The purpose of loan modification is to reinstate the loan and bring delinquent mortgages current at a monthly payment the debtor can afford. For many people with mortgages, it is a viable alternative to foreclosure or bankruptcy.

The most efficient way to find mortgage leads for loan modification is lead buying. Companies that specialize in providing such leads have many ways to identify good candidates for loan modification. First, they look for indications of a “toxic loan” or an unsustainable loan. If property values have dropped sharply, for instance, or if the borrower has a significantly lower credit score or has lost a job, this could be an indication of a toxic loan.

Lead generation companies also monitor the “notices of default” that lenders issue to debtors who are in arrears on their mortgage. If someone with a mortgage has received a notice of default, he or she is probably quite anxious to check into loan modification in order to keep his or her house.

Another way mortgage leads for loan modification are generated is through “borrower’s request.” The lead generation company places an advertisement about loan modification online, in print, or on local radio or television stations. People who need mortgage assistance either sign up online or call into a business center requesting further information. Their contact information is then sold to lead buying companies.

Buying leads for loan modification is not inexpensive. Lead generation companies may charge from $20 per $60 per lead, depending on how the lead was obtained, whether the lead is exclusive, and how old the lead is. Companies that sell such leads defend their high prices by saying that the conversion rate on loan modification leads is an astonishing 10% to 18%.

With fewer people interested in buying–or qualified to buy–property, helping clients with loan modification is one way for mortgage companies to survive in a slow economy.

Here are a few common sense steps to avoid stepping into a loan modification nightmare.

1. Get Educated - Learn all you can about loan modifications. Read and study the news to learn what programs and processes are emerging. Get the facts on the ones that are available and who qualifies. The more you know about how these federal and bank programs work the easier it is to sniff out "too good to be true" programs.

2. Ask Questions - Most fraudsters are lazy. They won’t do the hard work to really research and learn how loan modifications work or programs that are available. Consequently, after a couple of questions a scam often begins to break down and reveal itself.

3. Do Your Research - Make sure that what you are being told is accurate. In the age of the Internet most facts are verifiable with a couple of Google searches. Make sure programs, processes, and offers jive with what is being reported by the government and major news outlets. Everyone is intensely focused on the continued mortgage crisis so there is lots of information. Take advantage of that.

4. Check with HUD - The US Department of Housing and Urban Development (HUD) is the go to resource for loan modifications and has great guidelines on loan modifications. As you work with a loan modification company it is smart to check loan modification facts and claims with the HUD website.

5. Check BBB & Ripoff Report - A couple of other great places to check out loan modification companies are the Better Business Bureau and Rip Off Report. Both are websites devoted to taking in consumer complaints. Both websites give businesses an opportunity to refute complaints–BBB is a little less transparent than Rip Off Report, but both give you tip-offs to a scam.

6. Don’t Accept High Pressure - Although troubled homeowners should have a sense of urgency in solving their challenges with house payments they shouldn’t submit to high pressure sales. Generally, the loan modification process is a very methodical legal-like contract negotiation. As such, it should be carefully considered and worked through. Pressure to accept or sign agreements should be met with skepticism.

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The housing market is still shaky. Homeowners are still unemployed or underemployed. All the ingredients needed to whip up highly effective loan modification scams. And they are rampant.

However, the US Department of Housing and Urban Development is teaming with the Loan Modification Scam Prevention Network to make it easier for consumers to report scams. Launching PreventLoanScams.org HUD and this fraud prevention network hopes to protect homeowners before it is too late.

Homeowners are Running Out of Time

Any financial service scam is potentially crushing. However, loan modification scams have an additional twist–the homeowners are running out of time and options.

This pressure makes it easier for scam artists to prey on these victims. At the same time, every moment these homeowners are misdirected by fraudsters the less likely they are to get a real home saving result.

Loan Modifications are Confusing

Economic conditions are creating lots of mortgage fraud opportunities, but it doesn’t help that loan modifications are so confusing. Unlike a typical mortgage refinance, loan modifications are very unfamiliar to most and horribly complex. This causes confusion–an opportunity for wolves in sheep’s clothing.

