Divorces can be a lucrative source of business

BY STEVE GOODE, STAFF WRITER, NATIONAL MORTGAGE PROFESSIONAL MAGAZINE

When couples get divorced there is one thing that is almost universally true: Somebody is going to be highly motivated to find a new place to live.

When times are tough in the mortgage business, there’s a tendency for loan originators to expand their scope of offerings into niche channels. NonQM and reverse lending usually come to mind. But what about divorce mortgages?

With almost one in two marriages ending in divorce and 70% of them involving expensive real estate that must be divided, combined with the potential for closing mortgages for both parties, it seems like a no-brainer. But there are things to be considered before diving in, from understanding the dynamics and sometimes volatile nature of a divorce, to finding borrowers in more discreet ways than advertising on social media.

In real numbers, according to research from Bowling Green State University, the number of women who reported they divorced in 2021 was 948,862. The divorce rate is 14.0 divorces per 1,000 married women. That’s over 700,000 potential mortgage transactions.

Not For Every Loan Originator

“Itell [LOs] this is not a shiny new object,” said Jody Brun, founder and president of the Divorce Lending Association, which trains Certified Divorce Lending Professionals. “You risk making things worse, much worse.” Brun speaks from experience, having gone through a divorce that involved the division of real property 30 years ago. She recalled noticing a disconnect between the legal situation and the accompanying mortgage situation and the number of gaps in the process.

So Brun decided to educate herself, building on her own experience in the mortgage industry and as a participant in a divorce. She developed her curriculum and passed her knowledge on to lawyers practicing family law.

“They saw a lot of mistakes being made,” she said, adding that even though almost half of marriages end in divorce, no two are alike, whether it be the goals of the two parties involved, their outlook, or perspective.

The association’s program, Brun said, eliminates many of those mistakes, whether they are in divorce and family law, financial and tax planning, or a mortgage.

According to the association’s website, the certification program provides mortgage professionals with the training to better serve clients who are ending marriages, as well as additional mentoring, coaching, and business development designed to help them reach their audience.

For Brun, background knowledge and a broader understanding of how those pieces intersect with real property issues is a key component to working in the divorce lending niche. Mortgage professionals who don’t see the difference between divorce lending and other less complicated channels fail their clients and risk doing them significant harm down the road, she said.

“They can provide value or chaos,” she said

Word Of Mouth And Relationship Building

Brian Sacks, a mortgage loan originator at Homebridge Financial, has been in the loan origination business since the 1980s and started working as a certified divorce lending professional in the last four years. Sacks, who calls Bruns’ course “outstanding,” said the niche fits into his philosophy that loan originators need to have a multipronged approach to stay in business.

As for the divorce niche, Sacks said the benefits are pretty simple: “These are people who have to sell,” he said. “It’s not rate sensitive.”

Another advantage, in Sacks’ view, is that he has developed relationships with mediators and divorce lawyers that enable him to participate in the niche without having to advertise, an act that

Divorce

For

Over The Age Of 15

Provisional number of marriages and marriage rate: United States, 2000–2021

Who files for divorce more?

SOURCE: DIVORCE.COM 69% Women 31% Men

1 Excludes data for Georgia.

2 Excludes data for Louisiana.

Note: Number and rate for 2016 has been revised due to revised figures for Illinois. Rates for 2001–2009 have been revised and are based on intercensal population estimates from the 2000 and 2010 censuses. Populations for 2010 rates are based ont he 2010 census.

SOURCE: CDC/NCHS NATIONAL VITAL STATISTICS SYSTEM

According to sociological research by M.J. Rosenfeld, women file for divorce twice as often as men.

Women initiate 69% of divorces in the U.S. compared to 31% of men. Surveys show that such disparity results from women’s high and later unmet expectations of emotional support from men.

SOURCE: DIVORCE.COM he described as “cheesy.”

“You come blessed,” he said. “They bring us in while negotiations are going on.”

The key, for Sacks, is to come in early enough to make sure mistakes haven’t already been made, such as the case of a divorce in which the client who was keeping the home by virtue of the divorce agreement hadn’t applied for a mortgage. As it turned out, the person was not eligible for a mortgage, but no one had thought to ask.

