fees are only if we have to go outside for a vendor as far as collateral documents go i wish i held everyone's collateral document everyone's because it makes my life so much easier i have had events where we were talking before the video where i got a collateral file at payment in full and none of the assignments have been recorded okay well now i got to do all that before i can you know even do the release and i get files where the notes gone or i get files where they're not originals in the end if i get your collateral file at boarding first of all we're going to review it we're going to make sure it's complete and we're going to make sure that everything is assigned through to you we are going to make sure that it gets to you and we're also not going to record your transfer documents if something's already broken you know we're not going to make it more broken we image all of our collateral files they are held in fireproof storage there is no additional charge for document custody it also makes it easier in states where we have to surrender notes or other originals to the court or to the attorney to start the action it speeds everything up and the less that a file and its contents move through the mail or fedex the better yeah i mean everybody everybody's like oh it's fedex it'll be no problem i happen to know personally that there's a box of files that will never be recovered because it fell off a plane on a runway burst open and the papers went poof you're never recreating those files they're gone and the note still has magic i know there's a lot of movement towards e-sign and e-notarize and that's great but in some states the note has magic and you need it um everybody's oh last note affidavit that only works if you have a copy of the note to attach if you have nothing a lost note affidavit does you no good yeah right so but i love holding the collateral files i love being able to pull them and check things you wouldn't you you can't imagine how many times we get a question from an attorney yeah we're missing in a lounge and we look in our images and we're like well we don't have it turns out it was on the back of the note but we didn't have the original document so we didn't make the image so we didn't realize that was missing [Music] and if you are an individual if you don't have fireproof storage or if you plan to travel i had a client who said well i can't send you the original note because i'm in canada for the next 60 days well that doesn't work in real estate i need it today so um and even if you do have storage let's say you use a safety deposit box that's pretty common okay are you the only one who knows you have the box are you the only one who has a key who can open it because unfortunately the reality is we cannot predict how our lives are gonna go and a deceased seller deceased lender is a problem because especially if we don't know who your heirs are [Laughter] you know we we're good but we can't we can't just you know get all of this well he's like you know if you're if you're an llc and you're single member what happens if you're unavailable to sign yeah you know at least give someone a poa do something give ally to poa we have a standard form if you want to make us your limited power of attorney for purposes of your i've done that loan servicing and do you like signing documents because i can tell you this my clients who i have an lpoa on when it comes time and that loan pays in full and i print the document sign the document and send their wire and it's happening a week or less from payoff versus i have to produce the document i just send it to you you have to sign it you have to return it i have to have an original house hey you can get your money faster so it's an option and i don't know uh if all servicers have that option i know that it's an option here but it's definitely something to ask especially single member or an individual holding notes if there's no one else who can sign on your behalf that's that's gonna you know that's gonna save you some struggle going forward and it allows you to lead the life you want to lead you want to travel do you want to be out of the country do you you know what you want to do so um marco asked i'm not sure a statement a question that it's is it zero dollars for escrow i do not up charge for escrow i do not upgrade charge for multiple disbursements i do not up charge for partials bk no no our standard non-performing fee would apply it depends on the nature of the bk is it going to be a performing chapter 13 or whatnot it kind of depends on what was in place before it happened but we don't charge um the upcharge we the only thing you get is the is the legal fees for the filing of the preparing and filing of the proof of claim the review of the plan and any required objections and normally on the bulk of chapter 13 there's a big front loading of those types of costs but then once the plan is confirmed i mean in my opinion it's simply the posting of a payment we do the maintenance on our end to create the pre and post buckets and then it's just a matter of posting payments so we've never had a philosophy here at allied but it was that it was um special kind of like partials they're not special our system does it once we do the maintenance to match up to the to the plan and the proof of claim after that it's just posting checks and with the non-performing world are you guys doing the borrower outreach if we request it are you calling the borrower at your fee you know for for most servicers i'm sure you know this your fees are astronomically lower than most services which is great if i date a borrower or go default will you do the phone calls and all the issues and reach out to me for the problems at the same fee as you're charging for the monthly chart for the low dollars yeah we absolutely it's it's our collector has a standard list that's popping up um we are not calling them on day four we tell you right now we never call before the expiration of the grace period we rarely call before we're getting closer to that 30 or 45 day mark only because these are not borrowers who pay on time the ones who pay on time they're on ach and be totally honest if they're on ach they're going to pay on time the borrowers are unsophisticated they use every day of their grace period every second of it and in many times i have clients who pay their late charge every month borrowers pay their late charge every single month great love it you know and if we call them and if they're like oh i was just gonna mail you a payment we could be like we take that payment right over the phone we'll do it right now um so we do payments over the phone they can go onto our website and make payments if they don't like to talk to us a lot of borrowers didn't want to talk to you they just let's go online especially if you call they don't answer and then they go online and they make that payment you see it that it's going to post the next day it's it works kind of cool our website uh the portal for the borrowers they can actually opt in for a reminder it'll text them about four days prior hey your payments almost do and that actually works for some of our borrowers who are not if they don't if someone doesn't ask them to pay they don't pay but so because we are a small company we are not calling them every three days that's that's not happening um we are call and we are also we also review the loan a little bit we know these borrowers we know if this borrower's only is going to pay on the last day of the month we're not going to call them we know they're going to pay on the last day of the month some of our borrowers only pay if they get a notice of demand we call that the quarterly payment