Richter Management Group

Sometimes it’s good to know NO, ya know?

You have impaired loans to sell. You think you have been given a good bid but did you ask the right questions? Did you ask any questions?

Does that bid include any assumptions about future payment performance?
Does the purchase and sale agreement stipulate seller reserves or holdbacks?
Is settlement subject to counter party approval?
Is the bid price inclusive of all diligence costs and fees?
Is the price subject to change after diligence?
Are there last minute transactional costs or LLPAs?

The best way to avoid surprises after due diligence is to know what to expect before due diligence. It’s simple really. All you need to know is NO.

When you have loans to sell and a good bid from Richter you know where you stand, No surprises:

No loan performance triggers
No cash reserves or hold backs
No EPD
No seller application or counterparty approval required
No financials
No operational audit
No personal guarantees
No indemnification

You have impaired loans to sell, you should know Richter.

Call the ATeam4PlanB, call Richter 831.233.1626

Scratch and dent mortgage loans & pornography

We’ve all heard problem loans referred to as “scratch and dent” yet, in the absence of a standardized common definition of the term, when does a loan migrate from a commercially viable asset to an unsaleable liability?

Scratch ‘n dent is what you get with a sad Chevy or a defeated Kia, not a mortgage loan.  I’ve looked at a helluva lot of impaired loans, page by page, line by line, and I have yet to see a primer painted loan with dings, gouges and divots. 

Impaired would appropriately describe the more colorful story loans.  Impaired implies a noteworthy (no pun intended) flaw, a visible defect or something that is, in the eye of the beholder, less than perfect.  Variables are numerous; age, term, rate, asset value at origination, present value, location, credit profile, legal conformity, adherence to compliance (or at least some third party’s interpretation of compliance) and yes, size matters. 

There are other considerations:underwriting, packaging, settlement disclosures, curable or material document deficiencies, occupancy and collateral condition questions, FICO scores, vesting, level of documentation, timing of delivery, sales terms, subsidies, participation, DU or LP eligibility, insurance, warehousing or retention costs, corporate cash expenditure and the impact on leverage. 

Categorizing an asset by performance history results in another set of labels: performing, sub performing, modified/re performing, none performing, early stage or pre foreclosure, pending foreclosure.  Variables are virtually limitless.  There are no scratches, and there are no dents, but there are clown car loads of potential pitfalls. 

Any single adverse variable may affect saleability and settlement price.  As these combinations swirl around in the land of guidelines, investor overlays & third party audits, the ever increasing layers of risk will drive buyer’s required yield higher, right along with the size of the seller’s discount. 

Absent handy dandy cost per impairment variable decoder matrices it is difficult to assign a  value relative to present loss implications, future risk and interim carrying costs.  Considering the innumerable components of a single loan file, arriving at a price on the sole basis of the subjective term “scratch and dent” is meaningless.  Get that?  Meaningless.

If you are selling impaired assets you will lose money anytime a buyer applies a one size fits all price pulled out of the “scratch ‘n dent” grab bag.  Generic pricing will always favor the bidder and absolutely assures you will be leaving money on the table. 

When you are selling impaired assets you need a buyer who understands your loan.  Every loan is unique and each has its own story in its own context.  If you are shopping impaired loans you don’t need a black box bid, you need thoughtful assessments from a business partner that understands your problem.

Done right, selling impaired loans is more than a bid, it’s collaboration. Richter works with you.  Together we mine information.  Together we identify the problems and assess the risk.  We get it.  It’s all we do.  We bid your assets on individual merit, each asset stands on its own, as it should.  Before you sell debt as “scratch and dent” ask yourself if the buyer knows your loans as well as you do, as well as Richter does.

When ruling in the Jacobellis v. Ohio obscenity trial, Justice Potter side stepped the definition of pornography instead famously declaring, “I know it when I see it. “  Scratch and dent pricing likewise lacks clear definition, but you’ll know it when you see it.  

You deserve better. Call Richter. 

Time and ROI

You have repurchases, investor rejects, dwell time deadlines….problem loans that take time and divert your resources. How can you most effectively increase your ROI? Get back to what you do best, focus on new production.

If you have repurchases, mismatched investor underwriting overlays, whatever the reason, chances are Richter can help you. Richter’s sole business is dealing with impaired or otherwise unsaleable mortgage loans. We don’t compete for production, we only deal in problem loans.

You’re the boss. You’re engaged in activity that generates income. Move that rockpile that is draining time, energy, and resources. Get it off your plate.

Leverage your time, maximize your return. Call Richter.

FAQs

Dealing with impaired loans is not necessarily a bad experience, but it can be a pain in the ass if you don’t do it on a regular basis.

