Brian just received a great question on loan mods from a member - If you know Brian at all than you know he has very strong opinions.
I don’t like to disagree with him (he’s usually right) but was just curious what you think about this subject since it’s a question we receive frequently..
Leave your thoughts below.
Thanks
Cheryl Foster
Director of Member Services
www.loanofficerformula.com
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{ 15 comments… read them below or add one }
Hey Brian,
DO you know anything about what is described below? IS this a good
opportunity or not? Thanks, Mark
—–Original Message—–
From: Commercial Leads
Sent: Monday, October 05, 2009 6:41 AM
Subject: CMBS Mod Requests up 35% Since IRS Rule Change
Dear Mark,
The IRS Tax Regulation change opened the flood gates last Tuesday releasing
investors from a 100% tax liability for the restructuring of CMBS loans. As
a result every bank in the U.S. has opened its doors to commercial
modification.
You CAN EARN HUGE while Helping Others.
NOTE: COMMERCIAL MOD LEAD PRICE INCREASE COMING THIS WEEK. 1 DAY LEFT!
GET IN NOW FOR LESS!
The Conditions Couldn’t Be Better:
1) Banks hold more than 1 trillion in loans coming due by the end of 2010 .
2) Property Owners Cannot refinance because of current conditions.
3) The IRS relaxed Tax Regs on CMBS Restructuring Rules
4) Mod Program Renewal Rate is 92%
5) EVERY Major Bank in the U.S. is Now Modifying Commercial Loans.
6) AVERAGE COMMISSION = $8200.00 PAID UP FRONT
This is THE ONLY Commercial Mod Program in the U.S.
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I am not a big fan of loan mods — the banks really don’t have the capacity for a volume of loan mods and are afraid to do these in mass for fear it will encourage a mass of others who ARE paying but are upside down to ask for their loans to be modified as well..
Now let’s talk about statistics..
From every survey and analysis I have read the vast majority of people who are successful at getting modified– pay a huge fee to have someone help them do it ( money they can ill afford to pay when they are already behind on bills) and still get foreclosed on average 6 months later.
So I am not a fan of originators getting involved in loan mods. We already have 2 black eyes as an industry for the subprime mess and the option mess that is about to explode.. We certainly don’t need another one.
Would love to know your thoughts! Respond below
Dedicated To Having Buyers Chasing You,
Brian Sacks
http://www.loanofficerformula.com
I believe that mortgage pros should be the ones to originate the mod’s since we understand what is necessary to do so. However, the restrictions on us making it cost prohibitive to market those in need.
Pretty soon you will have to be involved directly with an atty licensed in the state your client resides or a member of a non-profit organization. the non-profit model works, but does not pay very much.
Volume will be required to sustain a loan mod business of any significance.
Patrick McCarthy
Financial hope for America
http://www.PMcCarthy.FH4AChapter.org
Be careful about “being a member of a non-profit organization.” This is just about as close as it gets to the license rental issues of the old net branch mortgage companies.
Be sure that you have BOTH the proper state licensing AND federal tax certification for your business before playing around with representing yourself as a non-profit or not-for profit organization with the intent of circumventing regulatory controls over loan modifications.
There is one company out there now marketing it’s self as a non-profit organization with a multi level marketing compensation scheme.
Loan modification businesses have enough problems without the stench of a multi-level marketing pyramid scheme being layered over top the business.
Brian,
I am not asking about residential loan modifications - I have no disagreements thus far in regards to the response regarding the residential mods. I am asking about Commercial loan modifications. Is there any difference in that market? Thanks, Mark
I am not a fan of loan modification loan programs either. This has been a breeding ground for displaced “loan officers” who can no longer shove SUB-Prime down everyones throat. In my opinion just another junket for the rats to jump onto when the sub-prime ship sunk. Plus I know in NJ the regulators are pressing charges and indicting several Loan mod offices - even the ones who claim to do it right.
The AG in NJ is prosecuting because the companies doing loan mods there ARE doing things illegally. There are two bulletins that make it VERY clear that there are absloutely NO up front fees allowed for doing a loan mod…and loan mods in NJ are only able to be done by LICENSED Debt Adjusters.
No problem…except that a Licensed Debt Adjuster can ONLY be a NON-profit (NOT a NOT-for-profit) company…and is restricted to charging a MAXIMUM of $60 per month to the client up to a TOTAL of 2 times the monthly mortgage payment. Oh and there is a $100,000 bond required to be posted to get a Debt Adjuster License.
NJ does exempt attorneys from the Debt Adjuster License. But ONLY if the work (the modification) is an ancillary service they are performing for the client. That is…they are only exempt IF they are representing the client in OTHER legal matters…not ONLY doing a modification.
And even if you get past that the NJ Supreme Court issued an advisory to attorneys making it next to impossible for a modification company to receive ANY compensation from an attorney. The Advisory EXPLICITLY tells attorneys they are NOT allowed to pay ANY fees to a third party company that brings them a modification client. So how do you get paid?
You could just get the attorney to hire you back to do the work on the file once the retainer has been collected. But the Advisory warns about fee splitting arrangements whereby the attorney has a quid pro quo arrangement with a third party that if the third party brings them a client the attorney will hire the third party to do work related to the representation of that client. Hmmmm…again how do you get paid?
My best advice is that if you are NOT an attorney dealing DIRECTLY with clients to do a modification of the client’s mortgage that you should keep as far away as possible from NJ.
Hi Cheryl & Brian,
Ladies first where I come from, the woods of Maine but we stiil have manners!
