Turning Adversity into Opportunity: Navigating Compliance in Mortgage Note Investing

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. Welcome, everyone. Thanks for joining us. 

Speaker 2

Happy Wednesday. 

Speaker 1

We are excited for our next note investing, mentorship webinar. And we've had a couple of these already, and they've gone well. And we're excited to put a Halloween spin on this compliance one zero one topic, what every note investor needs to know, to help stay away from risky and scary loans and laws. We'll put it that way. 

Speaker 2

More some things to pay attention to and to keep in mind and just to, you know, be able to gain a little bit more knowledge during your investing journey. 

Speaker 1

Absolutely. And we will be checking the q and a. I think I saw there was a question already, so I'll check that. 

Speaker 3

It was a hello. I did see it. 

Speaker 1

Got it. Hello back. Alright. So like we said, but we didn't say, but I'm Jamie Bateman. This is Shante Duffy joining me. We are your hosts. We are gonna cover compliance one zero one, what every note investor needs to know, and this is part of our mentorship series, which we've been doing. Overall, what we offer with mentorship is one on one coaching, consulting, mentorship on an as needed basis. It's very much tailored to your needs as an investor and really takes into consideration your experience, your strengths, and your goals. And, we kind of match all that up to mash all that up together and come up with a a plan and work with you to get get to those goals. Shontay, anything else to weigh in there? 

Speaker 2

We're here to help you. Hands on, we've had a I've had a few different mentees who, the questions range from everything and anything, from some basic really quick questions. We're here to help all of you guys with anything that you need. So no questions too silly. We spend the time. We want you guys to learn as well. 

Speaker 1

Yep. And we learn a lot as well. 

Speaker 2

That's true. 

Speaker 1

Next slide. All about me. This is my old picture, which is slightly dishonest at this point. Makes me dishonest. This is preteenagers, pre COVID, pre gray. So but, yeah, combat veteran, arm a former army officer. I don't know why we care that I'm a former all American lacrosse player, but somewhere I threw that in there. We had to add it. Experienced real estate investor, mostly single family. The residential space is really my wheelhouse. We've I've done some commercial type, investing more as a passive investor, but also have gotten into some land land notes and land investing. So along the way, just keep adding, tools to my tool belt. And, over the last six years, I guess, six plus years, six and a half, mortgage note investing has really been my primary professional focus. So NPLs, performing loans, reperforming loans, mostly firsts. We've done some a handful of seconds, and like I said, mostly residential paper. And, yeah, bankruptcy, foreclosure, all that stuff. And, really just operate the one income fund, the integrity income fund at this point, and I also am the host of the from adversity to abundance podcast. 

Speaker 2

Yay. I'm not as interesting as you, Jamie. I don't. I wouldn't say that. I'm Shante Duffy. My background and what where most people know me from is from the loan servicing part of this industry. I've been in the servicing realm for about twelve years now. And I just like to gain knowledge, share knowledge, help investors with everything and anything that they need. I also enjoy learning myself. So what I'm currently doing is still on the servicing world of construction loans right now, but also moving into some loan originations. So I get to try some new fun stuff and gain more knowledge to also share with the rest of you guys. So I am super, super excited. That's me really in a nutshell work wise. And, of course, I have the most amazing son ever who drives me crazy. Yeah. I was 

Speaker 1

gonna say dancing. What you said the other day. 

Speaker 2

Oh, we love him. 

Speaker 3

But, yes Just kidding. 

Speaker 2

That's me. 

Speaker 1

Alright. So to be clear, and especially with a topic like compliance, we are not attorneys. Neither of us have been through law school as far as I know. And, should 

Speaker 3

have. 

Speaker 1

But none of nothing that we say tonight is should be taken as legal advice, legal guidance, anything official. We're not lawyers or financial advisers. So we're gonna be speaking from a per the perspective of this is what has worked for us. This is what has not worked for us. This is what we've seen in the industry. This is what we might do in your situation and some give you some resources, etcetera. And and, from that perspective, seek an expert attorney opinion if you really want the the ground the ground truth. 

Speaker 3

Always. 

Speaker 1

Alright. 

Speaker 2

Excellent. So we're gonna dive ahead into this and just kinda go from there. The importance of compliance. There's a few different reasons and of why compliance is worth as an investor. The first one, regulatory adherence. Investors are required to comply with federal, state, and local laws when it comes to their note investing, such as following CFPB rules and things like that. We'll get into that a little bit further. The risk management, compliance actually helps mitigate risks in lending practices. As lenders, you guys should have some knowledge and gain some knowledge in that as well. This also will ensure this also includes ensuring that documentation and fair lending practices and predatory lending is avoided and things like that. So there's no risk. It's all clean, covered together. Investor confidence is the next one. Following the compliance standards enhances your credibility, enhances your reputation in this space. As we all know and as I preach to everyone, this is an industry that is word-of-mouth more than anything. It's about who you can get in contact with, who you can network with, and that's essentially how all of us have grown. So it also boosts that confidence knowing that you are staying in compliant. And then, again, you get to be like us and share some information that you've learned as well. Consumer protection. This ensures that borrowers, you guys are the lenders, ensures that borrowers are treated fairly, and there's transparent. Everything that they're going through and dealing with and completing paperwork, everything has to be fair on both sides. Market stability and integrity. This just kind of contributes to the overall financial stability. It helps prevent any negative practices that could potentially lead to major market crashes such as what we saw back in two thousand eight's financial crisis. So those are the important spaces for, compliance. You have anything you wanna add, Jamie? 

