TruAssets LLC Goes W2

Steve Johnson and Ed Hines Trailblazing with W2 Personnel

Several years ago, I went to Scottsdale, Arizona, to meet with Steve Johnson, Chief Executive Officer (CEO) of TruAssets LLC. I had the pleasure of meeting he and Ed Hines, Senior Operations Manager. During the course of the several days which I was present with Johnson and his Team the one thing which stood out was a fervent desire to redefine the status quo within the Mortgage Field Services Industry.

For years the National Association of Mortgage Field Services (NAMFS) way of doing business had been National Order Mill to Regional Order Mill to Otherwise Unspecified Order Mill and then finally to a W9 Contractor whom performs the service. The financial reality is that the Portfolio spends One Dollar and receives roughly Sixteen Cents of that dollar actually applied to work on the asset.

Several years ago, Foreclosurepedia discussed several salient points pertaining to the Industry. One was that the vast majority of NAMFS Members look at the Industry existing only for the purpose of their obscene line item enrichment. Second, Foreclosurepedia predicted the onset of a more institutional, employee based model. Fact of the matter is that we exist at the leisure of the financial institutions and the US Government.

During the course of my Consultation with TruAssets LLC, the concept of movement in the direction of onboarding W2 personnel was discussed. In fact, Hines had occasion to experience partial deployment of such an operation with his former employer. As opposed to when the hordes swarmed unemployment offices without order or hope, today the US Department of Labor, in conjunction with the Department of Veteran Affairs and other federal agencies allows for both monetary grants and tax credits in upwards of ten thousand dollars per hired employee.

When I sit down with Clients to discuss their staffing, I always relate the following,

You have 10 grass cuts which will pay $100 each; $1000 total. If you farm that out to 10 Contractors your costs will generally be around $50 each. If you farm that out to 10 employees, your costs will generally be $14 or less based upon the DoL Service Contract Act (SCA) prevailing wage for your state. So, your return on investment (RoI) with 10 W9s is roughly $500 versus 10 W2s at $860 (sans FICA, etc.).

If that were the end of the story, it would still make sense; however, it is not. You see, with 10 W9s you are going to get 10 completely different products. With 10 W2s you are going to get the Big Mac Model — your employees are trained to do it the way you want each time, every time. There is more, though. Not only are you going to receive in upwards of $10,000 per employee (depending upon your state); not only are you going to give a veteran of our armed forces the opportunity to reintegrate into society if you so choose to hire one, the PR is priceless.

When Matt Martin Real Estate Management, now known as Cronos Solutions, overthrew those whom held the US Bank Portfolios, the reality is that US Bank came to the conclusion that they desired a One Stop Shop; US Bank desired to have a cradle-to-grave approach. They wanted the cookie cutter approach and embraced Foreclosurepedia’s Big Mac Model. Today, Cronos, vis-à-vis CHS, are rolling out large scale work orders into the marketspace.

Hurst v Buczek was a landmark case settled in 2010 when a Contractor named Mr Hurst sued Buczek Enterprises and they paid him six figures in the settlement as Hurst was ruled to be an employee. Currently, Vinson v AMS, et al., is racing towards the same conclusion. In reality, since 2009, it has been a well known, albeit not spoken about fact, that there are no Independent Contractors within the Mortgage Field Services Industry. No matter how you dice it, the safe way to play is to ensure your Client receives the best product we are capable of providing while guaranteeing our financial success and functioning within a legal set of parameters.

TruAssets LLC is one of those firms whom you know are going places. When I stepped onto the floor I felt like I was returning to the Pit back on the Trading Floor. Large monitors hung strategically upon walls in such a manner that all personnel were able to view them. Embedded on those monitors was a constant weather widget. The weather widget was most impressive as Scottsdale is not the quintessential snow or rain capital of the US — and remember this was several years ago before the concept of weather was even a catch phrase. What Johnson realized, early on, was that harnessing information benefited not only himself and his Clients, it ensured the productivity of his staff.

Johnson, a protégé of Milan Thompson, CEO of ASONS, learned under some of the most challenging conditions during his time in the Midwest. In fact, only several months ago, I had the opportunity of taking a complete first and second floor tour of the ASONS facility in Muncie, IN. The similarities ended there, though.

Let me elaborate upon this in only the way a trained media professional such as myself is capable of doing,

Thompson’s theory of business is that as opposed to the Company shouldering any risk or burden, the brunt of such should be thrust upon Labor. Thompson’s recent demands to employees to take FIFTEEN PERCENT PAY CUTS are incendiary within an Industry whose talent has all but evaporated. The Old Guard’s view that Labor is expendable is best displayed by ASONS loss of the Freddie Mac Contracts in Pennsylvania and elsewhere. Thompson’s saddling Indiana taxpayers with a false bill of goods, while profiting by obtaining a $28 Million facility for $2 Million and never creating a SINGLE HOOSIER JOB will be his legacy. — More on this tomorrow when we explore the question of why Thompson kept the alleged “pathological liar” in his position for SIX MONTHS after discovering the alleged problems.

