The Subprime Meltdown = A Huge Opportunity

The current subprime meltdown should serve as a wakeup call for all. It offers an opportunity for homeowners to fortify their mortgage for the next few years and for loan officers to generate extra loans within the next 30 to 90 days.

First and foremost, everyone — homeowners, mortgage planners, Realtors, financial planners and CPAs — need to face the brutal facts:

• The game has changed. For the past five years, guidelines and mortgage programs have expanded and increased…now they are tightening and retracting.
• 100% LTV programs are going away.
• Debt-to-income ratios are getting tighter.
• Credit standards are getting tighter.
• Lenders aren’t as flexible as they have been over the past 5 years.
• Foreclosures are going up and financially stressed homeowners need advice more than ever.

If homeowners are proactive, they can navigate a soft landing. If they are not, they could find themselves in situations outside their control that could lead to personal financial disasters like bankruptcy and foreclosure.

Every member of the wealth team — mortgage planners, Realtors, financial planners and CPAs — needs to understand the current realities so they can best advise their clients.

Mortgage planners: this is your opportunity to be the hero by reaching out to your clients and other members of the wealth team, i.e. Realtor, financial planner and CPA. During a crisis, great leaders step up and show proactive leadership. This is your opportunity to define your role with every member of the wealth team and with appropriate clients in your database.

The most common mortgage strategies in today’s market are:

• Getting homeowners out of Option ARMs who aren’t prepared for payment recasting and aren’t saving money in a side account;
• Getting homeowners out of mortgages that have interest rates that are adjusting significantly within the next 18 months, because the future guidelines and interest rates are uncertain;
• Taking cash out to weather possible financial storms ahead;
• Consolidating debts to lower monthly payments and to weather possible financial storms ahead;
• To restructure debt and equity to achieve freedom points faster and with more certainty; and
• Setting up an equity line of credit to provide liquidity and flexibility if personal or professional changes impact their ability to borrow in the future.

If you want to harvest these opportunities, you need take the following actions with your homeowners:

• Do credit reviews;
• Do recast reviews;
• Do freedom point reviews;
• Do an equity review; and
• Make sure the home they are in today is a home they can afford tomorrow. Don’t let the bank and others control their future. Your clients won’t remember you for the products you sold, but for the problems you solved.

Mortgage Planner Action Items:

• Use the headlines as leverage to get homeowners to schedule credit, recast and freedom point reviews;
• Use the headlines as leverage to be the hero to both referral partners and clients. Proactively contact partners to educate them on what to look out for and how you can help their clients avoid disaster;
• Use the tighter guidelines as a sense of urgency to get the attention of homeowners who need to refi within the next 24 months; don’t wait or your program might not be available next month;
• Be proactive; solve problems by making complex ideas simple using Mortgage Coach and the Marketing Machine. From a relationship perspective, this could be the opportunity of the decade to become a hero with your past clients and referral sources, but you need to face the facts;
• Turn every loan opportunity into two loan by using the two-step referral optimizer questions. Here’s how it works: once you have delivered a valuable service like a credit review and/or recast review, ask your client: “Do you have any family members who could benefit from a service like this?” Then regardless of whether they give you a name or not, ask a second question: “Do you have any friends or co-workers who could benefit from a service like this?” Notice that we targeted two very specific groups of relationships in two separate questions.

Bottom-line, you need to help every homeowner with a subprime or exotic mortgage program evaluate where they stand today. From a relationship perspective, the subprime meltdown could be the opportunity of the decade to become a hero with your key relationships. The key to success is simple: just proactively deliver advice and valuable services.

Comments

[Tony Gallegos]

Dave,

Great information as always. Keep up the good work.

Tony Gallegos
The Mortgage Cicerone

[Mark Flanders]

Dave, this is an excellent article. Well thought out and well presented. I agree with you about the opportunities. Where many see trouble, others see opportunity! Thanks for a great read.