Well Brian the Loan Mods BS is a Political
move to try to help the Dumbbells in DC in office! I have done LM the Old Fashion way
when I serviced my Bank’s own portfolio and it takes maybe a week or 2! I had 2 LM’s I started in April ‘09, mind you this is Oct. 6 mths later and i party has filed BK because WF and the 2nd mortgage holder would not cut a deal so they both will lose. The second party had low CS so I could not Refi so I said do a LM, they are making their payments , he lost his job, they are still current 6 mths later they are still waiting for Chase WAMU to make a
decision and these Borrowres have 8 KIDS!
So I glad I did not tie my Futuer to LM’s I ‘d be eating bread & water now! The program is a Feel Good program and the Servicers play games with the companies like mine to put off making a decision. The servicers requested Financials over 6 times because they lost them or they said they were outdated!!!! So the Taxpayers are paying the servicers thousand for this service and it DOES not work. It ’s a scam, I could go on and on but it would take another 36 years( in business) to explain and complain! The END Brian we as an Industry need to Complain to our Senators and Congress people and tell them where the Bear s—- in the WOODS! So give them HELL my Friend. Banker Bill in Maine almost OUT of Business! Thanks for asking!
Hi Brian,
I am not a fan of residential loan modifications either for the reasons stated above and because trying to obtain a principal balance reduction (pretty much necessary here in California) is like trying to find a unicorn. We’ve had two at our company of around 40 originators and 10 branches. So I don’t do residential loan mods. That was not my question.
My question was in regards to “Commercial loan modifications”. Is there any difference in that market and if so is there any opportunity in it? Please address “Commercial loan modifications”.
Thanks, Mark
In Arizona, Loan Brokers, Loan Bankers, and Loan Originators are being told by Arizona Department of Financial Institutions (AZDFI) to keep Hands OFF! AZDFI is the state regulatory agency that regulates banks, credit unions, mortgage banks, mortgage brokers, consumer credit agencies, and LOAN MODIFICATION firms and individuals but not attorneys…and every one has until 6/30/2010 to get certified, licensed, bonded…in essence to be legal and there a boat load of people who are out of work realtors, insurance sales staff, car salesman, and mortgage officers who totally have no clue what they are doing and causing great harm.
HOWEVER, i see the modification less expense and more stablizing for the nation and industry than putting the house on through foreclosure, short sale, or bankruptcy, only to sale that piece of real estate displace family and let the investor or notebuyers make a fortune when for less monetary loss overall and less damage and vandualizm and a whole lot less turmoil in our towns and cities, we keep the families in their properties… this should only be for primary residence and only for those who can demostrate the ability to make it work with a modification and not short term but a permanent modification.
I have seen
According to the latest stats I have seen….over 51% of the people that have done loan mods end up in foreclosure anyway….so…..
This leads me to believe that loan mods are almost a waste of time. Never have been a big fan.
You should consider that according to other statistics around 54% of the loan “modifications” done in the first half of 2009 resulted in either NO reduction in payments or actually INCREASED the monthly payments that the homeowner already could not afford to make. People are being lined up by the government like sheep headed for slaughter with the brilliant advice that they don’t need an aggressive representative to look out for their interests in negotiating a modification. I mean after all the banks really want to help and you can TRUST them to make sure you are OK. Yeah…and the tooth fairy is now exchanging teeth for diamonds! As for the HUD Housing Counselors you might want to see who pays them for their work. Hmmm…the fee agreements I have seen while looking at becoming a HUD registered counseling company are between the LENDER and the HUD Counselor with a fee fro working with the homeowner to get their documents in order and an additional fee for a finished modification approved by the lender. Our government telling people to forsake other avenues that are open to them in favor of the HUD approach is kind of like shearing the sheep first so the blood from the slaughter doesn’t stain the wool.
Yes there are a lot of bad actors in the loan modification business…just like there were a lot of bad actors in the net branch mortgage companies. but that doesn’t mean we should be pushing people to use solutions that have been PROVEN to be ineffective. If anything the failures of the EXISTING modification programs of the government and the banks PROVES there is a pressing need for the for-profit modification firms.
The problems lies in building an effective regulatory structure that protects the homeowner AND insures that IF the deal is done the loan mod company WILL get paid. Instead of fighting we should be join with the regulators and define HOW the business should work. Perhaps with an escrow model with an independent escrow agent (do I hear Title Company) holding the funds for the homeowner to insure that the mod company only gets paid when the deal is done. Or maybe this should be operated with a mini closing where the modification is not effective UNTIL the modification company gets paid. Just imagine how mush harder mod companies would work and how much faster they would push for a solution IF they knew as soon as the deal was done they would get paid. (Kind of like doing a mortgage…the faster it gets done the faster you get paid.)
The point is there are WORKABLE solutions that can be put in place that give homeowners EFFECTIVE representation with their lender in their most desperate and vulnerable situation…the potential loss of their home.
If I understand the question… CMBS are similar to SF MBS pooled loans, the ‘owner’ or whoever has recourse on the pooled loans doesnt have much to lose. If it is a recourse loan, it becomes the sellers issue. From my expereince in mortgage servicing, I only had one loan that was a commercial (true multi family, not a fourplex) it took many months and massive amounts of data for the investor to even start a workout. so my opinion, if you have CMBS servicing experience or have worked at an investor who bought/ owned CMBS then it might be worth it, but short of that pass on it.
not legal to charge any up front fees unless lawyer… do it and go to jail….this is all I know.
In 20 states you cannot charge upfront fees…with more adopting that model. Attorneys have their own set if issues in dealing with modifications IF there is a third party company involved. Depending on where you are located…and where you are doing modifications affects how you need to be structured.