Feb/120
How to Buy Mortgages From Banks – The 4 Buckets in the Note Buying Industry
Here is a commonly asked question.
“My understanding is the federal government is going to be offering financing to private equity and hedge funds to buy up the bad debt aka defaulted mortgages.”
If anything it would seem this would at the very least invite a whole heck of a lot of competition.
What are your thoughts on this?”
Well, here are my thoughts:
How to Buy Mortgages from Banks – The Four Buckets
The “competition” merely adds to the deal source for buying mortgages from banks.
There are 4 “buckets” in the note buying industry:
a) Big boys – buying $100M and above
b) Mid boys – buying $20-100M
c) Small boys – buying $1-20M
d) Mom and pops – buying How to Buy Mortgages From Banks, Defining Your Deal Sources
If you’re a Mom and Pop or a Small boy, the Mid and Big boys are now deal sources to buy notes for you!
They’re looking for a big IRR (e.g. quick flip on their real estate notes) and they’re buying more competitively than the small boys and the mom and pops.
View them as a note buying deal source, partner up with them, come up with some transparent “Cost plus 5? type of approach where you give them 5 points in exchange for cherry-picking their portfolio and piggy-backing off their due diligence, and why wouldn’t they be interested in selling notes to you?
So if you’re worried about the drip from the water fountain (or the fire hose!) being intercepted in some way, just shift yourself a little so that you catch the drips from the guy who just got in front of you.
And you can always go look for another water fountain to buy mortgages aka nonperforming notes.
I assure you that the Mid and Big boys are NOT out there building relationships with the 8,000+ FDIC insured banks.
And last time I checked, those 8,000 have a few non-performing notes in their portfolios!
Hope this was useful (and inspirational) information for you.
It’s time to take massive action.
It’s all out there, for those that choose to see the buying notes opportunity.
Feb/120
Home Equity Second Mortgages
Secured loans play a crucial role in home equity second mortgages. You may have one or more secured loans in addition to your first mortgage. These loans are called secured loans because the lender will have registered a charge on your home for the amount of loan. The term charge is used here to both cover a charge and a standard security. The existence of a charge has two important consequences.
Firstly, the lenders can apply to a court for an order to sell your home to get their money back if you do not make the agreed payments or if you break the terms of the mortgage agreement in some other way. Secondly, you must repay to your lenders the sum outstanding on your mortgage when you sell your home. Before a property can change hands the charges must be removed; when the charge is a mortgage, it will only be removed when the loan is repaid. Every mortgage you have will be registered as a charge. These will be listed, usually in the order in which you borrowed the money, so that the first lender will have the first charge, the second lender will have the second charge and so on. This is the order in which the lenders will be repaid if your home is sold.
By the way of charge, the lender has secured the certainty of recovering the money lent, with interest, if you default on the payments. Secured loans may be taken out for any purpose and are normally repaid on a capital repayment basis, but interest rates will usually be higher than for your first mortgage. You are likely to have a shorter mortgage term on your secured loan and this, together with a higher interest rate, will make your monthly payments comparatively high.
Dec/110
Reverse Mortgage Agents Need Patience to Work Leads
So, you decided to start selling reverse mortgages in the last couple of years, bought yourself a bunch of cheap internet leads and ran out to meet the world. You probably received the first lead and called on your first prospect for this particular project and felt the sting of rejection. As a professional salesman, you picked yourself up and undaunted called on the second prospect. Same result.
This is is a common story among new reverse mortgage agents, especially those who have a background in selling traditional mortgages. Many times the salesman turns a good lead into a dead end by ignoring the obvious difference between the products and, more importantly, the customer. Reverse mortgages are about people.
Consider the following when you work your reverse mortgage leads:
Direct mail reverse mortgage leads are the best way to reach seniors and earn their trust. The senior organizations have websites, that are wonderful, but the power of mail and the printed word on paper resonates far more strongly with senior, particularly older seniors, many of whom do not even have a computer. It has been this way for years. And in the reverse mortgage industry direct mail is a great way to create a reverse mortgage lead. Any serious senior market market lender that does not have direct mail as part of their marketing mix is restricting their on revenue.
