NPLs-Loans Ratios, Determining Properties in Default, Finding Non-Performing Properties, Sell Indicators, Using Power Search

Hey, welcome to this week’s Q & A. Let’s get right into it.

I specialize in 100+ units in Commercial Real Estate, multifamily asset type. I’m looking at the BankProspector tool, and I see that there aren’t many non-accrual loans in Georgia right now. 

There are a couple of different ways that you can search. The best way for you to search, the way to get the best set of results, is to use the Power Search. So when we go in there, when we’re looking at these overviews, let’s say we pick a state, and we’ll just choose Georgia. These are the lenders that are headquartered in Georgia.

So there are 42 banks that are headquartered in Georgia that have commercial REO for $32 million. Now that doesn’t mean that’s the sum total of all of the REO that’s available there. Those are just the lenders that are headquartered there. 

If you want to find the lenders that are lending there, who are more likely to have assets you can pursue, I recommend that you use the Power Search. The Power Search is our map-based search. It looks not only at where the lender is headquartered but also at the entire, full base of lending, like what banks and what lenders have a physical presence in this area. 

So, in this case, I look at multi-family non-accrual, and there are 23 banks, and they’ve got 340 locations. In this view, there’s Atlanta right there in the view. If I back it out a little bit farther and I searched this area like that, it’s going to expand it a little bit.

Now in our upcoming release, we’ve got not only banks but also credit unions for this. So it’s going to get quite a bit better. But for now, this is the way that I would pursue your lenders to identify who your targets should be.

Power Search looks like a map button, and then you’ve got different selectors that you can add. And then, we’ve got our list of lenders. We can adjust the column visibility or what columns we want to see, like for loans for sale and REO, all those.

We can also see whether or not we have them on our watch list already. You’ll see a little plus button there, and when you click that, it shows you how many contacts we have for this bank, and we give you some idea of who they are so you know what kind of ranking we have or what kind of contact data we have.

So that is how the Power Search works. And that’s really where I recommend you start to do your best prospecting. That’s going to be most fruitful for you, so I would start there. 

What should the “NPLs to loans ratio” be before I contact the bank? 

There’s no hard and fast rule, but I’ll say that anything over 6% is considered a high non-performing loans to loans ratio.

To find that kind of information, we go into one of these records, for example, Beal Bank in Texas.

Then, we scroll down to where we put the NPLs to Loans data. This bank has almost a 13.5% non-performing loans to loans ratio. So that’s pretty high for that portfolio in the residential first position. Anything over 6% is considered pretty high, so that would be an indicator that they should really be thinking about moving those things on. 

How can I determine which properties have defaulted on the underlying loan? 

The way that this business works is that you’re not going to find individual non-performing loans out there being registered anywhere. You have to get that information from the lenders, from the asset managers. 

So when you jump in here, and you are finding a contact, for example, like a commercial loan servicer, an REO closing coordinator, loan acquisitions, a portfolio manager, or commercial default, some of these people are the people who are responsible for the workout and the recovery of these loans, and sometimes the foreclosing of these loans.

So if you want to find out the individual properties, we need to communicate with these folks. So the process is: 

Step 1: We want to identify the lenders. 

Step 2. We want to identify the people who are able to identify those individual properties for us.

Step 3: We want to make sure that we’re communicating with them and moving that relationship forward. 

I see many lenders initiate loans outside of my home state (which is Georgia) for properties located in Georgia and close loans. How can I locate non-performing properties regardless of which lender originated the loan?

This comes back to the same thing, which is if you’re looking for non-performing loans or even if you’re looking mostly for REO, then the fact is that if you want to do these deals direct, you have to find the people, not the properties. You really need to change the way you’re thinking about this.

We’re not looking for properties, we’re looking for the people, and those people will be responsible for dozens or more properties, including the non-performing loans. So they’ll be your workout officers, your special assets folks, your default specialists, these kinds of folks. That is how you get it.

