Supersize Note Investing Returns with Deficiency Judgments | Real Estate Notes Show

Episode: Saprina Allen Supersize Note Investing Returns with Deficiency Judgement Full Dave's Goals and Plans: - Congratulated Nathan on getting DNA conference tickets and website live - Recently acquired a couple small pools of assets - Growing calculator for non-performing asset analysis with continued updates Nathan's Goals and Plans: - DNA conference is live with tickets now available - Planning to bring seller finance and creative finance people to DNA conference - Pairing note creators with note buyers at DNA conference for deal-making - Spent two full classes developing bid calculator for accounting all possible outcomes Key Recommendations: - Build bid calculators accounting for all possible outcomes, not just best-case scenarios - Obtain and preserve origination/collateral files when acquiring non-performing notes - they contain critical borrower asset information - Plan for foreclosure as a possible outcome and understand the process before buying non-performing assets - Begin with the end in mind when originating loans to set yourself up for success - Review origination documentation to identify additional borrower assets (bank accounts, 401K, IRA, vehicles, spouse accounts) for recovery Topics Discussed: - Maximizing returns on non-performing notes through deficiency judgments - DNA conference details and networking opportunities - Importance of origination files in non-performing asset recovery - Performing vs non-performing assets and planning for default scenarios - Case study of recovering $46,000 from borrower checking account plus additional $12-13,000 later Guest Insights: - Saprina's career began in collections at Nat City Bank in 1994-95, leading to note sales discovery - Pioneered selling charged-off loans on eBay before modern note market existed - Early language around not pursuing deficiency balances came from late 1990s conversations with initial note buyers - Origination files are 'golden' for understanding borrower's financial position and identifying recovery assets - Started with $1,000 note sales, grew to $10,000 trades, eventually $100,000+ transactions we went through the collateral file and we found that he had a checking account and he still had money in the bank um from the original file it was still at the bank and we popped his checking account and we got forty six thousand dollars oh first pop and then um and then he um didn't take his money out the bank he he kept on putting money in there and we went back because we didn't recover all of our money and then we got like another like 12 or 13 000 about four or five months later [Music] foreign [Music] Dave putz from jkp Holdings alongside me as always Mr Nathan Turner good morning how are you good morning good afternoon everyone how are everyone doing so Nathan I wanted to congratulate you first off I see you got the tickets out and the website is up for DNA finally my goodness that was uh much longer than I anticipated getting that ready to go but uh but it's live it's up tickets are now available so for those who are not familiar with DME is it's a no conference right it's for a collection of individuals like ourselves to get together and talk and learn from other investors so if you are at all looking to learn or even experiencing if you look at Network you're going to get a vast collection of different people there yeah and one thing that I think is really exciting this year is uh you and I have been talking to a bunch of seller finance creative Finance people yeah and we're going to get a bunch of those guys there uh which is fantastic so you've got a bunch of people that are creating notes looking for an outlet paired up with a whole bunch of note buyers that are looking for notes to buy and we're going to come together at DME and meet each other and network and make contacts couple years is almost rare because everything's performing everything's doing really well and when they get in non-performing they get themselves in a bind yeah right they don't know how to do it you know was it the route we go through foreclosure we go through that process and we kind of pop an ass at the end of it yeah right um I think you do seem different foreclosure we're actually in great shape if we have a few accidents foreclosure but nothing like we used to have right yeah we've planned for it and that's all part of it understanding that there's this is a possible outcome so plan for it know what you're in for what would what would be the situation if that happened and are you ready for that and are you ready to to take on a property if that's what the case might be gotcha so um I wanted to make sure that we you know get someone on that can help us through that process of how can we supersize are returns in the fact that we are hoping I'm bringing her on here this Sabrina Allen that we can take a situation that is not in good shape or maybe small return and how can we leverage that into a great opportunity for us yeah so Sabrina thank you for joining us today hopefully you're doing well I know you're a little on the weather but I'm glad to see you join us today hello how are you guys doing good good um it sounds a little cliche but when when you create a loan you have to think about everything so when you're starting at the beginning you have to think about the end so um everybody gets all upset when you're originating alone of all the things that you have to provide up front and you know you you know you get all pissy when you have to get all those conditions to the underwriter but there is a reason us um got creative this was before all this compliance stuff and we actually sold a lot of loans on eBay we were selling cards on eBay on eBay we did this huge um we sold all this stuff we bundled it up and we sold it on eBay um we were doing a lot of leases we sold them on eBay um and that was kind of like where we started because I was always thinking outside the box but then there was somebody on Wall Street who um we all know but I won't name his name um who actually had reached out and wanted to buy a note for me and um and I sold that note to him for a thousand dollars which really created our space because after I sold him that note for a thousand dollars um he made it so easy he was like well do you have any more of those um I started typing up not on the spreadsheet you guys got a spreadsheet on a Word document I started typing up um loans that were charged off and sending them to him and he was selling them to guys like Dave Van Horn Mike Rasika um some of the guys that have been around for a long time Kevin Cordell um and the secondary and the secondary Market but I didn't know what I was doing I was just making my bonus um just keeping it 100 with you guys I had no idea what I was doing other than making my bonus and making my life easier as a banker hmm and making him promise that he wouldn't pursue a deficiency balance if he settled with these people that was that was the language that we came up with he promised me that he would never pursue a deficiency balance against anyone so that's where kind of like there's a language out there in our space that oh well we won't pursue a deficiency balance well that was a conversation that we had early on in the late 90s that there would be no deficiency balance pursued if they a technology Guru I just know how to you have it up here though I know how to process the information but I don't know how to use technology so I'm that's my weaknesses technology we all have weakness and strands and um so it was it was really it was amazing that once I learned how to underwrite it actually made me a better negotiator about recovering dollars I was always really a top negotiator with recovering money for the bank even before I learned how to sell loans I was always a top negotiator in reference to recovering dollars and so that's also something that I've been known for in our space in negotiating workouts um with people um because that's a strength that you have to have in our space um when you work loans that are in default being able to negotiate with a borrower fact finding information to get that information to be able to use to your benefit to get the dollars to actually make your loan re-performing that some people may not know what underwriting is right can you I know it's long-winded you know radiation of the big deal and underrated a different thing can you quickly explain the difference what they are and what they mean so um origination is is basically when you take an application you take an application what consists of that you basically you provide income documents um assets you tell the truth um you have to have either income meaning income doesn't mean employment so some form of income and you have to be employed for at least two years that's part of your application process and then the underwriting process means that we look at and we evaluate everything um the manual part of that has been removed we have an automated underwriting system now are looking for notes to buy and we're going to come together at DME and meet each other and network and make contacts and get some deals done so I'm excited about that yeah so with that said what do you think people will be the most interested in coming down there for besides networking what kind of topics do you think that you'll be having if you've already started to get involved this one's going to cover all kinds of stuff we've got um It's a combination of panels and solo presentations so my whole vision for this whole thing is I want people to come and be able to not just Network and that's a huge part of it I want people to be able to network and meet people but I want there to be enough education so that people that are just getting started feel like they've gotten something and people that are experienced feel like they've also learned something or it's not like hey no no we're bringing in people that you've never met before people you've never heard before and you're going to be able to hear what they've got to say a different perspective that's huge I know like last week we were going through some assets and we're able to acquire a couple uh small pool of assets um so things are starting to crack for us even and I think it's this Avenue that we're exploring in different facet um these idea of the fact of 30 billion dollars of assets created in 2022 is amazing yeah um yeah there's tons out there and I'm excited to have a bunch of those people there that people that are doing the origination so that's yeah that's great yep absolutely so I think for most of us um this stuff is really cool people who are um wanting to learn not just notes but different kinds of people out there who were involved I think people who are um excited by this because of the fact that they can get into notes and that the I guess the transfer from the why so when you're when you're getting a loan you're solid um but when you stop paying you're not right but all of those things that you gather at the beginning is for a reason and so um there's an underwriting file that a lot of times during the process when loans are sold in our world they get law the underwriting file gets lost but that file is really really golden if you get that that collateral that origination file with the collateral file it has so much information in it um when you talk about super sizing that asset um because it really tells the story about where the borrower was at the time that they were perfect or at least they qualified for the home it's it's that origination story that all these Marvel movies are putting but having that origination story that's a big deal and then you get to understand where they came from and why they thought they could perform on this loan um it's the glitz and the Glam yeah and it's the it's the assets it's the 401K it's the IRA accounts it's um the cars they had it's you know if there was a spouse even if they weren't on the loan but it may have been some other bank accounts you see everything in that origination file yeah which is really golden for us yeah if that file becomes non-performing and then we have to complete the Foreclosure yeah oh I say I say that to say we we set up at the beginning for failure we don't think about that when we're buying non-performing assets no we really do yeah and that is your meal ticket bought the loan wow all the way back from that City that's amazing for this um this space and um and in 2004 um we did this over and over and over again we started like doing ten thousand dollar trades and went to a hundred thousand dollar trades and I was getting excited then we went to 250 000 trades and I think by the time I left we were probably doing about 850 to a million dollars a month and that was in 2000 2004 late 2005 is when I actually left the bank and I went to the origination side and then I went to go work for him also okay um but that's kind of how I got started it was kind of by accident so selling non-performing loans in 2004 like right in the Heyday of crazy lending and everything else and there were there were that many non-performers you were able to sell million dollars a month listen it was so crazy even then yeah I was in a cubicle and literally I had files like I was drowning in a cubicle like they were stacked up wow you want to know like my process on how I picked the file to send it foreclosure I just picked one literally winner um I would just pick a file there was no Rhyme or Reason we were working in Lotus and dots there was no I mean like as long as you met your goal there was no pressure wow back then things weren't in default like they were today like they were in a way 09 200 10 but you still have that many loans that are defaulting you know for with the way the market was it's it's pretty astounding and interest rates were super super high yeah you know they were we're complaining about interest rates today you guys I mean like I was charging our stuff at 11 12 yeah yeah so wow so you know people are like well you know the the feds is doing this on purpose this is intentional well okay well 2004 we were charging enough loans origination to the buyer is almost complete so yeah that's cool yeah yeah really looking forward to it it's going to be really educational and and a place where you can come together and meet other people but it's going to be a lot of fun we've got some fun things going on there the night before the conference we've got an ax throwing tournament we need to register for that separately cool but get to be part of that as well and we'll have a DME ax throwing Champion for the year and then we'll see who takes the throne next year so I'm sure you guys have all heard of you know performing and non-performing assets right um and a lot of times right non-performing can be a bother some situation and we on this last week's call uh our our 10-week Mastermind Junior group we talked about this idea of building this big calculator right and you can't just build it for the fact that we are hoping or praying that um the asset will could perform a lot of times they won't and you never know and you have to build that in because just because they've been making payments steady for the last five years doesn't mean they're going to continue to make payments study for the next five years um we've been through that we've seen it we've experienced it so you want to make sure that you've you've accounted for all possible outcomes and that you're putting it together and so putting that bid calculator together we've spent two whole classes on that we spent a lot of time a lot of effort putting that together mine is even getting updated which is fantastic and and you know we continue to learn and grow yeah so with that