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BIFI Loan Servicing: Helping Investors Spend More Time On Their Business With Shante Duffy

February 2, 2022

chrisseveney

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GDNI 189 | Loan Servicing

 

Loan servicing, tracking taxes, dealing with insurance – no investor likes to do that. Investors don’t have time for that, they should be out there focusing on investing. Leave the servicers to do the dirty work, that’s their job and without them, this whole process wouldn’t work. Join your host Chris Seveney as he talks to VP of Operations of BIFI Loan Servicing, Shante Duffy. Shante helps investors spend more time on their business, rather than in their business. Learn about BIFI’s new user-friendly portal that gives more information to lenders. Leaving no one in the dark, communication is the top priority for Shante. Take a peek behind the curtain of BIFI Loan Servicing today!

Listen to the podcast here:

BIFI Loan Servicing: Helping Investors Spend More Time On Their Business With Shante Duffy

Jamie, how are you?

I’m doing well. I’m excited to be here.

We got Shante Duffy from BIFI Loan Servicing with us. Shante, how are you?

I’m amazing. I’m excited to be here.

Thank you all for joining us. As we mentioned, we’ve got Shante Duffy from BIFI Loan Servicing. Many of you know Shante, but why don’t you do a quick intro on who you are, what you’re doing, and we’ll get rolling into our typical episode of what happened.

I am the VP of Operations at BIFI Loan Servicing, a new servicing company in our space. I have been running the day-to-day operations building what I believe will be the best servicing company out there. That’s where my focus is at and what I’ve been busy working on.

How long have you been open now?

It’s October 29th. I’m rounding up and putting November 1st of 2021.

How’s business going?

It’s going and moving a lot faster, but also slower at the same time. Overall, we have roughly about 200 loans under servicing, give or take, and $4 million in UPB. We’ve been busy talking to investors, getting them set up, boarding their loans and working with other servicers to get the data over.

It sounds like note investing. You go fast and only go slow. It happens with services as well. Thank you for joining us. As full disclosure, many of you know Jamie and I have invested financially in BIFI’s interests. While we don’t have any involvement in the day-to-day operations, we did provide some investment dollars within the company. Jamie, why don’t we start with you on what happened, wins, losses or IRS issues? What’s going on?

That’s what I was going to talk about. There’s been another update since I talked to you, Chris. I’ve got some craziness going on with some PPP loan fraud, Paycheck Protective Program or whatever it stands for. It came out because of the pandemic and everything where the Small Business Association was giving these loans to employers to help continue to pay their employees during the shutdowns. Apparently, someone filed in my name a fraudulent application for a loan.

Shante doesn’t even know about this, so this is a genuine reaction. They filed for and received a loan of $170,000. I didn’t know about this. I was getting little inklings here and there over the last few months or whatever it is. Things that I thought were unrelated and odd things that were popping up. I would get IRS notifications that my business address had been updated and kept getting them for this one particular LLC. By the way, I’ve never had a single employee in that LLC.

GDNI 189 | Loan Servicing

Loan Servicing: Servicers are responsible for processing any payments that come in from borrowers. They also send out monthly statements, late notices, and so much more.

 

This is the LLC the person filed the application under. I would get these little things and calls from this company that helped process a lot of these applications and helps people do loan forgiveness programs, but honestly, it sounded like this car warranty expiration calls that you get. I was writing it off for the most part, but I did contact this company back in September 2021 and said, “I keep getting these calls. Can you look into this? I don’t know what this is.”

They said, “There’s no record of this person or you or anything in our system. Don’t worry about it.” This was September 30th, 2021. It turns out that, in fact, someone had filed with this company an application in my name with my Social Security number and my EIN for my LLC. I applied for a $170,000 loan and got it two days later. The way I found out about this was I got a $105,000 IRS bill in late 2021. My CPA has been working on this, trying to keep the IRS at bay and basically buy two months at a time because they’re so backed up with their different departments. They don’t talk to each other.

I had to file an ID theft report with the Small Business Association. Nothing on the personal side looks like it’s been affected, but it’s not something you expect to get into when you get started. This LLC is for rentals, even though they put a mortgage broker on the application. They said it had been started four years before the LLC ever was in existence. Clearly, the lender did not do its homework. That’s what’s been going on with me. It’s something I didn’t expect to have to spend time or energy on.

We’ll see where it goes. Be careful. I still don’t know exactly how they got ahold of all this information. It also included a picture of my driver’s license that was submitted. Be careful what you share online and what you’re sending back and forth. Email is maybe the tip for that. That’s enough about me. Chris, what’s going on with you?

If I understand this correctly, in 2021, someone took your information and basically submitted a $170,000 loan. Thankfully, it’s not like you sent me that information and I went and bought some property in other places. I felt guilty, so I sent you a computer, a camera and stuff like that.

On the application, to be clear, they stated that I had twelve employees and a $47,000 per month payroll expense. I’ve never had a single employee in this LLC. Therefore, I have no payroll. Apparently, there was a lot of fraud going on at this time. The application was submitted in March of 2021, but they used a falsified 941 IRS form a year prior. I wasn’t getting these IRS notifications that I owe all this money because they were changing the address and getting it. They created a false email address. I was not made aware of all of this. Thank you for the camera, Chris. What’s going on with you?

I’ve been super busy. I had my head buried in the sand a little bit, trying to catch up on a lot of things I had going on. We acquired two asset loans in Washington, DC that were in bankruptcy, but it was in involuntary bankruptcy. The lender forced the bankruptcy in that sense. I hadn’t done that before, but things are going well on one of those assets. We reached an agreement with the trustee on what is called a carve-out, which is their fees for managing the bankruptcy process and the property listed for sale. We had nine offers on the property. We’re waiting for those to get reviewed by the agent and submitted to the court for approval.