There is no way; there isn’t any mechanism, there’s no database, there’s no way to find non-performing whole loans owned by individual lenders. There are things like CMBS that you can pursue, which is Commercial Mortgage-Backed Securities. And those individual loans are identified, but it’s extremely difficult to tap in there for a number of reasons, some of which I cover in some of the content on the site. 

But the fact of the matter is that the way that those foreclosures are handled and whatnot, it’s likely that it’s very hard for you to get in there. So what we’re looking for are the people at the lenders who have the whole loans that we can work with.

I hope that this makes sense. 

How do I find out if the “property owners/institutions” are in the process of selling the property or not?

This is all about the one-to-one communication that you’re having with your prospects.

What indicators should I look for to see if these non-accrual loans are worth my time?

What we really want to focus on here is, do they have the kind of assets we’re looking for, and in what volume do they have it? Also, things like, have they been selling, have they been holding loans and leases specifically held for sale and this kind of thing, these are the things that help us understand what’s going on.

We cover all of this in the training. If you signed up and went immediately to BankProspector, I want to encourage you to go through the mastery training because we really spell it out. I really go deep on explaining exactly how the business works and what the best way is to approach folks.

I started saving individual searches in Power Search, but it does not appear to let me save the individual columns I want to see each time. Also, how do I export into Excel once I select these columns? The export feature does not seem to work with Power Search. 

So this again is a case where we are about to release a bunch of updates, which I think you’re going to be really happy with.

To do your export through Power Search, when you’re first identifying these folks, go through and make sure they’re on your target list. While you’re deciding whether or not they’re going to be on your target list, you can put some of these other columns on it, so you can get a good look at who you’re looking at.

You add them to your list. And in our upcoming release, we will have an export button, but we want to make sure these folks are on the target range for now. Then, go to the button right next to the Power Search button, which is where we export contacts. This is our advanced export. When you use this, you can go ahead and select all of your targets, and then you select all of the different columns that you want to include on that export right there.

Now, if you have other questions about this, then I want to recommend that you take a quick look at Mastering BankProspector. We have access to what’s covered right down at the bottom of the member home page. You’ll see that we go over advanced search, advanced contact export, which I was just showing you, details on the bank pages, and how this whole thing works is all covered under Mastering BankProspector right there. So definitely go check that out. 

But right now, until we have our new version released, the way that you want to do this is you want to add folks either to, you want to tag them or add them to your targets, and then you want to come here, and you want to select the specific items that you want in your export.

Also, on the column views, there are columns missing to view, which were part of my advanced export to view when I was doing this before. 

Also, if you do the Power Search for “All Banks” in the USA, refine it by “Loans for Sale Non-Accrual” with a range between 1-30k, the results are 0. However, if you do other searches (ex. Loans for Sale 90+ Days) and view the column of Loans for Sale Non-Accrual as a part of that search, there are banks with numbers in there for “Loans for Sale Non-Accrual.”

I would not put a maximum like 30k on there. Even if that is the maximum deal size that you think that you’re after, I would not put that on there. I would look at anyone that’s selling loans. And then I would look to carve out some of that. 

Now, if you’re feeling like that’s all that you have to pursue, then I would really strongly advise that you work to team up with some other folks, either as a JV or folks who you can broker notes out to or folks who will buy the whole portfolio or bigger parts of the portfolio and then carve pieces out for you, or you tie up the portfolio, identify specific loans that you want. I would not put an upper bound on yourself like 30k; it’s just too small. 

I hope that I’ve answered these questions. I hope you are getting going right now as we’re moving towards the end of the year. It’s an excellent time to be prospecting, especially as we’re coming out of all this forbearance and eviction moratoriums and all that sort of thing.

We’re just five days past getting settled with that, and I think we’re going to see a lot of inventory open up over the next 60 to 90 days. It’s going to be a really exciting time. So that’s it. I hope this was helpful for you. 

Thank you for being a member, and we’ll see you next week.