Myth Debunked: Why Banks Don’t Want to Take Your House

DJ Olojo [00:00:05]:

Hey, foreclosure fixed family. My name is DJ Olojo, and welcome to the foreclosure fixed podcast, where our goal is to help 1,000,000

DJ Olojo [00:00:14]:

homeowners successfully navigate foreclosure. If that mission resonates you please do us a favor, like, and subscribe, and tell a friend so that way we can help more homeowners. I am excited about our guest today. It's my friend, Chris Seveney. Chris is a commercial construction expert He has a master's in real estate from Georgetown, but most importantly, he is committed to helping borrowers come to win win resolutions. He is the founder and manager of 7E mortgage loan investment fund and he's just the all around good guy. Chris, welcome to our podcast today. How you doing? I'm doing great, DJ. Thanks for having me. Excited to be here today. No. I appreciate you, and and I think you can bring so much value to our listeners. How about you do me a favor and and give our listeners a little bit of background around how you and your company and your experience kinda intersects with people in foreclosure. So I can 2017,

Chris Seveney [00:01:17]:

I started investing in mortgage notes, which we act as the lender or we buy borrowers mortgage from other lenders Typically, we buy non performing loans, which are those borrowers who are behind on their payments with the goal to try and create that win win situation with borrowers. to try and get them on a new payment plan or some type of resolution or the primary focus to try and keep the borrowers in their home if it's possible.

DJ Olojo [00:01:44]:

Awesome. Awesome. And I think you just hit on something that that I really wanna highlight, and that's really important, is I think a lot of times when borrowers hear that their mortgage has changed hands or they have been delinquent. They automatically think that somebody wants their house. Talk a little bit more about the mindset. that you and your company have and most people in the space have and most companies in the space have around distressed debt or around foreclosure.

Chris Seveney [00:02:14]:

Yeah. So I spent 20 years in real estate, and I've owned real estate. Regio if we're buying a mortgage, we're buying it because we wanna be the lender. We don't wanna be the property owner. And that's a lot of lenders' models in the sense of, you know, they wanna be the lender. They're not built to be managed real estate or they they not want to manage real estate. So their focus is being the lender on that loan and working with the borrower to try and get them, again, on some type of payment plan or work with them to modify or forbearance to keep them in that property because that is our primary focus and most people we speak with that are in this industry. No. That is their focus as well.

DJ Olojo [00:03:02]:

So if I hear you correctly, what you're saying is that the myth that homeowners have that the bank just wants their house It is truly a real myth. It's not just something fiction of that that people say. Yeah. It's probably furthest from the truth. Now bank has the ability

Chris Seveney [00:03:20]:

to of course, take the home based off of, you know, the mortgage. But that's not what their desired outcome is. And in most instances, it actually cost the bank more money to foreclose on a property

DJ Olojo [00:03:34]:

and sell it than it does to work out some type of arrangement with a borrower. Can you elaborate on that a little bit more for our listeners? because I think that That that's a that's a really hot button for a lot of people. Right? Yeah.

Chris Seveney [00:03:47]:

So, you know, when a loan is in distress, you know, a borrower is behind on a payment, and I wanna be clear as well. If you're 30 or 60 days behind on a mortgage, you know, that's not a place you, of course, want to be, but typically, the lender is not gonna be coming knocking on your door, basically, throwing you out and foreclosing. or closing, it's a process depending on the state that can take a period of time. And when these loans are in default, the banks will want to get them off their book and they may sell them at a discount similar to, like, buying a piece of real estate that needs to be repaired. It might sell at a discount. So when these are sold on the secondary market, when they're bought, the because they might be bought at some type of discounts, that lender has more flexibility to work with the borrower on some type of arrangement, which is typically a repayment plan get them back on track to bring them current. And then if that occurs later on down the line, they may again repackage that loan and sell it and they might be able to sell it at a premium from what they bought it for back out onto the market, which is where they can make their money.

