Why Would a Mortgage Loan Officer Do Credit Repair?

The latest blog post from the president of Phoenix Credit Consultants:

This weekend, I read a “LinkedIn” article written by an old friend who is in the investment capital business. In it, she talked about a client of hers who ran a carpet cleaning business. In this carpet cleaning business, the owner “did it all”, it was him and his carpet cleaning truck, hustling from job to job, pausing where necessary to answer his cellphone, to book appointments for existing customers or to sell his business to new customers.

Anyway, the carpet cleaning businessman had an accident and broke his leg. He was forced to hire someone else to cover the appointments that he had booked while he recovered. During his convalescence, he was able to devote his time to marketing his company properly and his business grew. He found that he had been spending his precious time working “IN” his business, instead of “ON” his business. Oh yeah, by the way, the carpet cleaning guy was calling the investment capital firm to talk about financing for additional carpet cleaning trucks and equipment – his business was growing.

After reading this article, I started to think about the mortgage loan officers that the credit restoration company I work for deals with every day. I often encounter loan officers that say, “Credit Repair? Oh, I do that myself.”

I have often wondered, why would a loan officer choose to do this additional work? This additional work, mind you, for which they don’t receive any additional compensation.

I have been able to formulate 3 reasons, in my mind, why they do this:

1. They don’t trust Credit Repair Firms:

Many loan officers have been ‘burned’ by credit repair firms. They have referred their customer to a credit repair company which represented that they knew what they were doing. The credit repair company took the customer’s money and never did the work. Or, worse yet, the credit repair company did the work, but steered the client towards another mortgage brokerage. (Here’s a tip: Always do your due diligence. There is, at least, one local credit repair company that a local mortgage company has an ownership interest in. No, it’s not Phoenix Credit Consultants.)

2. They think that the work is easy, that it speeds the process up if they do the work themselves:

Loan officers have access to software like “Credit Expert” that analyzes a client’s credit report and makes suggestions as to a score increase that might be achieved if a client takes certain steps, like paying down existing accounts.

Sometimes, the work that needs to be done is “easy.” Oftentimes, a client who is referred to us who simply needs to pay down the balances on existing accounts. In those instances, we often explain to the client what they need to do, without charging them a cent.

But why would a loan officer spend their precious time doing this work, especially when there is a trusted alternative that will do the work for them?

Reputable, trusted credit repair companies do exist. (Again, do your due diligence.) These companies do the work that the loan officer is doing for them, at absolutely no cost to the loan officer or his company.

3.  They are concerned that the “cost” of credit repair will keep their customer from being able to close on a loan:

Many customers who shop for mortgages have saved ‘just enough’ for a down payment and the costs associated with a loan. Many loan officers surmise that if the borrower takes on the additional burden of paying for credit repair, they aren’t going to be able to have the funds to proceed with the loan when they complete the process of repairing their credit. They conclude that if they themselves help the client with the credit repair, they will save the client the money they need to close on the loan.

Here’s what they miss: Professional credit repair, properly done, doesn’t cost…It pays.

When a mortgage client’s credit is repaired properly, they will not only qualify for a mortgage (perhaps even for a better, cheaper mortgage), but they will also save on their homeowner’s and auto liability insurance premiums. More importantly, those customers who have ‘just enough’ for a down payment and the costs of a loan, are the customers who are the most likely to be required to have PMI – the savings on that insurance alone will most likely more than offset the cost of credit repair.

So, think about it. Are you spending time working “IN” your business that you could more effectively spend working “ON” your business? Does it really make sense for you to contribute your free sweat equity towards the cost of your client’s new home?