Many note investors don’t understand the rules that need to be followed to add charges for force-placed insurance or delinquent taxes. If you do it wrong, the amount may not be collectible. In this episode, Dan Deppen interviews Saprina Allen who has over 25 years of investing experience in many facets of real estate, specifically debt collection portfolios. They cover a range of topics, including the importance of continuing education, even for people with decades of experience in the mortgage industry. Saprina also talks about her mastermind group, as well as how to properly add charges to loans.
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Saprina Allen of Main Street Asset Solutions
In this episode, we’re joined by Saprina. How are you doing?
I’m doing good. How are you?
I’m good. Thank you so much for joining. I know you’ve got a long history in the industry. I’m very happy that you agreed to come on and share some of your experience and wisdom in different things. Start by giving us a little bit about some of your background and what you’ve been doing in the industry.
I started off at a big bank selling to a note investor when I was working for a foreclosure department. I’ve been working at that bank since ‘95. I started selling notes to someone that was in New York who had their office on Wall Street in the late ‘98, early ‘99. I was telling somebody that I used to sit back and laugh after he had funded $500,000 worth of bad paper from the bank because we were conditioned that that was garbage. Get rid of it, do something with it. For ours, it’s not collectible. That’s where were 21 years later, who would have thought that I’d be sitting in a place where now I’m the person that’s chasing that bad paper.
In hindsight, it is 2020. I have a range of backgrounds. I did medical collections. I’ve managed a couple of large hedge funds. I do two things here on Main Street. I’m the President of Main Street Asset Solutions which is our servicing division. From time to time, I’ll raise capital for Main Street Capital Partners. We’re doing a co-buyer. We’re trying to take down a large tray. I also own my portfolio. I’m hosting a mastermind every quarter. I keep the group small and intimate, no more than 10 to 12 people in Reno, Nevada. Every single month, I’m in LA speaking at a brunch or lunch at some event.
I was thinking you lived in Southern California for some reason.
That’s my dream home. That’s where I would like to live but those prices and the costs of living. I’m an Ohio girl so even Reno is a sticker shock for me for the costs on real estate here.
I live in Colorado and the prices here are high compared to the Midwest, but there are a lot of people from California that migrate to Colorado because even though our prices are high, they seem cheap in comparison.
They say that there’s a possibility that Reno is the next Silicon Valley. A lot of California people who are retiring are coming here, paying cash for properties, overpaying for them because the view is nice from my patio, seeing Tahoe and Mount Rose. It scares me because I think about when the market corrects this time, is it going to be worse than last time?
Nevada got hit hard last time. It seemed like it was one of the key handful of states.
When I first came here, I didn’t have my real estate hat on because I had gone through a horrific divorce. I wanted to get away. I wanted a fresh start but this was a temporary place. I didn’t plan on staying here. I’m going to be here for a couple of years and I’m going to do my thing. Years ago, if I had just invested in 3 or 4 properties, I would have made $1 million easy based-off of what real estate was years ago and what it is now. You live and you learn. Sometimes, even when you’re right in the heart of doing the business, you don’t think about things the same way when you have your personal trauma or turmoil.
Things always look like to me, especially the stock market and other things, everything was very obvious in hindsight. When you’re in the middle of it, it’s not that easy.
I was trying to function nothing more, nothing less. Every day, I’ll go and buy a couple of properties. I want to kick myself like, “How could you miss this?”
You make your offer based on UPB or value, the lessor of the 2, that payoff balance is not guaranteed to be collectible. Click To TweetYou have to have to wait for the next downturn and then scoop them up.
Hopefully, I’m sitting on a beach somewhere sipping on a martini or something the next time the downturn hits.
You mentioned you’re at NoteWorthy. That’s a conference that I haven’t made it out to as of yet. I was interested to hear about that.
This is the funny thing about NoteWorthy. It had a dark cloud over it because it had become such a pitch fest. Anybody who could breathe could speak there. Everybody who was trying to sell something that there was no good content. I was reluctant to go and the more I thought about it, Aaron Halderman and I have gone a long way back. I did some consulting. I said, “I’m going to support and I’m going to go present. I’m going to do that for him.” I did that and when I go to those types of events that I don’t respect, I’m normally in the hallway. I’m mingling. I’m trying to meetup with people that I do business with. This time, I stayed in the room quite a bit because I wanted to see what was going on. There were a lot of new people in the room. There were some seasoned people, so it was a mixed crowd. It wasn’t nearly as large as NoteWorthy used to be when it first started. What I will say is that there were some great content and vendors. It’s taken a shift for the better. I appreciated being a part of that event.