plan where every three months we send a demand and they reinstate and then they immediately re-default and three months later they like paying fees i mean they have to pay for that notice of demand and clearly you know that works for them but collections is a weird it is less a science more an art it is not more calls more letters gets more response it really has to do with knowing what that borrower's going to do or not do yeah um but we also try to make it really easy for them to pay like i said they can be on ach we'll pull their payment every month we'll pull their payment every two weeks how do they we we try to fit it to their paydays we you know we're not like you have to pay on on your due date the whole amount if they're paid every two weeks or twice a month we we can split it up we can help them out with that of course they can always call in a payment they can do the web payment they can use their banks bill pay um with borrowers who wire every month wow clearly people have more money than i do to pay bank fees because they are out there making use of that but you know it's a guaran at least it's it's not a payment that can go nsf so you know there's some there's some plus to that so and of course we still have borrowers who mail in a check every month yes mail it in they write it out they mail it in actually i think we do i we haven't done my wife does it she just likes doing it that way yeah yeah and i mean i just i've got everything on autopay because that's like my preference but people don't trust it you know we have people who will do a payment over the phone but they won't do it via our website because they don't trust that i'm like so you'd give a person your banking information but the website not doing that so borrowers are funny um but yes all of our outreach like i said the use of any allied employee is included in that fee so our collectors doing the collections our 45 day notices are run regularly that's a surprisingly effective letter they only read as far as the uh sentence that says the lender may start foreclosure and then they call because they're in foreclosure and we're no you're not sure but but it's an effective letter um one of the few the federal government has ever come up with that is actually has any kind of desired result yeah yeah so i'm not sure if we understand this question from well um i'm going to do my best to kind of translate it that there was a about i guess third-party vendors in their compliance with force uh with f d cpa um i'm positive i'm messing the question up do you want to share the questions in the chat i just wanted to i saw it as well i'm not familiar with this let me just read it the way it's real we'll see it says after reading about the hunstein versus preferred collection and management services case uh what measures does allied take when it comes to third-party vendors and compliance with fdcpa so we don't have any third party collection vendors okay other than our foreclosure attorneys and foreclosure attorneys are actually handled differently under fdcpa and they we're using we're using established firms that specialize in foreclosure and bankruptcy and so we can rely on um on their policies and procedures for any required notices that they send out i'm not familiar with this particular case so yeah it's not sure but it appears that's something the only thing i'm thinking about is maybe if if someone's doing a door knock maybe that's where it was going so door knocks actually a pretty good example we use a door knock firm when we first signed up with them they have they basically have a vetted letter that they will deliver so there's no custom letters with door knocks i get that question a lot can i send a special no you can't we have a special letter it's specifically written to comply with fdcpa and they continually update that letter to ensure that any new compliance requirements are included and based on the information that we um based on the information that we put into their web portal that's how the letters maintains its compliant situation i have to tell truthfully how much is owed what the outstanding balance is what the next due date is and so if there was a claim that it was false information that would come back on allied because i provided it but the text of the letter itself is you know we're trying to reach you because you know you're delinquent or whatnot i'd have to look it's been a long time since i've looked at the letter we've had the same vendor for years we have never had an incident relating to door knock letters so that at least has been great um but most other vendors don't really fall under that they aren't doing collection now if you're trying to send a realtor by and and ask them what you're trying to do like your own door knock yeah i don't know that that's that's the best idea realtors are definitely not fdcpa um experts yeah if you're just going there to find out who lives there okay you're probably okay and if you're they're gonna hand them a pre-approved letter maybe from your attorney okay maybe that works yeah i usually if i if i do do a door knock i typically say listen just knock on the door get someone to answer the door and see listen i would like you to call the lender would like you to call the service freaking on the phone and just getting them in that contact where the servicer now can speak to the borrower and get the ball rolling it's just getting break through that door because sometimes you have the wrong phone number maybe the phone number changed maybe the people there just are kind of going whatever maybe it's a tenant that moved in the house who knows what the story smells and they're saying you get the tenant situation you have to be careful again because you can't tell the tenant that they're delinquent correct this is where this whole fdcpa and privacy laws take place if the wife is not on the note and she answers the door you cannot tell her the loan is delinquent you literally can't you can only speak to the borrower and the borrower are only the parties that sign the note there are no others it doesn't matter if the wife's on the deed of trust it doesn't matter if the brother's on the mortgage you cannot disclose that because they are non-obligated um on the note the note is is your key no modification can add i i've seen modifications where they have the husband and the wife sign even though one of them wasn't on the note you can't create personal liability that wasn't there having them sign is unless you're specifically indicating somehow that this is a non-obligated co-mortgage or i i guess you could do that but when you're modifying the note it should be signed by the people who sign the notes so you got to be careful but it also applies the phone calls too though right if i call it if you like life answers you have to ask for mr if she asks why you're calling you can say i'm calling regarding the property at xyz yep that's it you can't talk about the debt yeah no you can't do anything and that's again that's that's why you rely on your servicers or your attorneys to do these types of things because you know you don't want to make that mistake and you can't assume that the people listed in that that the prior servicer listed mr and mrs you cannot assume that they are both on the note we have that all the time they'll both be listed in the customer information and then we pull the note copy and by god one of them isn't on there yeah so we have to pull them off as a contact for the file now if mr gives us authorization yeah yeah right we'll we'll put her on there she will have a four-digit code so we can identify positively identify her when she calls and you can't take their word for it