DJ Olojo [00:05:02]:

Okay. So you said a couple things that our listeners may not totally understand. Right? So, yeah, so let let I wanna rewind and back up because I know that we have listeners from all age groups, all demographics, all backgrounds, and so I wanna make sure everybody's tracking with us. you talked about buying a loan at a discount. Right? Mhmm. And so why would a bank sell a loan at a discount? Right? Help help help our listeners understand

Chris Seveney [00:05:30]:

Yeah. So I'll use numbers as an example because that's the better way for me. If you owe a $100,000 on your mortgage, and you're not paying on that mortgage. That mortgage, even though you owe a 100,000, the bank may not value it at that price, because the bank now has to do a lot of work, try and get that person back on a payment plan. know, the and, again, this is probably a little dirty secret that most people don't know. So the bank may sell that loan not for a 100,000, but they may sell it for less. Now that doesn't mean that the borrower owes less money. They still owe that same amount of money, but it's kind of behind the scenes like a backdoor deal of when it gets sold, And, you know, 50% of all mortgages in this country get sold back and forth. So this isn't like, you know, here, it's a unique experience I don't know if that answered it a little better, but

DJ Olojo [00:06:30]:

no. That definitely answered it, Chris. You know, I I love dirty secrets. So so please keep them coming. Right? So you said a couple things. 1, you said that it sounds like a bank is willing to sell a loan that is considered non performing or in pre foreclosure because they don't wanna deal with it. That's the first thing I think I heard. The other thing that I know about and that a lot of people talk about is a thing called headline risk. Right? where a bank doesn't wanna foreclose because it gives them a bad reputation, and they're worried about that headline risk. help our listeners understand kinda what that is and also why that is factored into the discount of mortgage note. Headline risk is

Chris Seveney [00:07:19]:

the last thing anybody wants to do is be on the front page of, you know, I'll call it an internet website you know, going old school newspaper, like, yeah, so used to read, but, you know, I used the proverbial newspaper of, you know, doing something negative and there's been some very large institutions that I'm not gonna name them, but they have done certain things that where They were foreclosing in certain areas of the country. They may have acted in discriminatory, you know, there are accused or, you know, paid fines for some discriminatory activity against, you know, certain classes. So that's something that everyone is very aware of. And, again, with the banks, they don't want to be the headline news or be the story or be somebody digging too deep into what they are or are not doing properly. for example, for closing on a borrower who's been, you know, attempting to work something out and provided all the information but just not giving them a response. That happens a lot with larger institutions that I've seen or I've heard, I should say, heard occur in the past with some of these larger banks that it takes a lot of time to process the information and the loan just keeps getting behind to a point where it's too far behind. As an example, the borrower is, you know, 4 months behind on a payment and they lost their job. But, you know, it takes the bank, and then they get their job, back, but the bank is like, oh, you need to make all the payments to us. And it takes them 5 months to do that. Now a sudden, they may have had the 4, but now that number is back to 9.

DJ Olojo [00:09:07]:

Well, and and I think that is a a huge point And I think a sticking point for a lot of borrowers, they reach out to their servicer, and they're asking for help. They're asking for a loan modification. They're asking for a forbearance. But the timeline to get a response, the timeline to submit all the documents, the timeline to actually get closure on whatever request they ask for is very, very long, and their situation kinda gets works. It's almost like a wound where, you know, it needs a stitch, a couple stitches, but you're just waiting and waiting and waiting, and then it gets in it, and it it becomes like a snowball effect. So you talked about the big lenders, but you have smaller lenders like yourself. So what are some of the differences that you all have versus other folks? And where does it benefit the homeowner?