Speaker 1

I think you covered it. 

Speaker 2

Awesome. Awesome. Alright. We'll jump to the next slide. Regulatory compliance. So there are some key regulations as well as some key agencies that everyone should be aware of. They do different things, so we should all be aware of. Some of the key agencies include the CFPB, which is the Consumer Financial Protection Bureau. This is what ensures that consumers are treated fairly, such as our borrowers are treated fairly and can access financial services without facing any discrimination and things like that. So CFPB, you can Google all this information as well, find out rules, regulations. They also give you template letters. They are awesome. They are should be your best friends from the servicing world that I come from. That's was, you know, almost like my part of one of my rule books and guidebooks to follow. But you guys can also familiar yourself familiarize yourself with that as well. Another agency is the Federal Housing Administration. Their role is to promote homeownership and ensuring that affordable housing options are available to all Americans. I'm strictly talking about loans here in the United States just in case. I had someone actually ask me the other day about something in another country, so I feel like I had to make that. 

Speaker 1

Yeah. And and also just to again, this focus the focus today, should be on owner is it gonna be an owner occupied debt? So just to be clear, we're not 

Speaker 3

Correct. 

Speaker 1

Really speaking about commercial paper. 

Speaker 2

No. I'm just kinda giving the broad overview just in case. 

Speaker 3

Yep. 

Speaker 2

The next one is the Federal Housing Finance Agency. Their role is to maintain an efficient housing finance system here. That's essentially their job. And then, of course, we have the SEC, which is the Securities and Exchange Commission, and they are responsible for regulating securities industry and protecting investors and promoting trust and integrity. That's kind of their role in their job. Questions were good? 

Speaker 1

Yeah. So no. That's good. And like Shanti said, this CFPB the servicers really really needs to know a lot about CFPB. Not that not that you don't as the investor, but a lot of this a lot of what you'll find is if you're using a licensed servicer, who who is is compliant and knows what they're doing, you should be okay in a lot of cases as far as borrower interaction. Not going too far down that path yet, but, and then the SEC, you'll come into, I know at least one person on on here, sir Clifford Jumper, may have a lot of experience in reading SEC docs, but you'll have, you'll come into contact with the SEC. The SEC becomes relevant specifically when you're talking about funds, and pooling money and passive investors, etcetera. So, that's really when that becomes more more relevant. But key regulations, Chante. 

Speaker 2

Alright. Key regulations. First one I we have up here is Truth in Lending Act, also known as TILA. Essentially, what that means is it's that the ownership of the notes, when you guys are buying and selling notes and you're drafting assignments and the launches to transfer over, borrowers need to be notified that their lender is changing. So for example, Jamie is lender a, and I'm gonna buy the note that Jamie has for sale. I become lender b, but our borrower needs to know that I'm now their lender and it's not Jamie. So, essentially, it's just letting it's a notice that is required to let borrowers know that their lender has changed. Pretty simple, pretty straightforward. The next one is the Real Estate Settlement Procedures Act, also known as RESPA. What this is, it's was a law that was created back in, I believe, it's the seventies, if I remember correctly, which protects the borrowers during our home buying process. It focuses on, like I said earlier, transparency, fairness, and the whole entire, you know, closing and settlement process of a loan. There are guidelines that are a little bit more strict and stringent into that. Your servicers are fully aware of the this regulation and what is required, for this as well. So, again, this is what protects our home buyers when they're buying our homes. 

Speaker 1

Yeah. And just quickly on, like, a lot of this, we're speaking in at a granular level too. So the TILA notice Ashanti was referring to is something that came out of the the TILA Act. Writ large, which is, I think, nineteen sixty eight is when that came out. And so, there are many other facets to TILA that we're not gonna dive into. We're trying to focus on what's relevant for you. Dodd Frank? 

Speaker 2

Dodd Frank. Essentially, Dodd Frank's goal the point of Dodd Frank is to improve the stability and, again, the transparency, of the financial system that we're working in and protecting our consumers and you guys as investors from any risky practices. That's kinda where the creation of the CFPB came from as well. So the goal it takes a little bit more a little further, a little bit more detailed where that covers the consumer side. It increased regulation. Again, it just keeps everything super transparent, includes mandatory reporting and things like that that are required. 

Speaker 1

Yep. And then we're throwing in here as as a kind of a newer player in this this conversation because there is an annual requirement, now for any any business, any LLC, any business, to file a a report. The first one is due at the end of this year, and I haven't done mine yet. We're gonna have 

Speaker 2

to get on that soon. 

Speaker 1

Got webinars instead. 

Speaker 2

Licensing. This is a very fun topic at times, but also stressful, and it doesn't matter what license we're actually talking about. Yeah. Licenses are required for just the general. We need to ensure that you are in compliant with state and or federal regulations, which then leads to the fact that there are license that are create licenses that are created to ensure that we're in compliance. Right? So we kinda outlined the two most popular that we kinda see with being lenders and brokers kind of thing. So there's a mortgage And 

Speaker 1

Go ahead. Sorry. But when we say lenders, we're including note investors, so it doesn't always. We're taking this from the note investor standpoint. So the lender license may apply here. And when Shante says lender, a lot of times, we're referring to a note buyer Note investor. Just to be clear. 