The other asset in that group is still waiting because there’s a second lien holder. Essentially, there’s no equity in the property, so we have to short-sale it. It’s essentially agreeing to a certain token value to give them. If they don’t accept it, we would pull it out of the bankruptcy and foreclose on them where they get nothing. It’s in their best interest to agree to this, but our attorneys are having a little trouble getting in touch with their attorneys.

I’ll chime in because I know a decent amount of what’s going on with this particular deal. Would you agree this is in some ways outside of the norm, as far as your own experience with non-performing loans, the payoff and principal balance? They’re big deals.

The UPB of one of the loans was $1.5 million. The payoff now is a little over $2 million. The second one had a UPB of $550,000 and I believe the payoff on that one is around $700,000. Combined between the two of them, the total payoff is close to $3 million.

This is a big deal. You mentioned the involuntary bankruptcy. There are also bridge loans, more short-term loans. What I wanted to draw out quickly was that you are playing to your strengths. They’re situated geographically in an area where you have boots on the ground. You also have an attorney who can work this that you’ve worked with quite a bit. You went outside your comfort zone a little bit and a couple of other variables. I think that’s a good takeaway for the readers. Make sure you have 2 or 3 things that you’re comfortable with in a deal but stretch over here on this side.

There’s a third asset in the deal, which would have put the total per acquisition over $2 million for these assets but that one ended up getting pulled at the last second. It definitely would not have been the path that we would go down from that perspective. That’s been taking up a good amount of time. I’m finishing up my books with my bookkeeper to submit for all the entities that we have as well. I got a bunch of assets under agreement between my multiple funds. I’m starting off the year strong. There are several on Integrity we have. I got four in another fund under agreement.

I also have four I closed on in another fund. I’m looking at another four assets, one in Hawaii. It would tick off another state that I haven’t invested in. The other one I’ll mention briefly before we roll in. I’m looking at an REO. This one’s crazy. It’s been ten years. It’s an actual REO and they can’t evict the former borrower because he built an addition on the house onto the adjacent property.

You need a loan servicing company to stay in compliance with federal and state law. Click To Tweet

The house spans over two property lines. His whole case is based on, “You can’t evict me because I’m not on your property.” He loses, but then he wins. It’s been back and forth. Basically, we’re guesstimating between taxes and attorney fees, they have probably spent over $500,000 on this case. Me being me, I said, “I’ll take a look at it.”

Shante, what’s going on with you?

I’ve been feeling pretty successful. I’ve run into a bump with some lines of credits I’ve been servicing. I’m trying to push those through foreclosure. As everybody knows, you need payoffs and reinstatements in order to generate a demand letter.

If we can back up briefly and explain for the newer note investor out there, somebody who’s not bought a note before or maybe they have one deal that they created and service it themselves or something like that. What is the main purpose of a loan servicer? What functions do you offer?

You need a loan servicing company to stay in compliance with federal and state law. At the very bare minimum, that is why you need a servicer. Servicers are responsible for processing any payments that come in from the borrowers, sending out monthly statements or late notices. Those are the basics, but they do so much more as well. Not every loan that they service is performing. Therefore, for non-performing loans, it requires some loss mitigation and borrower outreach efforts to come up with some solution.

If they can’t get ahold of the borrower or you guys can’t come to an agreement between the lender and the borrower, the option to take legal action is there. Servicers will coordinate that between the lender, the foreclosure attorneys and the borrowers. There’s a bankruptcy that we coordinate and manage on top of that.

In very simple terms, if people are familiar with the buy and hold rental property, a lot of times they don’t want to manage that so they get a property manager. I do think a loan servicer is probably a little more involved and certainly from a licensing standpoint, but it’s analogous to a property manager on the rental side of things. You’re interfacing between the investor and either the borrower or a tenant.

The difference I say as Shante mentioned, typically you pretty much need a loan servicer. A property manager, you can do it on your own, but especially now with the new regulations that came out about different things you need, especially on the distressing stuff of a foreclosure. You have to provide the last statements and stuff. I’ve looked at several notes that people have self-managed from that perspective and they’re a mess, even if they’re commercial and stuff. To try and clean that up versus a property, it’s much easier to clean up a property that somebody is left flailing versus a note.

That’s a good point that brings up. If you’re buying a note that’s been self-serviced, it’s going to have less value. If I’m buying a rental property, I don’t care if it’s professionally managed or not.

Line of credits run differently in servicing software based on how the note and the actual line of credit are spelled out. We realized there was a bump between us being a servicer and foreclosure attorneys on the information that the attorney would need to generate a demand letter, which is needed in order to move forward with the foreclosure complaint.

When I had the opportunity to get on the phone with the attorney and figure out what exactly is it that they needed and what was missing from the information. We provided them with the original payoff that we had sent that they had rejected. We’ve talked to her and gone through everything. She was very honest and helpful, which had my wheels spinning.

It comes down to a system situation. We use the mortgage office here at BIFI but realize the system is fully capable of handling lines of credit. That’s a big reason why we also chose the mortgage office to make sure that it can handle loans like that and realize that there was a missing step almost. That’s the easiest way to explain it and realize that, “This is how this needs to get done in order for the attorneys to move forward with generating and mailing out the demand letters.”

Once we tested it and made sure it worked, we sent it back to the attorney for approval. We made sure it was everything that she needed to move forward. We got that green light and realized, “This is super simple.” It felt silly. It was one of those like light bulb moments. It’s like, “Why are we not doing this?” It worked. I was very excited. I don’t think I’ve been that excited about something in a very long time.