Homeowners are looking for help and guidance. Loan modification scams set-up up tempting marketing and advertising to suck in desperate victims. 

HUD and Scam Prevention Network Help

This new loan modification fraud prevention network will give struggling homeowners a single, convenient Web location to report scams they are approached with and verify the legitimacy of services and companies.

I applaud any effort to help troubled borrowers get to debt and financial relief as fast as possible.

The Obama Administration seems to be tired of having the mortgage crisis hanging around their neck. They want these troubled mortgage loans modified and borrowers back on their feet towards recovery. At least that is the message being sent by Treasury Departments’ three man “SWAT Teams” being deployed to eight of the largest servicers to monitor their work.

“In an effort to shame the companies into doing a better job, Treasury will publish a list next week of the mortgage companies that are lagging. While big lenders like Citigroup and Wells Fargo have made double-digit gains in the percentage of eligible borrowers they have signed up for trial modifications, other companies like Ocwen Financial and American Home Mortgage Servicing have only increased their borrower participation by 6 percentage points or less since July.”

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There are few things harder to do than service people that are in trouble with their debt. They are confused, scared, and stressed. They have been harassed, badgered, and intimidated. They are suspicious, timid, and unresponsive.

Building trust and educating these consumer are key to your success as a debt settlement counselor. Here are some helpful resources for scripting your debt settlement sales calls:

1. My own Aged Lead Strategy Debt Relief Sales Scripts advocate using empathy, listening, and executing on promises as key ingredients to building good debt settlement sales scripts.

2. Lead Closer gives some basic elements in his debt sales scripts emphasizing Caller ID, pleasantness, and speed to pitch.

3. I really like the scripts from Debt Skinny. They are voicemail scripts, which are the lion share of what you will be doing in debt settlement calling.

4. Finally, MSTARS might be a solution if you want to hire someone to write custom scripts for your debt settlement organization.

I suggest that as you approach your debt settlement sales training you emphasize slowing down the sales process. This seems counter-intuitive, but unlike most other sales environments these consumers are already fatigued. They are likely to abruptly enter into a defensive mode with any pressure.

Empathy, listening, and less selling is going to get you to the solution faster than pounding home all of the help and relief you can provide. Trust first.

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I stumbled into a great website and resource for improving your sales process: JustSell.com. Certainly, check out the entire site. I particularly liked this article on Opening Statements.

In this article the author talks about a framework for creating an effective opening statement:

1. Creating immediate interest and energy
2. What are you selling, clearly and quickly
3. How do customers benefit when they buy

This certainly a little harder than it sound, especially if you need to get it into the short attention span of a consumer being cold called. It takes lots of practice and should be tested like you would any other type of advertising.

That’s right, your opening statement is an advertisement for continuing the conversation with me.

These are a few things from my experience and specifically from a mortgage or debt settlement sales perspective that might help you script some opening statements.

• Questions force consumers into the conversation. Ask one as early as possible
• Never talk longer than 20 seconds without engaging the customer for a response
• Benefits should be the core of every statement you make. No one cares about features
• Avoid going negative early. That means bashing the economy, the market, or the competition
• Tell a quick story that gets the consumer to say, “hey he/she is one of us”

What are some of the techniques that you use in opening statements?

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Have you ever tried to get someone to talk to you by pelting them with endless statements about you–how great you are, how much you are better than others, or how successful you are going to make them? No, of course not.

Ironically, that is precisely the technique we use to sell people on developing a business relationship with us. Instead we should be asking questions and gathering data. Let the customer tell us what it takes to sell them on our product or service.

That is the power of the open-ended question.

People love to talk about themselves–their successes and their challenges. And that is precisely the information you would love to have to guide your sales pitch. So, let it happen.

Let’s take a look at some good open-ended questions:

• When did you feel like your debt was first getting out of control?
• What is the most stressful part about your current debt?
• What led you to consider refinancing your mortgage?
• What made you select this house (neighborhood, city, state)?
• Is this your first mortgage?
• Are you working now?
• What is most important to you in a mortgage or debt solution?
• Have you talked to others about a mortgage or debt solution?
• What is your biggest concern?

