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.

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.

If you liked this post please sign-up to the RSS feed or get them via email and avoid missing the next Aged Leads Strategies best practice.

I love to find people who can provide good, accurate coverage and blend in a little humor-Martin Andelman is that guy.

Quickly becoming the obvious loan modification expert in my RSS reader this guy is on top of every little movement in loan modifications and he’s funny…even by his own admission!

So, I wanted to quickly point you to one of his monthly roll-ups. He calls it his Museletter.

Focusing the microscope in the government’s own loan modification programs “harboring” scammers:

“Charging advance fees for loan modifications… Telling homeowners to stop making payments because they must be in default to be eligible for a loan modification…. Starting foreclosure proceedings even while a homeowner is under consideration for a loan modification.”

“What’s this?  They must be talking about some scammer loan modification company, right?”

“WRONG!  But thank you for playing…”

“Those are the charges leveled in Congress last week against MORTGAGE SERVICERS that have signed on to participate in President Obama’s HAMP program, administered by Treasury, whose lofty goal is to modify millions of mortgages for struggling American homeowners.  I, on the other hand, want to be 6’8″.”

Here is another one of my favorites…Andelman takes a shot at everyones favorite mortgage meltdown whipping boy-Rep. Barney Frank:

“A senior House Democrat threatened banks Wednesday saying that if they don’t volunteer to save more homeowners from foreclosure, Congress is going to make them.  In a sternly worded statement, Rep. Barney Frank (D-MA) said that Congress isn’t afraid to revive legislation that would permit bankruptcy judges to write down a person’s mortgage.”

“In response, banks in Massachusetts on Thursday foreclosed on an extra 3,000 homes in Frank’s congressional district, causing a crowd of newly homeless families to burn Frank in effigy in the town square.  (Kidding, kidding… I’m a kidder… I kid.)”

Check him out-he’s funny-he’ll even tell you that.

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• Principal Writedowns Make for Better Loan Modifications–But Nobody Does it (usnews.com)
• Mortgage Delinquencies Hit Record High (abcnews.go.com)
• Mortgage Modification Efforts So Far: 5 Things You Need to Know (usnews.com)

Well it is a funny world isn’t it? Federal law enforcement and regulators are going after loan modification companies with a vengeance, yet the US Treasury is handing out BIG incentives to get them done.

Tim Manni, a writer for HSH Associates Financial covers another attempt to increase loan modifications:

“With this program, the Treasury is now paying financial incentives to all parties involved in the modification process (borrowers, servicers, and now lenders). If you recall, the notion that Washington was going to pay borrowers to remain current and services for their “success” was extremely controversial.”

So, the incentives for loan modifications continue to escalate, but the business seems to still be too complex to really efficiently execute, or make business sense.

One of the problems may be the focus on trying to cover losses instead of finding a way to make the process commercially sustainable. The objective is clear-cover the potential risk:

“The purpose of the program is to encourage additional lender participation and HAMP modifications in areas with recent price declines by helping to offset any incremental collateral loss on modifications that do not succeed.”

Are you in the loan modification business? Can you add some color to this? Please comment below.

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Most people attempt to compete with competitors. Attempting to highlight minor details between debt or mortgage products and fees is a guaranteed losing strategy. Compete with a leadership strategy. Be the authority. Be a consumer educator.

Using Your Own Site or Blog

You own website or blog can be the best way to establish yourself as a leader in your market. Establishing an editorial calendar that tracks the fundamental questions a consumer might have is a great way to help prospects become customers.

Here are some great examples:

• What is the difference between a fixed-rate and an adjustable rate mortgage?
• When should you pay points on your mortgage?
• Which is better debt settlement or debt consolidation?
• How do you get a loan modification?

Be ready with the answers on your website or blog. The beauty of search engines means that you will also be luring them in by simply publishing common questions and answers.

Using Other Sites

Maybe you think building your own website or blog is too technical. No reason to be discouraged. There are a lot of great sites where consumers are already going for answers to their questions.

Leveraging these sites in your marketing campaign is as easy as participating and sharing your knowledge. Here are some great examples:

Yahoo! Answers

Yahoo! Answers is one of the most popular and longest standing question and answer sites. It is full of questions and answers covering every topic from mortgages to how to get out wine stains in your carpet.

Simply register, or us your existing Yahoo! account and start searching for people needing help with debt or mortgage related areas.

Just to show you how effective and powerful this channel can be for customer acquisition-take a look at how much effort QuickenLoans has put into their efforts here: QuickenLoans Yahoo!Answers Profile

Linkedin

Linkedin is another great social networking site that has a questions and answers section. Again you can simply search for people asking questions about mortgage and debt topics and show off your expertise.

The really cool thing about Linkedin is the demographics. You are talking to very high net worth professionals. Recent statistics show that over 80 percent of their network in making over $100,000 a year. This is a great pool of prospective high quality mortgage borrowers or even “over their heads” debt clients.