GDNI 189 | Loan Servicing

Loan Servicing: Sometimes the interest rates will change and it changes based on the prime rate. There are also lines of credits that are based on a fixed rate lock.

 

If I could have jumped through my computer, I would have and hugged the software, but it was a big deal. I know that there are lenders that physically don’t move forward with foreclosures or hold them up where they’re trying to finagle a payoff when it shouldn’t be that difficult. It’s stuff that servicing software has. You have to do it, look for it and make sure it’s done correctly. That was my major win. It was a huge win because the line of credit has been like credit cards. That’s the closest way for me to equate them. Their billing cycles are different. Their account closing statements look different than a typical payoff, but I was able to find exactly what the attorney needs.

Here’s the question I have for you. I’m trying to foreclose on a line of credit. I don’t know why my hair gets so gray because of this, but I can never get the right information or it’s always wrong. I understand it’s like a credit card, but you mentioned a closing statement. I had a borrower who was $3,000 past due. They made an $800 payment and they did a closing statement. Now, they’re saying the payment is only $40 per month. I’m like, “It’s impossible because there’s $15,000 left on loan and six years left.” I’m like, “Where are they getting only a $40 payment when the payment’s supposed to be like $200 something a month?” I’m completely confused.

They’re definitely run off of interest. The line of credit is not necessarily a fixed rate. Sometimes they can be, but that sounds very low.

That’s what I’m getting at. My question is, the line of credit is I can take money out at any point in time but at a certain time, it gets cut off. Once it gets cut off, doesn’t it turn into a normal loan?

Over the remainder of the repayment period is what it’s called. It does. There are some lines of credits that do amortize correctly. They’re supposed to over the remainder of the length of the loan. What changes sometimes, which is somewhat similar to a conventional loan, is that it is almost like an arm. Sometimes the interest rate will change and it changes based on the prime rate. That’s when they changed.

There are also lines of credits that are based on a fixed rate lock. No matter what, once they’re in that repayment period, their interest rate does not move. It’s based on a treasury amount plus the index or the margin at a specific time. At that point, it’s fixed. There is nothing weird about it. You can’t draw anymore. That is a question I’ve been asked numerous times because when you break it down, you’re like, “This makes no sense,” especially on the fixed-rate side.

This may fall into the category of probably half of the questions in the note space. The answer is it depends. That’s for Mike Schultz. I have a line of credit on our primary residence. The first ten years is what you’re talking about the interest payments. The second ten years, I don’t think it’s amortized, but I think it depends on how the bank sets it up.

It also depends on how it’s written. I like the fixed-rate ones better because they make more sense to me. They click naturally. I’m not saying they don’t make sense. You treat them like an adjustable rate if they’re not based on the fixed rate. There still is a maturity date.

A lot of services have run away from working with them.

They’re not knowledgeable, or their system can’t handle what needs to get done. It’s usually one or the other. It’s not because they don’t feel like it. They do require extra work to make sure everything’s calculating correctly, but it’s either your system is not capable. I’ve been in a position where certain systems aren’t capable. You get a new system and you are not using it to its full capability. Not realizing that, “This is how this works and going from there.” It’s the lack of knowledge. I know that there’s a servicer that every time I see line of credits from them, I’m like, “What are you doing?” I basically have to start it over when it comes to my desk. There are servicers that have been dealing with them.

They’re not worried about it. Their system can handle it and it works. It’s a mixed side, but that was my gung-ho moment. I think it was like for at least the first quarter. There’s one other thing that’s going to come up soon that I’m pretty sure I’ll be way more excited about. That was a big deal for me to realize so that lenders also feel comfortable because they either are not buying lines of credit. They’re like, “I can’t foreclose.” They’re buying them, sitting on them, wasting money having it service somewhere and can’t move forward. At that point, it’s a sitting note.

It’s because the servicer can’t get to the attorney the documents that they need.

That the attorney needs and isn’t spending the time asking the attorney, “Why is this wrong?” Going back to the software and saying, “This is what the attorney needs. It’s servicing software so it has to be able to do it.”

You have to treat some lines of credits like an adjustable rate if they're not based on the fixed rate. Click To Tweet

In those instances, Jamie, I had a bunch in Ohio. I wasn’t comfortable because I didn’t think the information was correct. I don’t want to submit something or have the attorney review and get caught in the quandary of having incorrect information that we’re taking legal action on because it seems like every time I have a headache, it’s in Ohio. Shante, I know that was a big win. I saw on the Facebook group you also mentioned a portal coming.

Yes. I’ve been working very hard with the developer on creating a nicer, more robust and user-friendly portal for lenders. I have heard and seen other portals and things like that. The lenders love and hate certain things about it, but I also know it needs to be simplified. I do understand that note investing is not your full-time job, so you guys need to sign in quickly. We’re in that last phase of tying up some loose ends. I’m hoping to have this out and get some feedback from our clients that we do have to see what they like, don’t like or if there’s something that’s missing. This was also built with a lot of feedback before even starting it to know what we need up there and how you guys should see it.

I am so excited because the portal that we’re using gets you the information, but it’s not fun, pretty, and super interactive. There’s a lot of information that you’re missing that I feel like lenders should have. You should never have to ask for most of your information on any of your notes. The goal is to have everything up there. You should never be flying blind. I need to know that when you guys are up in the middle of the night because you can’t sleep, you can search through your notes and be like, “Okay,” and everything’s there.