said you know I've done my fair share we both grew up in this idea of a non-performing asset and a lot of times people say that's crazy you know because it's all different out there um non-performing asset to a lot of people who are getting into space the last yeah at the end of the day when the return looks very slim on the back end um so begin with the end in mind set yourself up for success so and now we got to go back a little bit Sabrina because if anybody doesn't know Sabrina you've been living under a rock but Sabrina tell us about uh you've got a ton of experience in this especially on the origination side so tell us where did you start from and how did you get into what we now call notes so by accident by going to work that's how I got into this um really um probably about 94.95 I took a job at Nat City Bank and um collections um what was going to work I needed to take care of my family I needed to help take care of my family and um just was driving to Cleveland every single day and um just the the grind of it all and I didn't like what I saw um 30 60 90 120 and that was it went to recovery went to charge off went to foreclosure and and after that I had no control I always used to think um if I could just get a payment I can save them but you couldn't save everybody and and it just felt like you were always drowning and and one day I took the time to read and understand the documents that I was processing um and in the documents the note said that I had we had the right to sell the document the notes um at any given time and I was like oh well if I could if I could sell it if I could sell this to somebody that would be golden so some of at 11 mm-hmm so real quick so those who are not dealing with the word can you define what charge up means for those people may not know a charge off is a loan that has not performed and it has gone delinquent 120 days and according to banking standards if a loan is gone delinquent for 120 days the bank has to write it off as a loss and legal action has to be called or the bank will accelerate the balance and it is due in full um and sometimes they will do a modification or allow them to start making payments again but it no longer sits in the normal realm of banking they have to go to the special Department right to land of the Misfits recovery department yeah over the years have been charged off loans just someone knows so yeah yes so then you got into originations and then how did that transfer into you started buying your own well um I well I felt like I needed to learn origination because I really didn't know origination so I went to work for um I went to work for some of the CD lenders um I worked for option one worked for Nova Star mortgage and um yeah the great ones and uh and then um went and worked for a hedge fund um that was in this space that was buying a lot of um stuff that was from neighborworks from America Neighborhood Housing and when I learned the process of underwriting um it made me very very well-rounded um where people say it made me dangerous because I knew the back end of understanding about people when life happened but then I also learned the process of The Upfront process of all the things that you needed in order to be able to get along and understanding credit would make which made me a force to be reckoned with and I'm just not tech savvy I'm not I'm not for whatever reason don't make the payments right what is the process from that point from a bank situation to retrieve some of their money that is in the retrieve their money that's in the deal for those may not understand what that that process is so Malone goes 120 days the bank has to take legal action what does that look like in the bank's duration okay so I'm gonna I'm gonna hit you with something in reference to some loans are are backed by the government so some loans have PMI on it and if the loan is backed by the government PMI will help cushion that blow um after the Foreclosure is completed foreclosure has to be completed a lot of stuff that we see in our world has no PMI on it let's be clear there are some loans that still have some PMI on it because I know some loans that we have purchased that were housed at BSI did have some PMI on them um and we were able to file those claims but you have to complete the Foreclosure before you can do anything to see where your loss is going to be okay you either have to go through a judicial process or a non-judicial process that means that you either have to go through the court and a judgment makes a decision or you have somebody like Matt Kelly and you go through trustee court and it's it's you know it's sold at the courts on a court step and that's how um the asset is sold and they're taking the action of the notes um and the assets I'll say the asset is recovered when I say the asset is recovered we get the um I'm sorry you got somebody's at my door um so good real-time video um you get the um you get the asset back or it's sold to a third party sure um if it's sold to a third party doesn't mean that you're going to recover your full entire balance um and and what I mean by that is is um there are still some people who manually underwrite but a lot of it is just basically we put it into a system and it basically gives us what what our conditions are to get your loan approved um but we still will verify the information um so there is still a human approach a human touch to that but the math equation pretty much yes and um and and the underwriting process what it does is um it also allows you to verify the income um verify your tax returns um it just wants to verify that you're being truthful and you're credit Worthy um so um most of us right now are doing underwriting at 580 to 620 credit scores um even with the um I heard you guys talk about uh seller financing which I do a lot of um so um those are the scores that we'd like to see you know 580 to 620 credit scores and we're doing some seller financing or loaning on our Ira money and those are the same scores that a lot of the banks want to use as well great so it's really interesting you get to that point and now you're underwriting and originating paper um getting getting the collateral fall together for you people and then when you create these notes you know there's no problems or guarantee that the borrower for no fault their own go through slumps and issues and problems right it could be a health distribution could be jobs creation it could be a marriage situation could be a kids duration we have numerous reasons throughout the years why people don't perform and a lot of times it's no fault their own right we've heard the stories the kid gets sick I ain't paying my mortgage payment I'm gonna make my kid better and we all get that I mean it makes sense to all of us parents so but when we have people out there that do things like this who underwrite everything do everything right and then know that we were able to pursue that balance how many states do you think that it's barred in I I I don't have the state so curious what do you think your guesstimate how many states don't allow you to go after that probably about 30 wow okay that much I think about 30 percent so you have to think about the friendly States nice word for it I'm just saying you have to think about this from the states yeah yeah and uh California [Laughter] well I mean just think about that what you got to do to get somebody out of a house in California is true you might be bankrupt by the time so um to everything you've liquidated the asset and there's still money owed to you you're in the deficit can you collect that money um according to your note yes your the mortgage is gone the asset is gone so this is why you have two different instruments you have a note and you have a mortgage now the house is gone the collateral is gone but this is why you now have the mortgage and that's the instrument that's the promissory note that now you can now enforce yeah so the mortgage is the lien on the property that secures the property to the IOU right so when you go after a mortgage you're going up to a lean position situation and that liens now gone but that person still owes you an IOU based on the terms inside the promissory note right if you have a house that you sell at the auction for 100 000 because it's upside down or whatever reason well you owe 200 000 according to Legal balance you have the legal right in those states to go after the hundred thousand dollars personally because that person still been doing it since like the 80s and I was like wow that's neat and so and he was like well you know Sabrina I've got to renew this judgment and I'm like well well how he was like well because you you can you can renew it so many years and look at I guess they get such limitations you have to renew that opportunity yes so he was he was you know he was renewing judgments in certain states that he was permitted to do so and he stayed on top of it so he had actually he actually had like a calendar like every time it was time for a judgment to renew in his office especially like on on people who had um properties over like four hundred thousand dollars he would renew those judgments because his mindset was is like people who lived in those type of properties they were prideful people and they would always have a certain type of lifestyle and eventually they would come back they would come back up and he would basically get something from them I'm down the line and and most times he did or they would want to buy some you know they would want to sell something and they'd have to satisfy that judgment before they could just quick things Cindy Coleman before I said hello she want to make sure I got it out across you to send me the common follower of us um she wanted to make sure she said hello we did have a question from John um you mentioned by going after people with money in an account how do you know that they have money in an account what's that process of finding out where their accounts are how to lebium and you know even things like tax returns okay so you guys so micro belt some of you guys know about microbilt right yep some of you guys belong to micro belt there is a feature with microbilt that does an asset search for you look at that on the drop down on the side it you can actually do an asset search through microbuild and it will come back and it will give you where at in Tennessee uh it's in Kingsport and you know they call me the Godmother notes for and it's it's because it's the guido with me now um um has he just fallen off the face of the Earth yeah I mean we've tried Facebook and like everything we've tried all kinds of different things track this guy down and he just kind of disappeared it's keeping a low profile at the very least have you tried like Lowe's Home Depot have you called the Lowe's Home Depot nope I'm gonna make a note so call the pro desk um become friends with the pro desk and see if he is taking other business through the pro desk because if he's a contractor um he is and then um the sad thing is is a lot of the contractors you know don't have a lot right um do you have his first and last name I've got his his first and last name but not I I as far as I know he doesn't actually have a business he's just a guy so I don't even know if he's licensed which again is all right it's on me I hired a guy that's just a guy and I totally get it and big mistake we learn we live and we learn we have hearts it's okay we have hearts I mean Cindy mentioned have you checked jail or prison but I I'm presuming uh if he's there the Judgment won't be too much good for you it's not going to do me a whole lot of good I hear you don't make a lot of money which tries to do that um but but really try the Home Depot Menards and Lowe's um and this is what I will tell you about contractors because I do a lot of fix and flips um they are remorseful and um sometimes they will come back and they will redeem themselves okay um believe it or not they are remorseful especially if you call out the lows at Home Depot and bears right people talk to you I mean will they actually um just so you got to be friends with the people at the pro desk yeah you know just calling um just talk nice to them they they just want somebody to talk to yeah yeah I can talk that's all right that's good um good tip good tip I will do when we look at these things it it sounds to me is you can pick a situation that may not be great and you may just barely get out and a year later your returns could just be amazing because you can go after this money that the borrower still owes you through a legal process wage garment and we talked on the phone about this and I never even thought about it but taxes their tax return for the next year is now yours so that that's the other thing that I used to to watch um when we would look to offset people's accounts so I again because the underwriter and me so they had kids and their kids were still minors and I thought they still banked at the same bank I would then wait around tax time knowing when they probably filed their tax returns um because people are just like um they're creatures of habit right um I would get that bank attachment around the time of tax return and I would know that I'm going to get their tax return um with that bank attachment because they had kids now shame on me that I'm gonna take their tax return but that's when I would try to make attachment and so you know and I had a conversation once with a friend of mine where um I was kind of feeling bad that I was that I was forcing this contract you know somebody had had created this note at some point in time and now they're that so let's say let's just use round numbers a hundred thousand dollars hundred thousand dollars of property sold but you owe two hundred thousand dollars and um the property goes and there's a deficiency balance um because of the asset it's gone and you um and you can't um you then recover all your money at the sale right to Define what deficiency balance means to an investor um you're negative you were owed 200 but you only recovered a hundred and but there are some states that there's deficiency as barred so um the ACA has a template that will tell you if you can pursue a deficiency balance or not so the ACA is the association of credit and collections professionals it's something that you guys can join um and it's a great place for crediting um credit and collection people um the ACA is also a place where you can actually also know what you can um what you need to do if you want to be licensed to be a surfacer but it's a it's a great place to learn compliance rules and regulations about our world right um but that is a they have every state every rule every regulation on deficiency balances that you can pursue or you can't pursue so um we had a template and um we use Salesforce um at the hedge fund that I used um that I worked for and when we finished the foreclosure after we were done we would either Market deficiency barred or deficiency not to borrow and we would market and if we had a deficiency balance we would tell the attorney pursue deficiency balance if we were able to um we would just market and we would after it's after so the Foreclosure has to be completely done um and the Foreclosure has to be closed and then you have to tell the attorney that you want you want a deficiency judgment they get the deficiency judgment and then you um you can do a wage attachment you can do a bank attachment and then once you get that and you actually know where there's assets then you actually have the attorney's office take care of that paperwork and send it in and you get the attachment um you get it granted and you get the money how often does that happen these days like there's I I only started seeing equity in about 2018.

