Summary:
Loan officers and mortgage professionals, with their diverse marketing strategies, have a significant potential for success. Closing more deals per month can lead to higher earnings and a place in the top 10% of the industry. The top 20% of successful agents earn 80% of the available fees. This potential for success is not just a dream, but a realistic goal for those who are willing to put in the effort. So, how do we work our way up to that prestigious position?
Article:
First, develop a list of prospects:
Customary methods for developing a list of prospects include identifying first-time home buyers, searching public records from title companies for characteristics such as low loan balances that originated more than ten years ago, monitoring construction permits for additions, and identifying property owners with delinquent property taxes.
A new method in California involves identifying burned-out neighborhoods, a bad joke.
A few subsets of borrowers/ properties that have a propensity to need private money loans include:
Properties on a loan default list
Properties that have delinquent property taxes
Properties that lack maintenance
Properties under the control of beneficiaries of a deceased property owner
Properties with a current private money loan
Since there are numerous reasons for a property owner to choose a private money loan, it is challenging to quantify these characteristics into a statistical model for a probability list.
The concept 'We locate a Buyer; we don't create the buyer' applies.
The best way to locate private money loans is to develop an extensive network of professionals with multiple clients. The type of professionals best to network with in the area:
Mortgage brokers, both those who specialize and those who do not specialize in private money loans
Real estate agents, both residential and commercial
Accountants and Enrolled Agents
Estate planning, divorce (family law), and probate settlement lawyers
Real estate transactional, estate planning, probate, and business litigation lawyers
Financial planners
Contractors, builders, and developers
Income property owners and speculative real estate investors
There are several methods for developing these lists. Marketing strategies are discussed in subsequent articles on this website.
If you have 500 leads in your network and each of them has 500 leads in their network, then your universe of possibilities is 250,000 (500 x 500).
If you have 1000 leads in your network and they each have 1000 leads in their network, then your universe of possibilities is (1000 X 1000= 1,000,000).
At any given time, someone associated with the professional service provider may need your services to obtain a loan.
Maintaining your network by consistently providing value to your members is key. This keeps you at the top of their minds and can lead to potential loan opportunities. Maintaining presence means being fully engaged and focused on the present moment, every minute, of every day, both physically and mentally.
Your correspondence should be from you, personally, rather than some ordinary advertising/subscription newsletter-those are a dime a dozen and mean nothing. Your communications will need to be authentic, personalized by you, and designed to help your client's business development. This personalized approach shows respect for your clients and can help build trust and loyalty.
Referrals and repeat customers are not just necessary, they are the lifeblood of successful loan officers and business professionals. They can significantly boost your sales volume, accounting for 80% of the available funds. Without a strategy and an action plan, you may find yourself in the bottom 80%, which only accounts for 20% of the available funds. This underlines the importance of a strong referral network and can inspire you to focus on building and maintaining these relationships.
Loans procured directly from the public:
There are many media platforms where you can advertise to solicit direct property owners who need alternative financing. Almost all of them provide an advertising option for a reasonable advertising fee. Google, Facebook, LinkedIn, and others are ready to sign up. The quality of these leads, however, is suspect. Establishing reliable communication with cold lead borrowers from these advertisements and obtaining the necessary data is, at best, difficult.
Personal contacts with lists such as defaults and property tax delinquencies are possible. The amount of research, work, and follow-up with a personal call or written correspondence may only place you in a pool of competitors for the same prospects.
Asking the Right Questions:
When a loan agent receives a loan inquiry, it is not just another task, but a crucial moment to ask prudent, industry-standard questions. These questions are not just routine, but fundamental for any lender to make a preliminary decision to inquire further into a complete credit package. Your role in this process is significant, and your questions can significantly impact the outcome.
These questions are industry standards and apply to direct lenders and loan agents who make or arrange loans for property owners as agents for borrowers. The loan broker may act as an agent, fiduciary of the borrower, lender, or both.
Mortgage brokers, loan agents, and direct lenders are responsible for developing a comprehensive package of related documents and disclosures that are sufficient for a lender to make a prudent credit decision. The mortgage broker must create an executive summary to submit to a direct lender for consideration.
The borrower should provide the following information.
What is the required loan amount?
Is the subject property a single-family owner-occupied or non-owner-occupied? Or is it an income property, residential or commercial?
Purpose and use of loan proceeds. A business purpose, a consumer purpose, or a combination of both is essential.
Is the use of loan proceeds primarily for business purposes? Or what portion will be used for consumer purposes?
Is the borrower looking for a private money loan, which is typically funded by an individual or a group of individuals, or an institutional loan, which a bank or financial institution funds? Understanding the borrower's preference can help you tailor your loan options to their needs.
Value of collateral property. How did the borrowers determine the value?
When did the borrower acquire the property, and what was the purchase price?
Existing liens are used to determine whether the loan-to-value is acceptable. Bottom of Form
Who occupies the property? Owner, tenant, vacant, or partly occupied.
Does the property have a rental income stream? What gross rents, vacancies, and expenses are required to determine net operating income (NOI)?
A borrower's estimate of value is often incorrect or intentionally exaggerated.
An appraisal report by a licensed and certified appraiser may be required.