How far does that event go back? It goes back pretty far, isn’t it?
Don’t quote me but at least ten years, if not longer, maybe 14 to 15 years. I don’t know quite the age of it but it was going on when I was out doing some consulting. There were a couple of years I was like, “I have wasted my money. Are you serious?” We went away from not doing booze. I was very reluctant about participating but it regained its integrity.
Was that in California or in Nevada?
It was in Anaheim. It used to be in Las Vegas and then when I won’t mention his name, someone got NoteWorthy, he moved into California. He’s no longer playing the space well but not respect it. Aaron took it over a few years ago and he worked its way back up to a good event.
When I go to events, I haven’t been to that one, but I was at IMN and I do Note Expo. There are so many people there. I find myself talking to everybody and I don’t even get to take in the content as well.
As a presenter, it’s even worse because once you present, people start approaching. They start talking to you. It’s almost an open door policy. I never wear my speaker’s badge until the day I’m speaking. It’s what I’ve learned. I’m managing my time and I have a short fuse sometimes. People who know me know that. I’m never mean and disrespectful but, by nature, I’m an introvert. I don’t mingle in the crowd. It takes a lot for me to do that. Once I get comfortable with my crowd, I’ll intermingle with them. I never had my badge on when I’m speaking unless it’s one of those events that if you don’t have your badge on, you can’t get into the room.
You can just wear it to get in and then put it away.
That’s what I normally do.
About how big a turnout did they have?
It is a big event, there are 400 or 500 people there. It has some growing to do but there were right people in the room that will share the word that they got something out of it and made some great connections. It will grow for the following year as well.
Do you plan on doing Paper Source? I’m debating on that one. I haven’t booked anything.
That’s a draft of something, I hate sports. If the draft is something going on in Vegas. All the hotels are high. If you’re planning on taking advantage of the block, you should do so sooner than later.
I might already be too late.
I just booked. The block was still available. I booked my flight. I’ve done that. I haven’t paid to go to the actual event but the things that matter because rooms have run at $500 a night because of whatever, I don’t know if it’s the NFL or the NBA. It’s one of the two that are going to be going on in Vegas. I stay at a more upscale hotel because I don’t like walking through the smoke every day.
I was out to Las Vegas and I was at Valley’s which I’d never stayed at. I don’t know why but that seemed the smokiest place I had ever seen.
I stay at the Vdara because it’s a smoke-free and casino-free facility.
I didn’t even know they had those out there.
It’s the only one that’s nice. It’s next to Aria.
That’s pretty good. I’ll have to keep that in mind. I have to take a look at that and see if I’m going to try to sneak out there or not.
Even with that event, I made a lot of connections. I did listen to a lot of speakers. I listened to a few people I wanted to hear speak. Sometimes that could be very overwhelming. When you’re in the business on a day-to-day and you hear people talking who are experts, it puts a bad taste in your mouth. If somebody who’s done 20 to 100 note deals and now they’re an expert and then teaching people to do things the wrong way. I’m very careful about who I listen to.
That makes sense. It takes a long time to get these things figured out. In IMN, I was talking to a couple of hedge fund managers that had experienced going back decades. Some of the craziest situations they run into I had never even heard of but you have to be around for a while to see some of those issues that you don’t even realize they’re a possibility.
I do continued education. It’s not anymore. It used to be DBA, Debt Buyer’s Association just to stay being compliant and being certified as a debt buyer. It’s now RMA. They’ve changed their name. I do some mortgage training about being a licensed mortgage loan originator. I continue to invest in myself, personally, not even for the business on an annual basis. If you don’t, you get lost. I can remember someone was asking me something about bankruptcy. The difference between 7, 13 and 11. I’m well versed in 13 and 7, but I’m not very well versed in Chapter 11. We have a Chapter 11 case that is driving me crazy. I’m not afraid to say I don’t know because there’s so much to know and learn. I have a good memory and doing this every single day. It will carry you but sometimes you have to get in a book, read and go to the classes to stay on top of things.
