How to Profit from Non-performing Mortgage Notes
Episode Details
Transcript
In this episode of From Adversity to Abundance, hosts Jamie Bateman and Shante Duffy dive into the world of note investing, focusing on six pivotal exit strategies to turn non-performing notes into profitable opportunities. The conversation explores real-world success stories and offers valuable insights into the Labrador Lending Note Investing Mentorship Program, which provides personalized coaching and strategic guidance essential for investors at all levels.
Key Topics Discussed:
- Exit Strategies for Non-Performing Notes
- Breakdown of six crucial strategies including mortgage payoffs, loan modifications, foreclosure, and short sales.
- Real-World Case Studies
- Success stories like transforming a distressed Jacksonville property into a profitable rental and an $18,000 profit from a seemingly worthless New York note.
Key Takeaways:
- Strategic Decision-Making is Key
- “Perseverance and strategic decisions can unlock hidden value in distressed notes.” – Jamie Bateman
- Personalized Mentorship Yields Success
- “Tailored coaching helps investors achieve significant financial and social outcomes.” – Shante Duffy
Notable Insights:
- “Turning a note from worthless to valuable requires perseverance and the right strategies.” – Jamie Bateman
- “The right mentorship can transform your note investing journey, no matter your experience level.” – Shante Duffy
Integrity Income Fund:
https://investors.appfolioim.com/labradorlending/investor/submit_interest/5
—
Labrador Mentorship:
https://labradorlending.com/investors/active-investors/
—
Haven Financial Services:
Learn more: https://jamie.myfinancialhaven.com/
—
Purchase Jamie’s Book:https://www.amazon.com/dp/B0CGTWJY1D?ref_=pe_3052080_397514860
—
Leave us a REVIEW: https://podcasts.apple.com/us/podcast/from-adversity-to-abundance/id1618672867?mt=2&ls=1
https://www.adversity2abundance.com/reviews/new/
—
Podpage:
Calling all aspiring podcasters and seasoned pros! Transform your podcast with a stunning website in minutes. Sign up for Podpage today to effortlessly grow your audience with our easy-to-use tools.
Sign up here: https://www.podpage.com/?via=jamie-bateman
Connect with us
Website: https://www.adversity2abundance.com
Facebook: https://www.facebook.com/profile.php?id=100089126144055
Instagram: https://www.instagram.com/adversitytoabundancepodcast/
LinkedIn https://www.linkedin.com/company/89949391/admin/feed/posts/
Youtube: https://www.youtube.com/@FromAdversity2AbundancePodcast
Connect with Jamie
LinkedIn: https://www.linkedin.com/in/jamie-bateman-5359a811/
Twitter: https://twitter.com/batemanjames
Speaker 0
Welcome to From Adversity to Abundance, the go to podcast for real estate entrepreneurs seeking not just to thrive, but to conquer with resilience and mental sharpness. Each week, join us as we dive into the compelling world of real estate through the lens of mental fitness, where challenges transform into opportunities. Get ready to transform your mindset and expand your understanding of what it takes to succeed in real estate. Let's explore these stories of triumph and resilience together. Speaker 1
Alright. We are here. It is approximately six zero three. We'll let, you know, the people who are struggling along join in whenever they are ready. But I think we should start now. So welcome to Lender Lending note investing mentorship program hosted by Jamie Bateman and co hosted by Shante Duffy. So I just want to thank you all for joining us today, on this for East Coast people, late evening. West Coast people, afternoon. Everybody in between, those in between times. So welcome. Jamie, do me a favor and select from beginning on your top left. Speaker 2
Good. Oh, I'm sorry. Speaker 1
I didn't see it. Yep. Speaker 2
We can go ahead, and I'll mess with it. Speaker 1
So as some of you may know, some of you may not know, we host a monthly free webinar to those who choose to attend and sign up and register. And we choose different topics to discuss that will help note investors in this space, from people who are a little bit greener to people who are a little bit more expense, experienced, and all those in between. If there's a topic that anybody is interested in, I always suggest you kinda reach out to us and let us know so we can make sure we cover those as well. If there's things you guys are, you know, wanting to learn more on, let us know. And, most importantly, if there's any questions that you may or may not have in your own personal note investing journey, feel free to reach out to us and sign up for a mentorship program where you get some one on one hands on, you know, communication and conversation with expertise from the space. And we'll get into some of the mentees or mentors that you mentees will be able to speak with. Speaker 2
Absolutely. This is exciting. So can you see the screen now correctly? Presentation? Speaker 1
Yep. Awesome. And this week, we are discussing how to profit from nonperforming notes and specifically six exit strategies that we zero down and narrow down to review with everybody. Speaker 2
Yep. And bottom line with this is this is targeted for those who buy nonperforming notes. That's what it's intended for, which, you know, in that case, it's kind of like a fix and flip property if you're unfamiliar with buying a nonperforming note. There's a a clear, entry point where you buy the the note, and then there's a clear exit point. And that really either ends up being through the property or through the borrower as we're gonna get into. But this is very applicable for anyone buying performing notes, originating notes, because as we know, not every note goes the way you wanted to, and so you want you need to be prepared and have multiple options. Speaker 1
