What Your Note Servicer Wished You Knew | Real Estate Notes Show

Episode: What Your Note Servicer Wished You Knew | Sohail Badruddin Dave's Goals and Plans: - Planning future AI-focused episodes with Nathan to discuss AI applications in note business - Monitoring portfolio for increasing defaults and late payments (30-60 day lates trending up) - Observing more non-performing notes and hard money loans coming through the market Nathan's Goals and Plans: - Involved in criminal and civil court cases in Chicago dealing with squatters who moved in during COVID (5 years ongoing) - Reviews servicing notes extensively when evaluating loans to understand borrower stories and payment behavior - Has one hard money loan in foreclosure while another performing loan remains stable Key Recommendations: - Review servicing notes carefully - they provide critical insights into borrower behavior and likelihood of payment - Don't ignore AI tools - experiment with them and ask them how they can help your business - Monitor current market trends closely - defaults and late payments are ticking up, affecting both note portfolios and hard money loans - Note buyers should request pre-review of documents before purchasing to verify serviceability and avoid boarding problems Topics Discussed: - Rescission rights on mortgages and their impact on note investors - AI implementation in note servicing (call recordings, automated recaps, conversation logs) - Rising default rates and late payment trends in current lending environment - Servicing notes as critical due diligence tool - Note origination vs note buying quality issues - Squatter/eviction case study from Chicago market Guest Insights: - Providence offers AI-powered call summaries and automated recap systems to improve transparency for note lenders - Notes are being purchased based on enforceability and profit potential regardless of origination source - Badly originated notes are a growing issue, particularly on origination side where frequency of problems is worsening - Pre-boarding document review could prevent costly issues before note purchases are finalized And the borrower has the right to resend on that loan.

>> So let's define resend. >> Unlimited time. >> Define resin. What does that mean for the common person doesn't know what that means? >> Every penny that that borrower has paid towards that towards that mortgage has to be refunded to the borrower. >> Yikes. >> And then you have to fight for possession of that property. So, interest, principal, everything you've paid out to the sub two loan. Welcome back to another Real Estate Note Show. I'm your host Dave Puts alongside my co-host, Mr. Nathan Turner. What's up, man? >> Doing well. Doing well. How about you? >> Good, man. Things have been good.

Winter time is upon us. We're getting >> all kinds of crazy weather now. Leaves are changing. Everything's just happening to us. Um, and the kids sports are what they are. How are things up there in Canada? busy busy. So, uh, our provincial government has been in a war with the teachers for the last several months. So, the the teachers have been on strike. We're actually kids are going back to school tomorrow. So, it's just it's been back and forth, back and forth. Kids have been off school for a couple weeks now, and it's just been Yeah. craziness. But anyway, it is what it is. We're we're getting through it.

>> Well, and in this crazy world of notes, drama is one of the things we typically love to live on. What's your drama with your Chicago situation? Any new news for the crowd? >> You know, I really wish there was [laughter] some significant forward movement. There's little little bits, little increments here and there. So, we we started our I was down there a couple weeks ago and we started our um criminal uh suit against the people since they're they're criminal trespassing at this point. And uh so that's and then you know sure enough I show up and it's you know the letter that I received is make sure you're in the courtroom exactly at 9:00 blah blah blah blah blah blah.

And I was there for all of three minutes. So he's like oh Nathan you're part of this case. Yep. I'm here. All right great. So let's uh let's schedule this for next month. Are you kidding me? [laughter] Uh yeah. So that's the justice system for you. So it it's just it's incredibly slow but uh but it is moving forward. That's the criminal side. The the uh civil side is still moving along. And I'm pretty sure we're actually going to go through the civil side to actually take the property back. >> And for those who have no clue what we're talking about, Nathan's been in a battle for eviction. Not even eviction because they already got evicted and they moved back in.

This is in Chicago in uh >> squatters to begin with. They they they never had the right to be there in the first place. They moved in during COVID. Here we are 5 years later. when people are loving the idea of having a non-performing note. These are the kind of things you kind of have to be worried about, right? [laughter] >> So, >> this is like the extreme worst case. I've never heard of anything like this before, [laughter] but >> yeah, >> but it does happen. >> So, with this said, you know, we're seeing some stuff in our portfolio that are changing a little bit. Um, we had a couple cracks last last three weeks.

We've actually had a couple defaults. Not defaults, but 30 days, 60 day lates kind of tricking up a little bit. Um, I've been seeing a lot more portfolios coming through. Um, I just saw a couple days ago some non-performers come through. Um, I've also seen some non-performing hard money loans coming through, >> which is >> Yes. Yeah. I'm involved in some hard money and I and and I was talking to uh the people I'm involved with and and the one that I thought I was in that is in foreclosure. Luckily, I'm in a different one that's still performing. So, [laughter] okay, great. >> Yeah. >> But it's starting to tick up.