If you don't know any better, you can't do any better. Click To TweetI’m often relying heavily on the attorney. A lot of times, people ask me questions on things and it’s like, “I don’t know but this is who I call when I need that.”
It’s funny you bring up attorneys. I have a blackball list of attorneys that I don’t use anymore from overcharging, tagging fees on, or not doing what they say they’re going to do. I had an experience. We’ve had a file with an attorney for a year trying to get the assignments recorded. Now, we’re at risk of losing the property so the HOA foreclosing because our assignment wasn’t recorded. This is in Kentucky. The Master Commissioner allowed the HOA to move forward with foreclosure and not addressing the first lien. Sometimes, these small communities need clicks and I’m like, “Was this intentional? I came right out and I asked the attorney. What if it was intentional? I’m not using you anymore and I got more power for you not to get any more business.” I have a blackball list that I tell people not to use. Besides me, you probably don’t know.
Unfortunately, I haven’t gotten on the phone to that side. It is tough with vendors. It’s interesting too, it’s such a small industry. You would think that sometimes that would police behavior on its own but it doesn’t. When I first got into the industry a couple of years ago, in the beginning, I was fairly naive about some of those things. As I’ve gone along and discovered who some of the bad actors are, I’m a lot leerier when I work with folks.
In my mastermind, part of the day, we go to my house for a reason. I’ll say what goes on in my house, stays at my house. I will name names in my mastermind. “Stay away from them, don’t do that. Do not ever do business with this person.” I’m very careful because I don’t ever want to get sued for slander and bad mouth in anybody. When you’re new and you don’t know any better, some people are salespeople that don’t make them good note people. That doesn’t make them a good steward of your money. If you don’t know any better, you can’t do any better.
I’m big on trying to make sure that I protect the new people that come in, so they don’t get taken advantage of. Even going back to 2008, I have emails, exchanges back and forth. Susie Berg was my partner in The Art of Notes. It’s one of the entities that I own. She was an attorney. We have emails from investors saying, “I just deployed $500,000 to X and they said that they were deploying it for loans. Can you please help me get my money back?” It was even to the point where I had such a good relationship with FCI. I could send over an exhibit A and like, “Did you guys board these loans?” It was like, “They’re not here. They were never here.” It goes back that far.
I’ve gotten a lot of calls from investors about one guru in particular that has problems. The stories are terrible and there are lots of them.
I tell people pink is my favorite color, not orange. That wasn’t nice. I watch the Note Investor Boards on conversations that are going on. That helps me sometimes come up with a topic for one of my webinars. Sometimes I’ll do a webinar with the Revival Brothers who have a great software. They analyze notes and give you exit strategies. Leaders Of Integrity, we also have a webinar and I’m a part of Leaders Of Integrity in the note space. I have been watching the groups on Facebook. One of the things that I’ve been seeing lately is corporate advances and not being able to put them on accounts and why you’re not able to put them on accounts. A lot of the investors aren’t understanding the restrictions on us charging things to borrowers without having the proper paperwork to back it up or taking the proper steps before we add those charges onto a loan.
They’re going to talk about some of those steps. I got an email from a service where I was adding force-placed insurance. They said they had been audited and they had to change their processes for adding a charge. I haven’t had time to go back through and read everything, but it sounded like some things may have changed from what they were.
They haven’t changed. What I’ll say is that you do it wrong long enough, you’re going to get caught. That’s the truth. The requirement is for force-placed insurance. Generally, when you’re doing your due diligence, they tell you the day you fund everything that you’re buying, make sure you have force-placed insurance on it. That’s the protector asset. That’s good advice to have because we did a trade and it was so many moving parts and still trying to manage day-to-day operations. Somebody said, “Did you call to put force-placed insurance on all those loans we bought?” This is a true story that day of service transfer, one of the properties burned down to the ground. It was a $70,000 investment.
I couldn’t return it to the seller. It wasn’t the day of funding, it was the day of service transfer. I was like, “Did you guys still have force-placed insurance on this loan?” I was told, “Yes, we did.” I called FCI and my broker. It was going through all these hoops, round and round and was even utilized in the same force-placed insurance company that they use to take the hand-off. I found out the property had burned down. Lo and behold, there was no force-placed insurance prior to the sale happening so that asset was the loss. I would rather spend a couple of thousand dollars upfront when I’m funding a deal versus losing an entire asset because I didn’t have force-placed insurance.