You should more so have questions on like executions of things and working with your servicing account specialist here, opposed to, “Did my borrower make a payment? When was the last time you called them?” I’d rather you focus on your investing side than tracking and chasing down your servicer for information that is readily available for you. That is the most important to me for lenders. Avoid that. You guys ask questions about the information you do see. Make these questions and things productive. Time is money. I get it. I am super excited about how it’s coming along. We’re literally right there.

I know Chris, and I have each used several different servicers. One servicer that comes to mind, their portal is robust. Honestly, for me, it’s too much information. I don’t need all that information. It gets cluttered. Another servicer, the portal is bad. You can’t find servicing comments. Another servicer, there are two separate logins. It sounds like what you’ve done is taken investor input based on many different servicer portals and try to come up with the best solution for the lender.

We need a one-stop shop for everybody.

That is important. It also will allow you and your staff to focus on servicing the loans as opposed to being in the middle of all of the communication for the lender as well. It should allow you to tighten up processes. I was going to ask quickly, what do you think is the area that BIFI needs to improve the most?

It’s a tough question, but I totally get the question. For me, in my perspective, we’re still getting our footing being brand new. Obviously, you’ve seen a lot of the situations, whether it’s foreclosure, escrow or bankruptcy-related or borrower outreach like loss mitigation and things like that. What we’ve outlined in the beginning, I realized like, “This process doesn’t work.” When certain situations arise, it’s not one size fits all. Realizing like, “We need to better this process.” We’re missing a giant step that being in space for years, I know, but I don’t think to break down. My staff hasn’t been in this space for years, so they don’t have the same amount of knowledge.

There are a lot of holes that we’re realizing are being poked and made, but I’ve been trying to fill every hole. Until you’re in it, we spent months trying to put together processes and things like this and say, “This works.” When you do it, you’re like, “This does not work.” There’s a step that’s missing, or this doesn’t work because the chain of basic command and how it goes through isn’t clear. Lenders aren’t being informed enough. Communication is very important, but it’s not just to lenders. It’s communication within BIFI.

The employees of BIFI have to make sure our communication chain is clear and concise and it’s steps 1, 2. It goes from here to here. We need to connect the dots. What I’m realizing is skipping dots and we can’t form anything. There are little hurdles in almost everything we do, but we’re catching them thinking about it, and how do we fix this? Overall, those little holes might’ve affected one loan, but big picture, they’re going to affect many more loans down the road.

It’s tightening up and perfecting almost like a base plan that we had and making it a little bit more detailed and user-friendly. A lot of things have been automated, which is very helpful, but then there are still steps that we have to take with that automation. There are timeframes that we have to follow as well. It’s pulling back and slowing down a little bit, figuring out what needs to get updated. It’s reminding like, “We have these processes. We haven’t seen some of these situations yet.” As they’re coming in, something like the line of credit, so I’m like, “This isn’t working. We have to fix that.”

With any small business, you’re trying to service the loans you have in this case. You’re also trying to tighten up your processes. It’s hard and a lot to juggle.

One of the benefits that I’ve seen and you mentioned getting this portal up and running has been because the portal you have right now through the traditional TMO gives you pay history and some of the comments and stuff, but I know you’re working on something extremely robust. Because of that, the communication with the loan servicing rep, to me, has been the most I’ve seen compared to other servicers. The number of emails or information I get updating me on the status and it’s not like once a year or six months.

GDNI 189 | Loan Servicing

Loan Servicing: The current BIFI Loan Servicing portal gets you information, but it’s not fun. There’s a lot of information missing that you should have. The goal is to have everything up there. You should never be flying blind.

 

Back to communication, understanding what’s going on, even though loans could be current and stuff, the email is like, “This one’s FYI. To keep you updated. This one is current and stuff.” Between that, the taxes and forced place insurance, understanding like, “Your tax is delinquent on this. We’re handling the escrow on this.” I’m aborting the loan, so give us the insurance certificate and the taxes. It’s like, “Here’s the link to the county website.”

I’ve had that with the servicer where I provide the link where they have to put in the address to look up the property tax information. It’s free. It’s right there and they won’t do it.

I think that with BIFI when it was created, there was a lot of time that was spent on figuring out like, “Why do people not like servicers?” We are always the bad guys. Nobody likes us, but you need it. You need a servicer. Servicers get such a bad rap. I’ve been in this space for years met many different investors, some small, some big, some who dive in like you, Chris, and some who are a little bit more cautious and take their time like Jamie and everybody in between and everybody on everything.

I asked for some serious, honest and it didn’t matter what servicer they were talking about. “I want the good and the bad.” You want to talk about that. That’s fine. Because those, bads I needed to focus on and those goods, I needed to make great. That’s where that came through, but the number one consensus from everybody, and I know you too as well, was communication.

To me, that’s silly. Everybody talks. You should know. That, to me, was the most important. There’s no reason you should ever be guessing. I don’t ever want a phone call from any lender, “I haven’t heard from so-and-so.” I can’t stand those phone calls. I don’t have the time for those phone calls. It’s getting everybody to understand that like, “This is your job. You are responsible for these investors’ loans. You need to communicate with them. Don’t wait for them to come to you.” That’s what we’re trying to push.

As you were talking, I was thinking of a particular servicer that I use. Honestly, they’re pretty good overall, but it’s very reactive. If you’re in foreclosure, the servicer will reach out to me and say, “I need an update on this.” It’s like, “You should be updating me.”

