In the cattle business, you spend most of your time working the herd to ensure it is well-fed, well-groomed and well on its way to market. You spend less time tending to that one hard-headed stray that wanders off from the herd. However, tending to that one stray and wrangling it back in is how you maximize your profits.
It’s the same in the lending business. You spend most of your time processing, approving, and servicing the good guys — those who remain with the herd. But, what do you with the stray borrower who is struggling with a stray deal? How do you keep them engaged with you, the lender? How do you bring them back into compliance? How do you keep them current on payments? How do you clear them out and get repaid? Consider these thoughts as you work your troubled loans back to the barn.
Communication
In all relationships, communication is paramount. And in this information age, communication has never been easier. Text, email, instant message — these are all good channels for exchanging information. But, with a stray borrower, there is nothing more powerful than the ole Alexander Graham Bell telephone. The phone allows you to hear the sincerity, the stress, the soundness of the game plan or lack thereof. More importantly, it allows your borrower to hear your voice, your sincerity of working it out with them, and your entrepreneurial thinking to work out of a bad deal.
On-the-Ground Information
Wrangling your stray means knowing where it is and working it back in with your cutting horse. In a stray deal, the lender needs to have boots on the ground to assess the condition of the property. Is it retail ready? Has it been touched at all? How much work is left to be done? What is the remaining budget until substantial completion? The lender needs to have a trustworthy source or team member on the ground answering these questions. The good-hearted nature of a contractor can quickly turn to stone when answering the phone of a distressed lender with a distressed deal in a faraway city. The lender must get on the ground.
Acceleration
Once the stray knows your voice and your position, you must be willing to use your lasso if it’s not going to budge. The lasso of acceleration (read: foreclosure proceeding paperwork) is your tool. It is no fun to wrangle in a stubborn stray kicking and screaming, but there is no better way to get the attention of a headstrong stray than the fear of loss. Foreclosure means no profit for the borrower. Do we want to be in this position as a lender? No! Will we take the step if push comes to shove? Yes! As the cowboy ballad of Git Along Little Dogies goes: “Whoopie ti yi yo, git along little dogies. It’s your misfortune and none of my own.”
To learn more about Residential Capital Partners, visit rescappartners.com.
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