We're starting to see some things happening. >> Yeah. I see some news articles and whatnot. Again, we're not into 2007 crisis mode. Nothing's like that's happening here. Just be aware that things are tricking and those who are buying performing nodes, just be more aware, right? >> So, you know, >> pay attention. >> Yeah. We we have our private group that we're talking to and we're seeing even the the originator slow down. >> So, they're watching their what they're doing with their assets. So, >> yeah. >> Um but all this comes together. One of the key factors is is what is happening in the market and Nathan's portfolio, my portfolio is nothing comprised to a serers portfolio of all these different investors coming together and putting their stuff in a serers's lap to handle, manage and control.

Um, and they see a lot of information, a lot of borrowers, a lot of data points, a lot of good and bad lenders, lot ownership of today's note portfolio, but someone that handholds deals on a larger basis, who sees notes come into the portfolio that are created by a lender who maybe the first time, right? All those things come together. Um, who else, Nathan? What else does Serers have that can help you as a note creator oriented seller buyer do to understand what's happening today? What are some things that they can flag? >> Yeah. You know, one of the things that I look at when I'm looking at buying loans is I look at the serers's notes.

>> So, what that is is just a record of any conversations they've had with the borrower. And I just find that so instructive because it's um you know even just like have has the serer tried to be making phone calls and the people are not picking up or uh did they pick up after five times and and the the message is oh I'm too busy I can't talk to you I'll talk to you later. Bye. And you know just trying to get a sense of the story trying to kind of insert myself into the shoes of the borrower to find out where they're at. What's going on? uh you know or do they pick up the first time and it's like oh hey sorry I missed a payment I'll get that to you right tomorrow and it shows up >> and it just it really instructive just to see what's going on just from an anecdotal >> perspective and so you can get to see >> I think people miss out on the servicing notes they don't really look at the servicing notes and and and uniscover what's really happening uh with the borrower >> really key >> yeah really some of the biggest insights coming from that so let's bring him in somehow thank you very much for joining us on a show episode for us talking about servicing all this happening.

Welcome and you're a repeat person for a reason. We appreciate you coming back on and giving us an update in that note market. How are you my man? >> I'm doing well. Thank you uh Dave and Nathan for for very excited to share all the details and heard you mention uh the the servicesers notes and stuff like that. Very important. um all our lenders have access to that information through their portal. With regards to our phone system, the the best thing that happened uh was an upgrade that service provider made where when you know the recording always takes place, all our calls are recorded, things like that.

But every gets a recap by AI >> and it it's automated. It gets the AI uh does the recap of the conversation. It's very detailed. You can also have the notes. There's notes in the but then what we do is we paste it in the conversation log and this way they don't have to think about what prior conversation looked like because it could have been 15 minutes worth of conversations. So the recap provides a very detailed or or a proper overview of everything that was sent and so the lenders can see it and then they you know basically decide what you know how to move forward or what needs to be done what the next steps are things like that.

So >> that's great that >> Yep. And >> we're making a lot of adjustments uh in our systems. I'll I'll share with you later but I'll I'll uh right now I'll just >> Yeah, absolutely. So, it's amazing that, you know, everything in this world is going AI, right? And people can hate it, they can love it, they can do anything they want with it, >> but the fact that it's here and if you're not taking advantage of it somehow some way and future show me and Nathan going to do some AI talks. >> Um, so stay tuned for that is you got to get used to what you're doing. You got to get understand that it's here and start playing with it.

The best way to do it is to mess with it and figure it out and see what works. see how you can use it or ask it how it can you can use it, right? You don't realize all the power it actually has. And a lot of times people say, "Well, I don't know what to do." Well, then ask it. >> Just, hey, >> I don't know what to do with you. What do I do? And it will give you an answer. So, I agree. So, I was glad to see that services are in in taking it in and using it. Um, right now when you seeing a note buyer come into play, um, they're boarding that note with you. Can you share some of the benefits of boarding with Providence? U, what are some of the new features that you guys have for note buyers who want to look for a note serer? Well, so from a when note servicesers and we're seeing a lot more notes sold lately.

It's uh very it become more frequent and we're we're getting notes on boarded from our existing clients that have other notes that are coming in or new uh or or our existing lenders that have sold the notes and the buyers are choosing to which is great um but they they do it because of the the level of service that's being provided to them. You know, I I always tell everybody that Provident is obviously in my mind the truth is definitely better than Neo. So, majority [clears throat] of the note buyers or note sellers or originators when when they the level of sophistication that comes with the response rates, the ability to solve for issues, it it just becomes easier.

We see notes being purchased regardless of, you know, it was RMLLO originated or not. Kind of like the what you showed, you know, where where if they were originated for notes, it red flags the deals. This is may not be eligible for a purchase. But right now, notes are being purchased um because they were uh how do you put it? As long as there's money to be made and they're enforcable, then the you know pulling the trigger and moving forward with with the transaction. What's holding up of some of the notes and we're also when we will review those. Real quick though before you go on is that so note buyers can come in and if they try to board a note that does not work.

