Fast FICO Recovery

In “The Credit Card Cure“, Ryan Rockwood details 7 Credit Repair Habits that you should develop, not simply to recover quickly after credit score hassles, but develop as on-going best practices for managing your credit score.

Credit Repair Habit #2 – Increase Available Credit

FICO calculations favor those who have more credit available than they need. This indicates that you are not “on the edge” and likely to default on payments. CR Habit #2 has two parts – 1) pay-down you balances and 2) consistently apply for higher credit limits.

For years I have advised that clients pay down their account balances to no more than 30% of available credit. That is, if you have a $2,000 credit limit at Sears, use no more than $600 of it. However, experts tell me that, for best results in this credit environment, it is best to keep balances below 8%. On the $2,000 Sears card that’s a whopping $160.

There is a “gotcha” here. You can never be sure of the day during the month when your creditor will report to the bureaus. Most often, it is at the same time that your monthly statement is calculated and printed. But, not always. In fact, if you pay careful attention to your credit report and bills over a period of time, You will see that the reporting date changes from month-to-month.

So, if you charge $900 at Sears this month and pay it down to below $160 when you get your statement, you will be reported as having a $900 balance – not what you want. The only way to handle this effectively is to simply never use more than $160 on such an account.

The second part of this CR Habit is to consistently apply for higher credit limits with your existing accounts. I emphasize existing accounts because whether/not it is advisable to open new accounts to expand your available credit is separate question addressed in a later CR Habit.

Your creditors want to extend additional credit to you. That’s what they are in business to do. So, even though you may have had a rough spot in your financial and credit life, you can begin at once to take the actions they require to raise your credit limits.

Contact each of your credit card and installment loan accounts and ask them to raise your credit limit. You might be surprised that they just do it! You will find that, in general they all have the similar requirements: frequency of use, dollar value of use, no missed payments, and a certain FICO score. But, you need to know specifics for each creditor…how long, what frequency of use, what dollar amount of use (and how is it calculated) and what FICO score.

Capture all that data for all your creditors and it will be clear to you where you have near-term opportunity to increase your credit limit and where you will have long-term opportunity. You will not make fast progress on this BP. Some of your creditors will require 6 months or more of certain credit performance before they will increase your limit. But, some will do so easily. These are the ones to keep in touch with routinely to check on your progress. Jump through the hoops they set out for you. And, when you’ve met the requirements ask for the increase and push hard for it.

December 29th Loan Mod Class: FICO 911

Call the doctor, my FICO needs emergency surgery

Prefer reading to watching video? Well you are in luck, here is the transcription!

Ryan Rockwood: Hello, everyone! Hello, and welcome to the call everyone. My name is Ryan Rockwood and my dad, Mike Rockwood, is the author of the “60-Minute Loan Modification” kit.If you’re new to the call, welcome. We do these calls for the public, and for all of our clients as well, every Tuesday. Then we have another call on Thursdays for clients only.

Feel free to ask questions during this call. Can you hear me now?

Mike: Yep.

Ryan: OK, good. Just want to make sure the people on the phones can hear. Feel free to ask questions during this call. There is a chat at 60minuteloanmodification.com\live.There is a chat that you can use there, although I have to say it’s a little wonky. The best way to send in a question during this call is questions@60minuteloanmodification.com. That’s questions@60minuteloanmodification.com.

Welcome. If this is your first time joining us, basically this is an online class, a support group, education, and mastermind seminar, all these things, wrapped up into one. We work on loan modifications day in and day out, and we have put together a product that teaches people how to do your own loan modification.

Please note that I sent out a special email today with a couple of special offers down at the bottom. One is a payment plan for the kit. One is a free trial for another thing we have. Basically like this, except for credit cards. Basically, do-it-yourself credit card repair. Check the email that you got. You should have received it in the last half an hour for those links. You need to use those links or those special offers won’t work.

Also, I want to let you know that if something goes wrong with those links, because we’re just trying to catch up on the technology side and offer people payment plans and special offers and stuff, it takes a lot on the backend, order processing.

Mike: It’s not as easy as it looks.

Ryan: Yeah, it isn’t. So, anyway, bear with us. If you see something that doesn’t work, don’t freak out; don’t try it a million times. Just give us a call and we’ll make sure to make it right for you. Hopefully we’ll eliminate a couple more barriers to entry for everyone.Today, our topic is…

Mike: Credit score recovery.

Ryan: Recovery, damage…

Mike: All of you, when thinking about a foreclosure work out, one of the things you have to be concerned about is your FICO score. There are ways to minimize the damages before you go into the foreclosure workout and there are ways to speed your recovery, so we want to talk about that today.Want me to go ahead and jump into it, Ryan?

Ryan: Yeah, please.

Mike: Let’s just remember, for those of you who are new, you can email questions to us at questions@60minuteloanmodification.com. Also, we’ll go live for those of you who are just on the phone and not watching us on the Internet. We’ll also go live for callers in about 10 minutes.I’ll give about a 10-minute teaching where I share ideas that usually come from one of our books. This one comes from “The Credit Card Cure.” It is the FICO management section where we talk about what to do before you start going late and how to speedily recover.

Our FICO score, of course, has become really, really important to us for a lot of reasons, more than just to get credit at low rates. FICO score is used by employers. FICO score is used by insurers.

Actually, in the big housing madness run-up, FICO score was used by all of us at cocktail parties. It actually became a status symbol, just like our SUV, just like our granite countertops, French doors, hardwood floors and manicured lawns.

I know you read the FICO score is one thing that, as you run into trouble, when you lose your job or your mortgage costs increase so much that you can no longer afford it, you’re backed in to a corner. FICO score is one of the early things you may have to sacrifice because you just can’t do it all, can you?

Prior to going late on your mortgage payment or prior to missing some credit card payments at the beginning of a negotiation plan, what you want to do because you’ll appreciate it at the end, is identify the credit sources that you will use to help you speedily recover. You need at least four. It’s best to choose a variety of credit.