Speaker 2

We're gonna have to make, like, a little glossary. So there is a mortgage broker license. This license is required for anybody who's facilitating or originating transactions, essentially, brokering those transactions in the beginning. I don't see many note investors needing a broker license for what we're doing. Mhmm. But it is there. I have seen a few of them, and I've recently been introduced to a whole bunch of new ones. So I felt like that was important to at least share. Then there are mortgage lender licenses. These are what we see a little bit more well, way more often. This is for us, no investors who either originate, buy, sell, doesn't matter, notes. There are specific states that require you to be licensed in order to be a lender and own a note in a specific state. So for example, Georgia. 

Speaker 1

That's a good one. 

Speaker 2

It's the one that I run away from. Georgia does require lenders. I and there are Georgia requires lenders to be licensed as lenders in the state of Georgia. 

Speaker 3

Mhmm. 

Speaker 2

Now there are exceptions and to each rule, there's limitations. 

Speaker 1

Yeah. 

Speaker 2

I tell everybody to just double check. Well, when we're gonna get 

Speaker 1

there what 

Speaker 2

the NMLS requires. But Yeah. When you're investing in certain states, also check as to if that state that you're looking to buy in, if you're required to be licensed or not. 

Speaker 1

Yeah. And so in some ways, quite honestly, I hate to say it, but this the the this presentation may be a little bit unsatisfying for people because it it goes down the path of, you know, it depends. Right? And so we're gonna give you a lot of resources and a lot of information that you may want to follow-up on. This is a great example because Georgia Georgia lender license, it depends what attorney you speak with, to be honest with you. So you can go into the NMLS, read that it like Shante said, the the state does require a lender license for you to be a mortgage note investor to buy that that debt. I don't know very many people who note investors who have a lender license. There are there are some. I've obtained mine previously, but it's expensive. And and, you know, and you've got to, it, it's there's work involved, and it's expensive to maintain. I think it was nine hundred dollars just for the license, not to mention the surety bond, etcetera. And you've gotta qualify for that as well. So if you're if you're buying one note in Georgia, is that worth it? Probably not. Right? So that's not me saying do to ignore the the law. I'm just saying some of this, there's a lot of nuance to. And, you know, it's also it also comes down to, k. This is what I'm reading on the NMLS and the state regulation, but how does the, how does the state actually execute? You know? Are people actually getting in trouble for this? Like so there's, you know, you you 

Speaker 2

I would air the side of caution of that question. And the only reason being is that I have worked with investors who were talking about lender licenses, but I know in the state of Illinois, you need to be registered as a debt buyer. 

Speaker 1

Mhmm. Yeah. 

Speaker 2

There is a difference. So 

Speaker 1

There I'm not at all saying ignore ignore the laws or the complaisance compliance requirements, excuse me, and be complacent. But, you know, there there you'll get different answers from different attorneys, and then there's also the business decision at how much risk you're willing to to take on. But, yeah, the Georgia is a great example for a state that does require, for the letter of the law, a lender license to buy mortgage debt. State variations, Shante? 

Speaker 2

So the one most, in my opinion, irritating part about licensing is that no state there it's not a universal thing. It's every state is different. So Georgia is gonna require me to be licensed as a lender, but Illinois is gonna require me to just be registered as a debt buyer. 

Speaker 3

Yeah. 

Speaker 2

So there are differences, which is why I always tell I tell everybody, rule of thumb, always check the NMLS before you buy as, like, part of your, you know, buy box that you're putting together. And when you are going when you purchase your note and you need to have it serviced, please make sure that your servicer is licensed in the state that the property is in. 

Speaker 1

That's exactly 

Speaker 2

right. Say that any more than Barely. I already have. 

Speaker 1

Yeah. 

Speaker 2

It is so important because servicers as well have regulations that these same regulations that they do have to follow, but there's also servicing licenses that no US investors don't need. But us in the servicing world, we do. 

Speaker 1

Well, you and I very well know. The the the the regulations and compliance, burden is much more onerous on a servicer than a a note investor. So and it's a critical piece. Please don't take this as me saying, oh, I have a licensed servicer, so I don't need to worry about any kind of licensing on my side. No. That's not what I'm saying. But if you have a are using a licensed servicer and you're not self servicing your loan, that significantly lowers your risk with regard to compliance. But take that a step further, which is what Shanti just said. Go to 

Speaker 3

the 

Speaker 1

NMLS, search your servicer's name. Right? Consumer access. Google NMLS consumer access. Brings up a a search engine. Type in your servicer's name. There are services out there servicing loans currently that do not have the proper servicing license in x state that they're servicing loans in. Might not wanna use that servicer. So, it gets extremely nuanced because they're you know, within the fifty states, there are many, many different licenses and many different interpretations for each license. So, it's not a it's not a cop out. It's just, that's the reality of it. Truth. It's a lot to get If 

Speaker 2

you're ever unsure, I always tell people as well when you're looking at the NMLS, reading it and reading the requirements and if you need it can also be confusing. I know I've struggled in certain states reading certain requirements. You also can call that specific state. It has their contact information. You can call and and get someone on a live phone and ask specific questions and say, I'm a note investor. I'm buying in Georgia, but I'm only buying two notes. And I'm never gonna buy anything more. What do I need to do? And they will actually tell you what you have to do. So they are helpful. 

Speaker 1

If they know what you're talking about. But yeah. Yeah. Yeah. No. Good point. Alright. 

Speaker 2

Alright. Loan servicing. So to piggyback off of your licensed servicer, I see that we have a comment about a servicer who is not licensed in numerous states, but they are licensed in some. 

Speaker 1

I can't see the comments right now. 