>> You're going to kick it back and say this doesn't we can't board this. So that's >> we can't service it which is a red flag for note buyers saying well if you can't service it why and that's a dangerous thing guys right because they a note service can't service a note there's a problem with the file. >> Yeah. Here's the issue though. By the time they come to us to onboard the note, they've already >> true. So maybe we can get somehow to we can maybe get serow to maybe like pre-eread documents here. Here are some AI tools or pre-eread documents. See if if it's boardable or not before you buy it.

>> Maybe I had a business idea. Yeah, we have a few like that where you know it's like gh why you did you not pay attention when buying this note >> or it's not as bad though um on on buy and sell side of things where it's really bad is on the origination side of things. >> Okay. >> So no buyers, you know, you got to handle before you get it. You have the ability to say yes or no to it, >> right? But the origation side is twice as worse because you're the one doing that work. >> Yeah. >> So we're we're you know we'll originate the notes in in Texas, right? Offer RMLO services, but the ones that we've not looked at where we're coming in at the tail end of a transaction is it's a little bit frustrating.

There's not an uptick. I won't say that. Um things are getting better for sure, but still the the the frequency of badly originated notes, it it just doesn't end. Simple things like the note, you know, everything else everything in the note is correct. For example, you know, knock on wood, we're happy. And then we look at the the settlement statement where prepaid interest was not collected and the first payment due date is like 60 days from the closing date. >> Okay? And so now when the payment comes in from the borrower, it's it doesn't fully cover the PNI or actually the interest the acred interest.

So now there's some sort of negative amortization or it didn't fully get applied correctly. And so there's no principal uh reduction. There's, you know, there's lots of interest being charged. And so we then have to typically what we'll do is we'll jump in at the front end of it at on boarding and and let the lender know that look this is what you need to expect and we will have that conversation with your borrower as well to make sure that they understand that there was no prepaid interest collected which just means that for several months down the line all your entire payment is going to get applied to interest only >> and at some point it will balance.

balance out. But for now, this is what what you can expect. So those >> and that's going to be a challenge. Yeah. And that's going to be a huge challenge for the borrower down the road where all of a sudden all they get stuck with this big bill and they're going, "What's this all about?" Well, it's because your paperwork was wrong to begin with and that's creates a huge challenge. >> Exactly. So, one of the options we offer is this is the amount, go ahead and pay it now because this should have been collected at closing anyway and then everything else would just will be just fine. >> Yeah. So, I we've only had one borrower take us up on it so far.

>> So, how many loans now because wraps became the the it thing. How many loans and percentage you guys are boarding are probably wrap notes? >> We're at 50% right now. >> Whoa. >> Wow. Really? >> Yeah. >> We're at 50%. >> 50% of the new notes you board are rap notes. >> Yes. >> Wow. >> Wow. We all know raps are big, but >> that's surprising. Yeah. >> Yeah. Know, and we're we're doing we're conducting more of an interview style uh meeting with our lenders, especially if they're new lenders [clears throat] to ensure that they understand and and and you know, we want to make sure it's a good fit, right? We we don't want coming on board with a wrap loan that doesn't have the money to back them up when things go wrong.

>> Yeah. and because it it reflects badly on us as a serer as well. So we we do a an interview, make sure they understand the risks of what they just originated and how it could impact all of us, including the borrower and the original seller. And once that interview confirms that they were a good fit, then we'll onboard those folks. >> So what are some of the few big crisis that a rap note does wrong? What we're lately seeing lately is you have a wrap note that collects for PITI. I'm sorry, the underlying lean that collects for PITI >> and then on the wrap note the lender decides for whatever reason to wave escros and >> okay >> and it just doesn't work.

It doesn't work right now. It may work for the borrower for the first year, but what happens after the first year? >> Yeah. >> And so we we we tackled that head on. We we'll even ask them to reclose if they need to, but it's just getting the borrower to agree to escrow. We've had to onboard a couple of lenders where they basically said, "No, we're not going to do that." >> And I can understand why they're doing that in the first place. They're trying to they're trying to make it so it's an affordable payment for the borrower and all those kinds of stuff. Listen, it's legal to do. You can do it.

Just you're screwing yourself. >> Sure. >> I just don't think it's a good idea. >> Covers the whole PITI payment. >> Yeah. >> Yeah. >> And and there's there's more than I we we sat down and a very lengthy discussion internally within my team to how to solve for it and there's really not a solution. >> Yeah. And it only gets worse after the first year. >> Does Provident Loan Servicing pay the underlying lean for rap borrowers, rep lenders? Will they pay the first lean and escrow it and make that payment for them? >> Wow, that's awesome. >> Yeah, that's comes in from the RAP borrower. So, we always recommend the the the RAP lender to be at least a month, maybe two payments ahead of what their payment their borrower's due date is.

