The Power of Perseverance: Navigating the Chaos of an Early-Stage Business with BIFI CEO Jamie Bateman

00:00:00
In this episode, I was interviewed by my friend Justin Bogard, and we're focused on the topic of entrepreneurship and specifically bi fi loan servicing, which is my loan servicing company. And we dive into some of the pain points with regard to entrepreneurship and how it can look beautiful from the outside and pretty messy on the inside side. And we don't shy away from talking about some of the challenges that Bifi has had to overcome and some of the personal challenges that I've had to overcome with regard to creating a servicing company or creating any company from scratch. And we get into partnerships and the challenges that can come with that and the ups and downs and the pros and cons of different ownership structures, et cetera. About ten minutes in, I read off this amazing quote from a really successful entrepreneur that I think is illuminating with regard to the true picture of entrepreneurship.

00:01:05
And then toward the end, we talk a lot about the future of Bifi and some of the recent progress we've made with regard to resources and why I'm really optimistic about Bifi loan servicing and the service that we're going to be able to continue to provide to our clients, lenders and node investors. So this was a fun chat. Again, ups and downs, we keep it real. I think it's a great example of adversity to From Adversity to Abundance Podcast, focused on the last three years of from creation of Bifi loan servicing to some low points and rebounding and how we're able to do that, and then to a new partnership that I can't get into the details about just yet, but it's really exciting. And the new partner brings a lot of resources from a financial standpoint and structure and process standpoint.

00:02:02
So really excited about the From Adversity to Abundance Podcast that Bifi is looking toward in 2024. I hope you enjoy it.

00:02:12
Welcome to the from adversity to From Adversity to Abundance Podcast podcast. Are you an entrepreneur or aspiring entrepreneur? Then this show is for you. Each week we bring you impactful stories of real people who have overcome painful human adversity to create a life of From Adversity to Abundance Podcast. A life of From Adversity to Abundance Podcast.

00:02:34
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00:03:05
Mr. Jamie Bateman, welcome to the beat the bank podcast. Justin, thank you so much for having me, man. This is going to be fun. You're welcome.

00:03:14
I'll send you an invoice after we're done. Absolutely.

00:03:21
And I'll send it back with a link to my podcast you were on with slightly more of a fee on top of that. Exactly. Upcharge. All right, Jamie, thanks again for being on the show. This is, I think, your second time on the be the eight podcast, and it's been a few years, but, yeah, thanks for being on again.

00:03:44
We know each other kind of through the note investing circle here, and it's not a very big circle, so a lot of us know each other. But you don't live where I am. I'm in Indiana. So you are outside of Baltimore, Maryland. So you must be an Orioles fan.

00:04:00
I am an Orioles fan. I follow the Ravens a little bit more, although that stings right now. Yeah. And the Orioles, of course, were just sold last week, so that was interesting. But they were sold.

00:04:14
Yeah. The ownership changed. I don't know a lot about it. That was a big news in Oriole land. But, yeah, I grew up going to Memorial Stadium, and then Camden Yards was obviously one of the nicer parks when it was built, and I think it still is one of the nicer ones.

00:04:33
It looks pretty cool of mine went out there and he said, that's a pretty awesome place to go watch a game. I thought the Orioles. I didn't know about the Orioles ownership changing hands, so I have to read about that because I kind of follow baseball. The Al east is kind of the teams that I watch because I'm a Red Sox fan, just because there's not really any american league good teams around where I'm at. So the White Sox are the kind of closest where I'm at.

00:04:54
But I got the Cubs, the White Sox, and the Reds. And a lot of people like the Cardinals because they're close by, too. We got Detroit that's up there just a little bit. A few more hours. Yeah.

00:05:05
Midwest is kind of cool. You can hit a lot of different baseball parks right here, for sure. We're not here to talk about, so. All right, so you're in Maryland. You started a servicing company a few years ago, and you also, before that, you kind of were, I'm assuming, a landlord turned note investor.

00:05:22
Yeah, absolutely. So landlord turned lien lord, if you will. But my favorite word, one caveat, though, with that is that it's not like I abandoned all our rentals and then I just went 100% into notes. I actually kind of see them working hand in hand. In fact, through my note investing, we've acquired one other single family rental that's in Florida.

