NL: What service does National Loan Exchange, Inc. (NLEX) provide?
NLEX: NLEX is the nation's leading broker of distressed financial assets. Our traditional role has been to facilitate the transaction of charged-off receivables between banks and other credit grantors and debt buyers. We are hired by the issuers to manage the complete sale of assets from portfolio evaluation and marketing to secure data transmission and contract negotiation as well as post-sale servicing. Over the last 14 years, NLEX has completed over 5,000 debt sales on behalf of virtually every major domestic issuer for over $80 billion face value.
NL: What opportunities does NLEX provide State Buyers?
NLEX: NLEX has recently initiated the State Buyer Exchange program (SBE). This is an effort to serve our state and regional buyers. The majority of our sales have been conducted at the national level; this program brings state buyers to the forefront of the debt marketplace. State buyers can now bid on their state(s) from portfolios offered on behalf of participating financial institutions. NLEX is a broker, not a reseller, which enables state buyers to bid on accounts that have not previously been sold.
NL: Who can buy or sell accounts through NLEX?
NLEX: Almost all of the portfolios sold through NLEX are brokered on behalf of banks and other financial institutions. These charged-off receivables are marketed to qualified debt buyers at the state, regional, and national tiers.
NL: How can I become an approved buyer?
NLEX: Prospective buyers can visit our website at www.NLEX.com and click on the "Buyer Registration" link to begin the process to activate an account with NLEX. The link contains a confidentiality agreement, contact information, and a buyer profile section. By creating a buyer profile at NLEX, buyers will be notified of portfolios that are consistent with their product type, aging, agency level and geographic preferences. If a prospective buyer has any questions regarding the registration process, they can contact our sales staff at 800-264-3683.
NL: What type of accounts are available for purchase?
NLEX: NLEX specializes in brokering unsecured, charged-off debt portfolios. The three most common product types offered include consumer credit cards and lines of credit, automobile deficiencies, and business credit card accounts. We also offer a wide variety of other product types such as secured auto files, mortgage deficiencies, Demand Deposit Accounts (DDA's), rental agreements, student loans, business/commercial loans, home equity loans and lines of credit, and leases, among others. The aging ranges from sub-performing to charged-off and out-of-statute accounts.
NL: Is there a minimum purchase price?
NLEX: NLEX does not have any minimum purchase price requirements for sellers or buyers. We have brokered account transactions with a face value of less than $20,000 to portfolios above $1 billion. Our average portfolio size is approximately $15 million; the volume available in each state will vary with each portfolio and issuer. We need buyers from each tier of the debt buyer market. The SBE program's success is entrenched in a "safety in numbers" mentality. For portfolio acquisitions to be feasible at the state level, participation from buyers ranging from mid-tier California buyers to small Alaska buyers is necessary.
NL: What size portfolios are available? What volume can I typically expect?
NLEX: Portfolios offered through NLEX range from less than $1 million total face value to over $1 billion. At the state level, volumes range from $10,000 to several million face value. In the first three months of the SBE program, we offered over $250 million to state buyers on behalf of participating financial institutions. The volume in each state will vary by issuer and portfolio. We have been able to accommodate the volume demanded by our current SBE members.
NL: What supporting documentation is available upon purchase? What is the cost to obtain further supporting documentation and the relevant time frame?
NLEX: Supporting documentation availability will vary by the issuer. Some sellers can provide all documentation up front in either hard copy of electronic format. In this scenario, documents are typically transferred within a few weeks of the sale. Other issuers follow the standard 10% of account documents for free and a charge of $7.50 to $10 per account for the remaining 90% of accounts. In either case, state buyers can request documents through NLEX and have a dependable medium for documentation retrieval.
NL: How do I evaluate a portfolio and how long do I have to evaluate a portfolio?
NLEX: Portfolios offered at NLEX are typically on the market for 5 to 7 business days. During this time, qualified buyers have access to our Bidder Information Packet (BIP) and Due Diligence data file. The BIP contains the Purchase and Sale Agreement, Seller Survey questionnaire, and a Portfolio Stratifications section. The Due Diligence data file is an Excel spreadsheet state buyers can manipulate to perform analysis at the state level. NLEX also employs a full time sales staff dedicated to answering any question buyers may have.
If we do not know the answer to a question, we ask the issuer directly. This provides state buyers with a direct link to the original credit grantor, not just a link in the chain of title.
NL: What is the typical chain of title for debt portfolios?
NLEX: SBE provides state buyers with much more direct access to the banks than what state buyers have historically been able to acquire. For most other brokered or debt resales, title is transferred from the bank to a national buyer. After that point, it may be resold to another, or several, national and/or state buyers. When a portfolio passes through several hands, the likelihood of it being scored and "cherry-picked" increases significantly. When a state buyer bids on accounts offered direct from an issuer through the SBE program, they get the accounts they bid on. There are no owners in between that can select and retain accounts that are likely to pay earlier in the recovery cycle.
NL: What issues do state buyers commonly face in the secondary market?
NLEX: When state buyers purchase accounts on the resale market, as previously mentioned, the chain of title can become convoluted and the bills of sale may not be retrievable. This is increasingly scrutinized in the courts. When purchasing through SBE, state buyers have access to the original bill of sale and they are a part of the original chain of title.
We have all heard stories of the small "fly-by-night" resellers that have sold the same accounts to several buyers at the state level. This situation is eliminated through the State Buyer Exchange program since accounts are transferred direct from the banks to the state buyers. There are safety mechanisms in both the contracts and IT departments that prevent duplicate sales of accounts.
Documentation for state buyers can be very difficult if not impossible to retrieve if the banks are no longer contractually obligated to provide documentation to the original national buyer. Since litigation is the primary recovery strategy of state buyers, documentation is extremely important. When state buyers purchase accounts through NLEX, they have access to documentation for a specific amount of time in which the issuer is contractually obligated to provide documentation.
NL: What is the typical sellers profile?
NLEX: The typical profile of an NLEX seller is a premium national financial institution. These top tier sellers provide the bulk of the sales volume. We do however broker on behalf of state and regional banks as well as credit unions.
NL: Who do I contact if I have questions regarding the State Buyer Exchange program?
NLEX: Interested state buyers can contact us via telephone at 800-264-3683. The primary contacts are Van Millis, Director - State Buyer Exchange, at extension 205 and Cassidy Beck, Marketing Representative, at extension 219. If you would prefer to email us, our email addresses are VanM@nlex.com and CassidyB@nlex.com. We will be at the DBA Convention Feb. 5-7. You may visit our booth # 623 or call us beforehand to set up a private meeting. We will also be exhibiting at many industry functions such as NARCA and the ACA events throughout 2008.
