Borrower outreach: DIY or have servicing company do it?

Question

A lot of times when you hear note investors talk about deals they have done, they talk about conversations with borrowers in the first person. For example, "I reached out to the borrower. They wanted to stay in their house, but their circumstances were X Y Z, so I was able to work out this or that to modify their loan payments, etc".

This got me wondering if most note investors actually contact the borrowers themselves or if they are really using a servicing company to contact the borrowers, but find it easier to talk about the results in the first person rather than "My servicer talked to the borrower and then told me and then I told them to offer the borrower..."

So, for all the NPN investors out there, I'm curious:

1. Do you do borrower outreach yourself or go through a servicing company?

2. If you do it yourself, what safe guards do you put in place to make sure you aren't violating any debt collection laws? Do you record the conversations?

Patrick Desjardins · Answer

Because they're horrible at it. They have high turnover and most of them have zero experience.

When I started I was talking to the borrowers myself and my results were 10x better, and getting results quicker, than going through the servicer. Sadly, because of all the regulations and scumbag attorneys it's best to let your servicer do it.

The ideal scenario would be if you're big enough and can hire your own in-house team and train them to follow FDCPA and CFPB.

Linda Hastings · Answer

Thanks for the historical perspective @Patrick Desjardins. Maybe with the recent chatter in the news about Dodd Frank and CFPB we'll get lucky and it won't be so cumbersome to do outreach anymore.

Linda Hastings · Answer

@Pari Thiagasundaram Are you asking why pay extra to have a third party do it instead of your servicer? If that is the question, then perhaps it's a matter of effectiveness of even cost. My understanding is that some servicers have different levels of service (i.e. different pricing depending on what you have them do; just doing the billing, tracking the balance, etc vs actually reaching out to borrowers). In that case, perhaps there are third parties that can do the borrower outreach at a better price point or are more effective in actually contacting the borrower if that's all they are doing. I suppose you could even have a VA do the outreach if they were properly trained and knew all the regulations to follow.

Pari Thiagasundaram · Answer

As part of your servicing, you can get that done, why pay extra?

Bob Malecki · Answer

I recommend using your servicer or a licensed 3rd party entity. You can contact the borrower yourself or have your employee do so since you are the lender, but you need to make sure you are compliant with all CFPB regs.

Linda Hastings · Answer

Thanks, @Chris Seveney PM coming your way.

Borrower outreach: DIY or have servicing company do it?

Borrower outreach: DIY or have servicing company do it?

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