either if you're like hi i'd like to speak to mr smith and he this is he and you say hey mr smith this is blah blah and you need to say you know can you confirm the last four digits of your social security number for me or can you confirm your date of birth yeah just something to tell you how many times they lie they lie when they call i lie i've done that before he'll be like i'll be like oh and you'll be like what's last four digits social security long con you know we're like are you actually this person or are you the son or what not happens a lot um the spanish speaking community because they'll very often have their children call for them and it's really educating them that you can call either with your parent or your parent needs to confirm their identity and give permission to speak to you um you can't pretend i hear my collector saying that all the time you cannot pretend to be the borrower that's fraud yeah you just can't do it so what are some of the things that investors knew and experienced you seen that really something we that should be a takeaway point of something they can prove in their business something that you've seen that something either you're saying boys an investor i would do it differently or something you've seen it was wow that was really well done can you name an experience you have that maybe falls in that category well on the negative side i did have a client who bought several loans and then was surprised they were land contracts do not buy loans that you haven't seen documents on don't do it it's not smart if you don't see the the chain that shows and especially when you're talking land contracts you need from the vesting deed to the original land contract creator and you need everything you should not be surprised by your servicer saying oh i'm sorry you're in alabama this is a land contract and it's going to take forever to foreclose because it had you know because there's rules or west virginia where they don't even recognize them they don't even know what to do with them had to go through a contract breach lawsuit to foreclose out that land contract in west virginia because they were like we don't know what this is yeah so do not buy loans that you do not see the collateral on i i mean i see all of these due diligence talks i know you guys talk about this it seems so obvious to me but there is surprise there is surprise um so something good what was the event where you saw an investor that was really something savvy or success you know um or technique that you liked you know i really i really like um i i think probably i know tapes are big these days i i think i see more quality due diligence when it comes to the the one-offs or the small groups and i know there's a time crunch they don't give you a lot of time to determine your tape and determine i know this okay i get it um but really uh the smaller more focused investors i think investors who know who know their states who know and who know how to buy um pricing is huge um understanding that just because you paid a lot for a loan doesn't mean you're gonna get paid a lot for the loan it doesn't always work out that way and um and and i have some folks who who struggle who struggle you know they're like well i'm not gonna do this proposed deal because i paid x and i'm like it's our experience that reos are never the answer they really are the worst case scenario we tell borrowers this all the time nobody actually wants your house i definitely don't want your 24 000 roof problem house i want you to pay that's what the lender wants they want you to pay but if you don't pay you can't stay i mean we all know those that's basically how it works there's no there's no other option there's no in between um so i would say clients who know who know their states they know what they know what the worst case expenses are because that's what we're looking at here you have to buy with worst case mentality it's performing today but it might not be tomorrow are you prepared let's say you're buying in new jersey are you prepared for what's involved with a 500-day foreclosure action minimum minimum are you prepared for that are you prepared for those costs and if you're going to stand on your mountain and die there are you willing to pay the 14 20 30 000 in attorney fees to be right yeah right and property taxes right we're and property taxes yeah we're ten grand a year probably we're integrating a year property tax out here so i preach this all the time and i agree with you that i always base my bid based on the worst case scenario and i've had sellers to me but this thing was performing for 12 months and then my answer is what would originate children eight what happened before 12 months it number formed one period of time there's a chance it could do it again if it does not perform and i predicted and i bid my base base on yield alone and it defaults what will happen to my well you bought it as a yield great but now it defaulted what are you gonna do about it and most people say well it was perf i bought a performer i bid as a performer and that's the problem a lot of people don't take into account the states the time frames the cost the court plus the legal costs which are two different things everyone talk about fannie mae pricing here's the cost of auction um of you know in doing uh the the auction fee sometimes also the publication of it all those kind of things on top of the fannie mae fees and the time frames ohio new jersey to five boroughs chicago right these are the areas where our timeline are we have a huge calculator figures that stuff out where texas is different than new jersey completely different buy texas all day long unless the borrower dies in test date and then you're hosed that's the only bad thing in texas but we just don't know when a borrower is going to get divorced when a borrower is going to die when when they lose their jobs um and also when you're looking at purchasing that worst case scenario might not be taken back to the house they might be a reinstatement it might be a payoff yeah and so again worst case scenario being relative to that particular it could be selling at node you bought it and you're predicting it could perform and actually know you're foreclosing on it and you're like great i'll get the equity when i sell it and someone comes in and buys it and you're out there and then you're out yeah so looking at what's the worst case scenario for that particular node yes and that's really that's really the work that a client is supposed to be doing when i send them over a completed workout package we will solicit that we have a package and application we ask for a bunch of backup information then we will send it to the client and i i don't think all of our clients do this i mean some of their the whole process kind of a mystery we send them the package and i'll make a recommendation sometimes i'll be like look here's what i think would probably work for these guys but really that's what you've got to be doing you've got to be doing that net present value analysis you've got to be thinking okay if if i take the 10 000 they're offering as a discounted payoff what's my yield versus if i have to worst case foreclose and add a bankruptcy always out of bankruptcy you know what about that uh what about you know do i come back and offer a deed in lieu and then resell how you know taking a look at all those scenarios dean loser heart i have so many clients who are like okay if their delinquents listen them for a deed and lieu yeah if it's not a land contract and they've been there for a while adeenlu offends them because they're like this is my home i'm not giving you my home you know land contracts are a little