TruAssets CEO Steve Johnson has a markedly different approach. After studying the W2 vs W9 equation, Johnson and Hines both came to the determination: To not begin to utilize W2 personnel would be detrimental to both their Clients and to their bottom line. Don’t just take my observations for granted, though.

Below is what Craig Karnes had to say with respect to the US Department of Housing and Urban Development’s (HUD) position with respect to SCA compliance. These quotes were made with respect to Contractor allegations against CWIS LLC and their employment of DEA Home Inspections out in California. We additionally noted that Task Easy had moved into former ASONS controlled territories and did not even require General Liability for services upon HUD assets.

The debris would be part of the initial services, not grass cuts, so at $200, it is possible to be in compliance with SCA, but it definitely appears to be low for the area. — DEA Home Inspections in California

Grass cuts also appear to be low at $27, depending on the cap for yard size, but could possibly be in compliance. — Task Easy in Michigan and elsewhere without requirement for General Liability

The $6 inspection fee though likely wouldn’t cut it under SCA as a standalone service.  As pointed out, with fringe costs etc, coupled with even a partial hour’s wage (30 mins or so per property), I would be very skeptical.  If enough subs are willing to come forward to raise concern at DOL, it should prompt an audit.

With respect to HUDs Marketing and Management (M&M) Field Service Manager (FSM) 3.10 Contract up for grabs, Karnes was even more direct in his statements with respect to HUDs fundamental disgruntlement with enormous National Order Mills incapable of handling their Portfolio,

The way the current Conflict of Interest language is written, they would not be precluded from bidding on the FSM 3.10 solicitation when it goes live.  However, to the extent that they are performing pre-conveyance services on HUD FHA inventory, they would be precluded from continuing the pre conveyance services after award.  Ultimately, it would come down to a business question of which is more profitable for the firm?  There’s never been a requirement that bidders be tied to one of the large national servicers, but many of the existing FSMs have created those relationships historically when bidding to gain the experience/past performance for evaluation purposes.  The difficulty is getting both the volumes and being able to cover the entire service areas.  Personally, I’d like to see more of the smaller end servicers band together and team to get the volumes/coverage areas nailed down.  I’d also like to try and provide incentive for firms that are already established in a particular area/HOC jurisdiction, rather than constantly introducing new businesses to areas that they’re not currently established.  Either way, I’m certainly open to comments, and expect evaluation changes when the solicitation does go live!

Several years ago, Johnson, Hines and I spoke heavily upon the fact the collapse of the National Order Mill scheme was inevitable. We spoke with respect to the fact that Regional Partnerships would begin to prevail and that those Partnerships would include W2 personnel and employees with General Contractor licenses in the states they occupied. As a salient fact, TruAssets today, is experiencing a far more granular control of both personnel and delivery of product to their Clients after embracing a W2 model. While there is no argument that the purchasing of vehicles and equipment is an expenditure, it is one which creates RoI over the long haul as opposed to the Ivory Tower overhead which others are saddled with.

Ernie Stefkovic is a man whom was far before his time. The former owner of Asset Management Specialists (AMS), Stefkovic pioneered the use of W2 personnel in the Mortgage Field Services Industry. Fact of the matter is that I am still, to this day, going over material which he and his firm promulgated. While I have never met the man, I stand in awe of that which he accomplished and like a disciple, I study the tomes I was able to obtain before the last AMS Servers flickered out. Tragically, after the sale of AMS to Mortgage Contracting Services (MCS), virtually nothing is left other than that which I have stored in the ISTAR Classified Repository.

Stefkovic is a man whom stood head and shoulders above his peers. What I mean is, Lee Mertins aside, Stefkovic and his staff had the challenge of creating a pipeline for the assets during the Crisis; they had to then not only systematically identify and track those assets, but they had to properly service them as well. As a testament to the fact that W2 personnel, under proper guidance, are the wisest strategy, Stefkovic today is the Director at Guardian Asset Management (GAM). GAM is a firm created by Dan Leader, a former AMS Director. Because Stefkovic encouraged the training and germination of W2 talent, today GAM thrives with many former AMS personnel. Pat Romano — hopefully soon to be Senator Pat Romano — was another example.