This is why we don’t allow investors to handle their own legal action. We shouldn’t, as a servicer, be in the dark either. We’re supposed to do everything from start to finish. No one said you couldn’t be a part of it. We’re going to make sure you’re a part of it. You need to be a part of it. No one should be left in the dark and that’s still the communication side. It’s like, “You have a servicer talking to an attorney, but where’s the investor in that communication?” Nowhere. They have no idea what’s going on.

People are going to say, “Chris and Jamie put their loans there. It makes sense.” How many other lenders do you have now?

I have a total of about 32 lenders here. We have loans that are pending coming through. Honestly, the biggest issue is we’re waiting on data from other servicers. It’s not that the lenders haven’t done what they need to do. They got their forms in, collateral and everything. It’s now in the servicers’ hands, which is a little frustrating. We also have like-new investors. I love talking to investors. They are my absolute favorite. I like that they ask questions.

They’re not sure and very honest with you, “I have no idea what I’m doing.” I don’t always talk to them in the sense of BIFI. This is what it should be across the board. Every servicer has a requirement to set themselves up, get information over and get your loan boarded. Most servicers offer force-placed insurance, running through the services, collateral storage and stuff like that. We do those things as well.

It’s fun talking to new investors. Talking to investors that I’ve known well before the two of you and they were definitely a little hesitant. Anything brand new, most people expect things to fail. You’re like, “How great can that be?” You had to give everybody time. At this point, I talk to them. I’m letting them know because they’re investors that I’ve worked with and have had so much experience as well in the note space. I also want your feedback.

It’s not like, “Come to BIFI because it’s mine.” I know you’re being honest with me because you’ve been honest with me in the past. When you don’t like things or things aren’t working, you don’t shy away. I want everyone to know that regardless of what happens at BIFI, you’re not going to hurt my feelings telling me that I need to do better or that my team needs to do better. I need that feedback.

I think people ask a question because you’re new. How many employees do you have? Do you have an office? We want to break down a little bit of the size of BIFI and everything.

Focus on the bad things and make those good things great. Click To Tweet

There are five employees in total. There are four of us here in the office and I have one person that does not work in the office, but they don’t need to for what they’re doing. We have two servicing account specialists. Our Accounting Department does not need to be that large at where we’re at right now. When I said that we were starting off slow, it was almost a blessing. I look at it as, as much as I’m super eager to run and get everything together, we’re perfecting these processes. Getting my staff also to understand you because they haven’t done this for forever either. There are definitely a little bit of learning curves there. Even on my end, starting BIFI, there are major learning curves.

Does your staff have servicing experience?

Yes. I selected my staff specifically because I didn’t want them to be completely non-existent in understanding what loan servicing is. It is such a unique and special thing that it’s not like you’re just a cashier at a store. It’s not learning the system. It’s learning how to work with borrowers, lenders and knowing what you can and can’t say. There are certain things that you can train people on, but you don’t get it until you’re doing it. We deal with borrowers and lenders who are super happy and super nice, but it also could be the polar opposite of that.

You have to have some thick skin in here to deal with both sides. It’s not just borrowers. You have borrowers about to lose their homes to foreclosures, and somehow, you’re the bad guy. You have lenders where this is your investment. Whether it’s your money or somebody else’s money, there is a connection and emotional ties there. It’s trying to balance both sides and keep both parties happy, which is why it was important to have staff that understood that we work for the lenders. The lenders are our clients, but we still have a whole other party we have to worry about. Keep that together and make it make sense. Some days are great and fun, and some days, we have these borrowers who are like, “What is going on?” It happens.

Chris asks about the building. Where were you situated?

I am in Hackettstown, New Jersey. It is ten minutes from my home. We bought this office space. We technically have two units that we’re working out of and we’ll expand as we expand into the other. We chose to purchase it. We don’t want to have a landlord coming in and kicking us out because they chose to sell things and things like that. We do have our own office space. Everything is done here. The payment address and the corresponding address are not any different. Everything is in one spot.

Back to employees, I think we were talking at one point in time everybody who’s with BIFI either has extensive servicing experience at a servicing company or a financial institution/bank?

Yes. Every single person here, myself included, we’ve been in one of those two places and nowhere else. I’m not getting a random cashier. That’s like, “I want to go.” They have at least the base knowledge. The hardest part is training them to meet what BIFI’s goals are. That’s training and training people is a challenge in itself.

What would you say some of the feedback you’ve gotten from the other investors, other lenders, besides the two of us?

I try to talk to a lot more of these other investors. I like when they send me feedback that they love. We do these things by notifying investors about, as Chris said, “What’s going on with your loans,” whether they’re performing or non-performing. We don’t want you ever to ask. We gave you the game plan of how we’re going to be working and I think that’s everybody’s favorite part right now. The timing on how long it’s taking for loans to get boarded, they’re very surprised but that came down to a process and a lot of that process is automated.

They’re very surprised and shocked, but they love the summaries and the fact that they’re getting emails or calls, especially when the loan is boarded. We want to talk to you. I don’t want you to be someone to email all day. We want to get you on the phone physically. If you have one performing loan, it doesn’t matter. If you have ten, it doesn’t matter. We want to talk to you and introduce ourselves to you specifically. We have to have a relationship.

That is the biggest push and how important it is. We want you guys to be comfortable with us as well. We sit here and set up a time to speak to everybody, talk to them and get game plans if their loans are non-performing or touching base, “This is the goal. This borrower’s performing. Let’s see if we can get them on ACH.” It’s something simple. It’s those little extra things that make a huge difference.

The biggest feedback I’ve gotten is that they love the communication and the next feedback I’ll get from them is definitely on the portal because that’s where I’m looking for. We’ve been telling them about it. We’ve been honest with them and letting them know like, “This is not permanent, but I’d rather take the time to give good quality things to lenders than rush you and give you something.”