bit different those borrowers seem to think they're tenants and they kind of disappear sometimes which is could be the best case yeah it could be the best case that they're gone and and understand for some people that didn't lose can go wrong because if there's other liens about property you're dealing you're in some states there are required disclosures and things that must be recorded to actually make this okay yeah i mean granted it's it was a mortgage or deed of trust and you took a deed in lieu and then you find out there's a problem if you haven't released the mortgage or deed of trust you could just foreclose on yourself and clean title but that's expensive and it's hard after the fact let's let's find out beforehand title is so underrated and i think people get title and they don't know how to read it or they just don't or they don't get a guaranteed title product um if you're doing something like a foreclosure you get a foreclo you know a trustee sale guarantee in many cases or you get a foreclosure title search there are guarantees there are warranties that come with that if you're gonna do a deed in lieu you're going to want to title commitment and best case best practice is pay to convert the commitment to a owner's policy when you finish your deed in lieu because then you can stand and say from this date i had clear title and this title company says so and if i don't they have to solve the problem that's one of the things that i don't see anymore that we used to see all the time at met with uh note acquisitions was getting getting either the lender's policy that this original seller got and having it endorsed over to you with the assignment or with land contracts metropolitan bought a new owner's policy on every single one and they got themselves insured um the current state right now where i'm seeing so many of these land contracts are unrecorded which is its own fraught with peril sort of adventure it would be more difficult to do so but i mean it at least a really good title search just so that you know where you're at because there's a lot of errors there's a lot of issues there's a lot of deed deficiencies that come up usually when the borrower wants to pay off and that's a hard time to fix some of that because these folks are gone you can't you can't work your way back through i mean some things can be fixed some things cannot yeah so so coming from the servicing side of things what's uh from what you've seen and what you've experienced and and you've been around at least as an allied company since 2004 so you've seen a few market roller coasters yeah what's your prediction what do you see coming down the pipe you mentioned 12 to 18 months meaning okay so crystal ball time we got it we've got a couple things going on here we've got the skyrocketing values going again and we all know that's it's great if you're selling your house right now that's awesome but it's not awesome going forward if there are people tapping equity again if we are a pre-2008 behavior where people are tapping equity and i think combined with the pandemic and some of the job issues there may have been some equity tapping to just just to rescue them and and low interest rates and ease of getting we have had so pandemic wise allied has not seen a marked increase in defaults related to covid we did not we expected it and we did not have it one of the things we also did was we made them prove the hardship before they could have a forbearance which of course they didn't do that in your big servicers you literally could go on their website say i've been affected by covet and they gave you a six-month deferral okay that didn't happen here we told people that wasn't an option but we've had record payoffs these low interest rates are record payoffs and not all of them not and not all of them are refinances there's a lot of sales people are taking advantage of the high you know the high values as well but i think i think we're looking at a problem when the covid deferrals come due there there are there are no borrowers in my opinion who can afford to come up with 12 months of payments today for what they've deferred and what they've added to their deferral i think that's more an issue for your standard fannie freddie va fha you're guaranteed loans i think there's going to be a huge glut of uh of modifications which is great um but i also think you've got borrowers who have been permanently placed in a hardship where they will not be able to so i think we will start seeing some sales coming out of the big servicers of loans where the borrower has permanently lost their job or lost a spouse to covet or some other issue and they literally cannot afford to pay their mortgage those are the worst kinds of the most heartbreaking because they just you know they they literally can't afford to pay and if a borrower has no ability to repay you can't offer them a modification correct you can work with them for potential deed and low you can work with them for a sale you can try but you can't work it out because they don't have um they don't have the income and that's a big key to your underwriting process right but i think so i think there's gonna be some i think there's gonna be another wave of non-performing coming onto the market um i think it'll it'll be interesting i don't know i don't know if it'll be quite as extensive as what we saw in 2008 yeah um and all i can hope is that that happens before the values start tanking because then at least they have more options and we have more options as holders um to help you wonder if it's gonna be more commercial or residential right because the thought is gonna be more commercial than residential at this point you know my thing with the commercial and we do so little it's very peripheral to our business but my thing with commercial is just from what you see in spokane even in my in my area is that work from home has damaged the office space because a lot of companies just realized why do i pay so much for office space when clearly we can work from home and i think a lot of companies are going to take advantage of getting rid of that overhead cost for space and utilities and whatnot and maintain at least to a certain extent some work from home and i think that's been hard on the office space and of course commercials you know retail space has suffered as well restaurant space has suffered as well and the restaurants here they're struggling to recover because they can't even get they can't get any employees yeah i can't open up because i don't have weight staff or i don't have kitchen staff or they're new and you get a new waiter and waitress and it's just the people coming like i'm not going back yeah it's painful so it's it's gonna be interesting i think it's gonna be interesting to see what happens but definitely commercial you're gonna have to see some repurposing i think you really it's some creative repurposing yeah yeah yeah amazon help me out yeah or i'll tell you this our local mall right definitely struggling you know you can't run the theaters the stores had to be here they opened up that empty space in like hallways and brought in like an indoor farmer's market because that got them some income for bruce and it got people in the mall which got them into the you know other parts of the mall so you know i was like wow that kind of created it and it was early too because you know our weather in in the early spring is not nice and but if you still want to go and look at arts and crafts and you know soap and honey and whatever yeah yeah that was an option and it definitely brought people in and it got people out because you know we were you know we're all experiencing that um pandemic fatigue