On the consumer side of the borrower side, before you could throw force-placed insurance on a property, you have some steps you have to take. You have to send them a letter stating that you’re now servicing the loan, you’re looking for force-placed insurance. The reason why we send that letter or proof of insurance, not force-placed insurance, is we’re looking to be able to change the mortgagee clause showing that now we are the beneficiary if there was a total loss. We want to be named on that so they don’t get all the insurance money. Thirty days later, you’d have to send a second letter if the borrower doesn’t respond. From that first letter, what happens is they’ll forward that to their insurance company and we’ll start getting updates via mail on insurance.
They still don’t call you even if they’re delinquent but they will at least acknowledge I do have insurance. The second letter goes out and still no response. Between 15 days and 30 days after the second letter goes out, you tell them that if they don’t send in the proof of insurance, you’re going to force-placed insurance and you also have to tell them that you’re going to charge their account for that. You have to have that backup in your system for every loan that you do force-placed insurance on. If you don’t, you cannot charge the borrower for that.
That’s why a lot of times people get confused when they’re looking at buying loans and they look at the difference between the unpaid balance and the payoff. I’ve always tended to wheel off of the unpaid balance because of the payoff amount. I don’t know that they’ve done everything correctly. Some of that may or may not be collectible in the end.
When you’re going through your foreclosure action and you transfer over from a previous servicer $30,000 to $40,000 of corporate advances with no backup, guess what attorneys don’t want you to do in your foreclosure action? They don’t let you include it. Nowadays, a lot of sellers are saying, “Look at the payoff balance. You place your bid on UPB, Unpaid Principal Balance or value. The lesser of the two, not the greater of the two. That payoff balance is not guaranteed to collect in any way, shape or form. Very rarely in this industry have I seen full payoffs happen and I’ve been around for a long time.
Especially when I was a new buyer, some sellers were extremely insistent on going off of the payoff, which I’ve always held to you. A lot of times they had to walk away.
I will tell people that there is no bad no, but there’s bad pricing. If you choose to pay what that seller wants to get in the game, what you’re doing is you’re driving the price up for other people in the industry and it’s not right. Sometimes people are so desperate and out of desperation, they do foolish things. The one big thing on is force-placed insurance but the other thing is taxes. I’ll tell my truth. I was trying to cut corners and save checks. I hated writing checks and I had 4 or 5 properties in one county. All the taxes were delinquent. This was 2015. I still didn’t feel anybody could tell me anything, but I’ve learned that lesson. I’m still teachable.
I still have a lot to learn but I was trying to save time. I printed off all the delinquent tax bills, wrote one check, gave instructions on how to apply it and I sent it off one check. I emailed my servicer and I tell them, “I paid my taxes. Could you add these to a loan?” “We need backup.” “Send over a check.” “How do I know that this check went to pay these taxes on these 4 or 5 accounts?” “Because I told you so.” I didn’t pay him right. I was told that I needed to have paid, either had backup support or a response from a county acknowledging my check number for each one of those property taxes that I paid or I should have paid them individually, not all on one check.
You wrote a single check. I follow you now.
It was a single check and not enough backup. I didn’t get the chargeback to my borrower. The corporate advance of making sure their taxes weren’t delinquent.
That can be a lot of money.
It was. It was a semester of school for my son. The other thing was attorney fees. Some servicers will let you self-service and do your own workouts and manage your own attorneys. It’s the same difference. I had several loans with one law firm. I sent one check. On the invoices, it will tell you it’s either a recoverable charge or it’s not but because I had the invoices, I send them over. I thought that was enough. I still need a backup that I had paid them. When you’re self-servicing, you’re doing your own workouts, your own loss mitigation, your own asset management, or whatever you want to call it, you need to make sure that the servicer is going to accept your form of payment or if the servicer is willing to do so, they make the payment for you. They make the corporate advance so they know that it’s done and then they’ll put it back on the account. If they don’t have any way of tracking that, it’s a little bit difficult to prove that it was paid. It’s a lot of paperwork when you have 30 different people sending you different ways that they’ve paid corporate advances.
That’s got to be tough. As much as I like to complain about services and different things that go on, I would not want to be a servicer. You have to deal with all the minutia on every note and all the compliance across all the states. It is not an easy job to do.