GDNI 189 | Loan Servicing

Loan Servicing: The number one problem lenders have with servicers is communication. They are responsible for this investor’s loans. They need to communicate with them. Don’t wait for them to come to you.

 

If any business ever says, “We have arrived. We’re perfect.” I’d run for the hills. I think it’s good that you’re always looking to improve.

Jamie, Shante sent me a few photos of the portal. Did she send them to you as a beta test?

Yes, I saw a little bit of it. It looks good so far.

Jamie, I have you on my calendar to talk to you. Don’t think I forgot about you because I didn’t and your feedback is usually good because you see things that I don’t see. You definitely see things that Chris doesn’t see, but there are specific investors that I need to speak with. I appreciate and need their feedback because they’re honest. I’m trying to be the best I can be for you guys and I can’t get it without you.

I may have to sit down on this because you’re going to take investor feedback and incorporate it or try and implement it in how you manage your business?

Yes. BIFI is By Investors For Investors. The FI is important. I can’t be for investors if I’m not willing to hear what investors need or what they like or don’t like. I have to be open. I don’t want to be one of these companies that exist, and they’re like, “We don’t want to do it. We’re in a cool spot to where we are now.” The feedback early on is helpful because, at that point, you build. It’s a building. It’s not that we’ve existed for many years, and we don’t want to change. Change is good. Change is positive. You got to change with the times.

Keeping up with that is very important to get honest feedback. If people hate it, they hate it. I’m not saying I’m going to change everything. If one person says one thing, I sit down, “How many other investors are going to have the same question, issue, comment or concern? Does it appeal to the masses?” It’s not, “This portal is for you, not me.” I have software that I work out of. It’s very important. It’s not just on the portal. It’s in general. If there’s something you’re not getting, tell me. If you don’t like the way something’s happening, I need to know. I don’t like when people are shy. I’m not shy. It’s needed for us to be successful and for what you guys need.

I’ll be honest, I don’t blame any experienced or any investor for not immediately throwing their loans at BIFI. I totally get that. Why wouldn’t they let somebody else be the Guinea pig? Chris and I have had many loans there for months now. I know you don’t have loans boarded with all 32 of those lenders. You’ve got other lenders using BIFI and having a positive experience. To me, it’s like, “There’s enough there to throw 5 or 10 loans.” If you own 50 loans, throw five over to BIFI and test it out.

Jaime, what do you like the most?

It’s communication. We get a weekly email that’s proactive with every loan that the loan servicing agent is working on. It’s proactive. It’s like, “BIFI is working on my loans,” as opposed to me having to nag. The screenshots of the portal that is going to be coming outlook good. I’m excited about that. A lot of the automation on the frontend with the forms as far as an entity set up or boarding a loan. As you said, Shante, it’s pretty seamless so far. There’ve been some improvements since Chris and I initially boarded loans there. I keep listing things, but I don’t like getting billed. If I’m going to have to pay for this service, I may as well make it as seamless and painless as possible. That’s been great.

When you mentioned billing, but also accounts receivable. You know what you’re getting paid for. It’s broken down. My bookkeeper’s like, “This is easy, principal, interest and charges.” It’s very clean, nice and easy. You mentioned communication and proactiveness. I’ve got some loans that use BIFI’s foreclosure coordination process. The information that they sent that they copied me on that they sent the attorney is very nice, professional and clean. Everything’s there.

Basically, they copy you on it. It says, “Make sure the communication stays between three parties.” When the domain got sent or whatnot, I got copied on it. If it’s not, they’re following up to make sure, “Just checking on status. Has this gone out yet? We want to stay up to speed.” From that perspective, again, that’s something I used to manage because in past experiences, when I’d have the servicer do that, it would take six weeks to get a demand letter out the door and then like, “I’m missing this document.” Now they’ve done the upfront work.

Let’s be real. It hasn’t been perfect, but the tracking of taxes and insurance, especially this time of year where everything’s due for taxes, from BIFI, we’re getting an email saying, “This borrower’s account is delinquent on property taxes.” We have this much in reserves that we can put toward it. Do you want to advance so and so? It’s proactive communication and tracking of taxes. Whereas with other servicers, I’ve had the experience where we touched on before, they’re very reactive. I know on the FBI side, BIFI is handling the letter cycle.

Communication is important so that no one is left in the dark. Click To Tweet

Chris, you have your own FPI. We’ve talked about it on other episodes through JB Lloyd, but that means you’re responsible for sending out all those letters and being CFPB-compliant. I can’t wait to get all of my stuff over to BIFI, where I don’t have to manage all that from an accounting standpoint for FPI and it’s been a real pain. The more loans I can get over to BIFI, the fewer bookkeeping and administrative tasks I have related directly to force-placed insurance. That’s been good too.

I’ve got one question for Shante before we get into the Notes and Bolts and so forth. Please tell me for every loan I ever bought at BIFI that I never have to go chase down another taxable again. Please tell me that.

That was the biggest separation, other than communication. It was the second thing. You guys need to keep your hands clean. We are the ones supposed to get down and get dirty and do the work. Your job is to keep investing, looking at tapes, breaking them down and bidding. My job offering an escrow service to you is to actually service the escrow, which entails start to finish. The most would be, “I need you to advance the money. This borrower hasn’t paid.” Jamie’s awesome at this. He sends tax bills because they’re being mailed to him and like, “I have this.” We don’t need it. It’s great, but thanks. We save it and everything else. I will never ask you for a tax bill.