Chris Seveney [00:10:09]:

having a smaller lender is, to me, personally, such a better situation for a borrower because smaller lenders and pay attention to every loan and understand when you have millions of loans you know, you're just a number. For us who have 100 to 1000 loans, it's very easy for somebody to pull that file. speak with, you know, when we use a servicer, speak with that borrower, and communication is so important for both parties involved in this and get on communication, whether it's phone or email, work out resolve, which typically can be a forbearance plan, which a forbearance plan is, you know, all legal action gets stopped. And it's usually a 3 to 6 month process where if you can make payments during those 3 to 6 months, then we will 5, which is change the terms of the loan based on agreed upon terms to keep that person in the property. And on a small lender like ourself, we can do that process in days where a institutional lender can will take or typically will take months.

DJ Olojo [00:11:29]:

So they're varying degrees of lenders, and there's varying degrees of servicers. And when I say varying degrees, I mean, different sizes from small to large, people who service and own a thousand loans to people who service and own 100 of 1000, if not millions of loans. And so the timeline between a servicer that has thousands of loans versus a servicer that has millions of loans to get things done is gonna vary drastically. Mhmm. help our listeners understand what the real life example of of what a workout would look like. So if I'm a homeowner and I'm in distress and I really wanna keep my house. I don't wanna sell it. I'm tired of getting post cars from investors. I'm tired of people calling me, asking me if they can buy my house. I wanna keep my house. Right? Help me understand kinda what a workout would look like. What I should understand or or what I should be willing to bring forward to have a resolution that's gonna allow me to save my home.

Chris Seveney [00:12:31]:

So the key is part of this is you know, making sure first for, you know, I'll say a borrower is make sure you understand your current financial position And if you can't or, you know, you don't truly understand what, you know, is required, find somebody who can help you. That's the first thing because the servicer is it which, you know, represents the lender who collects the payments is going to ask for a lot of information It's called a workout package is typically what it is and what they it's almost like you're reapplying for a loan. So they will ask for your prior tax returns, bank statements, your pay stubs. Now just as if you're getting a loan, and putting all that together and giving them, you know, when they ask for it, say, okay. I will get this to you within 2 weeks. And then, you know, stick to your word on that. And that's one thing that every lender and servicer want is somebody who can commit to something and make it work, do not over commit to something, you know, put in realistic time frames. 1 week versus 2 weeks is not going to make the difference. You know, so you'll take 2 weeks to put that package together. the lender servicer will receive that information, and they will typically, on the larger institutions, take 2 to 4 weeks to review that and get back to you and let you know, okay. We can approve a forbearance plan or we can, you know, modify the loan. They'll have some type of terms that they'll usually kind of dictate within that, but you know, I always recommend to every borrower also be proactive and talk to the servicer and say, What are they thinking? You know, can we do a, you know, that forbearance or, you know, can I we stop this to give me a chance to make those payments up? And then after that file gets reviewed, there's some paperwork that has to get involved, which will have a little bit of back and forth that they'll send you to sign. which may take again another 2 to 4 weeks.

DJ Olojo [00:14:49]:

So you said a few things there that I wanna rewind on because I think there are some salient points you hit The first thing I heard is that you have to reach out to your lender. Right? So your lender and servicer have been reaching out to you. They send you statements, but if you need help, you need to reach out to them and say, this is my situation. there sounds like there needs to be some active communication and dialogue. The the second thing I heard that stuck out to me was that there is a process in place. And as a borrower, you have to be prepared to follow through on that process. Correct. Yep. Alright. The last thing I heard is that if you don't hear back during the process, or if things are changing on your end as the borrower in the process, you need to proactively communicate that. because the process is not completed until all the paperwork is signed.

Chris Seveney [00:15:50]:

Correct. And think about it this way. When you're behind, how often were was that lender calling you for payments. Flip the script on them. You know, call them every other day saying, I got the paperwork. What's going on? you know how it feels to get calls twice a day or, you know, once every day for a week, flip the script on them because they'll look into file and bay and basically, like, We gotta get this resolved because I'm tired of this person calling me every day. Absolutely.