People get upset and get mad at you. I’m like, “It’s business. It’s not personal.” I’m here 15 to 16 hours a day making sure this stuff gets done. I come in and the sun is up, I go home and the sun is down. I’m home long enough to take a shower, get in bed and start all over again. Lots of times, I even go to sleep with my computer on my lap making sure that I’m getting to everything that I said I was going to get to and make sure that nothing falls through the cracks. We’re all human. Human error happens. You could imagine a pile of advances that investors have made. You can’t read their handwriting. They haven’t typed it, they’re scanning stuff, emailing you and it’s upside down. You need a full-time person to manage the paper that’s coming in from all different angles.
What systems do you use to keep all that straight? For my business, I have a CRM that I use and over time, I’ve tweaked the way I do it. To your point, it’s hard to keep things from falling through the cracks. To me, that’s the big name of the game.
We process all of our mail every single day. Mail that comes in paper-wise, we scan it, it’s loaded into a system, it’s attached electronically to each individual file, to each individual note or whatever that is. If there’s a step that it needs to be added into, we use the mortgage office. There’s somebody that manually puts that information in. If there’s a charge, the same thing, but everything is reviewed by a person before it’s attached. Sometimes you can’t read the writing, the investor won’t put a heading on it, you’ve got to figure out who the investor is and it’s all kinds of stuff on top of the communications that come in from the borrowers. We’re all intelligent people and not doubting some of the consumers, but you’re dealing with all different types of people, handwriting letters.
You can’t understand what they say. A lot of misspelled words, words that shouldn’t be used in a sentence. You’re reading through that and you’re trying to decipher what they’re trying to tell you. For those people who won’t take a phone call, it’s a lot of things but we manage it well. Our admin staff is great. I pay attention to detail because they’re like, “Did you mean to tell me to do that?” Not being afraid to say to myself or Krissie, “You should take a second look at this. You were moving too fast or you’re missing something.” That’s a great team to have to be able to say, “You might be looking at this the wrong way or we need another set of eyes on that.”
When you do something wrong long enough, you're going to get caught. Click To TweetThank you so much for coming. I’d like to have you on again because this was good. I can think of a lot of other subjects that we could dive into in the future.
This was my lunch but I’ll give up my lunch to share some knowledge and show people that I am approachable. I’m an introvert. Because I’ve been hurt in the industry too, I’m very cautious with the relationships that I establish and I build.
How can people get ahold of you if they want to ask you some questions or are interested in your mastermind?
They can email me at Saprina@MSASInc.com. Whether it’s a mastermind, they’re looking for services, or a question they need an answer, they can shoot me an email or they can call me on my cell. If I’m not busy, I promise I’ll answer. That’s (330) 472-3966. Link up with me on LinkedIn. I’m under Saprina Allen on LinkedIn. On Facebook, I’m Saprina Hopkins. My name is hyphenated and I’ve dropped off the Allen but you can reach me on Facebook, send me an instant Messenger. Any way you communicate with me, it’s me responding. It’s not someone else.
Thanks again. I appreciate it. That’s it for this episode and see you next time.
Thanks a lot.
Important Links:
- Saprina Allen
- Main Street Asset Solutions
- Main Street Capital Partners
- NoteWorthy
- Paper Source
- IMN
- Revival Brothers
- Leaders Of Integrity
- Saprina@MSASInc.com
- Saprina Allen on LinkedIn
- https://www.MSASInc.com/
- https://www.MSCPInc.com/
- LOIEvents.com
- Shop.NoteInc.com
About Saprina Allen
Saprina Allen has over 25 years of investing experience in many facets of real estate and specifically debt collection portfolios. Her experience includes foreclosure, mortgage deficiency, Brokering notes, note buyer, servicing, compliance and even medical collections and more.
Currently, she is employed by Main Street Asset Solutions in Reno Nevada, As the president.
Noted and praised for her work on bringing humanity and compassion while working with delinquent loans, her motto has ever been: “every home has a heartbeat.” This has served her well as she is perhaps the nation’s leading bad mortgage restructuring negotiator and note servicing advisor.
She is a mother and aunt and even a grandmother (though she doesn’t look it) and her family is her reason for her hard work and ambitious goal achieving.
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