00:05:47
So to me, they work well together and they're. Note investing is just another strategy that's really in that larger real estate investing asset class. Well, it's disappointing to hear you say that because I thought you would just dog on rentals. Well, that's all the time we have for today. Thanks for being.

00:06:06
Yeah. All right, I guess. Man, this invoice is growing by the minute. Yeah. Look, the truth is every asset class has pros and cons, and I know we're not going to dive into all those today, but I love notes.

00:06:22
I love note investing. The passive side of it is huge. But our rentals have been an important part of my own portfolio as well, and continue to be. Yeah, I can see rentals being pretty profitable, and it depends on the situation. I always thought the rentals, at least around here in Indianapolis area where I live, the more expensive ones, seem to thrive better than the lower end ones just because there's so much turnover and damage and stuff done to the lower end ones.

00:06:52
So I think if you had a portfolio of higher valued assets, it probably would pan off a little bit better. But notes fits my eye, so to speak, and I just stay in that lane and I'm pretty content with it. So you have a couple of funds that you've managed in the past, right? Yeah, that's right. Currently, today, currently still, we have one fund that's winding down.

00:07:14
It's a three year fund, non performing note fund. And that one has been a lot of work, but also has been profitable. And that one had a defined three year term. So it's winding down this year. And then the other fund is a reperforming performing note fund that's a little more predictable, a little more boring, if you will.

00:07:36
It provides the passive investor more of a predictable, passive monthly return. But, yeah, both have been good. Awesome. So that is the Labrador lending side. For those of you that aren't watching the video of this, we are streaming this on our YouTube channel for american note buyers.

00:07:56
So you can check out Jamie's little tag there. So, Labrador lending, how'd you come up? The name? I mean, so it's actually, in hindsight, a little bit misleading because we don't do actual lending, and that's probably a topic for another episode, but we don't really originate loans. We have done a couple, but that's not the we buy existing debt like you.

00:08:21
Um, but Labrador lending. We live on Labrador Lane. My kids lab actually have an entity that's called Labrador properties that has rentals in it as well. And my kids were the Labradors when they were in elementary school, which still surprises me that elementary schools have mascots now, but that Labrador lending just made sense. That's cool.

00:08:49
I wasn't expecting that to be the street you live on. Pretty cool. When did you start Bifi loan servicing? Technically, it was January 4, 2021. And as we're recording this tomorrow morning, I have a podcast episode coming out on the from adversity to From Adversity to Abundance Podcast podcast that goes into depth from my perspective, but more so from Shantay Duffy's perspective, and we can get into who she is.

00:09:18
She's the director of operations at Bifi. To answer your question, a little over three years ago, January 4, 2021. But we'd put in a good amount of work prior to actually creating the LLC. So probably three and a half years ago now, we were kind of planning things. What in the hell made you decide to start a loan servicing company?

00:09:41
I ask myself that every day. No, look, I try to keep it real, and things, there have been ups and downs, for sure, and tons of lessons I've learned, and I think we'll touch on a couple of those.

00:09:55
You hang around Chris, 70, too much, and he pushes you into to get uncomfortable. Chris is a fellow note investor and peer of ours, and he's in some ways been a mentor of mine as well. And Chris and I were just frustrated with the service that we were, the level of service we were being provided as note investors, fund managers from other servicing companies. And that's not to say that other servicers are all terrible and they do nothing. Well, that's not it at all.

00:10:33
But we thought that we could have a little bit, maybe a little more control of the servicing element as far as our own loans go, but primarily to provide investors with an investor first servicing company that really prided itself on communication and properly managing the servicing part of a loan. So it was out of frustration with other servicers, quite honestly. But for the record, I still use two other servicers today. I've used five total, and so I know they all have pros and cons. No perfect servicers out there, but that was the impetus behind bi fi loan.

00:11:20
So my questions are going to be more business related questions here. Sure. Love it. What is the biggest hurdle when you're setting up a loan servicing company that you have to go through? Because I'm sure there's a bunch of red tape that me, as a consumer of a loan servicing company, doesn't know about.

00:11:38
Yeah.

00:11:42
If you don't mind. I'm going to read this quote. I have a quote here and then I'm going to answer your question. Okay, so this is from. It was published in Forbes and it's a guy who I follow on Twitter.