Speaker 2

So the comment is, someone had noted that Allied is not licensed several states, which naturally would mean if you want a loan. If you have I know they're not licensed in, let's say, Michigan. Don't bring your Michigan loan to Allied. Find a servicer that can. Just as an example. 

Speaker 1

Yeah. Or or call Allied and ask them what maybe they have a maybe they've been given a legal opinion that for some reason they don't need that that license, but it's worth checking into. 

Speaker 2

So in regards to servicing, your servicer's jobs to handle your borrower payments that come in. So their job is to make sure that they're processing your borrower's monthly mortgage payments correctly. Their job is to also make sure that they're communicating to these borrowers about these payments that are due and owing and any late fees and any charges and things like that. Your service that's your servicer's job, not you as an investor. You should be able to see all of that and get that information as well from your servicer if you ever ever have a question. 

Speaker 1

Yeah. I would say that the servicer's main role from the investor standpoint is to collect borrower payments and disperse those funds to you. And then secondly, is to keep you compliant. Those are kinda the two big ones. To handle the money 

Speaker 2

most important. 

Speaker 1

Compliant. So yeah. In regards 

Speaker 2

to handling money, your servicer should be able to handle some escrow management for you as well. So there are escrow accounts for taxes and insurance, on these loans, and borrowers are responsible for paying not just their mortgage payment but their escrow payment. Your servicers can manage that and also disperse those funds to the escrowing agency. So if you have an insurance policy through State Farm, your borrower's insurance should be paid to State Farm by your servicer. 

Speaker 3

Mhmm. 

Speaker 2

Another portion of loan servicing compliance area is their delinquencies and foreclosures. This is part of their job to keep you in compliant with delinquent loans, nonperforming loans, loans that go into foreclosure. And it's not just these. It's loans that enter into bankruptcy as well. It's it's all loans, but, essentially, they when nonperforming loans are the rules are a little bit stricter. It's your servicer's job to adhere to all the rules and laws that they are supposed to be following in order to work out some sort of arrangement. 

Speaker 1

And just to chime in quickly, the many of you may know this, but bankruptcy is a federal thing, and and foreclosures are state level things. So you it gets very nuanced again very quickly. And just to throw in one of the things Shante taught me years ago, slapped me on the wrist for, I think, was is called dual tracking. I don't think we have that later slide, do we? 

Speaker 2

No. I completely forgot. I hate it. And I didn't really know what it was a hundred percent until I think it was actually you that brought 

Speaker 1

it to me, 

Speaker 2

and I was like, who's this? 

Speaker 1

I'll walk that fine line a little bit. But, basically, just as as an investor, you know, I talk about note investing sometimes in dealing with borrowers as similar to parenting where you essentially have carrots and sticks. You can't control their behavior, but you can influence it and incentivize certain behavior. And so you want your borrowers to make payments and to, you know, reinstate or, get caught up. Right? So you incentivize them, and with kind of carrots, we'll say. And then the threat of foreclosure is sort of the the stick. Right? So one of the things that Chantay kind of would make sure I was compliant with over the years was, not, in being involved with dual tracking. So what that really means is kinda doing both at the same time. So on one hand, you you can't on one hand say, oh, yeah. We're gonna work out a a trial payment plan with you and then probably do a modification. And then on the other hand, we're we're actually foreclosing at the same time. 

Speaker 2

Proceeding with the foreclosure. 

Speaker 1

Right. It's kinda one of the other 

Speaker 2

put the foreclosure on a hold if you want to entertain the loss mitigation. You cannot let the foreclosure timeline keep moving 

Speaker 3

when you 

Speaker 2

have when servicers have regulations that they have to follow. If they're gonna do some loss mitigation work with these borrowers, that takes time as well, and there's a timeline for that. So you can't have both going on at the same time. 

Speaker 1

Mhmm. 

Speaker 2

So you you gotta put one of them on hold. 

Speaker 1

Ask me how I know. So, yeah, anything else on this slide? 

Speaker 2

Nope. 

Speaker 1

1. Bankruptcy. 

Speaker 2

Good old bankruptcy. Okay. And the space that we're in has no investors. We buying, you know, usually single family, residential, owner occupied homes. 

Speaker 1

Or debt. 

Speaker 2

We usually see debt. Is debt correct? We usually see two types of bankruptcies. It's either a chapter seven or a chapter thirteen. A chapter seven is where a borrower is essentially try filing bankruptcy and liquidating all their debts and trying to just clear everything out. I seen this the most with bar borrowers who maybe have super high credit card debt, and they need to want they wanna get that discharged and things like that. There's certain debts that you cannot have discharged, just so everyone is aware. But we see those for borrowers who just kinda wanna walk away from things, clean slate, start over. Chapter seven, they're just kind of getting rid of everything, and no one's allowed to collect anymore. Do you have anything you wanna add to that before I jump in? 

Speaker 1

I think with the chapter seven, what you'll find is if you have a if you have a we're assuming you own the note already and then they've borrower files chapter seven, they need to determine whether they reaffirm the mortgage debt or not. So there's a reaffirmation agreement, if they do affirm the debt. So, basically, that means they wanna keep the house. They wanna keep the mortgage. They wanna keep paying on the mortgage. And, yeah, so that's really essentially it as far as chapter seven from from what from our perspective. Now chapter thirteens, we see all the time. 

Speaker 2

A lot. 