um and now that seems like all I ever see is is loans that have Equity excuse me in the property so it it are you still seeing that today where where there's a surplus there where you can go after that um I haven't seen a lot of surplus um a little bit but not much I've just recently as you you know you have recently just started seeing Surplus again um and but sometimes there's overage um but even if it's not if if you're white you still have the right to enforce the note and ask for the deficiency if you're allowed to ask for the deficiency and then I assume that that it's state by state as far as the statute of limitations up to so many years later yep um there is a there is a um I'll call him an old soul in California I love him to death because um a lot of the old guys um taught me so much about the way they did business so I so I gravitated to a lot of the older guys in in business because I did I learned so much and he actually would renew judgments in California and got very very wealthy doing it and there places that can like wholesale micro belt like they can do a search for them no you know you can't do that that's not that's not permissible right because I'm presuming most people are gonna say well Nathan now you know he's breaking you know David is breaking the rules even asking that question right that's the problem right now because a lot of people here may be a one or two investor they say oh I'm not gonna be part of microbelt how can I go find his assets have I not you know doing this full-time and not buying a bunch of assets number do maybe do it one time right okay how can they go about doing it so um the other thing is is like a lot of our attorneys that we use for foreclosure um they use Lexus Nexus Lexus Nexus is very expensive but Lexus Nexus also has a tool to search for assets so that's another way that you can do that um so um not only are you looking for bank account information but you can also attach to other property you guys now you um deficiency judgment you get a judgment you attach to other property think about it let's think outside the box yeah you can pass through a whole County and just everything that person owns so I've got a I've got a situation where it's not a deficiency judgment it's just a judgment so I had a a contractor that was going to do some work on a property I paid him in advance which I don't normally do but I did because I decided to trust them for some reason and then he took my money and didn't do any of the work uh and I never do this but I did this time because I was just insulted so I went ahead and uh hired an attorney to get a judgment judgment was granted but now we can't find this guy so it's in Tennessee and I've got time Tennessee's got a nice long uh statue of limitations there what's my best way of collecting on that not doing it and here I come and I kind of felt like I was the big bad guy saying you owe me money or else and in this conversation with my friend he said no no you're holding them accountable to something they've already agreed to and and he's totally right and that made me feel a lot better about it and I'm not I'm anybody who knows me knows I am the least vengeful person you've ever met uh but I believe in Fair and I believe in you know doing what you say you're gonna do and so me holding them accountable to what they've already signed up for I I'm totally okay with that you know and you could choose not to do this right that's a big thing say you have an older couple when the husband passes away and my wife loses the house yeah you technically go after her you can well you don't need to right right you have the option to uh right now mentioned tracking with the relation plate I don't know how we can do that but uh that's a great idea we can try to find anyone that way but I think that for me that you can this opportunity to take people who may just be screwing you at times or just didn't play ball play games maybe file you know BK twice where you can just let me you know they filed BK you can't pursue the the deficiency just so you guys know um so if they've been discharged in the bankruptcy you can't pursue the deficiency I've seen with people who may file the last minute and then never do the plan and then yeah the notorious follow-ups right those times you can definitely file against once you can get the foreclosure and the BK Bard uh Frozen for a minute go out to those people that just play games um this is something we have the opportunity to do and I don't know many people who have done it and I think it's the fact that lack of knowledge um a lack of experience but it is it's not commonplace to be happening but it is possible to do in certain states of owes you that money correct so that was probably just as clear as mud but um so I had one in Ohio I'll give you a special statement I'm a factual story so we had one in Ohio um that we actually had purchased a note in Ohio and it was a it was a net City you know and it went um it was a foreclosure sale and it was a condo that foreclosed the association called foreclosed and we thought we had got white because the the condo had foreclosed and so there was um there were surplus funds after the foreclosed after the condo association had foreclosed and we said well do we want to do we want to actually fight this what do we want to do so we uh we actually filed for the surplus funds from the HOA for closing we took those funds and we made a decision to actually pursue the note and we went through the collateral file and we found that he had a checking account and he still had money in the bank um from the original file it was still at the bank and we popped his checking account and we got forty six thousand dollars first pop and then um and then he um he didn't take his money out the bank he he kept on putting money in there and we went back because we didn't recover all of our money and then we got like another like twelve or thirteen thousand dollars about four or five months later wow and this took like about a year and a half it wasn't like an overnight process but it was a pretty sweet deal yeah what is the process to start that deficiency judgment against someone is it during the Foreclosure period and um hits for assets that's one way you can do it um two go back to that origination file that you had or you have when you buy your note so we get cheap we get lazy in the note space so we don't want to pay for all those copies for Richmond Monroe or um Casey Wilson to make all those copies um or we don't want to pay the storage fee for that origination file that information you guys is golden I have had the same checking account for over 30 years now I'm not I I'm not you can't get deficiency judgment against me but I've had that same checking account for over 30 years so I put a voided check in my in my file when I bought my house so when you're going through those files that checking account information is there even if a bank merges your checking account number doesn't change even if um when you when you put your assets on the 1003 or the erla now that we call it that information is on your loan application all you got to do is call and see if the bank account is open um so if someone doesn't have a a you know connection to work can they go find assets through a service out there that can well you know we we have a few people that say they can find assets that show up at our note events and things like that but I don't know how credible they are um they say that they can find assets you know you can hire private investigators you can hire companies to do that yeah you can um but I'm I've been successful leaving on finding assets through um the microbilt option doesn't have access to micro belt is the judges that's how much and they will be more gracious with our requests and understand our request better than if we're just fly by the night doing half-assed concentration and we learn ourselves that the more we put into this and the more good faith we put into it and you've tried everything the judges respect that that requested that point yeah um and also policies and procedures so um you know how you you heard me say that um every file that when the Foreclosure was completed we documented if the if the deficiency was barred or not that we've documented it in the system it was an automatic deficiency bar deficiency not bark deficiency pursued deficiency not pursued we've documented that so if anybody ever audited us where a borrower would say that they're targeting me they're picking on me so this was just part of the process where you didn't get um this um emotionally out of control because you've used your IRA money and you're just you're hell-bent and I'm gonna go get this person because um they didn't pay me back and I'm gonna do everything in my power because they pissed me off on the phone [Music] um we in our world in our space tend to be a little bit more emotional than just the regular Banker collector servicer collector so I kind of want to bring that into you guys too to just kind of think about that we are human it is sometimes it's not easy it is our money we've worked for it um we are investors we're Risk Takers some of our risk tolerance are always the same some of our risk tolerance are high some of them are low and we have to think about all of those things even when we're thinking about a deficiency judgment yeah yeah we have to be machine like too right we have to be just that boom boom boom boom Hey listen anything and we have it's a 20 loss we do this that's course um and then um the other thing that I want to point out to you guys is about um accounting is very important when you are going through deficiency um you know if you want to pursue a deficiency balance um if a judge is going to um you know if you're if a judge is going to challenge you on your balance when you're trying to pursue a deficiency so um we talk about you know corporate advances of taxes or um you know recoverable fees and expenses this is why it's important to use a servicer that's you know tracking our own expenses and doing all of these things where we think we're saving money but then we want to recover on the back end on a deficiency balance use a servicer even if it's a you know a low budget servicer for the accounting purposes of being able to recover our money right make sure that your your accounting is in order and it's traceable and it's trackable so I want to point that out to everyone also and the other thing that I want to also say is is that it's important that you've worked your file and what I mean by that is is that there is documentation that you made an attempt to work out there was an attempt to make reaches there was attempts to at least give a chance because sometimes you're going to get a pushback from a judge or from someone that if you don't work out something you didn't work out something with the borrower that judge is not going to look friendly on us they're going to look like we're going to be the big bad villains so at least if we did what we were supposed to do as the Creditor as the lender then if we do do the Judgment if we do do the deficiency if we do do the offset we did what we were supposed to do when we followed and we were compliant on the books yeah so I think that that's for opportunities to get the deficiency judgment I had my attorney ask me if I want to go for it and I've always just automatically just no no no no no no no it's fine it's good leave it alone um I want to make sure people out there who do have questions feel free to chime in here before we disconnect and let Sabrina go Sabrina has been in the space for God knows how long right doing all different Avenues in the notespace from accidentally selling assets and actually stumbling crosses opportunities um to being in the servicing space being in the radiation space she's done everything so it's really cool to have her on because for her knowledge experience um so so how ask the question how do courts look at the business judgments to judges favor homeowners in those cases anything as you just explained it's typically how the lender treats that borrower that would that be accurate um I would say it depends on the judge I I will I will say it depends on the judge because you have judges that are super super consumer friendly and then there you have other judges that are just you know they're just by the book it is what it is and and it's horrible to say that you know um I I can remember um having an argument with somebody I said you know Federal Trump State all the time but sometimes um you um you should um hope that that stuff just stays in state court and it never goes Federal um because you get better treatment in in State Court than you do federal court um and and so it's it's kind of the same thing um you can go and Judge Judy's courtroom and it's Hell on Wheels you can go in judge Jones's courtroom is just like oh I'm so glad I got judge judge Jones so you don't know you really don't know you know sitting as an I mean like I've been used as an expert witness I've been you know I've had to go in mediation hearings and and you just really never an hour with us with your busy time I appreciate it is deficiency judgment is an area that most people don't actually do or know about or not even talk really you know thinking about now um in the many conferences we've been to it's not a topic of your discussion often and I think it's because most of the time people don't know about it don't use it and the markets change a lot right there's not as many underwater assets as there was back in our day a in 2010 nine time frame so I think that you your experience knowledge is Awesome with that nine um so if you do have additional questions I post in the chat the webinar link uh to our Forum so we can if you have questions I can just vote right over Sabrina um but I know on Facebook you know Serena Hawkins you can reach out to her that way um or shoot us a message we'll send our contact information so well Sabrina again I thank you for joining us on this Friday afternoon for us and uh hopefully um you know in the future we can reconnect with you serious do you are you currently with somebody right now as business-wise are you working for someone right now so I actually work for Premier Bank as a loan originator um and I um also I'm still um with Main Street asset Solutions um business is really slow but I'm still um I'm still with them helping them clean up some things and um I do some mentoring and coaching on the side and do my Fix and Flip so I'm pretty busy and um I um I do plan on seeing you guys in Tennessee this summer in June um so I was excited to take your ticket really so I will see you guys in Tennessee and you guys should join um always