24 Sept: Strategic Planning Loan Mod Teleconference
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Learn more about our services: LOAN MODIFICATION KIT Thanks for joining me… live! Ready to take action? Want a private coaching call with Mike? Want us to do your application? AGGRESSIVE LOAN MODIFICATION Strategies Live Teleconference Recording More info? Ryan: Hello, hello. Welcome to the show. This is the 60 Minute Loan Modification Insider Secrets Teleconference Series. We’re here to beat the bank to save your home and help you escape bad debt forever. My name is Ryan Rockwood and as usual I’m joined by my father and business partner, Mike Rockwood, on today’s call. Mike: Good evening. Ryan: Today’s clients only call is about street fighting with your bank. How to know how aggressive to be, when it can backfire, and what you must know. But, before we get started, couple of quick announcements. The only place, I believe, where you can email in questions here while we’re live today is the email address questions@60minuteloanmodification.com. Email them in, write them down and email them in as you think about them and we’ll try to get to each and every single one. Later on we’re also going to take some live calls so please mute your phone if at all possible. Announcement number one. We have many requests to listen to previous call recordings and we’re happy to announce that soon we’ll have a clients only web page where you can listen or download any and all of our past calls. So stay tuned for that coming soon. And that’s a cool thing. You know, whenever I do an online class or whatever I’m really excited about it and they are usually only once a week like ours. We have two calls a week but one of them is for new people. I know that obviously the classes have been going on before I found out about it and to tell you the truth, whenever I enroll in a class like the one you guys are in here I just get it done in the first week. That’s just my personality type. And I’ll go back and basically take the whole course in one week and that just works better for me. So if you’re that kind of type A personality or whatever, now you’re going to have, basically you just sign up and boom. Every week there’s something new but the basics are the same. We’ll deal with new strategies and stuff. So anyway, you can pretty much have a couple months of these calls, the knowledge of them, at all times. Announcement number two. For six or eight weeks we’ve been getting bombarded by B of A / Countrywide horror stories. But there are some people getting good results. We’ve all heard the bad news. But if you’re one of the few getting a good response and a good mod from Countrywide, please give us an email to let us know and we’ll share your story. Mike, what was that call you got yesterday? What bank was that? Mike: The Texas one. It was Countrywide. There you go. Well, he had been working on the modification for about two months so that’s extraordinarily long. It was a little bit of a challenge. He had some real income challenges but yeah, it was Countrywide. Well, B of A. Ryan: So what did they say? Was it actually Countrywide or B of A? Mike: They pretty much rolled everything together when you call it. It’s B of A. It’s all B of A now. Ryan: What was the–can you tell us what it was? Mike: Yeah. It was a pretty standard modification. This one was an offer for three years reduced. They did take it all the way down to 2 percent. The guy was just thrilled because he was really afraid they were going to lose this home and they bought it new about three years ago. They just love it. And he was able to keep the home. They cut their payments by almost $1000 and they’re just thrilled. So it’s a three year, 2 percent deal and then it starts to climb up so it’s a very traditional loan mod. It’s one of those that we call A paper. A loan mods. So it’s as good as they get. Ryan: Two percent is just incredible. Mike: Isn’t that sweet? Ryan: Can you imagine that? So that’s your primary residence. Mike: And his kids, they get to stay in the school and they got a reasonable monthly payment and then, you know, three years from now they’ll start thinking about okay, now what are we going to do about this thing. What are we gong to do about the value. Ryan: The thing is, a lot of people–of course everyone wants to know the secret, right. And that’s what a lot of people are here for, like tips. And I guess there are tips. There are tricks. There are strategies. And there is just some help from the community of people saying go, go, you can get it done. Don’t give up, that kind of thing. But it’s kind of like, did this guy do anything extraordinary? He didn’t have the hardship letter than would knock anyone’s socks off or anything like that but he just went through the paces. He followed the program, went through the paces. Mike: Yeah, Ryan, this is a good example of somebody who–and we talk about this all the time. Somebody just picks up the phone and calls the lender and starts working it out and gets rejected. And then contacted us late in the foreclosure process and said listen, is there any hope for me and we started over again. And the truth is this time they went back and with an intelligent application. First time they had just pretty much been a victim of getting caught flatfooted. Not understanding what those questions meant and not understanding how much income you needed to show and to be able to justify the right underwriting criteria so it’s a case where it’s just goes to show that you really have to be prepared before you talk to the bank because once you do get it right–and really, the topic of the call tonight, getting aggressive. When you really have a tough, tough situation and getting aggressive. You have to assume the basics. It’s like in any sporting team, if you want to get up to the excellent level you have to make sure that you’re doing the blocking and the tackling correctly. It’s the ABCs of having your application dialed in right, your budget all dialed in right, presented in a prequalification fashion so that you get it right down, exactly right. Sending it in correctly and then following up like a crazy person. And you get a good modification. And that’s the thing I wanted to really encourage people with. I wanted to be sure to report that absolutely every day, not a single day goes by that we don’t get either an email or a telephone call thanking us and also sending messages about successful loan mods. So sometimes in the four to six to eight to twelve weeks that you’re working on your modification, you can kind of lose heart and you can begin to think, is this really happening or am I just caught up on some kind of a hoopla. Well, it really is happening and it’s happening and it’s life changing and it’s happening absolutely everyday. Thousands and thousands of people everyday get loan modifications. But keep in mind, the line is getting longer and longer. There’s 10,000 applications everyday. We heard the other day that Chase gets 40,000 a month just on their own. And what are they, 15 percent of the market? So this is a frenzy and getting super aggressive like we’re going to talk about tonight is absolutely the right thing to do if you’re in a tough situation and we’ll talk about tricks and tips here in a minute. Ryan: Today’s topic is aggressive strategies for dealing with banks. Mike: Send in your questions at questions@60minuteloanmodification.com or just write them down and we’ll go to live questions in about 15 minutes. First of all I want to remind you that the basics always apply. You have to have this good application and you have to follow up aggressively. And let’s just review for a minute what a good application is. A good application has absolutely every item that they’ve asked for and it doesn’t miss a thing. Like if they ask you for three months worth of your checking account don’t try to get by with just sending them two. And if it’s not real clear if it’s a checking account or if it’s a money market account or if it’s a combined savings / checking, some kind of hybrid, or a credit card account, then get it clear or make it clear for them. Assume that everything that can go wrong with your application will go wrong. So wire brush it before you send it in. anything that has a question like, let’s say you have rental income and you think that you should be able to justify using 85 percent even 90 percent of the gross rental receipts. Then take the time to write out a good, logical note and explain why you’ve done that on your financial worksheet. So what I’m saying is a good application is really important. And then let’s just review for a minute how important follow up is because remember, when you submit a good application you know what the outcome is going to be. You know if your hardship is good. You know if your loan is bad and you know if your numbers are dialed in correctly. Now all of you are clients of ours so you all know the mysteries of the budget. You all know the mysteries of debt to income ratio and documentable income and cost of living and how your cash flow is supposed to net at the bottom of your budget. So you all know when you send it in what the right answer is. So there’s really no excuse. Then it’s just a matter of following up and as I’m sure you all have learned by now, follow up is especially important in the first week and late in the process. There is a lag time during which your application just is in the queue and there’s nothing you can do to move it ahead. But you really want to be all over that follow up procedure that we recommend right after sending it in because so many of them never get entered into the system. They get lost somehow. It’s really not an inconsiderable amount. It’s quite a few. So follow up especially in the first ten days and follow up real strong after about two or three weeks or three and four weeks. All right. So those are kind of the basics and then let me start into special tips that I give to folks that are really, really set to street fight with their lenders and people get this way when they, number one, either don’t really care if they keep the house or not. They just really want a good deal or they don’t want the house. That’s one reason why they get into what I call a street fight. Another one might be because you at all costs want to keep the house and so you absolutely want to street fight fro a good loan modification. And another one is when you’ve got a really crappy loan. But honestly, that one’s kind of easy because the really crappy loans get modified in a heartbeat. The bank is really interested in getting those off the market. So that one usually doesn’t take as much fight as the other two. But let’s be clear. All of the published rules are for the common man. You know who the common man is. You know, salt of the earth. You know, hard working individuals. You know, like you and me, you know, morons. The rules are for the masses. The rules are for the masses. And the closer you get the more street fighting you do with your lender the more you will realize that the rules can be broken. They can be bent. They can give modifications when the investor does not take modifications. They can give you a modification on a rental property in spite of the fact that they never give modifications on rental property. So the rules change as you play hardball with your lender. Believe that. It really is the truth. Better mods and breaking the rules, in other words, getting out of line like I always talk about, sometimes that just is necessary. You just have to break the rules to get out of line. Now, the first bit of advice I would give you is you have to get comfortable with the “F” words. The first F word is Foreclosure and the second one is FICO. Now the first F word, foreclosure, is something you have to get comfortable with and this is shocking to a lot of people, but once you get comfortable with it, you realize it’s a paper tiger. It can’t really hurt you. In fact, a foreclosure process is a consumer protection process. It’s a process that’s set in place to give you plenty of time to work things out with your lender after you’ve gong into default. So you really need to think through, you need to read through, get some of my resources, and read through the workbook and some of the other resources we have for you on foreclosure and get comfortable with the fact that you jus might have to negotiate hard with your lender and get to the point where they give you a notice of default if you’re in a non judicial state like California or when you get to the point where they actually take your butt to court and they actually file suit against you to foreclose. Ryan: I’ve got to say we should stress, of course, that while rules can be broken that doesn’t mean that you want to, right off the bat, refuse to send in your checking account statements or something like that. You got to pick your battles and while things can be potentially bent and broken and special effort made, you’ve got to get the process going. You’ll need a negotiator. If you don’t have a negotiator, you don’t have anything. Mike: Well, Ryan, are you kind of reacting to some of the folks that we’ve talked to recently who start fighting from day one? I mean, they don’t even submit the application. Ryan: That’s what I was thinking of because we’ve had one guy, real nice guy but kind of kooky. He’s in Chicago and he calls me. He keeps on wanting to sue the lender. Mike: Before he submitted a loan application. Ryan: I don’t really get it other than he’s really into it. Has a sue happy mentality and wants to help other people sue them. But it’s like first I would try to work it out. That’s just to be friendly and kind to everyone but because life is hard enough and if you really want to go toe to toe with someone–most people when their house is threatened they turn tail and run and pay and send mom’s money, their own money, their 401k, their kid’s bank account. The most common aggressive strategy that I think most people will have to take and it something that most people have to get used to is simply not paying your mortgage. Going late in order to get considered for a loan modification. Mike: Yeah. It’s a big hurdle. It’s a big first hurdle but it’s the first punch in a street fight. Ryan: It’s kind of 90 percent of it. Mike: Psychologically maybe, because once you’ve done that and it doesn’t hurt so much. You recognize that man, that was a paper tiger. That was an excellent adjustment, though. Excellent. And that’s why I started off this session reminding you that the blocking and tackling of getting a good loan modification and shaving some money off your monthly payment and rescuing your finances during your down turn, it’s all about the basics, all about a good application and good follow up. So beyond that I recommend that you get comfortable with the two F words. Foreclosure is the first one. Don’t let it scare you. And FICO is the second one. And obviously they’re related because once you miss a payment and you start into the street fight, you start threatening to get foreclosure, your FICO score is going to go down. Most clients are really surprised at how little their FICO score goes down. But take four, five, six of those hits and it starts down considerably. Most clients take at least a 100 point hit during the course of a loan modification if they are negotiating seriously and hard with their lender because they miss five or six payments. All right, so that’s the first thing. Get comfortable with the F words. The second bit of advice I want to pass on to everybody is that second mortgages are toast. And by that I mean that the second mortgage industry knows full well that they are screwed. They are the ones that hold mortgage, they hold deeds, they hold as collateral, vapor. It’s gone. It has vaporized. So I want to encourage all of you when you’re street fighting, when you are fighting really hard to get a good modification and the gloves are off you’ve really got to play hard ball with the second mortgage. A lot of clients are offering settlements in the ten to twenty percent range and some of them are starting to get accepted. That is you offer to buy them out. It’s a good strategy. Secondly, you may have to let them charge the loan off before you can get them to consider that radical a settlement and by charging them off–I want to be sure you understand what that means. That’s an accounting practice that requires that if a loan, a second mortgage, is over 180 days late they can no longer keep it on their books as a good loan. The obvious implications are if they kept all these bad loans on their books a lot of their investors would be getting ripped off because a lot of those loans aren’t any good. So they have to take them off the books, write them off as bad loans but that doesn’t in anyway give up their lien or give up their ability to collect the loans or to give it to a collection agency to go after you to try to collect it. But it is just something that you should know in the whole street fighting with the second mortgages. That when you get to that six month point, 180 days, they will threaten to charge it off and they always make it sound like it’s such a big deal. We’re just going to charge this thing off, that’ll teach you. And you go, well, what difference will that make to me? And they can’t answer that because it makes no difference to you. It gets reported on your FICO score, so by that time you’re pretty well FICO insensitive. So second mortgages are toast. The third thing I want to remind you is you really have seven options when you’re arm wrestling with foreclosure or arm wrestling or street fighting with your lenders about your home. Four of the options enable you to keep your home and three of the options do not let you keep the home. Let’s review them. The three that let you keep your home, they would be loan modification, catch up / pay up, and that involves things like deferments and repayment plans, forbearances, and partial claims. And the third option, foreclosure work out option, is refinance. And for those of you who have equity in your home when you still have a good job and you have good credit rating it really is a good time to refinance. And I just talked to about 100,000 people. There’s about eight million people who don’t fall into that category. The fourth one that let’s you keep your home is bankruptcy protection. And then there are the three options that don’t let you keep your home and they are the short sale, a deed in lieu, and that always attractive walk away. And here’s what a lot of folks are doing that are really aggressively trying to accomplish their goals. They’re pursuing multiple strategies simultaneously. For instance, a lot of people who I’m advising are taking a short sale process, the loan modification process and an application to turn the home in deed in lieu at the same time. And the beauty of that is there’s a deed in lieu requirement to have the home on the market for 90 days. Well, you might as well start from day one then and you might as well have it on the market as a short sale so that you understand what how that option will work out for you and you might as well be applying for a loan modification at the same time so that you have that option. Ryan: With the short sale option, what’s really tough for most people because for one thing they’re dealing with the spouse, dealing with kids. The point is not wanting to leave. So in other words most people aren’t pursuing options that they probably should pursue in tandem because it makes you talk and deal with some kind of tough issues on the front end. Mike: I thought you said we could keep the house. Ryan: We might be able to but if I put the house on the market and have a sign there, we’ll have people in our house. We’ll have to keep it clean. Everyone is going to know it’s a short sale. It’s easy for us to say that because we help our clients out. Mike: But you’ve named the right issues. Those are the issues that people struggle with. Ryan: For the thing is that and this is really tough, the thing is we’re not–most realtors, this just isn’t their gig and people think they’re mostly stupid which is probably true but that doesn’t affect this. The thing here is that realtors get paid selling houses and this just doesn’t fit into this standard rubric of stuff that they teach you down at the local brokerage and so it’s easy for us to say cause we know that if we took a short sale listing we would maybe never show the thing. Mike: Right. We wouldn’t put a sign up. Ryan: They wouldn’t get any calls. It’s like most agents don’t–so anyway the bottom line is I want people to know we’re not throwing it out there like go call a realtor, do a short sale, cause most of the realtors you call are idiots in this department. So while this is an option and something you need to pursue there are more extenuating circumstances. The other thing I would encourage people to do is, you mention get okay with foreclosure. Well, in my experience the only way you can do that, if you don’t have a family, who cares, right? But that’s not 99 percent of the people. For 99 percent of the people the lack of money has already created quite a rift in the household. In some cases the wife won’t sit down at the table with myself and the husband because he’s wanting to learn about what are the short sale options. She is indicating that she is dead set against that. So the solution isn’t to have the agent over and put everyone in that situation. In my mind, all you can do is keep talking about it, never pushing too hard. And I used guys because that’s just my experience but I’m sure the opposite happens with women and men too. Whoever is financially a little more astute. So in my situation, when it worked for me, and if you read my book on credit, you know some of the things I went through. What