Let’s say you’re about to enter into a loan modification negotiation and you determine that you’re so strapped you have to miss a mortgage payment. By the way, that’s good advice, just to get the negotiation on the right footing with the lender. Before you go late, what I want you to do is think through which are the accounts you can use to speedily recover. You’ll want a variety.

In other words, you’ll want a home mortgage, a credit card, a car loan, and maybe an installment loan or a department store card. You’ll want at least four accounts, four to maybe ten accounts. I want you to identify the accounts. The older they are the better. Having credit for a long period of time adds to your FICO score.

In the chapter in my book, “The 60-Minute Loan Modification, ” and in Ryan’s book, “The Credit Card Cure, ” there’s a section that talks specifically about FICO score and how it all is built up. I want to you be sure to review that so you understand what mathematics they use and what factors help you to build strong credit.

The first step in a speedy recovery, after you have had a period of time where you’ve had bad credit, you’ve had to miss some payments. I always advise that you miss them all at once and get it over with. Do all your negotiation over a three- to six-month period. Get all the pain and all the hurt out. Get your bills down to where you can manage them. Then start to recover.

Once you recover, the first step, of course, is to get familiar with the credit report. I advise that you go right away to annualcreditreport.com and get the free credit report from all three agencies that you have coming.

Every year they have to give you a freebie on annualcreditreport.com. I advise you to go ahead and pay for your FICO score from each of those agencies as well. It’s inexpensive. I think it’s $10 each and it really does help quite a bit.

Then you’ll want to familiarize yourself with that credit report. Over the coming months, as you begin your recovery, you’re going to want to watch your progress and watch for things that are going wrong.

The second step is to commit to a periodic review of your progress. I say at least quarterly, if not monthly, you want to get this credit report. You’re going to have to pay for it after the first time. Get that credit report to make sure that you’re on track and recovering your credit score.

If you had a 700 credit score when you started your FICO problems and it drops down to a 500 or so, into the 500 range, which is common when people are going through a loan modification, if it gets protracted five or six months. If you’re going through a short sale work out and you’ve stopped your payments.

It’s not uncommon for people to lose 100 points or some even lose 200 points. If you’re down in the 500 range and you have to work your way back up to the 700 range to be comfortable, that’s probably going to take 12 to 24 months.

With the seven credit repair best practices that I outline in the book, you can certainly make it in a year, but you’ll have to be really diligent about applying them.

I want to stop for a minute and talk about changing habits. Sometimes we take it lightly. We think we’re going to lose weight just on sheer guts. We’re going to stop a particular bad habit or start a particular good habit. With the new year coming, a lot of us are thinking about those kinds of things. I really want to emphasize to you, or remind you, how difficult it is to change habits, to break old habits and to start new habits.

Don’t think that credit habits are any different. Your financial habits are deeply ingrained. In fact, they probably go all the way back to when you saw your parents handling their money. It’s embarrassing for all of us to admit, but 90% of our money management habits came from our parents. It’s probably part of your parents that you didn’t particularly admire, but you picked it up. Changing those habits is really tough.

You have to understand how habits are formed. They’re formed over a long period of time, repeated behaviors, and reinforced with rewards. I want you to think about that. How are you going to change behaviors? What new behaviors are you going to implement? How are you going to get reinforced in their practice? How long are you going to commit to it?

It’s very hard for any of us to commit to anything for longer than 30 days. Scientists tell us that it’s a 30- to 90-day process before we actually change habits. I recommend a 30-day commitment, and then another 30-day commitment, and another 30-day commitment to get you to where you have to be.

Each one of these steps will require you to make short-term commitments and find some way to reinforce those new behaviors. I’m going to really share in depth about the first best practice. The others I will just list for you. You can get more information either by getting the book or in future teleconferences I’ll share more information about some of the other best practices.

Based on the fact that our credit history makes up 35% of our FICO score, the first best practice is, “all accounts, on time, always.” That means that every bill that you have needs to be paid on time forever.

You need to make late payments part of your history and rewrite your history. There is no single step that you can take to fast credit repair or otherwise, that’s more important than just plain never going late again. You have to be honest with yourself about why you made late payments in the first place.

Some of us just have the kind of attitude that we just don’t care. Some of us blame others for being extravagant in their spending, like our spouses or our kids. We blame emergencies because we don’t have an emergency fund. We blame just the cost of living which is really our cost of living, choices we have made.

There are a lot of excuses about why we make late payments and you have to get at the heart about what kind of excuses you accept. Then debunk them. Don’t accept them.

Let’s be honest. People who are less intelligent that you, less disciplined than you, who have less money than you, and who have more bills than you, and more excuses than you, are making their payments on time, every month. A lot of people do. Maybe half of the people in the country do. Make their payments on time.

Think about it. Let that sink in. People do it and you can, too.

In order to begin this new habit, on-time payments on all accounts always, you have to start new behaviors. Don’t expect the old behaviors will get you there. That’s the definition of insanity. Make behavioral changes and make commitments to stick to them for 30 days at a time.

Here are some of the ideas that some of my clients used to help them make their payments on time. The first one is simplify. Get fewer bills by paying off small ones and consolidating others. Stop junk mail and emails. I know that’s an ongoing process. Get less clutter. Simplify. Maybe get a post office box to keep all your US Mail clutter away until you’re ready, like weekly, to deal with it.

The second tip is get organized. Either on paper or online but get your budget items down and your due dates clearly stated in one place. Then identify how you will make those payments each month. Do you make them by mail? Do you make them online? Do you make them by phone? Have those resources available to you in the same place every month.

Number three, use whatever means is effective to you to be reminded of those due dates. Use our own calendar. Try email notifications from accounts. Try online alerts that your bank probably offers. Or services like mint.com that can send emails or tweets to remind you when bills are due.

Another tip is to establish an emergency fund to take away the excuse that you had kid’s health emergency or school emergency or something like that. You have to have an emergency fund. Honestly, it doesn’t have to be a lot of money. You can start it by just stashing away in a place that is difficult for you to get to, like a credit union account or an automatic withdrawal from your paycheck. Just $10 or $15 per paycheck so you’ve got $300 or $400 stashed away for that emergency time when that Nordstrom bill is due and you just haven’t got the money to pay it.