Absolutely. Go ahead. A little bit about who we are and what we offer. In regards to our mentorship program, you get consulting coaching services on an as needed hourly basis. So if you guys come across situations where you need a little bit more assistance, you wanna block off an hour with us, you absolutely can, and we'll address your needs one on one. You get hands on direct access to note investing experts. We'll go through some of these people in the next couple of slides. And we also share with with our mentees, our trusted consultants that help us, such as servicers, real estate agents, attorneys, things that you may need in your note investing journey. So we do connect and refer out that way as well. Speaker 2
Absolutely. So a little bit about me. We don't need to spend too much time on this. You can go to our website, labrador lending dot com, if you wanna read more about me. And, but I've been in the real estate space, real estate investing specifically for about fifteen years now, I guess. Prior to that, I did work for a title company and a mortgage broker, and have different have held different roles in leadership and, coaching as well, which is relevant for this, coaching in lacrosse specifically and a lot of team sports in my background. So, also the host of the from adversity to abundance podcast, which I recommend you check out. And Shante has been a guest on that show, twice. Right? Speaker 1
Nice. Yep. Speaker 2
And so that was two two really good, episodes. So a little bit about Shontay, you wanna speak about yourself? Speaker 1
Yep. My background is more specifically in some loan servicing and loan servicing operations, compliance, what investors need to stay compliant and manage their loans and things like that. I have been in the space for almost twelve years now, which is crazy to think about, and I love every part of it. I am branching out and doing a few new things, more so investor geared instead of, you know, loan servicing and things like that. But as Jamie said, if you wanna learn a little bit more about me, my story, my background, feel free to check out his episode or my episode on his podcast from adversity to abundance, and you'll learn a lot more there. Speaker 2
Yeah. We get pretty personal on it. Yep. So you literally like, you you said, do you like everything about this space? I'm just Speaker 1
I do. I love the stress that it brings to life as well. I'm always up for a challenge. So this is exciting, and I love sharing knowledge, which is why I'm here. Yep. Absolutely. To be able to watch everybody grow. And then we also have Mark Blunden, who is not on our call tonight with us, but his background is in document custody, title, loan servicing. I've actually worked with Mark in loan servicing as well, loan acquisitions. He is an active real estate agent as well, located in Orange County, California. And he is very knowledgeable when it comes to financial risk management, strategic acquisitions, economic trends. He's definitely the the numbers guy at the team of Speaker 2
advisers. Oriented. He's very organized. We've brought him in already with mentees, on active files that they were buying notes they were buying to go through the the collateral file, in great detail. So he's extremely knowledgeable. He really really had a major impact on Casey Wilson and Associates and their their, their operations out there. He ran their operations for many years. So, we the three of us bring a different skill set and a different set of experiences, which is something we find, there's a lot of synergy, and we bring a lot to the table. So, we're not lawyers. We're not financial advisers. None of this, you know, none of this is legal advice. And even if we were your attorney, an attorney, we wouldn't be your attorney most likely. But, yeah, the the standard, caveats there. Disclaimers, I should say. Alright. Speaker 1
Then we kinda dive right in. Speaker 2
Yeah. So, Shanti, what is a mortgage note exit strategy? Speaker 1
So exit strategies are essentially plans that are outside of the signed promissory note that the borrower agrees to pay back. There's many different examples, and there's a handful of different exit strategies that us as lenders can use to have either the borrower continue to pay their mortgage payment. And if not, there's signs that we need to take different recourse to where the property essentially ends up paying, and we'll kinda dive a little bit more into what that actually means. Speaker 2
Yeah. This is a very basic, definition here. And as I alluded to earlier, really all exit strategies, other than selling the note, you could buy the note and sell the note to another investor. But I can't think of another exit strategy, that does not go through the borrower or the property. I've been wrong before. So if you have any, examples, put that in the q and a. We're not using the chat, feature or function. We're using the q and a, by the way. So if you have questions, comments, we will get to those in a bit. But, yeah, ultimately, like I said, buying an NPL, that's how we're framing this, a nonperforming loan. And and my background is more in first than seconds, to be clear. I have bought some seconds, but, we're we're approaching this from the angle of first lien mortgage note investor or first lien lender. And, if you're buying a nonperforming note, again, there's typically a clear exit point as well. And so in this presentation, we we're promising to go over six exit strategies. There may be a bonus one. And we're not saying this is all possible exit strategies for the record, but these are some of the most common ones. And and as Shanti said, it's backup repayment plan. So how do you get your money back and then some, hopefully? So category number one, borrower repays. And example number one is a reinstatement. Shontay, what is a reinstatement? Speaker 1