worked for me is a very low key, low temperature long term discussion asking questions of the other person. So let’s get into a little psychology there. I would really recommend that because lots of people who are trying to convince their wife, this or that, you’re screwed. If your wife doesn’t want you to short sale and you’re going to short sale, what is the point of saving your credit if your marriage is gone? It’s just not worth it. So the bottom line is better to pretend that your with her and get kicked out of the house. That’s my opinion. So consider that option. I have great success with people who are able to–the question is a lot of times in my situations one party refuses to talk about it but demands a certain standard is met, like the house is kept. The other party is more realistic and is willing to explore other options and so in my advice, I don’t know if anyone would care, but my advice is to throw out, like lob the question out there and continually say, well, I don’t want to short sale the house either. But is there, do you see an alternative? Ask the question. Can you work more hours? Could you get a better job? Could we take the kids out of private school? You have to really express to your partner that it’s not you fighting them. You are creating a soft landing for your family. So you’ve got to get together on this and if it is taking the kids out of school, I don’t know what it is. But that in my opinion makes it a lot easier to talk. And don’t think it’s going to happen overnight. But given a month of non confrontational conversations I think that you’d be amazed at how the most stubborn person can be suddenly the one pushing for something that’s perhaps better financially for the family. Mike: That’s powerful stuff, Ryan, and I do get pegged on the person I’m working with and very often, you’re right, they go back and they come back a week later and they say, maybe we’re not going to move quite so fast on this or that and you realize they’ve talked it over with the significant other and there’s a difference of opinion. There always seems to be. But at any rate I love the multiple options simultaneously. I really think it’s a powerful way to keep your options open and to make this thing work out on your terms. Ryan: One more point about getting okay with foreclosure. There’s this one idea of foreclosure that’s someone taking something from you. That’s the generally held assumption, I think. Your house is going to be foreclosed upon. At some point some demon is going to come in and swoop in and take over. But the truth is you can kind of think about foreclosure as your friend in a really weird way if you think about the foreclosure laws. So here’s the deal. The worst case scenario is you’re going to get six months of free rent to save up for a place for your family for the next place before you get relieved of hundreds of thousands or a million dollars worth of mortgage. Mike: Finally you’ve said something that is memorable. And the other stuff has been important in terms of relationships and everything but what you’ve just named is a third F word – FICO, foreclosure, friend. Foreclosure can be your friend. Ryan: Yeah. I don’t know if you have a way to shed a million dollars of bad debt this year that’s not on your house, I suggest that you take it whether it’s a part time job or collecting stamps or whatever it is. If you’ve got a million dollar house all you’ve got is a lump of coal right now. All it’s going is down. So yes, you have to live somewhere. But you don’t have to live somewhere that costs $6,000, $7,000 a month. So a friend is something to get you out of that situation. So anyway, consider it that way. Consider it like it’s a slide. I’ll take that escape hatch. Mike: Now here’s two more things I want to mention that folks who are really aggressively fighting with their banks to get good modifications to their loans are doing and you’ve got to take this real seriously folks. They’re meeting with a bankruptcy attorney and I don’t mean calling somebody up or getting on a website and asking a question and coming back tomorrow and seeing if it’s answered. Get on a forum or something like that. I mean they’re calling a local bankruptcy specialist, an attorney who just does bankruptcy, and they’re paying him a couple hundred bucks to meet with him, or maybe not even the attorney but a paralegal who works for him, and they pay him $150 and they talk with him for 30 minutes and they get real clear on two things. Number one is, help me to understand bankruptcy for me. And then describe your situation. Number two. You want to be sure that you’re crystal clear. You have clarity on no matter what state you’re living in what are the state laws with regard to recourse and deficiency judgments. Cause you want to be sure you understand if that lender can come back and get money from you if you decide to go down the short sale route. If you decide to walk away from this sucker or if you decide to give it to them deed in lieu. Ryan: So that’s a good thing. What’s weird to me is that so many people are cheap. We’re all cheap. But if you want some advice, for God’s sakes, pay some one. You just can’t call up the loan modification company and say, can I get a loan modification. You are truly saving a penny, losing a pound, foolish thing. You’ve got to pay someone. Mike: It’s just so funny when I say to somebody listen, $150, here’s the name of the guy. $150, you understand when I say $150 and you have clarity on this issue. No guessing. Ryan: Yeah, he’s paid up, it’s over. Bankruptcy attorneys, if you get a good one, they’re happy to tell you if you’re not a good candidate. I suppose there’s lots of sleazy bankruptcy attorneys like anything but the ones that we use they are the really good ones. Mike: They want to interview you too. Okay, so the last thing is do the same thing with a CPA. With your CPA, with your trusted tax advisor. Go and get clarity on the tax liabilities of what you’re doing. If there’s some forgiven debt involved, if there’s going to be any principal reduction you want to be sure what your tax liabilities are and again you can probably do that for free. But get clarity and get specifics on your deal so you can move forward with confidence. Ryan: While all that is true and everyone has to do that, let me give you the answers that we want to hear and we want to get to. One is there will be no recourse. This sucker is over, whether it’s foreclosure, a loan modification or a short sale. We work toward that and the other thing is there will be no tax liabilities. So, you keep asking the questions until you get those answers and if you’re not getting those answers you need to double check them because you can email us or call us. But almost everyone we work with has had both those things lined up if they do things properly, like a short sale, for example. So that’s what you’re shooting for that’s entirely realistic to have no tax liabilities and no possibility of recourse. Mike: Okay, let’s take a few questions. Caller: Yeah, I just received your modification kit on CD so I haven’t got a chance to go through the whole thing. I’ve been investigating this for a few months now. Of course my hardship is reduced income. I believe I qualify for the affordability program but do they really try to reduce your mortgage down to 31 percent of your monthly gross? Ryan: Okay, so your primary question is, is there really hope of getting it down that low, is that right? Caller: Yeah, reading a little bit that I could so far and basically the lender gets down to about 35 percent and then the government pretty much kicks in the balance of that from the Obama program to 31 percent. Ryan: What else are you wondering about as you begin this process? Caller: My thing is I’m about to put all this together. I did contact my lender, it’s CHH and they’re over here in Jersey. Not only that I tried to reduce my payment but I also, even though I’m negative right now but I am using my savings to make ends meet at this point. The thing is how much money do they want to say in my checking and banking account that will qualify me or not qualify me for that? I only have about $10,000 that’s probably going to last me about another five or six months before I would have to go into a foreclosure process. Ryan: And so I take it your current now? Caller: I’m current now. Ryan: Okay, great. Let me get another question from someone else. Caller: I heard you mention a partial claim and I don’t think I’m familiar with what is a partial claim when you’re trying to do catch up. Ryan: Okay, just to repeat. The first gentleman is just getting started in the process and he’s got a lot of questions just form a real basic perspective. Number one, can he really, can the lender really reduce his monthly payments to be like 35 or 31 percent of his income. And that’s part of the president’s Making Homes Affordable plan. Can that really happen? He also asks how much money does he have to have in assets? Whether it’s checking accounts, how much is too much, how much is too little and then the second caller asked what is a partial claim when it comes to FHA or VA insured loans. And so why don’t you go ahead, Mike? Mike: Okay. The 31 percent is the targeted amount. That’s the A ++ loan modification is when the lender can, by manipulating the three levers that they have, if they can get your payment down to 31 percent then they hit pay dirt. It’s like a casino and all the bells and whistles start to light and they win. They win big. And here’s the three levers that they can pull. The first is they take your interest rate down to 2 percent and if that doesn’t get that payment down to 38 percent then they take you to 40 years. They extend the loan out to 40 years. If that doesn’t get your monthly payment down to 38 percent of your gross income, then they pull the final lever and that lever is interest only payments. So if they use those three levers and they can get you down to 38, ding, ding, ding, they win and the government pays them extra money to take your loan payment down to 31 percent of your gross income. Now, keep in mind this is your first mortgage on your primary residence. So that’s the A paper. That’s on your primary residence. It’s your first mortgage only and it’s a percent of your gross income. And that does happen. It happens like all the time. So you can fully expect that that will happen and you’ll nail that if you get that budget right and if you’ve go a solid hardship and you’ve got a bad loan. So that definitely will happen. And then your question with regards to how much in savings. Nothing in savings is absolutely fine and I just don’t know if I would show if I had a lot in savings. I don’t know that’s it’s any of their business. They certainly don’t have recourse to it unless you’re in a recourse state. That is that you are personally liable for the loan. But honestly they’re not asking a lot of questions about balance sheets. They used to require a balance sheet until about January of this year. All the loan modifications required a balance sheet for you to reveal all of your assets. But they’re not even asking for it now. Ryan: We’re meeting with a gentleman tonight, actually, that has been told, he called us up after he was told by his bank that he had too many assets. And we’re going to try–we’re in California so we’re going to try to get to the bottom of was that a misunderstanding from the bank? Did someone in a different state operating under a different set of guidelines think they had some recourse to that or do they? So we’re going to meet with him tonight. You do get that. Mike: So if I had another savings account and another checking account that had very little money in it, that’s the one I would send to them. Remember, they’re looking for an easy way to give you a loan modification and they know that their underwriter is going to require that they see a checking account and they see a savings account. So send them one with reasonable activity in it so that they can do what they want to do and what they get paid to do and what your tax dollars have allowed them to do and that is modify your mortgage. Let me talk about the partial claim. The partial claim is pretty sweet and a lot of people don’t know about it. If your loan is FHA insured or if it’s VA insured, you have the right to make a partial claim on that insurance and the partial claim goes like this. If you default on the loan your lender suffers no hardship. He gets paid by the insuring company. You can make a partial claim. Here’s how it goes. You can borrow between four and twelve months of payments. Let’s say you get four months in arrears and you now have enough money to qualify for a loan modification but you haven’t got enough money to pay for all the arrears. Let’s say it’s $8,000 or $12,000 in arrears. You haven’t got that money. Well, you can file a partial claim on your insurance and they will lend you that much. Here’s how that works. They lend you four to twelve months worth of your payments. It’s interest free and it’s payment free. It simply is due–it’s a lien on the property and it is due when you sell the home or when you pay off your mortgage. Then it becomes due. So it’s a pretty sweet deal and a couple of my clients have used this in order to get back on track. Like when their employment rebounded and they were able to qualify for a killer modification but didn’t have enough money for the arrears. That’s how they got it. Ryan: Got some great news, actually from long time listeners Kelly and Lisa. They said they got the package today and they’re stoked and had a question. They said that basically they just got released from Chapter 13. They have about $20k in arrears, mostly lawyer fees, and they want to know should they deal with getting a forbearance on that first or should they deal with a loan modification. And deal with the loan modification second. That’s kind of what she’s leaning toward. But I don’t know a ton about the situation but I would handle it, I would treat it as if you haven’t been paying the mortgage for six months and the arrears have just piled up and the whole deal is all the same. Mike: Read it again. How does it go? There’s $20, 000 in arrears on the mortgage? Ryan: Yes. Mike: Okay, attorney fees on the lender cause they went to trustee sale and they processed paperwork and stuff. Do you know what state they’re in? Ryan: No. anyway, do you think my point is still valid that this is an ideal time to go for the whole loan modification caboodle? Now you’re probably, they’re probably in a little better shape because they were in bankruptcy. I’m sure, my guess is that they’re 90 days away from a notice of default. I would say go for it and although our book doesn’t specifically address anything like this, I think you could just substitute the lawyer fees for basic arrears. Mike: Oh, they are. Just expect that the lender will be glad to lump those on the end of the loan. Ryan: Yeah. I don’t think that’s even debatable. Mike: They’re in good shape. Ryan: I would go in under the assumption that that will work. That needs to get wrapped into a loan again and re-amortized and in the meantime you need some temporary relief. Mike: Yeah. And what they have to focus on now is a lot of other issues have cleared up so now they have to focus on income probably. They have to be sure they’ve got the income nailed before they submit that application. Ryan: Another client, Larry, has a great loan modification actually that his equity loan offered to bring his loan down to four percent and cut the payments in half for twelve months. That’s pretty killer. But he told them he may not be interested because his first is not playing ball and so he’s not going to start handing out any money to them until he gets this settled with the first. What he says here is that his loan modification was rejected. They said he had too much money. The spreadsheet that I used, he said, reflected a 62 percent DTI. They said it was at 27 percent. They used gross while I used net. I resubmitted, changed my numbers to reflect my gross and even then I was at 45 percent DTI. So I rewrote my hardship letter. Now he’s missed a couple payments and is saving that money because he knows it’s probably going to be one or two payments he needs to get going to initiate the loan modification. And I think you’re in great shape. One thing that I would question here was that those numbers were off so significantly that I wonder if–I don’t think the gross / net thing nailed it. Mike: No. think about it. If your gross and net, the difference between those two, is never more than 15 percent or 20 percent. So it could change, it could alter your DTI from 62 down to 52 percent but nothing much more than that. Ryan: So what I propose may be in the mix here is HTI. What do you think? Mike: Yeah. Very well could be. That’s a good one. So in fact you may have other properties and they may be bumping him out because in fact his first mortgage is 27 percent of his gross income. Sure. That could very well be. Ryan: So that’s just a thought. Larry, consider emailing us directly. You get email support so we’d be happy to help you out and figure that out. Just so we know. Mike: Here’s the thing. A lot of people get turned down for the Making Homes Affordable Program because some of the lenders now have established separate departments and they bump them out and you don’t qualify because of something like this. If we’re right on our guess here. You could have just been rejected by one department and the bank is more than willing to give you a modification. You just don’t qualify for the A paper. So you may still qualify for a modification. You just have to make sure you’re talking to the loss mitigation department. Ryan: They told him he didn’t get a loan modification would they also say, wouldn’t it make sense for them to say in our department? Mike: Yes, you would think so, but I’ve got several instances in which they didn’t do that. So I don’t know if it’s a routinely they’re making that mistake or just occasionally do but that’s pretty startling. Ryan: From a trainee perspective it would be easy to not know another department existed. It might be standard protocol, script to say, but, we encourage you to apply over there. And you just don’t get that. You’re telling accurate information. It was declined. Mike: Some of the loss mitigation reps, some of them are two weeks off the street. They just hire them, they put them through this crash course and a lot of them don’t really know what they are talking about. Ryan: Well, I hope that although we didn’t stay exactly on track here, I don’t think people are getting a range of strategies. If they wanted to scale the bank’s walls, we can support you by email. So thanks so much for joining us tonight, guys. We’re obviously the advanced class, the 60 Minute Loan Modification Insider Secrets Teleconference Series. We’re huge fans of the do it yourself loan modification but that doesn’t mean you should do it alone. We’re here to help and calls like this are a great forum for all of us to share ideas and help each other through these trying times. We do spend most of the day on the phone, so email is the quickest way to get a fast response to any and all questions. Please email us at help@60minuteloanmodification.com. Thanks for joining us tonight and keep fighting the good fight. Mike: Goodnight everybody. QUALIFIED WRITTEN REQUESTS & LOAN MODIFICATION More info? —–Qualified Written Request Teleconference Transcripts——- Ryan: This is the 60 Minute Loan Modification Insider’s Secrets Teleconference series. We’re here to beat the bank, to save your home and help you escape bad debt forever. My name is Ryan Rockwood, and as usual I’m joined on the call today by my father and business partner, Mike Rockwood. Mike: Good evening, everybody. Ryan: Today’s call is about qualified written request, but I have a couple quick announcements first. Number one, before you contact your lender it is always a good idea to have a plan in place. We talk with clients all the time who say things like “My lender is working on a solution” or “My bank says they’re trying to find a program for me”. This might be the case, but usually what really happened was the bank used those phrases as a polite way to get you off the phone. So a much smarter approach is to educate yourself first, then approach the bank with an end goal in mind. Usually what we’re talking about here is a monthly payment amount that is a goal, okay? That is realistic and that you can afford to pay. It’s really a sad thing, you know, when someone does get kind of shrugged off. They actually believe them when they say, you know “Call back, we have a new plan in place next month” or “We’ll try to get you into something like that”. You really have to know that this is a behemoth and you’re really going to have to kick and scream a little bit if you want to get heard, period, let alone helped. Okay? Also number two, if your current interest rate is less than 6% fixed right now, there is little to no chance you will get a loan mod even if every terrible thing possible has happened last year. A less than 6% loan currently is considered good enough so your bank probably won’t even be bothered. So you should look at other options such as short selling. Okay? I hate to start off the call bursting everyone’s bubble but there’s no point in… Mike: Alright, but let me challenge you on this one Ryan. Ryan: Yeah. Mike: Because why do we always have to be telling people the truth? This morning I heard an ad for a law firm, a big national law firm, you know, touting the fact that they’re really going to get you a principal reduction on your loan modification. And I thought “Oh man, what a bunch of hooey.” And then now, you’re speaking the truth about, realistically we have very poor luck when we take on a fixed rate of 6% or less. We just don’t have a good hit rate. So we pass that information along to you. But you kind of feel like “Oh man, why do we have to be the reality seekers?”