Speaker 1

A lot more often. Yeah. And and often times 

Speaker 2

grown to like 

Speaker 1

Yeah. Well, I mean, we'll buy loans in chapter thirteen or, the borrower file file for chapter thirteen while we own the debt. And so that's a reorganization of debt, so they're not it's not wiping everything out and starting over. And so, yeah, like Shante has here a potential for negotiation and restructuring terms. Some things that are nice are you're dealing with attorneys. I I don't know if that's always nice, but you're dealing with attorneys who, you know, are professional, and and and you get so much information, from the from the borrowers, about their financial situation and dealing with trustees and attorneys versus maybe a borrower who's gone dark. And, you know, it's I like them because once they're in chapter thirteen, they can't file for chapter thirteen again till later. We have some serial file filers, but it's kinda like, well, okay. What else are they gonna do at this point? So, yeah, something to quite honestly, early in my career, I was probably a little bit too scared of chapter thirteen or bankruptcy as a whole, And I would encourage newer note investors not to necessarily shy away from buying debt that's in chap in a chapter thirteen plan, but, you know, price it and research it appropriately. Shontay, anything to add? 

Speaker 2

I was gonna discuss a little bit of some of the impacts. We talked about the potential for negotiation and restructuring of, loan terms for the thirteen. But for a seven, things can go a different way. So on a chapter seven, they a borrower can essentially have an automatic stay on collection. So, basically, when a borrower files bankruptcy, all collection efforts have to stop. You can't call these we can't your servicers can't call. You can't call. You cannot call attempting to collect a debt. You cannot call them about their late payment. You're they are protected by this bank bankruptcy law. On the flip side to that, though, is that these borrowers, we don't actually have to talk to them. We get to talk to their attorneys. So it does kinda open some room. On the other side of the automatic stay, though, there's a relief from stay that us investors can file for and hope that the courts allow us to continue on with collection efforts despite this borrower being in bankruptcy. 

Speaker 1

Collection efforts including foreclosure. 

Speaker 2

Including foreclosure. Yeah. It's could be for different reasons. Serial filers is a big one that I think we I've seen the most often. I've seen some where people could prove that the property has no equity. So then it's worth less than the amount. There's different reasons, but it'll allow you to continue to move forward. It's whatever collection efforts you were working with. 

Speaker 1

Yep. And just So Pacer dot gov has a ton of information. You should sign up. It's a free account. It might take a week or two to get it set up. I think they asked for a credit card, but I've never actually been billed. So and you'd have to be really doing a lot of volume searching to key be billed for that. But Pacer dot gov and then another resource for bankruptcy is NDC. We're not gonna get into that too deeply, but if you have a loan that's in bankruptcy, you can add that to, the system called NDC. What is it? National data center or something like that? I don't know what it's that might be, that I don't sir Clifford jumper knows. I I know. But I 

Speaker 2

was just saying. 

Speaker 1

But that what that does, NDC will help you track your your own payments. So let's say you've got twenty loans in bankruptcy and you don't wanna go in, like it it kinda synthesizes everything and brings it, it essentially gives you a pay history. The payments that the borrower is making to the trustee, for example, are all kind of compiled there. So that's a nice resource. Anything to add about PACER or NDC? 

Speaker 2

NDC is National Data Center. Yeah. And Yeah. The reason that's important is because the trustee's pay it's the trustee's payment history. That's how you're getting your borrower's payments. And, sir, Clifford Jumper, I'm gonna have to Jumper. I'm gonna have to agree with you. I'm ninety nine percent sure patient charges you. Not a lot. 

Speaker 1

I no. It's so you have to it's over twenty dollars. So it'll say you charged you ten cents or whatever it is, but unless you cross twenty dollar the twenty dollar threshold, you don't actually get charged. Good. You 

Speaker 3

know? So I did not know that. 

Speaker 1

But Sir Clifford Jumper may have a bigger fund than ours, so maybe he's been charged before. 

Speaker 2

Good old foreclosure. Alright. So there are two different type foreclosures vary by state. Judicial states versus nonjudice the nonjudicial states. I'm sorry. There's essentially just different processes based off of the type of, security interest instrument. 

Speaker 1

Yeah. Yeah. So That And this also gets gray. People want everything in, you know, black and white and one or two boxes. But for the most part, if you're running if you're working with a deed of trust, that's gonna be a nonjudicial foreclosure. And so not through the courts, but through a trustee, is however, that's not always the case. Like, Maryland is a good example. We have deeds of trust here, but but everything ends up going through the court. So and there are other states that it can absolutely go either way. You know? Michigan is one. So not every state is is judicial or nonjudicial, but there are states that are clearly you know, Texas is clearly nonjudicial and and fast, and that's why notes are more expensive there. That's one reason. Because there's certainly a cost to going through, you know, three years in the courts in New York or New Jersey, cost and time and and money. So, there are some resources if you wanna reach out. There's some good websites we have that we can give you kind of a map of of judicial versus nonjudicial and also estimated timelines and and cost for foreclosure. Anything else on that first bullet? No. K. You can 

Speaker 2

As with foreclosures, every borrower you can't just just decide you wanna foreclose and just call on attorney and say take the house away. We all know it doesn't work that way. The written notices have become especially, it depends on two years, have become such a and it's not such an important piece to the foreclosure process. And it's not necessarily a job that you, the investors, have to do. Your servicer should be doing it for you, but it also comes with additional charges. I know Jamie and I, for example, recently, on an asset we were looking at wanted or taking it to foreclosure, and in the state that it's located in requires this additional notice outside of the demand letter. And that that has to either be sent by us as the investors or the servicer. The Arizona. Choose. 

