Buying Defaulted Loans – “Why don’t you give me a list of banks that sell defaulted loans?”

On buying defaulted loans:

I recently received the following:

“… If a had a list of banks that sold notes to individual investors I would just concentrate on them!

It is one thing to ask for someones private contacts but I don’t see any reason that you cannot say X Bank sells, Y Bank does not. I have invested a tremendous amount of time going up dead ends for the pleasure getting the “We are sick of your faxes and phone calls, We don’t sell notes, do a short sale and quit bothering us.” response. How can I success in how to buy defaulted loans?”

Here is my reply:

“…, I hear your frustration in terms of “just get me the list, dammit!”

Here’s why I don’t do that. I received an email yesterday from a broker I’m working with. It was from a senior manager at Nat City Mortgage, saying they’re selling in $100-200M pools.

Up until yesterday, I didn’t think Nat City Mortgage is selling notes, but I couldn’t be certain, only because the last time I’d contacted them was at least 8 months ago.

That’s why, when you mentioned you were chasing a note held by Nat City Mortgage, I didn’t tell you that they didn’t sell. I honestly wasn’t sure if their policies had changed.

Times change. Nat City was written up in the NYT the other day in an insightful article titled: “Regional Banks are Rocked”. And now they’re selling large pools of defaulted loans.

You’re good at the direct sell – go ahead and call this senior manager up directly and maybe you’ll be able to buy that Nat City loan regardless of what your own rep told you. (See the Hector story below)

My list of banks that sell defaulted loans (which I’ve confirmed) might be only 20 banks long. Does that mean that I know that only 20 sell notes? Obviously not. It merely means that I’ve spent time developing only those 20. And I know of another … probably 20 … that don’t sell defaulted loans.

But here’s the catch that I want you to understand. They’ve said “No” to me.

As my mentor taught me: No means “No” today. This goes for BUYING DEFAULTED LOANS as well!

Other challenge I see: Someone like you reads a list I put together and thinks: “so I won’t try X or Y or Z because Dean doesn’t have it on his list.” And you miss a perfectly good opportunity to buy defaulted loans right there in your backyard.

I’ll teach you and everyone else everything I know. Getting a RELATIONSHIP to buy defaulted loans from, however, is something I want YOU to do.

It’s when people like you take the initiative to break through to new banks that you actually progress. I know you’re frustrated and tired. I can’t help that.

I can only defend my actions as justified given the strategy I pursue with banks, and that I share with you and with everyone.

No means “No” today. Remember that. It’s like the highschool hotties you chased after. You didn’t turn around after getting turned down just once, did you?

Another example – I thought Chase didn’t sell to small guys. In fact, I worked at Chase and spoke with the SVP Legal Counsel in 2004 re: getting approved to buy from Chase. He told me there were 12 approved buyers. All of them big boys. I found out three weeks ago that there’s a small potato named Hector cherry-picking single loans from Chase out of Florida. A buddy of mine tells me that he sends gifts to this one collector he works with, and somehow gets all his single loan purchases approved.

The rule is simply that … there are no rules when Buying Defaulted Loans

That’s the simple explanation. Selling notes isn’t exactly a regulated activity – it’s not like originating, and it’s certainly not regulated the same way.

Probably not the answer you were looking for, but an explanation of the way I operate on this very specific point of giving out any kind of a “definitive list of banks that sell defaulted loans”.

There are many many more notes around than you will know what to do with.

Dean