How to Start a Loan Modification Company
Loan modification companies have been proliferating since the start in 2008 of the U.S. foreclosure crisis. Numerous seminars, costing $1,000 to several thousand dollars, have proliferated to take advantage of the many Realtors and mortgage brokers looking for extra work during lean times.
Other People Are Reading
Instructions
-
-
1
Become affiliated with a local law firm or start a non-profit. Your state government may require one or the other to legally collect money from homeowners to help with loan modifications. Check with your state government's department of commerce website. It takes a few months to set up a non-profit, so you'll want to start this as early as possible. Keep in mind that being a non-profit doesn't mean that you don't pay yourself a reasonable salary for your job.
-
2
Find a seller of default lists, or lists of homeowners in default. This is not the same as "lis pendens," which is a pending lawsuit by the lender filed with the local government. Being a matter of public record, these lists are cheap, but if you rely on them, your advertising will get beaten out by others. You need to make contact with someone shortly after they start receiving default notices from the lender, which can mean either more than 30 days late or more than 60 days late. 1 Touch Marketing is an example of a business that sells such leads. Catching the homeowner early not only helps you beat out competition but also gets the homeowner before he has stopped answering the phone because of harassing debt collectors.
-
-
3
Keep the letters and postcards you send out simple. State a range as to how much of a monthly reduction they can reasonably expect you to negotiate. Mention a money-back guarantee, using the word "partial" if you don't want to give it all back should the lender not grant the modification. And mention that you're a non-profit. Use professional stationery made by a printing shop.
-
4
Advertise in the least expensive local newspapers. Make your ad different from the others so it doesn't blend in. If the other loan modification businesses use borders, don't use borders. If everyone else uses black and white, pay extra for color.
-
5
Meet at people's homes. Homeowners facing foreclosure may make an appointment with you at your office, but there's a good chance they won't show up. They are going through the most disorganized, demoralizing time of their lives, most likely. So you can't expect them to travel and be punctual. Make it as simple for the homeowner as possible by showing up on their doorstep. You may feel an office engenders trust, but it does no good if they don't have the will to show up.
-
6
Avoid locking yourself into any year-long contracts if you can, with the exception of a P.O. box. This includes office space and lead generation contracts. You don't know if the government will come up with an incentive that will make it much easier for homeowners to get modifications on their own. You don't know if the lenders will become more rigid in granting loan mods. Avoid pay-per-call lead generation. This is when you pay an advertiser or directory service for calls generated by your ad at their site. The trouble is that most calls will be from vendors, particularly lead-generation companies. Also, customers may just be calling to compare numbers. You don't want to be charged for every one those calls. You could get 50 calls before you have one customer who buys your service. At $30 per call, you likely won't break even on that one homeowner.
-
7
Check out every company before doing business with them, especially any company you'll be paying more than a few hundred dollars. Look on the local chapter of the Better Business Bureau for each company's headquarters location. Also look them up on complaintsboard.com and ripoffreport.com to see if there are any complaints against them. For example, yellowpages.com has dozens of posts about their practices at complaintsboard.com. Use Angie's List for local people.
-
8
Have satisfied customers write a review about your business on Angie's List. Give them the website address and tell them exactly how to go about doing it. Make it as easy as possible for them. When you have a few reviews, start including a link to these posts in your marketing.
-
9
Use the free advice at creditboards.com if you want to build up your business credit. You can use the credit to expand your marketing campaign. Some credit-building services claim they'll build up your business credit if you pay them $500 to $2,500. But creditboards.com, being a forum, has more current information, which is extremely important during a credit crunch when lenders are scaling back their lending and companies are cutting back on customer payment history reporting. As long as you make sure the state has your company listed correctly in its registry, you should be set.
-
10
Be persistent with the lenders to win loan modifications. Winning a loan mod for a homeowner is a waiting game, making regular contact with the lender to make sure things are moving along. That's what you're being paid to do. Make a contact for each of your clients every three to five business days, to make sure the lender hasn't lost your file. Expect it to take months for them to get through the backlog. If you have good people skills, a lender representative may bend a little to resolve your application much quicker. Treat the lender representatives like royalty. They think you're making a bundle off their back, so treat them like their doing their job is a huge favor to you.
-
1
Tips & Warnings
Keep in mind that you may get only a 5% response rate to your solicitations. Of those responses, only 10% may be seriously interested in sticking with you. Of those, only a third may be qualified for a loan mod. Therefore, it's very important to be smart about your expenses and efficient in your time management. Avoid services requiring up-front payments or lock you into a contract with minimum monthly payments. Avoid seminars that cost thousands.