So, right now, you know, if if the November payment is due on their wrap borrower's loan, ideally they would be due for December or January on the underlying thing. >> That makes sense. >> Yeah, that makes a lot of sense. So rap loans getting paid for. They they don't put PITI into that loan because they want to keep it cheap, right? Um >> are are they doing disclosures and things like that? And explain what disclosures are if they're not. >> So rap disclosures are I see it on every transaction because they're all closing at title companies. Um in Texas and you you can't close a wrap transaction uh on at a kitchen table.

you have to do it with a title company or an attorney, but it's across the board in all other states. Every state that we service loans and if we see wraps, they're they're closing properly, they're disclosing the underlying lean, so the borrowers are aware of what's going on. >> Okay, good. >> That's that's the piece that I've always been really gunshy on is because I I can see it getting really messy where the new buyer doesn't know that there's an underlying loan and what do you mean there's this thing out there? And you know, I can just see that getting really messy really fast. And so I'm glad the disclosures are happening.

That would solve a whole lot of those problems before they arise. >> Yeah. And Texas actually has a really good disclosure for uh both in uh taxes, I'm sorry, for the underlying lean and then the insurance requirements. [clears throat] Mhm. >> The the one thing I am seeing frequently that I wish will change quickly is rep borrower gets insurance on the property and then the lender does not cancel the existing insurance policy because they they're worried that that that would trigger the uh deal and sale clause on the underlying lean, >> which is not true. >> Now, what's worse is when you have two policies and there's a claim, guess what? Neither one's gonna pay.

>> Yeah. Right. So, >> yeah. And all that for nothing. Now you've got these two policies and now it's not insured at all. >> Exactly. >> And again, for those who are new to RAP notes, these are things you have to be very wary of and don't cut the corners. Right. That's the worst thing you could do. You're playing a legal game. Um what happens if uh and know we talked about this off air. What happens if a if a um paperwork is not done well? What could happen to the rap lender in refers to the borrower and maybe not underwriting well? Maybe the arm load route. What are some of the big possibilities that could happen to those lenders if they're six months into it or eight months into it and the borrower defaults? What can legality wise do? So, it really depends and and this is what I keep hearing from title uh some of the some gurus, right? It really depends on if the note is being challenged.

>> Mhm. >> If if it's not challenged, it goes through just fine. Sure. >> But I'll give you Texas's example. You do not disclose properly or at all. Then the borrower has the right to resend on that loan. >> So let's define resin. >> Unlimited time. >> Define resin. What does that mean for the common person? Doesn't know what that means. Every penny that that borrower has paid towards that towards that mortgage has to be refunded to the borrower. Yikes. And then you have to fight for possession of that property. >> So interest, principal, everything you've paid out to the sub two loan >> and then you have to evict them.

>> Yep. and they basically live for free for six months and then you have to evict them. >> Yep. Remember, as a lender, it doesn't matter how many loans you originate or buy. As a lender, you are expected to know what the job is. >> You are expected to know the regulations. And there are people who will say, "It's not my job." We have lenders who will say, you know, you're servicing it. you need to fix this. Yeah. No, no, no. We'll fix it. We'll help you fix it. But we want you to understand that this is your responsibility. You are the lender, >> right? >> And as a lender, that is on you if you didn't disclose it.

>> Absolutely. >> And yeah, [clears throat] >> so let's shift gears here. You see a lot of assets, right? You guys see a lot more than me and Nathan have together, I'm sure. Um Yeah. And I know you've recently shared some [clears throat] privacy that you're bringing on some bigger dogs as some bigger portfolios. What are some of the numbers you're seeing? You know, we're hearing about some defaults going on in our our portfolios. U we're seeing this and this and this. What are you seeing internally? Are you seeing the uptake of non-performers performers? What kind of properties or notes are the ones to watch out for us note buyers? What are our red flags we should be paying attention to? So, what I'm seeing more of now is if the loan goes more than 90 days past due, [clears throat] >> it does end up in foreclosure or ded the the the percentage has ticked up tremendously to where, you know, I was looking at our numbers earlier today where every loan that went, not every loan, but majority of the loans that went past 90 days past due ended up in either a foreclosure or a deed and lose situation.

So, in other words, the modifications are not happening >> or they're not coming back for not reinstating. They're not even restating. >> They're unable to. >> Yeah. They'll they'll make a couple of payments to try to catch up and then it's it's just not happening and and it's making it very difficult for them to >> Is this across the board like even for like raw land or mobile homes or residential? Is it across the board most of the time or do those outliers like land, mobile homes that me and Nathan don't love do different things that you've off top of your head? >> Our best performers are land loans right now.

>> They're getting paid. >> The the ones the worst are the wraps um because they were just not done correctly to begin with. and and then single families with maybe even mobile homes with with land are are somewhere in the middle. But the best performers are simply land loans and they're we're just it's unbelievable. It's uh our default rate on those on the land loans is about 0.5%. >> Wow. >> All right. We should rethink this idea. I I was just having lunch with a friend the other day and he was talking to me about land notes and he's actually going to have lunch with you so later this week. But he was saying that uh that's he's been drawn more and more to land notes just because they've been performing well, yields are higher and I'm thinking, man, I think I'm going to have to revisit this.

