It's the ugly file.
The client approaches his broker in crisis mode: he's going to lose his property.
This client has defaulted on mortgage payments and is on the precipice, or in the midst, of a legal process.
Often, he has sacrificed various forms of credit (car payments, credit cards, phone bills, etc.) in a desperate attempt to save his home. The trigger point of this financial deterioration varies as much as the files. He was laid off work, is in the middle of a nasty divorce, pays child support, has unexpected or chronic medical expenses. The list goes on.
The client was likely caught in the trap of waiting for a miracle that never materializes. He has a cash flow problem but equity in his property.
The client needs money. And he needs it fast.
There are two options most commonly presented to a client with this profile. In the first option, he loses his home. In the second, he sells it in a fire sale. Both options leave the broker with a closed file and the client with catastrophic repercussions.
The majority of clients in this position will lose the roof over their head along with the equity in their home. Those who manage to sell in a fire sale are forced to channel the proceeds towards their mortgage, penalties, arrears and legal fees. Clients who come out of a fire sale are often left with little-to-no funds.
The ramifications continue. Without the financial support to restart, any remaining funds go towards immediate living expenses instead of building a future. The client's most pressing hurdle is to provide a roof over their family's head. The stress on the family unit grows exponentially.
The broker loses too.
The broker has failed to find a solution for his or her client. As a result the file closes and does not fund. The client has no incentive to provide referrals; by losing the equity in his home the client is not in a position that will foreseeably generate future files. Ultimately, the broker has failed to differentiate him or herself from the competition.
Let's return to what the client needs: time and money.