Why You Need to Market to Troubled Homeowners and How to Do It
Foreclosures rates are up over 200% across the land. Even
in the golden State of California, the land of appreciation. Two million
homeowners [per their credit score] in the 50 States are in trouble. Some are
having a really big problem as they have 2/28, 3/27 or option arms that will
have a pay rate increase beyond their ability to pay. That alone is a two
trillion dollar market in 2007.
Some years ago I was asked why
women seem to marry less than perfect men. My answer is, that’s just about the
only kind there is. Well, that’s also the reason to market to troubled
homeowners; if you know how to convert their problems into a profit, even when
you can’t fund the loan.
In the old market place even a dim wit could make
money; with its ever-lowering interests many mortgages were refinanced again
and again. Add in the fact that lenders only required a borrower’s breath to
steam up a mirror. In fact, they would take your word for that.
Today’s declining middle class family income and
property values, higher interest rates and ever tighter underwriting have
created the current declining market. You will see a lot of mortgage brokers
and their reps giving consideration to raising chickens this year --because
they see their income plummeting. They don’t know how to market in this
business climate and only say to troubled homeowners: “Sorry, we can’t fund
your loan today. Good bye.”
1.
Loan possibility. Perhaps some will qualify for a new sub-prime bank loan or a private
money loan if the credit is shot but the LTV is under 65%. Don’t know any
private lender --ask me for a list.
2.
Loan modification. If the borrower can prove that they have solved the problem that
caused the pending foreclosure, a professional loan modification company can
negotiate with their current lender to stop the foreclosure and do a workout
with the lender to keep the homeowner in their home. Don’t try to do it for the
client, as you don’t know the different underwriting guidelines of the 790
lenders, nor the secret handshake and mystical language of bankers. Retired
bankers own most of these companies and charge the homeowner a range of $1,500
to $2,000 and pay you a commission of $600; and turn the clients back to you
once the problem is solved. Then, in time you can do a new loan. Note: if a
client has solved the problem and as most lenders will not take partial
payments, they should be saving money.
A free
list of the foreclosure laws for all 50 States is yours for the asking.
3.
Pay rate reduction. 2/28, 3/27 option arms, and most 80/20 loans pay rates are increasing
up to 44% and many homeowners can’t afford the new payments. Their only hope of
keeping their home is to negotiate a pay rate/interest rate reduction. This is
a difficult, complex negotiation that takes the professional former banker type
to handle. Cost runs $1,500 and commissions run $600. Once the problem is
solved you need to get their credit repaired so you can fund a loan with a much
lower rate.
4.
Deed in lieu of foreclosure. When there is no or little equity and no hope of
keeping or selling their home; and the borrower is fearful of the lender
looking for a deficiency judgment, then a deed in lieu can be the answer and
prevent such judgment. Again, not a simple negotiation. Fees run $1,500 and
commissions run $600. Note: forty-four of the 50 States allow the lender to
receive a Deficiency Judgment against the borrower for any loss they
suffer from the results of funding a loan on their home. The 6 States that do not
allow deficiency judgments are: California, Minnesota, Mississippi, Montana,
North Dakota and West Virginia.
5.
Repair your client’s credit. So you can write them a new, affordable loan. Take
care of whom you recommend, as there are a lot of companies that charge $500 to
$1,000 upfront to repair credit and many are not dependable. We know a
reputable company that only charges $90 to start and $39 a month; and pay you a
small commission.
6.
Refer to a Realtor. The borrower has some equity
but no hope of saving their home. The only way to save their equity is to sell.
Your job is to direct them to a Realtor you do, or want to do, business with;
and that will give you loans for the listings. Note --most Realtors will also
give you a 1% finder fee for the listing if you ask for it. Oddly, they can
legally pay you a finder fee, but you can’t pay them a referral fee because
it’s a R.E.S.P.A. violation. When your client sells his home, he will want to
buy a home he can afford. That should be another finder fee plus a loan. Four
commissions from one client you couldn’t fund a loan to.