It looks like an interesting option. So, I I was unable to break down the the RAP default rates versus your non your regular regular seller finance rates, but I'll if you're ready, I'll give you some of the numbers. >> Yeah. Yeah, let's go for it. >> So, loans that are 30 days past two, but not 60 days past 2, we don't really call them defaults. They're they're late, they're delinquent, but they're not, you know, defaults. We're currently at about 8.5%. on those >> and more than likely 80% of them will catch up that >> we expect that to happen. >> Yeah. >> There 4% of the loans are 60 days past due.

>> All right. >> 1 and a half% are 90 plus. >> Okay. >> And then 2.8% are 120 days past due where we don't expect them to catch up. >> Okay. Is that up? Is that up or down from say six months ago? >> It's improved. >> Really? >> Whoa, that's kidding. Interesting. Okay. >> And I hate to ask how much percent of that is wraps. It sounds like it's a large percent of raps are the one defaulting. >> I I would say 60% of them. 60% of them. >> Wow. >> Huh. >> That's amazing. And are these look if a seller finance note I know you get on this down this if a seller finance note goes bad does it go bad right away typically or you think it takes 12 months for a life event to happen.

So, what I'm noticing as a trend and and it's it's across the board over my last 27 years in this in the mortgage business is lower the down payment, the the faster the loan defaults. >> Um, pretty much any loan with 10% down or more, it it will go at least a year, maybe two years before we'll see some cracks. Anything less than 10% down payment, three months, four months, and they'll they'll stop making Yeah. >> Wow. >> That's very consistent over the last several years. >> Very interesting. So, again, one of those tips for those who are originating, get the down payment. Make sure you're getting at least 10%.

>> And that's payment. Qualify the borrower. >> Make sure they have the ability to pay. keep your ratios very tight right now because your insurance will what you know if it jumps up the next year or taxes or both then your you know maybe your max 43% now pushes them into the 50s >> and they're they're going to hurt. >> Yeah. >> Okay. So that's interesting because that's something Dave and I have talked about for a long time is is at minimum 10% and it's nice to hear that there's some [laughter] numbers behind that. >> Yeah. Uh so that kind of validates what we've been saying for a long time. >> It's amazing that you know our gut uh makes sense.

[clears throat] It's common sense, right? If they don't have a lot of money put down >> makes them subject and as much as they want the house >> and they plead with you emotionally and I know there's lenders out there, they really want to sell the house. They want that money coming in and they really want just to make the terms good for the borrower to work. Nathan, how many times you talk to lenders who are trying to sell you a note, they go, "Well, it worked for the borrower. I couldn't make it any different. The borrower fit. It was perfectly made for them." >> Yep. >> The borrower may not be the right borrower, and you just made it right >> fit for the wrong person.

>> Yeah. >> Yeah. Maybe >> one of the most common high rate of defaults are those folks that have been tenants in the same home >> and now purchased it on owner financing. That's one of our highest ones. >> Wow. I would have thought that doesn't common sense at all to me. I would think they for a while >> that's a basically a billier pay to begin with. [clears throat] >> Well, and and it's weird and I I can't put my finger on it either. It it's it it when every time I see it, it's like this is odd. It what accommodation did you provide as a lender to these borrowers to where now they are in default? Did was their rent too low and now the payments higher or did they not put any money into the transaction? Usually it's the money that they the down payment was always much lower.

>> Yeah. and and then whether the payment stayed the same or not, [clears throat] it didn't matter. If the down payment's lower, they end up in default. >> So, I'm I'm guilty of that that I've done that in the past where I've considered whatever they paid in rent and we will put that as their down payment. But, it's that's a very different feeling than actually coming up with savings or whatever and making a sacrifice to make a down payment. So, that could very well be a factor. I could see that. And before we go too far, are you now with your RMLO? Are you first off is profit loan servicing doing credit reporting for borrowers? >> Yes.

That's awesome, right? >> Yes, we're we report to Equifax uh working on TransUnion and Experian should be up and running, I would say, by February 1st with the other two, >> but we're already reporting to Equifax. >> And how many states are you able to do Armalo work in right now? >> Armalo work only in Texas for now. >> Okay. and we're still trying to work up deals with banks to see if they'll uh let us originate in other states, but it's not the there's a major push back from majority uh and I think in all cases I would say it's the compliance managers that are having hards with it >> and like on the servicing side we we were able to get that worked out and so we we can service all all 50 states except we choose not to service in New York and Pennsylvania But and in Chicago origination.

