Big Bucks From Break Ups

Not For Every Loan Originator

“I tell [LOs] this is not a shiny new object,” said Jody Brun, founder and president of the Divorce Lending Association, which trains Certified Divorce Lending Professionals. “You risk making things worse, much worse.”

Brun speaks from experience, having gone through a divorce that involved the division of real property 30 years ago. She recalled noticing a disconnect between the legal situation and the accompanying mortgage situation and the number of gaps in the process.

Watch the Interest

So Brun decided to educate herself, building on her own experience in the mortgage industry and as a participant in a divorce. She developed her curriculum and passed her knowledge on to lawyers practicing family law.

“They saw a lot of mistakes being made,” she said, adding that even though almost half of marriages end in divorce, no two are alike, whether it be the goals of the two parties involved, their outlook, or perspective.

The association’s program, Brun said, eliminates many of those mistakes, whether they are in divorce and family law, financial and tax planning, or a mortgage.

According to the association’s website, the certification program provides mortgage professionals with the training to better serve clients who are ending marriages, as well as additional mentoring, coaching, and business development designed to help them reach their audience.

For Brun, background knowledge and a broader understanding of how those pieces intersect with real property issues is a key component to working in the divorce lending niche. Mortgage professionals who don’t see the difference between divorce lending and other less complicated channels fail their clients and risk doing them significant harm down the road, she said.

“They can provide value or chaos,” she said

Word Of Mouth And Relationship Building

Brian Sacks, a mortgage loan originator at Homebridge Financial, has been in the loan origination business since the 1980s and started working as a certified divorce lending professional in the last four years. Sacks, who calls Bruns’ course “outstanding,” said the niche fits into his philosophy that loan originators need to have a multipronged approach to stay in business.

As for the divorce niche, Sacks said the benefits are pretty simple: “These are people who have to sell,” he said. “It’s not rate sensitive.”

Another advantage, in Sacks’ view, is that he has developed relationships with mediators and divorce lawyers that enable him to participate in the niche without having to advertise, an act that he described as “cheesy.”

“You come blessed,” he said. “They bring us in while negotiations are going on.”

The key, for Sacks, is to come in early enough to make sure mistakes haven’t already been made, such as the case of a divorce in which the client who was keeping the home by virtue of the divorce agreement hadn’t applied for a mortgage. As it turned out, the person was not eligible for a mortgage, but no one had thought to ask.

In another case, Sacks said, the person keeping the home as a result of the settlement needed a year of alimony payments to build credit and income requirements to qualify for a mortgage.

“These are not quick loans generally speaking,” said Sacks, who estimated that he closes 15 to 20 divorce loans a year.

The key to working in the niche, Sacks said, is to realize that you are there to help mediators or divorce lawyers do a better job for their clients and get them through a very difficult time, albeit one that will result in the purchase of one home and sometimes two.

“The approach must be one of an educator not a beggar,” he said. “Too often LOs are just walking in with their hands held out,” he said.

Helping People

Cindy Tamsin, a senior mortgage advisor and certified divorce lending professional at House America Financial, has been involved in the divorce lending channel for about five years and said it represents about 5% to 10% of her business annually, although she believes it could be a full-time job.

“It’s slowly growing,” she said. “There will never be a shortage of people divorcing.”

While there may not be a shortage, the Bowling Green research does indicate that the divorce rate is at its lowest in 40 years. But, still, almost a million people a year are calling it quits on their marriages.

Like Brun, she went through a divorce and realized that lenders could provide a much better experience for those going through a break up in which the only bigger issue than what happens to the house is what happens to the kids.

“My goal is to help people. When I went through it I didn’t know what to do,” Tamsin said. “I got it all wrong.”

Tamsin said that LOs thinking of getting into divorce lending should be guided by a set of principles or expectations, including: it’s very rare that a divorce doesn’t get contentious; always keep both parties in mind; sometimes it’s like therapy; and there will always be people divorcing.

Timing is also an important aspect of getting involved in a divorce settlement and helping couples divide property and get mortgages.

“It’s harder when they’ve waited until they ruined their credit,” she said.

Tamsin said she’s never had to pay to advertise for divorce cases because the channel is largely word of mouth and cautions those in her line of work that haven’t been through a divorce to “pick another niche” because the process can be difficult and lengthy. However, Bruns disagrees that LOs in the niche should have gone through the divorce experience.

That difference aside, Bruns said her organization has just surpassed training 800 loan originators in the craft of divorce lending, and the goal is to continue to grow that number in order to help them provide a valuable service and to help lawyers and families involved in an emotional experience.

Teamwork

Kathryn Kostas, vice president and certified divorce financial analyst with EP Wealth, a financial planning and wealth management firm, has worked with Tamsin for several years.

Kostas said her role in a divorce settlement is to research what will work for both parties — and many times — enable one to qualify for a mortgage to keep the home while leaving the partner leaving the home the ability to afford to buy another home if they want. Tamsin, she said, plays a huge role in that.

“We’re trying to create two financially stable households and the mortgage and real estate pieces are huge,” Kostas said, adding that a divorce lender’s ability to be able to work through obstacles — such as a spouse with no income history in years — is also key.

“Creativity is a huge factor. ‘What can we do here? How do we make this work in a way that’s best for both parties?’” she said. “I’ve had some terrible experiences (with divorce lawyers). I need someone who knows the right questions to ask.”

Kostas said that those experiences don’t mean the lawyers are to blame. Their job is to get the best deal they can for their clients and also not to give financial advice because that’s not their responsibility.

But she also tries to explain to them that a divorce lender can help keep their client in the home, which will likely lead to a good review and future referrals.

“Once they see the benefit , they’ll continue to use a divorce lender,” Kostas said.