Another tip is to use online budgeting tools like mint.com. Check it out. I think you’ll really be amazed at how far some of these online budgeting tools have come. They’re really very sophisticated, very elegant, and user friendly.

Last thing, automate payments from your checking account or at your creditor. That can be a great help, if you have a predictable enough income, to be able to automate those payments. Man, that can make it really easy.

Get overdraft protection on your checking account.

Lastly, a great idea a couple of my clients have used is they just go out and hire a bookkeeper. They pay for bill payment service. If you have the wherewithal to do that and it’s just a matter of not having been organized or not caring enough about making payments on time, hire somebody to do it for you.

I want you to reinforce this behavior. There really is only one way that I know that’s successful. Go to public confession. That is, I want you to identify three of your friends whose opinion you value and confide in them what you’re trying to do for the next 30 days.

Just tell them, “Listen, I have a little bit of an issue with regards to on time payments. With the new year coming I’m firmly committed to making on time payments. I want you to hold me accountable for the next 30 days to make these accounts, – name the accounts, six credit cards or eight bills, whatever it is – I want to make these accounts on time. I’m going to contact you each Saturday, if it’s all right with you, and tell you whether or not I’ve accomplished that.”

Honestly, pick a coworker, pick a friend, a parent, a child, a neighbor, a relative, somebody that you trust and you care about their opinion. Enter into this agreement with them. They won’t mind one bit and it will hold you accountable. Even if you fail during the month, it will help you get right back on track and get back on that 30-day commitment. That’s my advice for how to deal with that first best practice which is “never make a payment late again.”

The other best practices, there are six others, I’m just going to read them to you now. You can get them in the book or write to me and I’ll send you a copy of this article. There’s also going to be a blog post in the coming weeks.

The next best practice, increase your available credit. You do that in two ways. Number one is pay down your debts. That’s easier said than done, I know. Also, you constantly apply with all your credit lines for higher limits.

After you’ve had a bad FICO event, – like missed several mortgage payments, went 120 days late on a credit cards, that kind of thing – it’s hard to convince your creditors to increase your limit. If you ask them, they’ll tell you very specifically how long the period of time it needs to be that you go without missing a payment, how frequently you need to use credit, how much of the credit you can use, and how much they will increase it.

It’s a pre-programmed formula and they’ll be glad to share it with you. So, pay down those debts, ask for more credit constantly, every month.

Best practice number three is to never close any account. It’s really a mistake to close any account ever. Those older accounts are really your best, and resurrecting them and using them is really in your best interest. It helps in the FICO mathematics.

Number four, use all your credit accounts. Don’t leave any of them dormant. You want to use small amounts frequently.

Number five, open new accounts only after careful evaluation. You really never want to have more than like four credit card accounts and no more than 10 credit lines open at one time, although some people have many more because they have a lot of real estate. Mortgages are OK, but not installment credit cards. More than four is really a little bit of a red flag.

Then best practice number six is make payments twice a month. You get a FICO attaboy for making a payment, and you get a FICO attaboy for making a payment in full. So get both by making a minimal payment and then your payment in full every month.

Number seven is hire a reputable credit repair company. I have one to recommend to you on the website, but here’s what you want to shop for is one that just does credit repair, just disputes your negatives. It should cost you probably $100 to $400, and they should dispute your negatives over a three-to-four-month period.

They will be successful in getting some valid negatives off your credit report. I’m sorry, it’s just the nature of the beast. When they dispute them often enough, the credit bureaus do acquiesce, or the credit bureaus fail to investigate and therefore have to drop the negative, or the creditor themselves fails to argue with you and has to stop reporting. So they will improve your credit score, and they also help clean up those negatives which are in fact erroneous.

So there. I went longer than I was supposed to, Ryan, but at least I got through all seven of them. This is just an extremely critical area because it is so easy to do. It’s easy for people who are going to the mat with the bank, taking it in the shorts with your FICO score. It’s easy to recover within 12 to 24 months.

Ryan: OK, just a couple notices that I just chatted here while we were listening to you, and that is that recently we had one of these classes transcribed, and I wanted to get audience reaction to that. I know that I prefer to read something much more. Well, if it’s live I like to watch it, but if it’s after the fact I very much would prefer to read the transcript rather than watch a video.

Mike: You scan it faster than you can…

Ryan: Yes. I’m a decently fast reader. Anyway, check that out. You can access it by using the link that I’ve put in the chat, or just go to the top of the site. Up at the upper navigation, the second one in is called “Articles.” Click it. The second article down is this transcript that we did on December 17 of a member’s call that was a really good call.Also, if you would, let me know if you like it because we can continue to spend the money on getting that done, maybe make it a regular thing, if folks find it helpful. Who knows if they will or not?

The other thing is that… I just lost my train of thought.

Mike: You’re ready for me to jump into some questions?

Ryan: Yes, but… Shoot, I had something I wanted to tell people. Oh, I know what it was. It’s come back to me. Tonight’s article I think is also the first article on that blog post, so if you want to get a copy of some of the points that Mike made tonight, you can just truck on over to the article section too. Same area, it’s just the most recent post.OK, so check it out, and again, let us know. Also, again I want to point you to a couple of special offers that were in the email, at the very bottom of the email, the most recent one that I sent about a half an hour before this thing started, and be sure to read the note at the bottom that says it’s experimental.

We’ve got some questions. Should I read off one, or…?

Mike: Yes, go ahead. Start us off.

Ryan: Kay Logan says, “My letter told me not to pay the increased amount in my loan that went up last month until my modification is complete. Continue to pay the old required loan payment to the lender. I have been waiting for paperwork for three months so far. Many phone calls, no paperwork yet. What can I do to make them faster? I believe them stalling. My letter told me not to pay the increased amount in my loan that went up last month until my modification is complete.”So you must be having a rate increase, so they said don’t bother with that. Just continue paying your old…

Mike: Yes, I think you’ve got it right, Ryan.

