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   ARTICLE   |   From Scotsman Guide Residential Edition   |   April 2007

Diversify to Stay Afloat

Brokers have many options to keep their businesses going

The mortgage industry is cyclical, and we are now in a downward slope. These days, properties are not appreciating as they have in recent years. Also, some industry estimates point to a significant number of mortgage-holders becoming delinquent on their loans or possibly facing foreclosure. To top it off, there has been an increasing amount of negative exposure about the mortgage industry in the media.

These factors are sure to cause many brokers who have little previous experience to leave the industry altogether. Although this may seem like bad news to some, this industry self-purging should help those brokers who are committed to the industry survive the current cycle even stronger than before.

The days of business falling in our laps with aggressive purchasers or refinancing opportunities are no longer with us. The reality is that it now takes much harder work to achieve loan closings.

But not all is lost. In many areas around the country, there are many markets that may be examined and possibly pursued. Mortgage brokers should look at all the available sources of loans and examine how to tap into each of those sources.

The following are some — though  certainly not all — of the opportunities available in today’s market.

Second or investment homes

To generate business from around the country, brokers should consider periodically advertising in other states or visiting locations that are known to have individuals who own a second home.

You can market yourself to these homeowners and offer your services to them or to their friends.


A high number of the loans that were made in the past five years were done as three- or five-year ARM loans that have a higher rate effective upon expiration of the initial term. ARM borrowers are, or soon will be, in dire need of refinancing in the near future.

Deeds of trust are available through public records. As such, you should consider getting a listing of closings in the period of 2001 through 2003 to find out who has an ARM. You can contact these borrowers and offer them current loan opportunities.

Many loans also were recently done using the 12-month treasury average index. These often have a one-year teaser rate and then reset to a much higher rate in the 13th or 25th month of the loan. These borrowers will feel a significant increase in the monthly mortgage payments and also will be prime candidates for refinancing.


I believe that part of the slowdown in home sales comes from the unrealistic values that many homeowners place on their properties. These property values often are based on sales from the past few years, and some homeowners have been unwilling to recognize that the rapid appreciation of properties has ceased.

But it is not all bad news; most of these property-owners will in fact make a significant return on their original investments, although clearly not as high as others who sold their properties in the period through 2005.

As soon as the reality hits and home prices adjust to current market levels, I believe we will see a significant increase in home sales and purchases. As such, it is important for brokers to maintain their contacts, aware that they will be able to provide the best form of financing at the appropriate moment.

Foreign nationals

Many areas, such as South Florida, California and New York, have a significant population of foreign nationals and people from other parts of the United States in pursuit of a second or investment home. In fact, this market makes up a significant portion of the lending activity in these areas.

Contrary to a belief held by some people, not all aliens are illegal or without economic means. Many foreigners have substantial financial means and are in search of a primary or secondary residence.

As a broker, if you decide to target these foreign nationals, there are certain guidelines that you should follow. The following are not all-inclusive:

  • Service: Because of the level of service many of these borrowers are accustomed to in their home countries — and because of the differences in homebuying — your level of personal service may have to increase significantly.
  • Communication: Some of these foreigners may not be fluent in English. Your ability to communicate directly with these individuals will be a significant positive factor.
  • Customs: Do some research on the specific nuances of these individuals’ home countries. There are many different customs throughout the world, and understanding their customs will make these individuals feel more comfortable with you.

Ethics is still key

In this market, and when working with these opportunities, brokers should avoid the allure of comprising ethical behavior for a quick fix. This may take many forms or shapes. It may range from assisting in the creation of fraudulent documents to ensuring approval of a mortgage loan to inflating property values.

Certainly, mortgage brokers need to close loans to stay afloat. The question, however, is what they are willing to do to achieve these loan closings.

Are they willing to pay the price and create leads, follow up with past customers and put in a place a communication network, which will generate work? Will they maintain their level of product knowledge and stay up-to-date on where those products?

The alternative is to take shortcuts and participate to some degree in an illegal transaction.

As far as I’m concerned, the choice is easy: Do the (hard) work and close the loans.


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