A former AMS Operations Manager, Romano is, bar none, the most knowledgeable person I have ever met in the Mortgage Field Services Industry. Romano stood as the epitome of that which might be attained by a W2 employee with respect to comprehensive understanding of their occupation. When Foreclosurepedia pioneered the Enterprise Vendor Management Portal (EVMP), a  property management platform which seamlessly integrates, via API, with Equator, Yardi P260, various industry platforms, Romano was priceless with respect to understanding Operations. EVMP REQUIRES NO THIRD PARTY APPLICATION to move encrypted photos, video and voice from the field to the client — no Aspen Grove nor Pruvan as it is entirely HTML5. With EVMP, you OWN AND CONTROL YOUR OWN DATA and may query it in any semantic fashion you want — kinda like that W2 thing, huh?! Property Preservation Wizard (PPW) does not allow that and in fact, PPW refuses to indemnify loss for more than the price of dinner at Ruth’s Chris.

Valued at over $29 Million and with over TWO MILLION LINES of source code, EVMP is light years ahead of anything domestically available. Stability? There have been over ONE HUNDRED VERSIONS RELEASED! That means you onboard $29 Million worth of software WITH UPDATES FREE UNTIL THE INTERNET ENDS — the source code used is the most actively maintained repository from a CMS Standpoint. Your cost? Simply the time to tailor to your workflow. Period. End of conversation.

EVMP utilizes the same  open source technology which Goldman Sachs co head of the Technology Division, Don Duet, recently praised. And like the foresight Duet has, several NAMFS Members are currently beta testing EVMP. Why, you ask, do Establishment NAMFS Members refuse to allow its use? Because it would make PPW, Pruvan, EZInspections, Equator and Yardi obsolete overnight.

TruAssets is far ahead of their colleagues with respect to rolling out the end product which Industry Clients want in the 21st Century. Open, candid and transparent, Johnson and Hines also have, what I like to think is an unfair advantage: They are in the Prime of their Lives. In the same way in which we saw a pivotal change in Congress when Jesse Helms and Strom Thurman died, so to are we witnessing change in both the Brexit and Donald Trump’s populist appeal as a rebuke to the Establishment. The Cigar Smoking, Cloak Room deal making environment is being challenged directly with an emphasis upon transparency.

From simply a fiscal point-of-view, it goes without saying that the Old Guard’s position that fraud, waste and abuse will continue to be tolerated in order to finance obscene and grotesque overhead are coming to a rapid end. Eric Miller, the Executive Director of NAMFS, whom is paid OVER ONE HUNDRED AND TWENTY THOUSAND DOLLARS PER YEAR, WHICH CONSUMES OVER SEVENTY PERCENT OF ALL MEMBER DUES AND IS TWICE THE NATIONAL AVERAGE FOR HIS VOCATION, is a sterling example.

It is not simply Eric Miller, though. Miller, a former LPS Executive whom received his Golden Parachute with his placement at NAMFS, is identical to the dire straights which many firms have ended up in. Make no mistake about something, I make it my business to know the precise financials of ASONS and others. Pick up the phone and ask them if you doubt me. What I choose to do is continue to keep Foreclosurepedia’s tradition of never sharing strategic intelligence provided that the playing field stays level.

When ASONS wanted to officially release the stepping down of Steve Helser and the ascension of Nathan Vannatter to the position of CEO, Foreclosurepedia was the exclusive media outlet to make that announcement.

Johnson and Hines represent the New Breed in the Industry. Over the next several days, Foreclosurepedia will begin to demonstrate that the Old Guard is being laid to rest. What I mean is that, for years, Foreclosurepedia stood as the Beacon of Light in the Wilderness for Labor. Today, Foreclosurepedia has diversified. While before, Management were concerned with whether or not Foreclosurepedia would withstand the test of time, today, we have become a bellwether of the Industry. Our crossing of the aisle; our establishment of a bridge between Labor and Management, is responsible for HUNDREDS of private negotiations on behalf of each party. The recent South Carolina Summit, which represented a combined total of nearly $31 Million annually, would not have taken place without Foreclosurepedia’s assistance.

Stay tuned Wednesday as we make the announcement with respect to how a smaller Regional Vendor became a Marketplace Powerhouse!

In closing, TruAssets, over the past several years, has proven that embracing critical and empirical data is profitable regardless of the source. As their metrics become publicly releasable, it will stand as a testament to the fact that Foreclosurepedia, once again, is #TheOracle. Prognostication is in our DNA. As more and more firms cast off the castigations of an ineffective Trade Association in favor of a free and open marketplace, profitability will, once again, become synonymous with product quality. Six Sigma Lean, Agile Management and Open Source will replace terms such as Chargeback, BATF and Bankruptcy.

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