Friday, July 17, 2009

Is The Loan Modification Industry Dying?

buzz this

Over the past 3 quarters much of the lead gen industry, especially the tranche of it previously focused upon mortgage, has taken financial solace in the loan modification industry. Not only is it a perfectly counter-cyclical industry to the down-swinging mortgage industry, especially sub-prime mortgage, but it is made up of many individuals who were previously involved in mortgage and that bought mortgage leads. I would not call it a party exactly because who would couch a phenomenon built on the back of consumer misery as such? However, it has helped many of us to grow revenues at a rate that we had probably never seen before. At one point loan modification was my companies biggest growing vertical. And now, it seems, it is close to being at an end.

Two things make me think this:

1. Loan Modification isn’t working for most homeowners.

I recently discovered statistics from a preeminent hedge fund that show that in most cases loan mods have been a dismal failure.  In fact of all the mortgages that were modified last year, over half of the mortgages were delinquent again within six months. What was more interesting was that the amount of time it took to go delinquent following a loan modification was also rapidly reducing. That’s not good!

2. Nearly every State Attorney is trying to close down Loan Mod companies

This week the Federal Trade Commission released a new initiative called “Operation Loan Lies” (subtle, isn’t it?!) which is an effort to crack down on loan modifcation companies across the country. The operation is backed by a large number of state attorneys and other government agencies and marks a coordinated effort right off the bat to close down 189 loan modification companies.

I don’t think it’s a shock to many people in this industry that loan modification, on the scale that we have seen it, is receding. Luckily the lead generation industry today is in much better shape than it was 12 months ago when the loan mod boom commenced. For many the green shoots of economic recovery are even beginning to flower and bloom. It is a good time to be part of this industry!


  1. So where do these companies, business owners and employees turn to? I have seen many put more effort into the debt settlement space, but that option is not too different then the loan mod space.

    Is it back to waiting tables??

    Are you seeing any trends?

  2. Mike,

    From a lead generation industry perspective we've obviously seen continued and growing interest in the for-profit education industry. It's also counter-cyclical but much less sharply so than loan modification has been. Interestingly I have seen a bit more activity around the new hosuing supply market recently e.g. buidling products. New homes beginning to be built (or finished) may be a leading indicator of a pick up in the real estate market.

    Another trend I see is more and smaller companies DIYing their lead gen activities. Conversions on self-gen leads tend to be very robust. So I think services around making self-lead gen more achieveable will explode in 2010-2011.

  3. Interesting!

    The loan modification process can be frustrating and confusing for many distressed homeowners. But you have to know what exactly is loan modification. A loan modification is a permanent change in one or more terms of a borrower's home loan.

  4. Hi...
    I think services around making self-lead gen more achieveable will explode in 2010-2011.I have many seen put more effort into the debt settlement space, but that option is not to different that the loan mod space.