. You know what I mean? Ryan: I do feel like we’re in the role of a bummer in a way. Mike: Yeah, yeah. We’re not fun. Ryan: We do have to figure out a way to get paid for being a bummer, I’ve got to say, because we’re really not getting paid. Here’s the thing. If you sign up for the law service, they charge $5,000. It’s a legal retainer. It’s their money, they can take it right up front okay? When we do a loan mod, we charge a fair, when we personally do some of the loan mods we charge a fair $3,000 and most of that, if not all of that fee, is 100% guaranteed based on the outcome. So the bottom result is that–anyway you can see obviously why a law firm would be driven to sign people up and we’re not. Mike: And the key for us is we don’t take the assignment if you’re hoping for a principal reduction or that’s what success is for you. Or if you have a 5.875 fixed rate, 30 year fixed rate loan. We just turned one of those down this morning. We just won’t take it on because we can’t guarantee it. We can’t afford to go after it when there’s little likelihood that it’ll succeed. But at any right, I know that that is our role. That’s what we have to do so let’s just keep doing it. Ryan: That is your contribution. Okay, onto today’s call. Today’s call is about the qualified written request. What are they and how do we use them. Today’s call we have a special handout available for everyone. It’s at our website 60minuteloanmodification.com/downloads/qwr.doc Mike: As in qualified written request. Ryan: So again that’s 60minuteloanmodification.com/downloads/qwr.doc. So jump online and grab that. I assume most people have our web address. That’s probably how they found us. Mike: But you know what Ryan? This is a Tuesday call. We’ve got a lot of people around the country who are listening to us for the first time because they heard me. I’ve done five radio spots since last Thursday’s call. Ryan: Well let me give a quick so I don’t forget to give the background here. Here’s the background of the call. If you’ve been to our website, if you’ve heard my father on the radio, you know some of his story and you know some of the story of loan modifications in general. How it’s so important and how you need basically to get involved. If there’s any way you could possibly benefit from this, it’s your tax dollars at work, etc. So anyway, long story short, Mike spent a ton of time, probably 6 months total, failing to do a loan mod on his own. You know, the way the banks told him. “Just call us and we’ll help you through it” kind of thing. And getting denied, denied, denied, denied, denied. And so basically finally ended up cracking the code but not until after a lot of work and some pretty unorthodox thinking. In light of all of that, we encouraged him “You’ve got to put this together. Some kind of book, some kind of product or maybe we could help people”. Before no one had thought of doing loan mods yet. This is like back in the day right? Mike: (laughs) Yeah, yeah. Ryan: Like 3 months ago. Mike: 4 weeks ago….12 whole months ago. Ryan: And it sounded ridiculous. It did. Doing loan modifications for someone. We’re in real estate so you know mortgages, real estate, all this kind of stuff. That has a normal feel to it. Loan mod was like “What?” We kind of just started up a little business and started helping people out and it grew a little bit from there. So that’s how these calls came about. Basically we got two teleconferences every week. Tuesday is free to everyone and we try to deal with more entry level topics so you won’t get overwhelmed. Thursday is for clients only. Anyone who’s purchased the product can join us and we try to get into some of the loan mod ninja stuff there. Like the hardcore head spinning stuff. And we try to get some–because if you just jumped right into now and you heard that Thursday call, and this is your first time on, you’re thinking “Can I get a loan mod”? It’s really, you can get overwhelmed and you– Mike: Yeah. “These guys are crazy”. Ryan: –”this isn’t even worth it”. Right? But what we try to help people realize is that you actually don’t need to understand how it works and those complicated questions are kind of on a case by case basis. So what we do is we just take the questions, field them, answer them if we can, and try to find out an answer if we can’t. Okay? So that’s kind of the gist of it. Later on in the call we will take callers live. So if you would like to talk, please definitely speak up. Don’t be afraid. Also, be sure that you mute your phone if you’re not speaking when I do that. Also you can always send in a question to me right now, this very moment by email at questions@60minuteloanmodification.com. Okay, so keep them coming. Shoot in the questions. We’ll deal with everything as they come in if we can. So thanks again for joining us. Basically we’re just going to launch into the topic today. Today’s topic is qualified written requests. The only reason I think any newcomer to the call would have heard about this is–I think it was kind of popular 4 months ago. There was this kind of popular claim that there were some tricks that people– Mike: Oh, right. You’re referring to the “produce the note” craze of a few months ago. Ryan: Yeah, where it was like, there were a few people who got their homes free because there was some kind of error. The media made a big deal out of it right? That was the qualified written request. And since then everyone says “Hey I’ve got to ask for my mortgage”. Mike: Yeah so I can jerk the mortgage company around right? Ryan: Which is cool. I mean go for it, definitely. But we’re here to tell you that they’re giving away too many houses. So you want that to be your….shoot it out there, let it sit… Mike. Yeah, ask them. Ryan: Yeah, but pursue other things at the same time. You know what I mean? And then, so why don’t I just turn it over to you, Dad? Mike: Okay, so the qualified written request. Before I start running through the prepared comments on that topic I want to really emphasize what Ryan said really is true–that you need to drive this effort. The lender will not drive it. That’s why we believe that it’s best for people to do loan modifications yourself. We believe that a “do it yourself” loan modification is a better modification, because it needs all kinds of English. It needs all kinds of passion. It needs somebody who really cares about it and, and you care about it because it’s your home and your money. Believe me, the lenders are having a hard enough time pushing loan modifications through their systems on properties that they are going to own very shortly, and they don’t want to. And on clients who have stopped paying, they are in default, they are non-performing assets and they’re going to have to start reporting them as non-reporting assets really soon. They’re having a hard enough time pushing those loan modification applications through the system. So don’t believe it if they tell you that they’re working on trying to find a program that you fit into or something like that. Believe me, they’ll get back to you yes, 6 or 8 weeks from now with an update on what they think. So forget about that. You’ve got to drive this effort. Now just in order to give you a little bit of flavor for the kind of feeding frenzy that we’re seeing in the loan modification business. I shared this information with those of you who are on our Thursday call, but that’s clients only so some of you on this call didn’t hear these little tidbits. I want to share them with you. One of the negotiators at Chase, while I was on waiting for some information from them the other day got chummy and friendly with me and told me a little bit about some of the things that are going on there these days. And of course, as usual, this quarter they’ve started a new division every quarter for the past 2 years. It seems like a year and a half at least they’ve formed these new companies and new departments and new special teams. But just get a load of this magnitude. He says that his department, the loan modification department at Chase, that’s WaMu Chase gets 100,000 faxes every day. Can you believe that? They get 40,000 applications each week. They currently have 155,000 in the queue waiting for resolution. Doesn’t that just blow your mind? The enormity–this is one bank. Ryan: You know what I can say? This week, I was actually surprised on how fast I was able to get through to Countrywide. Mike: Yeah. Well maybe because everyone for 2 months has been running away from them. Maybe they’re getting a little bit of a break. Ryan: I don’t know. Mike: You got right through? Ryan: Maybe this is an example of another change. It’s all kind of speculation right now. Maybe they’re getting people on the phone. I don’t know what it is. But she was actually able to provide me with a decent answer. Mike: Okay. Because they had been busted for at least a couple of months. And I just also want to report that Chase forms these special teams. They now have this “Way Forward” department which is the department that is supposed to be adhering to the, oh you know, helping the responsible homeowners who haven’t gone late, haven’t gone into default yet. These are the guys that President Obama really targeted in his “making homes affordable” program. And so this “Way Forward”–and as we all know it’s been since March 4th that that program was announced and it just seems to have gone onto the heap of bones. Just like all the other government programs that have been started and been ineffective in terms of slowing the rising tide of foreclosures. But Chase has started this “Way Forward” department and they have a care team that is kind of a hit squad. When the negotiators need more information on a file, or there is something wrong with a file, or something incomplete on the file, they hand it to the care team. The care team is kind of their information hit squad. Well now they’ve even started a refinement of that and they’ve started a hit team called the “Imminent Default Team”. These guys are the ones who are working on the borrowers who are very close to defaulting. In other words they’ve gone past their 15 days and they could default here in the next 2 weeks. So this “Imminent Default Team” kind of pounces on those loan mod applications and tries to ram them through. So it’s kind of a good sign that Chase–at least they understand the problem. But if these programs and these teams are anything like in the past, it’s really going to be a lot of lip service. Really, what really matters is getting a good solid application, a knowledgeable application submitted on time to the right place and then good strong follow-up and good negotiations. So let’s see how a qualified written request fits into the whole picture. Now the “Real Estate Settlement Procedures Act” is a consumer protection act. Section 6 in it specifies safeguards for us as consumers of loan services. It’s called the “Qualified Written Request.” Section 6 describes it. It establishes a legally mandated communications protocol between us and our lenders. The beauty of this is, you know 50 years ago it would certainly not have been nearly as important because when your home mortgage was held by a local bank you could just go down, mosey on down and review the situation with your banker. But in today’s financial markets, not only is the lender that you initially received that loan from likely to have hundreds of thousands of employees worldwide, but they actually have sold your loan in a number of different ways. They wholesaled it off and it probably became part of some mutual fund investments in a process called securitization. That process has been legal since the Bush administration first took office. Or you know what, it was the end of the Clinton administration. So about the time of the dot com bubble burst. So that’s been legal. These loans are resold, they’re wholesaled. They’re packaged into you know, producing, we would call them derivatives. And they make enough money to attract investors. That’s a whole other issue because I’ve always kind of wondered “How come this can be so profitable that you can repackage a mortgage and make it profitable enough that an investor would want to go after it?”. You know to me it just boggles my mind. But at any rate it happens, and let’s get back on the topic. The “qualified written request” is so useful now because it gives a reasonable expectation that our requests for clarification or our complaints, or our requests for a modification to the terms of our loan will not go unheeded. Ryan: But the section 6 or the prop 6 or whatever. Basically I just want people to know in simple terms, there’s a law out there that says that if we send a document to the bank that asks them a question or something like that, that they have to respond within a certain period of time. Mike: That’s right. Ryan: You know it kind of sounds, if you think about it. Before all this it sounded to me pretty ridiculous. Like pretty like weird government rules. Some kind of, I would have though it was some kind of weird special interest lobby. Mike: You mean just bureaucracy? Like why do we need something like this? Ryan: Just a silly law. When you ask them I don’t think you need a law, I wouldn’t think you would need a law to get a response to a question about your loan. But like you were saying, we’ve gone a long way from being able to walk in anywhere and see anything. Most of us these days, it’s quite true that we have no idea what’s in all that fine print in that loan document. Mike: Right. Ryan: And I’m not sure how to deal with that either, because there is no reasonable expectation that we should read through that and understand it I don’t think. Mike: Right. Ryan: So anyway, now it’s starting to make a little sense. The kind of consumer protection thing… Mike: It is a consumer protection. It really, in these trying times is really important and well written. It’s one of those times where you just have to hand it to the government because they’ve done a good job. And it’s HUD, which by and large is an organization that is run pretty well. But let me say more about the “qualified written request”. It gives us reasonable expectations. Here is what they are. They cannot ignore your request. If it is written and you have proof that you submitted it to them, the law requires that the lender responds to these inquiries within 20 days and tell you that they received it if that’s all they can tell you. And within 60 days they need to give you a full explanation and an answer to all your questions. So you should be using “qualified written request” for formal requests for information that cannot be made by phone with a customer service rep at your lender. Let me give you 7 examples. To learn who actually owns your loan. The company that you’re sending money to, we all have learned is just a servicer. Very, very unlikely that the company you send your mortgage payment to is anything but a servicer. So if you really want to know who owns your loan, you need to send in a “qualified written request”. In fact, they will not tell you over the phone. They’ll instruct you as to how to submit a “qualified written request” to get that information. Secondly, to apply for a modification to the terms of the loan, like you do in your hardship letter. That is a “qualified written request”. Or to request an explanation of fees, or special charges that you incurred, you should use a “qualified written request”. To request special handling of reports like credit bureau reporting regarding any payments that they are reporting as missed. If you want a formal explanation of how they are reporting a particular instance, or how many, or if you want to argue with them that they should not be reporting it as missed for whatever reason, you do that in a “qualified written request”. If you have any escrow related questions that the customer service team can’t answer over the phone, submit it in a “qualified written request”. And of course you know your escrow account is impound for your taxes and for your insurance. Most loans have escrow accounts and impounds. Most consumers find it pretty handy, and of course the banks love it because then they’re sure that your insurance and your taxes get paid. Alright. Then you should also use “qualified written request” to file a complaint and also to inquire why your modification is taking so long. Ryan: What? Mike: Did you hear what I just said? I’m suggesting a new use for the “qualified written request”. I suggest, and I’m going to start this myself. And I’ve got to say it isn’t my idea. It was submitted on one of the forums that I belong to last week. Submitted a suggestion that we all start using “qualified written request” to ask “Why in the world is my modification taking so long?” And I’m going to start using it about two weeks into the modification application process. Let me tell you how you should format your “qualified written request” and then we’ll get on to some of your specific questions. And remember, your questions can be on any topic regarding loan modifications. It doesn’t have to be on “QWR”. Alright, here’s what you do. You should submit this format. You should put your name and it should be in the name of everybody on the loan. Husband and wife, or if two non-married individuals are on the loan. Everybody on the loan should make the request. Secondly, put the property address. That is the address that is collateral for the loan. Third, put the date and then your question. Here is some advice. Really be specific. I like to use numbers, and it’s really good if you can, use the term like “I suspect violations”. I always use “I suspect violations” if at all appropriate. Like “I suspect violations of the RESPA or of TILA in the processing of certain fees associated with my loan modification. Can you please give me a specific breakdown of all those fees and an explanation of why they were incurred?” That would be a great question. Then you sign it if at all possible. So if you’re sending it by US Mail, or certified mail, or FedEx or whatever like that, you can sign it and get everybody on the loan to sign it. I always send them certified mail if it’s absolutely critical. Otherwise, honestly I just send them by fax and it seems to work just fine. Or you can of course send it by USPS postal service. Then I would just pay that extra buck for the delivery receipt notice. Alright. So that’s the format. Use them at will, don’t abuse them. There’s just no point. Honestly they are an important part of the loan modification process. We’re already using them in the loan modification. Like I said, the hardship letter, your request for the loan modification itself. We always recommend that at the end when you do get your mod offer, you send in a “QWR” immediately asking for 3 things. Number one is additional concessions. Number two is a list of all the fees that will be incurred in this modification, and an explanation. Number three is we always ask, and I recommend you do, always ask that they not report all of your lates. Let’s say you went late four times during this modification. I always ask them to take two of those back because of their processing delays. And you know what, it happened. I just started doing it recently and I did get agreement. It seems to not be that big of a deal for you to ask them to reduce the numbers of reported lates. Alright? So that was one of the recommendations that Rusty made a couple of weeks ago when he was on a conference call with all of you and we started trying it, and it worked. Ryan: So with something like that you just recommended three different items okay? Is it okay to put them all on one request? Mike: Yes, absolutely. That’s once “qualified written request” with three questions. Ryan: So what do you do? Do you number them or something like that? Mike: Yep. Yep. Ryan: Because I could just see getting one back. You know the other thing is that we have seen some really lame answers to “qualified written requests”. What do you think about that? People think “Oh I’m going to get an answer”, but in so many cases something will come back, “We don’t believe we need to provide you with that information”. Mike: Yes, now that is lame. Honestly I’m kind of surprised that, the way the lenders seem to take this pretty seriously. But you do occasionally get these lame-o answers, and then all I do is I immediately follow it up. “Not good enough. Not good enough.” Go right back to them. “Not good enough. The answer you provided was incomplete and inconclusive.” etc., etc. All you can do is start it over again. Ryan: Okay. So that’s “qualified written request” in a nutshell. If you’re brand new to the call–we provided that as just a tidbit, kind of an idea of some of the ins and the outs of the loan modification process. Nothing you need to memorize or write down or get started right away. By far you know, the basic information about your finances and so on is the first thing to gather. Not any certain “qualified written request” info. So let’s see, one sec. I’ve got a question. Mike: Hey Ryan, let me take this first will you? Ryan: Okay. Go ahead. Mike: Here is a question about stating that it is a “qualified written request”. Jim says, “Do we need to state that this is a qualified written request and from that is from RESPA section 6?” My answer to that is that in fact I’m not sure that you need to. I always do. I always end the “qualified written request” with that statement. “I understand that this is a qualified written request and my expectation is that you’ll respond to this within 20 days, and certainly with a complete response within 60 days as outlined in RESPA section 6.” That’s just