Credit Repair and Loan Modification – Good or Bad For Net Branch Loan Officers?

I have noticed that there are several “side businesses” trying to recruit loan officers.

By “side businesses” I mean companies that offer services like credit repair or loan modification.

My in-box is full of offers and I see recruiting ads everywhere.

These companies are trying leverage the loan officers ability to connect with a group of clients that could also be prospects for their business. This is common business practice and you can find this in many industries.

It does raises a few real important questions.

1. What is the best use of your time.

Should loan officers invest their time building their own origination business or become a referral source to help someone else build their business?

Should you spend your time finding credit repair leads or another type of mortgage or real estate related service for someone else instead of investing your time in developing a referral network that delivers you an ongoing stream of business?

Credit repair and loan modification are not bad things (although everyone has heard the stories of companies that charged for services and did not deliver much in the way of results) and these services could help some people in the long run.

But I think that the question is really about time, focus, and reward.

How much time do you have to spend, is the activity diluting your focus, and how much of a reward will you receive.

Based on time and reward I think anyone would be better off focusing on their core services. You will profit more by focusing on the activities that help your core business instead of diluting your focus by spending time and effort on an activity that does not generate revenue for your core business.

Ask your self the question. Am I a loan officer or a loan modification representative? If you have to decide – which one are you?

What ever your answer is that is what you should focus on. Any one who tries to be all things to all people will fail at all of them.

2. Is this legal?
If you originate FHA loans – in today’s environment almost everyone does – you could be in violation of HUD employment rules.

HUD says it is OK for a mortgage company’s employees to have other employment but it cannot be with another mortgage company, a real estate company or any other finance related company. Here is the exact wording from the HUD handbook “They may have other employment including self employment. However, such outside employment may not be in mortgage lending, real estate, or a related field.” You can find this in Chapter 2, Item 2-9, G (Full Time, Part Time and Outside Employment).

I think credit repair and loan modification would fit HUD’s definition of “a related field”.

Credit repair has been around for a log time but for most of the time that the industry has existed FHA played a minor role and most mortgage companies did not consider HUD rules for many of their practices and policies. That has changed. FHA now is the primary product at most mortgage companies.

Loan modification is a relatively new part of our industry. I do not think many companies have gotten that far yet to ask the question of their compliance department – “Does this violate the HUD employment rule?”

The HUD rules on employment are simple. It is only a few sentences and leave little room for misinterpretation. As an employee of a HUD approved mortgage company you cannot work for another mortgage company, real estate company, or any company in a related field.

If you are employed as a  loan officer and you  are also acting as a credit repair, and/or  loan modification agent to earn additional income you should question your compliance department to make sure you have their OK.

Get it in writing.

Lee Walsh