00:11:53
His name is Brent. Be sure. I'm not sure how you say it, but his quote was, he's the CEO of permanent equity. You can look him up. His quote is, all businesses are loosely functioning disasters, and some are profitable despite it.

00:12:08
He said, at 30,000ft, the world is beautiful and orderly. On the ground, it's chaotic and confusing. Nothing ever goes to plan. Surprises lurk around every corner. Things are constantly breaking.

00:12:20
Someone is always upset. Mistakes are made daily. Expecting anything less is out of touch with reality. Now, with that backdrop, to me, that's actually been very comforting to know that, look, no company has it all figured out. There's no perfect organization.

00:12:41
Creating a business is all about solving problems. And the day you're not solving problems or facing problems, then you're really not adding value. So what are you bringing to the marketplace? Starting a servicing company in particular has. You're absolutely right, tons of hurdles, especially if you're dealing in the owner occupied space.

00:13:01
That's something that's important to point out because there are servicers who primarily or only focus on hard money loans, investment property, business purpose loans. Right. So private money loans, hard money loans where the property is not occupied by the owner. That type of servicing company comes with a lot fewer hurdles when it comes to state licensing. Okay, so the licensing piece, and quite honestly, this is a mistake that we made.

00:13:33
I would do it differently if I had to start one from scratch again. But the licensing piece is a huge hurdle. It's very cumbersome, very expensive, very time consuming, very state dependent. So lots of nuance there that we're not going to be able to cover entirely. Quite honestly, we don't want to put your listener to sleep.

00:13:54
But that is a big piece of. That's one of the major hurdles in the beginning when you're doing owner occupied loan servicing. So is it a process for getting a license in a certain state? Like you file documentation to say, hey, I'm a loan servicing company and I want to get a license. And then you probably have to answer many questions and provide certain things and then somebody has to approve it.

00:14:17
And do you get audited? Is that kind of a little bit how it works? It is a little bit how it works. This is where I start to sound like an attorney and I say, it depends. You don't have to go into a very specific, I'm just trying to get like the 30,000 foot view of like how does the process work from start to finish and how long does it typically take?

00:14:36
Yeah, the problem, I'm not dodging the question. I completely, it's a critical question. Right. But if you're applying for a servicing license in Texas versus New York, entirely different. Entirely different processes.

00:14:54
But in general, some states do require you to have a full gap audited financials. So where you do actually have to pay for an audit and year end audit. In fact, we're going through our 2023 year end audit right now to reapply and to renew and apply for additional state licenses right now. But 30,000 foot view, you should consider at least, I'd say two to three months before you're going to get most licenses back. And there also are net worth requirements.

00:15:28
And when I say that, that's the business, so not my net worth, but the business's equity. Right. So it really does vary considerably per state, though. So those are some of the hurdles is having audited financials and then also net worth requirement for the business itself, two or three months. Actually, it sounds kind of quick, just in relative terms in our business, considering how long things can take and stuff, especially when you, I would agree closures, but yeah, that doesn't seem too bad at all.

00:15:57
But yeah, I'm sure the monetary investment can be pretty steep too, to get those licenses. And again, I'm answering really from one state. So if you're working on many states, it's going to take a lot more time. So it might take six months just because you're not only doing that in a vacuum, but that's definitely one of the initial hurdles. And I referred to a lesson learned, and this is just my own takeaway, is from more of a business standpoint, is one of the tips I would give people, whether you're starting a loan servicing company or any business that's kind of service related, is make sure you have the demand there initially before you set up, before you invest a lot into licenses, and then you're signing up for annual renewals and you're committing yourself to higher expenses.

00:16:48
So I would have scaled, if I had to start over, I would get fewer licenses initially, maybe five to ten state states, and then make sure we have the demand, the number of loans there to service those and then slowly acquire additional licenses. The hard part is some people, some note investors and lenders really want to work with just one servicer. So they want one solution. So that can be tricky when we don't service every state. Currently we have 25 licenses and growing pretty good.