Speaker 3

I think 

Speaker 2

it wasn't Arizona, but I think it was, it's one of the a's. Arkansas. They require the specific letter. So, again, the written documentation, your servicer should be able to handle this, but I know plenty of investors who foreclosures. Mhmm. So I just I kinda want to make sure everybody is 

Speaker 3

on top of that. And with that being said, that everything that goes on, please make sure 

Speaker 2

that you keep proper documentation. Foreclosures get to be they they take a little bit of time, but just keep all of your ducks in a row. Don't lose anything. Timelines are extremely important. And, again, like I said, your servicers can do most of the communication if you want them to, but you guys also, as investors, have the ability to. And the one thing that I am super, super guilty of is not considering the borrower rights when it comes to foreclosures. I completely for and I would I'm trying really hard to not continue to do this. But redemption periods, for whatever reason, escape my mind all the time, and they shouldn't. Jamie, do you wanna explain a little bit more of what I mean 

Speaker 1

by that? Yeah. I mean, even after, foreclosure, in some states, the borrower has a period to be able to redeem and, pay the or or reinstate and redeem and get current. So, I think Alabama is a one year redemption period. So something to consider. So could be wrong on that. I that's I think that's true, but, very state specific. But, again, documentation is critical for for all this stuff. So, you know, we're not out to take advantage of borrowers, but at the end of the day, they need to pay. And and sometimes they're not able to afford the property or you know, so they've we gotta find another solution. So we're we're certainly cognizant of borrowers' rights. But, honestly, as an investor, we're doing that so that we're doing everything above board and so that the foreclosure can legally go through. So, yeah, you can get into all kinds of issues with, you know, a a foreclosure could be contested. Right? And then charges on there could be contested. Maybe maybe your servicer didn't know what they were doing, and they added charges to a loan that were not recovered. Allowed. Yep. And maybe the a judge throws it out, the whole thing out because this this is clearly predatory lending, and, you know, you you added five thousand dollars in charges that shouldn't have been on there when it should have only been certain legal fees and force placed insurance, for example. Just making this up. But, that's why it's really important that you know what you're doing and your servicer knows what they're doing. 

Speaker 2

And your attorney. 

Speaker 1

And your attorney for sure. Alright. We've got a bunch more slides, so let's pick up pace a little bit. So state specific licensing requirements. 

Speaker 2

So we did talk, about this a little bit earlier. As we stated, you know, states have specific laws around note investing, loan servicing, different types of licenses, different states, all of it. States such as Georgia, as we mentioned, Nevada, Ohio, and a couple others do have licensing requirements as investors, or as lenders. So double check into that. Some states, like I said earlier as well, you may be exempt from licensing depending on their that state's rules and guidelines. 

Speaker 3

Yep. 

Speaker 2

So, essentially, to ensure compliance when it comes to the state specific licensing and there's just so much going on, just consult with an attorney in that state, call the the the state itself, you know, make sure that the regulations are subject to change at any time. 

Speaker 1

Yep. And there are companies who specialize in this too. Like, Cornerstone is one, in keeping entities compliant. So to be clear, we're not saying that Georgia, Nevada, and Ohio are the only states that have licensing requirements. Just wanna make that very clear. Those are examples of some that do. California, Pennsylvania, now Maryland, potentially, Illinois, Shante mentioned earlier first you know? And, again, these are not all the same license. Could be debt collector. Could be lender. So, yeah, check the NMLS. Check with your attorney. CFPB action on contract for deeds. So this came out. Contracts for deed will say so this came out, over the summer, I think, or spring summer of this year, where this CFPB put out sort of a as an action or an opinion or I don't know what the right term I guess it's an action to, how how contracts for deed should be viewed, from a compliance standpoint. So, Shante, I'll let you take it from here. 

Speaker 2

Alright. So the gist of it was that it needs they're taking action to eliminate predatory lending practices. What they've noticed and discovered over the past however many years is that the contract for deeds, which I kind of refer to them as glorified lease zones, they seem to have the homeowners or the borrowers in this situation seem to be having there's questions around predatory lending because these tend to be borrowers that don't naturally qualify on their own at a regular bank getting a mortgage. 

Speaker 1

Yep. 

Speaker 2

It's supposed to protect the homeowners when purchasing a home so they're not swindled. Yep. They're not taken advantage of. They're not put into a situation that they can never get out of. They can't afford. We're not you're not supposed to set the buck to fail. Mhmm. It's supposed to work. Right. Which at this point, they're trying to essentially the way I took it was to treat it like a mortgage. It's essentially not supposed to be any different. It's not it it does need to we should not be I don't I don't know how to put this in, like, the nicest place possible. It's it's to also protect these homeowners and that we should be taking this into consideration. They are required to follow and adhere to the Truth in Lending Act. Mhmm. Their ability to repay. When you're looking at it alone or creating a loan with the borrower and they don't if they don't have enough money to pay, you can't be putting them in, you know, a mortgage that they can't afford. 

Speaker 1

Right. 

Speaker 2

So Make go ahead. 

