I very much agree with the previous poster, that buying one (sy) two (sy) purchases has fallen out of Vouge with banks as they constantly get bitten by wanna be “investors” that get themselves sued by cutting corners, lieing to consumers, not following collection laws, etc.
Conversely, I understand the original poster to state that he wants to get out of that arena and take his business to the next level, buying bigger packages and becoming more relationship orientated with the banks.
I am working to do the same.
I have picked up a couple of general points that you probably both know.
The first, is that at the bank and mortgage company level the entire loss mitigation departments are dominated by essentially 10$ per hour people. High turn over, low incentive for them to create or even comprehend the value of relationships.
The second, is that these mainstream lenders are very concious of the end of the quarter, end of the year (as in this month) much like other corporate types, many of the people who earn incentives off of bonuses for the mitigation departments turn over often by the nature that in the lending business, this job is a “results at any cost” type business that enables them a stepping stone to the job they really want.
The third is that when you develop a relationship with the bank, it only lasts a year or so, and then at some point the bank will inevitably take the “reo/mitigation/debt trading” in house, thereby alienating you and your contacts.
Fourth, hedge fund and private money looks at these loans as opportunity to make turn the loans into performing assets, contrary to our view of liquidation. They are getting 20-25% cash on cash returns for this, our returns are better, they know this and are continuing to try to build a better mousetrap than us.
NExt, the current trend is that nationwide investment banks, Security National is an up and commer, are in the business of brokering these loans, and the prices for big pools are nothing like what we are used to paying. They are doing a good service to the mortgage industry but sucking margins out of our deals.
So, thats the bad part, but the good part is that delinquency by shear numbers is at an all time high + the mortgage business is bigger than it has ever been. So nowmatter what these banks do, real estate will always be a local business. Guys like us in each respective market understand our streets better than they do sitting in an office in (orange county), Ameriquest, (minneapolis) Wells Fargo, (columbus) GMAC, or (South Carolina) HomeEq.
As far as making the relationships you ask about. This is what its all about, in my not so humble opinion. Call it bribery, call it what you want, but I have found that we are in a profitable enough industry to spend some money on others.
- My holding company has a Large Fishing cabin in Minnesota, stocked with late model snowmobiles and atvs. (and I personally dont fish, like snow, mud or hunting)
- My holding company has a stable of expensive cars that I use to pick up several of my local lenders contacts (i happen to reside in a city that has alot of banking interests)
- I hang around with, when entertaining these bankers, alot of good looking tail.
- I have even at great expense experimented with hiring a former casino host in las vegas, (i no longer employ him, but am looking to hire another) to help me entertain, trust me that when I ask a loss mitigation department head (often times a type a male in his mid 30s and single) to meet me in vegas, they find the time
NOW granted, this stuff costs alot of dough. But:
I GET DEALS. = I MAKE MONEY.