good to see you guys and thanks for having me and if if I could be of service to you guys you know don't hesitate to reach out let me know I'll do anything in my power to help you yes thank you so much Sabrina thank you so much all right why Z and come from about of of a business versus it's an investment that's a good point a lot of people think about this as the business but they act like it's a it's an investment which is it is an investment but you can't treat it in the eyes of the Court as hey it's my money I want it back in certain Creations um you know we've had throughout the years where we've had opportunity to do deficiency judgments and I've often not you know um most time they have no money really to a point right can I go after that you know we had one it was it was a hundred thousand dollar loss situation but it was an old lady that husband was just it was wheelchair and they were to get 600 back in taxes nothing coming through and for me it wasn't worth the effort is there a cost in per se for this energy judgments for someone to do what's the typical cost to get this thing filed approved and start Levering accounts um so again attorneys time but generally like court costs um could be between 150 300 and then really important and this is a good question you need to negotiate what it's going to cost you with your attorney up front so they don't milk you because what eats us up in our space is attorney fees because they just milk us milk us milk us so understanding what it's going to cost us up front with the attorney what is it going to cost us for you to file a deficiency judgment against for us is it um included in our first uh our foreclosure cost um every time you um you know you send an offset to a bank what is that fee what does that look like look at their fee structure if there's additional Administration costs and and also is it a cheaper rate if your paralegal doesn't versus you doing this is true yeah oh good very interesting stuff I I had I had the same thing I'd I've had were saying before this seems like it works better in an upside down Market where where more people oh more than what the house is worth do you see that coming around again what's your crystal ball do you see house value is dropping enough that that we're going to see those underwater values again um I've been watching the market this week and I've been saying prices drop more drastically this week than I've seen in a long time yeah prices dropping 10 15 000 and you know like in my market we're like I pay cash for low end price properties I mean like I'm chopping at the bits um but what does it mean for other people um I think it's going to be a ripple effect you know like for a buyer hold Buy and Hold um seller finance people I think it's going to be really a good thing for some of us but for those people who are doing bank loans um we're going to probably see some mods coming down down the pipeline and um I I don't my crystal ball um just says that we're um we're going to embrace ourselves cfpb is not going to let what 2000 what happened in 2008 happened but we're going to see some things really shift and change very interesting interesting well with that Sabrina I want to thank you for coming on with us on this Friday morning afternoon kind of time frame share your knowledge your experience with us and those watching us and listening to us a lot of people are saying they want to go back to the beginning and they missed earlier please do so you can check on YouTube Facebook video will be here LinkedIn all that stuff and I you know just having you on having your knowledge and it being I encourage you guys to reach out to Sabrina and ask if you have questions whatever um if you are in a space where you're looking to learn choose another valuable resource to kind of Leverage your knowledge off of um but for you to come on and just spend know how that stuff is going to turn out right interesting it's it's interesting to have that kind of concept because it's you're right sometimes you can do everything you can in your power but it's still the judge's opinion on what they think is in favor of or not in favor of and it's nice to live and learn right you may say oh boy they want us to do this next time and attorneys are always learning about the judges right you guys are turning about that local judge you're going to learn a lot you're going to learn oh yeah that judge likes this or that judge like that or Hey listen we gotta do this with this judge um they get to learn their personality um true story I was in Alabama and a um in a mediation case and um and we were going to use an attorney that wasn't familiar with the judge and um this this late this judge was a trip and probably the 11th hour I changed to a local judge probably I mean a local attorney was probably the best thing I ever could have done I vacation with this lawyer now her and I are really good friends and um she said she said well what made you change your mind as it sure wasn't your hourly fee I said but I said I realized you were a local um I was doing some research and I saw that both of the judge the judge and the attorney was at an event together like a golf outing um just kind of doing some research and I said hey they're at the same place I said I think I'm Gonna Change I think I'm Gonna Change lawyers and that was what saved me wow so you just never know but you know if it's one of those things that if you don't understand the politics in that City or in that courtroom sometimes you're just going to lose yeah that's fascinating so this this like we and get some deals done so I'm excited about that yeah so with that said what do you think people will be the most interested in coming down there for besides networking what kind of topics do you think that you'll be having if you've already started to get involved this one's going to cover all kinds of stuff we've got um It's a combination of panels and solo presentations so my whole vision for this whole thing is I want people to come and be able to not just Network and that's a huge part of it I want people to be able to network and meet people but I want there to be enough education so that people that are just getting started feel like they've gotten something and people that are experienced feel like they've also learned something or it's not like hey no no we're bringing in people that you've never met before people you've never heard before and you're going to be able to hear what they've got to say a different perspective that's huge I know like last week we were going through some assets and we're able to acquire a couple uh small pool of assets um so things are starting to crack for us even and I think it's this Avenue that we're exploring in different facet um these idea of the fact of 30 billion dollars of assets created in 2022 is amazing yeah um yeah there's tons out there and I'm excited to have a bunch of those people there that people that are doing the origination so that's yeah that's great yep absolutely so I think for most of us um this stuff is really cool people who are um wanting to learn not just notes but different kinds of people out there who were involved I think people who are um excited by this because of the fact that they can get into notes and that the I guess the transfer from the origination to the buyer is almost complete so yeah that's cool yeah yeah really looking forward to it it's going to be really educational and and a place where you can come together and meet other people but it's going to be a lot of fun we've got some fun things going on there the night before the conference we've got an ax throwing tournament we need to register for that separately cool but get to be part of that as well and we'll have a DME ax throwing Champion for the year and then we'll see who takes the throne next year so I'm sure you guys have all heard of you know performing and non-performing assets right um and a lot of times right non-performing can be a bother some situation and we on this last week's call uh our our 10-week Mastermind Junior group we talked about this idea of building this big calculator right and you can't just build it for the fact that we are hoping or praying that um the asset will could perform a lot of times they won't and you never know and you have to build that in because just because they've been making payments steady for the last five years doesn't mean they're going to continue to make payments study for the next five years um we've been through that we've seen it we've experienced it so you want to make sure that you've you've accounted for all possible outcomes and that you're putting it together and so putting that bid calculator together we've spent two whole classes on that we spent a lot of time a lot of effort putting that together mine is even getting updated which is fantastic and and you know we continue to learn and grow yeah so with that said you know I've done my fair share we both grew up in this idea of a non-performing asset and a lot of times people say that's crazy you know because it's all different out there um non-performing asset to a lot of people who are getting into space the last couple years is almost rare because everything's performing everything's doing really well and when they get in non-performing they get themselves in a bind yeah right they don't know how to do it you know was it the route we go through foreclosure we go through that process and we kind of pop an ass at the end of it yeah right um I think you do seem different foreclosure we're actually in great shape if we have a few accidents foreclosure but nothing like we used to have right yeah we've planned for it and that's all part of it understanding that there's this is a possible outcome so plan for it know what you're in for what would what would be the situation if that happened and are you ready for that and are you ready to to take on a property if that's what the case might be gotcha so um I wanted to make sure that we you know get someone on that can help us through that process of how can we supersize are returns in the fact that we are hoping I'm bringing her on here this Sabrina Allen that we can take a situation that is not in good shape or maybe small return and how can we leverage that into a great opportunity for us yeah so Sabrina thank you for joining us today hopefully you're doing well I know you're a little on the weather but I'm glad to see you join us today hello how are you guys doing good good um it sounds a little cliche but when when you create a loan you have to think about everything so when you're starting at the beginning you have to think about the end so um everybody gets all upset when you're originating alone of all the things that you have to provide up front and you know you you know you get all pissy when you have to get all those conditions to the underwriter but there is a reason why so when you're when you're getting a loan you're solid um but when you stop paying you're not right but all of those things that you gather at the beginning is for a reason and so um there's an underwriting file that a lot of times during the process when loans are sold in our world they get law the underwriting file gets lost but that file is really really golden if you get that that collateral that origination file with the collateral file it has so much information in it um when you talk about super sizing that asset um because it really tells the story about where the borrower was at the time that they were perfect or at least they qualified for the home it's it's that origination story that all these Marvel movies are putting but having that origination story that's a big deal and then you get to understand where they came from and why they thought they could perform on this loan um it's the glitz and the Glam yeah and it's the it's the assets it's the 401K it's the IRA accounts it's um the cars they had it's you know if there was a spouse even if they weren't on the loan but it may have been some other bank accounts you see everything in that origination file yeah which is really golden for us yeah if that file becomes non-performing and then we have to complete the Foreclosure yeah oh I say I say that to say we we set up at the beginning for failure we don't think about that when we're buying non-performing assets no we really do yeah and that is your meal ticket yeah at the end of the day when the return looks very slim on the back end um so begin with the end in mind set yourself up for success so and now we got to go back a little bit Sabrina because if anybody doesn't know Sabrina you've been living under a rock but Sabrina tell us about uh you've got a ton of experience in this especially on the origination side so tell us where did you start from and how did you get into what we now call notes so by accident by going to work that's how I got into this um really um probably about 94.95 I took a job at Nat City Bank and um collections um what was going to work I needed to take care of my family I needed to help take care of my family and um just was driving to Cleveland every single day and um just the the grind of it all and I didn't like what I saw um 30 60 90 120 and that was it went to recovery went to charge off went to foreclosure and and after that I had no control I always used to think um if I could just get a payment I can save them but you couldn't save everybody and and it just felt like you were always drowning and and one day I took the time to read and understand the documents that I was processing um and in the documents the note said that I had we had the right to sell the document the notes um at any given time and I was like oh well if I could if I could sell it if I could sell this to somebody that would be golden so some of us um got creative this was before all this compliance stuff and we actually sold a lot of loans on eBay we were selling cards on eBay on eBay we did this huge um we sold all this stuff we bundled it up and we sold it on eBay um we were doing a lot of leases we sold them on eBay um and that was kind of like where we started because I was always thinking outside the box but then there was somebody on Wall Street who um we all know but I won't name his name um who actually had reached out and wanted to buy a note for me and um and I sold that note to him for a thousand dollars which really created our space because after I sold him that note for a thousand dollars um he made it so easy he was like well do you have any more of those um I started typing up not on the spreadsheet you guys got a spreadsheet on a Word document I started typing up um loans that were charged off and sending them to him and he was selling them to guys like Dave Van Horn Mike Rasika