Turn your Denials Into Revenue Streams

Written By: John Hoxsey
Certified Master Loan Processor (CMLP)

The industry seems to be changing every day, and the rules we played by yesterday are completely different today. As revenue streams dry, we need to look alternate sources to sustain us. The bad lending practices of the past have come back to haunt lenders that offered extreme products in previous years. Now, they are swinging to an ultraconservative mindset which may create a whole new set of problems in the interim – but that is a discussion for another day. Bonnie Hilt wrote an interesting article last week in reference to the state of denials. The article started off like this:

“If your office looks anything like mine does, then you have a stack of files about 2 feet high that you have recently rejected.”

So how do we navigate the minefield that is the mortgage industry today? What should we do about all of the loans that have been rejected? Fortunately, there is hope for your TUD’s. No, subprime is not back!!! But, many times you can offer the borrower’s that were denied something better than a refinance.

Enter the Note Modification. There are many companies out there that will help borrowers who are in “bad loans” and have no hope of qualifying for a new “good loan”. A competent lawyer is able to show the borrower’s current lender; if the loan were underwritten by today’s guidelines, that it would not qualify. In many cases borrowers who are on the brink of Foreclosure, or who may be considering a short sale, can do a Note Modification. Some lenders are even taking these borrowers down to 4% just to make the DTI work!!!

Why would the lender do this??? It is better for them to have a performing loan at a ridiculously low rate, than it is to have a loan that goes into default. The lender loses liquidity when a loan goes into Foreclosure, they have holding cost until the property is sold, and they have to pay attorneys’ fees.

Why would you refer your turn-downs to a company that does this? That is simple. Many modification companies will pay you up to $500 upon the note change, for a loan that you refer to them. This is not a loan and this falls outside of RESPA. Why would you not refer your dead files to a company like this?

If you contract process, then technically the dead files are not yours to refer. However you may be able to split the commission with your broker when it is all said and done. After all, you worked on a file that did not close, and you have a source to help the borrowers who would not otherwise qualify. You may even be able to get the broker to send all of their turn downs to your source. In which case, you may make about $50 per file.

Next week I will discuss how to find the source for the modification, and how to negotiate the terms with your brokers and the Attorneys’ who handle modifications.

Remember - Your reputation is your business.

Happy processing!!

About the Writer. As one of NAMP's volunteer writers, John Hoxsey is currently a NAMP member in good standing and is a NAMP Certified Master Loan Processor (CMLP). If you would like to become a volunteer writer for NAMP, please email us at: blog@mortgageprocessor.org.