we just just want to go out i used to lament my son i just want to have brunch again you want to have friends so we're going to wrap it up there and turn off the facebook live feed guys i appreciate everyone jumping on here melissa thanks for coming on it's so early in the morning on a friday day i know uh we're dealing with some nice weather coming up both of your as well if you have any questions feel free to reach out to melissa um she's been real helpful um the cost for servicing is astronomically cheap compared to a lot of places um and as she said before and i'll vouch for a lot of people recommend it uh because the services are top-notch and you're not warmer-legged you're not actually not getting you know ding for every little thing you're dealing to which is a really nice change so reach out to reach melissa and uh allied servicing for any questions i do have the servicing uh fees on the comparison chart if you need them um but if you have any particular questions for melissa reach out to melissa and go from there so enjoy everyone thank you very much for watching and melissa thank you for joining us yeah absolutely it was my pleasure hey fellow no investor are you looking to learn the basics of note investing so you can get started however you don't want to spend a few hundreds or thousands of dollars and hours online on some training program have you thought about attending a notes conference however you don't want to spend the money or the time away from your family well we have a tremendous beginners video series of 20 different topics with each video being less than 15 minutes this means each video is less fluff and direct to the content visit www.jkpholdings.com beginner dash series to learn more again www beginner dash series puts here from jkp holdings alongside me nathan turner hello what's up man it's a beautiful day in the neighborhood we're looking forward to some really good weather up here in northeast i'm excited last week it was a wash with terrible um we thought about last week uh downright cold yeah and now we're going back to the 90s which i'm kind of happy we didn't have soccer last weekend because it would have been crazy but uh we're getting back to the 90s it's gonna be a good weekend some barbecue and all that stuff how are things with you really good really good just kind of going through everything i took some time uh last week actually just kind of take a minute and and go back over my desk and kind of rearrange some things and and it's it's more organized i'm liking this this is good but yeah it's it's been uh it's been really good we've got uh some deals on the go moratoriums scheduled to clo to finish off the end of this month we'll see we'll see yeah yes and i know a couple states are extending them and all that stuff and then day we don't know what's going to happen when right um but what we do know is the fact that what we can control is the fact that we can control borrowers we can control what we do and how we make decisions and how we organize and what we buy um and for some people buying can be the most difficult um for me is managing the assets right um but for a lot of new investors they get nervous about buying and we i've talked a bunch of beginners this week and the most common question i get is either a i don't know what the bid and how to process do that or b they accept my offer now once right comes next yeah we talked last week about you know do i send a formalized letter and then what do i do with the servicer i don't have one and what can i do and where can i go and wait is a servicer what does a server do right yeah we spend a lot of time in the no world kind of talking about all the due diligence and everything that goes into you know choosing correctly and buying a good note and and which is all very necessary and information you have to have but yeah then the question is then what yeah and that's that's the point where it's like okay you got there done and it's like okay i'm going to look for the new no no no no no you kind of just gotta jump in and really start working with your team right and we talked about the team being the important part for us last week yeah we have attorneys we have realtors yeah and then we have services yeah servicers are absolutely like you must have yeah it's not even just like uh it would be nice if you had one no no it must have yeah that's an integral part of notes and the services has to be in place and what i explain to people with with servicing is it's like a property manager for rentals right they handle sending the bills they handle it all they issue the questions they go back to the landlord and say hey landlord what do you want to do in a situation if the renter stops paying they're reaching out they're doing the knocks and some of that so but the servicer can do a lot or they can do a little they can help manage your foreclosure they can help manage everything yeah so from start or not right so for a lot of the new investors and experienced investors servicers can be their headache and also their lifesavers yeah when you're managing multiple assets you don't want to be doing this stuff on your own even if you know how to which we don't advise you to go contact borrowers but managing the asset yourself can be overwhelming right yeah if you're imagining five assets you can handle it yeah sending that paperwork every year sending the tax forms out getting a phone call knowing what you can say or not say yeah how to stay out of jail right especially at the very beginning uh you know for most people they've still got some kind of full-time job in this household which is great uh but you you have to understand this is not just to set it and forget it there's management involved even with a servicer there's management involved you know you have to be on top of it in some way shape or form uh there's work involved after the fact so what we we've had a few services on before but we've heard a lot of great things about allied services so what we did was we're going to reach out to melissa right melissa bully is someone that you can turn to for advice you could turn to for you know helping guide you through the process let's remind her when she's not an attorney she's not going to play a tournament right um but and she'll tell you based on her experience and that's all she can do so today's focus is on learning about what a servicer can do for you as an investor what are some tricks and what's going on in the world servicing that we you know investors should be worried about you know licenses and things like that foreclosure timeframe and costs and be prepared yeah so well melissa welcome thank you so much for having me today yes can you give us a little bit about your background how you got in the space what brought you in and how long you been doing it you know i i accidentally i i answered a blind box ad in the 90s and ended up working for a metropolitan mortgage and securities and at the time they were the largest institutional buyer of private paper wow and i came in through their it department they were developing a system called brokernet that they were putting out there to really speed the process between the brokers to the contract buyers to closing it it was a really remarkable system for the time i really enjoyed working on it i provided a lot of support but then i ended up transitioning into supporting their servicing system and so i was working on the back side of that constantly well then i kind of fell into the servicing manager job so i did all their non-default servicing managements uh so we did documents we did we did all the loan adjustments it was customer service it was escrows things like that and i did