Private Lenders: How to Immediately Reduce Mortgage Losses

If you want to immediately reduce your mortgage losses you need to make immediate changes to how you underwrite your deals. As a private lender you face unique challenges because often you are competing with bigger players in the mortgage industry such as B financial institutions with less resources.

Often a mortgage broker or agent will submit a deal to you, you will then leverage the tools that you have to perform due diligence and then rely on an appraisal to ensure that there is sufficient equity in the property being financed to secure your deal. All of this is time and money.

The best way to ensure that you well equipped to close a deal is to empower yourself by knowing as much as possible about the property you are financing and the area that it is located in. Does your application even merit going as far as an appraisal? Is a particular area even of interest to you? This is step one in terms of making the changes necessary to immediately reduce mortgage losses.

Sticking to short term mortgage loans is your next line of defence. As a private mortgage lender, the shorter the mortgage term, the more opportunity you have to get out of a deal where the client may be paying enough to maintain the mortgage out of power of sale, but is too much of a collection issue to be worth keeping on the books.

Next is keeping on top of your portfolio, the areas where your mortgages are financed, and identifying when a property is no longer a good risk for you. This means keeping on top of trends and identifying when a negative shift in the market in a particular area may be in the cards.

Many publications go far to report on overall housing numbers, but you know as well as we do that the housing market can shift from area to area and also as it relates to particular housing types. Condos are a great example; condos are a type of property that, when there is a negative shift in the market in a particular area, are the first to take hit.

Your best line of defence to immediately reduce mortgage losses is to begin to deploy the use of AVMs (Automated Valuation Model) & Property Reports. AVMs enable you to look at a particular property or area to identify if value could be an issue. Looking at an AVM and property report at the application stage and coming up to your client’s annual mortgage renewal will help you see if a property is worth what you think it is. Where existing mortgages are concerned it may reveal an issue that could shift your decision to renew, thus immediately reducing your mortgage losses by mitigating the probability that you have mortgages in your portfolio that have shifted to a higher loan to value than what existed when you initially granted funding.

An AVM may reveal that a particular property or property type in a particular area may not be of interest, before requesting an appraisal and potentially funding something that could represent challenges in the future.

Reducing mortgage losses boils down to knowing more, and in the age of technology knowing more is easy and inexpensive. As the old adage goes, knowledge is power, so now may be a better time than ever to invoke the power of the AVM.

For more about immediately reducing mortgage losses using an AVM and Property Report please contact Purview For Lenders today by calling 1.855.787.8439.