the way I do it. I’m not sure that you have to but that’s my recommendation. Mike: In our basic kit, “Loan Modification: Do it yourself” kit, “60 Minute Loan Modification” kit, there is a workbook that has appendices. More than one appendix at the end of it. It has appendix-itis? You can take them out. It’s perforated. So you can do an appendix-ectomy. Okay, so you have a written document and then we also provide what we call a black belt CD that has all the forms in active spreadsheets and word documents, so you can cut and paste and use them. You don’t have to recreate them. So that’s handy for faxes and for forms. Every form that you need is on the black belt CD. Alright? Ryan: Alright, let me jump to a question here. Hold on. Okay Tom asks, “A friend of mine works for a loan mod company. Says that most loan mod offers come by mail and you seldom get a chance to talk to your negotiator. Is that your experience, and in a case where that happens, any suggestions on getting the personal negotiation going?” Thank you very much Tom. The thing that I would say is, I guess when we first started this it seemed like we had a lot more contact with the negotiator. Mike: Well that’s for sure. They had time to talk back then. Ryan: It’s like “It’s me again”. You know? And now I don’t, here’s the thing. They’ve gotten better. It has its ups and downs, but what the question is assuming is that the loan modification was not good enough. Because there’s certainly no reason to talk to anyone if the loan modification is adequate. Okay? So that’s what a lot of people like talking to folks like us and comparing things. A lot of people, we get an email like “Here’s my loan modification offer, here’s what I was at and here’s what I got. Should I go for it? Should I push more?” You know, that kind of thing. So you can, the tough thing is you don’t know really what the expectations are. In any case, suggestions on getting the personal negotiation going. Let’s assume that it is a bad loan modification or just not that great. Do you have any suggestions for how he might do that? Mike: Well, first of all, in 7 out of 10 cases, we get to talk to the negotiator before we get the modification offer just because we are very aggressive on our follow-up. We recommend a daily follow-up regimen that is a fax, and it seems like in those final weeks we’re calling them every couple of days as well. So we do break through and get contact with the negotiator just because we’re all over it. So 7 out of 10 cases, that’s just my guess, we already are talking with the guy or the gal. In those cases which we don’t, generally those modification offers are signed by an individual. They come from an individual negotiator. And even if they don’t, when you call back in on it the person that ultimately will talk to you about it after you have the modification offer is just the negotiator. So I haven’t ever had any trouble getting through to the negotiator. You can just keep asking if you’re talking to a loss mitigation officer and just say, “Are you the negotiator assigned to this file?” and if they’re not just keep telling them you need to speak to that person. You need to get through to that person. You certainly have a right to, and I’ve never had trouble getting through to that. I’ve never, not that I haven’t had trouble, it’s always hard work, but I’ve always been able to. And you really do need to because they are the ones in charge with getting it out of their office and over to underwriting. So they’re the ones. But see, so many of the outfits like Chase have these other teams that they hand things to. So here’s Jane, your negotiator and she realizes you might just have qualified for a new program that just came down the pike yesterday and they were briefed on it in their morning meeting. So Jane calls the “Care Team” and says “Care Team, hey I was just about to send this modification offer out and I realize it may have something to do with that new program that the supervisors explained to us this morning. Will you take it and evaluate it and get back to me?” So then it goes off and they might call you, and they might get clarification on a point or two, and then you do have another person. So you have a “Care Team” hit squad and then you may get contacted by the “Imminent Default Team” as well. How would you like that? “I’m calling you from the Imminent Default Team”, and you say “Shoot, I didn’t realize my default was imminent. Is that my demise is imminent or my default?” It’s the “Imminent Default Team”. “Well you’re right, my default is imminent and if you don’t tell me what I want to hear on this call, my default is going to be you know, the next time the payment is due.” Yeah, it’s going to be certain. Alright, so Tom I haven’t encountered that much of a problem. I think you just have to roll up your sleeves. You know, towards the end of these modifications, there is a little flurry of activity. A little extra work you have to put in just to be sure you nail a good one. Ryan: Okay, so anyway I’ve got another question. And remember questions can go to questions@60minuteloanmodification.com. Okay, “I have about 20K in arrears on my mortgage. Can I just send in a “qualified written request” to have this re-amortized or even forgiven, or will I have to put this in a hardship letter?” Well that’s kind of an interesting question. Mike: Yep. You bet it is. Ryan: Like why not just do that right off the bat? You go through this whole thing, the dance, and you could look at all these documents or you could just do it. What do you think? Mike: It’s not a bad strategy. Here’s the reason why. I’ve been involved in an awful lot of cases where the folks are late in the foreclosure process and things really get messy then. They throw out all the rules. I mean they might call you a week before the trustee sale and say something like “Listen, if we were to modify this loan to this blah, blah, blah, blah, would you take it and we could just. If you paid up this and blah, blah, blah.” So you throw out all rules and as you get out of line, which I call getting out of line is not paying your bills. So get out of line and the rules go away. But in the same case here, that’s basically what you’re doing. If you went and you’re not late on your mortgage and you sent them a note, a “qualified written request” and asked them that, they would refer you to their loss mitigation department who would start you down the loan modification route. Our argument always has been that you don’t want to be just at their mercy in that. You want to be in control. You want to control how this thing works out, and it’s very easy to get in control. In fact, we always say it just takes 60 minutes to prepare to call your lender. So don’t just call the lender, just contact the lender. But the methodology you’re talking about using, especially if you don’t mind going late on your mortgage, is just a fine one. Ryan: Well I mean, but the answer to the question is really–ultimately I believe she’s going to have to–they have a set procedure for approving a loan mod. Mike: They’ll try to fit her into it. Ryan: Regardless of how you initiate the process, be it a phone call or “qualified written request”, I think in the end unfortunately you’ll have to do the hardship letter, do the documentation, do all that kind of stuff. Mike: But isn’t it funny Ryan how many loan mods we do where, you know what I mean, you don’t submit 3 months of checking accounts, you don’t submit last year’s taxes. It’s a deal done like on a napkin at the 11th hour. So it depends on your tolerance for messiness. Ryan: Well I don’t know. I can’t say exactly that those are loan mods. Those are almost like foreclosure triages it seems like. Mike: They result in a repayment plan and a modification. Ryan: Yeah, but no one in this case wants to let it get to that spot. The thing that you’re talking about I think is like the trustee sale is next week and that’s awesome that we can work it out, but a lot of times we can’t. Mike: You always have to be ready. Ryan: Yeah, you have to be ready to pay the price. So, and it’s a heavy one. Okay, questions@60minuteloanmodification.com. Let me jump online here and see if we can get come questions answered. Mike: Hey Ryan, before we do that let’s make sure that we’re not overlooking part of that question which had to do with all the arrears lumped on to the loan. That is a routine way of handling the arrears in a loan modification. The most typical is if you are a payment or 2 behind, for you simply to be asked to make an initial down payment and to reinstate the loan or to get the loan current. They may put you on a repayment program that requires a down payment and 3 payments before they start the modification. But generally speaking, it’s pretty easy to negotiate that all the arrears will be added to and amortized over the life of the new modified loan. It’s not a new loan, it’s a modified loan. Okay? Ryan: Alright. One sec. Caller: Hi, my name is Mark. I have a question. Ryan: Hi, Mark. Caller: Question I have, first of all thank you very much for these phone calls. I wanted to find out, it sounds like there are a lot of documents hitting the lenders between you know, faxes and God knows what else, and that they’re behind schedule. Also my understanding is that they’re required to respond within a certain time period on the “qualified written request”. They’re so behind; I would imagine that on a regular basis they can’t respond. What happens if I’ve fallen behind on my payments and I notice a default has been filed and you’re playing the waiting game? Doesn’t that mean that they could just move forward with the foreclosure if all the timing doesn’t line up just perfectly? Ryan: Okay great question. And Mark, what state are you in? Caller: I’m in Irvine. Ryan: Okay. Mark from Irvine, he’s calling in and he’s saying, You know, the qualified written request, you shoot that in and you get something back I think in 60 days. But the truth is that might not happen with the 100’s of thousands of letters their getting right now. So in the meantime can the bank move forward with a foreclosure? The answer, so it does seem like the stars have to align. A couple different things, Mark. For one thing, you don’t want to have the “qualified written request” be your hope for something that’s going to stop a semi-imminent foreclosure or even pause it. I’d be real careful about using that as that tool, hoping it could ever be that. To answer your question, you’re right. Sometimes you will get a letter back I think just saying–haven’t we got back letters just saying “We’re working on it. We haven’t been able to get it yet. It’s taking longer than we thought.” You know, so they can essentially extend that 60 days to anything that they term reasonable. Now the problem here is enforcement, okay? Yeah they need to respond within 60 days, and let’s say you don’t feel like they have. All the shucksters out there will tell you, well you know then you can sue them and you can get your house for free. But the thing is that you have to sue them to get your house for free. What that means is hiring a lawyer and filing a lawsuit, providing enough documentation that the lawsuit can move forward– Mike: And guess what Ryan? The court will find that the damages don’t quite equal your house. The damages equal you know $175, here you go. Ryan: And your attorney fees are there. And that’s the bummer. It’s real hard, the lawyer based loan thing. In fact we did that for some time. We worked with a lawyer on our team and we recently dropped it because of non-interest. Because ultimately we would kind of talk everyone out of it. We weren’t getting better results. But anyway, the answer to your question–so people get all excited about this and I get, we get several kind of well meaning phone calls from people who call us all the time and want to go ahead and proceed. They say “How do I sue?” They fundamentally do not understand the process, but ultimately could you sue for–because ultimately you could sue someone. You could file a suit for a couple hundred bucks with some document you got off LegalZoom or something like that. But the thought that you have the slightest prayer in something like that. In fact you file suit, I don’t know how you even get them to stop the foreclosure if you did that. I think the bank just barrels on. We’ve seen that in many cases. If the bank can’t find the loan documents, if the bank can’t find–lost everything you submitted, they’ll roll with it. It’s a cumbersome, clunky, behemoth you know? The elephant in the room, and it’s going to do what it wants. Mike: But here’s one insight I would give you Mark. The bank wants not to interrupt the foreclosure process primarily because like in Irvine, in California here it’s a lengthy ordeal for them. You know its non-judicial foreclosure and from the time they notify you. Now you say you’ve got a notice of default, it’s been three full months before they can schedule a time to take away your home. So they don’t want to interrupt it, but you’ve got to know that many folks are not getting a notice of default after 90 days. Many people are going as long as 6 months before getting a notice of default. Then those that get notices of default, very often are not getting notices of trustee sales after 90 days which is their legal right, just because the banks are so swamped. If there is any action whatsoever on your file, you get delays and you can just continually request delays because you’re trying to sell the house or because you’re trying to modify the loan. Etc. Etc. Banks these days are awfully willing to continue to delay and work with you to postpone foreclosure, but boy do you have to be certain of what you’re doing. Ryan: You don’t want to go in there and request that extension for the first time the week before or even a month before the deadline. You want to have every month you talk to them, ask for that extension. You know what I mean? You certainly have to have a solid history of things. I’ve had many cases where I’ve called the bank. I said “Hey, this person called me last minute, but this home I can totally sell. If you just give me 30 days on it, we will just sell the home and pay you off completely” and whatever. The juggernaut rolls on. In most cases, in that scenario. The only thing we can do last minute to stop it is like a bankruptcy or something like that. Mike: So here’s the deal too. If you call in the last weeks before the trustee’s sale and say “Listen we think we have some hot prospects to buy this house. Couldn’t you give us a little more time?” They may or may not. But what they will do is if you submit a bonafide offer from a qualified buyer, they definitely will put it on hold while they evaluate it because it always takes them a lot longer than a couple of weeks to evaluate your short-sale proposal. Ryan: And that’s kind of branching out into something else that my dad and I talk about and that is, you know, loan mods are great but they’re not the only game in town. You can’t rely on the. You can’t force your situation into a loan mod. And absolutely, should everyone try a loan mod? Sure. Definitely. But that’s not all it’s going to take in today’s climate to save your home. To get yourself back on track. To take advantage of this stuff you have to be zigging and zagging and also planning for a short-sale and even the stuff you don’t want to plan for. You know what I mean? You have to talk to that bankruptcy attorney. We really recommend a multi-pronged approach– Mike: We absolutely do. Ryan: –the whole time. That’s hard to wrap your mind around because you want the solution. Mike: But the thing that we always counsel people on is “What is your objective?” If people say, “My objective is singular. I want to keep this house.” Then we have four foreclosure fighting tools that we can use. If they say “I want out from underneath this debt”, then we really have three. You know, there’s the short-sale, there’s the deed-in-lieu, and there’s just walking away from the darn house. But we also have four that enable you to keep your home and they include bankruptcy and loan modification and paying up and catching up and refinancing. So you have to have a whole arsenal of weapons in this battle if you want to win. Loan modification far and away is the fastest, cheapest, and easiest way to fix your screwed up mortgages. But you’re going to have to have a cold assessment of the situation. It might not be the one that works for you because of your income, because of whatever. Ryan: Yeah, and you can’t. In most cases we can force a loan mod, to tell you the truth. However we can’t force that to be the answer to your situation. Right? If you, there are people who call and say “Can I get a loan mod?” We say “Of course you can get a loan mod. We’ll fight for you.” We absolutely torture these things so they’ll work. But if you still can’t afford at the end of the day to pay the $2,400 a month mortgage, that isn’t the solution for you. Not to say you shouldn’t do it. Don’t get me wrong. You know what I mean? They’re different things. If you do it, you’ve just bought 6 months. You’ve wrapped everything back into the mortgage. You pay it for a couple of months before you default again, so they have to start the whole process of NOD and trustee sale over again. You’ve essentially just bought yourself…Let’s say you did it yourself and you paid $300 for a book like ours or something… Mike: $300? Are you announcing a price increase? Ryan: (laughs) Well whatever. Just as an example. You’ve just bought yourself for a small amount of time, serious, serious time. If you figured your mortgage is worth I don’t know $3,000 a month to you, another 6 months is worth $20,000. So if you could pick up a part time job that would get you $20,000 in those months…. Mike: What Ryan is describing is a strategy that some of our clients are using that we have started calling “hide and seek”. What you do is you occasionally pop out from behind the rock and pay your mortgage. Ryan: I didn’t know that was what we were calling it. Mike: Yeah, and then you run, run away again. So it’s called “hide and seek”. You occasionally catch up. And it’s laughable how long some of these people have strung out these terrible, terrible mortgages. Ryan: To those other people though, there’s not much we can say. A lot of people get the notice of default in exactly 90 days. You know trustee’s sale, 90 days later. I don’t understand. No one understands I think why. Some of our clients, I think one hasn’t paid in 15 months and I just checked and there’s no foreclosure date. Mike: But it’s so weird because it’s not a particular zip code, it’s not a particular equity situation, it’s not a particular lender. It’s just weird. Ryan: I think it’s like blessings from God. And so Mark, in answer to your question. Where you’re at in the NOD process, the foreclosure process, I think you’ve got time. Yes, you’re going to be pressing it up. You do want to budget 90 days for a loan modification, 30 to 90 days. However, get your loan modification in this week. This isn’t something you want to spend 30 days on. You want to get it in this week, and should you do that and follow up, I think you’re going to be well on your way to getting that loan mod. If not getting the loan mod, you’ll know when you need to bail and you’ll know when you need to request another extension or something like that. Oh, we got a nice compliment there, that’s nice. Mike: About the fact that they can hear you now? Ryan: Yeah, probably. Richie asks, “I’m waiting for my lender to reply. They said they would get back by July 24th. I’ve already gone through the pre-qual. My tenants have moved out. I do not want to sign a lease until I get the loan mod. How do I pressure them to hurry up? If the loan mod is not good enough, negative cash flow. I am going to short sale.” Okay. Interesting, interesting stuff here. I just want to start off saying it is a darn bummer that your tenants are gone okay? Furthermore when you rent something here in California, you need to sign a lease I assume. Right? But can it be a month to month lease? Mike: Oh definitely. Yes, but Richard why not sign them? I mean you need to sign a tenant right away, but, and anyway even if you’re going into short-sale, the short-sale might take you 6 or 9 or 12 months. You don’t know that it’s going to go fast. Ryan: You know what happens? I guess it’s been a little while since I’ve worked a short-sale. What happens with a lease in a short-sale? Mike: Well, you know it’s at risk. Technically you know, like a management company wouldn’t take a yearly, an annual lease from someone if they knew full well that the home is in foreclosure, or that it’s of course up for short-sale. But that certainly doesn’t mean that you shouldn’t take the lease. Here’s my thinking on that. Because you’re pursing a loan modification, you’re pursing a short-sale. I always recommend that you pursue them in tandem so that you can take the option that is best for you. Very often your buyer, particularly if it’s a short sale, your buyer it’s highly likely is going to be an investor. They may love to have a renter in there. So don’t presuppose that you’re going to get entangled and you don’t want to have a renter in there. It may be a godsend that there’s a renter in there, or it may be that the bank has to pay three months to buy the tenant out or whatever you negotiate. So I really wouldn’t worry about it, Richard. I would get a tenant in there so that during the short sale, and during the loan modification, even though you might not be paying the mortgage at least you have some income coming in to cover management expenses.. Ryan: You’re going to need money to start that loan mod up. They might ask for a month or two down so you’ve got to get that money coming in. Here’s an idea I would do. I