In another case, Sacks said, the person keeping the home as a result of the settlement needed a year of alimony payments to build credit and income requirements to qualify for a mortgage.

“These are not quick loans generally speaking,” said Sacks, who estimated that he closes 15 to 20 divorce loans a year.

The key to working in the niche, Sacks said, is to realize that you are there to help mediators or divorce lawyers do a better job for their clients and get them through a very difficult time, albeit one that will result in the purchase of one home and sometimes two.

“The approach must be one of an educator not a beggar,” he said. “Too often LOs are just walking in with their hands held out,” he said.

Helping People

Cindy Tamsin, a senior mortgage advisor and certified divorce lending professional at House America Financial, has been involved in the divorce lending channel for about five years and said it represents about 5% to 10% of her business annually, although she believes it could be a fulltime job.

“It’s slowly growing,” she said. “There will never be a shortage of people divorcing.”

While there may not be a shortage, the Bowling Green research does indicate that the divorce rate is at its lowest in 40 years. But, still, almost a million people a year are calling it quits on their marriages.

Like Brun, she went through a divorce and realized that lenders could provide a much better experience for those going through a break up in which the only bigger issue than what happens to the house is what happens to the kids.

“My goal is to help people. When I went through it I didn’t know what to do,” Tamsin

Adjusted Divorce Rates, 2021

According to Bowling Green State University, Arkansas had the highest divorce rate among women in the U.S., with 21.7 women divorcing in the last year per 1,000 married women. •

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Bowling Green Divorces by State

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Bowling Green Divorce Rate by State

• • 50 | NATIONAL MORTGAGE PROFESSIONAL MAGAZINE | MAY 2023

Bowling Green Adjusted Divorce Rate

Financial troubles are also another common reason for divorce. According to divorce stats, economic issues cause about 25% of divorces.

Couples going through their first divorce are around the age of 30, Divorce.com said. Married couples between the ages of 20 and 25 are 60% likely to get a divorce.

Baby Boomers have the highest divorce rate among other generations — 34.9%, reports Divorce.com.

Divorce.com also reports the following breakdowns by race:

• African-Americans: 33% divorces per 1,000 married residents

• Hispanic women: 22% divorces per 1,000 married residents principles or expectations, including: it’s very rare that a divorce doesn’t get contentious; always keep both parties in mind; sometimes it’s like therapy; and there will always be people divorcing.

Timing is also an important aspect of getting involved in a divorce settlement and helping couples divide property and get mortgages.

“It’s harder when they’ve waited until they ruined their credit,” she said.

Tamsin said she’s never had to pay to advertise for divorce cases because the channel is largely word of mouth and cautions those in her line of work that haven’t been through a divorce to “pick another niche” because the process can be difficult and lengthy. However, Bruns disagrees that LOs in the niche should have gone through the divorce experience.

That difference aside, Bruns said her organization has just surpassed training 800 loan originators in the craft of divorce lending, and the goal is to continue to grow that number in order to help them provide a valuable service and to help lawyers and families involved in an emotional experience.

Teamwork

Kathryn Kostas, vice president and certified divorce financial analyst with EP Wealth, a financial planning and wealth management firm, has worked with Tamsin for several years.

Kostas said her role in a divorce settlement is to research what will work for both parties — and many times — enable one to qualify for a mortgage to keep the home while leaving the partner leaving the home the ability to afford to buy another home if they want. Tamsin, she said, plays a huge role in that.

“We’re trying to create two financially stable households and the mortgage and real estate pieces are huge,” Kostas said, adding that a divorce lender’s ability to be able to work through obstacles — such as a spouse with no income history in years — is also key.

“Creativity is a huge factor. ‘What can we do here? How do we make this work in a way that’s best for both parties?’” she said. “I’ve had some terrible experiences (with divorce lawyers). I need someone who knows the right questions to ask.”

Kostas said that those experiences don’t mean the lawyers are to blame. Their job is to get the best deal they can for their clients and also not to give financial advice because that’s not their responsibility.

But she also tries to explain to them that a divorce lender can help keep their client in the home, which will likely lead to a good review and future referrals.

“Once they see the benefit , they’ll continue to use a divorce lender,” Kostas said. n