Ryan: “I’ve been waiting for three months for the paperwork.” It depends, Kay Logan, on what paperwork you’re waiting on. If you’re waiting on the paperwork to apply for a loan modification, then I would say…

Mike: You lose.

Ryan: …you’re in big trouble here, and it’s time to reevaluate the whole tactic that you’re taking here. However, hopefully you are just waiting for some sort of final paperwork decision, some sort of loan modification.

Mike: Yes, Kay Logan, because you shouldn’t wait a nanosecond for any paperwork to apply for a modification. It’s all available on every lender’s website, number one, and number two, you don’t actually need their paperwork. You can apply with the Making Homes Affordable paperwork that’s available at mha.gov, or you can apply without any of the correct paperwork, and they’ll send you the specifics of what you need later.So that’s not an issue. I’m sure you’re not waiting for that paperwork. You’re probably waiting for the paperwork to sign off on that loan modification. That’s probably what it is.

Ryan: “But what can I do to make them move faster?”

Mike: Honestly, nothing. Absolutely nothing, and in fact, these holidays are going to slow them down even more because when the regulars come back from vacation next week, they’re going to be swamped with mistakes that these temporaries have made during this week and just the backlog of applications.Remember, there continues to be about 11,000 applications every day, so it’s over-fricking-whelming. So don’t expect it to get better. You have to be street smart enough to navigate the system and make it work. Don’t expect them to speed up at all in their evaluation.

But it is very, very predictable, Kay Logan, in terms of how fast they’ll go. So if you’re surprised, if you’ve got a particular time frame in mind and they’re not meeting it, maybe you’ve got false expectations. Most loan modifications are taking five to seven weeks right now, and those are people who are in default only.

People who are not in default are basically not getting loan modifications, and when they do, it is at least three months, and sometimes five, and sometimes never. Sometimes it’s never before they get a response.

All right, got another question?

Ryan: I do. OK, we’ve got a question here from Daphne. Now Daphne was told that her loan mod app was denied because of NPV. Remember we’ve heard a little bit about that?

Mike: Yes.

Ryan: “That is, based on my income of $4,300, to meet the 31% the payment would have to be $1,320. $1,056 would be taxes and insurance, and $264 would be toward the loan. The service rep says this means that most of the loan balance would be in forbearance. I requested the loan period be extended, however the rep told me the lender was not extending the term beyond 12 months. Is this correct? Do I have any recourse? Is it time for a short sale?”

Mike: Well, it’s up to you in terms of the short sale. We always encourage people to think really soberly about short sales because so many of our clients are fighting to keep houses that are bummers. I just talked with a gal today who was fighting, who had been fighting already for a year, and she can’t wait to keep fighting for a house on which she is $150,000 upside down. It’s not going to come back to that value in her lifetime, but she wants the house.So, Daphne, think through short sale. Think through bankruptcy. Think through all the alternatives, but you’ve got wrong information about your loan modification. You haven’t been rejected because of the net present value calculation. I don’t know if they told you that or if you imagined that, but that’s simply not the case. If this is your home…

Ryan: Why do you say that?

Mike: Well, because just the numbers that you threw out there didn’t include taxes, insurance and homeowner’s association, which they must, and it’s $1, 300. That’s 31% of her $4,300 income, and so, Daphne, you may have gotten declined because you simply aren’t needy enough, that is, declined for the Making Homes Affordable program, if your principal, interest, tax and insurance on your first mortgage on the home you live in is less than 31% percent of your gross household income.Every single day, I work with people to torture those numbers to make sure that they are seeing them correctly and measuring them correctly. Is your gross household income of $4,300, is that your income only? Are you the only person on the note? Is it an average of your last 12 months income, or is it in fact the last three months, less than that? Is it W-2 income versus your own company income?

So there are a lot of variables, and I never, never, never would give up on a loan modification, but I do encourage you to think through the short sale, like you had suggested.

Ryan: I also want to tell you that in reviewing your – I just put your name in the database – it looks like your emails from us have been bouncing.

Mike: No.

Ryan: Yes, it looks like Daphne hasn’t received anything from us since December 22nd, when something bounced, and sometimes your Internet service provider will do that occasionally, but what our system does is then kind of like turns you off. So she’s almost certainly not on this call, she must have sent that in, or maybe she uses an old email to access these calls.But anyway, if you would, go to your Spam folder, see if you can dig us out of there. Anything with “60 Minute Loan Modification.”

Mike: Un-spam us.

Ryan: Approve us, whitelist us, whatever your different thing does, and I just turned you back on in our back office, so hopefully you’ll start to receive some email from us in the future.

Mike: So Daphne, good news, you are now turned on.All right. Nick asked me, “Are second mortgages easier to deal with than first mortgages in loan modifications because they are in a more precarious position with equity?” Nick’s point is that because our housing values have declined and second mortgages, are of course, second behind the first – see how I just figured that out – if they are easier to deal with, because they are in a more precarious equity position.

So, Nick, your observation is absolutely correct. They are easier to work with, they have been, at least for the last year. But I’ve to say in the last two or three moths, for whatever reason, who knows why this happens, they have gotten more and more aggressive.

In fact, I was very surprised this week, to be working on a short sale in which ING Direct is the first mortgage holder, and they like usual, offered $1,000 to the second mortgagor.

And the second mortgagor, Wells Fargo, who normally would just accept that and move on down the road, got to move, got to move, got to move, haven’t got any equity in the house, haven’t got any recourse, because it’s a California purchase money deal, didn’t accept it. They insisted on $8,000. That’s smothering that GMAC would have done. But Wells Fargo did it, that’s surprising. But what’s even more surprising is that ING Direct agreed to it.

So second mortgagors are getting more aggressive, for who knows what reason, but they are certainly easier to work with. And if you are willing to go late on your payments with the seconds, they are putty in your hands. In fact, if you’re willing to let them go quite late, they will accept almost anything you offer, even a token $75 a month, just to keep from having to write the loan off.

