The news isn't good. Over 30 subprime lenders closed their doors this year so far, with many more to come in the next few months. And, one of the biggest subprime lenders, New Century is ready to bite the dust. With all this and more, I would consider the subprime market effectively "dead" until this shakeout is finally finished.
Many of you have asked what can be done to stop the mortgage hemoraging and how you'll be able to survive the new realities of the marketplace. In response, I've put together some of the best feedback and tips from fellow warriors like you.
FOR YOUR CURRENT SUBPRIME BORROWERS, HERE ARE A FEW IDEAS:
1. Try to restructure their financing arrangements. If it's a purchase, will seller carry some of the closing costs or reduce the price? If you can rework the DTI and LTV on the loan you might have a chance.
2. Can you consolidate any debt on the loan? Can you get rid of seconds and HELOCS paid off at the table? How about paying off any other debt too? This will help your debt ratios.
2. Put borrowers on hold until their credit score increases. Can they wait a few months while they sort themselves out? A better score would greaten their chances of getting a loan. Do you have a credit repair company that you work with?
3. If the borrowers are already deep into foreclosure or bankruptcy and will lose the house within a month, I would give up on the loan. Yes, it could possibly be saved, but it isn't worth your time or aggrevation. Despite what you hear, these loans are a nightmare to deal with when it gets this late in the game! I know of NO REPUTABLE LENDERS that will touch these loans because who wants to take on the risk!
4. An extreme option may be "hard money lending" which is private funding from opportunistic investors with little to know underwriting requirements. They make their own rules, and as such, make their own high exorbanent interest rates.
5. If the borrower is in a really tight bind, they could call one of those "we buy houses" ads and dump the place. Yes, it helps them. But doesn't give you a penny in your pocket. Again, it's a last resort.
6. Be sure to call all of your subprime wholesale account representatives and get updated criteria for their lending rules. You'll want to make sure that they can still do your loans that you have in process.
7. Refer your borrowers out to a debt management firm who can help them get back on track. Again, you don't get anything from this. Just a thank you and some gratitude. They'll remember you and hopefully send you some referrals.
I hope these tips help give you some ideas on how to survive the subprime shakeout.
Rob Lawrence is ranked one of top national trainers in the mortgage industry. He is the currently the CEO of Battlecall.com, coaching, tools and resources to turn mortgage professionals into mortgage warriors. Visit www.battlecall.com for his free "Sink Or Swim" weekly newsletter, mortgage training, marketing advice and more! Jumpstart your career in the mortgage business, starting today.
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