Speaker 1

Yeah. Go well, just gonna add to that. So contracts for deed, aka land contracts, which their form of seller financing, We're not saying this is applying to all seller financing, but land contracts specifically. And, again, this is we're talking mostly on this webinar about owner occupied residential property, but land contract is a is another term for contract for deed. Let's face it. A lot of these originators of these contracts have been taking advantage of, like Shante said, lower income, less, I guess, educated, and more desperate borrowers. And that's not just that's not saying all CFDs are bad or all people who create CFDs are evil, but the CFPB put out this action, that if you're gonna initiate a a land contract, originate land contract, you need to fully adhere to those normal TILA requirements that Shante's talking about, the ability to repay based on the borrower's income and also provide accurate disclosures and limitations on balloon balloon payments because, let's face it, the borrower is not gonna likely be able to come up with 

Speaker 2

fifty grand in five 

Speaker 1

years when they the whole thing was sixty grand. Like so just something another another thing for you to research if you were unaware of that, and it came out in August of this year. So, this is one we won't spend too much time on, but there is an ongoing, case that was brought to our attention, and this specifically affects, loans in Maryland, that started out with the focus on HELOCs, but could be expanding to more, mortgage debt more broadly. 

Speaker 2

Shante? So, essentially, I'm gonna try to give the short version. I'm not gonna put so much light on HELOC because I think I believe where this is going, it's going to affect everybody. But, essentially, there was this case was addressing the home equity line of credit and who was assigning the assignees in the foreclosure of this specific loan. Essentially, they're stating that the assignees of the HELOC, so that's the current lender, should have been licensed as for Maryland. 

Speaker 1

Registered. Right? Is it 

Speaker 2

register I'm gonna go with licensed. 

Speaker 1

But Gotcha. 

Speaker 3

I could be wrong. For jumper? 

Speaker 2

I will double yeah. 

Speaker 3

As I 

Speaker 2

said, we can also ask. Yeah. But they they should be licensed. 

Speaker 1

Yep. And and I think, and, again, we're not attorneys, and this is something new for us. But when a a borrower would take out a HELOC, I would think, okay. They qualified for the full amount of that HELOC, right, for their ability to to repay. But the way that the state is interpreting this is that every time the borrower took out a, took money from that HELOC, that line of credit, they actually, should be I guess, that that ability to repay should be examined again from my understanding. So and therefore, you should be as a that debt owner, you should be licensed or registered with the state. And I and I think where this is headed is a modification of a, say, a first lien mortgage could be also viewed as essentially a refinance, and therefore, you are a lender. So, you know, I've done a bunch of modifications, and, typically, what we do, is we don't raise that PNI payment from what the originated you know, the original term was, the original PNI. So we we keep that principal and interest the same or lower. We may extend the term of the loan, but we're therefore, we get kinda get around the requirement to prove or show the borrower's ability to repay because that's already been done many years earlier. So modification typically is not viewed as a new loan or a refinance, which is a new loan. But I think with these HELOCs, the when the borrower pull on that line of credit, it was being viewed as it's being interpreted as a new loan, and that could also apply to modifications now. So as a note investor, what does this mean for me? I own this debt, and now I wanna do a modification. Well, I might need to be licensed to have to do to be able to do that modification. So this is again, it's still kind of in the courts in, and I know, I know Chris Seveny has a lot of information about this if if anybody wants to reach out to him, and they probably discussed this in in Chris's membership group too. Shontay, anything else? 

Speaker 2

No. Not until 

Speaker 1

the next 

Speaker 2

one because it kinda breaks up the licensing. 

Speaker 1

Alright. 

Speaker 3

We can 

Speaker 2

at least in Maryland. 

Speaker 1

They can read this slide. 

Speaker 2

Yeah. So, again, two different licenses. What each one requires, again, double check, call the state, do all of that. And essentially 

Speaker 1

Yep. Next step is to register with DLOR. So, you know, this isn't us saying everybody panic and and you you shouldn't be a note investor because there's just too much to the compliance piece. It's more a matter of just awareness in general. Right? So checking with other investors, checking on your servicer, checking with your servicer, checking with your attorney, make sure you are compliant, maybe sticking with a handful of loans at first so you're not, spreading yourself too thin from a compliance and opening yourself up too much from a compliance standpoint. Anything else on this Maryland slide? 

Speaker 2

No. The Maryland stuff is generally new to me. I had a phone call about it, like, last week. So I'm still researching and reading separate things as well. But 

Speaker 3

Okay. 

Speaker 2

Definitely keeping our ears open, and we'll share any updates that we have as well. Yeah. And then, additionally, to kinda wrap this up because I know we've taken a lot of your time, everyone, it's just additional compliance resources, things that we've kinda mentioned earlier that may or may not affect you, may or may not be needed by you if you already have it. But just to remember and I'm gonna add one other thing is network. Use your re use your people as resources as well. Don't just use the MLS and just your attorney. There's people in the space that have seen a lot of things. I've asked questions on things just because I've never seen it and needed help. So don't be afraid to also network and reach out to anybody and everybody. That's how I learned about these new laws changing, so I think it also helps other investors as well. 

Speaker 1

Yep. And you usually have options. You know? There's Always. People to talk to. 

Speaker 2

Just like one person. 

Speaker 1

Yep. These are a couple of the for our mentorship program, a couple of of mentees gave this this feedback for our program. I actually had a call with, Peter Holiday today. He's probably been, man, talk about somebody who took the ball and ran with it, took the the bull by the horns, if you will. And, these are the kind of people we like to work with in our mentorship program. It is you know, not that we won't work with you if you only wanna have a few sessions, but, man, it's it's really great to work with someone like Peter who I think he probably owns twenty or twenty five notes now. And 

Speaker 2

Now. 