DJ Olojo [00:16:18]:

Absolutely. Like, you you wanna blow up their phone line. Right? You wanna call on multiple you want a resolution. And and and that's the goal. I I I think that lenders want to. The misconception that Everybody just wants your house. It is not the case. But I think that what Chris is trying to articulate is that people may want to get to a resolution. But if they're not willing to put in the work, on their end, a resolution is not gonna happen.

Chris Seveney [00:16:52]:

Correct. You it's gotta be a, you know, a two way, you know, call it the two way street where both sides have to be open with each other and communicate with each other as a lender the biggest challenge we have with working out a loan is when the borrower does not communicate If the borrower does not communicate or respond, that forces our hand into going down that legal process that nobody wants to go down because it just incurs cost that both parties eventually will end up having to pay.

DJ Olojo [00:17:29]:

Totally understand that. Now can you give us an example of, successful workout that you've completed before?

Chris Seveney [00:17:36]:

Yes. First, I'll say Now from a percentage standpoint,

DJ Olojo [00:17:41]:

90%

Chris Seveney [00:17:42]:

of loans that we buy delinquent probably end up in some type of workout compared to, you know, 10% end up, you know, going down a legal process. That also includes borrowers who may be deceased or no longer wanted the property. So the other kind of comment before I mention about the workouts is You know, sometimes the media over inflates the number of foreclosures and how everyone's getting foreclosed. It's actually, you know, the numbers are pretty small that that actually happens to successful workout. We've done a typical loan, and I've got one thinking in my head, Barr was about 18 months behind because of a divorce and job loss. They got back on their feet. got a better job and wanted to try and catch up on the payments and What we, did with that borrower, and I'm just gonna use simple numbers of the payment was a $1000 per month. We asked them to put a down payment down of I think it was about $25100 down to show that they were, you know, willing to work with us on that. And as part of a workout, expect to, you know, be able to give a little bit more than one payment to show some seriousness. And then the after that, we did what's called a forbearance. So, again, all legal was stopped to give them a 6 month window. And if they made payments during those 6 months, we took all those payments that were behind and dropped them at the bottom back of the loan. So it would then make their loan. So they put gave us a down payment. They made 6 consecutive payments to us. And then we modified contractually modified the loan and pushed all those payments to the end of the loan, which in credit terms, make sure on your credit report now shows your loan is back being current, which is important because when you're behind on your mortgage, your your credit score, of course, will continue to go down, which hurts you and the ability to refinance But by getting those 6 payments, bringing the loan current, and if they make another 6 or so payments, you know, then they might be eligible later on. try and refinance if they can get better interest rates in the future.

DJ Olojo [00:20:11]:

Wow. So I think that's a a nugget and a bomb you just dropped on us. Right? So two things. One is that if a borrower is even 18 months behind on their payments, there's still hope for them. It's not, oh, I'm losing my house. I'm too far behind. There's still hope. There's still opportunity. Number 2 is If you do a forbearance and they add the payments to the back of your loan, now your loan shows current on your credit report. Right? And so it's almost like you get a fresh start to try to reset your life, your financial situation, and ultimately, you know, your financial future. Yep. That's awesome, man. That's awesome. Well, Chris, I I think it's time for for for my favorite part of the podcast which is the opportunity to go into the bow tie round. And, basically, the bow tie round is where we get to a tie one on with our grass, Chris. Alright? The b is for the best advice you would give someone in foreclosure. The o is for one thing you're grateful for right now, and w is for the wildest, most interesting foreclosure story that you have. Alright? So so so let's tie one on, Chris. What is your best advice for someone in foreclosure?