If the loan request is for a junior loan, information about the senior loans will be required. They may include a copy of the promissory note, loan agreements, and a recent payment statement from the senior lien holder or loan servicer. It may also be prudent to review the recorded documents related to the senior lien associated with the deed of trust.t
Does the first lien have a written provision in the deed of trust referred to as an alienation clause, or what some call a due on further encumbrance clause, that would require the lender to obtain written approval to place a junior lien on the property? Is the property owner/borrower a private individual or an entity?
This fact is important because, in many cases, the original borrower may have been parents, possibly deceased members, siblings, co-trustees of a family trust, ex-spouses, or other miscellaneous parties. Some earlier property purchases were taken subject to a lien that prior owners obtained in the past. Handling a property sale subject to means that the purchaser/borrower intentionally failed to notify the first lien holder of the transfer. Was the sale transfer kept a secret, deliberately? Therefore, the loan documents still list the prior owner as the obligor on the note and deed of trust.
Does the person requesting the loan have the sole authority to borrow and encumber the property with a new lien? Are there other parties of interest who may object to recording a lien on the property? An example would be an estranged ex-spouse, such as an ex-husband or ex-wife.
Are there multiple borrower parties that a lender must include in the application, processing, underwriting, and closing process? A lender's frustration will occur when it is discovered that the borrower has intentionally excluded an undisclosed, hostile party. I promise you that an unknown borrower party won't fool the title company. When the title insurer underwrites its coverage, it will ensure that the correct parties have signed the documents. Verifying the proper parties is part of their insurance underwriters' and approval process.
When a loan broker submits a loan to a lender:
No amount of advertising will enable lenders to reach all borrowers. Most borrowers develop relationships with one or more loan agents in their search for loans. Loan agents gather information about borrowers and properties and interact with prospective lenders or other agents who represent them.
Loan agents vary significantly in their experience, the amount of effort they are willing to put into a transaction, and the level of professionalism they exhibit.
Loan agents who desire a quick and professional response should take the time to organize their files and convey a coherent set of facts to the funding lender. Managing in today's world means submitting documents in a digital PDF format for online submission.
Develop an executive summary to include the following:
Submitting the broker's name, contact information, and requested fee
Proposed new loan amount
Purpose of loan: purchase, refinance, equity 2nd, consumer, business purpose, consumer purpose, both
Summary of the proposed transaction, term, and cash out
Are the loan proceeds of more than 50% to be used for business purposes?
Will a portion be used for consumer purposes of less than 50%?
Summary of the proposed transaction, term, and cash out
Explain the collateral property address, type, description, amenities, and property condition
Loan application form, either a standard residential 1003 or a commercial loan form.
Commercial applications and financial statements are preferred
Estimated value conclusion and source of facts
Provide an income stream for income property, if it exists, with the rent roll and financial statements.t
Availability of cash flow from the borrower and the property to make monthly payments
Potential exit strategy.egies: sales, refinance, receiving an inflow of money from another source.
Any noted strengths and weaknesses of the borrower or collateral property. Withheld and overlooked facts are ill-advised.d
The Funding lender's job will be dramatically faster, more efficient, and more pleasant if the borrower's loan agent takes the time to get to know their transaction and articulate the material facts the first time around.
Could you email an initial loan inquiry to the lender and follow up with a phone call?
Submission Form: Business Purpose Loans Only.
Date _____/____/_________
Procuring broker: ______________________proposed fee_____________
Broker phone (___) _______________ email ___________________________
Proposed new loan: $________________ First_______ Second_________
Date of loan closing_____________ Reason___________________________
Property value________________ _first Lien___________________________
Second lien ________________ Combined loan to value_______________
Purpose of loan: purchase ____ refinance_____ Equity 2nd ________
Purpose
_____________________________________________________________________________
Is the use of loan proceeds primarily for business purposes_____________
Will a portion be used for consumer purposes ______If so how much
______________________________________________________________
Type of property: Single Family_______, Apartments__________________
Commercial_________, Industrial________, Other____________________
Subject property address: ________________________________________
City ___________________________Zip ___________ State_____________
Does the NOI cover the loan payments _____________________________
Source of monthly loan payments: _________________________________
Can the borrower provide 3-6 months of bank statements to improve cash flow?
Personal and business accounts are needed if the borrower owns a business.
Yes, _________________ No_________________ Comment_____________
_______________________________________________________________
Title held by: Individual(s) _________________________________________
Family Trust_____________________________________________________
Entity: LLC __________________________Corp ________________________
Planned Exit strategy to pay off this loan: _____________________________
Borrow Name____________________________________________________
Contact person, other than the borrower.____________________________
Phone number___________________________________________________
Email ______________________ Best time to contact ___________________
borrower advised on how to pay the appraisal- Y_____ N_____
Approved appraiser ________________________Timing________________
Comments: _____________________________________________________
_______________________________________________________________
There are many roadblocks to successful loan closings. Concentrate on eliminating activities and people who waste time and energy. The obvious task is to focus on the concept that time is money. Roadblocks include delays, setbacks, excuses, barriers, and misrepresentations that can hinder a successful closing in lending.
Leverage time utilization with the available techniques and tools. We can double or triple our effectiveness by utilizing available hardware and software applications.
Some mortgage brokers are highly professional and always submit a complete package with full disclosure in mind. Seek out those with whom you want to work and make a mental note about the others.