The foreclosure industry often gets a bad rap. While some outside the space have formed a skewed perspective on foreclosure professionals (we’ve all seen how they are routinely portrayed in movies), this heavily-regulated facet of the real estate world serves as an intermediary between borrowers and lenders. You will be hard-pressed to find someone who knows the ins-and-outs of the industry better than Randy Newman, the founder and CEO of Total Lender Solutions. But just as Originate Report learned when we sat down with Newman to discuss his growing company, the foreclosure business wasn’t always on his radar.
Originate Report (OR): What originally caused you to become involved in foreclosures? It doesn’t seem like something that you just wake up and want to do one day…
Randy Newman (RN): I am from New York originally – I was a real estate attorney and still am to this day. But in 1999 I came out to California to visit and I fell in love with the San Diego area. A year later I was on a plane to California for good. In 2005, I was teaching some real estate courses for those wanting to obtain their real estate license – one day, one of my students came up to me and asked if I knew anything about foreclosures. I said “foreclosures? I’m a real estate lawyer, of course!” He said his father-in-law was not happy with his trustee, and asked if I could talk to him. At the time, I said to myself “what the hell is a trustee?” as we use mortgages on the East Coast (without a trustee). I searched online and found the United Trustees Association– I enrolled in a certification course that was being held in two weeks and and told my student that I would gladly speak to his father-in-law in three weeks. That was my first foreclosure-related customer, and I haven’t looked back since.
OR: Throughout Total Lender Solution’s existence, there have been a number of ebbs and flows in the economy – how has this impacted your business model, if at all?
RN: The reality is that foreclosures are always going to be needed – whether we are talking about institutional lenders like banks or private lenders (what we call hard-money lenders), it’s always in need. There are always going to be people who are not able to afford what they’ve done, or in some cases, take advantage of what’s happened. The majority of what we do are commercial business foreclosures; this includes SBA loans and fix and flips – there are always ups and downs, but this segment of the real estate process will always be there. In most cases, in an economy that is strong, what we serve is more to light a fire under the borrower; when nothing is happening, it is often the case that the borrower doesn’t have an impetus to do anything. That is when we become involved – in California and Nevada, two of the states we operate in, it can be a three or four month process – we light that fire, and the borrower realizes that we are serious. That’s really the most predominant thing we do in an economy like this; years ago, however, everything went to sale when the economy took a turn for the worse.
OR: You’ve discussed this a little bit, but how does the foreclosure process change as the economy grows and weans? And does a negative economy make the job of a trustee or nonconventional lender more difficult?
RN: Right now, we’re seeing an uptick in the nonconventional lending space as far as foreclosures go, and I think the reasoning behind that is people are starting to get nervous. We’ve had a relatively long uptick in houses selling within a few days, but those properties are sitting on the market longer now. The longer things stay on the market, nonconventional borrowers lose money – the interest payments, at first, can be manageable but as time drags on and construction costs increase, this hurts both the borrower and the lender. Still, about 85 percent of properties on which we start the foreclosure process are being refinanced or sold. Borrowers have to come to a sense of reality that they’re not going to be making as much money anymore.
OR: Currently, Total Lender Solutions operates in four states. Can you discuss some of the differences in the way that foreclosures operate across the country? What has been your experience with acting as a trustee in California, for example, as opposed to Nevada?
RN: California is still the largest market for us, partially because of the sheer amount of property that is in the state. Our second-largest market is Texas for a similar reason, it is a large state and there is so much property there. There is expansion going on in Texas currently, and I happen to be there as we speak, but trying to compare the processes of these states is insane – the process lasts around four months in California but in Texas, the actual foreclosure process lasts less than a month. There’s a pre-notice sent to the borrowers which gives them 20 days to pay, and if they don’t there are often sales in less than a month. So there’s much more opportunity for a lender here – the borrowers can get caught off guard, especially if they’re new to the area.
OR: Can you speak about TLS’ year? Between the acquisition of a new company and the beginning of your business in Texas, it seems like a busy time in the foreclosure world.
RN: It was definitely a busy year for us. A foreclosure company that existed for quite some time was acquired a new owner in recent years, and she was a student of mine at the trustee’s association. We became friends and she was looking to retire and have someone take over the company. This is actually the second company I’ve acquired; the first was Western Regional Foreclosures in Arizona. A friend of mine was the owner of the company, and she and I had referred business to each other for a number of years. In 2016, she turned 66 and wanted to retire, so I purchased the assets of the company and employed her one employee – without her, I don’t know if I could do it. She works so hard, and she helps deeply with the continuity of the business. With the advent of video conferencing, we are able to conduct face-to-face meetings several times a week.
Arizona’s processes are closer to Texas than California and Nevada, so the Arizona office handles Texas and the California office handles Nevada. We’re looking to expand up into Oregon and Washington State, which we’re planning to do by the second quarter of 2020.
OR: You brought up the role that technology has played in video conferencing. How do you feel that technology has made it easier to operate in a number of different states?