A reinstatement is when a borrower is defaulted for number of months of payments, and they decide to pay the entire defaulted balance in full. That past due balance that was owed also has late fees involved, additional charges that are involved, interest that's been accruing, and things like that. So it brings a borrower contractually current. And what I mean by that is today's August twenty eighth. Let's say the borrower is due on the first of every month, and let's say they have not paid since May. So they missed the month of June, July, August, and they're about to potentially miss the month of September. Let's say they come in and say I need to reinstate. They basically have to pay for the four months, the payments that they missed and the late fees and any charges that accrued on their loan at that point, and it'll bring them contractually current to where their next due date would be for the month of October if they paid this in September. And at that point, it's current. No charges. No fees. It's a beautiful clean loan, and, hopefully, they continue to repay on a monthly basis per their note. Absolutely. Statements are fun for the most part. Everybody likes receiving, you know, lump sum of cash, and it's a way to, you know, keep the borrower on their home. Borrowers do do this often. There's different reasons for it, why borrowers default as well. But a reinstatement is always the route you kinda ask your borrowers first if they have the ability to reinstate and bring their account current. Speaker 2
Yeah. And, in almost all cases, as a as the investor or lender, you really don't have an option to refuse a reinstatement. So for the most part now I did learn recently, in some cases, that's not, required. But, and and that's a very rare scenario where it's the the borrower was actually deceased, so I could actually refuse a full reinstatement. But in most cases, say ninety eight percent of cases, you don't even have an option if the borrower sends in enough money to reinstate to the servicer. They're reinstated, if you haven't completed foreclosure, etcetera. So, that like Shontay said, that brings them current. Sometimes these can be a little bit frustrating if you have a borrower who who's a lumpy payer that you know, where they're they'll they'll reinstate, and then they'll fall behind for six to eight months, and then they'll reinstate again. And then the the and so, yes, it's great to get that reinstatement. But then they if when they go back into default, oftentimes, the servicer charges more per month. And if it's a low payment loan, it can really, really crush your your, returns. But, again, you don't really have too much of a choice. And by the way, we're gonna get into some case studies here in a bit, which, I think are a little more exciting than definitions. Loss mitigation loss mitigation agreements, this one, Shontay can talk more about. It's a pretty broad, category. Yeah. So give us an example or two of a loss mitigation agreement. Speaker 1
Loss mitigation agreements would include something such as a loan modification, a forbearance agreement, trial payment plan, extension agreements, which we will dive into in a little bit. We'll kind of explain what each one of those are and when you can offer them and how long they last and things like that. But and, essentially, all these agreements, either permanently and or a long term or a temporary change, the outline of the note, the repayment requirements. But as I said, we'll get further into this. You can't just slap a borrower with an agreement and expect them to sign. There are steps that you have to take with your service a servicer to be able to even offer a loss mitigation agreement, but we will dive into that, shortly. Speaker 2
And one thing to add is that some of these don't all necessarily operate in a vacuum. So you may have a trial payment plan that then leads up to a loan modification because you wanna see that the borrower can perform for three to six months before you make a more permanent agreement. So, yeah, lots of lots of different options within the loss mitigation agreement arena. Refinance, in today's world, it's less and less of an option. It's although I did just have one where it was a short payoff and a refinance. But, refinances can be great because almost anytime you get a payoff, that's a win because you should be buying at a discount, and therefore, full payoff is going to give you, more than you put into the note. So a refinance, the borrower's going out on their own, maybe with some assistance or, you know, in a direction from you, but for the most part, on their own, finding another another lender and replacing their existing mortgage that you own with a new mortgage. And, hopefully, you get a full payoff, in that case. So it is different than a refi than a, loan mod where that's the same loan is is, remains in place, a refinance is a new loan, and then a payoff discounted settlement. So that can be essentially a full payoff or a short payoff that you, as the lender or a note investor, agree to. You may you may agree to a short payoff for many different reasons. And, again, I just just had one couple weeks ago. Anything to add to that one, Shante? Speaker 1
No. Those are fun. I've always loved watching lenders get payoffs and settlements and getting refinanced. Speaker 2
These three so we've promised six, and we're giving you seven. We like to underpromise and overdeliver. So, in this case, these for these three, we're exiting through the property. So, essentially, like we said, twice already in in all of these cases, you're either going through the borrower or you're going through the property. So these are three examples of exiting through the property. Foreclosure, most people are familiar with. Take the legal process all the way through until you take the property back. Again, we're not in that's not necessarily our intent to kick people out of their homes and to, you know, buy these defaulted loans in order to foreclose on someone. But at the end of the day, that is your recourse. That is your collateral when you're buying when you're investing in mortgage notes. It's one of the great things about mortgage note investing is you do have that collateral. You know, if you buy a bunch of shares of Apple stock and it tanks, not much you can do about that. Whereas here, you can take back the property via a foreclosure. And a lot of times, foreclosure is your, last resort. And the second, option here, deed in lieu of foreclosure, may be something you're able to negotiate as you're moving toward a foreclosure and the borrower realizes, okay. I'm gonna lose this home. And so the deed in lieu Shontay, you wanna talk about a deed in lieu of foreclosure? Speaker 1