would say, I’d get someone in and say just this, that you know you’ll give them half rent in order if they’ll go for this. Not even that, give them 75% rent if they’ll go for this month to month situation. All things going forward, as soon as you get your loan modification or something, the rent will go up to it’s full amount and they have the option of signing a year lease or getting out. It’s totally fair and I would love to do that if I was a tenant, you know. You know someone without kids and family obviously. You know what I mean? College kids or something, that’s great. To get money coming in by hook or crook, you’ve got to get someone in that sucker. You know whether it’s a month to month lease or however you do that. That’s up to you. Also, you know tenants do go away. Assuming they’re not over 55, they’re not disabled. Mike: And you’re not in a rent controlled area. Ryan: Yeah, and they haven’t been there for…. Mike: Forget everything we just said! Ryan: There are some times where renters don’t go away, however, 99% of those cases, even those ones we’ve mentioned, are like five year plus. The government respects the fact that they’ve been there longer. It’s a seniority thing. Mike: Like rent control. Ryan: It’s like a seniority thing. I don’t know why that makes sense, but virtually for the first couple of years you have nothing to worry about. But if you’re in a rent controlled area and you get into you know year five and they’re disabled and stuff like that, then you’ve got some consideration. But anyway, even in that case it’s, you know in a horrible situation it’s $30,000 to pay someone off and get them to go out. If the bank doesn’t want to play ball with you and they’re going to be stuck with this property, you know more power to your renter if they get $30,000. Tell them to never leave. If you’ve got to stick them with this property, what a delight to be able to leave them with a tenant that will stop them from getting–at least tie it up for another 6 months. Mike: You know a client in Florida the other day told me this story after we had short sold his home. The renter who he was very good friends with, he really came to like this guy over the time. The home was taken in foreclosure. It was a town home and the renter stayed for 11 months without paying rent before the bank got around to processing the eviction. Ryan: That’s hilarious. Mike: Isn’t that bizarre? He lived free for a year. When the guy lost the home he just advised him like that. He said “Listen I’m losing this thing. I don’t recommend you move out immediately, because you know my local realtor tells me the bank is just not moving very quickly on evictions. So just hang in there.” And it was 11 months. Ryan: That reminds me of something else. There are whole websites now dedicated to renters. Actually it was one idea I had a while ago that I was never able to pursue. But it’s like there are now whole websites dedicated to renters to find out if their landlord is in default, presumably before they sign a lease. Mike: Right. Ryan: And what that I think demonstrates is that landlords care nothing clearly about a lease in a foreclosure situation. What that says to us is that’s the very last consideration, if any, on the landlord’s mind. You know, and in many cases I’m sure that it’s happened. That they’ve rented out the place and took the deposit and took the thing, two days later it was lost at auction. I bet you anything that that’s happened. And you’re never getting that money back. I’ll tell you that. Probably not. You’ll never find that landlord again. But also, I think from that perspective anyway, from a landlord’s perspective in signing a lease and sticking a tenant in there, not a whole lot of risk. Mike: I like your initial recommendation. Just deal with it up front with them and explain the next few months, the next six months are going to be a little rocky while I negotiate this loan modification. You know, like you said, just negotiate some kind of concession. Ryan: When your finances are a mess, your house is under water, and you’re just trying to choose between option number one and number two and neither are what you really want, it can be an emotional and frustrating time. Believe me we know, because we’ve personally been there unfortunately. The important thing is that you try to get clear and figure out your end game here. If you want to keep your home, great. Then loan modification is often the fastest, simplest, and easiest way to do that. You can lower your monthly payments and reduce your burden each month. We’re huge advocates of “do it yourself loan modification”, but that does not mean you should do it alone. If you haven’t already, order our 60 Minute Loan Modification Kit. With it you get a one on one coaching call with Mike, and you get to take advantage of our critiques. We will take a look at your hardship letters, rewrite them if necessary. We’re going to look at your budget and advise you to adjust if necessary. Our simple program has helped so many people. Just the sort of thing to HOW TO WRITE A HARDSHIP LETTER More info? ———-Transcript Below———— Ryan: Hi everyone and welcome to the 60 Minute Loan Modification Insider Secrets Teleconference Series. Welcome. Thank you, all of you, so much for being here. We’ve got a lot of people on the call right now tonight and we’re excited about that. We’ve got a timeless topic–hardship letters. We want to make sure that every one knows how to reach us. We’re going to take some questions–we always take lots of questions. There’s several ways to get them to us. One is by e-mail and you can e-mail them to questions@60minuteloanmodification.com. That’s questions@60minuteloanmodification.com. And the next thing you can do is jump right on line when we un-mute the call and ask your question and we’ll try to answer your question. We’ll have to mute you again so every one can hear us because it’s incredibly hard to hear, when we un-mute the call but then we’ll try to take care of everyone’s questions. For everyone here that’s new, we’re here to beat the bank to save your home and help your escape bad debt forever. My name is Ryan Rockwood and as usual I am joined by my father and business partner, Mike Rockwood, on today’s call. Mike: Hi, everybody. Ryan: Now, announcement number one. As a reminder we have a teleconference every Tuesday, and Tuesday’s calls are primarily beginner topics. Thursday we have a client’s only teleconference for people who own our 60 Minute Loan Modification Kit. On those calls we’re able to take more live questions and explore more complicated and aggressive tactics for saving your home. So basically what I’m trying to say every one here is that we’ll try to–well, you’re saying I don’t know if I’m a beginner. If it’s your first time on the call, then you’re a beginner and very rapidly you’ll blow past the beginner questions and you’ll have something that a little bit more complicated. Like in my situation I got a response from the bank that was a little bit different. What do you take on this? Something like that. Advanced questions, okay. Take those to our Thursday night classes and we will solve them for you. You know, your home is a very emotional investment but in order to secure a great loan modification it’s very helpful if you can take a step back and look at this from the bank’s perspective. The bank has their best interest in mind and in many cases foreclosure is not in their best interest. You staying in your house and continuing to write them checks each month is usually in their best interest. And with that in mind forget the sob stories of doom and gloom and focus on the real issues at hand. Your hardship, your expenses, getting your loan modification done. Ultimately it doesn’t matter where the real estate market’s going. It doesn’t matter if this guy does fall in. Right now, you have an opportunity to get a loan modification so you can deal with this the situation as it stands right now. Of course, if the real estate market blows up, if it goes high, if it goes low, we’ll try to bring you the strategies to respond to those situations as well. So for the past month we’ve been getting numerous complaints about B of A Countrywide. I’m happy to report that our clients started getting loan mod offers again last week. It’s unclear if this is just a fluke or how long it will continue, but it’s good news for those of you with B of A Countrywide loans. Mike, I didn’t tell you this I got a e-mail today from a client that said that B of A told him that they don’t do loan mods now on HELOCs. Have you had any direct experience with a HELOC with Bank of America recently? Mike: Boy, now that you mention it I guess I have not. The one that I was working on earlier today was Wells. No, I have not. Ryan: What about all your loan modifications weren’t any of them with Bank of America and HELOCs? Mike: No, those are–all of them I have are first mortgages. So let’s ask our listeners to be on the look out for more information from Countrywide and B of A about a change in their actions on modifying HELOCs. It would be a really weird time to start getting more stringent on HELOCs and on second mortgages. My goodness, those are the ones that are really at risk along with credit cards debts. Ryan: Particularly this is a second mortgage that had no equity Mike: Yeah so lots of luck trying to get that one. Ryan: I asked our client to call back again. It sounded like he only got that answer once and so I’m hoping that he’ll be able to check back in with me and report that it wasn’t an error or something like that and I’ll let everyone know on that. Mike: You know, Ryan, I suppose it’s worth repeating and I’m sorry, you guys, if I say this to many times. But our advice always is when you get an answer that seems weird and with all these untrained representatives working for the loss mitigation departments and collection departments and customer service departments at the lenders you get a lot of rookies and a lot of people that just don’t know what they’re doing. They’re put on the phone like after two or three days of training. So remember our recommendation in terms of what we do with these people is we ask five times. In other words, we’ll call back five times. If we’re still getting the wrong answer, we’ll escalate it to a supervisor and of course you all ways do that with as much diplomacy as you can. And then the third line of offense is a qualified written request. So when you get a statement like this, like B of A is no longer modifying HELOCs or you sometimes get people that just say–reps who tell you, no we don’t. Like Saxon was telling me this last week. Saxon doesn’t modify mortgages unless it’s owner occupied. And I in fact, just about two hours ago got them to agree that in fact they do and they accepted this mod application. So it took three times. I had to call back three times. That’s the chain of command you go through when you’re getting a weird answer. Ryan: I suppose that that some one didn’t probably end up changing their mind ultimately. What probably happened is that along the administrative roadblocks that are set up, someone was genuinely misinformed. That’s their role–to turn down things that don’t meet certain criteria and approve others, right. So they were just trying their best to get that criteria reviewed. It’s not going to be the easiest thing. After all, that’s what they’re there to do is enforce that criteria, not justify it. So keep that in mind and I know it’s difficult. With that in mind, today’s call–The Three Minute Hardship Letter. Mike: Okay, so let’s just kind of review our ideas about what use to be called the hardship letter. Now Ryan and I are starting to call it the hardship statement because, like we said in an article several months ago, your hardship hardly matters any more. I was on a radio show earlier today in Kentucky from my office here in LA and the host was a bankruptcy attorney and he took the opportunity to go through the modification that he was working on currently. And I got to tell you he got into such complexities and some of you listeners may actually have been tuning in because you heard me on that radio station. But he got into such complexities about the guy’s hardship and about the situation and about pending bankruptcy and relevancy of the bankruptcy to this property versus other properties. I’m telling you, he violated a major premise of our recommendation in terms of hardship letters–that is hardship statements. And that is you’ve got to dumb it down. You can’t make this overly complex because you’re not dealing with people who can deal with complexity. The people who look at your hardship statement, who look at your hardship letter, are looking for key words just like Google does. They’re looking for key words like illness, divorce, death, reduction in pay. And as soon as they spot those they go right over to their check list and they check it. So give them the key words and help them find it and check it off and move your hardship application along. I always recommend that you say as little as needed to get past this objective. These days a lot of lenders are, in fact, sending you kind of a check list of six or seven common hardships and asking you to check which ones apply and then explain if your hardship is different then that. Ryan: But then that is hit or miss. Some of the time they’ll do that and even some of the same lenders don’t do the same thing all the time consistently. So don’t count on that. It’s worth a little bit of mental strain but it’s basically–people say, well if people go on and on in their hardship letter, in my opinion that’s okay. The worst that’s going to happen is they’re going to bore the pants off of someone. Mike: Yeah. Ryan: And hopefully they’ll get all the reasons up there in the first paragraph and it’ll just be kind of a novella. But what is not good is that people usually want to know, well does my hardship qualify. Mike: Yeah. Ryan: So that’s kind of part of the “how do I make a hardship letter” problem and so I don’t know. I wish we had an easy way to tell people if their hardship qualifies in a real easy way. Mike: Yeah. Let’s talk around that issue for a minute. Does my hardship qualify? Let’s think about it. That is a common question. People call in, and in fact I’ve got three on my screen right now. I’ve got three questions that have come in in the last couple minutes that we’ve been on and all three of them are whether or not this particular hardship qualifies. It is a burning issue and many people–first of all it always amazes me that people are reticent to admit that they have a hardship. There’s just some bit of pride in all of us that just says, “Admitting you have a hardship is being weak,” or “being needy.” So a lot of people don’t like to admit that they have a hardship and they put it off to long before they will admit that they do. And it’s usually one spouse or the other that first says, you know what? This pain is just getting too bad. I like how Tony Robbins always talks about running toward pleasure or away from pain and it really is a pain / pleasure thing. When the pain gets bad enough–when it’s so bad that you’re literally getting ill at the first of the month when you have to make that mortgage payment because you just can’t do it, you don’t have enough money in the checking account, that’s when the pain is bad enough to where you will take action to change your situation. So that hardship, getting back to the topic, your hardship–lately I’ve been using this recommendation with clients. Try to fit into the grid. You know the grid that they provide. I know Indy Mac and Countrywide occasionally, like Ryan said, are using this grid that they send you with seven hardships. Check yours and you really want to, if you can, fit into that grid. A lot of people will give extra explanations and a lot of times I think its emotional and they just want to get a really good hardship instead of just checking that one applies. Because really the hardship really hardly does matter any more. There just has to be one and if you can honestly fit into one that’s on the grid, do it. And just get up to the front of the line. The point of the hardship letter is to get you past that gate keeper. You remember, we’re all trying to get up to the front of the line because there are so many people applying for loan modifications we can’t wait in line. So we have to get by that gate keeper and the way you do that in many cases is just fit into the grid. right? Ryan: I guess if people have one of those horrible hardships they know it. Like someone died or a job has been lost. An injury has been sustained. They’re the ones not asking about this question. I guess the ones asking are the ninety percent of the people who’ve had a reduction of income but they’re kind of good natured. Their honest sense of fair play kind of doesn’t allow them to think about that as a hardship because they think, if think about it as a hardship, I can’t. I must put a positive face forward and if I think about that as a hardship I’m going to be feeling sorry for myself. Mike: Yeah, it’s a psychological barrier. Ryan: I’m sure that does a lot of good things for us as Americans, but one of the things is also it probably does a lot of good things for rich Americans who benefit from this sort of attitude of all the poor people. Mike: Here, give me another ton of bricks I can carry it. Ryan: Hardship, shmardship. Really that’s the way we’ve always thought of it too. If someone calls us to say, “Do I have a hardship?” We kind of say well yeah, let’s figure out one for you. You kind of have to decide. If you’re on the edge there you can’t say, “Oh does my hardship qualify? I’m going to get it, maybe. I’ll do the best I can and it’s not really that bad. Or maybe I would just see if–” No. You have to dig in your heels and say, “I don’t care what it takes. If I got a sprained ankle last month, I’m going to make my hardship letter sail through without any–” I really think that people need to look at the hardship letter not like, “Will I qualify?” but “I do qualify and this is how I’m going to blow it by this hardship letter reader and never think about it again.” Because you can’t go in there half straddling it. Mike: If you’re going to go into a fight with one hand tied behind your back you’re going to lose. Yeah, you’re right in terms of when people have a problem–they are struggling to make their mortgage payment, believe me, it’s because of a hardship. I mean something changed, right. Ryan: Yeah. Are you going to Vegas every weekend and blowing it? No, you’re not. Probably working 80 hours a week and paying everyone else except for yourself. Mike: Yeah. So let’s think about it. What changed? What got harder? Why did it finally come to your attention that this is too much pain, I can’t endure it any more. Was it the credit limits on your credit cards? Was it the end of your savings? Ryan: Maybe they revoked your home equity line of credit. Mike: There you go. Or was it the change in the terms of your loan that jacked the price up $500 or $1000. What was it? Ryan: Maybe you spent all of your savings at this point. Mike: Yeah I ran out of savings. Does that qualify? Well, I think so. Ryan: Yeah. But you don’t say that. You say, “Hey, I have been so desperately attempting to–I’ve been so committed to paying this I have actually, even when I haven’t been making that money, I’ve been paying this out of my personal savings account, my retirement account. I have been managing to do this for two years. Now I’m destitute. Mike: You see now, Ryan, you and I have become super sleuths. You know, when we hear people say that we say now okay, that’s not the hardship but it is a symptom of a hardship. If you were dipping into your savings every month to make that mortgage payment, there’s a hardship there. Now keep talking to me. Where do you spend your money? How much do you make? Where does your money go and invariably nine times out of ten or even higher we come up with a hardship. So lets talk through–let’s be sure to go through some of the hardships that our clients are currently using just to name them so that people are familiar with hardships that people are using successfully and those that are actually named by Countrywide and by Indy Mac and we’ll go to some questions. I’ve got some of them right here. Okay, now here are ones that people have used recently. One is a death of a relative who was contributing to household income, even though that person was not on the loan. Another one is that the person had received no bonus this year. Now on a month to month basis that wasn’t a reduction in income but over the course of the year, that was. Now another one is unemployment benefits are too little to make ends meet. Well, you know the real hardship was first he lost his job. Another hardship is laid off from job and the replacement job is less pay, so that’s a reduction in income. Here’s another one that’s reduced hours. They had become dependent on overtime–that’s not uncommon–and now they are unable to work any over time so there back to 40 hours a week and that’s a reduction in pay. Another one is a spouse’s job loss, even though the spouse was not on the loan. And that, in fact, is a good answer to one of the questions I see before me on the screen here. And then this I mentioned in past teleconferences. This guy had a child who lost their scholarship late in their college and so he had to come up with about 800 dollars a month to help the kid finish his college. And then, of course, the old traditional. The ARM–the adjustable rate on my mortgage adjusted and the monthly payment was up. So those are some of the common hardships that are qualifying for loan modifications. Ryan: I’m just trying to check the dates on my information because her concern–this is kind of off topic–but