How to Start a Loan Modification Business in a Loan Modification Boom

For those of us in the loan modification business, lower interest rates greatly impact our business in a positive way. In this article I am going to explain how lower rates help our chances of success in the loan modification business.

So what do lower interest rates mean in the loan business? When rates drop significantly those of in the loan business call this a "refi boom".

Is there such a thing as a "loan modification boom"? Well, I think there is. When lenders agree to modify hurting borrowers into a new loan, often the lender will offer the borrower a 30 year fixed rate loan at current market rates (regardless of the borrower's credit scores, etc.). So when current interest rates go down, the modified 30 year rate offered will also go down.

So what does this mean? In a refinance boom, more borrowers will qualify based on the lower payments being offered at a lower rate.

So similarly in a loan modification boom, lower rates will also allow more borrowers to qualify for a loan modification.

Consider IndyMac Federal's loan modification guidelines in which a 38% debt to income ratio (DTI) is used as a target for affordability. This 38% DTI ratio looks at the borrower's current principal, interest, taxes and insurance payment and compares that to monthly income . With lower rates and lower payments, more of our customers who are facing hardships will qualify for a loan modification.

Recall that the FDIC took over IndyMac Bank earlier this year and IndyMac Bank made a lot of loans that are now in default or close to going into default. IndyMac Federal (the new name the Bank is now operating under FDIC control) is contacting its customers and is offering 30 year fixed rate mortgages permanently capped at the current Freddie Mac survey rate for conforming mortgages). This Freddie Mac Survey rate moves with the market so when interest rates go down so does this Freddie Mac Survey Rate.

So when you are marketing your services to potential loan modification clients, let them know that rates have dropped and their chances of a successful loan modification are going up if they act now.