Yep. A deed in lieu is essentially an agreement where the borrower voluntarily gives up their property. So instead of you as the lender going through the entire foreclosure process, which is different time frame wise, state by state. I'm here in New Jersey, and this could take up to three years, where in Texas, it's very, very quick. So a deed in lieu is an option to where instead of going through that legal process, the borrower will actually sign over the property back to you being a lender, and they will walk away. A lot of times with and they're no longer responsible. A lot of times with the deed in lieu, what I've seen is lenders have also offered a cash for keys that go alongside with this. And what that means is that they tend to give the borrower a what I've seen, a small lump sum of change to basically have them sign the property over. I've seen deed and lose most often happen when people get divorced. They might lose a job, but they have another place that they can stay, and they don't have a way to maintain and retain their property. So it is a good way. I also know that there's times where we've seen this, and the cash for keys example comes into play because the borrowers, unfortunately, don't wanna go through the foreclosure process. They know it's just kinda kicking the can down the road for them. They wanna sign the property over, but they might not have money for a down payment or, security deposit in an apartment. So that's what I've seen the most is lenders kinda give money to almost, like, relocate you. And then you guys pick a date as to when everything's kinda closed out. And at this point, you are now have a REO property, essentially, real estate owned property that you can choose to sell, rent, and do whatever you please. Speaker 2
And and a couple of reasons why if for the investor, why is this a good thing versus foreclosure? Well, time value of money, you're getting the property more quickly than had you had to go through foreclosure. It's also less expensive, hopefully, depending on if there is cash for keys involved. But, ultimately, it's just faster, a faster way to the property versus a foreclosure. And for the borrower, they avoid that foreclosure, and that a foreclosure could affect their credit, etcetera. And another thing to mention is there is such a thing as a deficiency judgment in some states. And so with the deed in lieu, you're wiping that lien. So a deficiency judgment is where the borrower owes more than what the property is worth, and you may be able to sue the borrower for even if you get that property back through foreclosure, you may be able to sue the borrower for additional debt if they have other property. Now deed in lieu most likely is gonna wipe out that entire debt, and so there that's one other reason the borrower may be in favor of a deed in lieu. So, again, these are like Shante said, it's agreement where the the borrower voluntarily gives up the ownership of the property. So we're doing this in cases where it's win win for the it's win for the borrower and win for the investor. Short sale, we're not seeing as much of, recently. Speaker 1
More. Yeah. Speaker 2
Yeah. Because most most people have equity in the property, so short sale is a little more common and more relevant when a borrower or property is underwater and the the borrower owes more than, the property is worth, and you negotiate a short sale, with the lender. The borrower negotiates a short sale with the lender. The lender approves that sale. They go forward that way, but we're not seeing those quite as much recently just due to market and economic conditions. Again, we do have case studies we're gonna get to in a minute. Do you wanna speak about this slide? Speaker 1
Yeah. So this was a little bit more of the type of agreements for loss mitigation. So I'm just gonna kinda run through these really quickly, to kinda give you an overview. There's a loan modification. A loan modification is a more long term solution. It is permanent until payoff unless you continue to keep modding it. With the loan modification, you're completely changing the terms of the loan. It could be for many different reasons. Maybe when the borrower took the loan out originally, interest rate was astronomically high. Their payments, you know, they might not be able to afford their payments. Either way, a loan mod is a permanent for the remainder of the loan time permanent agreement. You cannot put any borrower into a loan modification agreement without reviewing their finances, and this is where your servicers are important. They usually send out a financial application when a borrower has a hardship, and we wanna hear about that hardship. So what that financial application explains is it has you have the borrower complete it. It explains their income, where they spend their money, what bills they have, and then we also ask for some extra proof, such as bank statements and tax returns and pay stubs. This is all the information that you need to review as a lender to see if there's loan modification terms that could fit for your borrower. What we don't ever want is any, you know, predatory lending or putting a borrower into an agreement that, out of the gate, has them failing. So payment shouldn't be higher if their