she was concerned because she was under the impression that the Bank of New York was buying Indy Mac. Mike: Yeah, that would have been about Christmas, the first quarter of the year. Ryan: But she was greatly disappointed because the Bank of New York– they’re payments for not doing loan modification but I don’t think that that’s going to fly. I don’t think the new bank, and I don’t know if that is the case, this document I have before me says it isn’t. And the FDIC assures that any Indy Mac loan modifications will still be going on. But if, in fact, the Bank of New York buys Indy Mac, I don’t see how they’re going to get out of the federal requirement to do loan modification. Mike: Won’t slow them down at all. Ryan: Just because they’re Bank of New York. So, anyway, that’s one thing that hopefully will encourage her. Mike: Along those lines too, I want to remind everybody that even though that sometimes your loan, or you, or your situation may not qualify for the (A) loan modification paper–that’s A as in A-B-C–so there’s (A) loan modification paper and those are the ones that are owner occupied and that qualify for the President’s Making Homes Affordable program that I now call making banks profitable. But any rate I call that (A) loan modification paper because it’s there very best because it lines up all of the benefits. The bank is making the most money on you and you’re getting the best loan modification. That’s when are tax dollars really do us some good. But remember, there’s all kinds of (B) paper out there. You don’t necessarily have to qualify for the (A) paper. The bank, on the loans, that they own, that don’t happen to qualify for the President’s program, are just as interested in modifying your mortgage. They’re several thousand dollars less interested because there not going to take money from the government, but they still want to keep you in your home. They still want to keep the asset on their active asset, performing asset list. So there’s all kinds of reasons why banks are modifying loans beyond the government program. So don’t let that stop you. If you think for some reason you can’t get your–you know, the bank’s never going to be able–your HTI, your mortgage-to-income ratio down to thirty-one percent. You’ve got to apply anyway. It doesn’t matter what program or it doesn’t matter what kind of qualification. You can get a modification and you might not get down to two percent, but there’s nothing wrong with getting down to three or four percent if you’re at an adjustable rate or a high fixed rate, right. Ryan: Good. Mike: all right let me take a question on my screen. My hardship is a dramatic increase in expenses due to divorce but my wife was not on the loan. How should I explain that? And I think that this writer is assuming that because that income, the wife’s income, was not on the original application, that in fact that the bank gives a hoot about that. And, in fact, they don’t. In fact, there not even resurrecting your application and they’re not even doing all kinds of investigation. All they want to know is, do you have a hardship? So tell them what they want to know. Yes, I have a hardship. My household income was cut dramatically when my wife and I divorced. And that is one of those hardships that are usually on the checklist and that’s one that will immediately get you right past the hardship gate keeper. So don’t even consternate about any problem explaining that. It is a reduction in household income, even though she was not on the loan. Now you have to assume all kinds of payments that you use to split with her. So that one is a bonafide slam dunk. Right, Ryan? Ryan: Absolutely. And back to this other person who wrote me a lengthy letter, I want to say that what she says in here is a lot of details on her hardships specifically she asks us to comment, and she talks about investment property. Some problems with Idaho changing the homeowner’s exemption taxes. She talks about real estate dropping. She talks about being actually scammed in real estate and perhaps some TILA violations in not being told something. Man, it gets complicated, doesn’t it, real quick. But I think what I recommend here is–I mean obviously you have a hardship. And the hardship at the heart of all of this is that–well, I’m trying to think of one sentence to some it all up and then you can describe it with all these things. Perhaps, “My hardship is decline of income due to the housing crisis–due to the U.S. housing crisis.” And then you support it with, “While my property value has dropped in half I’ve been unable to fill it with renters and in addition to that to make up for budget short falls the State of Idaho has decided that they are not going to allow my home owners exemption, which increases my taxes, increases my expenses, decreases my income.” So the key is, when you boil it down, all the explanation in the world is fine. I, unlike my dad, don’t mind a three page hardship letter as long as the first two sentences of the first two paragraphs give nine different reasons for the hardship in exactly why it’s going to be there. You don’t need to blather on. Mike: Yeah, I understand. Ryan: Someone wrote a nice letter here she says thank you for helping us when no one else seems to be trying to help. That’s pretty cool. She also asks is HSBC Mortgage Services hard to get a loan mod with. Mike: Oh no, not harder then any other. I mean, the same as any other. The ones that I consider the easiest are Wells Fargo and Indy Mac and you get other loan modification experts that would say, are you kidding? So a lot of it just has to do with your experiences and the types of modifications that you brought to those people. But remember, everything, everything, everything has to do with your application and your follow up. It’s up to you. The system is in place. It’s a well oiled machine. It just isn’t very intelligent. So you need to submit a killer application and follow up on it and you know when you submit your hardship or when you submit your application what you qualify for if you’re using our system. Ryan: Here’s an interesting one. Denise asks, what about over qualifying? And she goes on to list medical disaster, business down turn, family medical problems, used all the savings to make payments, lost a million in equity, purchased everything between 2005-2006, income is short term weekly rental that can’t be counted on. How much do you reveal? Mike: Yeah, that’s a really good question. I go back to my basic premise that you reveal only as much as you need to. So I would pick one of those hardships and use it and leave the rest alone. There’s just no point. You’re not going to get any kind of gratification out of explaining it to them. You’re not going to get any sympathy out of them. Hardships have become, like I said, just a gatekeeper. You just want to get past it. So don’t look for any thing more and honestly any one of those qualify. Ryan: You know, depending on how you word it, I wouldn’t mind throwing in a little trifecta. Mike: Yeah, three isn’t bad. Ryan: Just have something to fall back on if something gets knocked out. Mike: Well, how about the danger of coming across destitute. Ryan: Right. Well, that’s the thing. On one hand we have to prove a verifiable hardship and medical disaster is going to be pretty easy to prove. Business down turn due to the economy. Family medical problems, and then I would go to used up all the savings on payments. So you’ve got those three and each can be explained basically in one sentence, a three sentence paragraph that starts out the letter. You know, “I never wanted to have to write a letter like this. However, I hope beyond hope I can keep the home and not let it go to foreclosure. This year I had a number of very serious set backs which qualify me for a hardship.” And then such and such medical disaster happened to me, my brother, my dad, my dog, whatever. “And the total bill is pending at x and then due to the slagging economy my own personal business which is x has been beat up and profits are–”. Mike: How about you use a percentage? Ryan: Yeah, “profits were down twenty percent. Furthermore…” Anyway, you get the idea but the next sentence is about savings account, about depleting the savings account. Mike: Yeah, and I like the point you always write in the hardship letters about the good faith effort. You always mention the fact that they’ve depleted savings or run their credit cards up and I think that shows intent. It shows that you intend to and you really want to be responsible to this debt but you are at wits end. So I think it’s a good reflection on the borrower. Ryan: You know, I think it’s basically–it’s down toward the bottom of the paragraph. The first sentence really has to say something like “medical emergency.” The point is the first sentence. Very hard stuff and if you want to get in a little supporting argument down there get it in after you’ve got the kickers in. Never lead with it and always remember that these letters are read by people who have to run their credit card up to put gas in their car to get to their crummy job in the morning. Everyone is in the same boat and obviously–I mean reading this e-mail I feel like, oh no, all the savings is gone. You know, I can identify. My savings is gone. Check, boom, gone. Mike: Yeah, get this off my desk and get this over to a negotiator quick. Ryan: Don’t get me wrong there not going to get passionately behind you or anything but all we’re looking for is a check box and get it moved on to the next person. Mike: Well, you see that’s the thing. You want your application to move on from desk to desk to desk to desk because these guys in their cubicles have literally dozens or even hundreds of these files and once they open yours, you want them to close it and move it on to the next cubicle. Not set it aside for review later, right. Ryan: You know, a good thing to recall–and we’ve been doing this for so long that I know I’ve forgotten–is that first time you do the hardship. Like I said you’re usually looking for some validation in a sense. And you’re not going to get it. No one is ever going to call you up and say, you know what? You have a certifiable hardship. We feel terrible and we’re going to approve your loan mod. Even the best case scenario, no one’s ever going to talk to you about it again. That might help people think about it. It’s like, you don’t have any thing to prove to anyone. All you have to do is get through the system, disappear, and move on with your own life, right. Mike: Well, it’s like Ryan for that kind of thing you go to church or you go to talk to a family member, you know, for emotional support. Don’t look to these guys for emotional support. Look to these for money. Ryan: I mean honestly, I think that my first one I wrote, I thought maybe– you know, it’s hard to recall. You can easily see someone thinking, okay, they’re going to write me back and say we approve the medical but send us copies of the bills. They’re not going to do it. That doesn’t happen. It either gets approved right then and there or it’s off the desk, failed. I would say you got one shot but you don’t. We’ve written plenty of second hardship letters. You’ve really got to go at it. Whack at it. In our book we actually provided real life hardship letters that have been approved and just feel free to borrow the language exactly. It’s not copywritten, for goodness sakes. You know, it’s not plagiarism either. You’re not asked to write a creative writing assignment here. You’re basically filling in the blanks on a form. They want it in a letter and they’ll get in a letter. Use these as they work. Don’t worry, they’re not going to think that the language is too similar or anything like that. We haven’t had anything like that ever happen. Mike: Hey, Ryan, you touched on a topic the other day that I know a lot of people have mistaken misgivings about, have some mistaken concepts about and that is about rental market. A lot of our clients own rental properties and everybody has this intuitive sense that because everybody’s losing their homes to foreclosure–four million foreclosure notices in 2009, there will be–that there’s a flood of people looking for rentals and so then you think the rental market would be hot. Vacancy is way down, prices up, but the opposite is actually what’s happening. And who knows exactly why that is? I’m sure economist does, but for general economic reasons–in fact, the rental market stinks. And vacancies are very high and rental rates have been slipping for about fifteen months. Ryan: People are hunkering down. Moving in with family. Getting some savings built up. Rightly so. It’s true. It doesn’t make any sense from the supply side economics, but you know, we were calling around for a family member, my wife and I, this week, and I was stunned at how many landlords–we were driving around the beach cities trying to find a places that looked neat. I couldn’t believe at how many landlords picked up the phone and called me back and I got to tell you, I have looked for rentals in the past and I have never been treated with such respect and this time I wasn’t even looking. I even left a message saying I’m calling for my family member. You know, like the typical call that gets deleted, never returned. The property management company doesn’t give a darn anyway. There’s plenty of spots, and you know what? They were even saying stuff like that this unit use to be $2100, now it’s $1800. You should move on it really quick, and you know you’re kind of like, whoa, this is beach property they’re looking at. This particular one was a one bedroom apartment looking at the Pacific Ocean. Mike: Well, see here’s the deal. So many of our clients have reduction in this rental income and they wonder if that’s a hardship. Well, that’s a duh. That’s your income. That’s a bonafide slam dunk hardship. So if you have rental properties and your vacancies are up, your maintenance is up, whatever. Your net income is down–that’s a hardship that qualifies. Here’s another one off my screen. My married son and his wife and his son are having financial difficulties and recently moved in with us at a very tough time for us financially. I’d like to think a loan mod could help us. Will this situation qualify as a hardship? And the answer is “yes” because your expenses just went through the roof. You have three more people probably, $450 to $500 just in groceries alone, much less utilities, and etcetera and etcetera. Ryan: And because the natural assumption is there is, well, sure you get some more expenses. However, it’s going to be offset by the additional income of two people–I would maybe not be so specific and just say, you know, due to family member emergency my grandkids and their family are now living with me and under my financial responsibility. Mike: Yeah, that’s a good way to put because then think about all the expenses they’re incurring now. If the son and his wife, in fact, can’t make their medical premium payments every month, this couple might have to help them. There’s car insurance, there’s car payments, there’s gas, there’s all the expenses. So, yes, your expenses increase dramatically. You have a verifiable slam dunk hardship. Ryan: Here’s one. Will the fact that I rented out my house a couple months ago and now live in my apartment behind the house and drawing unemployment qualify as a hardship. Let’s take a one step further from that I would not go with that. What I would use that as a supporting evidence of my hardship, but some things happened that caused you to move out of the house and live in an apartment and draw unemployment. Let’s get to that. You lost your job. You’ve been unable to get another job although obviously trying for x amount a month. In an effort to make good on your commitment you’ve actually rented out your own home in a desperate attempt to make that monthly mortgage payment, which of course you cannot make with rent if you’re in most areas of country. And you can continue this uncertain living situation if you’re certain you can continue this. Mike: You know you can make those payments but you need some help. Ryan: We should have stressed that earlier on the other call where the women had to many problems. You’ve got establish the problem and then move on because you also have to qualify for enough income. No one who’s not drawing an income has ever gotten a loan modification that I can think of. So you’ve got have that income. You’ve got to put it in there, whether it’s in a couple months I will be back working the full hours. In a couple of months I will be better and going back to work. What’s the hope on the horizon? My grandmother is on her death bed and I’m going to inherit a ton of money–no, I’m just kidding. Mike: We always advise in terms of good news on the horizon that it not be to soon, because you don’t want them to offer you a deferment or a forbearance, and it not be too late because, you know, it can’t be out there for five years. I don’t like to say when the economy recovers. I like to be a little more specific. So I always recommend that people say that in 18 to 24 months I’m going to be back or something like that, or I hope to recover. Ryan: Okay, sometime in the near future. Mike: Not in this month. Ryan: Yeah. Near future is pretty new, honest. Caller: My name is Dell. Hi. I wanted to know if this would qualify me. About six years ago I became a legal guardian for my grandchildren. I have minimal help from the state. Of course my expenses have increased dramatically. I have two rental properties that would only decline because of the housing prices. I’ve used up all of my savings and refinanced all of my properties and my home just to stay on top. I ran out my credit card. I am now out of my resources. Would this qualify me or how do I go about this? Ryan: Well, that’s a great question. We’re going to need a little bit more information. What do you want to know there? Mike: Well, Dell, there must be some recency to the hardship. So they’re going to be looking for what has changed now as opposed to two years ago and I know from what you’ve told us already this has been getting worse and worse and worse. I’ve done the credit card thing, I’ve done the refinance thing, but it’s going to be easier for them if you can point to some point in the last year that’s making it just unable to go on. Ryan: So right off the bat can you think of something that’s changed in the past two years or we could help you think deeper. Caller: I think I would have to dig deeper. I don’t know. Ryan: Well, for one thing I can think of, you know, you have recently used up all of your resources and you have a good faith effort to make good on your commitment. Okay, yeah. It’s kind of weak, but you know you have a big family to support. I don’t think there going to care if they’re your grandkids and it was six years ago and stuff like that, but you still have a family to support and the rental incomes don’t, in fact, cover the mortgages and stuff like that. Mike: Wait a minute, Ryan. I bet–Dell, if you really study it I bet you got ten percent less here then you did in 2007, and I bet you’re getting ten percent less this year because I bet you’re going to have more vacancies. Caller: Correct, yeah. Mike: It’s kind of a confluence. Ryan: Okay, so what they were talking about here is decline of income. Mike: Yeah. Ryan: We’re talking about a decline of income on– Mike: At a time the grandchildren are getting older and more expensive. Ryan: Increase of expenses. Mike: Yeah. And I bet your credit cards have about hit their max and I bet they’ve tried to lower the limit on your credit card. Ryan: And they’ve increased her rates probably. Caller: Well, what I did Is I went on this program where you do the monthly thing and I did it for five years so it’s like I closed off those credit cards and I’m on a program. Ryan: Did you do that through a third party company or did you do that directly with the credit card company. Caller: I went directly to the credit card company. Ryan: Okay, so that’s fine. That can be an example of extinguishing all of your resources and a good faith effort to deal with all of your problems the best that you can. So I think that could be both. Now the other thing is, it’s probably beyond the scope of this conversation, but you have to figure out what good are those properties doing you. And if, in fact, these are maxed out properties and a loan modification isn’t going to get them cash neutral for you, I would suggest you think about short selling these homes and getting them off your books because rental income isn’t going anywhere in the next ten years. Now, of course, if you can cash flow it and you can handle the stress, go with it, but consider–of course, pursue the loan modification, but in the back of your mind and maybe at the same time consider short selling. And we could help with that to if you want to drop us an e-mail. Caller: Well, I just recently joined your kit so I’m going to be setting up the 20 minute one on one. Mike: Oh, good. Then we’ll dig a little bit deeper on the refinance and on your credit cards because I think somewhere in there, and your decline in your rental income, I think that’s where your hardship lies. Caller: Thank you. Ryan: We look forward to hearing from you, Dell. Caller: Yes, hi. My name is Claudia. My situation is that I just got my bankruptcy Chapter 7 discharged and I got an e-mail yesterday from the (inaudible) and I really want to save my houses. And my husband and I had to go out of business in January. We closed our only source of income but we have four tenants in the two properties that are rentals. And we are not paying the three houses–the one that I live in and the other two and we’re living with these rentals and now in September I have a promise of a full time job which will give me $35,000 a year. And now