There are significant differences between any two financial products. Everyone in the mortgage industry knows that is is naive to think that all loans are created equal. This is especially true when comparing reverse mortgages to conventional loan types (Equity Loans, 30-year Mortgages). Although there are similarities that can be used when interacting with your client, key differences are apparent. The differences between the products makes a difference starting with the lead generation process.
Telephone leads, although which can be effective are still cheap leads by comparison, it works out to be the same numbers game and internet leads are typically very unreliable. These are facts that are captured by the pricing. A direct mail reverse mortgage lead let’s you know that the prospect was willing to get out to the mailbox twice to get the information you have. The relationship starts there.
Let’s say you order 100 Direct Mail Reverse Mortgage Leads from a reputable vendor that has at least 20 years of experience working with the senior market and knows how to generate a demographically appropriate list or eligible seniors. The average loan officer should be able to close 10 and work another 5 that you may close later. A more experienced sales person would take those same leads and close 20 to 30. This is a huge difference on the return on investment.
Let’s look at a few key differences:
Difference #1
The average age of a reverse mortgage customer is 74.
Difference #2
The sales cycle for reverse mortgages is much longer. From the time a lead is generated until the time of closing could easily be 3 months. This means reverse mortgage leads are the beginning to long relationship.
Difference #3
There are a lot of myths about reverse mortgages and sensational stories that distort the qualities of the reverse mortgage product. Those are the stories that seniors see in the newspaper and on TV. This is a “new” product to anyone who doesn’t know about it.
Difference #4
Very few reverse mortgage professional professionals have more than 5 years experience selling reverse mortgages. As a result, very few reverse mortgage professional have rich experience with the senior market. (Annuity Professional and Life Insurance Agents sometime have valuable experiences that help them proved better service.)
Difference #5
Seniors expect and deserve respectful, considerate, and patient contact. This market is built around the sit down at the kitchen table generation as opposed to today’s fast food nation.
These five differences are so incredibly important that it shocks me as a long-term sales person, who has worked door-to-door sales, that agents in the field are unaware of the implications and the impact is has on the way a customer is approached and the way a loan is closed. I’d like to address these issues below.
Good reverse mortgage lead generators know this, because we see thousands of leads a month and build the mailing lists for the campaigns, because we have experimented with all types of lead generation systems over the years and have the statistics on the results.
What can loan officers and agents do to increase Conversion Rates on Reverse Mortgages Leads:
It is essential address the demographic and product difference in logical manner and keep the customer first in you actions. to an extent the customer leads you to the appropriate decisions as much as you lead them.
In direct mail reverse mortgage lead generation two to three weeks may elapse between the time the customer fills out the lead card and request assistance with their finances. Sometimes people forget things. Kids forget thing and adults forget things. There has been more than one study complete about how we tend to become more forgetful as we get older. You need to be prepared to deal with age related factors,
Here is a group of solutions that will work for you, when you are ready to increase your closing rate.
Solution #1: Order Leads in the Right Area:
When you order your leads, you should order them in an area that you really work in. The same way a real estate investor should buy property in neighborhood they are close to on a regular basis.
Solution #2: Meet Face to Face at the Start of the Sales Process
Remember one of your first goals is always to get in front of the customer. Shake their hand and start a personal relationship. Remember you will be in a position of trust for the next couple months (especially if this is a FHA or HECM loan that requires counseling) and you are talking to someone about the future of a home that they already have equity in. Bring your literature and business cards with you and set an appointment. You are another person in the neighborhood. This is old school, but familiar to older Americans. If there is a no soliciting sign, call from your cell phone and let them know that you are delivering the information requested. The principle here is why should senior prospect have to make a minute for sales person who hasn’t made a minute for them. Go a little out of your way.
Solution #3: Present the Lead Card, Letter, or Application to the Senior Homeowner
Anyone can honestly forget a postcard they mailed out, but almost no one forgets their signature. It is a good way to jog a persons memory and bring them back to the moment when the filled out the card. You can’t do this over the phone and you can’t contact a senior by email that doesn’t use a computer at home.
