Thoughts from the desk of Bob Repass…
#ThrowbackThursday – surely you’ve heard of it? The social media trend where you post old photographs to share old memories. Well how’s this for Throwback Thursday; 2016 marks the 25th year that I have been writing and sending out The Buyline newsletter to my clients and colleagues! Check out the photo below to see what the first edition looked like.
Times sure have changed, back then it was a one page, two-sided newsletter that I mailed, yes with a stamp on it, to all my clients, colleagues and prospects. It was 1991 and I was in my second year with Metropolitan Mortgage & Securities as a National Contract Buyer based out of my office in Raleigh, North Carolina. As far as I can remember there was no internet, no email but we did have this cool thing called a fax machine with something called “thermal” paper. I just knew that if I was going to make it in the discount note buying business I needed some steady customers!
Now The Buyline is an e-newsletter that I still send out to our clients, colleagues and prospects. It has definitely evolved over the years and I will periodically share some of the past Buylines with you in the coming months.
I will close this month’s edition of The Buyline with the same closing I used back in 1991in my first issue: “Well, that’s it for this month’s The Buyline. I hope I have accomplished my goal; to provide you with useful information in an easy to read format that will help us continue to produce business and increase our bottom-lines. Thanks…”
The Trading Corner
How to Select the Right Servicer for You
By Bob Repass
While the old adage “you make your money on the buy side” is true, having the correct servicer in place will not only ensure that, but can also enhance your return. This is the case whether you are investing in performing notes, nonperforming notes or both.
So how do you go about selecting the servicer that is right for you? The same way you go about determining if a note investment is right for you, Due Diligence! Today there are many more options for the smaller investor when it comes to loan servicing. More and more servicers have opened up to handling the servicing for investors that own one or more notes.
Here are a few things to keep in mind when determining what servicer you want to use. In most cases, especially when buying a performing note, if you have the option of leaving the servicing in place with the current servicer do that. The ease of servicing transfer especially for the borrower, is a tremendous advantage when you can leave the servicing with the current servicer. The borrower continues to make payments to the same place and the transition is as seamless as it can be.
On a nonperforming note, if the current servicer is close to finalizing a workout strategy such as a loan modification, a deed-in-lieu or even a foreclosure sale, keeping the servicing in place can help bring that resolution to completion. However, if there is no workout strategy in place and you have another servicer that you feel more comfortable with, then transferring servicing at this point can make good sense.
The most important thing to keep in mind is that regardless of which servicer you select, it is still up to you to “manage” that servicer. You are the investor, and you are the one they answer to. The relationship you have with the servicer or servicers you engage, will have a huge impact on your success. As with any relationship, the key is communication. I suggest determining on the front-end the best way to communicate with your servicer.
Some servicers have excellent on-line portals that allow you to keep track of your loan portfolio and where your loans stand at any given point in time. Others prefer email communication especially when getting direction on how to proceed on the handling of an asset.
My last piece of advice is to treat your servicer professionally and with respect. Yes, you are the client, but you rely on them to keep your investments performing in line with your expectations. Take advantage of all opportunities to get to know your servicer. Meet them face-to-face at industry trade shows such as NoteExpo 2016. The vetting process may not seem important but I can tell you from years of experience, having a good working relationship with your servicer(s) will make your life much easier and less stressful.
What is in store for NPL’s in 2016?
by Eddie Speed
The sale of non-performing notes set a record breaking year in 2015. So it’s no surprise that the biggest question we have received at our 3-day trainings this year is: What does 2016 look like?
Well if January is any indicator, which we think it is, it will be another record year but not so big as to over-heat the market.
So far we know this:
Fannie Mae made the first sale announcement of the year. Their first sale will be $1.35 Billion in NPL’s. This is just higher than their previous record sale in November 2015 ($1.24 Billion).
Freddie Mac followed up shortly after that with a $1.6 Billion dollar sale. This is also a record high sale number for them!
So, right now it looks like 2015 $18 Billion in sales will be eclipsed by about another $2-$3 Billion. So look for about $21 Billion in NPL’s sold this year.
Again, they won’t overheat the market so those in the NPL business will have a long run at super-inventory levels.
Get started now!
In the Spotlight
The month’s “In The Spotlight” column takes a somewhat different approach. This month is Super Bowl month and here in Dallas it has been a long-time, 20 years to be exact, since our Cowboys last appeared and won a Super Bowl title. So suffice it to say we tend to “live-in-the-past.” So this time of year names like Aikman, Emmitt, Lilly and Pearson are tossed about. However one name still stands above them all and that is Roger Staubach.
A former star quarterback for the Dallas Cowboys—his teams reached the Super Bowl five times, winning twice, Staubach transitioned from pro football to a successful career in commercial real estate. I recently read an interview with Staubach in the January issue of D Magazine. Following is an excerpt from the interview that I feel is worth sharing:
What’s the toughest challenge you’ve had to overcome? I’ve always believed you have to have the right people in the right places, but the challenge is getting the right people in the right places working together.
What do you enjoy most about what you do? Interacting with the people in our company as well as our customers. It’s fun putting good people together. Our business is a service business. I really enjoy bringing the people in our company together with our prospective clients.
What’s the best business advice you can offer? It takes a lot of unspectacular preparation to get spectacular results. You have to work hard at what you do. I always like that saying that “there are no traffic jams on the extra mile.”
Capital Markets Update
PREPARING FOR AN OPPORTUNITY OR AN EMERGENCY?
by Ryan Parson
Beyond the Emergency Fund
The traditional planning world advises that you have a minimum of three, and up to twelve months’ living expenses set aside in a savings or money market account for unexpected expenses. Planners usually call this the “Emergency Fund.”
There’s no denying that every family should have ready money. You don’t know if or when you’ll need it, but you have to be ready in the event of things like significant medical expenses or a temporary loss of income.
The Advantages of Moving Quickly via an Opportunity Fund
While having an emergency fund certainly makes sense, the concept begs a bigger question…
Exactly how much cash should you have lying around – and for what purpose?
What you don’t hear about often enough is the advantage of an “Opportunity Fund” that is ready for an appropriate investment opportunity.
Both types of reserve funds require cash, but they serve very different purposes.
An Emergency Fund allows you to be ‘reactive’ to life’s occasional challenges.
An Opportunity Fund allows you to be ‘proactive’ with life’s many opportunities. Emergency cash can be thus both Protective AND Providential.
Of course it’s true there’s a downside to idle dollars, but many successful investors still set aside extra capital to move quickly.
Could Your Cash Reserves Do Double Duty?
Ask yourself why you’re holding a cash reserve in the first place? The answer has to do with being prepared for unforeseen events. Are these reserves strictly for reactive responses, or could your cash reserves do double duty as your Opportunity Fund?
When your next investment opportunity presents itself, will you be prepared? Put differently, will you, as an active passive investor, be prepared to handle not just unforeseen expenses but also be ready to move quickly and decisively to build wealth and passive cash flow when that opportunity appears?
Here’s to being prepared,
Quote of the Month
“Great things are done by a series of small things brought together.” – Vincent Van Gogh