SmartHippo

My recent favorite is SmartHippo. One of the biggest reasons is that it is new. That means big opportunity to be on the leader board and seize a solid position front and center of all their mortgage and debt consumers.

The interface is simple and you can create a profile that tells borrowers why they would want to work with you (beyond all the great answers you are giving them). Even better you can link back to your website or profile to get a free lead or two.

Zillow Mortgage Marketplace

ZIllow is another new entry and has a great marketplace to not only answer questions, but also qualify to get some free leads. Their website is more a rate quoting set-up, but many consumers are just looking for rates.

You can demonstrate your expertise by how competently you can meet the needs of borrowers with innovative quotes and loan structures.

Regardless of which of these services you may use the winning strategy is to get in front of as many prospective mortgage or debt clients as possible with your expertise, not your cheesy sales pitch.

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Buying aged leads is one of the most economical marketing methods. You are getting consumer inquiries (hand raisers) at a fraction of the original price. Obviously, there is a reason for that discount. However, many folks make aged mortgage or debt leads a primary element of their marketing strategy.

How do they do that? Simply by thinking through all the various opportunities within each lead.

The Obvious

Most people buy and work aged leads with the obvious approach. Naturally mortgage and debt leads are categorized by how they were originally generated or targeted (i.e., refinance, purchase, debt settlement, loan modification). That typically leads people to simply call and offer products and services in that same category. Chances are the borrower’s situation has significantly changed since the original lead was generated.

That is where savvy lead buyers get creative.

The Cross-Sell

As you are developing your sales process for aged leads think about the type of people you are calling and what may be going on in their financial lives. This critical thinking is likely to give you alternative approaches to convert the lead and help the customer.

Refinance Mortgage Lead – Many people that are coming to websites and responding to emails for mortgage refinancing are homeowners struggling to make their mortgage payments. This could be due to a job loss, resetting mortgage rate, or mounting debt.

This means that you can easily talk to these clients about loan modifications or debt settlement solutions. In addition, you should make sure they didn’t already refinance into a mortgage that puts them in an even worse position, which is becoming increasingly common.

Loan Modification Lead – In this case the obvious approach may just work. Loan modification programs have gone through so many iterations and fluctuations most attempting to get one are unsuccessful in their first attempts.

However, loan modification customers are typically also in need of debt consolidation or settlement services and could simply need to refinance a mortgage.

Debt Lead – Borrowers looking for debt relief are often unsure of what they need. They know that they can’t pay their bills, but are unsure how to fix it. The remedy could be as easy as a loan modification, refinancing a depreciating home, or consolidating high interest rate cards.

Don’t simply look at or buy aged leads by the “original” label. Think beyond what the marketer labeled them and think about what the consumer is probably really looking for—loan modification, refinance, debt relief. Write your telemarketing script to offer a full range of solutions. You just might find yourself closing more loan modification deals with mortgage refinance or debt settlement leads.

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There is no question that CRM or other lead management software will make you more productive and effective at converting aged debt, loan modification, and mortgage leads. However, making the right decision can be difficult.

Although I will not give any specific endorsements I will give you an introduction to some of the ones I have found that you might want to check out:

Debt Management Software

• Debt Manager 2000
• Prime Debt Soft
• Credit Soft

Loan Modification Software

The loan modification is a much newer space. Therefore many of these software systems are going to be brand new. So, be cautious and make sure you get some sort of free trial.

• Direct Capital Software
• Casimod
• Broker Outpost also had these suggestions

Mortgage CRM Software

• Kaleidico Sales Manager
• Top of Mind Networks

Give these CRM software providers a try. Tell me what you think and if you have other recommendations.

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Loan modifications are a moving target. There are so many programs and they are constantly changing. Whether you are a loan modification company or not you need to understand these programs. They are a significant part of the mortgage market these days.

Getting informed on loan modifications can be as confusing as understanding what is in the various programs. Here are some good resources to help get you up to speed:

HUD – Loan Modification Frequently Asked Questions
FDIC – Loan Modification in a Box
MortgageLoan.com – Mortgage Loan Modification Guide
LoanWorkout.org – Loan Modification News
US News & World Report – 7 Things You Should Know About Loan Modifications

There are more resources and changes that come out everyday. My suggestion is to set up a Google Alert to send you an email with all of the daily clippings of loan modification. Giving that a quick read every morning will help you and your clients.

Never set-up a Google Alert? Here is a quick how-to:

1.    Go to http://www.google.com/alerts
2.    Enter the search term: “loan modification” OR “loan modifications”
3.    Select “Comprehensive”
4.    Select “Once a Day” (more frequently will be overwhelming)
5.    Select an email account to deliver it to

Hope that helps-if you have other resources or ways to stay on top of loan modifications let us know in the comments below.

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