um some of the guys that have been around for a long time Kevin Cordell um and the secondary and the secondary Market but I didn't know what I was doing I was just making my bonus um just keeping it 100 with you guys I had no idea what I was doing other than making my bonus and making my life easier as a banker hmm and making him promise that he wouldn't pursue a deficiency balance if he settled with these people that was that was the language that we came up with he promised me that he would never pursue a deficiency balance against anyone so that's where kind of like there's a language out there in our space that oh well we won't pursue a deficiency balance well that was a conversation that we had early on in the late 90s that there would be no deficiency balance pursued if they bought the loan wow all the way back from that City that's amazing for this um this space and um and in 2004 um we did this over and over and over again we started like doing ten thousand dollar trades and went to a hundred thousand dollar trades and I was getting excited then we went to 250 000 trades and I think by the time I left we were probably doing about 850 to a million dollars a month and that was in 2000 2004 late 2005 is when I actually left the bank and I went to the origination side and then I went to go work for him also okay um but that's kind of how I got started it was kind of by accident so selling non-performing loans in 2004 like right in the Heyday of crazy lending and everything else and there were there were that many non-performers you were able to sell million dollars a month listen it was so crazy even then yeah I was in a cubicle and literally I had files like I was drowning in a cubicle like they were stacked up wow you want to know like my process on how I picked the file to send it foreclosure I just picked one literally winner um I would just pick a file there was no Rhyme or Reason we were working in Lotus and dots there was no I mean like as long as you met your goal there was no pressure wow back then things weren't in default like they were today like they were in a way 09 200 10 but you still have that many loans that are defaulting you know for with the way the market was it's it's pretty astounding and interest rates were super super high yeah you know they were we're complaining about interest rates today you guys I mean like I was charging our stuff at 11 12 yeah yeah so wow so you know people are like well you know the the feds is doing this on purpose this is intentional well okay well 2004 we were charging enough loans at 11 mm-hmm so real quick so those who are not dealing with the word can you define what charge up means for those people may not know a charge off is a loan that has not performed and it has gone delinquent 120 days and according to banking standards if a loan is gone delinquent for 120 days the bank has to write it off as a loss and legal action has to be called or the bank will accelerate the balance and it is due in full um and sometimes they will do a modification or allow them to start making payments again but it no longer sits in the normal realm of banking they have to go to the special Department right to land of the Misfits recovery department yeah over the years have been charged off loans just someone knows so yeah yes so then you got into originations and then how did that transfer into you started buying your own well um I well I felt like I needed to learn origination because I really didn't know origination so I went to work for um I went to work for some of the CD lenders um I worked for option one worked for Nova Star mortgage and um yeah the great ones and uh and then um went and worked for a hedge fund um that was in this space that was buying a lot of um stuff that was from neighborworks from America Neighborhood Housing and when I learned the process of underwriting um it made me very very well-rounded um where people say it made me dangerous because I knew the back end of understanding about people when life happened but then I also learned the process of The Upfront process of all the things that you needed in order to be able to get along and understanding credit would make which made me a force to be reckoned with and I'm just not tech savvy I'm not I'm not a technology Guru I just know how to you have it up here though I know how to process the information but I don't know how to use technology so I'm that's my weaknesses technology we all have weakness and strands and um so it was it was really it was amazing that once I learned how to underwrite it actually made me a better negotiator about recovering dollars I was always really a top negotiator with recovering money for the bank even before I learned how to sell loans I was always a top negotiator in reference to recovering dollars and so that's also something that I've been known for in our space in negotiating workouts um with people um because that's a strength that you have to have in our space um when you work loans that are in default being able to negotiate with a borrower fact finding information to get that information to be able to use to your benefit to get the dollars to actually make your loan re-performing that some people may not know what underwriting is right can you I know it's long-winded you know radiation of the big deal and underrated a different thing can you quickly explain the difference what they are and what they mean so um origination is is basically when you take an application you take an application what consists of that you basically you provide income documents um assets you tell the truth um you have to have either income meaning income doesn't mean employment so some form of income and you have to be employed for at least two years that's part of your application process and then the underwriting process means that we look at and we evaluate everything um the manual part of that has been removed we have an automated underwriting system now um there are still some people who manually underwrite but a lot of it is just basically we put it into a system and it basically gives us what what our conditions are to get your loan approved um but we still will verify the information um so there is still a human approach a human touch to that but the math equation pretty much yes and um and and the underwriting process what it does is um it also allows you to verify the income um verify your tax returns um it just wants to verify that you're being truthful and you're credit Worthy um so um most of us right now are doing underwriting at 580 to 620 credit scores um even with the um I heard you guys talk about uh seller financing which I do a lot of um so um those are the scores that we'd like to see you know 580 to 620 credit scores and we're doing some seller financing or loaning on our Ira money and those are the same scores that a lot of the banks want to use as well great so it's really interesting you get to that point and now you're underwriting and originating paper um getting getting the collateral fall together for you people and then when you create these notes you know there's no problems or guarantee that the borrower for no fault their own go through slumps and issues and problems right it could be a health distribution could be jobs creation it could be a marriage situation could be a kids duration we have numerous reasons throughout the years why people don't perform and a lot of times it's no fault their own right we've heard the stories the kid gets sick I ain't paying my mortgage payment I'm gonna make my kid better and we all get that I mean it makes sense to all of us parents so but when we have people out there that do things like this who underwrite everything do everything right and then for whatever reason don't make the payments right what is the process from that point from a bank situation to retrieve some of their money that is in the retrieve their money that's in the deal for those may not understand what that that process is so Malone goes 120 days the bank has to take legal action what does that look like in the bank's duration okay so I'm gonna I'm gonna hit you with something in reference to some loans are are backed by the government so some loans have PMI on it and if the loan is backed by the government PMI will help cushion that blow um after the Foreclosure is completed foreclosure has to be completed a lot of stuff that we see in our world has no PMI on it let's be clear there are some loans that still have some PMI on it because I know some loans that we have purchased that were housed at BSI did have some PMI on them um and we were able to file those claims but you have to complete the Foreclosure before you can do anything to see where your loss is going to be okay you either have to go through a judicial process or a non-judicial process that means that you either have to go through the court and a judgment makes a decision or you have somebody like Matt Kelly and you go through trustee court and it's it's you know it's sold at the courts on a court step and that's how um the asset is sold and they're taking the action of the notes um and the assets I'll say the asset is recovered when I say the asset is recovered we get the um I'm sorry you got somebody's at my door um so good real-time video um you get the um you get the asset back or it's sold to a third party sure um if it's sold to a third party doesn't mean that you're going to recover your full entire balance um and and what I mean by that is is that so let's say let's just use round numbers a hundred thousand dollars hundred thousand dollars of property sold but you owe two hundred thousand dollars and um the property goes and there's a deficiency balance um because of the asset it's gone and you um and you can't um you then recover all your money at the sale right to Define what deficiency balance means to an investor um you're negative you were owed 200 but you only recovered a hundred and but there are some states that there's deficiency as barred so um the ACA has a template that will tell you if you can pursue a deficiency balance or not so the ACA is the association of credit and collections professionals it's something that you guys can join um and it's a great place for crediting um credit and collection people um the ACA is also a place where you can actually also know what you can um what you need to do if you want to be licensed to be a surfacer but it's a it's a great place to learn compliance rules and regulations about our world right um but that is a they have every state every rule every regulation on deficiency balances that you can pursue or you can't pursue so um we had a template and um we use Salesforce um at the hedge fund that I used um that I worked for and when we finished the foreclosure after we were done we would either Market deficiency barred or deficiency not to borrow and we would market and if we had a deficiency balance we would tell the attorney pursue deficiency balance if we were able to um we would just market and we would know that we were able to pursue that balance how many states do you think that it's barred in I I I don't have the state so curious what do you think your guesstimate how many states don't allow you to go after that probably about 30 wow okay that much I think about 30 percent so you have to think about the friendly States nice word for it I'm just saying you have to think about this from the states yeah yeah and uh California [Laughter] well I mean just think about that what you got to do to get somebody out of a house in California is true you might be bankrupt by the time so um to everything you've liquidated the asset and there's still money owed to you you're in the deficit can you collect that money um according to your note yes your the mortgage is gone the asset is gone so this is why you have two different instruments you have a note and you have a mortgage now the house is gone the collateral is gone but this is why you now have the mortgage and that's the instrument that's the promissory note that now you can now enforce yeah so the mortgage is the lien on the property that secures the property to the IOU right so when you go after a mortgage you're going up to a lean position situation and that liens now gone but that person still owes you an IOU based on the terms inside the promissory note right if you have a house that you sell at the auction for 100 000 because it's upside down or whatever reason well you owe 200 000 according to Legal balance you have the legal right in those states to go after the hundred thousand dollars personally because that person still owes you that money correct so that was probably just as clear as mud but um so I had one in Ohio I'll give you a special statement I'm a factual story so we had one in Ohio um that we actually had purchased a note in Ohio and it was a it was a net City you know and it went um it was a foreclosure sale and it was a condo that foreclosed the association called foreclosed and we thought we had got white because the the condo had foreclosed and so there was um there were surplus funds after the foreclosed after the condo association had foreclosed and we said well do we want to do we want to actually fight this what do we want to do so we uh we actually filed for the surplus funds from the HOA for closing we took those funds and we made a decision to actually pursue the note and we went through the collateral file and we found that he had a checking account and he still had money in the bank um from the original file it was still at the bank and we popped his checking account and we got forty six thousand dollars first pop and then um and then he um he didn't take his money out the bank he he kept on putting money in there and we went back because we didn't recover all of our money and then we got like another like twelve or thirteen thousand dollars about four or five months later wow and this took like about a year and a half it wasn't like an overnight process but it was a pretty sweet deal yeah what is the process to start that deficiency judgment against someone is it during the Foreclosure period and after it's after so the Foreclosure has to be completely done um and the Foreclosure has to be closed and then you have to tell the attorney that you want you want a deficiency judgment they get the deficiency judgment and then you um you can do a wage attachment you can do a bank attachment and then once you get that and you actually know where there's assets then you actually have the attorney's office take care of that paperwork and send it in and you get the attachment um you get it granted and you get the money how often does that happen these days like there's I I only started seeing equity in about 2018.