>> Yeah. Yeah. It's just a nightmare. >> Don't bother. [laughter] >> Interesting. Interesting. That's good. I'm glad you see you guys are expanding and and getting in more states and things because that's uh I think that makes a big difference. You know, Dave and I both have notes all over the country. So, it's it's hard to go with one service that's like one specific area uh because there's only so many notes that I have in that one in that one state. >> Yeah. So, let's get back to it, right? So, note buyers are starting to see the fact that raw land may be where to go. You're seeing less defaults because our biggest concern with raw land is defaulted and having to sell the damn thing, right? Like, how do you sell it? Who do you sell it to? And every raw land person we've had on the show goes, I just resell it easily.

But what you're saying is we may not even have to worry about that as of right now that these loans are performing pretty well and they're easy to handle. I mean the borrower's just the borrower. There's nothing damaging the property. >> I guess if the property gets damaged it just drains out or >> I don't know. Yeah. You know, no insurance to worry about. >> You can set fire to it and only grass would [laughter] burn, you know. >> Yeah. Yeah. Or you clear out some forest area, right? So it's amazing that those things happen for note buyers when they work with Provident Loan Servicing. I'm presuming you guys have the online portal.

Share a little bit about for the note buyers what it looks like to work with you guys directly. How can they work with you? Um are they dedicated to one person? Just give us some scenario. What does this how it looks like for the note buyer? >> Sure. Um so for the note buyer, we we've been working on a lot more techn And it's it's like 100 things coming down the pike and we're rolling them out in phases and you'll you'll you're it'll blow your mind when I but we we have a custom lender portal which provides them with the ability to view their loan in real time and 90% of what we see on back end is v visible to them.

They have the ability to download, you know, tax statements, they uh documents, escro analysis, things like from from the for each of their borrowers. Um they in can actually when they call in, someone actually picks up the phone >> and >> that's different. >> Yeah. >> Yeah. Borrowers. Um, now I'll I I will tell you this. The only thing that's holding us back at more people on the lender relations side who can answer the questions quickly. So, there's only two of us right now that will answer lender questions. So, it it and typically if I'm on the phone with a lender, you know, my call now >> we're just talking and we're communicating.

So, but typically if no one answer goes, we will call you back within. >> So, so what? So, just just real quick clarity on some stuff here is that if you're a lender and you really want to get a hold of these guys, do your best favor and email your question because >> yes, [snorts] >> the amount of information and believe me, me and Nathan see enough of you guys. I'm sure Joe How sees 10 times more and has more questions. I got three emails today asking me what down payment should be made and how they should structure a loan and I'm not the serer, right? I can see these guys getting overboarded.

So, please do your best. >> Don't shoot an email and says call me. Don't shoot an email and say here's my number. Don't shoot an email and say I'm going to call you tomorrow at 9. Shoot an email and explain the situation. Provide your phone number that can call you if they feel it's necessary. But please, as a lender who's looking for a serer, take your time. ask your question and give them an opportunity to get back to you. It's just it's a lot because it what most people don't realize as a lender there's a lot of rules and laws in place and it's not a quick learn. There's a lot of but what ifs and if then and it depends that one two people adding a third and fourth is a big big task.

they because a lot of experience goes behind this, not just education. >> So, please make sure that you shoot the emails, do that kind of stuff. And for note buyers, if you have a question, again, shoot the email, add a phone number. If they can call you, they will. Most likely it's email explanation and they know more than likely they probably seen your problem before. they can answer it rather quickly because oddly enough when you've done this for as many years as Sohow, >> there's not many unique unicorns that came out, right? So, >> So, when note buyers come to you, they can go to your ser your they can loan board it with you guys and then get it on the platform and then go on and download servicing notes.

They can download reports. I know some services out there that you can't download the servicing notes without naming names. they don't understand it. It It's >> It's a vital part. It vital. You got to have the that information that just adds so much information and color to what's going on. >> As a note buyer, if I'm working with a serer who doesn't I couldn't work I I read those. Why do I got to speak to them? I got my servicing notes to read and I have a flag and it says, you know, >> I have a flag that says borrow try to call borrower. Try call. Okay, I got two flags over here that they try calling the borrower.

Now I got to jump in here, right? I have a flag that tells me stuff. If I'm not getting information besides an email, it doesn't help me at all. Dangerous. >> No. Then you're in the dark. You you have no idea what's going on, what the communication was like, any of any of that information. Worst case or and then what what becomes worse is if you call the borrower, you may end up saying the exact same thing where that was already asked, right? So >> yeah, I I think call notes are very very one of the most important part of a servicing process and and yeah, it's very important. >> So let's take this another step forward.

One of the biggest things me Nathan can stand are people who service notes themselves. >> We're not saying it's illegal. We're not saying you can't do it, >> right? >> But please, >> there's even some programs out there that can really help you do it if you buy the right ones and use it properly. If you can, we're telling you don't. What are some of the things that just top three of nos if you surf the self-service and note that these people are probably doing themselves already? That's a problem. Not calculating the escros correctly, that's the biggest one. >> Um, co-mingling the funds, that's another one.