00:17:24
Yeah. So when you're setting up a loan servicing company and going through the red tape and you're learning about the state requirements and you're getting the licenses, and there's also federal requirements too, as it pertains to notifying and disclosing to the borrower of a change of service or a change of ownership of that note as well. So how do you learn about those things? Are you like reaching out to other people to say, hey, what specific things are going on? Or an attorney says like, hey, here's what you got to go through and walk this way?

00:17:56
Yeah, to be perfectly honest, it's where I do rely pretty heavily on my team and the CFPB guides a large part of those requirements. As far as the timeline that you referred to, hello and goodbye letters and Respa and CFPB are kind of the federal guidelines. Your listener can google those. We do have training for anyone who's going to be reaching out to borrowers directly to make sure that we're following federal guidelines. We're not texting people at three in the morning, hey, you got to pay your mortgage.

00:18:30
Or there are federal regulations as far as what is too frequent, what's considered harassment or something like that. But that is the primary function of, in my mind, the two functions that a loan servicing company provides are one is collecting payment and then dispersing those funds to the lender, but two, making sure that everyone is compliant. So one of the reasons to use a loan servicer and not self service your own loan is that you alluded to foreclosure. We can produce pace history that is backed up and can be presented in court to help with that foreclosure process. But yeah, to be perfectly honest, I've been more involved in the state processes as far as state licensing because those are things, honestly that I need to sign off on as CEO, typically as an officer of the company, whereas I'm not personally calling and interacting with borrowers.

00:19:35
So I'm not personally involved in the day to day of the more federal related requirements. Very cool. So a lot of red tape. We just want to make that for sure. So this world that we're in, in the note investing world, the note investing community, it's not a very big community.

00:19:57
And like I said in the opening thing when you got on, we all kind of know each other and then you also know rumors and you also hear things out there and kind of wonder what's true and what's not. And obviously with a rumor, there's three sides to every story. There's one side, there's the other side, then there's the stuff in the middle. That's probably the accurate stuff. Sure.

00:20:15
So, like any other company that starts up or any other fund that's out there that we know, there's always things that you hear about struggles. And so your company, Bifi, is one of those companies that have had rumors out there that they've had some struggles in there, and you've actually went out and kind of got in front of it and mentioned through a blast, messaging through people that are your clients, to say, hey, here's some transitions that we're going through, here's some changes that are happening and blah, blah. I just kind of wanted to give you the floor to kind of walk through when you start up a business, how it struggled, and then kind of how you kind of shifted your focus back towards other things and got on the right track and the path is a lot more clear.

00:20:59
I had heard that you learn more through adversity than success. So I wanted to learn a lot. So we created a bunch of adversity. No, I'm kidding. But look, the reality is we've had a lot of ups and downs.

00:21:16
In hindsight, several of the downs could have been prevented. And again, I've walked away with a bunch of, I haven't walked away. I'm continuing to learn, but looking back, I've gained a lot of knowledge with regard to lessons learned.

00:21:35
I actually would point your listener to the episode. It's our 100th episode because we go into a lot of detail on the from adversity to From Adversity to Abundance Podcast podcast. And I just think if anyone's interested in more of the true behind the scenes details of bi fi, Shantay gives a really good, it's from her perspective mostly. And Shantay is our director of operations, like I alluded to, and she's the servicing guru in our mean, we have a team as. So for further detail, check that.

00:22:10
I mean, the first year, just to kind of quickly hit the timeline and some maybe low lights and highlights during 2021. Chris 70, Shantay Duffy and I were putting together our plan and getting licenses. So when I say our plan, I mean sops, how are we going to handle foreclosures? What are we going to charge for this? What are the monthly servicing fees?

00:22:36
What are the whole fee schedule? What are we offering? Right. So what services actually are we offering? Because you think oh, every servicer has the same what's your value add?

00:22:48
How does it make what's our value add? 100%.

00:22:53
Why would someone choose us? Right. And that's where what we did was. Chris and I are very active note investors. Chris had already run at this time probably six, maybe seven note funds when we were three years know.

00:23:11
So not only the two of us, Shantay also is an active note investor, but we also had meetings with active investors to find out what were their pain points with other servicers. And ultimately, the big thing was communication. That's probably the main piece. But so for 2021, we were putting together those processes and kind of just the overall plan, as well as obtaining licenses. That was really kind of just laying the groundwork for the company.