that for years and at its height i boy i probably had 51 employees and of course i worked closely with sheila white who was their acquisitions manager so she managed all their different closing departments whether it was the note space or it was the origination space or any the structured settlements and not annuities lotteries all the things that they bought right and so we worked for together forever well when the parent companies had their difficulties and their um their broker dealer had their difficulties and they ended up having to uh file bankruptcy and the insurance companies pulled out i worked for one of the insurance companies briefly um same role but they basically said metro and summit said to us they said melissa and sheila we want you to find a servicer for this little tiny portfolio we have left and of course it was a super super special portfolio because they had sold most of the servicing to aquin by that time um they didn't really have anything that was normal remaining in the portfolio they had sold a bunch of loans uh later on they would have been selling a bunch of loans to security national who bought several but what really was the sticker was like the partials and the special assets and so we're looking and we're looking and we're talking to different servicers and we can't find one so originally it was a joke we're like ah we should go do this ourselves and then one day we're like no no we should go do this ourselves wow and so in 2004 we left our cushy corporate jobs and decided to do this and so we opened our doors and it actually worked out great metropolitan and summit were one of our first clients um security national turned out to be one of our clients because they wanted us to service the partials for them and so and then it just grew from there and as everyone knows this industry is so word of mouth yes it really is and we have done so little advertising you know we do a couple shows a year back when the world was still turning we would do a couple shows a year and that's all we've needed to do because this industry is so close knit everybody knows everybody of course we got a huge um influx of business when note school took off eddie of course has been a friend of ours for years because he was a metro client and that's the funny part is when people call up and they're like i knew you from metropolitan and i'm like okay does that mean you're coming with the torches and pitchforks because that's what happens here but you know but they know that you know they know that you've seen it when partials got big we were like all right we're already servicing them great you know and it was you know whenever they come up with the new shiny product wraps we were like great we can do wraps reps are no problem we've seen them before so i think that experience with metropolitan really gave us an edge in this industry in that i don't have clients who come to me and say i want to do this and i go i've never heard of that because i've seen so much already because metro did so many different and unusual structures i mean literally we had we had eight different kinds of partial at metropolitan i can't believe i'm saying that out loud because now people are gonna be like well what kind of partials yeah how do i do those but they were super flexible they were the kings of buying the deal in a way that worked for both the buyer and the seller the seller got what they needed but the buyer mitigated their risk by the way they purchased it so it was great to have that experience and to see it although i will admit when i first came into this industry i was like i came from originations and i was like you do not have enough paper in this file there's not enough paper here i how are you buying this and is this legal because it doesn't seem right and so but now i mean we've been doing this for we've been doing this since 2004 and it's amazing to have made it through 2008 and even through the pandemic and you know knowing that there's some challenges coming our way probably in the next 12 to 18 months we're just really looking forward to continuing wow that's really interesting that you're doing partials and special stuff before the crash we were doing them very much you learned something nathan this is great well we all we all like to think that you know we've we've figured yes yeah and then you met yeah i think you meet her so it's it's cool to hear about the background because you know nathan and i even though for most people we're 10 plus years in space you have people doing this for decades that just trump our knowledge and being around you guys and i talked to an investor who's been doing this for a long time too and like well my techniques don't work anymore actually your techniques are kind of what we all need because everyone's doing it a new way and you you're really losing out on the fact of reading collateral files and understanding the borrower instead of just taking a tape and then going institutionalized and just doing it partials one way there's only one way to do a partial we mean eight right and not being creative with things and that's how i think that this space is missing um moving forward and i think that's what's gonna happen because in social notes at three four five percent you can't buy them and get a 10 yield on it anymore where eights and sevens and sixes could lift up so creativity is gonna be a big thing and parcels may be something we we nathan talked about bringing on a partial conversation and i think we'll return that sometime soon so let's go base the back to basics here i'm a brand new note investor and a servicer someone i'm told i have to use what happens if i don't use one yeah why do i actually need a servicer what's there now so my thing is this if you don't use a servicer it means you like talking to borrowers constantly about their about their questions and these are unsophisticated borrowers so many times in this industry uh and you just like talking to them you like making sure they have insurance you like making sure that you're sending information to the irs and to them appropriately and that you're complying with all state laws as to what's in that year-end package you like sending them bills you like calculating payoff quotes yourself and most of my clients have real jobs i mean you guys mentioned that they have things that they do every day and this is not it and so the the level of involvement that you want to have with the loan is determined by the systems that you put in place and the servicers or the attorneys or the you know the property preservation companies whoever you're hiring to help you out and and keep your portfolio performing or bringing reperforming your non-performing portfolio however you've come into this space you can do it all yourself i don't do anything that's magic you know i i happen to have a great system that does a lot of things for me but if you're if you're excel savvy you probably can do most of the math i do in excel and be able to produce what you need to produce and the question is is it worth your time are you making money servicing loans or are you making money acquiring them working them out um turning them with partials or resales where is the best use of your time so let's explore a little bit more right um and i think that for most investors they don't even know what you said right what do you mean insurance why are we the insurance let's back up even farther than that yeah i'm a i'm a lender i just bought my first note and i'm going to move forward and i'm going to call the borrower and say hey i got a note that i own that's yours and the grandmother picks the phone up and then he's saying i can't reach him there i'm