finances can't cover it. So things like that. Again, that's a little bit more permanent. Forbearance agreements, are the second most, like, popular that I actually see, agreements that are being made. These are for borrowers who are in situations there at the moment. Maybe their finances aren't together a hundred percent to pay the original note terms, but they might be in between jobs. They might be out on disability for a couple months, maternity leave, you know, all these different reasons, and their financial situation has changed. So forbearance, you're forbearing foreclosure. You're willing to give them a shot at making lower payments than what their actual note calls for to see if they can even keep up with that before putting them into something either more permanent like a loan modification or just going back to the regular note terms. But I see this agreement the most when people are in between jobs or family changes, and things like that. There are also trial payment plans, and I don't see these nearly as often anymore, but they were definitely super popular just a couple years back. But what they are, the forbearance agreements naturally will go anywhere between six months to twenty four months at most from what I've seen. Trial payment plans are shorter terms. It should not be anything more than a twelve month trial for a borrower. I usually see three to six months. And, again, it works a lot like a forbearance agreement where we just wanna test to see if you're gonna make your payments for the next three months. Outside of these two agreements, between the forbearance agreement and the trial payment plan, plan agreements, there is an end date before the loan is paid off. So you towards the end, the last two, three months of payments that should be coming to you, you should be talking to your borrowers about putting them in something more permanent. You should have a plan. So if a forbearance agreement ends September or August thirty first, you shouldn't be waiting till now to kinda put a borrower into their next agreement. You should kinda be ahead of that. I always tell people to start the closest sixty days. If you can get ninety days out to start that conversation, give yourself time to draft whatever the agreements at the borrower's review, do that. The only other agreement that I've ever that most lenders use is an extension agreement, and what they extend is the maturity date. A lot of times, lenders will buy a note, and the borrower was defaulted back in two thousand fifteen through two thousand twenty. So for five years, they were behind. When the loan was picked up or when you picked up this loan, the borrower is still not contractually current, so they're not due for the current day, month, year. They're still extensively back, which means that as they pay every single month, even though they're paying, you know, July, August, September, it might not being be it's not being applied to July twenty twenty four's payment that's due. It might be getting applied to March of twenty twenty three because that's how far behind they are. So at this point, when maturity date comes up, instead of having your borrower pay a lump sum balloon payment at maturity, which technically the loan is called to be paid, in full at that point, lenders will extend the agreement and make sure they can extend what the borrower's currently paying out in a monthly payment plan and that you're not outside of your maturity date. So, essentially, you're getting a new maturity date and or giving a new maturity date to the borrower and letting them continue to pay. Exactly. That all of these are things that borrowers need to sign off on. You can't do this without them signing and getting these agreements notarized. Speaker 2
Good point. And sometimes, loan mod is recorded. Sometimes, it's not. Speaker 1
But Yep. Speaker 2
Yeah. And a lot of these, like we said before, do work hand in hand, so you may have a trial payment plan in conjunction with a forbearance agreement. I'm not I promise not to foreclose while we're in the middle of this trial pay trial payment plan. If all goes well after six months, and I and I like I said, I won't foreclose, you you, you know, hold up your end of the bargain. We'll do a permanent loan mod. You know? So, I tend to kinda skip the trial payment plan. I don't know if it's because I'm impatient or what, but, typically, what I'll do is offer two to three options to the borrower depending on how their their application looks and what their their financials picture looks like. Oftentimes, we'll offer at least two options to them and, essentially, boils down to the more money you can put down toward your, we're almost always forgiving some part of the arrears, some part of the total payoff. But the more money you can put down right now, the better the terms are gonna be for you on a monthly basis as a borrower. So that gets into the weeds quite a bit, but I've ended up doing, you know, two to three options like that versus a trial payment plan. But other other investors like using that trial payment plan because it's very temporary. It's kind of in pencil. You don't have to really commit too much. It's a test run kind of, you know, dating before you lock in that the marriage of a loan modification, if you will. So, alright. Case studies. Let's see how this goes. Alright. Speaker 1
So we want to share with you guys some case studies that have real life things that have happened with some of the exit strategies that we've reviewed with you. So it looks like we have three of them right here, deed and lieu, loan nod, foreclosure, and I think we're starting with that deed and lieu. Speaker 2
Exactly. You're able to see this Jacksonville? Okay. Speaker 1
Yes. I am. Speaker 2