Speaker 1

You know, not that we're the only ones who have ever influenced him or anything, but, he's been an active member in our mentorship active client of ours in our mentorship program, and he's just really taken off. And so you never know where, where you're gonna go with this journey exactly, and that's why we don't have a one size fits all training program. We do think we we mentioned this on prior prior webinars, but we do think our program supplements a membership group well because you're not gonna necessarily get into the weeds on a particular deal in a men a group of twenty people or something. And it also supplements a training program well where you go through training and, you have kind of the fundamentals down. You kinda get it from an academic standpoint. But, again, you don't know, oh, you know, you haven't built your buy box or you're gone through your due diligence checklist, and now you have an actual deal that you're bidding on. Like, you might need help or have want that, extra kind of eyes on over your shoulder kinda thing to help you. And, And, again, we're not we're not here telling you it's your decision. We're we're not telling you what to do or giving you financial advice. You're driving. You're you're, kind of steering the ship, but we're saying, hey. This might be couple things I would consider. This is what I've done. This is what I did that didn't work. Don't do this. And, so that's a little bit about kind of our mentorship program, and compliance is certainly an important piece of that. Anything else? And, Ashanti, you've had a few more calls since, our last webinar, a few more 

Speaker 2

mentorship sessions. I enjoy every last one of them. I just, again, it's fun to hear the questions that are asked. It's fun to for me, I enjoy sharing the knowledge. And you build a rapport and, trust me, you end up being making these relationships with people. And for years, I've been in the space for over a decade, and there's still people that are helping me that I've met, you know, day one, and I'm helping them that I met, you know, ten, twelve years ago. So, again, like I said, networking is very important. 

Speaker 3

Yeah. We 

Speaker 2

do have a question from RW. The question was, where are some places to find notes, and 

Speaker 1

are there any online portals? Question. It's 

Speaker 2

our favorite question. 

Speaker 1

Yeah. That is something we get into a lot in our member our mentorship program. And, you know, there there are online exchanges like Paperstack. Really, I think I hate to say it, but it really depends because it depends on your your goals. It's really a, a networking thing, and, you know, I think buying from an established and well respected note investor or fund is a great way to go initially. And but we do have sources of notes that we can we do provide to our mentees. And but there's no there's no, the truth is sometimes it's just a matter of, you you know, adding value and building that building out your network and kind of getting to know people. I mean, that's what Peter Halliday has done. He's just kind of networked and moved his way up the, you know, up the ladder a little bit, if you will. So it's a very inefficient market, marketplace, and I kinda like it that way because that's where you can how you can find deals. And, yeah, it's networking, relationships. There are brokers. Dave Polio with SN is a very active broker. Paperstack, like I said. We've got other other sources. But a lot of times, it's really just instead of looking for this one one big source, it's kind of look around, you know, who's in Facebook groups that might be selling loans at that time. Look for a fund that's closing because they need to sell their loans. Shanti, anything else about, sources? 

Speaker 2

Like, I think you hit them all. 

Speaker 1

Servicers are another one. Servicers, they they may not own the loans, but they they talk to other investors all the time. 

Speaker 2

That is true. I have definitely been clear a few notes myself that way. Yeah. I I I I've recently just kind of been looking through word-of-mouth for myself. So 

Speaker 3

Mhmm. 

Speaker 2

That's kinda where I'm seeing the most. 

Speaker 1

Yeah. But it's a key key piece for sure, and it's deal flow has been challenging. I think it's starting to open up a little bit more, but, it's definitely caused pricing to go up and that the supply has not been quite where we want it to be. I I've gotten more and more into these HUD, HECM trades. So if anyone's interested in reverse mortgages, reach out to me because there are gonna be more HECM offerings here, which is the these reverse mortgages through HUD. So that's gonna be a fruitful, source of deals as well. Additional resources, we have a seventy four page ebook on our website. Go to labrador lending dot com slash ebook or just click on mentorship when you get to labrador lending dot com. What we found is is investors generally fall into active or passive. Doesn't mean you can't be both, or neither, but you can, 

Speaker 3

you 

Speaker 1

know, the ebook is geared towards the active investor who wants to really kinda roll up their sleeves and and get into buying whole notes and building scaling their business. Questions? Additional questions. Mentorship, just to be clear, we it's we charge one hundred and fifty dollars per session, and one session is one hour. So one hundred and fifty dollars per hour. They're typically over Zoom, and we can share screens, record, share resources. We often share resources in between sessions as well, and we do require a three session minimum, to get started. So, but, again, a lot of it is up to you. You know? It's gonna be do you how how much work and time do you wanna put into this? But, it's been a fruitful journey for Shante and me. 

Speaker 2

I've been having fun. I enjoy it more than anything. 

Speaker 1

Any other questions, concerns before we get out of here? This has been I 

Speaker 2

haven't seen anymore. We gotta thank you. And will you make these slides available? Yes, Jamie. The question is when. 

Speaker 1

Sure. Yeah. We'll put the the video out on YouTube in a week or two because we wanna incentivize people to actually sign up for these the the men the webinar, but we will also we can send out the slides as well when we when we do put the video out there. So feel free to email me at bateman james at labrador lending dot com. Anyone else? Everybody going trick or treating tomorrow? 

Speaker 2

Not me. And my front door light's gonna be off. I won't be home. So 

Speaker 1

You'll be hiding. 

Speaker 2

We have another one. 

Speaker 3

Thank 

Speaker 2

you both for the presentation and your time. You're welcome. Thanks for joining us today. 

Speaker 1

Alright. Well, thank you very much, everyone. We appreciate it. 

Speaker 2

Thank you, sir Clifford Jumper, for all you do. 

Speaker 1

Alright. We're gonna get out of here. 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.