March 19, 2012
Wow, it's been a while since I blogged. I guess that's what happens when deal flow is nonstop and there is more to work on than there are hours in a day. Regardless, I'm forcing myself to write a quick entry to emphasize the importance of priorities.
Last week I performed my due diligence on 120 non-performing loans from a household-name bank. These were all loans that were secured by properties that had lost a substantial amount of their value, and the bank had essentially charged off the loans rather than pursue foreclosure.
The servicing (or collection) notes are the source of every file's 'story'. All correspondence between the bank (or its servicer) and the borrower is contained in these notes. It is my job to separate the wheat from the chaff; in other words, to pull out of the dozens of pages of notes what really matters in finding a resolution to the file vs. all the other 'noise' that just takes up space.
One particular file from that package of 120 loans really got my attention; in fact, there were two entries that summed up where the borrower's priorities went WAY off track. The first entry was copied verbatim into the collection notes after the servicer asked the borrower why they should consider a Modification of her loan (typos have been corrected from the original text):
"I get $180 in food stamps until I start back working, which will be soon. I just got a call back from an application I put in."
-Sent from my Samsung Epic 4G
Now, the Samsung Epic is a smartphone. Of the four members of my family with a cell phone, I am the only one with a smartphone. If I didn't need it for work, I wouldn't even bother with a smartphone. Now, whether this borrower got the phone for free during a promotion or actually paid the going rate, it doesn't really matter. Here's what's important: Cell plans for smartphones are expensive; mine is over $100/mo for my phone alone. Let's get to the 2nd entry:
"The cost for school varies; this semester my tuition was $1,500 and my books were about $1,800. Yes, I'm still receiving unemployment; they extended it. When the unemployment is depleted, they just extend it again."
- Sent from my Samsung Epic 4G
Now, we are dealing with a borrower who hasn't made a payment on her mortgage in over FOUR YEARS. She still lives in the house, and has no intentions of moving out. The servicer was trying to get her to pay $182/mo for her house payment and she said there was simply no way she could afford that.
I may be a cynic, but I'm guessing this borrower also has high-speed internet, cable TV, and a myriad of other "essentials" that take priority over making sure she has a roof over her head. My advice to every deadbeat in America who has decided they can't (or won't) afford their housing payment: Check your priorities. A smartphone (or a simple cell phone, for that matter) isn't a NEED. Neither is cable TV, twice-daily Starbucks Caramel Macchiatos, internet access, or flat-screen TVs. Try being responsible and start paying your mortgage again.
Believe me - if you don't make your payments, I WILL foreclose and put someone in your house that will. Am I fair? Absolutely. Will I show pity when you send me your sob story from a smartphone? Hardly. Make your payments, or enjoy your fancy smartphone in your new home, also known as that big cardboard box that once housed your flatscreen.
Make it a great week.
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