What can you do to manage your mortgage note portfolio for the best performance and outcomes at the moment?
Most investors haven’t invested through times like these before. Many are going to find the next few months challenging. That’s great if you thrive on challenges and creating solutions. We are also in a period when many investors are going to blow it. Others will shine by making the right moves, demonstrating what they are really about; and their brands will benefit from it for the long term.
One of the most significant factors right now is how do you best manage your note portfolio and borrowers.
Even Elon Musk and Tesla have been asking its landlords for a break. So, no one should feel bad about exploring what options there are to temporarily minimize outgoing expenses and bulk up on emergency capital reserves.
Remember, just as you may hope to get some breaks on your own bills right now, treat others (your borrowers and tenants) in the same way. If everyone froze all payments for four months, we could all potentially step right into the swing of things again, without a legacy that is pulling us down by the ankles.
Mortgage note holders are very much on the frontlines of this. There are many types of short and longer term workouts to deal with this situation.
We’ve seen the very generous automatically grant borrowers four months payment vacations. Others don’t care, refuse the idea of entertaining helping borrowers, and are either buried in denial or think they will profit more by taking properties back.
Options here include short term deferment of monthly payments and longer term forbearance agreements.
Some key thoughts:
- The faster you act, the less you’ll probably have to give up
- Be sure you are putting your borrowers in a better place, not setting them up for disaster
- Consider accepting partial payments to keep them in the routine of paying
- Be efficient. If you have to deal with every borrower with a new workout every 30 days, you may lose more than just offering a 3-4 month break upfront
Of course, you will have those who just want to keep paying, because they can and want to do the right thing. There will also be those trying to work the system. Be generous, but have systems in place to balance this.
One of the worst things happening right now is that banks, servicers and other creditors simply are not accessible. Bank branches are closed, and it can be virtually impossible to get through by phone as they cut staff and are overwhelmed by calls. Many borrowers are finding they cannot get through to even make payments when they want to.
Be accessible. Make it easy for them to contact and pay you!
Hire temporary call center staff, enable live chat, texting and email contact if necessary. Don’t be the roadblock to your own success.
Pick Your Loan Servicers Well
In many cases mortgage note investors must have licensed loan servicers handling front line communications.
If you’ve ever dealt with servicers as a borrower, you know many are terrible. Their approach is directly counterproductive to the results you want to get.
Pick your servicers carefully. What’s their attitude? Are they capable? How do they get results? Are they equipped to deal with this volume of communication and to work in this new virtual environment effectively?
Connect Your Borrowers with Other Resources
There are many other resources to help your borrowers. The more they can access, the more likely they are to be able to pay you. And more so if you are the one helping them.
Provide the best information on:
- Getting personal stimulus checks
- Getting SBA loan money to keep businesses running
- How to refinance
- Local grants, food services and utility help
- Getting a handle on their finances and budgeting
- Where and how to find new work now
Don’t Blow It
Borrowers are quickly seeing the true colors of their creditors. They will be loyal and motivated to go the extra mile to pay those who help them willingly.
They will be turned off by those not offering help, and may purposely withhold payment to make you pay.
If you already blew it and failed when they tried to contact you in advance, step up now. Be proactive, reach out to them and make sure you make contact. Otherwise, don’t expect them to try again and give you a second chance.
Keep Yourself in Top Performance
Stay in top mental and physical shape yourself. It will go a long way to great decision making. Exercise, eat healthy, and have routines that support a healthy mindset.
You can’t do this all alone. It will take your whole team.
Communicate and be transparent with them. Help keep them mentally and physically healthy. Get SBA loan help to keep making payroll if you need to. Help your teams adjust to remote work if they aren’t used to it.
Find out more about investing in secured debt and real estate, go to NNG Capital Fund