Impaired loans become a distraction from your primary revenue generating activity and detract from your core business. Lucky for you, Richter has your Plan B when it comes to disposing of problem loans. Impaired loans is our only business and we are damned good at it, it’s all we do. We have been called a one trick pony….well, okay but we’ve have mastered the trick and we will confidently tell you we are the A TEAM when you’re ready for PLAN B

You have questions, we’re right here to talk to you (831.233.1626) or, in the meantime, here’s an overview:

Basic steps in the process

• Lets talk about the loans
• Bidding methodology
• Diligence process and findings
• Clearing conditions, if any
• Collateral request
• Purchase & wiring funds
• Servicing transfer and follow up

Q. I have loans held for sale, what’s the first step?

ANSWER: Call us (831.233.1626) and let’s talk about the loans, why they may be considered unsaleable and what is your expectation for an optimal outcome. We will listen to you. We have to. Would you really take our recommendation seriously if we didn’t know your loans as well as you do? I hope not.

Q. Can you tell me what these loans are worth?

ANSWER: Sure! After you tell us about the loans and send us a spreadsheet that captures basic loan data. Loan data coupled with a thorough understanding of the problem allows us to give you an accurate price. Price is important, but a real price, (a price you can literally take to the bank) is really important. Richter takes a great deal of pride in giving clients pricing that stands up from bid to settlement. The overwhelming majority of our bid prices never change and the loans trade at the price quoted at bid. No surprises, no last minute adjustments.

Q. If I like the bid, what next?

ANSWER: Good question and probably the easiest to answer. We will give you a written Letter of Intent to purchase along with a link to upload your electronic file. The LOI will specify bid price and, to manage expectations for both of us, it outlines the diligence process. You can help us expedite turn around by sending complete files: the credit, income and closing documents, pre disclosure and compliance documentation (don’t worry, theres no limit to file size so you can upload everything you have all in one piece). Generally speaking the due diligence begins the day following receipt of the files.

Q. What does diligence entail? You know these are closed loans, right?

ANSWER: You bet, we only deal with closed loans and we review each file as a closed loan, not new origination. Upon completion of diligence you will receive a full report. Based on past experience there are few, if any, conditions and generally those are simply missing, illegible, or incomplete document pages. Nine out of ten times these things can be addressed and cleared quickly by email, or phone.

Q. How do I get my funds?

ANSWER: Once all conditions are cleared your bid price will be reconfirmed. Pricing is expressed as a percentage of the Unpaid Principal Balance and you will not be subjected to any add ons. We will ask you to forward the collateral package and provide the most current pay history showing escrows disbursements and balances. A funding schedule will be prepared using the pay history and an agreed upon cutoff date for settlement.

Q. What do you need besides the note and wiring instructions?

ANSWER: We will ask you to ship the original note, allonge, recorded deed of trust, final title policy. We will never ask for collateral until all conditions are cleared and we are prepared to wire funds.

Q. How soon do I get my money?

ANSWER: The collateral package is reviewed the same day it is received. Assuming nothing is missing (endorsements for example) the note is forwarded to a custodial bank and, upon their acknowledgment of receipt and acceptance, the wire will be prepared. Wires are typically sent within 72 hours of receipt of the original note and allonge. We wire as soon as practical and adjust interest based on the funding schedule cutoff date.

Q. What about trailing docs and servicing transfer?

ANSWER: Immediately after you have received your funds, we will forward servicing transfer information along with a list of appropriate contacts for trailing docs, MERS assignments, and customer service questions.

<><><><>

TIPS: (let’s make this easy for both of us)

You can speed up turn time by assigning a contact person for all communication.

Often there is a delay in clearing conditions, assuming there are any, and generally that can be done by email. Having a point person speeds up turn time.

The biggest time stealer is shipping. When you send information always request delivery by 10:30 am.

Early morning shipments often arrive before the building is unlocked and get put back on the truck for later delivery, costing a day or more.

Deliveries scheduled for afternoon delivery will not be processed until the following day.

Before you ship collateral; double check all assignments, endorsements, live signatures, allonges etc. Having to resend an incomplete or incorrect document can cost 2 business days.

Always provide tracking numbers and advance notice of shipments. That allows us to effectively monitor service levels and provide accountability.

So, What is the bottom line?….we say No a lot.

Richter = No surprises

Richter = No excuses, we do what we say we do

Richter = No lack of transparency, we own the process

Richter = No confusion, we communicate

Richter = No tombstones, every trade is confidential

Yep, it’s that simple.

now call us

831.233.1626

or email

info@richtermanagementgroup.com