As published in Scotsman Guide's Residential Edition, May 2010.
Mortgage brokers can serve as an essential link in the real estate owned (REO) and distressed-property markets. Brokers, however, must work harder and smarter than many retail lenders to keep up with regularly changing lending guidelines.
To do this, brokers must establish themselves as elite professionals and know how to work with partners, including REO-listing brokerages.
First, brokers should know what retail lenders can offer and establish products for buyers who fall outside of those lenders' guidelines. By offering specialized programs and products and maintaining timelines, you can become a top performer.
It's also imperative that brokers are aware of all regulations, guidelines and programs available for distressed properties and loans. No longer can brokers count on guideline changes affecting only new files that haven't locked in a rate or program. Some industry or investor policy changes will affect approved loans or signed loan documents and mandate new underwriting conditions. Often, this occurs outside of brokers' control, but brokers can minimize damage by remaining informed. This is especially true when working with REO and time-sensitive distressed properties.
When handling deals involving REO properties, mortgage brokers often will work with REO listing brokerages. These companies represent the distressed-property eyes and ears for many financial institutions, including banks and lenders, and can manage the properties for them. REO-listing brokerages often possess credentials such as:
Diverse lending options, which are a must when buyers or properties don't meet standard industry requirements;
Financial backing, which is imperative for keeping substantial operating capital available for managing REO properties;
Accounting experience, including staff responsible for expenses paid on behalf of financial institutions and banks;
Repair teams and specialized REO contractors, who manage property rehabilitation, code compliance and lender-required repairs; and
Office and field support personnel, who confirm the remedy of code violations and lender-required repairs. They also can ensure compliance with sign-off requirements, city inspections and possible homeowners-association mandates.
Mortgage brokers who work with these property and listing brokerages must adhere to strict performance timelines and deadlines, as well. The time lost shopping for a better deal could derail the transaction and lose your buyers their dream home.
Getting it right
REO-listing brokerages will remember which mortgage brokers perform and which don't. Thus, it's important to seek lenders with proven track records and to ensure your clients are qualified to buy now.
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