Atypical bailoutsJoe Cornoreverse mortgages, FHA, home equity conversion mortgages, adjustable-rate mortgages
I have been writing articles for more than seven years now. Out
of all of the articles, podcasts and Web site newsletters, the top
two articles I have written that have generated the biggest
response have been "Mortgage modification" and "Debt to income
management." Credit re-structuring is at a far third place in
comparison. This is possibly due to the unique market our industry
is experiencing. Teaching unique concepts is very popular, but
rather than being popular, they are dearly needed in today's
The need for uniqueness in the industry is required to service
the modern homeowner and purchaser. So, the busy time spent in
responding to inquiries has fostered yet another article in
utilizing things atypically. Let's begin.
I have found hardly any need for reverse mortgages. They run at
higher rates, charge monthly and annual fees until the cost in
obtaining the loan compares with a conventional loan, and you have
to sell them to the older generation, which I am personally
approaching quickly. The Federal
Housing Administration has home equity conversion mortgages
(HECMs) in both adjustable-rate mortgages (ARM) and fixed-rate
mortgages, Fannie Mae has
the Home Keeper Mortgage in ARM only, and there are some private
sources that do jumbo loan limits, such as Financial Freedom's Cash
Account Advantage Plan in ARM only.
You need to be trained, and you must personally be present at
either the application or the counseling of the borrowers. Most
choose the application, as you need to obtain approximately 60
signatures and disclose about 130 pages to the borrowers before
starting the loan process. I am not exaggerating the figures. When
I am in my late 70s to early 80s, I will not be interested in
signing so many things in one sitting.
However, if the borrowers are over 62 years of age and are
facing default and possible foreclosure, the reverse mortgage can
salvage their home if they have equity in the property. People
playing the 100 percent HECM game, along with depressed areas that
may have diminished equity, will not be able to take advantage of
the reverse loan as a bailout. There are plenty of baby boomers
that fall within a percentile that could utilize such a loan.
Now do you see why the age of a borrower is so important? The
reverse mortgage does not concern itself with credit scores,
mortgage rates, credit period or notices of default. In fact, most
of what is concerned in the standard amortized loan is not a
concern in a reverse loan.
I do not believe in encumbering a property later in life, except
if you must. Learning about and using the reverse mortgage loan as
a bailout is a must.
I have previously written about short sales and a lender
restructuring a loan for a borrower.
How about contacting the lender and arranging for him to take
the property back in lieu of foreclosure and establishing a lease
agreement with the recent ex-owners of the property? Im sure your
next question is: Why would a lender take a property back and rent
it back to the just recent ex-owners?
By taking the property back, the lender saves in processing and
foreclosure, legal, vacancy, repairs, and re-marketing costs. Using
this approach also reduces the amount of people affected
financially by the loss of the property. In essence, the lender
gets the property back swiftly, he leases it back to the past
owners, and if the tenants do not keep up on the rent payments,
they are evicted. As a licensed broker, you may wish to contact
various lenders and work out an arrangement for expediting
potential defaults and foreclosures for them, at a fee.
There are so many ways to generate income in this industry, and
I love showing you ones that others do not even think about. You
can obtain the lenders' default list and work to assist the
borrowers in retaining their home as owners or renters. Remember,
there may be some that work on a reverse mortgage and you are not
requesting the lender to take the property back every time. Come
on, folks! Put your imagination to work here.
In the arrangement with the lender, you are explaining that you
will incorporate many methods and concepts for helping him save by
taking the property back and working to remedy the bad debt load
sitting on his books. You will need to pay for more training in
this regard. This leads me into my final concept on unique ways to
bailout borrowers and brokers like you. If you are providing
service at lower fees, you need to seek other means of
compensation. You need a unique bailout.
Trainers market, contract, receive payments and fill classes to
train. They usually promote themselves, and they net all of the
gain for their efforts. You see the ads exclaiming that the guru
will be in a city near you. They book the class and pay for the
cost before they secure a flight and hotel accommodations. If a
course is not selling well, they cancel the engagement and schedule
the pre-paid sales for a later date.
I, on the other hand, have always established training classes
uniquely. I let the brokers promote and sponsor my trainings. The
brokers send out the ads and promote the course. They collect the
fees, and when they can cover the cost for the event, they contact
and secure the date with me. Usually, 16 paid attendees cover my
charges and expenses. I have trained classes of 40 to 50 people.
However, I do not bank any more after the initial 16.
If 16 people create $5,000, it makes sense that 32 people create
$10,000. You, as the promoting broker, earn $5,000 of income with
32 attendees. Of course, they can have two days of training by
putting three to four attendees' payments towards having me for two
You become known in your market, you assist in organizing and
promoting strong education for the industry, and you bank while
doing such. Wouldn't it be fantastic to teach unique ways to work
your area by sponsoring training? Now, for the sake of other
trainers, you are free to contact and pick any trainer to arrange a
local class if you wish.
Earning additional money in this way does not mean there will be
no competition or copycats. In essence, I have given a unique and
atypical way to market, thus opening up my concept to becoming
typical. I may be protected from the average trainer by thinking
atypically, but nevertheless, it is now published and public for
all to take advantage of.
Let us see if there are atypical brokers out there, and maybe in
the future I will be writing that this is the most responded to
article that I have written to date. Perhaps it won't, unless you
incorporate these opportunities to benefit both your borrowers and
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]