Do you have some good open-ended questions you use in the sales process? Add them to the comments below.

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A recent report “Why Servicers Foreclose, When They Should Modify, and Other Puzzles of Servicer Behavior,” from the National Consumer Law Center (NCLC) seems to indicate that another record month of foreclosures is the result of servicers taking the more profitable road.

This report makes the case that foreclosing on mortgages in a market with severely depressed property values, high unemployment, and continued economic weakness simply makes more financial sense to servicers. Whereas a short sale or foreclosure can leave the bank recovering only 30-75%. Often this deep loss can be avoided with a loan modification.

However, from the servicers’ perspective loan modifications consume a lot more over time in administrative and processing expense, cutting into their profits.

Loan modifications are often an intense legal negotiation and filled will verification processes, than a majority of these borrowers will default again. This reality, driven by an unstable economic climate makes loan modifications a risky proposition for servicers. And although a loan modification is likely to advantage the mortgage investor or bank and the borrower, the incentive are still not adequate to convince the servicer.

The report, in analyzing foreclosures from 1995 to 2009 also seemed to find that forbearance (giving the borrower several months of payment grace in order to recover financially and then resume payments) was actually the most successful work-out strategy.

The bottom line of this report was that the loan modification programs put in place by the federal government are still insufficient incentives to avoid foreclosure.

Here are some of the suggestions the National Consumer Law Center makes:

• regulate loan originations
• mandate loan modifications before foreclosure
• fund quality loan mediation programs
• provide for principal reductions on existing loans through the Home Affordable Modification Program (HAMP) program and through bankruptcy reform
• increase automated and standardized loan modifications for borrowers in default and provide a safety net for borrowers who do not qualify for a standardized modification
• ease accounting rules for loan modifications to facilitate standardization and encourage long-term loan modifications
• require loan servicers to be more transparent and uniform in how loan modifications are reported
• limit fees charged to borrowers

What do you think? Why are we still working on this crisis years after the collapse of the mortgage market?

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I know from my clients that loan modifications are still a booming business. And one of the most critical components is understanding a borrowers debt-to-income ratio. More simply how much “qualifying” debt are they paying every month compared to their monthly income?

This apparently simple calculation can get very complex.

Are we talking about front-end DTI or back-end DTI? Does alimony and child support count? How is it calculated if you are self-employed? How does home equity loans or credit line impact this ratio?

These are just a few of the important questions that are plaguing your loan modification clients. To help you build a good loan modification sales script and tools for this customer base went looking into my archives and on other smart websites and this is what I found:

• My own authoritative post on loan modification DTI calculations
• A great article by the author of Loan Modification for Dummies, Ralph Roberts
• A really good video on how to calculate DTI for a loan modification

I hope this helps you and your loan modification customers. This is the centerpiece of qualifying most of your loan modification clients.

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I am curious what the general sentiment is on this topic. I hear a lot of my customers having to make adjustments because of all of the regulatory changes. There’s HVCC, loan modification rule changes, increased mortgage licensing requirements, robocall bans, and a host of other changes that target the financial services industry.

How are you dealing with these and other market changes?

Here are some of the trends I am seeing with my clients and in the market:

1. Small and independent brokers are having to find bigger shops to join or operate under in order to stay compliant
2. Everyone is monitoring regulatory issues and legislation much more closely
3. Costs are going up and most increases are attributable to compliance
4. There are fewer sources of funding for lenders
5. The government is forcing more inefficiency, while cutting profit opportunity

This certainly is making it tougher to run a debt or mortgage business. However, I think there are some great opportunities to excel in this environment too.

• If you look for the right savings, like buying aged leads versus real-time leads, you can stretch your advertising budget a lot farther.
• The regulatory environment also weeds out the bad apples-improving the image and the trust of those remaining in the business.
• Finally, I think whenever market sand is shifting creativity always wins-learn to do something faster, more efficient, or more appealing.

Then, while your competitor are moping with their heads down you will be passing them by.

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