00:23:45
And then in late so August of 2021, Chris and I boarded our own loans at Bifi. And when I say our own loans, those were funds that we were managing, funds that we ran or still run, as well as just owned by our entities. So we wanted to make sure, yes, these were live loans, and these are real. These are not play money kind of thing. Right.

00:24:09
Yeah. But we wanted to make sure we would feel the pain first if there was to be pain. Right. And so we did that for a couple of months, September and October. Really the two months that we serviced our own loans.

00:24:23
And then we felt comfortable right after, I would say, early November of 2021 is when we kind of opened up the doors to third party servicing. So servicing loans for other note investors like yourself. And so I would say we don't have too much time. But over the next, say, year, almost year, ten to twelve months, things were going pretty well at Bifi. We were growing slowly growing.

00:24:59
You don't just hit the ground running and make a million dollars a year out of the gate. Right. So we weren't profitable, and most companies aren't. No, most are not. Yeah.

00:25:13
For at least three to five years. Yeah. And we knew that was to be expected. Right.

00:25:23
Just being totally honest with you, things took a turn for the worse in late 2022. And what happened? Like you said, there's other perspectives, for sure, but from my perspective, what was going on was we put too much on Shantay's plate. Chris and I did. And when I say expected, yes, we put a lot of work into this ourselves and put a lot of money into it, but we kind of expected that she could take the ball and run with it.

00:25:54
Now, before anyone hears that she's not able to take the ball and run with it. That's not what I'm saying. What I'm saying is creating a servicing company from scratch. We bought office space in New Jersey. That was a big deal.

00:26:12
So there were a lot of pieces that Shantay had to deal with that Chris and I either weren't dealing with because we were remote, or we didn't have the time, because we were dealing with our funds and everything else, and that she had never dealt with before. So creating processes, it's one thing. She worked at Madison management for about nine years, and she rose through the ranks, and she was very well respected and gained a ton of knowledge. But she didn't start Madison management. She didn't start a company there.

00:26:41
Right? She'd never been a landlord. So all of a sudden, the HVAC goes out in our office space, or she has to collect rent from the tenant next door because we bought two office spaces. Well, these are not things she's ever done. So there were a lot of hurdles.

00:27:00
Those are just a couple of examples, a lot of challenges that Shantay specifically had never dealt with. And quite frankly, in hindsight, it was probably, I don't want to say unfair, but just unrealistic of Chris and me to expect that this could just take off and be successful out of the gate like that. So things somewhat devolved. Honestly, what we tried to do was we brought in someone, and I'll just fast forward here, but we hired someone to be more of the business and accounting and sort of model, role model for Shantay from a business standpoint, almost like a mentor and a guide. And Shantay could still.

00:27:44
Then the thought was that we would free her up to focus on loan servicing, which is really what she does best. I mean, she's an absolute beast when it comes to servicing loans. Unfortunately, that did not go well. We didn't hire the right person, quite honestly, and coming out of into 2023, that's when I would say Bifi hit rock bottom. Shante had actually left the company.

00:28:12
And she talks about this on my. Yes, she had some things going on personally in her own know that she had to get right. And it's one of the risks you run when you have a small company. If someone leaves, say, let's just say FCI, they're a bigger servicing company. If one of their employees leaves tomorrow for six months, you might not notice as a client.

00:28:36
Right. Or if you do, it's a little blip. When Shantay left, it was a big deal. It did take us quite a bit of time to dig out of the hole that was created in the beginning part of 2023. And I'm happy to say we've rebounded and we're making a ton of progress.

00:28:57
I'm super excited about the future of Bifi, but the reality is we've had some low points. For sure that was your adversity that you didn't intend to happen, but. That's right. Yes. Well, that's understandable.

00:29:12
And like we mentioned before, anybody that has a company or started a company, there are things that you can't foresee happening. And you got to be able to be malleable. You got to be able to flex and bend and pivot and move and change direction if you need to. And it definitely sounds like we've had a lot of offline conversations, so I know a little bit more of what you've been through than what we're explaining here. But this is a short podcast, so we're just trying to give you the high level of the struggle and then how you've redefined everything and kind of moving forward today, fast forward into today.