I don’t have that with the credit cards, that was huge. Do you think that I would be okay for the modification if I give up one of the houses? Ryan: Yeah. Well, there’s several things at play here. One, I’m assuming that the homes are not part of the bankruptcy, right? So they were never included in it? Caller: We included and we asked–how you say–released or foreclosure. They just started foreclosure again. Ryan: And the judge released them? Caller: Yes, so they will foreclose if I don’t do anything. Mike: And you want to try to hold on to them, is that right? Caller: The one that we live in, we love to live here. Of course, we cannot afford $4,000 dollars mortgage, but if it was $2,000 or even a little more we could work three jobs and try hard. But the second one is a very good house with two tenants. They are awesome and we would love to get loan modifications and get a little profit instead of having no money left over because this house is $4,000 dollars. The third one, it’s too much of and expense because the gas/electricity is in my name and it’s all together–the second and first floor, so I’m tired of that house. But I like the rent that is coming in, so I don’t know what to do. Mike: Here’s some off the top of my head thoughts about what you’ve said. Now keep in mind that I think it’s a good strategy to be pursuing short sales and loan modifications at the same time because there’s no reason why you can’t stop the short sale if you get a good loan modification. Caller: And play the game. Like I’m trying to sell to help the bank and then suddenly I’m qualified I keep it. Mike: Yeah. So I think it’s actually the smarter strategy. And, Claudia, it seems to me that you need to be pursuing loan modification on all three properties at once. Caller: Yeah, okay. Mike: Now is your own home in foreclosure? Caller: Yes. Let me think if we got a letter. Yes, we got a letter that they ask to be relieved and start foreclosure. Mike: Okay. So you’re going to be on a short leash. You need to be really proactive on at least one or two or maybe all three of those. You only have three months to resolve this. So you want to take action, proactive action right away so you can go through this on your own terms and if you have to let one of them go, it sounds like you already know which one that is. Caller: Yeah, okay. Ryan: I think that you also need some professional stalling tactics here. And you may have to pull out the loan modification card to get some stalling because you do not want to get that notice of trustee sale issued. That’s a real headache when that gets issued. So I think you want to get a couple things in the works in the couple’s apartments right away but now, what was her main question? Mike: Well, her main question is does she hardship that can qualify her for a modification on her first home and that’s really, Claudia, that’s really the burning issue because the people that can hurt you most right now is the company that owns that first mortgage because they can take away your home. All the other people can hurt you a little bit but those people can hurt you bad. So let’s really focus on financial hardship for you that’ll enable you to qualify for a really good, an (A) paper loan modification on your own home. Ryan: Certainly, you know, business–going out of business, Chapter 7, shutting down the business is enough I think. Caller: It’s all done and we are relieved we don’t need to pay any thing. Mike: Now, Claudia, what they’re going to be looking for is okay, you’ve cleared the hardship hurdle. Ryan: Now, do you have any income? Mike: Now, do you have enough income to keep them up. Caller: That’s the problem. I only have a little part-time but this future full-time job in September. It’s a gymnastics school so only in September they have students. Ryan: And how about your husband? Caller: I coach. My husband also is a coach. We both were coaches our whole lives and now we have no gym. We used to have a gym that went out of business. Mike: Ah. Caller: So he has no job. He’s been trying since end of January and everybody thinks he’s over qualified so he doesn’t get a job. Ryan: Okay, I’m telling you right now, the bad, terrible news here is you guys need a loan mod. But with $4,000–we sell loan modifications, right, with our kit. I hope you know what that means. Which we try to encourage people to do loan modification. But in talking to you I really am concerned that this may not be a reality for you and the reason that this may not be a reliable solution, the reason I say that because I know your mortgage on your home is $4,000 and I’m assuming your other properties don’t cash flow. You know, you guys are going to have to show $7,000 in income a month. And if you can’t show that, you don’t have a prayer. Why don’t I suggest this, Claudia. Consider shooting me an e-mail at questions@60minuteloanmodification.com and I will follow you up with tomorrow and see if we can suggest some good alternative strategies, because I really–from a stalling point of view a loan modification might help you somewhat, right. But I don’t want to give you false hope that what we’re talking about here is the solution for you. Caller: Yeah. So maybe I would have to have a short sell to gain more time? Mike: You might have to. Now, a couple weeks ago a conference call on the topic how to bolster your income and I think what Ryan will do tomorrow when he hears from you is brush off some of those notes and tell you some of the ways that people are proactively getting their income built up in order to qualify for a loan modification. It might be that information you need. Ryan: Write to questions@60minuteloanmodification.com. Thanks for your call. Okay, now we had some good calls. In talking through some of this stuff, although it sounds specific, it’s pretty general. So I do hope that people don’t just zone out when they hear about someone’s specific problem. You know what I’m saying? Mike: Yeah, because you know the principles are the same in every application. You got to just keep looking for what is the hardship? Because people describe their hardship symptoms to us. Ryan: Yeah. Absolutely. I agree. Mike: All right. And Claudia was actually a good example of that. You know, she explained the symptoms and when you’re looking for the hardship, man it was staring her right in the face. They had lost their business, lost their income, and had to file Chapter 7 just for that reason. So the hardship is a no brainer. Then moving on to how do I qualify? is a little bit more complex. Now we got to deal with the income part of it. Ryan: Yeah, you really should pat yourself on the back for showing up on this call tonight and taking action to save your home and fix your finances. I know it seems like a boulder and, you know, the other options available to you–putting it off another day, that kind of thing, are the kind of things that limit your options ultimately and there’s only one that will be made for you and that’s the one where the sheriff comes and locks up your house. And that’s the very last thing we want to happen. Because no one’s going to come and bail you out unless you raise your hand high. That’s what this process is all about. We are huge advocates of do-it-yourself loan modification, but that doesn’t mean you should do it alone. Mike: Thanks and have a great night. INVESTMENT PROPERTY LOAN MODIFICATION More info? Ryan: Hello, every one and welcome to the call. This is the 60 Minute Loan Modification Insider’s Secrets Teleconference series. I’m Ryan Rockwood. As usual I’m joined by my father and business partner, Mike Rockwood, on today’s call. Mike: Hello, everybody. Ryan: We’re here to beat the bank and save your home and help you escape bad debt for ever. Tonight’s clients only call is about investment properties, but before we get into that a few quick announcements. Number one, if you have a number of investment properties that are in trouble financially it’s very possible that you need to consider short selling one or more of your properties. If so, it can make your other properties easier to modify so it’s important to establish a property priority list. Announcement number two, we’ve had two clients recently get extremely fast modification. Greatly reduced rates for less then one year. Now while this sounds like a poor solution if you were to knock off $500 of your monthly payment today for the next six to eighteen months, that all adds up very quickly. Obviously I think any of us would like to have an $6000 in our pocket at the end of the year. I just say that because a lot of people just sit of the fence and think is this worth the effort? Should I submit a loan modification? It’s not going to be the final solution anyway. These are the things that rattle around in your mind. They’re kind of the excuses for not taking action that people do. This person, for example, he’s going to have it for a year. Yes, the problem will still be there in a year and that point hopefully we’ll have some better solutions to deal with it. However, if not he’ll be in better shape than if he hits a brick wall today. So anyway, keep that in mind. On with today’s call – how to deal with investment properties. Investment properties. Well, I guess people like my dad–and I wanted to just wasn’t able to–and people like probably most of the people on this call suddenly find that they, after this last five to ten year run up, that they own a bunch of properties. It’s not unusual to have ten mortgages. Well you know you tell some one that and it sounds like you’re some kind of real estate mogul. You know with the 80 / 20 financing and so on it’s very possible to rack up five mortgages in a heart beat as we did. As a lot of people on our call did. Now that those assets turned into a lead weight it’s kind of time to look around, to take stock of going forward or going backwards and try to figure out what needs to be thrown over and what we can hold onto and get out of the slump with. Basically, we have to stop the bleeding or at least slow it down a great deal. So with that in mind, let’s hear from Mike who wrote the 60 Minute Loan Modification. Mike: Okay. Ryan want to give every body instructions as to how to send there questions in? Ryan: Yeah. As we talk we all ways take calls at the end from clients and you can go ahead and speak up if that’s your nature. I’ll unmute the call. I can’t hear you now and you can also e-mail questions to questions@60minuteloanmodification.com. And with that in mind, whenever some thing strikes you, be sure to write it down immediately and shoot it in and we’ll deal with them all at once or as they come in and hopefully we can help you out. That’s questions@60minuteloanmodification.com. Thanks a lot. Mike: All right. And I see we’ve got some questions coming in now. But let me get started talking about investment properties. Now about half of our clients have investment properties. All of the stimulus bill, all of the stimulus money is earmarked for loan modification and refinance encouragement support has to do with your primary residence so investors have been left out and have been defamed and kind of downtrodden and disregarded and I find it kind of funny actually because–and I called the people who kind of look down on us investors now, I call them smugglers because now they’re smug because they didn’t invest in real estate over the last six or eight years. And I just kind of think back on it and I just kind of think now, why wouldn’t have someone invested? Ryan: Fear. Mike: Well, yeah, that’s it exactly. Fear or lack of money. Whatever, but there was ten to twenty percent appreciation on an asset that the lender would give you a hundred and five percent of the value to purchase. It is by far the best tax advantaged investment on the planet so I just found it comical. I mean at any other time we say the people who do that, who get out there and make those investments are the capitalists. They’re the doers, the movers, the shakers and now because of the economy and the housing market turns down a little bit, so now we call them irresponsible? Give me a break. Ryan: Well, it’s tough. The truth is we really shouldn’t even be talking about it, right? We should just move on with our lives. Mike: It’s comical. I just think it’s comical. You wait another five years from now and we’ll be saying, listen, the people who fought through and still own property are going to again feel pretty smart. Give me a break were not going to become socialist. This is a capitalistic society, capitalistic economy and those that got the property are going to be better off. And the guys and the folks who can hang on during this difficult time and find a way to own property or find a way to keep their property are going to be better off. I’ve got ten items here that I want to pass on to you about how clients with income property are getting good loan modifications. The first thing is an awful lot of them are seeing it as an opportunity to prioritize and cherry pick or cull through their properties. So in other words, the first step I always recommend is to think through which of the properties do you really want to come out of this thing owning. Because very often, if you have a lot of properties, very often that half of them are dogs anyways and you kind of regret having bought them. But once you make the purchase there’s some ego in there and you really fight to keep them. But if you really run the numbers on them, usually half of your properties are significantly less attractive long term then others and that usually has to do with location. Because it really is location, location, location. So I always recommend that the first thing we do is prioritize them and see which ones are the most important to you. Now that’s helpful for a number of reasons. One of the reasons is your debt to income ratio overall may be so bad that you have to lose some of the worst ones in order to get them off your books because they’re real stinkers in terms of what they bring in and what you have to pay on them. So sometimes just taking fast action in terms of–I mean trying to give them away as deed in lieu or short selling them. You know, sometimes you can short sell in 45 days, 45 to 60 days if you hire someone that’s really good to do it, like us. So that important first to prioritize and think through. Now is it really important to hang to these properties? Are they, in fact, smart choices? And then lose those bad ones fast. Ryan: That reminds me of something we were talking about with another client, I can’t recall who. But it’s kind of like the unofficial no application refinance. I don’t know but we got to develop a name for it. But it’s like basically, you know, when a lot of people say to us oh I put $50,000 into this property and now it’s gone. I don’t want to let it go. Well number one, the money’s already gone. Okay. You just have to do the math and figure out in ten years if you broke even how much would you lose, essentially. But regardless, what a lot of people we’ve been talking to are doing is kind of saying, you know what, I’ll just try and get that $50,000 out. I’ll stop paying my mortgage and we got one client who’s fifteen months into not paying a mortgage and imagine if you collect rent of three thousand the whole time. That’s another way that people around the country are basically, I don’t know they’re like qualifying themselves for a refinance. They’re basically refinancing their money out of the property. Mike: They’re getting there money back out of it, right? Ryan: And I don’t know. Fifteen months, that’s an extreme example. That’s a real one, but certainly six months is a piece of cake and nine if you can fart around a little bit, okay. So just something to keep in mind. Mike: Now, Ryan, I want to pass on a related bit of information I learned from a client who has a Florida property. Now, if you have properties in some of the really hard hit areas like the inland empire of Southern California or Phoenix or many parts of Florida, you maybe in a situation where the bank actually is so overwhelmed that they can’t move very fast to foreclose, number one, and they can’t move very fast to evict. Number two. I heard a story earlier in the week about a client who lost his property after nine months of fiddle farting around the bank and he was pleased because he had recouped, just as you explained, Ryan. He had recouped about forty thousand dollars worth of payments because he was renting the property. So he recouped that in rent while he had stopped making his payment. Ryan: I guess if you were even living in the house the same situation applies actually. You got to count your own mortgage. Mike: Right. I mean deal with the ethics there on your own terms but here’s the next step. He said that he thought it was pretty interesting because when he lost the property he advised the renter, of course, that now he was no longer the landlord and that the bank owned the property and the tenant was smart enough to not pay his rent. And do you know it was eight months before the bank got smart enough to kick him out? And it really wasn’t a matter of being smart. It was really a matter of just getting around to it. So here this guy lived in the property for eight additional months with out paying rent. So I mean, you can take advantage of some of the totally in overwhelmed situation the banks find themselves in. Ryan: Now that would be extraordinary. What if he had lived in that house and just stayed? Probably the same thing would have happened. Mike: Yeah. That would be like 19 months with no rent. Okay, now here’s a bit of information I want to pass along. You remember, of course, that the government does not subsidize loan modification efforts on part of a lender for rental properties but put yourself in the shoes of one of these investors. You see that there’s a rational way forward. A rational, mathematically sound way of rewriting these loans in order to keep them current. Almost all of the investors ultimately will modify on rental properties. It takes a lot more negotiating power to get them to do so. At first they will refuse, and then, what I always recommend is that we exhaust all are other options I always put the properties up for sale and get them on the MLS right away. So that if I want to try to exorcise a offer to offer the property as deed in lieu, I will already have the three months on the market. And you can go ahead and put it on the market. Get it listed at a relatively high price, so at least it’s on the market, technically, although you don’t have to fool around with a lot of looky loos and a lot of buyers. Because–. Ryan: Well, you don’t technically have to show it. The disadvantage, though, would be we could do that because you know were licensed to sell homes and we have a certain objective in mind but it is going to be quiet a challenge for who’s listening to this to get the big hair lady who’s name and face is on the bus bench near by to cooperate with them in regards to not showing the house, for example. Mike: If I’m working short sells, I can explain it to people in Florida and Georgia and in Ohio and Michigan, you know what I mean? I think that’s the keys. You have to be working with an expert who understands all your options. Ryan: Well, if it’s not you too, if you’re not the agent, which probably most people aren’t, you can’t expect some one to do it for free either. So don’t be stupid. You can’t call someone up and say hey I want you to list my house at a high price so that it’ll never sell. You’ve got to develop some sort of fair compensation plan because there’s a lot to it. I don’t know what there is, but it seams to me to make a lot of sense if someone could pay us, not us exactly, someone could pay someone, I don’t know like some kind of monthly membership fee to stall foreclosure at any– Mike: Remember, Ryan, that there are plenty of brokers who for $500 will put your “for sale by owner” home on the locale MLS. So those are the guys you have to look if you haven’t got any personal relationships with people who you’re working with. Ryan: That’s a good point. But a lot of people feel kind of frightened to do that, you know? If you didn’t know, you’re like, well, who’s going to call me? It would make sense to have some regular monthly fee to have someone just pull out all the stops. Mike: All right, so what you’re hearing from me, then, is that I very often on investment properties I start multiple foreclosure work out options at the same time. So very often I will prepare to request a deed in lieu and you know what? That’s usually just a paper tiger. They don’t want a deed in lieu. Keep in mind that when you deed the property to them in a deed in lieu contract, they don’t get relieved from the second mortgage or for any mechanic’s liens, any tax liens. They don’t get released from any other liens, number one. And number two, they don’t like to take property deed in lieu because actually there’s a lot of legal implications to taking on property and going through the short sell process or the foreclosure process gets a lot of experts involved. You know what I mean? They get a inspector out there. They get a local realtor. They get a lot of people to look at the deal to tell them. you know. that there could be some environmental issues or legal issues or eviction issues or damage issues, etcetera. So deed in lieu is, a lot of times, just a ploy on my part. I ask for it and then they tell me what the requirements will be and it’s always it’s on the market at least three months. So I always start that early. And then also requesting a short sale consideration, I think again is another–I use it as another phony threat. And I use it because I want them to realize I’m serious and that I’m going to go to the mat on this one and that they can’t make me afraid by reporting me to the credit