They’ll very often, immediately, just on the phone on your first call, cut the payment in half, at least for 18 months to 24 months. So yes, they are easy to deal with. You’ve got to be tough though, and you got to be willing to negotiate in good faith, which honestly, let’s be frank, means sacrificing your FICO score to some extent.

Do you have a question, Rocky?

Ryan: BJ writes in, “My loan is in review. Currently in escrow, department of B&A, for the HAMP loan mod. 90 days past due, owe four payments, notice of default, expired on December 10th. The rep suggests I make one payment or at least part of one payment to improve my chances for final approval. Her point is something that could be used to show the buyer is interested in the property and may prompt the negotiator to make a decision quickly, and something similarly positive. Can you please comment?”

Mike: [blows raspberry]

Ryan: “Should I make a payment? I am so close to a decision with this HAMP thing, that I don’t want to make the wrong step.” With the help of our kit, he has made progress. Also he has enrolled in the Credit Card Cure program and thinking about starting to miss a credit card payment after the loan mod decision.So, a couple of things. BJ, here’s the thing, could some activity be seen positively by someone? Sure, I think so.

Mike: Especially by a supervisor in the collections department. They’ll be real positive about it, because that’s what they’re hired to do and that’s what they’re measured to do every month. But there’s nothing in the Making Homes Affordable program that says that the borrower has to have a good attitude. So, forget that. And nobody cares about your attitude anyways.

Ryan: However, there is something in there that requires the homeowner not too be too late, I think.

Mike: Yes, you’re on to something now.

Ryan: And so, with 90 days past due and owing four payments, he may be getting to the stage where he is a little bit…

Mike: Sure, what state is he in?

Ryan: Doesn’t say.

Mike: BJ, Ryan’s right, here’s the critical thing. You’re flirting with a sheriff’s sale, or a trustee sale, with being 90 days late. Number two, what do you care if you make a payment, if you fully intend to keep the house? You know, what do you care? It really doesn’t matter to you financially, because whatever principle you pay will be paying down the principle on a home you’re going to keep, and whatever interest you pay, you’re due anyways.In the Making Homes Affordable program they will not be allowed to charge you penalties, but they are allowed to charge you interest. So, I say, make the payment, but be sure to get something good out of it, get something for it, get the rep to ask you for it, and acquiesce, as a favor to them. So that seems reasonable. I think you’re being led on by a collection agent instead of a loss mitigation negotiator.

Ryan: I don’t think that they’ll probably accept a partial payment. So if I were you, I would….

Mike: Why? You’re thinking they’ll just hold it? Yes, you may be right.

Ryan: I don’t know, here’s the tough thing. I think that if you have the money, the safest thing to do is to start making that payment, but don’t make up the arrears yet.

Mike: Don’t get current.

Ryan: Yes, don’t get current. That’s the safest thing to do, OK? There is very little risk.

Mike: And he’s prepared financially.

Ryan: Well you know, every one in this situation is hurting though. It’s after the holidays and everyone is overextended. He is loathe to send another $3,000 out, but you know ultimately, either way, it will postpone your foreclosure another 30 days, if that’s the way it ends up going.

Mike: And I think that we’ve given him good advice, with no risk.

Ryan: Yes, and I think what I would do is I would send it in to the collections department and also loss mitigation and I would say “As instructed, I’m sending you this because the rep on the phone told me that this would help my chances.”

Mike: Bingo.

Ryan: “And I’m a huge sucker, and I’m being manipulated by you.” So I think that’s probably the best thing to do. And also you’re welcome to the Credit Card Cure, that’s great that you joined.I saw that you joined and I emailed you an invite to Google Voice, which if people don’t know on the call, Google Voice is a free service that actually that allows you to set up your own existing phone number to screen callers. And it’s great if you’re getting collection calls.

Mike: Well it screens it in that it transcribes your voice mails into emails, which is so sweet. Because then you’ve recorded their phone number, who they are, what company they’re calling from, and then you call them back if you want to.

Ryan: But also there are more sophisticated features too. It can announce people if you want it to, it can say “Who are you?” If it’s an unknown number that’s not in your phone book, they can say, “I’m Bob,” or whatever.

Mike: Bob, the collector.

Ryan: Yes, so anyway, you should have gotten that invite, be sure to accept it, we only have a limited number of those. Don’t misplace that, sign up for that right away. And welcome, we’re excited to have you in the Credit Card Cure Co-op.

Mike: You know, I got to think that right after the holidays you’re going to get an influx of members just because the holiday credit card crunch is over. And people are saying, “You know what? I’m in too deep.” A person loses their job, or they get cut back on hours, or they have other financial issues in their life, and all of a sudden they’re in trouble.

Ryan: We’ve got one here from Kelly M.

Mike: Kelly M?

Ryan: Yes. “What do you do to show income if you’re self-employed and do not receive a regular paycheck? Husband: carpenter.”Oh, I remember these guys. “He doesn’t get a pay stub, so would copies of deposit checks suffice as income verification?”

Let’s just tackle that. He doesn’t get stubs. Here’s the thing. If it’s tricky, you might end up having to show a couple things. Copies of the bank statement with the little circles and arrows drawn to the deposits.

Also copies of the checks themselves, if your bank can provide those or if you have those, like canceled checks, that will work too. A P&L, a profit and loss statement, is something that something that sounds really complicated, but it’s pretty easy to show a little profit and loss statement.

Mike: All three of these things you might have to do along with taxes from last year and things like that. But keep in mind, Kelly M, that in most cases, the lender wants to modify your mortgage and wants to get good information from you. So one thing that the underwriter will without question accept is any of the things that Ryan mentioned that you have signed. Have you and your husband sign it.Let’s say you have last month’s bank statement. You circle three paychecks and say, “This was a paycheck. This was a paycheck. This was a paycheck, ” and at the bottom you say, “These are the three paychecks this month.” Then sign it and date it.