Chris Seveney [00:21:32]:

Yeah. My best advice, and we touched upon it during this episode is communicate with the servicer. And if there's things you don't understand, find a family member, a friend, who can help you. When people go into defaults, a get a sense of Like, they're scared. They're embarrassed. They feel like they've let somebody down, and we all feel that emotion, you know, because you feel like you may have failed at something. This is not the time to do that. This is the time to seek assistance from those who are closest to you. We try and help, and it may not be them giving you money, but them helping you understand the situation so you can understand because the servicer with some of these comments and the paper they request might be overwhelming for you. So and if you don't understand something, Please ask the question because the servicer is there to help you. Their goal is if they're work trying to do a forbearance or a modification, That means they wanna get that deal done. What is one thing that you are grateful for right now? Yep. I am grateful for my family and our health. You know, it's something that, you know, in our past, some family members who have had health issues, and just having a loving caring family that is there to support us. So that's something that I'm so thankful for every day.

DJ Olojo [00:23:06]:

Man, you could not have said that any better. I had a a colleague who who died yesterday or actually on Sunday, and we're recording this podcast in late June, but I I I just to be alive and and to have support is a blessing in and of itself. So regardless of what situation or where you find yourself, you know, having a family being alive is is a tremendous blessing, and I echo your sentiments a 100%.

Chris Seveney [00:23:31]:

The the last part, man, is what is your wildest or most interesting foreclosure related story, man. We want a good one, Chris. I mean, they we could record a whole another podcast on this. I've had, you know, mold houses, houses burned down. I think my wildest one was when We had a deceased borrower show up in courts. So, yeah, I figured that would, you know, say what would go on. So we had a property where the borrower had passed away, and we couldn't find any of the family members. So we had, you know, legal start before closure process. And as part of that, they have to, like, note fi and post and, you know, try and find all, you know, family members. And there was a son who had the same name as the father. and, you know, basically showed up in for the the, you know, in this state, you have to have a hearing as well. So the son showed up to the hearing, saying he was the father, saying he was the borrower. And my attorney was just completely, like, drove them for a curveball at first, and we didn't realize it at first because we had a death certificate. We had, you know, all the in, you know, this person, you know, we have a death certificate, and this person showing up saying he's this person in court. And then finally, you know, realize, okay. It's the sun. and we ended up actually doing a workout with a family, in getting it through probate and doing the workout, But, yeah, my attorney called me and said in the note said the borrower showed up to court. And I'm like, okay. I kinda, you know, it just I just didn't know, like, how did the borrowers, you know, show up in court? So

DJ Olojo [00:25:18]:

hey. You know, it's interesting because foreclosure makes the dead rise again. So, you know, it it works out. It works out, man. Well, Chris, we are so grateful for for you joining our podcast today and for you sharing this great advice with with borrowers it is so important that people are communicating with their servicers and that if you are in some type of financial distress that that you seek help from folks around you who you who you can trust and who who love you and wanna support you. Chris, do us a favor and tell our listeners how they can get in contact with you or get in touch with you and and keep up with with your journey.

Chris Seveney [00:25:59]:

Yeah. The best is You can check out information on our website 7einvestments.com. We also have a podcast called creating wealth simplified in our first hundred episodes, actually, we're talking about our stories and note investing in some of those crazy stories we have, but our current podcast really talks to people about investing and continuing the the journey to save money and to grow into build wealth. So people have the ability to retire. I like to call it the 404040 rule, which you know, nobody wants to work 40 years for 40 hours a week only to retire with 40% of their income because you will never retire in that instance. So we like to share some bits and information on ways to try and save and build that, what, generational wealth.

DJ Olojo [00:26:52]:

Awesome. Awesome. And I can attest that, you know, the the creating Wilson 5 podcast is a great podcast. And the podcast that was before that that you mentioned, Chris, definitely there are episodes that talk all about amazing foreclosure stories and just just really kinda good workouts and resolutions. So this wraps another episode of the foreclosure fix podcast Do us a favor. Please like, subscribe, and leave us a review. We would love to get your feedback, love to get your comments, and we are so grateful for you being a part of the foreclosure fix family. We love you. God bless. Thanks. The views and opinions on this podcast are for informational purposes only and should not be construed as legal advice. If you have a specific legal question, we highly recommend you contact a qualified legal profession