So let's see here. You can see all my folders up here. If you go to our website, labrador lending dot com, and go to, resources, we've got blog posts here. We have a free ebook that's seventy four pages. It probably should be five ebooks. But if you click on resources and then go to blog posts, this is one of the blog posts that's out there. We're not gonna go through every word here or every section of this, but this was a ended up being a deed in lieu. It was a first lien defaulted note that I bought, that the property was in Jacksonville, Florida, and you can see here some of the numbers. And we we're moving toward foreclosure. There was some communication with the borrower, not a lot. We we tried as best we could to work with her. Turns out that she was actually renting out the property and collecting rent, but still not paying her mortgage. And so we offered multiple, scenarios, and you can see the timeline here. So, again, I'm not gonna go through every every detail. There's there are two parts to this, part one and part two. We were looking at a really high, return here, and it ended up being a great return. We worked with the occupants. We ended up giving them two extra months to get out because this property was was they were not in good health, and and it was really a really beat up property. And it was just wasn't a there were bed bugs, and it was just not a healthy environment whatsoever, but we did give them extra time to get out. Eventually, that was after the deed in lieu gave the occupants time to get out. And this property is actually a long term rental of mine still, and we did a long distance rehab where we put twenty five to thirty k into the property. One of the nice things about notes is you can do this investing from anywhere. I've never been to Jacksonville. I wouldn't necessarily recommend a long distance rehab right out of the gate, but if if you haven't done one before. But, this one turned out very well, and it's one of the best deals we've had, from a numbers standpoint. Again, we rehabbed the whole property, and you can go through pictures, if you go to our website. And, again, it's rented out, and the the rent has increased since I've put this with this, blog post up. So, impact investing, I I do wanna point out, you know, we were able to move these these occupants from this really not good environment to, I I hope a healthier environment get them a fresh start. And we also ended up forgiving, quite a bit of debt, for the homeowner, probably twenty some k, if I recall correctly. So she got a deed in lieu, the borrower, and so she did not have to go through foreclosure and have that affect her credit or anything like that. And and, also, we put in twenty five to thirty thousand dollars directly into this neighborhood. So we're helping the the borrower. We're helping the occupants. We're helping ourselves by profiting, and we're helping the neighborhood. And so we're adding value all the way around. You know, this was a long process. It was in it's in Florida, and that's an expensive state to go through. We went through almost all the way the whole foreclosure. Oof. But yeah. So you can go to the website, our website, and see, part one and part two of that case study. Shontay, anything to add? I know you don't know the case study quite as well as I do. Speaker 1
Not as well, but I feel like I knew where you had this service and what you were dealing with. Speaker 2
Yeah. Second case study. And, again, we we are happy to take questions here in a minute. You may have to Speaker 1
I have it up. Yep. I think the q the q and a should work, and if you guys want to raise hand. Speaker 2
Here we go. Alright. And I also have a YouTube video on this one. Probably should be I probably should redo it, but, it's, we actually turned now to be clear, we've lot we've lost money on deals. We're highlighting some of the wins here. Not every deal is a win. But this one, we turned one hundred dollars into about eighteen thousand dollars in two years. This is almost unheard of. And so we're not gonna go through every bullet, but, I ended up purchasing this note as part of a, there there was a pool of, ten New York notes that I bought. And this was on paper worthless, this one, because it was actually passed Shante spoke about the maturity date earlier, and and when we bought this, it was already past the maturity date, and there was the the seller of this pool of notes just wanted to get rid of this one, so I didn't have a choice to I I needed to take this one if I wanted the other nine. So the borrower owed approximately forty eight thousand dollars. The property was about fifty And so there were, yeah, there were some legal questions about whether it was a legitimate still a legitimate, lien because, in New York, there's a six year statute of limitations, and she hadn't made payments in over six years. So I think that's what the issue was. I I can't recall the specifics. It's been a little while, but, we did have an inspector go out, and one of the occupants, approached the inspector with a shotgun, so that didn't go so well. But there were many servicing issues, many transfers, a lot of confusion, you know, when we bought this this loans. A lot of services are not licensed in New York, but that's a story for another day. You can see the timeline here. We offered a five thousand dollar short payoff to the borrower. You know? Again, I paid a hundred dollars. I figured that five thousand dollars would be an excellent return. No response. And ended up, where we raised we did a loan modification. It was very close to foreclosure. A lot of times, these borrowers don't respond until an attorney gets involved, and even then, they may not, you know, because they get letters from their servicer monthly. So you get another a demand letter from your servicer, and it just may not do much. Whereas an attorney gets involved, hey. We're foreclosed foreclosing next month. You know? And it's like, okay. I'm ready to talk. Yeah. So we ended up and now to be clear, New York takes much longer than one