Then you’re on the hook, and the underwriter is off the hook. That’s what they’re looking for is just they’re off the hook. They are responsible because they verified you said this was your income. So it’s actually pretty easy. You’ll do well.

Ryan: Number two: “My home is a two-family home. We receive some rental income. Does that make us less eligible for a modification?”No, I don’t think so. Does it make you less eligible? Maybe. I guess what we have to figure out are debt-to-income ratios with that included and everything like that, so the answer is maybe. But not necessarily, and not across the board.

Mike: It certainly doesn’t disqualify you for the big program, Making Homes Affordable. You’re still OK.

Ryan: Her debt-to-income is in the 67% range. I would imagine that it’s actually less than that if you calculate the income from the other rental.

Mike: Well, that might be her total debt though, Ryan, with car loans and credit cards. That might be her total debt-to-income, and 67% is high, but not too high. Once you get up near 70%, it’s not uncommon to have the lender ask that you agree as a part of the settlement that you will go through a credit management seminar. People tell me they are absolutely wimpy, absolutely easy to do. You can do them online in one evening, so that’s nothing.We’ve seen debt-to-income ratios as high as 78% get approved, but any time I get up near 70%, I go to great lengths to document everything, make sure everything will be really clear on things because you’re getting up in that area.

Ryan: Kelly asks a follow-up. “Is it a problem if you have a poor credit score, missed mortgage payments, second mortgage, credit card payments in the past year?”The answer is no. The loan modification is not based on your credit score, thank God. Hallelujah on that.

Mike: The thing people are often surprised about that and surprised that it has nothing to do with the value of your home. Two items that of course are drilled into us in terms of working with our lenders, but FICO score and the value of your home, don’t even mention them. They won’t.

Ryan: I’ve got one more here from Sean M, “I was told there are some magic ratios that will get you offered a permanent modification for the remainder of your loan. Is this true, and if so, what is that ratio?”That’s on the Thursday night call. Sean, you tried to squeak one in there. I’m just kidding. No, really. Thursday.

Mike: Sean, there aren’t magical formulas, but it’s really clearly evident when we have an applicant that just hits the bulls eye, and it’s pretty easy to predict. It is that you have a real clear hardship that’s easy to articulate, easy to identify, one of the common ones.You have a loan that’s very modifiable, like it’s a high-interest rate if it’s fixed, or it’s an ARM, especially if it’s a negative AM, or one of those pick-a-pay loans, or even an interest-only loan. Those are really modifiable. Everybody wants to modify those.

If the loan was made prior to 2009, and if it’s on your principal residence, and the first payment with PITIA is higher than 31% of your gross household income – I hope you followed all that, because that was a good little summary of what the qualifications are – if all those things are right, you are virtually guaranteed that you’re going to get a Making Homes Affordable modification.

If some of them are not true, then you still have a good shot at a modification. It just won’t be one of the sweet ones. But honestly, an awful lot of people who have adjustable rate mortgages are thrilled to get a $100 a month reduction in their payment, but they’ve switched from an interest-only loan to a fully amortized, 30-year fixed-rate mortgage so they’re happy as can be.

They don’t save a lot month to month, but just that emotional benefit of knowing that you’re not going to get caught up in this rate rise that’s on the horizon in the next three to five years is benefit enough.

Of course, the people that are in negative am loans that are going $1,000 or more in debt every month by making the payment that they agreed to, those people are beside themselves with joy when they get switched to an amortized loan.

OK, Sean. You know, you’re sure getting the questions. I promised these six people I’d get to theirs. How much time do we have?

Ryan: There are a lot tonight, I’ll tell you that.

Mike: You’re getting inundated.

Ryan: Well, I’m getting through all of them, actually, all the questions that were emailed in, questions at 60MinuteLoanModification.com.

Mike: They have a right.

Ryan: Sean, also my records show that you’re not a client yet, and you’ve been with us for a long time, so be sure to check it out.

Mike: You need some of this stuff, Sean. It’s not Sean W, is it?

Ryan: Sean M.

Mike: Oh, Sean M.

Ryan: A lot of these questions are answered in our products and stuff, so if you’re joining us every week, and thinking about this stuff, and worrying about it, we’re going to say make a leap.Anyway, also he asks, “I’m struggling to make my payment, and my first 30-day late will be the first of the year. Are there any guides for how many lates lenders want to see in order to be taken seriously?”

Not really, but you’re not really going to be considered too late until you’re…

Mike: Till February 1.

Ryan: 60 days, 90 days late. Then everyone gets worried, “Am I too late? Will I get foreclosed on?” and all this kind of stuff. Go 90 days late before you even start fretting.”What sort of late profile will lenders want to see on credit cards, and how does a debt-settlement strategy on credit cards affect the loan-mod process?”

What I would say is the debt-settlement strategy can actually help you quite a bit in your loan modification if your ratios are too high and your budget is getting blown out of whack by your minimum payments. If you have engaged in a debt-settlement agreement, plan, whatever, even if it’s just really in your own head, you can explain that and possibly affect your budget.

So it can be a really good thing, but in regards to settling credit card debt, you have to say no more credit card debt, first of all. You can’t continue buying anything on your credit cards, and you have to stop making your payments on credit cards. That’s the starting point.

Sean, I did a free two-week trial in the credit card course, the co-op course that we have in the bottom of the last email today, so check it out. Within two weeks you’re obviously going to know if it’s right for you.

What that is, is it’s designed to basically guide you through the credit card settlement process week by week for about six, seven months as you go. I’m with B&E on the first and Citi on the second.

Mike: My turn?

Ryan: Yes.

Mike: OK. Lee asks, “In a short sale, does the first mortgage negotiate with the second to settle or how does that work?”The way it works is the first will usually make an initial offer to the second, but your short sale negotiator, your realtor, or whoever is running the short sale for you…

By the way, we love to do short sales. We’ve been doing short sales for years. We’ve been the dominate short sale realtor in the South Bay for a couple of years. That’s the South Bay, California, south of Los Angeles, south of LAX.