Um and and co co-mingling can actually get get you in trouble very easily. Um and like in Texas and a couple of other states that I know, there's criminal penalties for that. >> So why do it? >> Yeah. >> And and then the [clears throat] interest calculations, they will majority of the folks that self-service will typically do an a they're self-serviceing based on an amortization schedule that they had generated at closing. that is never accurate >> and it just it it just creates issues down the line if you apply the payments based on a an a non- enforcable amortization schedule because when the payoff request comes in it'll create all sorts of problems and and we've solved those problems for many people but it's just not fun.

>> Yeah. >> Yeah. So Nathan you've talked to borrowers before and I've talked to borrowers before. There's >> you can't call up and say, "Hey, Mr. borrower, you owe us some money." >> Right. >> Right. Or, "Hey, your father owes us some money." >> Right. >> Or your wife owes us some money. >> Or, "Hey, listen. You haven't called us back. >> I know you work at a XYZ company. I'm going to call you at work and get my money." >> Yeah. >> Right. >> Yeah. >> There's some. And if you're not worker serer and you're doing yourself, can you get away with it? You can. If you don't, if >> not without fines.

>> And if you do get caught, you're going to be in big trouble, right? >> Yeah. >> There are a lot of regulations about how to work with borrowers or dangers >> if you don't do it correct. >> Yeah. The mini Miranda is the biggest one. Um, I don't think any self-servicing lender ever reads that to their borrower. >> You have the right to remain silent. [laughter] >> Well, I forgot what is it. Oh, um, >> property loan servicing is a debt collector. This maybe this is an attempt to collect a debt, you know, stuff like that. >> And and you're really supposed to read it to them. We we have it where inbound calls are always every call has that recording plate so they know what's going on.

um when we call outbound, my customer service or my collections reps will always read that out first >> and and then you know have that conversation because don't want to get >> I'll try putting in the show notes too guys I have it too I'll try to put in the show notes for you guys and again if I talk to a borrower >> and they start rambling I throw that in there no matter what >> because yeah I need to have make sure I said it and I can document I said it and if you do talk to a borrower make sure you tell the serer what you talked Well, because they need to keep record of what happened. >> Oh, >> yeah.

On call notes where our lenders add their own notes if once they have had a conversation. >> Perfect. This will allow us to know that, you know, if this convers we may skip uh having that conversation again with the borrower. It just makes it easier that way. >> Um so, we learned a lot during this conversation. We learned about what notes are doing right now. We're seeing the fact more performing stuff going on. We're hearing about all this good stuff happening. We're learning about the fact that you guys are using AI, that you have credit report going on. You have under rain going on in Texas, that we've heard some big problems that going on.

But I would say in an influx of things, we are creating a way to help people who can't get their own loans from banks. And that part we love not only as no buyers but in the world of fact that we're decentralizing and we're actually allowing us to be able to um >> take control of what the banks aren't able to or not wanting to or borrowers who just don't want to work with banks. And to me that's actually like a social work thing. It's great to see we're able to help and we should be creating a win-win scenario. Just make sure it's a win-winwin. Meaning the fact that it doesn't work just for you and the borrower, but it also works for the legal system or for the note buyer or for anyone else.

Because when you have a win-win, you're missing that third win, which will cause you to have more problems, issues, concerns later on. Um, too many times it works for the seller, it works for the buyer, borrower, and that's it. And that's the danger. >> Um, >> and in so many situations, it's not a problem until it's a problem. Yeah. But then when it becomes a problem, it's a big problem. Often times it be it can become something that's really insurmountable and to the point where like you said so you may be liable for every dollar that they've paid you and now you have to return all of that and now you're dealing with a different kind of a situation.

Like it's just [laughter] >> could you imagine you having >> six 10 20 of these things you've taken off and things are working for you. I run to lies people who >> and then the things start defaulting and just like a landlord >> but you have to give all that money back. >> I mean bankruptcy is probably the easiest way of doing it but how does it happen like you just you went your dreams became a nightmare and the dream should become a great dream that's it. >> Um >> it's a shame out there. So and I we're not naming names here guys. It's not about naming names. It's about just educating and letting you guys know about this stuff and letting you learn about what is happening in serviceer world.

What are numbers look like for note buyers, what's working, what's not working, and for lenders, what's working and what's not working. Um, I'm going to ask you one my last question. I'll let Nathan ask his final last question. But in the world of of of the servicing thing, um, what are some of the things that you can see that would help borrowers more now? What are some things that the borrowers need? Um or are refinancing happening at all? Or is there something that we can do to help borrowers or even in the in the you know the note agreement that could be even better for everyone? Is there anything off the top of your head you can think of? >> What I can think of is to if if your borrower is having trouble making payments, I would recommend working with them.

um work work with a solution. Kind of like you said, make it win-win-win for everybody, right? >> Work for towards a solution, not with the intent to bring current, but make sure that they stay current with with the payments, which could, you know, it could be as simple as temporarily reducing their payments for a set number of months. They could have had a job loss. they could have had an illness in the family or just a variety of things that life happens to people, right? So, I if if the lender is willing to work with their borrower and genuinely listen to what's going on in their lives, they'll be able to find that solution.

