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As these loans are salvaged and removed from the pools, a healthy volume of revenue likely will come via the refinancing business. Brokers can take advantage of this business, thus finding their own trickle-down advantages from the PPIP.
Extracting creditworthy borrowers
Historically low mortgage interest rates could sway refi decisions from borrowers in these pools. Even creditworthy borrowers with reliable incomes may be uneasy about letting their option ARMs reset to include greater monthly payments. In some cases, now-affordable loans may otherwise become unmanageable.
Mortgage brokers can develop strategies to identify and court these borrowers. According to a Credit Suisse estimate, option-ARM resets accelerate this coming spring from about $4 billion a month in March to $14 billion a month in September 2011.
Brokers can enter this market by working with smaller banks that have troubled assets on their books and boutique investment funds looking to buy troubled pools. It's similar to networking with real estate agents and homebuilders: The most-important things are to cultivate relationships, study each of the loans and talk to borrowers to determine if they will be eligible to refinance.
This could help potentially souring loans evolve into stable, long-term investments underwritten and funded based on accurate borrower profiles. In turn, it allows brokers new business and a way to help clean up what has become an economic mess.
Chip Larson is president of Home Equity Partners, a California-based firm that acquires troubled mortgage assets in California, Nevada and Arizona. Home Equity Partners' experienced managers help clear nonperforming assets off the books of financial institutions with troubled mortgages.
The company offers mortgage products that allow struggling homeowners to remain in their homes and share in future appreciation. This model represents a new financial direction for all involved. Contact: email@example.com or via www.homeeqp.com.
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