Surviving the Mortgage Meltdown

The current subprime meltdown is a wake up call for everybody in the
mortgage industry. It offers an opportunity for homeowners to fortify their mortgage for the next few years and for you to generate new loans immediately.

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.

Loan Officers: this is your opportunity to be the hero by reaching out to your clients and other members of the wealth team, i.e. Realtors, Financial Planners and CPAs. 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 prospects and clients in your database.

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

• Getting homeowners out of Option ARM’s 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.

Loan Officer 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 refinance 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. 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;