The story goes something like this: You have a great client meeting, you get them through counseling and you start a file of notes about your conversation and information about their home, including the value, mortgage payoff and other pertinent details to prepare for the application. Then you get that great email or fax from the HUD counseling agency that includes their copy of the unsigned counseling certificate. At this point, I picture the beginning of a NASCAR or Indy race as the green light comes on, the flags start waving and the starting gun fires. And you’re off! To go write another loan…
In the days and weeks that follow, the onion is peeled back. The credit report comes in, the title work comes in, and your processor or loan system alerts you that the appraised value has come in. In most cases, all the news is good and you are off to close another loan and help your client obtain a reverse mortgage.
But sometimes, as the onion is peeled back, a strong, pungent odor is revealed and your eyes begin to water. You have one of “those” loans. It’s a problem child, and it could be anything: survey encroachments, clouds on the title, probate issues, too much debt attached to the home, liens, repair issues, primary residence concerns, low value, etc. The list goes on and on. If you have been around the block for as many years as I have, you have seen it all.
When this happens, it’s easy to say, “Wow, that’s too bad,” move on to the next client and not try to take the challenging loan any further. Or, while you’re looking for the next client, you can meet with the borrower with the troubled loan, tell them what you’ve uncovered and help them put together a plan of action. If they’re willing to work through their issues, it might be possible to keep the loan moving forward. Let them know that certain documents, like those pertaining to the appraisal and counseling, will have to be readdressed, depending on the timeline for solving the problem. But help, don’t run. It will be good for you and good for them too.
My suggestion is to find a few great referral partners to work with who can assist such clients in solving the problems that are preventing them from obtaining a loan. Here are a few ideas about the kinds of referral partners you could connect with:
Building and Repair
} Roofers Many times roof inspections are needed to certify that the roof is good for three years or more, and in some cases you can escrow for roof replacement.
} Wood rot repair This comes up a lot in Purchase transactions for resale homes in Florida, and probably in other areas near water. A quick wood rot repair that brings the property up to par saves trouble when the WDO report comes back negative. Your Realtor may have a list of these folks.
} Structural engineers Doublewide mobile homes need structural certifications to pass FHA guidelines, which includes checking the skirting, tie-downs and support devices to make sure the residence meets building codes.
} Handymen These professionals can often complete simple or complex work on homes to bring them up to par. I recently hired a handyman to remove burglar bars from the windows of a home and install quick-release latches per FHA guidelines.
} Plumbers Plumbers can come in handy in situations where a house has its own well or septic tank, which was likely installed before the city’s water supply was able to connect to the house. They can assess the work involved and their estimate can help deduce if connecting to the city’s water line is feasible.
I once worked with a client whose home repairs required a general contractor because the damage was so serious. Remember that escrowed repairs have a ceiling, but repairs on the HUD-1 do not, so you can do some repair work upfront and pay at closing, while the rest of the work can be saved for post-closing. Read the guidelines and check with your company on the specifics if you come across such a situation.
It’s the Law
} A trust attorney Having a go-to trust attorney can be helpful. Recently, I closed a loan involving a revocable trust, which had to be reviewed for title. I worked with a law firm that has a title company on the ground floor, so we did all the title and law work in the same building. With the proper help, you can do reverses with trusts and life estates.
} A bankruptcy attorney You might even consider adding two or three bankruptcy attorneys to your Rolodex. Remember, it is possible to do a reverse just one day out of a BK7. I have even done a reverse inside of a BK13 to pay the trustee.
} A probate attorney I worked on a loan for a client who had gotten a divorce just before her husband passed away before he had moved out of the home. He had children and she wanted a reverse mortgage, but we needed to probate the estate before I could do anything. She also had other liens on the home from creditors, and so she needed some help from a bankruptcy attorney and then a probate attorney before we could consider applying for the loan. She came back to see me in a year and we were able to close her loan.
} A divorce attorney I had more than one client who wanted a divorce but needed help paying the bills and also needed money to pay the departing spouse some of the equity they had in the marital home. I was able to help them with both and when the departing spouse got her settlement in the divorce, guess what? She needed another home, and the reverse for Purchase program was a great way to help her pay for her next place. Now tell me the ex-husband and ex-wife won’t love you once you help them split up, pay the settlement, pay the lawyer and get settled in separate residences. That’s a project worth undertaking—two loans, two happy single folks and one happy divorce lawyer.
Also, consider connecting with your local legal services firm or legal aid. They can be helpful in certain situations. I had a client whose mom left him her house in her will, and the home had a mortgage on it. He went to legal services to figure out how to give the home up, because he did not have the money to pay off her mortgage or make payments. I met with them at the legal office. He was over 62 and was renting an apartment. We talked to him about the possibility of keeping the home and getting a reverse mortgage, and in the end, he did.
Odds and Ends
Consider making contact with a survey company, as you’ll need to have surveys completed on Purchase loans. I once helped a client who did not get her land surveyed before she added a swimming pool, barn and a garage. Guess what? She added some of those structures to her neighbor’s yard and encroached on his property line. I had another loan where the barn roof was so close to the property line that it hung over the neighbor’s yard. I brought in a surveyor to meet with both neighbors and we agreed to a land swap, where we cut equal parts from both pieces of land to remedy the situation.
An insurance agent who handles property and casualty, and flood and hazard insurance can also be helpful. I find quite a few borrowers without insurance.
In closing, when connecting with other professionals who may help solve some of the roadblocks your clients are facing, remember to collect two or three names for each referral group to avoid a situation that might be considered steering. You also don’t want to be held responsible if any issues arise with their services; make sure to check out these providers with the state licensing body and other professional boards, and ensure that their licensing and insurance requirements have been met. As one of my colleagues often says, this business is a social mission. Don’t just take the easy, fast and clean loans. You need to learn how to fix and close the good, the bad and the ugly.