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PreForeclosure Marketing:  How Mortgage Refinances Can Generate Leads and Income

Many times when marketing to PreForeclosures, homeowners tell us they want to try to refinance their loan to stop their foreclosure.  While this can often be a solution to stop foreclosure, it isn’t always the best one.  However, for the people who do qualify for a refinance, you need to understand how to convert this into more business.

Partnering up with a mortgage broker who can help such borrowers is going to be a key to your investing business.  If you pass them leads, they should be able to repay you for sending them business.   

One way that the mortgage broker can repay you for a lead is to send leads back to you.  In other words, they will have plenty of clients coming to them trying to refinance to stop foreclosure.  Many times these homeowners won’t qualify: you want to be in a position to get those referrals from your lender, so you can talk to the homeowner about other options.

I would recommend proactively contacting various lenders and see which ones in your area focus on bad credit refinances.  They’ll have the best chance of getting the loans closed, and will also be speaking to the most prospects that are behind on payments and not in a position to refinance.  You could have multiple loan offers sending you deals; remind them they’re helping the homeowner by sending them to you, rather than just telling them that they don’t qualify for a refinance.

To know whom to network with, I would recommend a smaller mortgage broker who specializes in bad credit loans.  If you can find a lender who underwrites their own loans “in house,” and has a good understanding of your local market, you can use this to your advantage as well when you talk to them about the types of opportunities that they could be sending you.

To ensure the deals keep coming, I would suggest paying a “finders fee” to these loan officers if a lead they send you turns into a deal.  This will help them to remember you and your company the next time a homeowner tries to qualify for a refinance but they can’t get the loan closed.

In many states, however, it is illegal for mortgage brokers to pay you a commission for sending them clients.  I suggest that you make sure what is and is not legal in your state, and follow the law to the fullest.  The last thing you want to do is get in trouble with your state for illegally collecting commissions.

However, there are ways to combat the issue of an illegal finders fee.   One way is to see if the mortgage company is willing to take you on, legally, as an employee and issue you a W-2 at the end of the year.  If you are an employee of the company, it’s not illegal for you to take a commission anytime you find a deal for them.

Since loan officers are paid on commission, it’s really not a huge deal for a mortgage company to take you on as an employee.  Remember that you’ll need to speak with the hiring authority at the lenders’ office, and if you’re going to go this route, I recommend that you work with a smaller broker rather than a big bank.

Many states are now requiring loan officers to pass state-licensing exams in order to legally offer mortgages to the public.  If you live in such a state, remember that you’ll need to get certified.  At this point, in my opinion, it’s becoming too cumbersome to become a lender, and I would probably rather just send referrals over to lenders in exchange for them sending leads back to me.

When marketing to PreForeclosures, partnering with mortgage brokers is a great way to develop and grow your business, and also help the homeowner.  Set up a lead exchange program with them to get more leads.  If you’re sending them business, you can try and get paid financially, but remember that you must be in compliance with your state lending laws with respect to earning a commission as well as being certified.