um and now that seems like all I ever see is is loans that have Equity excuse me in the property so it it are you still seeing that today where where there's a surplus there where you can go after that um I haven't seen a lot of surplus um a little bit but not much I've just recently as you you know you have recently just started seeing Surplus again um and but sometimes there's overage um but even if it's not if if you're white you still have the right to enforce the note and ask for the deficiency if you're allowed to ask for the deficiency and then I assume that that it's state by state as far as the statute of limitations up to so many years later yep um there is a there is a um I'll call him an old soul in California I love him to death because um a lot of the old guys um taught me so much about the way they did business so I so I gravitated to a lot of the older guys in in business because I did I learned so much and he actually would renew judgments in California and got very very wealthy doing it and been doing it since like the 80s and I was like wow that's neat and so and he was like well you know Sabrina I've got to renew this judgment and I'm like well well how he was like well because you you can you can renew it so many years and look at I guess they get such limitations you have to renew that opportunity yes so he was he was you know he was renewing judgments in certain states that he was permitted to do so and he stayed on top of it so he had actually he actually had like a calendar like every time it was time for a judgment to renew in his office especially like on on people who had um properties over like four hundred thousand dollars he would renew those judgments because his mindset was is like people who lived in those type of properties they were prideful people and they would always have a certain type of lifestyle and eventually they would come back they would come back up and he would basically get something from them I'm down the line and and most times he did or they would want to buy some you know they would want to sell something and they'd have to satisfy that judgment before they could just quick things Cindy Coleman before I said hello she want to make sure I got it out across you to send me the common follower of us um she wanted to make sure she said hello we did have a question from John um you mentioned by going after people with money in an account how do you know that they have money in an account what's that process of finding out where their accounts are how to lebium and you know even things like tax returns okay so you guys so micro belt some of you guys know about microbilt right yep some of you guys belong to micro belt there is a feature with microbilt that does an asset search for you look at that on the drop down on the side it you can actually do an asset search through microbuild and it will come back and it will give you um hits for assets that's one way you can do it um two go back to that origination file that you had or you have when you buy your note so we get cheap we get lazy in the note space so we don't want to pay for all those copies for Richmond Monroe or um Casey Wilson to make all those copies um or we don't want to pay the storage fee for that origination file that information you guys is golden I have had the same checking account for over 30 years now I'm not I I'm not you can't get deficiency judgment against me but I've had that same checking account for over 30 years so I put a voided check in my in my file when I bought my house so when you're going through those files that checking account information is there even if a bank merges your checking account number doesn't change even if um when you when you put your assets on the 1003 or the erla now that we call it that information is on your loan application all you got to do is call and see if the bank account is open um so if someone doesn't have a a you know connection to work can they go find assets through a service out there that can well you know we we have a few people that say they can find assets that show up at our note events and things like that but I don't know how credible they are um they say that they can find assets you know you can hire private investigators you can hire companies to do that yeah you can um but I'm I've been successful leaving on finding assets through um the microbilt option doesn't have access to micro belt is there places that can like wholesale micro belt like they can do a search for them no you know you can't do that that's not that's not permissible right because I'm presuming most people are gonna say well Nathan now you know he's breaking you know David is breaking the rules even asking that question right that's the problem right now because a lot of people here may be a one or two investor they say oh I'm not gonna be part of microbelt how can I go find his assets have I not you know doing this full-time and not buying a bunch of assets number do maybe do it one time right okay how can they go about doing it so um the other thing is is like a lot of our attorneys that we use for foreclosure um they use Lexus Nexus Lexus Nexus is very expensive but Lexus Nexus also has a tool to search for assets so that's another way that you can do that um so um not only are you looking for bank account information but you can also attach to other property you guys now you um deficiency judgment you get a judgment you attach to other property think about it let's think outside the box yeah you can pass through a whole County and just everything that person owns so I've got a I've got a situation where it's not a deficiency judgment it's just a judgment so I had a a contractor that was going to do some work on a property I paid him in advance which I don't normally do but I did because I decided to trust them for some reason and then he took my money and didn't do any of the work uh and I never do this but I did this time because I was just insulted so I went ahead and uh hired an attorney to get a judgment judgment was granted but now we can't find this guy so it's in Tennessee and I've got time Tennessee's got a nice long uh statue of limitations there what's my best way of collecting on that where at in Tennessee uh it's in Kingsport and you know they call me the Godmother notes for and it's it's because it's the guido with me now um um has he just fallen off the face of the Earth yeah I mean we've tried Facebook and like everything we've tried all kinds of different things track this guy down and he just kind of disappeared it's keeping a low profile at the very least have you tried like Lowe's Home Depot have you called the Lowe's Home Depot nope I'm gonna make a note so call the pro desk um become friends with the pro desk and see if he is taking other business through the pro desk because if he's a contractor um he is and then um the sad thing is is a lot of the contractors you know don't have a lot right um do you have his first and last name I've got his his first and last name but not I I as far as I know he doesn't actually have a business he's just a guy so I don't even know if he's licensed which again is all right it's on me I hired a guy that's just a guy and I totally get it and big mistake we learn we live and we learn we have hearts it's okay we have hearts I mean Cindy mentioned have you checked jail or prison but I I'm presuming uh if he's there the Judgment won't be too much good for you it's not going to do me a whole lot of good I hear you don't make a lot of money which tries to do that um but but really try the Home Depot Menards and Lowe's um and this is what I will tell you about contractors because I do a lot of fix and flips um they are remorseful and um sometimes they will come back and they will redeem themselves okay um believe it or not they are remorseful especially if you call out the lows at Home Depot and bears right people talk to you I mean will they actually um just so you got to be friends with the people at the pro desk yeah you know just calling um just talk nice to them they they just want somebody to talk to yeah yeah I can talk that's all right that's good um good tip good tip I will do when we look at these things it it sounds to me is you can pick a situation that may not be great and you may just barely get out and a year later your returns could just be amazing because you can go after this money that the borrower still owes you through a legal process wage garment and we talked on the phone about this and I never even thought about it but taxes their tax return for the next year is now yours so that that's the other thing that I used to to watch um when we would look to offset people's accounts so I again because the underwriter and me so they had kids and their kids were still minors and I thought they still banked at the same bank I would then wait around tax time knowing when they probably filed their tax returns um because people are just like um they're creatures of habit right um I would get that bank attachment around the time of tax return and I would know that I'm going to get their tax return um with that bank attachment because they had kids now shame on me that I'm gonna take their tax return but that's when I would try to make attachment and so you know and I had a conversation once with a friend of mine where um I was kind of feeling bad that I was that I was forcing this contract you know somebody had had created this note at some point in time and now they're not doing it and here I come and I kind of felt like I was the big bad guy saying you owe me money or else and in this conversation with my friend he said no no you're holding them accountable to something they've already agreed to and and he's totally right and that made me feel a lot better about it and I'm not I'm anybody who knows me knows I am the least vengeful person you've ever met uh but I believe in Fair and I believe in you know doing what you say you're gonna do and so me holding them accountable to what they've already signed up for I I'm totally okay with that you know and you could choose not to do this right that's a big thing say you have an older couple when the husband passes away and my wife loses the house yeah you technically go after her you can well you don't need to right right you have the option to uh right now mentioned tracking with the relation plate I don't know how we can do that but uh that's a great idea we can try to find anyone that way but I think that for me that you can this opportunity to take people who may just be screwing you at times or just didn't play ball play games maybe file you know BK twice where you can just let me you know they filed BK you can't pursue the the deficiency just so you guys know um so if they've been discharged in the bankruptcy you can't pursue the deficiency I've seen with people who may file the last minute and then never do the plan and then yeah the notorious follow-ups right those times you can definitely file against once you can get the foreclosure and the BK Bard uh Frozen for a minute go out to those people that just play games um this is something we have the opportunity to do and I don't know many people who have done it and I think it's the fact that lack of knowledge um a lack of experience but it is it's not commonplace to be happening but it is possible to do in certain states of course um and then um the other thing that I want to point out to you guys is about um accounting is very important when you are going through deficiency um you know if you want to pursue a deficiency balance um if a judge is going to um you know if you're if a judge is going to challenge you on your balance when you're trying to pursue a deficiency so um we talk about you know corporate advances of taxes or um you know recoverable fees and expenses this is why it's important to use a servicer that's you know tracking our own expenses and doing all of these things where we think we're saving money but then we want to recover on the back end on a deficiency balance use a servicer even if it's a you know a low budget servicer for the accounting purposes of being able to recover our money right make sure that your your accounting is in order and it's traceable and it's trackable so I want to point that out to everyone also and the other thing that I want to also say is is that it's important that you've worked your file and what I mean by that is is that there is documentation that you made an attempt to work out there was an attempt to make reaches there was attempts to at least give a chance because sometimes you're going to get a pushback from a judge or from someone that if you don't work out something you didn't work out something with the borrower that judge is not going to look friendly on us they're going to look like we're going to be the big bad villains so at least if we did what we were supposed to do as the Creditor as the lender then if we do do the Judgment if we do do the deficiency if we do do the offset we did what we were supposed to do when we followed and we were compliant on the books yeah so I think that that's for the judges that's how much and they will be more gracious with our requests and understand our request better than if we're just fly by the night doing half-assed concentration and we learn ourselves that the more we put into this and the more good faith we put into it and you've tried everything the judges respect that that requested that point yeah um and also policies and procedures so um you know how you you heard me say that um every file that when the Foreclosure was completed we documented if the if the deficiency was barred or not that we've documented it in the system it was an automatic deficiency bar deficiency not bark deficiency pursued deficiency not pursued we've documented that so if anybody ever audited us where a borrower would say that they're targeting me they're picking on me so this was just part of the process where you didn't get um this um emotionally out of control because you've used your IRA money and you're just you're hell-bent and I'm gonna go get this person because um they didn't pay me back and I'm gonna do everything in my power because they pissed me off on the phone [Music] um we in our world in our space tend to be a little bit more emotional than just the regular Banker collector servicer collector so I kind of want to bring that into you guys too to just kind of think about that we are human it is sometimes it's not easy it is our money we've worked for it um we are investors we're Risk Takers some of our risk tolerance are always the same some of our risk tolerance are high some of them are low and we have to think about all of those things even when we're thinking about a deficiency judgment yeah yeah we have to be machine like too right we have to be just that boom boom boom boom Hey listen anything and we have it's a 20 loss we do this that's why Z and come from about of of a business versus it's an investment that's a good point a lot of people think about this as the business but they act like it's a it's an investment which is it is an investment but you can't treat it in the eyes of the Court as hey it's my money I want it back in certain Creations um you know we've had throughout the years where we've had opportunity to do deficiency judgments and I've often not you know um most time they have no money really to a point right can I go after that you know we had one it was it was a hundred thousand dollar loss situation but it was an old lady that husband was just it was wheelchair and they were to get 600 back in taxes nothing coming through and for me it wasn't worth the effort is there a cost in per se for this energy judgments for someone to do what's the typical cost to get this thing filed approved and start Levering accounts um so again attorneys time but generally like court costs um could be between 150 300 and then really important and this is a good question you need to negotiate what it's going to cost you with your attorney up front so they don't milk you because what eats us up in our space is attorney fees because they just milk us milk us milk us so understanding what it's going to cost us up front with the attorney what is it going to cost us for you to file a deficiency judgment against for us is it um included in our first uh our foreclosure cost um every time you um you know you send an offset to a bank what is that fee what does that look like look at their fee structure if there's additional Administration costs and and also is it a cheaper rate if your paralegal doesn't versus you doing this is true yeah oh good very interesting stuff I I had I had the same thing I'd I've had opportunities to get the deficiency judgment I had my attorney ask me if I want to go for it and I've always just automatically just no no no no no no no it's fine it's good leave it alone um I want to make sure people out there who do have questions feel free to chime in here before we disconnect and let Sabrina go Sabrina has been in the space for God knows how long right doing all different Avenues in the notespace from accidentally selling assets and actually stumbling crosses opportunities um to being in the servicing space being in the radiation space she's done everything so it's really cool to have her on because for her knowledge experience um so so how ask the question how do courts look at the business judgments to judges favor homeowners in those