00:29:44
Obviously, you are a servicing company, and you do service many loans, and we still have loans with you and stuff. Yeah. Well, let me just say that the ownership structure has changed in the last few months, and Chris is no longer an owner of bi Fi. Chris, 70. He is still a client of bi Fi's.

00:30:07
And Chris and I are on great terms. We're going to be on your show here in a couple of days. Valentine's Day. This will be released after Valentine's Day. But, yeah, on Valentine's Day, we'll be doing a special broadcast.

00:30:17
So look back for that February 14 broadcast and see if Chris and I got along or not. But we still communicate, and we're still in touch on a lot of different things. And what he decided was that he had to focus is huge, right. And in business in general. And I think he'd taken on a bit too much, to be honest, and I think he would admit that.

00:30:40
And so he had to focus on what he had going on with his regulation a and his big fund. And so he left bi fi in August. And then there are some more recent changes that have been very positive from a resource standpoint, in late December in particular, and some of that I can't get into, but I'm really excited about the future and some of the resources and support that have been brought to Bifi already and are on the horizon. So I think that's just going to really provide a higher level of service for our clients. I'll be perfectly honest, I was looking like the dumb idiot who was just too stubborn to walk away and didn't want to admit defeat there for a little bit, it wasn't looking good.

00:31:29
Just being real. I'm not saying I'm not ready to spike the football, but it's looking a lot better than it was in, say, August, September, October of 2023. Well, you're an entrepreneur at heart, and if it's not in your or any entrepreneur's heart to give up, and because you didn't give up, you can see the light in the tunnel, so to speak, or you're really close to being there, or you're already there and you're getting ready to break through. It's really cool what you've been through. I mean, obviously it wasn't fun going through the low points, but all of us out there, we think, especially the younger generation that comes through and starts to build these note businesses or just businesses in our note industry, and it kind of looks easier.

00:32:16
We think we know the way to do it, and it's really a blend of knowing what the experienced folks out there have been doing, how they started their companies, and a blend of what technology is helping today versus what they didn't have back then. All those things help out. So it is a struggle. And if anybody out there thinks that anybody that's started a fund or started a company in the note space, that it's been easy and they've hit 100% perfect dart throws every single time, it's absolutely not the case at all. Every single person we could put on this podcast, and we can interview them, and they would all talk about what you have talked about today and some of the mistakes and struggles that they've been through and how they overcame it.

00:32:55
But it's how you overcome it and how you pick yourself up. Right. And move forward. Absolutely. And does it get old talking about, I don't love to focus on the negative, right.

00:33:05
But at the same time, one of the things I want to make clear is I am not walking away from any. If we messed up the servicing on a loan back a year ago, I'm owning that right. I'm not walking away from that. We're facing it head on, and we're cleaning up the issues. And that's why we've also hired someone to come on as our business development lead.

00:33:26
And one of the first things he did was set up a call with any investor, any current client who wanted to talk to him so that we could understand the pain points and address them as opposed to just pretend everything's fine or ignore the issues because you care. Yeah, absolutely, I do. And my goal is to just continue to provide a high level of service and continue to improve the level of service that we're providing. And again, these recent changes, which I'll be able to speak about more in the future, I'm thrilled about, we're able to lean on a big partner who is providing a lot of the day to day support. Meaning when I say support, I mean it.

00:34:14
Support, HR support, accounting support, the business side, as opposed to the loan servicing side that we know really well. And so it's been able to provide Shantay and me a lot of clarity and focus on the investor to be able to provide that higher level of service. So Bi Fi has a bright future, for sure. That's awesome, Jamie. You're awesome.

00:34:37
Thanks for being on the podcast today. This is episode number four of season six on the beat the bank podcast. Jamie Bateman of Bi Fi loan servicing and Labrador lending. As we know, that's the street that he kind of lives on there. That's right.

00:34:49
Thanks a lot, man, for being on the show today. Can't wait to do the broadcast together here in a few days as we're recording this. So we will catch you all on the next episode. Thanks, Jamie. See you.

00:34:58
Thanks, Justin. You. Thank you for spending your most valuable resource with us, your time. If you like the show, please share it with your friends and fellow podcast listeners. One entrepreneur at a time.

00:35:11
We can change the world. See you next time. Our.