We do short sales nationwide. We currently have short sales in about six states. What we do is, when we have to go outside of the state, we co-op with a local realtor to actually do the transaction because the Department of Real Estate, all of those departments are state-run.

In the short sale, what will happen is your negotiator, your realtor, will notify both lenders of the short sale proposal with the same package. The package has the offer, your finances, your hardship, and a request for the short payoff. And a very important document which is called the HUD-1 Settlement. That is a government produced document that an escrow or a title officer produces that shows both lenders just how much they will net out of the proposed deal.

In that proposal there is a proposal for settlement for the second that your negotiator, your short sale realtor, has come up with. Typically, it’s a token amount. If the first is going to be shorted, then they’ll usually pay $1,000 to $5,000 to the second as a courtesy. Very often that is just accepted and both lenders issue a statement saying they accept it as payment in full. Then you deal with the recourse issues, etc., in those letters. So that’s how that works, Lee.

Rene asks, “How can I qualify for a Making Homes modification as my first mortgage on my home is only 25% of our household income?”

So he’s asking about an MHA modification, that’s the sweet Making Homes Affordable modification. The “Obama Plan.” Rene is hoping to qualify. However, this first mortgage on his home is only 25% of his household income.

So if that statement is true, Rene, you in fact don’t qualify, can’t qualify, and will not qualify. What I always do when people tell me that is I ask them to take a minute with me on both of those numbers and let’s just dig into them to make sure that you’re looking at them correctly.

In other words, is your household income stated as it needs to be? Is it self-employed income? Then you have a little more flexibility. Is it a W-2 income? Is it from one household member or two? If it’s from two, are both of those on the mortgage and are both of them from W-2 income? Is the monthly calculation based on a twelve year average or the most recent three months or a common three months or seasonally adjusted, et cetera, et cetera, et cetera?

Then you move to the payment. Is that payment fully loaded with principle, interest, tax, insurance, and Home Owners Association dues? If not, then you have a possibility that you can argue, not a possibility, a certainty that you can increase that payment to include all of those things. So that’s kind of a long answer to a short question, but it’s really an important one.

Some people give up too easily. In fact, I’ve had people who, in fact, well qualified who had given up on their own home and were working on other modifications. I said, “Let’s just take a minute to review why you gave up on your principle residence, your primary residence, and getting that modification. ” That’s usually the easiest, simplest, fastest, bestest one to do.

Then Scott asks, “We are now done with Chapter seven bankruptcy. We’re ready to renew our effort to get a loan modification on our own home. If we get a Making Homes Affordable modification, we can afford to keep this home. Right now our entire household gross income goes to the house payment. We actually pay our bills with credit.” He asks for my advice.

Scott, my advice is that you are in deep trouble. You just got out of Chapter seven and you still have to use credit. It’s no news to you that you are in financial pain. Your home somehow was avoided in bankruptcy. You got through bankruptcy and now the stay has been lifted and you can negotiate with your lender about your home.

I wonder why that was. It must not have been an asset. In other words, the judge must not have determined that you had equity in it. That further complicates your situation. I think the question you’re asking is can you apply for a Making Homes Affordable modification betting on the come?

In other words, apply for it based on the fact that you can afford it if you get the modification. The answer is that’s good thinking, but good thinking that’s not being applied. The truth is you have to be able to afford your current situation in order to qualify for getting some assistance.

You’ve got to take some dramatic action. Because you’ve just gone through Chapter seven bankruptcy, I know that you are a tough person, a person able to face difficulty. What you have to do now is continue for a few more months to get this modification. You have to get some professional help from a guy like me to work on that income, to get it up to where it can enable you to qualify for that modification. So, write me, hire me, buy our kit, and let’s work together to get that modification.

You have some serious work to do, but now is the time. The clock’s ticking on you. If you hadn’t already been in the foreclosure process, the bank’s going to pick up right where they left off. If they had already begun the foreclosure process, they’re going to pick right up at the same point now.

Ryan: Neil Fink asks, “Why are interest-only loans more likely to be modified? Because they result in amortizing loans or for other reasons?

Mike: I think, Neil, it’s just because there’s a lot of political pressure to get people out of all the creative financing, some of which made a ton of sense in an appreciating market. There’s a lot of political pressure to get people out of anything that adjusts. You know that’s going to come right back into fashion as soon as the economy stabilizes again in a few years.Some of these products we’ve seen before and we will see again in the future. When you go through a difficult time they fall out of favor and people say, “How did it ever make sense for people to pay interest-only on a declining asset?” Well, nobody ever imagined that real estate was going to be a declining asset or a depreciating asset. It’s just a sign of the times. I guess that’s why.

Ryan: Everyone, I want to thank you so much for joining us. We got through a lot of content tonight. If you’re new, your mind’s probably blown. Don’t be too freaked out.

Mike: Yeah, we were all over the place.

Ryan: Yeah, you’ll be asking a lot of these same questions in a couple months. Just start where you can. The first thing to do, and the easiest thing to do, is to get the kit. Jump online, get the kit, and start your loan modification. Remember it’s 100% guaranteed. If you don’t get your loan modification, for God’s sake, send it back and we’ll refund your money.That’s about as good an offer I think you can get today in terms of low risk. We try to take all the risk out of it for you and enable people to move forward. Really, the only people that are getting helped were originally these people that could fork over $5,000 or $10,000 and have someone work on it for them.

Mike: Have an attorney work on it.

Ryan: Yeah. So, anyway, hopefully this loan modification kit has opened up a lot of doors to a lot of people. It can really make a difference. Please check it out.

Mike: Remember us for short sale service to you around the country, nationwide, and remember us for any loan, foreclosure work out services. We’re available to help. We’re expert in the area. Please recommend us to your relatives and your friends who need assistance during these tough times.2010, there’s just no way it’s not going to be every bit as tough as 2009. Let’s redouble our efforts. Please help us get the word out that we’re here to help. We’re a good, ethical, hard-working, street-fighting, foreclosure-busting company. So let your friends know about us, 60MinuteLoanModification.com. Thanks, everybody.

