Make mortgage modification your nicheJoe Cornoforeclosure, negotiate, refinancing, sub-prime, pre-payment penalties
Years ago, when people had slow equity and high rates of
interest, I would communicate with the lending sources that
purchased the loans that I originated. Rather than simply watch
clients lose their homes to foreclosure, I would negotiate with the
lenders to work with the borrowers.
Due to my clients losing jobs, or becoming ill or divorced, I
started contacting lenders and did so easier than the borrowers
could have. I had phone numbers that reached actual humans, and it
saved time that the customer would spend on the lender
merry-go-round of communication disservice. I became my customers'
negotiator with their lenders.
The term "mortgage modification" is new for lenders to save
oneself from foreclosure. The reasons for people being on the verge
of losing their homes are the same today--loss of job, sickness and
divorce--but we now need to add not being able to afford the
The concept of mortgage modification is a fantastic way to work
your database and assist lenders is realizing that they are better
off working with you and the borrowers. Refinancing the borrower
will stop approximately 60 percent of the expected foreclosures.
This equates to one out of every five sub-prime loans originated
over the past two years alone.
Approximately 70 percent of these sub-prime loans carry
pre-payment penalties. By explaining that if the lender would waive
the pre-payment penalty the borrower could refinance out of
foreclosure, you have presented strong reasoning. I would assure
the lender that I would resubmit the refinance back to it first.
Now, the lender would have a stronger loan due to a lower rate of
interest, and the potential foreclosure is alleviated.
Rather than leaving your previous borrowers on their own to save
their home, why not be their liaison to the lenders? This is truly
your fiduciary responsibility. Take a minimum commission or
standard fee for the time spent to work out a plan to save your
client's home. Just waiving a pre-payment penalty can sometimes
make the deal work for the borrowers.
Lenders make themselves difficult to reach on the consumer side
of the loan. As a broker, you can make contact, get to the point
quickly and unemotionally, and work with the lenders to salvage
their bottom line. Your borrowers would see your increased worth in
working with you, and you can get paid by refinancing them.
Your relationship with your client base just increased, your
image and service with your lending sources just surged, and you
feel pretty good that you are doing something about the industry
woes of dumb lending practices. However, you may increase business
with the new service that you are providing.
With a planned marketing/sales campaign, receiving testimonials
from those who you save from foreclosure and having your customers
tell others of your services, you can create a business in itself.
There are approximately two million U.S. households headed for
foreclosure. You can become the "loan workout" or "mortgage
modifier" businessperson and attract a segment of the industry yet
to be tapped.
Changing times always create opportunity for another service to
be developed. The relaxed lending standards of the past have opened
up an opportunity for you to present the lenders with a solution.
As the lenders are scrutinized and reviewed by shareholders,
government agencies and themselves, they may see your resolve as a
positive and proactive way to illustrate that they are doing
something to fix their mistakes.
Of course, lenders basically make themselves hard to reach and
need to be sold on the concept. I can see many insurers and the
companies that administer the loan servicing being very interested
in your plan to reduce foreclosures by 60 percent. Approach
consumer advocate organizations and watchdog groups to support your
service as well.
Various responsible lending groups would back your efforts and
probably supply you with direct lender contact information. They
would also refer customers who need your services. You could work
with state government agencies as well. You can contact me for
ideas on reaching this nationwide market.
The cost to foreclose on a decreased-valued property is very
high to a lender. Your concept of home salvaging will make sense to
most in our industry. You may ask, "Why would the borrower want to
do this?" Borrowers do not typically look at their homes purely as
debt. They need a place to live, and they do not mind cycling
through a depressed cycle to remain in their homes. This is the
reason that foreclosure is so emotional.
In California, when Silicon Valley dried up for approximately
five years, 45 percent of Northern California properties were
upside-down on their values versus loan balances. Less than five
percent went late on their payments or went into default. People
have attachments to their homes. Family is usually nearby, their
children are enrolled in local school districts, and they have
This is your key marketing approach when working with property
owners. They are more than borrowers or consumers. They are people
with lives and wish to maintain their existence within their
communities. It is true that there is life after foreclosure, but
most people want to continue living as well as avoid foreclosure,
if possible. There will be some that will not be able to avoid the
By working with potential secondary first-time homebuyers, one
can open up other opportunities to locate someone else to purchase
the homes in risk of foreclosure. However, going into depth on this
subject would require an article of its own.
As you read this article, you can see many potential positive
sources to do business with. This is why atypical marketing is so
important. When everyone else is sending out monthly newsletters,
attempting to secure commercial lending deals and marketing reverse
mortgages, you can be doing something unique and beneficial. Rather
than going along with everyone else, initiate something unique that
differentiates you from the rest.
Please e-mail me any ideas that may come from this article. I
have supporting data and articles that can assist your uniqueness.
Do not send me excuses. That is what everyone else is practicing at
Joe Corno is president of Utah-based We Be Consulting and
Seminars. He may be reached at (801) 836-2077 or e-mail [email protected]