When I started in the sub-prime lending industry, deals were called "story loans." The reason? Most borrowers had a story that brought them over to the sub-prime side of lending. Part of the underwriting process involved reading and evaluating the story. Some were sad; others were unbelievable and creative; some made you shake your head in wonder. Most, however, contained one or more of the following plot lines:
*Death of a spouse.
*Failure of a business.
Nowadays, sub-prime lending has transitioned into non-prime lending. The storybook is growing. Plotlines expand and the stories don't always tell of a life or love gone wrong. The most common, of course, involves the stated income borrower. This includes the self-employed businessperson whose business tax deductions reduce gross income. Others operate in the no-doc arena simply because they don't want to disclose any information about themselves. Some have perfect credit, but high debt ratios. Others want to stay away from mortgage insurance requirements. Clearly, these are closer to being success stories rather than the traditional story loans.
What does this mean to the mortgage broker? How can you capture a greater share of the non-prime business? First, evaluate your approach toward the borrower. If you are a broker who only goes after straight-A conventional borrowers, you will need to change your mind-set because now a whole other world has opened up to you. Decide which story loan borrowers you want to include in your pool of business. If you decide you want it all, then you must expand your marketing efforts.
To find the traditional story loan borrower, you must find people with problems or better yet, find someone who knows several people with problems. To find the new story loan borrower, you may find yourself at the same source, but with a different approach. Here are some ways you can find borrowers with a story:
*Advertise in non-traditional publications, such as The
Greensheet or Pennysaver.
*Market to family law and bankruptcy attorneys.
*Check out your local Bar Association and find out if you can attend meetings as an affiliate member.
*Advertise in neighborhood association publications. If it's an active association, ask if you can make a presentation at one of their meetings.
*Join, attend and speak at financial planning association meetings.
*Target medium-sized employers in your area and offer your services to its employees. Your goal is to make presentations to groups of employees. If you collaborate with a financial planner, your presentation will be much more valuable to the organization.
*Advertise in local business publications and write articles for them.
*Join, attend and be an active member of a business-networking group.
*Get involved in your local Chamber of Commerce or business association.
It takes more than just advertising or joining a group to make your efforts work for you. If you join a couple of groups and advertise in a few publications and not much happens right away, don't despair. It takes many months of consistent activity for results to materialize. You will need to advertise month after month or attend and participate in meetings for a long time before you see results in the form of increased business, but it's worth it. You're cultivating long-term referral sources for your business.
Decide on the story you will tell. Will it be a tale of persistence and tenacity? Or, will you decide that story loan borrowers are much too time consuming? If it's the former, you can be sure that your story will be a successful one.
Lisa Kelly is senior vice president of Upland Mortgage, a nationwide division of American Business Financial Services Inc. She can be reached at (800) 765-3140 or e-mail [email protected]