Solution #4: Let the Prospect talk to You About Their Needs and Issues
If you want to be listened to, be a good listener. The product you have is intimidating to many, so you need to understand what concerns they have so you can concentrate on addressing those in clear and unambiguous terms. Ask the project about how they do things in their life and gather information, before making recommendations. Show respect for your elders. There is no reason to push seniors around to prove that you know what your are talking about. You can control a conversation, while still providing your customer with the utmost respect.
Solution #5: Focus on the relationship early
New reverse mortgage agents want to work a leads fast and clean and need to learn that when they are selling a reverse mortgage they are likely to be in interaction with the borrower (and spouse if present), adult children (who are also poorly informed about the product), and FHA or HECM counselors. A reverse mortgage effects a lot of people most of whom are uncomfortable with the product. With a solid agent to client relationship you will be able to use well-earned trust to take you from the kitchen table to the closing table.
Solutions #6: Debunk Reverse Mortgage Myths
Provide factual information and dispel common myths. the senior homeowner who filled out the reverse mortgage lead card will need to be able to respond to friends and family, who may criticize the decision from lack of knowledge. Prepare the senior prospect for counseling.
Solutions #7: Never Misrepresent the Product or Mislead the Consumer
This should go without saying. Anyone who does not know this should leave the business entirely. That is unprofessional salesmanship and could result in loss of license.
Conclusion:
Many people with a traditional mortgage background, come into the mortgage industry with the idea that you just call people to start the relationship or they walk through your door all on their own. That is the rare case of a true organic lead. Non-traditional products have few organic leads associated with them. That is why they are non-traditional.
Reverse mortgage leads are a start to a relationship. The salesperson must complete the sale. Otherwise, there would be know need for salesman, because the lead generation company would have already closed the sale. Salesman are paid for performance and improve with patient practice towards perfection.
As as a reverse mortgage lead generator, I find that financial advisors and annuity salesman, are often better prepared for the relationship sales process and have better closing rates off direct mail reverse mortgage leads than those jumping straight from a traditional mortgage background.
This has a lot to do with the way the insurance industry sales process worked for many years and the fact that many financial advisors have been trained at some point by a experience professional door to door sales man who knows how to get in front of the customer. Mortgage sales people have more of a bankers attitude and wait for people come to them and close themselves and little intent on maintaining a relationship.
Reverse mortgage are a great product for a salesperson willing to put in the time and work a program that has success and high conversion rates at its core.
Dec/110
Do You Understand Mortgages For Bad Credit? Test Yourself
Do you really understand what it takes to acquire real estate financing, especially when you have a not-so-spectacular credit score? Take the following quiz and see how you rate.
Question One
When it comes to truth-in-lending laws, what are the disclosures a lender must make when processing a mortgage for bad credit loan?
(a) The length of the mortgage
(b) The current market index rate
(c) Your loan-to-debt ratio
(d) All costs of the loan
Answer: (d) All the costs of the loan. When you apply for any of the mortgages for people with bad credit, the lender must disclose all costs associated with the loan. These include the APR or annual percentage rate, any service charges, appraisal fees, survey costs, attorney’s fees and costs attributed to title and escrow fees.
Question Two
Certain ARMs or adjustable rate mortgages offer the flexibility to convert the loan to a fixed-rate type of mortgage on the anniversary date of the origination of the loan. This is offered typically within what amount of time?
(a) One year
(b) Ten years
(c) Six months
(d) Five years
Answer: (d) Five years.
Question Three
Which of the following situations is the best type of condition for securing mortgage loans for bad credit?
(a) When you can pay for the loan with a down payment
(b) When your credit card payments are below their limits
(c) In a “seller’s market”
(d) In a “buyer’s market”
Answer: (d) In a “buyer’s market.” In this type of market, you have the opportunity of usually buying a house at around 20% below its normal asking price. Therefore, you have a lot of room to negotiate as well as easily procure the services of any of the mortgage lenders for bad credit who secure mortgage loans for people with bad credit.