bureau. Nah, nah, nah. And it is the truth that on rental properties you’re going to have to be more aggressive and it seams like all investors are willing to go lay down the mortgages in order to get a good modification. You rarely get an investor who wont go late. And when I have I’ve never satisfactorily negotiated a good modification for them. All right. Now keep in mind that the lenders, in trying to move faster and faster, are standardizing a lot of their practices and they have pretty much across the board now gone to 75 percent of gross rents that there going to allow you to credit as income. The other 25 percent, we all know, goes towards vacancies, maintenance and repairs. And 25 percent is actually a little bit conservative. I know a lot of us investors don’t like to admit that we spend that much on those things. But we probably do and if your number is significantly less than that–if it’s 85 percent. If your loss or your expenses are only 15 percent of gross rents then you have to argue that with them. You’ll probably be successful up to about 85 percent of gross rents. So now what the lenders are doing, instead of what they use to do, which is ask you to keep all your rental properties separate from your personal, is they’re lumping all real estate owned together. Your home and all your rental properties. They allow to include on the income line 75 percent of your gross rents. In the debt area, they’re going to ask you to list all of the liens against the properties and the lowest monthly payment that you can make on all of those. Now keep in mind that rental declines is a great hardship. They wont argue for a minute. But they might ask you to document it. I have had them ask to document it. And that’s usually easy enough to do, really, just with either check receipts or management company receipts. But rents have been declining across the country pretty steadily for about 18 months. So it shouldn’t be too hard to show. And most of your declines will come from vacancies. I bet you have an extra ten percent in vacancies in the last twelve months than you normally would have. Now also wanted to point out the delays are definitely longer then on primary residences, so expect to have to go a 120 days or longer. An awful lot of them that I’m working on, in fact, go to charge off. That is, they go to a 180 without making a payment on their second mortgage and that one gets charged off and you all know what that means nothing. That’s just an accounting practice that the lender has to go through. But they’ll continue to try and collect and it still shows on your credit report and, in fact, the charge off itself shows so that’s an additional ding on your credit. And I just wanted to encourage all of you that in fact with income property I’m finding that we can get what we want. It just takes longer. But we are getting good modifications. Ryan: You know what’s a good idea? This just kind of popped into my head. When you’re an investor and you’ve got these properties, you both have to manage the bank expectations and the renter’s expectations. So a few things just from our own experience that really, really make things difficult for landlords. If the tenant finds out that you are not paying the mortgage they get intensely concerned as they feel that they then have a right often not to pay you. Mike: Good point. Ryan: This is great. I’ve never actually thought of this, but here’s how you head that off. Whenever I go to a house and I’m knocking on the door and discover that it’s a investment, it’s a renter, if push comes to shove, if I can’t find that owner easily I am more then delighted to share the public financial information with the renter and the same is going to be true if they approximately a 100 people contact some one in the process of NODON, notice of default on. So expect that that’s going to happen. Don’t even try to avoid that. So here’s some ideas for you. First of all, go down and verify that your tax records are correct and make sure your mailing address is not the site address. That’ll help you with about 80 percent of solicitations and then add a real good, live, phone number to the tax record. I say that just because you have a renter. If it’s your own home, forget it. Take the number off. But because you have that renter your going to have to manage expectations even if it is just saying, no, it’s a investment strategy. Well, I’m taken care of. Thanks, bye. Please take me off your list. Mike: Ryan, that’s really good input. Ryan: Here’s another idea. Call the tenant in advance and just say, I just wanted to ask, are you getting any mail for me? No. Now that’s an opportunity to say well, I’m applying for a loan modification. Oh really, what’s that? Well, I’m hoping I can get my interest rates reduced. Oh, that’s cool. And then you go on to say I might actually have to miss a few payments in order to get it, so don’t be alarmed if someone comes to the door knocking just be sure to give them my information. It’s a normal part of the process and I’ll keep you updated about that. Mike: That’s exactly it and when they hear loan modification–honestly there’s been so much in the press about it. People are just getting familiar with it and comfortable with it. That is my recommendation, that last one I gave. Those are good ideas too, but it’s good to be proactive. Then you just don’t have any problems. Ryan: That’ll save you because what the renter will end up doing then is getting the information, then they’ll spend time confirming the information. Then they’ll get worried and call you about the information. Then they’ll feel compelled to check up on the information and you suddenly have a huge headache on your hands. So what would be so much better is if you could have one phone conversation upfront and then not talk to them for the next six months quite happily. So that’s a nice little goal. Mike: I’d like to share a reality check and it’s kind of medicine that we all should take on some of these rental properties. A lot of times in counseling folks in the tax liability of a short sale or a deed in lieu or just letting the home go back. You know, mailing in the keys and let it go through foreclosure. I do a little reality check with people when they get a little bit upset about the fact that they may have a tax liability. And you have a much greater liability on income property then on your own property, because as we all know we have all been exempted from any forgiven debts tax liability by virtue of the 2007 law. It was MFDRA – it extends through 2012 and it gives you on your personal residence forgiven debt it gives you tax exemption on any forgiven debt. Ryan: I didn’t know that it did not include investment properties. Mike: It does not include investment properties so you have to be a little more wiley on investment property and that’s why a lot of times with investors I counsel them about the three ways that most people are getting exempt from there tax. The first one is by virtue of that law. The second one is insolvency. With so many properties so upside down it’s usually a piece of cake to prove insolvency. Your CPA can help you prove it. There’s a form that the IRS has you fill out. Ryan: It’s not bankruptcy. It’s kind of an accounting statement as apposed to a tax designation. Mike: And believe me, an awful lot of you on the call are insolvent. I know that doesn’t sound good, but if you were to be totally liquidated right now, your liabilities would exceed your assets. So cover your assets. So that’s one way. And the third way is through bankruptcy. Ryan: An insolvency is apparently, we have been told, we’re literally talking about a piece of cake. Your going to have to have your CPA do it. Mike: Here’s what I wanted to say about the reality check. I walk people through it and it has a before and after check. There are two rows. One is before and one is after and it shows what you own right now. And let’s just make it up. It’s a $500,000 duplex in Pomona and it currently depreciating at one percent per month because property values are still declining in Pomona. And you owe $750,000 on this duplex. Now after the short sale or the deed and lieu or the foreclosure you will have no debt and you may be tax liable on that $250,000 that is forgiven. Ryan: So what’s the max you would pay? Mike: That would probably be–well, let’s just say $250,000 and let’s say you have nothing to offset it, which would be bizarre. In other words you have not put any into it to reduce your tax the basis of your property value so it would be very unlikely but let’s say you actually had to incur $250,000 worth of income that you couldn’t write off. You couldn’t reduce. So let’s just say that you would end up spending $37,000 at fifteen percent if you just sucked it up and paid that in taxes. Ryan: Then you’re going to get out of it so if you’re looking at that I could either owe an extra $250,000 or $37,000 in worse case scenario. Mike: Yeah. After I get rid of this headache, worse case scenario is I owe $37,000 but right now, I owe $750,000 on a $500,000 asset that’s declining by $50,000 a year. Ryan: If you do It next year you might get another $50,000 out of it but that’s a good point. Taxes stink. We all got are taxes but don’t be an idiot. If someone had an option for today to erase $250,000 worth of debt for $37,000 you’d be quite an idiot or you’d have to be assured that your land is literally on oil or some thing for you to keep that land. Mike: So the same financial smarts that got you into this thing should serve you now to realize some of these investments are stinkers and you should get out. Ryan: And the other thing about federal taxes is also about I don’t know based on the number of people advertising on television, It must be fairly common to settle. They must settle those pretty commonly. Mike: They might. I don’t know about that but honestly I’m not a tax wiz. But I have spent many years to get–but have a great tax guy but there is just no way that I end up paying $37,000. There’s just to oo many expenses. Ryan: Well, here’s the thing. You’ve got to have an end game in mind. A lot of people call us and they say, well, I put $200,000 into it and now I’m $300,000 upside down and it’s a dog of a house. In some cases around here, even in California, these are hundred-year-old piece of junk homes with the bad layouts, small apartments. You’re going to attract riff-raff renters and you’re always going to have problems in terms of maintenance. You got to call it and I’m not saying run away. I’m saying develop a strategy and in this case the obvious strategy in my mind would be submit a loan modification. Perhaps if it was mind I would stop paying. Stop paying. Submit a loan modification. Do a short sale with no showing. Basically with tenants in there you’ve got a year and a half probably in which to recoup money but that doesn’t mean you don’t do a loan modification. It’s kind of like you get in the shower, you’re going to have to use the soap. You’re going to have to shampoo and every day you have to do those things. All these things all need to be taken care of. You don’t say, well, I’m going to get up this morning but today I’m not going to take a shower but I’m going to brush my teeth. So anyway apply every opportunity. For goodness sakes, a loan modification is free. I mean even if you have someone doing it for you, a lot of people will pay us to do a loan modification and we charge $3,000. Just to stall it. I mean, if you think about anyone who’s going to pay you, they’ve got a $6,000 a month mortgage. Mike: I want to say this upfront. This whole story about prioritizing and deciding about if you want to cherry pick has to do with stating your goals. That’s one thing I always do upfront, remember? Let’s state the goals. What is the goal here? Are we hanging on to this property? Are we cash maxing it are we trying to get ultimate cash out of it and we could care less if we lose it? What is our ultimate strategy? Ryan: And the thing is you have to have–with a house that’s $250,000 over mortgaged you have to just say, hey, we all made some–the easy money, made everyone makes decisions that at best could be called marginal and at worst you know, 80 percent of them were ridiculous. So, you got–no matter, loan mod or no loan mod, should not affect your decision necessarily to hang on to the property. I guess I’m just repeating myself. Mike: Okay, also I want it to be out there–second mortgages are dealing. And I recommend that you start negotiating at about 15 percent. If you have the hutzpa, if you have the nerve, if you have the attitude to take it right to the end of foreclosure and continue to–even take it to charge off. If you’re doing that and you’re wrestling them to the mat they are accepting buy outs. Fifteen to thirty percent is common and I would begin negotiations at 10 or 15 percent and see if you can’t just buy out those second mortgages. That can be part of your strategy too. I’ve got a couple of properties where it’s my strategy. I’ve just decided, you know what, I’m going to have a two percent interest only first mortgage and I’m going to have no second mortgage on this property or I’m not going to own it. So that’s what I’m negotiating and the banks just refuse to take the property and they are negotiating with me and I just might get it. All right, so before we go to those questions I wanted to pass on a big of funny information I learned this week about Chase, WaMu Chase. You know, sometimes when you get a negotiator on the line for whatever reason, you hit it off with them and start chatting. Well, I was chatting with this guy at Chase and he was telling me what a hoot it is to work for that outfit. He said they’re just–he’s said it’s like a start up. It’s pretty exciting. He said they get, get a load of this. They get 100,000 faxes per day in his department. They have 155,000 loan modification applications in the queue that they’re currently working on. They get 40,000 applications per week. This is one bank. And they’ve started this, he says they’ve put together this new series of departments to try finally to implement the President’s Making Homes Affordable program for clients who are not late and they put up this sham, this shell, months ago but now he says they’ve added a swat team to try to really kick start it. And that’s called the Imminent Default Department. And that is they hand off to this Imminent Default Department, the IDD team, they hand them clients who they think are getting to the point where they just might go late. And that team is charged with trying to pull out all the stops and get that modification processed in time so that they don’t go late because he said they are learning that once a homeowner goes late and realizes it’s not so terrible that they go later and later and they begin to cop an attitude. So it’s very important to chase for their own reasons to stop defaults. Now chase is the one that has that Way Forward department and the Care Team. The Care Team is also a swat team that handles some of these 155,000 when the negotiator is just swamped and can’t get to asking the borrower for a clarification on something, he hands it to the care team. But anyway, I thought it was kind of interesting to hear the magnitude of the business that Chase is in, in the loan modification business and some of the teams that they’re building to try to, I think in many ways, just put up a phony front like they’re really paying attention to those guys cause where the money is in the guys who are late. Ryan: Well, it probably goes other ways cause I’m sure they’re trying to unload those loans too so maybe it would behoove them to keep them current. I have this one question that is directed to you. John, are you out there regarding your email question? Caller: Yes. Let me ask you question. I was talking to Mike the other day about this and he directed me how to do this. The question that is in my mind is this. Debts means the ones that are creditors, right? The rest is expenses. Ryan: Yeah. That can be confusing. Debts literally are amounts you owe people. Not ongoing cost of living stuff. Caller: In calculating DTI should we use the debt or the debt and expenses? Mike: Just debt. Ryan: That’s a very important distinction. Caller: Okay. And as far as revenue, should we use the gross revenue or that 75 percent of the rental income and 85 percent of salary? Mike: John, you don’t want to get hung up on which of those you use. You just want to be sure that the result is within guidelines. So if you use a percent of your net income–so if you take all of your debts and you calculate it as a percent of your net income it’s going to be quite high. Maybe as high as 75 percent but will still get you a loan modification. If you use your gross income and it’s over 65 percent then I would be alarmed. I would work on it and try to get it down. So it doesn’t matter which way you do it because you know what? When the lender gets it they’re–depending on the program that they’re trying to get you to qualified for they’re going to use whatever calculations, whatever ratios are mandated by that program so they may even take just your first mortgage on just your primary residence as a percentage of your gross income. So if you just pay attention to whichever ones you use, just pay attention to the outcome and figure out if the outcome makes sense and with that ratio should you be able to go forward. Caller: The maximum should be 70 percent? Mike: Seventy five percent on a debt to income ratio of all your debts as a percent of your net income is about as high as you dare get. Otherwise you’re going to get bounced. Caller: Okay. Seventy five percent net income to debt. And debt, but expense don’t calculate. But we put it in the worksheet, right? Mike: That’s correct. Because at the end of the worksheet you want to see if you have money left at the end of the month. Because they’re going to want to make sure that you don’t have too much money and that you have enough. Caller: Oh, okay. And as far as sending them the document, should we send the whole thing that we calculated? Mike: What I always recommend is that you only send the first two columns. Because I don’t like to show them that I calculated debt to income ratio and I don’t like to show them–I always like to show them as little as possible and to dumb everything down. I give them the information they need but I don’t want them to know that I know what I’m doing. Caller: Okay. All right. That sounds good. Thank you very much. Mike: I’ve got one on my screen here from Mark who says he has three income properties. All of the first mortgages are with Wells Fargo bank. You must have had a broker friend who really made a lot of money on you over the years. The question is, can I modify all three at once? And the answer is–wouldn’t that be nice. I was successful in doing that one time. Not with three, but with two. So while it makes a ton of sense and I highly recommend that you try to do it, most often whenever I tried to get two loans modified at the same time or multiples I almost always get turned down. Lately I started two of them with Washington Mutual and it was 30 days before I realized that they hadn’t started on one of them and that they needed me to resubmit everything and that they insisted that I give them a month, another month, of checking accounts and savings accounts so it was really a hassle. So the answer is I would try really hard but I wouldn’t count on it. Ryan: Thanks so much everyone for joining us tonight on the 60 Minute Loan Modification Insider’s Secrets Teleconference series. Thousands of people picked up one, two or even ten homes in the past five years and as a result we’re now in a situation where we’re over leveraged or underwater on properties. That’s exactly what we’ve been talking about all evenings. It’s sad but it’s true. And in order to come out on top here you have to remove your emotions, accept a loss of some kind and then do a triage to fix your situation as soon as possible. The good news is that if you bite the bullet right now it’s actually quite an opportunity to increase your net worth, perhaps more than you could have, in a run up in real estate prices had they gone that way. Very few people could have increased their income as much as they can now by eliminating their debt. We’re a huge advocate of do it yourself loan modification, but that doesn’t mean you should do it alone. Short sales are also likely to be part of the modification equation and really anything that makes you less broke now and in the near future is worth exploring. We’re here to help and calls like these are hopefully easing you through what could be an emotional, trying process. We spend most of the day on the phone, so email is the quickest way to get a fast response to any and all questions. Please email us at help@60minuteloanmodification.com. Thanks for joining us and good night. Mike: Thanks everyone. Good night.
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Loan Mod Manners Teleconference – 22 Sept 2009
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We’re here to help and calls like these are hopefully easing you through that can be a very emotionally trying process. If you own our 60 Minute Loan Modification kit, we look forward to having you on the call Thursday night when we talk about advanced strategies for investment properties. If you do not yet own our kit, do yourself a favor and buy it now on the website. It’s a tiny investment. It’ll pay for itself many times over. Now we spend most of the day on the phone, so e-mail is the quickest way to get a fast response to any and all questions. Please e-mail us at help@60minuteloanmodification.com . Thanks so much everyone and have a great night.LOAN MODIFICATION for Investment Properties
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