That’s the thing. It’s important. Nobody likes tracking taxes and dealing with insurance. Maybe somebody does, but I don’t, but it’s important.

Escrow is fun, Jamie.

It is, once there’s a solid process, but your job is not to do my job. That’s how I look at things.

For me, escrow is not fun.

Do you track taxes or insurance if you’re not escrowing?

It is an option if you do not want to escrow. We’ve had a few lenders choose that. Chris had to choose that. They don’t want escrow on loans. It’s non-performing. There’s no escrow account there. We’re not paying out taxes, but they want to track it at least. We set it up for that. At that point, when taxes are delinquent, the amounts that are due, when we get the information back, that’s what you were getting. We’re not paying for it. There’s nothing to pay. It is an option on both sides.

I got deceased borrowers, so I put them in escrow. They’re not going to pay. I still want to check the taxes because in case I have to go through probate or foreclosure or whatever that time maybe, I can still have BIFI monitor the taxes. If they become delinquent, say, “By the way, you got delinquent taxes.” I don’t lose the property tax sale. Do you use a third-party company for all that?

I do. I think that’s where it makes it so much easier. The servicers don’t like escrow either, but it’s something that we have to offer, leaning on third-party services to help us with obtaining the information. There’s a reason I don’t need a bill from you. That’s somebody’s actual job. They have a whole company that does that. There are many companies, but we partnered up with another company to help us with that.

One other thing popped into my head. Either one of you can speak about this but offering fund management services. I don’t know if either one of you wants to jump at that or if it’s something more for the future. I heard a little birdie tell me that was a service that might be offered in the future.

It’s a service that BIFI can provide. I have one of my funds being used as test cases where investors can log in to see the loans within the fund and can run borrower statements. If you have a fund that has a preferred return of what I pick a percent, basically, the servicing software can run all those based on the investments. They could handle the money if they wanted to. There’s a lot that can be done. Shante asked me to do behind-the-scenes work on that with her to offer that as a service down the line.

GDNI 189 | Loan Servicing

Loan Servicing: When people don’t like something, they don’t shy away from giving feedback. You’re not going to hurt anyone’s feelings by telling them that they need to do better. They need that feedback.

 

A lot of bigger funds, and they’ll pay a lot of money to a third party to offer that service. If you’re used to managing 5, 10, 50 loans, you don’t want to get into producing statements and things like that.

For someone like Chris, who has a billion funds, that’s why it was good to have him join that side because he knows.

I think where it’s more important is not only looking at your statement, but somebody could see the fiscal loans there like in the portfolio, not like, “I invested $100,000. It’s blind what I’d invested in.” In multifamily, I can drive by to the apartment building I put in. In a note fund, it’s like, “What assets make up this fund?” It’s usually what they call a blind fund, so you don’t know. Where, as part of that portal, this is the ability to let the person log in and see the access or the loans.

I think it’s great that you’ve tightened up a lot of processes, but you still have some projects in the works.

To be great, you have to.

Jamie, Note and Bolt.

Do you have one, Chris?

My note and bolt is what we’ve talked about in the past, but as part of due diligence and bidding, now understand the state that you’re investing in. My membership group did a very in-depth presentation. Shante is a member of my group. She is going to buy a note in 2022. We did a very deep dive in Ohio.

I learned a lot, and I didn’t know half the stuff that was talked about, but it was informative.

The process in Ohio and understanding the potential based on if mediation exists or it doesn’t, there are different counties in Ohio, but most importantly, the fact that your actual legal expenses are not recoverable. The court filing costs, the preliminary judicial report, which most people don’t know what that is, which is expensive. That can be recoverable, but the legal expenses are not. I say that because I’ve seen a tape that people were bidding on distressed assets in Ohio with very low UPBs.

They’re bidding at $0.50 to $0.60 on a dollar. If it’s an $8,000 loan and you’re bidding $4,000 to $5,000 on that, the Fannie Mae guidelines for legal fees is $3,000, so that isn’t coming back unless it’s a reinstatement. Even on a payoff, you don’t get it, which is crazy. That could be $3,000 out the door, plus your servicing fees, FPI taxes and insurance. Some of that can be added, but your servicing can’t. Between your servicing fees and legal fees, you’re not making anything. That $8,000 asset, you should probably be somewhere around $1,000 to $2,000, but when people were bidding it up at $5,000, $6,000.

It’s not only true for foreclosure. You were saying, even if I wanted to try to mod a loan and raise the principal balance, you can’t do that because they’re not recoverable. That’s crazy. That is very important when bidding.

The second part of that component was, if you don’t know, there are so many people to ask, reach out to somebody and say, “I’m looking at this. What’s your experience in this state?” There’s a lot of people chatter shot does a lot in Ohio. I, unfortunately, do a lot in Ohio or pick up the phone and call Sottile & Barile. They do collateral reviews. As part of that collateral review, even ahead of time, they can give you some information on what it costs and what to expect.

BIFI is by investors, for investors. They can't be for investors if they're not willing to hear what they need. Click To Tweet

You should do North Carolina next.

That one’s already done. The PowerPoint’s ready. Do you want me to do it?

He has to do every state. That’s what I told him. Everyone needs to go sign up for his membership or something because you don’t hear that. I’ve been in this space longer than him and would have never put that information together. I’ve known Franco for years.

When I did it put together, I sent it to Franco. I put it together and said, “Franco, here’s what I want to talk about. I got a lot of information.” It’s 32 slides of data, not like 32 slides of fluff like, “Join me on Facebook.” It’s 32 slides of data. He’s looking at this and he’s like, “How long do we have?” I’m like, “We’ll talk for an hour, but the information’s there. People can always go back and refer to it.” The PowerPoint slides have a lot of text on them, which is unusual for PowerPoint. Usually, you put the bullets and then talk about it but I wanted this to be a webinar on the attorney ask questions, but also be able to use this as a takeaway to stick in your file for later on that you can always refer to.