month. We ended up forgiving about six thousand dollars in from the total payoff. We lowered her interest rate, considerably. We created a new thirty year term. She put down five hundred dollars, and then one year later so she made payments on time for one year, and a year later, we sold this note for eighteen thousand five hundred. So we ended up not foreclosing. We it was a crazy home run from an ROI standpoint and, did a loan mod. And I was so in general, loan mods are often the most profitable way to go. And we kept the payment, the monthly payment. Because we extended the term, we we kept the monthly payment around what it had been. And so we're not requalifying the borrower like it's a new loan or anything. She'd already been qualified at those those monthly terms, and, this all went through attorneys and everything. And so I'm able to sell this for eighteen thousand five hundred because the new principal balance is twenty eight thousand, and she's made twelve months of payments. And so a new I mean, a a note investor sees this as a reperforming loan, which has a little bit higher risk than a true performing loan. But, you know, eighteen thousand isn't too bad of a price for that person. So win win win. Win for the borrower, win for us, and win for the new notebriar. Yep. Exactly. So here are some of the numbers we're not gonna go into detail there. Shante, any anything further on that one? Speaker 1
No. This is a very good example, though, of how loan modifications do work and how at the end of the day, if you decide you want to sell that note, you now have a reperforming loan, and it is attracted to other note buyers as well who are looking for performing. And, you know, there's a small world that likes New York, but you still found a buyer. So Yeah. Yeah. Again, the overall is always win win. Speaker 2
Yeah. So I'm not gonna go into too much detail on this one. I just presented this, on a monthly broadcast with Justin Bogard. This was a Michigan contract for deed. I'm saying foreclosure here because it's people understand that more. And in the end, the timeline was more like a foreclosure anyway. So, it technically was a forfeiture and, redemption period, all that. But, this started out as a performing contract for deed in Michigan. You can see some of the numbers here, and, it ended up going nonperforming. So, again, this presentation isn't just about buying nonperforming notes and how to exit them. It's also what happens if my performing note goes south. Here's some of the key dates, and beef we ended up, we offered a modification. I think we did a we did a loan mod, and maybe she made one payment after that. And so here are the terms of the loan mod. Before the loan mod and then after, you can see them there. But, ultimately, she didn't, follow through. I think the the borrower was got into really bad drugs, and was addicted to drugs. And the township see if yeah. I mean, there are some crazy pictures here. This was just in her yard, and I used to call this the mattress vomiting RV. This was just in her yard. This that's, like, not much. That's nothing. Right. And so but then eventually so the township, the neighbors, complained of blight, and I ended up working with the township. Long story short, we ended up foreclosing, doing a forfeiture, and then waiting having to wait, to actually get into the property, but ended up being five dumpsters full of trash and ten thousand. I think it ended up being, like, twelve thousand, actually, but at least ten thousand just for the trash out that it cost us. But we did file a a force placed insurance claim, and we got eleven thousand from that, from water damage. And, the cool thing about this story is that we were able to get the kids out of a really disgusting, like, unhealthy, unsafe situation. Situation. And as apparently, as soon as the trash out as soon as we got into the property I mean, I wasn't physically there, but, child protective services were called immediately. So, super sad scenario, and it's one of those where we had to wait for this, redemption period before we could actually actually evict. And who knows, you know, how much worse and unsafe the situation got for the the children during that time. But, we got them out of that house, and we ended up making a good profit. You can see it here. But it took us two and a half years total from buying the the contract for deed. And here are some of the main takeaways. I'm not gonna read them to you, but, this is our third case study. We did a deed in lieu. We did a loan modification, and this one is the foreclosure, calling it a foreclosure, which includes forfeiture. And yeah. Alright. So let's see here. See if I can get back to the right screen. Give me one second. Alright. Speaker 1
Maybe start over. Speaker 2
Okay. Alright. These are a couple of, testimonials. You can read these, from these are from our mentees, couple of mentees. That one's a bit long, but, these are some of the people we've been able to help. And, Jeff Vincent, actually Shontay and I have each worked with and kind of we're proud of this one because, he joined our program, and he's he had a lot of experience with rental properties, and he's got a a really strong background in real estate investing. So and that's something that's really factored into our approach is where are you coming from, not just where do you wanna go, but where what's your background? What's your experience? So he was able to hit the ground running, and he was already part of, Chris Seventy's, group membership group, which helped as well. And he said, hey, Jamie. If if we do three three mentorship sessions, do you think you can we can get me a note? And I said, yeah. I said, I think so. You know, I'm not not gonna rush anything, but and I'm not making promises, but probably. And we literally had three sessions. I think one was two hours, so maybe four hours total of mentorship, and he