I took a long ride yesterday with the buddies. There’s nothing like a good day of zipping through the Sierra Foothills to clear the head.
As you know, the Lenders have used the mortgage broker community to bolster their sales. This was both good and bad. We saw plenty of high quality loans originated by some of the most professional people in the business, Mortgage Brokers. We also saw plenty of bad loans primarily originated from guess who? The Mortgage Brokers.
It’s a love hate relationship. The Lenders love having a revenue stream generated from a small staff with little overhead. They don’t need fancy offices, buildings or retail outlets. They don’t need a huge advertising budget. A small wholesale staff can service a very large group of brokers. It was a cost effective way to fund more loans. It’s a leverage play.
Unfortunately that leverage play has now come back to bite them. It’s no secret the squeeze is now being put on the Brokers by the Lenders. Brokers are Bad.
Here’s the question. While the Mortgage Broker was a system to generate more revenue, will the Real Estate Agent become the new broker?
No, really. I’m not talking about loan generation revenue but the other side of the coin, Loss Prevention. By estimates, it costs the lender more than $60,k to foreclose on a home. Once they hold it on their books they’ll have to sell the home to cash out. The final loss at the REO sale could and usually is potentially much more. So the Real Estate Agent, and their role in negotiating a short sale wouldn’t add to the revenue, but it would minimize the loss.
Currently, the Loss Mitigation Department of any lender is understaffed and overworked. It’s typical to spend an hour or two on hold. Once you get to a real person, well… I’ll try to say this nicely. Let’s just say, the better paid, smarter, more effective people in the lenders organization tree don’t work in this department, yet.
With Short Sales and REO’s only going to become a bigger part of the overall picture, how long till we see the lenders bolstering their Loss Mitigation Departments to better service the ones that are currently helping their bottom line – the Real Estate Agents?
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{ 8 comments… read them below or add one }
I have tried to contact Fremont loss mitigation department for about a week, to discuss my clients offer. I waited on hold for 30 minutes each time, and never got through with anyone. How are they expecting to sell off any of the properties, if they don’t have anyone to answer the phones?
Great post, thanks. I am new to your blog and I really like what I see. I look forward to your future work.
I really like the article. You know, it’s sad but I’ve had a couple of dealings with loss mit departments in the last couple of month that just don’t get it.
I had structured deals that would have limited their loss, made my investor money and I would have gotten paid for it.
For whatever reason, that didn’t make sense to them. Now I see the properties on MLS for LESS THAN what I was going to get them with everyone making more money.
They have a word for this. I think it’s the same word you were searching for earlier.
So Sad, and so true.
I’ve had 5 short sale deals never happen this year, and they always end up selling for less after they get the property back.
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I agree, we may to go to drastic measures to fix the current mess we are in.
Great post, it is going to take alot to fix the mess we are in. and it is going to take a lot to help the borrower understand that we are only trying to help not hurt.
I think we need to be resposible as brokers and lenders to be educated and then we need to educate our borrowers to begin the process of fixing this mess.