On this page, we’ve posted some very unique case studies. Within the course, you’ll have the opportunity to study real examples of situations with banks, borrowers, lawyers, etc and see how each predicament panned out. Some for the better and some for the worse.
We feel sharing our experiences is one of the best ways to learn. With over 20 years in the distressed mortgage industry, we’ve had our fair share of both successes and failures. We feel it’s our responsibility to pass on what we’ve learned to our students.
Case Study: Customer Service
I had a borrower who at first, refused to speak with me. Every time I called him at home and introduced myself, he would tell me he didn’t owe me any money and hang up the phone. I even tried calling him at different times of the day thinking I was catching him at a bad time. That didn’t seem to work either.
After sending him most of my collection letters, I decided to try a different tack. I sat down and wrote a very personal letter. I explained in the letter that I understood what he was going through and conveyed that I am not here to hurt him in any way, but rather here to help him through this difficult time. I wrote that he could call me anytime to discuss his loan with me and that I promised I would try to come up with a solution that we both would be happy with.
No more than 3 days later, I received a phone call from him, thanking me for the personal letter. He went on to tell me more about his situation and within a half hour, we both agreed on a payment plan that made sense to both us.
The point of the story is that sometimes you have to think out of the box and maybe put a little human touch to your work.
Case Study: Bankruptcy
Steve bought a loan from Company X, who had been servicing the loan for 2 years without any results.
When Steve did his due diligence, he found the borrower had filed Chapter 13 a year before Company X purchased it.
Company X didn’t make any notation of that on the tape, because they weren’t aware of it.
And, when Steve checked PACER, Company X wasn’t listed as a Creditor.
Upon further research, Steve found out the borrower was in a Chapter 13 Wage Earner Plan.
The pre-petition arrears were to be paid by the trustee, but a Proof of Claim was never filed by Company X.
Steve filed the Proof of Claim and was added to the List of Creditors.
He then spoke with the Trustee, and within 60 days the monthly pre-petition arrears payments began.
Additionally, the borrower started making regular monthly mortgage payments.
Company X might have not wanted to sell this loan if they’d been aware of the BK filing and the subsequent payments that followed.
Case Study: Legal
Dan bought several mortgage notes from Steve.
Within days, Dan sold one of the notes to another buyer, Mike.
Mike worked the note for about 6 months. After no success in converting the note from a non-performer to a re-performer, Mike sold the note to Bob.
Bob started calling the borrower and unfortunately violated some FDCPA laws and the borrower, hired an attorney, who filed a lawsuit.
As with most lawsuits, the borrower not only sued Bob for violating FDCPA laws, but also sued Mike, Dan and Steve. His claim was that the mortgage note should never have been sold to anyone who wasn’t completely verse with Collection laws.
The claim, whether valid or not, is irrelevant. The fact is Dan, Steve and Mike had to spend money to hire attorneys. The case was eventually settled out of court.
Unfortunately, with this case, there is no takeaway. It’s a risk anyone in the mortgage note industry has to take. The only ounce of prevention here is to be careful whom you are selling notes to. During any conversations you may have with buyers, take note of how professional and knowledgeable they seem.
In over 15 years of doing business, Keyhole Financial Services has only had this happen to us twice.
Case Study: Skip Tracing
Meet Matt Hoenig. Actually, you’ll never meet Matt, because he’s impossible to find. He’s a professional “debtor”. He took out a second mortgage of $45,000 from Bank of America in 2010 and started paying for 6 months and then just stopped. After 4 months of making phone calls and sending out letters, Bank of America sold this note to Company X for $6,000. Matt owed $230,000 on his first mortgage with Wells Fargo and was only 2 months behind.
Company X took the usual steps in trying to contact Matt. They sent out letters, tried various phone numbers that Bank of America had on file, but came out with nothing.
Company X then hired a door knocker, who visited the borrower’s home on three separate occasions at three different times of the day. The best the door knocker could do was speak to some neighbors who confirmed that Matt did live there.
Company X accessed their skip-tracing program, TLO, and tried all of the phone numbers and emails on that site. They started calling relatives and neighbors, leaving messages, but still, no Matt.
When they entered Matt’s name into Google, they found a short article about the town’s high school prom and Matt’s name was mentioned as being a limo driver. Company X contacted the limo company and asked to speak with Matt. He wasn’t there at the time, but the receptionist ended up giving out Matt’s cell phone number.
Company X called Matt on his cell phone and also texted him. Matt finally answered his phone and like a bank robber caught with money in his hand, muttered, “ok, you caught me. Let’s come up with a monthly plan.”
And just like that, Matt became a re-performer.
Case Study: Customer Service
We purchased a non-performing loan from a Seller we work with all the time. The borrower (Jane) was two years behind on her 2nd (our loan) with a UPB of $65,700.
Jane was 180 days late on her 1st with a UPB of $503,000. The Fair Market Value of the property was $680,000 (we had a Real Estate Broker run a BPO and checked some of the appraisal sites), so there was some equity, and the borrower had been living in her home for nine years, so there was emotional equity as well.
We called the borrower every other day, both on her home and cell phone. Unfortunately, after three weeks of calling, she never called us back. Finally in the fourth week, we reached her on her cell, and Jane seemed surprisingly glad to receive our call. She said our loan was hanging over her head and she was currently working out a loan modification with her 1st lien holder.
We discussed her current monthly payment, which was $408. We asked if she could start making monthly payments and she asked if we could work with her because money is tight. We offered a temporary payment arrangement of $350 and she said she could definitely do $325. Bingo!
We generated a Temporary Payment Agreement for a six-month period and told her we’d re-visit her account at the end of this time. Currently, we are four months in and Jane has not missed a payment.
This account demonstrates how persistently contacting your borrower and building relationships generally pans out
Case Study: Foreclosure
Company A bought a $50,000 Non Performing 2nd mortgage note from Company B in June 2013. On the tape the 1st lien status was listed as 30 Days Late. The credit report as of May 2013 listed it as being 60 days behind. Company A bid accordingly and won the bid.
Company A’s collection model was to be very aggressive right out of the gate, and sent a Notice of Intent (NOI) to the borrower as soon as they were allowed.
After one month of collection phone calls and letters, and no response to the NOI, Company A started the necessary steps towards foreclosure, only to find that the 1st lien holder had already foreclosed on the property with no surplus to cover any of the 2nd lien.
This brings up several questions:
- The 1st lien holder started the foreclosure process before the loan was sold to Company A. Yet at the time the tape was released, it was listed as being 30 days late. Whose responsibility is this?
- Why didn’t the 1st lienholder make the owner of the 2nd aware of the foreclosure when they initiated it?
- Assuming there is no remedy for Company A, is there anything they can do?