cases anything as you just explained it's typically how the lender treats that borrower that would that be accurate um I would say it depends on the judge I I will I will say it depends on the judge because you have judges that are super super consumer friendly and then there you have other judges that are just you know they're just by the book it is what it is and and it's horrible to say that you know um I I can remember um having an argument with somebody I said you know Federal Trump State all the time but sometimes um you um you should um hope that that stuff just stays in state court and it never goes Federal um because you get better treatment in in State Court than you do federal court um and and so it's it's kind of the same thing um you can go and Judge Judy's courtroom and it's Hell on Wheels you can go in judge Jones's courtroom is just like oh I'm so glad I got judge judge Jones so you don't know you really don't know you know sitting as an I mean like I've been used as an expert witness I've been you know I've had to go in mediation hearings and and you just really never know how that stuff is going to turn out right interesting it's it's interesting to have that kind of concept because it's you're right sometimes you can do everything you can in your power but it's still the judge's opinion on what they think is in favor of or not in favor of and it's nice to live and learn right you may say oh boy they want us to do this next time and attorneys are always learning about the judges right you guys are turning about that local judge you're going to learn a lot you're going to learn oh yeah that judge likes this or that judge like that or Hey listen we gotta do this with this judge um they get to learn their personality um true story I was in Alabama and a um in a mediation case and um and we were going to use an attorney that wasn't familiar with the judge and um this this late this judge was a trip and probably the 11th hour I changed to a local judge probably I mean a local attorney was probably the best thing I ever could have done I vacation with this lawyer now her and I are really good friends and um she said she said well what made you change your mind as it sure wasn't your hourly fee I said but I said I realized you were a local um I was doing some research and I saw that both of the judge the judge and the attorney was at an event together like a golf outing um just kind of doing some research and I said hey they're at the same place I said I think I'm Gonna Change I think I'm Gonna Change lawyers and that was what saved me wow so you just never know but you know if it's one of those things that if you don't understand the politics in that City or in that courtroom sometimes you're just going to lose yeah that's fascinating so this this like we were saying before this seems like it works better in an upside down Market where where more people oh more than what the house is worth do you see that coming around again what's your crystal ball do you see house value is dropping enough that that we're going to see those underwater values again um I've been watching the market this week and I've been saying prices drop more drastically this week than I've seen in a long time yeah prices dropping 10 15 000 and you know like in my market we're like I pay cash for low end price properties I mean like I'm chopping at the bits um but what does it mean for other people um I think it's going to be a ripple effect you know like for a buyer hold Buy and Hold um seller finance people I think it's going to be really a good thing for some of us but for those people who are doing bank loans um we're going to probably see some mods coming down down the pipeline and um I I don't my crystal ball um just says that we're um we're going to embrace ourselves cfpb is not going to let what 2000 what happened in 2008 happened but we're going to see some things really shift and change very interesting interesting well with that Sabrina I want to thank you for coming on with us on this Friday morning afternoon kind of time frame share your knowledge your experience with us and those watching us and listening to us a lot of people are saying they want to go back to the beginning and they missed earlier please do so you can check on YouTube Facebook video will be here LinkedIn all that stuff and I you know just having you on having your knowledge and it being I encourage you guys to reach out to Sabrina and ask if you have questions whatever um if you are in a space where you're looking to learn choose another valuable resource to kind of Leverage your knowledge off of um but for you to come on and just spend an hour with us with your busy time I appreciate it is deficiency judgment is an area that most people don't actually do or know about or not even talk really you know thinking about now um in the many conferences we've been to it's not a topic of your discussion often and I think it's because most of the time people don't know about it don't use it and the markets change a lot right there's not as many underwater assets as there was back in our day a in 2010 nine time frame so I think that you your experience knowledge is Awesome with that nine um so if you do have additional questions I post in the chat the webinar link uh to our Forum so we can if you have questions I can just vote right over Sabrina um but I know on Facebook you know Serena Hawkins you can reach out to her that way um or shoot us a message we'll send our contact information so well Sabrina again I thank you for joining us on this Friday afternoon for us and uh hopefully um you know in the future we can reconnect with you serious do you are you currently with somebody right now as business-wise are you working for someone right now so I actually work for Premier Bank as a loan originator um and I um also I'm still um with Main Street asset Solutions um business is really slow but I'm still um I'm still with them helping them clean up some things and um I do some mentoring and coaching on the side and do my Fix and Flip so I'm pretty busy and um I um I do plan on seeing you guys in Tennessee this summer in June um so I was excited to take your ticket really so I will see you guys in Tennessee and you guys should join um always good to see you guys and thanks for having me and if if I could be of service to you guys you know don't hesitate to reach out let me know I'll do anything in my power to help you yes thank you so much Sabrina thank you so much all right we went through the collateral file and we found that he had a checking account and he still had money in the bank um from the original file it was still at the bank and we popped his checking account and we got forty six thousand dollars oh first pop and then um and then he um didn't take his money out the bank he he kept on putting money in there and we went back because we didn't recover all of our money and then we got like another like 12 or 13 000 about four or five months later [Music] foreign [Music] Dave putz from jkp Holdings alongside me as always Mr Nathan Turner good morning how are you good morning good afternoon everyone how are everyone doing so Nathan I wanted to congratulate you first off I see you got the tickets out and the website is up for DNA finally my goodness that was uh much longer than I anticipated getting that ready to go but uh but it's live it's up tickets are now available so for those who are not familiar with DME is it's a no conference right it's for a collection of individuals like ourselves to get together and talk and learn from other investors so if you are at all looking to learn or even experiencing if you look at Network you're going to get a vast collection of different people there yeah and one thing that I think is really exciting this year is uh you and I have been talking to a bunch of seller finance creative Finance people yeah and we're going to get a bunch of those guys there uh which is fantastic so you've got a bunch of people that are creating notes looking for an outlet paired up with a whole bunch of note buyers that are looking for notes to buy and we're going to come together at DME and meet each other and network and make contacts and get some deals done so I'm excited about that yeah so with that said what do you think people will be the most interested in coming down there for besides networking what kind of topics do you think that you'll be having if you've already started to get involved this one's going to cover all kinds of stuff we've got um It's a combination of panels and solo presentations so my whole vision for this whole thing is I want people to come and be able to not just Network and that's a huge part of it I want people to be able to network and meet people but I want there to be enough education so that people that are just getting started feel like they've gotten something and people that are experienced feel like they've also learned something or it's not like hey no no we're bringing in people that you've never met before people you've never heard before and you're going to be able to hear what they've got to say a different perspective that's huge I know like last week we were going through some assets and we're able to acquire a couple uh small pool of assets um so things are starting to crack for us even and I think it's this Avenue that we're exploring in different facet um these idea of the fact of 30 billion dollars of assets created in 2022 is amazing yeah um yeah there's tons out there and I'm excited to have a bunch of those people there that people that are doing the origination so that's yeah that's great yep absolutely so I think for most of us um this stuff is really cool people who are um wanting to learn not just notes but different kinds of people out there who were involved I think people who are um excited by this because of the fact that they can get into notes and that the I guess the transfer from the origination to the buyer is almost complete so yeah that's cool yeah yeah really looking forward to it it's going to be really educational and and a place where you can come together and meet other people but it's going to be a lot of fun we've got some fun things going on there the night before the conference we've got an ax throwing tournament we need to register for that separately cool but get to be part of that as well and we'll have a DME ax throwing Champion for the year and then we'll see who takes the throne next year so I'm sure you guys have all heard of you know performing and non-performing assets right um and a lot of times right non-performing can be a bother some situation and we on this last week's call uh our our 10-week Mastermind Junior group we talked about this idea of building this big calculator right and you can't just build it for the fact that we are hoping or praying that um the asset will could perform a lot of times they won't and you never know and you have to build that in because just because they've been making payments steady for the last five years doesn't mean they're going to continue to make payments study for the next five years um we've been through that we've seen it we've experienced it so you want to make sure that you've you've accounted for all possible outcomes and that you're putting it together and so putting that bid calculator together we've spent two whole classes on that we spent a lot of time a lot of effort putting that together mine is even getting updated which is fantastic and and you know we continue to learn and grow yeah so with that said you know I've done my fair share we both grew up in this idea of a non-performing asset and a lot of times people say that's crazy you know because it's all different out there um non-performing asset to a lot of people who are getting into space the last couple years is almost rare because everything's performing everything's doing really well and when they get in non-performing they get themselves in a bind yeah right they don't know how to do it you know was it the route we go through foreclosure we go through that process and we kind of pop an ass at the end of it yeah right um I think you do seem different foreclosure we're actually in great shape if we have a few accidents foreclosure but nothing like we used to have right yeah we've planned for it and that's all part of it understanding that there's this is a possible outcome so plan for it know what you're in for what would what would be the situation if that happened and are you ready for that and are you ready to to take on a property if that's what the case might be gotcha so um I wanted to make sure that we you know get someone on that can help us through that process of how can we supersize are returns in the fact that we are hoping I'm bringing her on here this Sabrina Allen that we can take a situation that is not in good shape or maybe small return and how can we leverage that into a great opportunity for us yeah so Sabrina thank you for joining us today hopefully you're doing well I know you're a little on the weather but I'm glad to see you join us today hello how are you guys doing good good um it sounds a little cliche but when when you create a loan you have to think about everything so when you're starting at the beginning you have to think about the end so um everybody gets all upset when you're originating alone of all the things that you have to provide up front and you know you you know you get all pissy when you have to get all those conditions to the underwriter but there is a reason why so when you're when you're getting a loan you're solid um but when you stop paying you're not right but all of those things that you gather at the beginning is for a reason and so um there's an underwriting file that a lot of times during the process when loans are sold in our world they get law the underwriting file gets lost but that file is really really golden if you get that that collateral that origination file with the collateral file it has so much information in it um when you talk about super sizing that asset um because it really tells the story about where the borrower was at the time that they were perfect or at least they qualified for the home it's it's that origination story that all these Marvel movies are putting but having that origination story that's a big deal and then you get to understand where they came from and why they thought they could perform on this loan um it's the glitz and the Glam yeah and it's the it's the assets it's the 401K it's the IRA accounts it's um the cars they had it's you know if there was a spouse even if they weren't on the loan but it may have been some other bank accounts you see everything in that origination file yeah which is really golden for us yeah if that file becomes non-performing and then we have to complete the Foreclosure yeah oh I say I say that to say we we set up at the beginning for failure we don't think about that when we're buying non-performing assets no we really do yeah and that is your meal ticket yeah at the end of the day when the return looks very slim on the back end um so begin with the end in mind set yourself up for success so and now we got to go back a little bit Sabrina because if anybody doesn't know Sabrina you've been living under a rock but Sabrina tell us about uh you've got a ton of experience in this especially on the origination side so tell us where did you start from and how did you get into what we now call notes so by accident by going to work that's how I got into this um really um probably about 94.95 I took a job at Nat City Bank and um collections um what was going to work I needed to take care of my family I needed to help take care of my family and um just was driving to Cleveland every single day and um just the the grind of it all and I didn't like what I saw um 30 60 90 120 and that was it went to recovery went to charge off went to foreclosure and and after that I had no control I always used to think um if I could just get a payment I can save them but you couldn't save everybody and and it just felt like you were always drowning and and one day I took the time to read and understand the documents that I was processing um and in the documents the note said that I had we had the right to sell the document the notes um at any given time and I was like oh well if I could if I could sell it if I could sell this to somebody that would be golden so some of us um got creative this was before all this compliance stuff and we actually sold a lot of loans on eBay we were selling cards on eBay on eBay we did this huge um we sold all this stuff we bundled it up and we sold it on eBay um we were doing a lot of leases we sold them on eBay um and that was kind of like where we started because I was always thinking outside the box but then there was somebody on Wall Street who um we all know but I won't name his name um who actually had reached out and wanted to buy a note for me and um and I sold that note to him for a thousand dollars which really created our space because after I sold him that note for a thousand dollars um he made it so easy he was like well do you have any more of those um I started typing up not on the spreadsheet you guys got a spreadsheet on a Word document I started typing up um loans that were charged off and sending them to him and he was selling them to guys like Dave Van Horn Mike Rasika um some of the guys that have been around for a long time Kevin Cordell um and