Question Four
What is the major advantage of obtaining a 15-year adjustable rate mortgage (ARM) over the same type of mortgage for bad credit loan for 30 years?
(a) The term for repayment can be extended
(b) It has a 2% annual cap
(c) More of the principal is paid each month reducing the interest costs over the loan’s life
(d) More of the interest is paid each month to pay off the loan
Answer: (c) With a 15-year mortgage, your monthly payment is more because you’re paying a greater amount of the principal. Therefore, your interest costs are reduced.
Question Five
Generally, how long does it take for most mortgages for bad credit to close?
(a) One month
(b) Five days
(c) One week
(d) Two weeks
Answer: (d) Two weeks. Generally, these types of loans can take, on average, a couple weeks to close.
Question Six
What is another name for mortgage lenders for bad credit?
(a) Traditional lenders
(b) Secured loan lenders
(c) Sub-prime lenders
(d) Bankers
Answer: (c) Bad credit lenders are also referred to as sub-prime lenders. If you obtain a loan from this type of lender, you are known as a sub-prime borrower.
How did you do? The more information you have, the more prepared you will be when shopping for a bad credit loan. The Internet can give your further information and resources if you’re looking for mortgages for bad credt.
Nov/110
The Truth About Reverse Mortgages
One of my jobs for a very long time included working very closely with a financial advisor and an elder law attorney. I learned a lot from both of them. The most important thing I learned is that long-term care isn’t just about picking a nursing home or a home care agency. Long-term care is also about the legal and financial matters that almost always come up when families are trying to help an aging loved one make choices.
Most families cannot afford to privately pay for nursing home care or in-home care for very long. This wasn’t planned for or budgeted for prior to retirement. Planning ahead is getting more popular, but for our older generations, it wasn’t an option for various reasons.
Because of this I try to make sure I know what all of the financial options are for seniors and their family members. One of them is something that not many of us understand very well- a reverse mortgage.
Reverse mortgages have received a lot of press lately. NBC Nightly news, ABC, CBS….they have all run stories. Of course there are pros and cons to reverse mortgages, but interestingly enough, two large organizations support and advocate them, especially for seniors who need long-term care. The National Council on Aging and AARP both support the use of reverse mortgages in certain circumstances.
A study released by The National Council on the Aging (NCOA) shows that reverse mortgages can be used by over 13 million Americans to pay for long-term care expenses at home, allowing many to remain independent and in their homes longer.
The “Use Your Home to Stay at Home: Expanding the Use of Reverse Mortgages to Pay for Long Term Care” report, funded by the Centers for Medicare and Medicaid Services and the Robert Wood Johnson Foundation, also shows how reverse mortgages can alleviate financial pressure not only for individuals and families, but also for state Medicaid programs and the federal government. Increasing the market for reverse mortgages could save Medicaid $3.3 billion (with a four percent take up rate) annually by 2010.
A reverse mortgage is also called a home equity conversion mortgage. These loans are backed by the federal government (HUD and FHA). Seniors 62 and older are eligible to use this federal program. This is a “non-recourse loan”, which means that the heirs of the seniors are not responsible for repaying the loan. In fact, a reverse mortgage is a loan that does not have to be repaid unless both homeowners (assuming a couple) leave the home permanently, or pass away. No monthly payments are required. The senior is the one who gets paid.
Finally, the money seniors receive from a reverse mortgage is tax free, and does not interfere with SSI or Medicare benefits.
As with any financial transaction, there are other things to consider, and reverse mortgages aren’t for everyone.
However, for the senior or couple who are having trouble making ends meet, this can be a life saver. Some seniors are using the extra cash flow to pay for in-home care, adult day care, pay for prescription drugs, pay off credit card debt, and make much needed home repairs so that they can live safely and more comfortably.
Find a reverse mortgage specialist in your area, and network with them. They might be able to help a senior you know pay privately for care much longer than expected.
For more information visit http://www.aarp.com , http://www.ncoa.org , or http://www.reversemortgagenation.com .
If you would like a FREE REPORT on reverse mortgages, I would be happy to send you one. Just email me at valerie@nextgenfinser.com and I will email or snail mail your report.