RN: Having so many tools at your fingertips is incredible. The ability to connect via email, scan documents, sign documents electronically – who would have ever thought you would be able to do that? I have been in real estate law since 1982, and started as a legal assistant when I was in college – I remember when a desktop word processor was literally a machine that needed its own desk …and the printers weren’t much smaller! At that time, those two pieces of equipment cost about $20,000. I thought it was the greatest thing at that point, because I was typing up college term papers on a word processor and transferring it to floppy disks. The first PC I bought had 20 megabytes of storage, and my second computer had 40 megabytes. I said to myself “how am I ever going to use this much space?” It just blows my mind.
Now, when I travel to conferences I don’t need to put an ‘out of the office’ message up because I can access work material wherever I go, for example. It has been both a benefit and a burden because now there is no down time; I used to be able to sit in an airport and relax but now I’m checking emails and talking to people. It just seems like I can’t shut off sometimes – but the upside is it allows for the growth of the business, and allows me to connect with people that I wouldn’t necessarily meet otherwise.
OR: How has the changing nature of technology assisted Total Lender Solutions in its growth process?
RN: You know, when we first started the functionality was more stifled. We’ve gone from using spreadsheets and using search and replace functions to running software that allows us to perform calculations and other tasks. If there is an activity coming up in a week, we can easily take care of it; overall, it streamlines the process a lot more. In the last two years, because we’ve grown so much, I brought in a few consultants to help us nail down the internal processes and procedures that have made us so incredibly efficient. I am blown away because I thought I would have to bring on one or two more people this year, but due to the resultant efficiencies, I can essentially double my business in the next two years without bringing on an additional person.
For the sale and purchase of real estate, social media has played a large role in that. Every broker I know has a social media presence – I’m getting inundated on LinkedIn, Facebook, and even email with information. From my perspective, there can be too much information at times and it’s not necessarily a bad thing, but there tends to be some overload. The problem is, every once in a while you get someone who’s not overly-confident; those people can get thrown into a tizzy because there is some bad information that gets seeped in. The only social media we use is LinkedIn because for our purposes, it is more business-oriented as opposed to Facebook or other platforms.
OR: Apart from social media, what are some of the other changes you’ve noticed in the foreclosure market throughout your time in the space, and throughout Total Lender Solutions’ existence?
RN: Legislation. There are so many people who have good ideas and they want to do it right, but sometimes things don’t work out as planned. Even going back to 2010 when the Dodd-Frank Act was imposed, the CFPB created a requirement that consumer loans secured by a residential owner-occupied property a 120-day waiting period before a foreclosure can be started. While that doesn’t necessarily hurt Wells Fargo, it hurts the smaller lenders who are held to the same standard, and there is no exception for them. If you have someone who is dependent on that income, it can be hard to tell them that they have to wait – there comes a trickle-down effect when they can’t pay for their mortgage. The good intentions behind these things don’t always translate into a positive outcome in the end.
Lobbying also plays a role. Sometimes, there gets to be a media hysteria surrounding things. The ‘foreclosure crisis,’ for example, wasn’t really a foreclosure crisis. There was a lot of greed on the origination side of things, in the large entities that had the ability to take advantage of people and people who tried to game the system. When the smoke cleared, so many people said “wow, none of these things are viable.” All of a sudden we had so many loans that shouldn’t have been applied for and deals that shouldn’t have been brokered in the first place. The media then comes in with mass hysteria saying how all the banks are evil. Of course they played a part in it, but there was also fault on the side of the borrowers as well. I don’t personally believe that everyone should be owning their own home – if you can’t afford it, then you can’t afford it – and there are different things you can do.
OR: All of that change aside, can you describe what a typical ‘day in the life’ looks like for you?
RN: For me, the good thing about my day is that I don’t get involved with the day-to-day processing of files. When I first started the company I did everything, but now I have some great people on my team and I am able to spend a considerable amount of time reviewing issues that pop up, anything out of the ordinary that happens, and strategizing how to best run and expand the business. I also spend time talking to borrowers explaining the process to them, and pointing them in the direction of talking to their lender. No lender that I have ever talked to wants to foreclose. Oftentimes, it is just a lack of communication which causes mistrust, and that moves the process forward.
The question I get asked most often is “what is it going to cost to foreclose?” That’s always the first question. We are a very regulated industry; our fees are set by statutes in most states. We get paid a percentage based on the work we do, and the amount on the loan when we start.
OR: You mentioned the people that you have brought on board as the company has grown. Can you talk a little bit about the importance of creating a productive, hard-working team?
RN: The people I’ve brought on board had absolutely zero experience in the industry. What I looked for are people who have a good attitude, who are hard-working, who are willing to get the job done. I hesitate to say I looked for people who wanted to have a good time, because a lot of what we do with the foreclosure process has serious consequences for people, but it is important to enjoy the work that you do – and that goes for any industry. I strive to find people who are intelligent and hard-working.
Looking forward, we want to expand our client base and move into different states as well. Like I said earlier, we’re looking to move up the West Coast into Oregon and Washington State and at the same time, increase our client base. The economy is going to turn – there are always ups and downs, that’s just how it works – with that said, I don’t think the next downturn is going to be anywhere near what we experienced in 2008-9. We just have to continue being in the right place at the right time, and I think we’re on track to do that.
For more information about Total Lender Solutions, visit https://totallendersolutions.com/