going to call the job and see if i can hold him there let me try him at nine o'clock at night because he's probably hit the front then can i do any of those three things and what if i say something on the phone is wrong is there legal consequences of doing that kind of stuff generally speaking so everybody talks about fair debt collection practices act absolutely that technically applies to third parties allied is the third party i don't know in the notes so i have to observe it but i will tell you if you as the holder are not very careful to represent the actual holder you have to say if you bought it in xyz llc you have to say hey i'm melissa with xyz llc you can't have a property or you can't have a a loan management company or a loan workout company you're a third party but even if you're calling as a representative of the holder if you are not observing those rules you are opening yourself up to to legal and because there are there are attorneys out there that pay their bills with violations of debt collection laws because there's also state laws and so if you don't know your state and federal laws just as great as you know you need to know all of them in all the states you're in you can violate it and maybe no one will notice maybe the borrower won't notice but you know you can't you can't like keep calling them we've had this experience a client will just call and call and call and call that's harassment or the client will text them and just text them and text them that makes sense right that's how you get ahold of them but that's that's harassment they have they they cannot not respond then you're supposed to take proper legal action um you can't you know you can't threaten them you can't you can't say i'm going to you know you can't be like if you don't send me money i'm going to take your house you know it's it's true but you have to do it right um you we had a collector back before the days when i was at metro the guy was like i'm having a garage sale this weekend i'm trying to raise money to make my payments and this collector said well you better keep your camping equipment because that's where you're going to be living if you don't make your payments this is a perfect example of what you cannot do especially these days and you cannot afford no one can afford a consumer protection lawsuit in any way shape or form none of us can granted servicers are a little bit more used to defending those and dealing with them but again you don't want to do that and if you're new it makes sense to have people in place that can save you from very expensive errors because those that's not the experience we want you to learn from that's those aren't the experiences we want you to learn from uh so there's just there's there's a lot of risk and so you have to determine how much risk you're willing to take and how educated you feel that you are it's not hard to become educated i'm not gonna i'm not gonna pretend that it is but can you remember you know each time each state some states have different breach notices because i have people who always like i'm just gonna send the demand notice myself i have one that my attorney did for this and i'm like okay you're in a different state and it might have a different timeline are you reviewing your documents do you know where to look to find out the breach timeline do you know where to look to determine if you even need a breach notice or whether you can go straight to foreclosure if you don't know these things that's why you need a servicer in place who can take those steps for you so let's go up we're going to definitely get some more topics here and i think that you know we also have people who want to contact the grow themselves when can we actually start doing that i'm sorry i missed that i had some feedback dave's working something out there it's like is it me it's me isn't it got something else going on so let's talk about the tr dave's back yeah my bottoms are good so i'm not sure what it was as a comedy i thought so when we were talking to a beginner one of the questions they ought to have is that you know this hello letter goodbye letter topic right what can i call borrow i just bought the note nathan i said why are the money i'm gonna call the borrower and get them on i'm gonna start process getting them performing i feel that it's a poor choice here's why here's why so there are there are two actual letters involved in in a note sale there is a letter that in this example nathan would send to the borrower saying i've sold this note and this is who i've sold it to and this is their contact information and that is commonly referred to as the tila 404 letter which is strictly a notice of loan sale it says i held your note i've sold it to this person effective this date and it gets mailed then there is the the goodbye letter which is the outgoing servicer says hey servicing is changing from xyz to allied and there's so there's two different notifications that have to happen in my experience most borrowers don't open either of those so fyi they throw them away then what happens is so the the the servicer goodbye letter sets a date that allied takes over after that date i have 15 days to get the loan into my system check all the documents make sure everything's correct do our qa and then i send a hello letter that says hi i'm allied i'm your new servicer this is how you reach us these are your options for making payments um please send us proof of insurance and here's our privacy policy so it's it goes out to them and it includes their coupon book and the idea is that now they know who we are and they can pay us that's great now the service transfer date starts a 60-day window where the borrower cannot be collected upon nor can we impose late charges it used to be known as the respa service transfer period but it's a 60-day period in which i do not recommend anyone make any calls to their borrowers it's designed to make sure that when the borrower set a payment to the prior servicer they have time to forward it to us and we get accredited so there's no collection occurring for interim payments that have been lost in the or not not lost but they are still going to the old servicer still going to the news servicer you know let's get them all in line get the borrower getting their insurance to us get all of that working through after that 60 days expires if the borrower is not current that's when the servicer is going to start their outreach did you get the goodbye letter did you get our letter we will send copies so again right after that 60 day period it's a very kind contact we make the assumption they didn't read the letters because most americans unfortunately don't read all their mail they don't open it all uh you know and i think it's because i've been in this industry that i find that amazing i open everything you just never know um but they they almost never they almost never receive it and or receive it they almost never open it so if we get returned mail we also you know during that 60-day period we may have to do a skip trace maybe we were given a bad mailing address maybe we don't have any phone numbers that happens commonly so we're going to be doing some of that research as well our boarding process of course is not just loading the data into the system we compare that data to the documents if they don't match now we're questioning was there a mod is there a forbearance is there a letter somewhere where someone said we're gonna do this thing for a while what why are they different if um we check bankruptcy records on all borrowers i cannot tell you how many deals i get that are not tagged bankruptcy and have a chapter 7 discharge that applies and once we've got