An Interview With Craig M. Geisler; President of Cherrywood Enterprises, LLC
Robert: Being the fact that you are the President of Cherrywood Enterprises, and you are a buyer and seller of charged off debt files; what is the state of the debt buying marketplace in 2019?
Craig: That’s a good question, Robert, and that seems to be on everyone’s mind since the beginning of the year. From my perspective, we are in a market of constant change. Ever since the major banks decided to stop selling their charged off loans, buyers have been looking at alternative sources to buy debt. The first and most obvious market was the auto industry. With the abundance of charged off deficiencies and availability of backup documentation, it was an obvious source for files. Now, the market is rather saturated with auto paper. Plus, many of the sellers, don’t have all of the necessary paperwork needed to file suit. It can be tricky. Then, there seemed to be a shift into the consumer loan space with Cashcall, then LoanMe, and some of the other consumer lenders, it was good paper with good docs. Then, with the creation of the CFPB and what seemed to be an abuse of power in early 2012, many buyers just got out of the industry all together. Now that there seems to be a clear description of what the CFPB is looking for with violators, there appears to be a cautious approach to buying. So, we at Cherrywood Enterprises began looking at the commercial aspect of the industry. First, as mentioned in our last article, commercial loans follow the guidelines of the UCC code, with no jurisdiction for the CFPB. That creates a safe feeling for buyers. So, I see that being a big industry for buyers and sellers alike going into 2020.
Robert: Tell me a little about Cherrywood Enterprises. What separates you from other buyers and sellers?
Craig: Well, Cherrywood Enterprises has been my growing baby since 2012 when my brother and I created the company. I had been with 3 other buyers/sellers since 2007 and I found faults with how they ran their operations on many aspects. Some had trouble finding good files, while others didn’t offer good post sale support. Some were extremely technically advance and had a great platform, while others didn’t really seem to embrace their buyers as the bloodline of the company. They were regarded as just buyers and they would get the post-sale docs anywhere from 2 weeks to 2 months after the sale, even when they had the docs in house. I never got that. The first thing we implemented was an obvious “customer first” format. What that meant was, without our buyers and sellers, we were nothing. Reputation had to be everything. So, if we told you that you would get the docs within 48 hours, we moved heaven and earth to do so. Chain of title was the first priority post sale. We asked some of our buyers what the most frustrating part of the debt buying marketplace was, and the majority said it was the inability to get the chain of title and backup docs in a timely manner. That became our number one focus, and still is to this day.
Then, we implemented an advertising and marketing platform to reach out to small to regional banks, credit unions, auto lenders, and commercial lenders. We created marketing campaigns that would reach those sellers who didn’t know that their charged off loans were worth anything and educating them on the process. That became quite the task, as many of those sellers didn’t like the pricing that their loans were worth. So, it became an educational call, and a sales call.
Last, was the ability once we received the files, was getting the Bill of Sale from the seller immediately upon funding the deal. Of all of our processes, that was the easiest, but apparently seemed to be difficult for other sellers to get to their buyers.
Robert: That’s good to hear, but the main thing our readers are probably thinking is, what about pricing on all of these different kinds of files?
Craig: That’s what its all about…pricing. Well, obviously, with each different type of asset class, comes different kinds of pricing. There are many aspects of what these files are priced at. There’s geography, age, backup docs, how many times the accounts had attempted to be collected on and by how many agencies, verbiage in the docs that allows for attorney fees and whether or not there is arbitration. Unfortunately, there isn’t one set of pricing for each asset class. The best answer I can offer is a range on where I have seen files go for this year. For charged off, in stat files, I have seen them go anywhere from 1%- 13%, and for out of statute paper, anywhere from 5 basis points on up to 80 basis points. Of course, all of that is depending on the criteria I had mentioned above.
Robert: Fair enough. Now, where do you see our industry going in the future with regards to the kind of paper and pricing?
Craig: Well, I don’t have a crystal ball, so its just my best guess. If you look statistically over the last 10 years, pricing has pretty much stayed the same, except for the pricing of fresh credit card files coming direct from the issuer. Those accounts have been increasing in price over the last 8 or 9 years due to the fact that there just isn’t much of that product out there. The old laws of supply and demand apply. Everything else, auto consumer loans, judgments, commercial, etc. I can only assume they will stay in the range they have been, unless we see less and less of that type of asset class. It appears that auto deficiencies, with the recent uptrend in charge offs in the auto industry, will continue to be accessible and in large supply. The 3 asset classes I see gaining in popularity is commercial, mortgage deficiencies, and medical. All 3 are still relatively new to the marketplace and not in bulk supply. We are still learning about the nuances of each, and how they can be better collected or sued upon.
Robert: Interesting. How do you see Cherrywood Enterprises evolving as these new asset classes increase in popularity?
Craig: Well, we have already ramped up our marketing to include commercial and medical debt issuers. Buyers still have a lot to learn about the best ways to not only collect on these, but in filing lawsuits, as well. For instance, we have always heard that large balances; those in excess of $10,000, have a high probability of declaring bankruptcy. Yet, in many of the commercial files, the balances exceed $20-40,000 in balances. So, while they may still declare bankruptcy, many do not in an effort to save their business.
With medical, traditional collection efforts simply don’t work in trying to collect on these accounts. You can’t go into a call with a mentality of being the big bad collector. There is HIPAA compliance that needs to be followed, and the collector need to take more of a sympathetic approach to the debtor. I hear that more often, a softer approach to medical debtors is the way to go.
With mortgage deficiencies, I always thought these would be the most difficult loans to collect on. The debtor already lost their house, what’s the motivation for them to pay? The answer? Many consumers care about their credit scores again, and while maybe they lost their house, they still have dreams of buying a house again down the road. Maybe the debtor lost their job and simply couldn’t pay their mortgage, or they went through a divorce? There are many reasons why they fell behind, but these are the kind of debtors that can turn things around within 12-18 months and want to buy a house once they fix their credit!
Robert: Many good points to ponder. Last question. Tell our readers about the Cherrywood Enterprises and the recent success stories that have made you proud about being the owner of your company?
Craig: That’s a good question. There are many. We recently brought on a young man to be our Vice President of Business Development. His name is Hunter Godfrey. He had the tough task of reaching out to credit unions and banks in an effort to sell their charged off files to us. This requires making hundreds of cold calls, emailing thousands of emails to these sellers, and taking a LOT of “no’s”. We have all been there at one stage in our careers, but he stayed with it…. hoping for his first deal, and then he finally got it! He and his girlfriend are buying their first house, so it was good to see his hard work and efforts pay off.
Also, we were working with a credit union that we had a good rapport with last year, and they decided to hold off on selling. We were disappointed, but we understood. Last month, they finally got back in touch and we were able to work out a nice deal with them.
Also, we work with a lot of new buyers…. first time buyers. Some had been burned in the past by bad brokers in the industry. Not only were we able to get them good files, but we helped them find a good agency to place the files with, and they made their investment back within the first 4 months of placing the accounts.
All of these stories have helped us establish a good buyer and seller base and create customers for life! That is the mantra we have adopted for Cherrywood Enterprises. Each deal allows us to create customers for life, and we intend to do our part to keep them. We work 8-10 hours a day, so each customer kind of becomes like an extended family. We talk about spouses, kids, vacations, family firsts, and even sad moments that we all experience. I truly LOVE what I do and the people we work with! I couldn’t imagine doing anything else with my career. That’s what we at Cherrywood Enterprises are all about, and it comes across in our dealings with people every day. I am proud to be the owner of Cherrywood Enterprises!