Otherwise, it's going to be that cycle where they catch up and fall behind, catch up, fall behind. And ultimately, they'll go, "I've paid too much in legal fees. I'm going to let this house go or drag it out to the point where getting paid. they're filing bankruptcies and things like that and it it just doesn't work for anybody at that point. >> Yeah, I think that's a big thing is just making sure and that means you have to do right in the beginning to have the equity to be able to make that move. >> So, one of the questions too that I got the other day and I answered it. I want to see your opinion.

>> So, we always have to work with the borrower based on the terms of, you know, legality that if a borrower wants to work something out, it doesn't work for our numbers, right? They don't reinstate. Are we forces lenders to modify a deal that doesn't work for us? >> No. No. You the important thing is to have made that attempt to benefit the borrower, but at the end of the day, if it doesn't work for you, it doesn't work for you. And and you can't be you're not being forced into a situation where it's it's a lose situation for you and a win situation for the borrower. that that just doesn't work.

The government recognizes it. Um, everybody will recognize that. If you end up in front of a judge, they will recognize it as well that you attempted to, but it just doesn't didn't fit within the the box that you have. And and at that point, you know, the only other step forward is maybe a deed in L or a foreclosure >> and and and do it in a more of a dignified way for the borrower, too. And and it it just works. >> Yeah. and and like so many times and David you've had this as well like almost always we're able to work something out >> but there's that rare time when just it's just not going to happen and and it's a sad time and and I hate it when that happens but >> and it's rare thankfully but but it does happen.

>> Yeah. I talk to borrowers and say I'm sorry. >> You know the numbers just won't work. I mean, we've ran to I ran to a lady where her husband, you know, got sick and he lost his job and she's like, I can't pay 1,400 a month. I can only afford 500. >> It It won't work. It just It sucks. >> Life happens. >> Yeah. Yeah. Same kind of thing. I had a husband and a son die on this poor lady and and now she's stuck working at a job that just doesn't pay enough and and Oh, I wish I could have done something else for her, but it just simply doesn't work. And that's it's unfortunate, but it does happen.

It's rare, but that's the good news. >> 127. >> So, Nathan, let you ask your final question. A little different for him. I think >> I'm I'm always interested in talking to people that have been doing this longer than I have and and you're one of those. So, Helen, so I'm I love learning from people that have more experience than I do. So I'm I'm curious now like with your perspective and and having gone through some cycles and now servicing uh a whole lot of notes that will give you a different kind of perspective. What do you see coming up like in the next 6 or 12 18 months um just in terms of like uh default rates and uh you know what's working not? What do you see coming up? >> That's a tough question.

Um and difficult good question but difficult to answer mainly because the the numbers that are coming out you know the the CPI numbers the inflation numbers the jobs numbers >> Mhm. [clears throat] >> the last ones that came out were not vetted properly. They were just pushed out um because that's what they had to do. Mhm. >> The challenge will be to not crash the market >> um just the way it's going. Um we're also seeing in a variety of pockets where foreclosures have ticked up. >> Yeah. >> And so even if the rates drop, let's say they drop to 5% for example, still not there. M >> you know people will able they'll be able to refinance there there's going to be a mini refinance boom if that happens >> but the ability to purchase another home will still not be there.

It it's it's it's going to be very difficult for folks >> because the house value is too high still. >> Exactly. And we're seeing price cuts even in in the Texas market. In Florida it's it's even worse. But in Texas, we're seeing price cuts from, you know, these homes I'm seeing started out at 600 are being cut down to 500 and their asking prices and it's mainly because that's the people are unable to afford it. Unemployment if it rises um the economy is very strong right now. So I don't expect unemployment to rise significantly but the incomes are not rising. >> Yeah. incomes are almost flat and so I the way I see it there's not going to be a market crash at least I hope not but theing um people will be able to take advantage of the refinances >> but being able to buy their next home or a slightly bigger home that will be a challenge >> well I appreciate your knowledge your experience your time you're willing to just share share.

Um, we're lucky to be in a in a space that those around us are an open book when it comes to everything like that. >> Um, and it's great to have people like that on our side. So, so again, me and Nathan, thank you so much for joining us, spending an hour with us, sharing your knowledge and experience with us. And guys, if you have any questions, you you'll have a link below that will show you how to get a hold of Sohal. And I encourage you guys to email him to reach out, check out the website. Note sellers, note creators, note buyers, everyone. Go check it out, learn a little bit about it, ask questions.

Phil House all over the place, social media. Sometimes I question if he's working at all because he's everywhere it seems like, which is a useful, helpful thing. So guys utilize his knowledge experience as well as the business probably loan servicing so well. Thank you so much man for joining us..