Anyone who has spent any amount of time with you, Chris, is not surprised by that. You always over-deliver on the level of information or the content.

The best part is a lot of the things that get discussed there from firsthand experience first. There are factual things, and you have an attorney telling you the cold hard facts, but then it’s relatable when he’s able to sit here and say like, “I dealt with this. I remember this time.” No one does that. I was blown away sitting and listening. There were so many things that I didn’t even know, and as a servicer, I had no idea.

My note and bolt is back to it depends. I was sent a note to look at a non-performing loan in Georgia. The last payment had been 2010. My note and bolt is it can vary based on the state as to whether the statute of limitations kicks in based on the maturity date on the last time the borrower made a payment or even based on the last time there was any legal action pursued by the lender. It can vary greatly as to when that statute of limitation kicks in.

Please research with an attorney or more than one attorney in that particular state if you’re looking at buying a loan where the statute of limitations could be an issue. I’ve had one where the statute of limitations was beyond that but I was able to get the borrower to sign a modification and resolve that issue for me. That’s another sub-note and bolt.

Jamie, what about your note and bolt about the emotional distress you’re dealing with now for $25,000?

You’re handling that, by the way, very well.

That’s the IRS thing, but Chris and I are looking at a loan.

We won’t get into too much detail, but there are counterclaims involved. It’s my understanding and again, talk to your attorney, that it has to be actual damages. You cannot claim emotional distress as part of foreclosure and stuff, either party.

You guys get the fun stuff.

There’s always a story with every note.

GDNI 189 | Loan Servicing

Loan Servicing: Investors need to keep their hands clean. The servicers are the ones that need to get down and dirty. Servicers offer an escrow service to investors and actually service the escrow.

 

Shante, you must have tons of stories of being in this for years. What’s your Note and Bolt?

My note and bolt and I feel like this is a universal thing, and I always stick by this. You need to ask questions as investors and question your servicers. That HELOC line of credit, I need everyone who’s read this to go question your servicer, unless it’s me because I figured it out. Question your servicer and if they can handle the full capability to what an attorney would need, I feel like a lot of people run scared for the wrong reasons on buying assets because they think of the servicers that they’re used to use. If you don’t ask the right questions, you don’t light a fire under so many people to figure it out. Ask questions. You have a right to question your servicer. I’m not saying it to be rude about it, but definitely ask and you never know.

I know you guys ask me stuff all the time and I’m like, “I don’t know.” There are things I never thought about. My brain works differently than yours. I’m used to doing one thing over other things, so ask. Everyone’s trying to gain and share knowledge. That’s what this space is all about. That’s what I take away from this space is we’re all trying to learn different things and sharing knowledge that we can all come up with. We’re not trying to put anybody down here, so ask questions to your servicer. Don’t be afraid. I like questions.

Jamie, final thoughts.

This has been good. I think people appreciate our show for many reasons, but one is that we keep it real. We honestly need to sell our stuff a little harder, in my opinion, our own stuff, Chris. Sometimes, we can get down the path of being too honest. We’re so in the weeds that we end up complaining about certain things or pointing out the negative, which I think people appreciate, but then we also need to step back and appreciate the positives of note investing.

I hope people have gotten a lot of value out of this episode. We try to keep it real but also point out the pros and cons of BIFI. Chris and I are biased at this point. We do want people to use BIFI, but the reality is we’ve experienced BIFI as lenders for months now. I can say I’m quite pleased and it sounds like you are too, Chris.

I am very pleased. Part of it is the push is also people realize back to what the biggest complaints about servicers are how things were managed, but the company is explicitly set up to cater and custom to lenders and the whole processes. When Shante says training people and getting them up to speed is because they’re used to doing things a different way from other servicers and then there’s the Shante way, which is different than the other ways.

When she talks about growing and getting the systems down, it’s not that people don’t know what they’re doing. They know what they’re doing. It’s getting them to go from here to the way Shante expects where the company to be, which she has in my mind because of how the responsiveness has been. They’re managing the foreclosure process as I would manage it. That gives me additional time now on the ten foreclosures or whatever with BIFI to go buy assets or look at other things because I’m not chasing down attorneys. They’re doing that for me.

The other thing I’ll add is, yes, it makes sense. We would put real loans, our own loans there, but at the same time, these are real loans. We’re managing funds. These are actual loans. These are not dummy loans or something. If it was not going well, believe me, I would pull my loans from BIFI. I have my own business to run. I know Chris would do the same. Hopefully, other note investors and lenders can appreciate that we’re putting our money where our mouth is. With that, Shante, any final words?

Thank you. Go out and do some good deeds and bring your loans to BIFI.

One more thing, Shante, where can people find you?

BIFI will be at the DME on March 10th and 11th, 2022. That’s in St. Petersburg, Florida. BIFI will also be in attendance at IMN on the 14th and 15th and that’s the Palm Beach area. You’ll see me there. BIFILS.com is our lovely website and our email address is Servicing@BIFILS.com.

Thank you all.

Don’t forget to like, subscribe and go out and do some good deeds. Take care, everyone.

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About Shante Duffy

GDNI 189 | Loan ServicingShante Duffy assists with the supervision of day-to-day company operations, provide lender consultation services, assist with note servicing, handling of insurance services, and promotes note servicing & investment services at national conferences.

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