just closed on his first note last week. So pretty exciting stuff, and he's all pumped up, and he's, ready to buy a second one. He met he met with all three of us. He met with Mark to go over the, collateral file. He met with Shante to go over a lot of servicing questions, and I think you, you two are setting up another call Yep. To go over, some of the next week. So we're pretty proud of that one. That was, you know, top of mind. And then, Peter Halliday, I've worked with, just had another another session with him this week about, hypothecations. So, hopefully, he doesn't doesn't mind me sharing that. Additional resources, go to our website. We have a free, note investing ebook, which is seventy four pages, the power of mortgage note investing, and that's a great resource. It's not gonna tell you how to do everything, but it's it's got case studies, and it's got a lot of, other tidbits in there too. Chantay, anything to add as far as resources? No. Speaker 1
I think the website's a great spot to start. I'm always gonna tell people to, you know, if you have any questions or interested in the mentorship, there is a block on our site that you can complete. It'll send us an email, and we'll set up a call with you to kinda find out what your needs are, where you're at, what you need some assistance with, and kinda come up with the game plan for you and your individual needs. It's not just three calls. It could be ten calls if you need ten calls. It can be all different things. There is no limit. Obviously, if we don't have something for you, if it's more geared to legal, we will advise you that as well. Yeah. And I here to help at Speaker 2
Absolutely. And it's again, we said this on the first webinar, but for those of you who didn't see that that webinar, we think coaching is great. Meaning, I should say training, like formalized training programs where it's, you know, chapter one, module one. We think those are really important, and those are more structured than we offer. And we also think group, memberships are really helpful as well. This is meant the mentorship program is one on one. It's meant to take some you know, what you have from gain from those options and really pour gasoline on this thing and move you forward quickly and, you know, meet you where you are. Not not too quickly to a point of where it's unsafe or something, but we're trying to meet you where you are. I'm working with someone now, and he's chomping at the bit ready to go. And, actually, what I'm ended up what I'm doing is kind of, hold on. Let's let's make sure you're not, you know, doing something unsafe and buying a note that's, that's gonna lose you money. But but the point is not everyone is some people need more of a kick in the pants, and some people need, hey. Hold on. I'm gonna I'm gonna give you permission when it when you're actually it's time to pull the trigger. So it really depends on your personality, your background, and your goals. And it's very much catered to each person. So I don't see any questions in the q and a section. If anybody has any, feel free to put them there. Otherwise, yeah, I think we've covered quite a bit. We like, we talked about exiting through the property, multiple ways. We talked about exiting through the borrower multiple ways as well. And I do think, you know, I do think we're gonna see an uptick in defaults. I don't have my a crystal ball or anything, but, you know, personal debt credit card debt is rising. Obviously, inflation generally has been up. Savings amounts, savings accounts have gone down, across the US, and, I think, you know, that that's only gonna lead to more and more defaults. And so that's been one of the challenges is finding nonperforming notes recently, but I do think that will get a little bit easier in the in the coming years. So, and, again, whether you're buying performing notes, re any kind of note, you wanna know, different exit strategies. So, hopefully, this was helpful. Shante, final thoughts? Speaker 1
I would just recommend, you know, do your due diligence, get some research done to completely understand some of these exit strategies, lean on your resources. You have them. They are available. If you don't know where to start, we're here to help. But we I know we covered a lot and kinda just threw a lot of everybody, the shortened version. But we're here to help and assist, and no matter what you buy, what you have, it might not even be about exit strategies. Every month, the last Wednesday of every month, we do a live webinar and a topic that we kinda come up with or that we see as a need. So we will be back actually on September twenty fifth. Okay. That's the next webinar. And Speaker 2
You guys have topics that are Yeah. That you want, covered, we can take that into consideration. I Speaker 1
would say we did not finalize that topic as of yet, but I'm open ears, and we are excited, and we are here to help. And, again, networking is very important in this space. Be a part. Don't be afraid to ask questions. There were people we have people here to help. Speaker 2
Absolutely. Anybody have anything? You can raise your hand, and I can let you speak. If not, we are gonna sign off, give you your time back, and, let you enjoy the rest of your Wednesday evening. Alright. Well, thank you, everyone. Thanks, Shontay. Speaker 1
Thank you. Everybody enjoy. Speaker 2
Alright. Take care, everyone. Speaker 0
Thank you for joining us on From Adversity to Abundance. We hope today's episode has equipped you with valuable insights and practical advice to elevate your real estate journey. For more inspiring stories and resources, visit us at w w w dot adversity to abundance dot com. If this episode has inspired you, please share it with a friend who could also benefit from our conversation. Together, let's turn adversity into abundance. Until next time, keep building your mental fitness and your real estate empire. 