the secondary and the secondary Market but I didn't know what I was doing I was just making my bonus um just keeping it 100 with you guys I had no idea what I was doing other than making my bonus and making my life easier as a banker hmm and making him promise that he wouldn't pursue a deficiency balance if he settled with these people that was that was the language that we came up with he promised me that he would never pursue a deficiency balance against anyone so that's where kind of like there's a language out there in our space that oh well we won't pursue a deficiency balance well that was a conversation that we had early on in the late 90s that there would be no deficiency balance pursued if they bought the loan wow all the way back from that City that's amazing for this um this space and um and in 2004 um we did this over and over and over again we started like doing ten thousand dollar trades and went to a hundred thousand dollar trades and I was getting excited then we went to 250 000 trades and I think by the time I left we were probably doing about 850 to a million dollars a month and that was in 2000 2004 late 2005 is when I actually left the bank and I went to the origination side and then I went to go work for him also okay um but that's kind of how I got started it was kind of by accident so selling non-performing loans in 2004 like right in the Heyday of crazy lending and everything else and there were there were that many non-performers you were able to sell million dollars a month listen it was so crazy even then yeah I was in a cubicle and literally I had files like I was drowning in a cubicle like they were stacked up wow you want to know like my process on how I picked the file to send it foreclosure I just picked one literally winner um I would just pick a file there was no Rhyme or Reason we were working in Lotus and dots there was no I mean like as long as you met your goal there was no pressure wow back then things weren't in default like they were today like they were in a way 09 200 10 but you still have that many loans that are defaulting you know for with the way the market was it's it's pretty astounding and interest rates were super super high yeah you know they were we're complaining about interest rates today you guys I mean like I was charging our stuff at 11 12 yeah yeah so wow so you know people are like well you know the the feds is doing this on purpose this is intentional well okay well 2004 we were charging enough loans at 11 mm-hmm so real quick so those who are not dealing with the word can you define what charge up means for those people may not know a charge off is a loan that has not performed and it has gone delinquent 120 days and according to banking standards if a loan is gone delinquent for 120 days the bank has to write it off as a loss and legal action has to be called or the bank will accelerate the balance and it is due in full um and sometimes they will do a modification or allow them to start making payments again but it no longer sits in the normal realm of banking they have to go to the special Department right to land of the Misfits recovery department yeah over the years have been charged off loans just someone knows so yeah yes so then you got into originations and then how did that transfer into you started buying your own well um I well I felt like I needed to learn origination because I really didn't know origination so I went to work for um I went to work for some of the CD lenders um I worked for option one worked for Nova Star mortgage and um yeah the great ones and uh and then um went and worked for a hedge fund um that was in this space that was buying a lot of um stuff that was from neighborworks from America Neighborhood Housing and when I learned the process of underwriting um it made me very very well-rounded um where people say it made me dangerous because I knew the back end of understanding about people when life happened but then I also learned the process of The Upfront process of all the things that you needed in order to be able to get along and understanding credit would make which made me a force to be reckoned with and I'm just not tech savvy I'm not I'm not a technology Guru I just know how to you have it up here though I know how to process the information but I don't know how to use technology so I'm that's my weaknesses technology we all have weakness and strands and um so it was it was really it was amazing that once I learned how to underwrite it actually made me a better negotiator about recovering dollars I was always really a top negotiator with recovering money for the bank even before I learned how to sell loans I was always a top negotiator in reference to recovering dollars and so that's also something that I've been known for in our space in negotiating workouts um with people um because that's a strength that you have to have in our space um when you work loans that are in default being able to negotiate with a borrower fact finding information to get that information to be able to use to your benefit to get the dollars to actually make your loan re-performing that some people may not know what underwriting is right can you I know it's long-winded you know radiation of the big deal and underrated a different thing can you quickly explain the difference what they are and what they mean so um origination is is basically when you take an application you take an application what consists of that you basically you provide income documents um assets you tell the truth um you have to have either income meaning income doesn't mean employment so some form of income and you have to be employed for at least two years that's part of your application process and then the underwriting process means that we look at and we evaluate everything um the manual part of that has been removed we have an automated underwriting system now um there are still some people who manually underwrite but a lot of it is just basically we put it into a system and it basically gives us what what our conditions are to get your loan approved um but we still will verify the information um so there is still a human approach a human touch to that but the math equation pretty much yes and um and and the underwriting process what it does is um it also allows you to verify the income um verify your tax returns um it just wants to verify that you're being truthful and you're credit Worthy um so um most of us right now are doing underwriting at 580 to 620 credit scores um even with the um I heard you guys talk about uh seller financing which I do a lot of um so um those are the scores that we'd like to see you know 580 to 620 credit scores and we're doing some seller financing or loaning on our Ira money and those are the same scores that a lot of the banks want to use as well great so it's really interesting you get to that point and now you're underwriting and originating paper um getting getting the collateral fall together for you people and then when you create these notes you know there's no problems or guarantee that the borrower for no fault their own go through slumps and issues and problems right it could be a health distribution could be jobs creation it could be a marriage situation could be a kids duration we have numerous reasons throughout the years why people don't perform and a lot of times it's no fault their own right we've heard the stories the kid gets sick I ain't paying my mortgage payment I'm gonna make my kid better and we all get that I mean it makes sense to all of us parents so but when we have people out there that do things like this who underwrite everything do everything right and then for whatever reason don't make the payments right what is the process from that point from a bank situation to retrieve some of their money that is in the retrieve their money that's in the deal for those may not understand what that that process is so Malone goes 120 days the bank has to take legal action what does that look like in the bank's duration okay so I'm gonna I'm gonna hit you with something in reference to some loans are are backed by the government so some loans have PMI on it and if the loan is backed by the government PMI will help cushion that blow um after the Foreclosure is completed foreclosure has to be completed a lot of stuff that we see in our world has no PMI on it let's be clear there are some loans that still have some PMI on it because I know some loans that we have purchased that were housed at BSI did have some PMI on them um and we were able to file those claims but you have to complete the Foreclosure before you can do anything to see where your loss is going to be okay you either have to go through a judicial process or a non-judicial process that means that you either have to go through the court and a judgment makes a decision or you have somebody like Matt Kelly and you go through trustee court and it's it's you know it's sold at the courts on a court step and that's how um the asset is sold and they're taking the action of the notes um and the assets I'll say the asset is recovered when I say the asset is recovered we get the um I'm sorry you got somebody's at my door um so good real-time video um you get the um you get the asset back or it's sold to a third party sure um if it's sold to a third party doesn't mean that you're going to recover your full entire balance um and and what I mean by that is is that so let's say let's just use round numbers a hundred thousand dollars hundred thousand dollars of property sold but you owe two hundred thousand dollars and um the property goes and there's a deficiency balance um because of the asset it's gone and you um and you can't um you then recover all your money at the sale right to Define what deficiency balance means to an investor um you're negative you were owed 200 but you only recovered a hundred and but there are some states that there's deficiency as barred so um the ACA has a template that will tell you if you can pursue a deficiency balance or not so the ACA is the association of credit and collections professionals it's something that you guys can join um and it's a great place for crediting um credit and collection people um the ACA is also a place where you can actually also know what you can um what you need to do if you want to be licensed to be a surfacer but it's a it's a great place to learn compliance rules and regulations about our world right um but that is a they have every state every rule every regulation on deficiency balances that you can pursue or you can't pursue so um we had a template and um we use Salesforce um at the hedge fund that I used um that I worked for and when we finished the foreclosure after we were done we would either Market deficiency barred or deficiency not to borrow and we would market and if we had a deficiency balance we would tell the attorney pursue deficiency balance if we were able to um we would just market and we would know that we were able to pursue that balance how many states do you think that it's barred in I I I don't have the state so curious what do you think your guesstimate how many states don't allow you to go after that probably about 30 wow okay that much I think about 30 percent so you have to think about the friendly States nice word for it I'm just saying you have to think about this from the states yeah yeah and uh California [Laughter] well I mean just think about that what you got to do to get somebody out of a house in California is true you might be bankrupt by the time so um to everything you've liquidated the asset and there's still money owed to you you're in the deficit can you collect that money um according to your note yes your the mortgage is gone the asset is gone so this is why you have two different instruments you have a note and you have a mortgage now the house is gone the collateral is gone but this is why you now have the mortgage and that's the instrument that's the promissory note that now you can now enforce yeah so the mortgage is the lien on the property that secures the property to the IOU right so when you go after a mortgage you're going up to a lean position situation and that liens now gone but that person still owes you an IOU based on the terms inside the promissory note right if you have a house that you sell at the auction for 100 000 because it's upside down or whatever reason well you owe 200 000 according to Legal balance you have the legal right in those states to go after the hundred thousand dollars personally because that person still owes you that money correct so that was probably just as clear as mud but um so I had one in Ohio I'll give you a special statement I'm a factual story so we had one in Ohio um that we actually had purchased a note in Ohio and it was a it was a net City you know and it went um it was a foreclosure sale and it was a condo that foreclosed the association called foreclosed and we thought we had got white because the the condo had foreclosed and so there was um there were surplus funds after the foreclosed after the condo association had foreclosed and we said well do we want to do we want to actually fight this what do we want to do so we uh we actually filed for the surplus funds from the HOA for closing we took those funds and we made a decision to actually pursue the note and we went through the collateral file and we found that he had a checking account and he still had money in the bank um from the original file it was still at the bank and we popped his checking account and we got forty six thousand dollars first pop and then um and then he um he didn't take his money out the bank he he kept on putting money in there and we went back because we didn't recover all of our money and then we got like another like twelve or thirteen thousand dollars about four or five months later wow and this took like about a year and a half it wasn't like an overnight process but it was a pretty sweet deal yeah what is the process to start that deficiency judgment against someone is it during the Foreclosure period and after it's after so the Foreclosure has to be completely done um and the Foreclosure has to be closed and then you have to tell the attorney that you want you want a deficiency judgment they get the deficiency judgment and then you um you can do a wage attachment you can do a bank attachment and then once you get that and you actually know where there's assets then you actually have the attorney's office take care of that paperwork and send it in and you get the attachment um you get it granted and you get the money how often does that happen these days like there's I I only started seeing equity in about 2018.

um and now that seems like all I ever see is is loans that have Equity excuse me in the property so it it are you still seeing that today where where there's a surplus there where you can go after that um I haven't seen a lot of surplus um a little bit but not much I've just recently as you you know you have recently just started seeing Surplus again um and but sometimes there's overage um but even if it's not if if you're white you still have the right to enforce the note and ask for the deficiency if you're allowed to ask for the deficiency and then I assume that that it's state by state as far as the statute of limitations up to so many years later yep um there is a there is a um I'll call him an old soul in California I love him to death because um a lot of the old guys um taught me so much about the way they did business so I so I gravitated to a lot of the older guys in in business because I did I learned so much and he actually would renew judgments in California and got very very wealthy doing it and been doing it since like the 80s and I was like wow that's neat and so and he was like well you know Sabrina I've got to renew this judgment and I'm like well well how he was like well because you you can you can renew it so many years and look at I guess they get such limitations you have to renew that opportunity yes so he was he was you know he was renewing judgments in certain states that he was permitted to do so and he stayed on top of it so he had actually he actually had like a calendar like every time it was time for a judgment to renew in his office especially like on on people who had um properties over like four hundred thousand dollars he would renew those judgments because his mindset was is like people who lived in those type of properties they were prideful people and they would always have a certain type of lifestyle and eventually they would come back they would come back up and he would basically get something from them I'm down the line and and most times he did or they would want to buy some you know they would want to sell something and they'd have to satisfy that judgment before they could just quick things Cindy Coleman before I said hello she want to make sure I got it out across you to send me the common follower of us um she wanted to make sure she said hello we did have a question from John um you mentioned by going after people with money in an account how do you know that they have money in an account what's that process of finding out where their accounts are how to lebium and you know even things like tax returns okay so you guys so micro belt some of you guys know about microbilt right yep some of you guys belong to micro belt there is a feature with microbilt that does an asset search for you look at that on the drop do....