Mortgage lenders are necessary for homeowners and property owners who often need mortgages to buy their dream homes and properties.
This is because owning a property these days requires more stringent requirements and assessments, including the client’s financial capability.
Mortgage companies exist to help aspiring homeowners with their funding needs. However, as lenders, there is one thing that you should always take into consideration – how well can you deal with mortgage loss?
Mortgage loss is a risk for every mortgage lender because it can happen at any time and can cause a significant impact on your revenue and performance.
But, what is it exactly, and what can you do to lessen its negative impact on your firm?
Mortgage Lenders: Types and Definition
A mortgage is basically a loan.
However, a mortgage is more specific. It is often used to refer to a loan intended for real estate transactions without any collateral.
It is offered by financial institutions such as banks and mortgage brokerage firms or those companies focused on funding mortgages for both residential and commercial properties.
Most mortgage lenders get funds from other clients or institutions, such as in the case of capital funding, a scheme where lenders and equity holders provide capital money for both short and long-term needs.
Here is another thing that clients should understand – the types of mortgage lenders.
The best mortgage brokerage knows their niche. Hence, know your specialty so that you can offer the best product for your borrowers.
Here are the five known types of lenders in the industry. Which one are you?
A financial institution that offers and underwrites home loans with specific guidelines and intensive screening procedures.
A mortgage broker works as a middleman. They do not have control over the loan terms, timeline, and approval.
Mortgage banks actually grant many mortgage loans in the US, either as a retail or a direct lender.
Direct lenders do not need capital from investors to grant loans because they have their fund source.
Retail lenders provide mortgages to consumers only but still offer other products such as checking and savings accounts or personal and car loans.
Mortgage Loss and How to Manage It
For mortgage firms, a loss is a nightmare.
It is a risk that is unavoidable but can be manageable if you know how to handle it.
Everyone in the industry knows that mortgage loss happens when the borrower fails to pay the loan within a specific period due to some reasons.
Still, regardless of the reason, this loss is always a major drawback for most mortgage financing firms.
And, when this happens, you need to control it immediately to prevent further losses and damages to the company.
So, what measures can you implement?
Here are some known strategies to help you.
Implementing Loss Mitigation Schemes
Loss mitigation happens when borrowers and lenders work together to avoid a foreclosure of the property.
In simple terms, you negotiate with your client directly or with the investor to develop a payment schemed that works for both parties.
You can try pitching the following:
- Repayment Plans – This process allows you to modify the current loan plan of the debtor.
- Flex Modification – Provides homeowners flexibility or grace period on their current payment schedule. You can modify the homeowner’s interest rate, add the overdue payments to the remaining balance, or extend the loan’s term.
- Forbearance Plans – It allows the homeowner to skip or make reduced payments for a specific time only.
But what if none of these options works?
Well, you have no choice but to implement stricter options such as:
A deed-in-lieu of foreclosure is a document that transfers the property’s title from the homeowner to the mortgage lender.
It basically means seizing the property from the borrower and agreeing that the client has no longer any loans to pay.
A short sale means the homeowner sells their property in a hurry. Here, the sale amount can be equal to or less than the amount due on the mortgage.
Moreover, the lender has all the rights to get the proceeds of the sale. It is also up to you if the borrower gets a deficiency judgment.
So, what do you think? Is it too complicated to handle a mortgage loss?
The answer could be subjective, and different firms indeed have varied strategies when handling such a concern.
What matters is that you know how to manage mortgage loss mitigation and use it to your advantage.
For More Information, Contact:
John (Adam) Watson, CEO, CanCap Mortgage Group Inc.
Email: firstname.lastname@example.org Tel: 416-452-5281