7. It’s a Short Sale candidate. The homeowner cannot afford the home and the
amount of the loan is equal to, or greater than the value of their home. You
have an opportunity to find an investor [or you] to buy that home for 20% to
30% under the market value of the home. Smart investors have been doing this
for 50 years. Your commission is usually 1% of the sale price and the
commission from the loan. For the free information file called “The Logistics
of a Short Sale” contact this author.
8.
Buy it yourself. Now and then you will find a
homeowner that will say: “If I had $5,000 I would be out of here.” You know
there is some equity. Write the check. You will find homes that need lots of
repairs and more cash than you have available. Good news, there are investors
that will buy and repair and sell the home; and pay you 50% of the profits.
I am often asked if a homeowner can negotiate with
his lender. Think what would happen if you write a loan and first thing that
happens is, the lender’s underwriter talks directly with your client. The
problem is, clients say what they think the lender wants to hear; and that’s
not in their best interest. It’s the same for homeowners talking to their
lender or anybody talking to a lender and doesn’t know the unpublished
guidelines of these lenders. 20% of our business is redoing agreements someone
worked out with a lender and the borrower never had a chance of paying.
Marketing to troubled homeowners
There are five ways to market these people: 1. Mail
or call every homeowner; 2. Mail to a list of homeowners that are in
foreclosure; 3. Mail to a list of homeowners that have credit problems but are
not in foreclosure; 4. Mail to all former clients and say if they get into
trouble with their payments to call you, as you have home retention programs to
help them. Keep in mind they may be too embarrassed to talk to you unless you
say you understand problems happen to everyone; the 5th marketing idea is
buying leads.
Every day we all get flyers from lenders and brokers
offering loans we don’t need and frankly, those shotguns seem to me are
shooting blanks. The no call list has been tough on telephone marketers.
We started a list company because hundreds of our
mortgage brokers asked for a way to find troubled homeowners before the public
notice of foreclosure is filed and the competition knows. This type of list
comes only from the credit reporting companies selling through list companies.
Most good mailing list companies pick borrowers with poor credit and loans
about to, or having received the notice of a pay rate increase.
If you are going to mail to people already in foreclosure
the trick is to do your mailing before everybody in town does; by starting to
send letters and start knocking on homeowners doors the same day or the next
day the legal notice is filed; and every 30 days thereafter.
Unless your flyer or you get there the day after the
notice is filed, the chances of success are small. Best place to get a list of
foreclosures is to go to the county recorder and pick them up every day; or get
the legal newspaper that publishes them every day in your marketing area. Keep
in mind by the third day these folks will be getting 50+ letters a day.
What is worse is, the creeps will start showing up
at the homeowner door trying to scare these people by saying --the sheriff will
be here any moment to force them out --and the only way to save their home is
by deeding the home to them --and they offer to rent it back and give them an
option to buy it back at a later date when things are better. Fat chance --and
if they could buy it back in a year or so, the equity will be stripped out.
These creeps will pay you $5,000 to find victims for them. Don’t do it!!
Sixteen States have already passed laws on this matter. You don’t want to be
explaining your participation in a court of law.
Note –40+ letters received every day by people in
foreclosure will be from your local friendly attorney stating only a bankruptcy
can save the home. Most of the time they are dead wrong and the worst thing the
client can do is file a bankruptcy. A great number of these bankruptcies fail,
and the client will show up at your door saying --now what? Good news, a loan
modification is possible.
Buying leads --if this has ever worked for you,
please let me know.
One thing for sure in the mortgage world is change.
You must always be on the right side of the business curve. That curve is today
going down; and if you are not prepared, you will go down with the market.
Jim Richman
Jim Richman is a well-known author, speaker and
expert on foreclosure solutions, short sales, and marketing. Jim is a former
banker, H.U.D. commissioner and is president of Richman & Associates Inc.,
a group of dedicated former bankers.
Website- www.HomeRetentionPrograms.com
and co-owner of ICS Direct Marketing, a company that offers a list of troubled
homeowners with credit problems. Website- www.icsDirectMarketing.com. To
receive the company’s free updated information files you can contact Jim jimLrichman@msn.com or by phone (877) 502-7283