discharges now those phone calls the new lender wants to make are prohibited you do not call borrowers with discharges if you didn't check that in your due diligence don't make a phone call until you have checked pacer pacer is super cheap i encourage people to have it yeah it's a double-edged sword because they don't understand what they're reading and they get a lot of questions as a result but yeah but just being able to see if there is a discharge that is after the date of your loan origination is huge because that's going to save you a lot because no one wants to be pulled into a bankruptcy court for contempt of a discharge order so you know and these are all things your servicer does as a matter of course but definitely not on the borrower let's cur let's just make sure we're clear on that so a borrower goes in bankruptcy they make all their payments they clean right through it and their loan is still active right they didn't get dismissed they got through it all everything went me through the bar is on the other side of it they default afterwards as a lender i can now call that borrower even though that loan so the loan is still active after bankruptcy if it was a chapter 13 discharge and this is default on post-petition payments after or post-discharge payments yes they are still obligated for those payments chapter 7 however eliminates all personal liability they can never be called ever again your only recourse is the property so if they are not paying post chapter seven discharge your only option is notice of demand and work through foreclosure unless the borrower makes inbound contact and requests a modification and then you want to make sure that your modification or forbearance contains special language indicating it is not an attempt it's voluntary you're saying it's voluntary you're restating their for their bankruptcy information and saying this is does not create new personal liability so just to be clear special language is required for any post discharge yeah just to be clear though you know if the borrower takes chapter seven and continue and retains the debt and holds the asset right and they get their bankruptcy and they retain the debt for you can reach out to them it's when they discharge the debt out of the system completely and they're no longer responsible for the debt itself if they did not reaffirm in the chapter seven you cannot call them they had to have reaffirmed the debt which is so rare most debtor counsels do not recommend reaffirmation for their clients uh we try and when they put that um when they put their intent to reaffirm in their in their chapter seven filing we will send a reaffirmation agreement immediately for them to execute but it almost never happens um but it's just safer to chapter seven post discharge do not make a phone call send start your legal action and let them contact you so go with that is that borrower the servicer can't make any contact or recommended contact for 60 days can i go to my attorney and say i want to file for closure immediately i wouldn't okay well just to answer that question if they are reasonably performing let's say they are less than a year delinquent and they've made payments in the prior year i would wait out the 60 days now if you've got a true non-performing that's six years delinquent they've never made a payment to the last three servicers i'm okay with i'm okay if you want to have your attorney start action or even our attorneys will start action during that 60 days because they are truly non-performing there are no payments that are getting lost there's no there's none of that they can't claim they didn't know where to pay although they will um and you know we still can't assess any late charges during that 60-day period but you can at least start that foreclosure action you can get that 45-day notice out then you can do your breach and then you can start the foreclosure but again same thing there are there are statutory notices that have to occur before you can start foreclosure and that's why you need to coordinate with your servicer you can't just buy the note go to your attorney and start foreclosure and you have to be careful we've had attorneys who didn't understand the moratoriums we've had attorneys who didn't understand who didn't know that there were statutory notices that had to go out before they could start so you know vet your attorneys as hard as you've got your servicer because you want someone who knows everything because today's environment is too complicated to simply have you know your brother who you know is a general purpose attorney sends you a percent a breach notice for you it's cheap but it's not a good idea and i don't understand i say allied uh we prepare breach notices here they're a hundred dollars i don't think that's too expensive there's a couple states that are more expensive but most states it's a hundred dollars and to have it done right you know but people are like oh no i'm gonna have my own attorney do it i'm like you must like paying bills because they're going to charge you three or four times that but you know we're pretty flexible at allied you want to use your attorney use your attorney you want to use our attorneys use our attorneys however they want to do it um not all servicers are flexible like that there are servicers that require you use only their approved attorneys and you coordinate through them um we have a blended philosophy and if you use your own attorney just keep us involved if you send a demand tell us so we restrict the account don't accept payments be great tell us what your fees and costs are that you've incurred you are going to have to send us the bills you cannot recover things like the cost of recording your own assignment you know we need to look we need to see what the bill says um so that we're accounting for it properly on the borrower's side so i got a question on on going back again to to this is a new note it's being transferred over to allied let's say that i did a bunch of uh postcarding and i found myself just a regular seller finance note so it's not it's not something that was previously professionally serviced it was just you know mom-and-pop service note so what information do you need in order to board that loan really the information we need is no different the absolute minimum the only thing i can't know from a review of the documents is the unpaid principal balance and the next due date any outstanding balances and the uh the borrower's information social security number um contact information etc but the information is generally the same i would never buy a note from an individual seller that did not either have a reasonable facsimile of a pay history that was itemized principal interest running principal balance especially accounting for escrow if that was involved all of that if they didn't keep anything formal i would i would get a pay history affidavit you want something in the file that you can stand on when the borrower says that's not my balance right so you know sometimes we just get a pile of uh cancelled checks and an excel sheet great that works too you know we've got evidence we can stand on that but the difference is is that i don't have a service transfer period basically there is a letter from the outgoing seller that says to the borrower it's addressed to the borrower it says i've sold my note to nathan and nathan wants you to make your payments to whoever your designated servicer is so would say make your payments to allied they send that to the borrower that's the party they know the borrower hopefully will read it and and do that and then they just include a copy in our package but they just have there has to be something ....