Do you have anything else to add?

Ryan: No, that’s it.

Mike: All right. Good night.

Ryan: Happy New Year.

Fast FICO Recovery

In The Credit Card Cure, Ryan recommends7 Best Practices to get your FICO back in shape after a tough time negotiating for debt settlement, loan modification or aforeclosure workout. Following is an excerpt:

Best Practice #1 – All accounts, on-time, always.

Never make a payment late – not ever again. Start writing your new credit history. No single BP can help you more than this one. So, take it seriously.

Be honest with yourself about why you have late payments on your credit report. If you only have the recent lates…from your recent financial turmoil…and you otherwise have a great record of on-time payments, then you will likely master this BP easily. It’s already part of the way you handle your finances.

On the other hand, if you see from your credit report that you routinely are late with payments, you have some serious habit-changing to do. And, we all know how hard it is to change habits.

Start by identifying the excuses you accept for failing to make payments on time. Some people blame their spouse for being disorganized, or their kids for expensive tastes that cause them to get overextended and short of cash. Others blame the “cost of living” or exorbitant finance charges or financial emergencies (that seem to occur routinely). And, some people just “don’t care” about paying on time. It’s never been a priority and they don’t realize how important it is in terms of FICO score and in terms of late fees and penalties. One of my clients was amazed to discover that she had paid nearly $3,000 in one year in overdraft charges and late fees on credit cards!

Whatever excuses you accept, I challenge you now to consider that, somehow most people manage to overcome those same challenges and make their payments on-time. People who are poorer than you, less intelligent than you, less organized than you and less well-intentioned than you are making their payments on time. Stay with this thought for awhile. Stay with it until you really accept it and are embarrassed enough to muster the will to change. It’s up to you.

In order to begin a new habit – on-time payments on all accounts always – you’ve got to start new behaviors. Don’t expect the old behaviors to get you there. Make behavioral changes and stick with them for at least 90-days. Here are some ideas:

• Simplify – get fewer bills by paying-off small ones, consolidating others. Stop junk mail and emails (ongoing process, I know) to get less cluttered. Maybe get a P.O. Box to keep USPS clutter away until you are ready to deal with it?
  
• Get organized – either on paper or online…get your budget items and due dates clearly stated in one place and identify how you will make the payments each month – by phone, by mail, or online. Have the payment tools you need easily available.
  
• Use whatever means is effective for you – to be reminded of your due dates. Use your own calendar, try email notifications from each account, use online services that send emails, tweets, etc.
  
• Establish an emergency fund – start small, but be consistent. Even just $10 per paycheck into a savings account that is difficult to access will enable you to build a stash of emergency cash to help you stay on-time with your payments.
  
• Use online budgeting tools like www.mint.com
  
• Automate payments from your checking account or at your creditor
  
• Get an overdraft protection on your checking account
  
• Hire a bookkeeper and bill payment service
  

 

When you are organized enough to know in advance that you may be late on a payment (short of cash) contact that lender immediately by phone and grovel like your FICO score depended on it. Your creditors will appreciate your resolve to pay on-time and sometimes, on an exception basis, they will extend additional time without reporting the payment late.

 

 

Reinforcing the new behavior (All bills, On-Time, Always) requires the power of “public confession”. That’s right, this one is so important that I recommend you turn to others for help to reinforce it for at least 90-days.

 

Choose three people who are close to you and whose opinion you really care about. Choose a spouse, parent, adult child, friend, sister, brother, co-worker or an online forum friend from www.Credit CardCure.com.

 

Here’s how it works:

 

Explain to your friend that you have committed to making on-time payments for 90-days on these accounts (name them specifically). Ask for their help in holding you accountable. Tell them to expect an email or phone call from you each week to report on that week’s payments. Ask them to support you by asking for an update if you do not send one.

 

Now, simply send three emails or make three phone calls right after your weekly review of your budget. Be honest with your supporters. If you fail to make a payment on-time, simply state it and start the 90-days over again. Start ALL the accounts over again – remember, your goal is All Bills, On-Time, Always. Accomplishing the feat for 90-days will go a long way toward making it a habit for you.

Members Loan Modification Class | Dec 17

We just received this transcript of our recent class. If you find it helpful please let us know. It’s an expensive undertaking to get these transcribed. But personally prefer reading to watching video. Please let us know if you find this helpful.

-Ryan Rockwood

December 17, 2009, Loan Modification Class transcript

Ryan:  Hello, hello, hello, everyone! Welcome to the show. It’s the Thursday edition, members only “Credit Card Cure.”

I’m sorry, that was yesterday.

[laughter]

It’s “The 60‑Minute Loan Modification: Foreclosure Doctor Series.”

Mike Rockwood:  No, it’s “The 60‑Minute Loan Modification: Foreclosure Doctor’s Tuesday!”

Ryan:  Oh.

Mike Rockwood:  Duh!

Ryan:  Oh, I didn’t know that. OK.

Mike Rockwood:  [overlapping] Oh, that’s next time, huh?

Ryan:  So, the more general one?

Mike Rockwood:  Yeah.

Ryan:  So, we started on a new program called “Credit Card Cure, ” and that is for everyone with credit card debt. Go over and get signed up. We’ve still got an introductory price. You can find that at cc.ryanrockwood.com. Or I think you can also go to 60minuteloanmodification.com/credit. OK?

Anyway, welcome to the show. Everyone here is a client. So, there’s no product pitching or anything like that.

Mike Rockwood:  No introductions needed.

Ryan:  No introductions needed. You know who we are, we know who you are. And I want to thank you very much for joining us.

Tonight’s show, basically, is on‑‑

You know, it’s the holiday season. Everyone as you know is pretty much “out to lunch.” So, how are we going to go about thinking and addressing our loan modifications? Now, I do think that everything is moving slower at the banks. This is the first order of business, right? And so if possible, it’s not ideal.

But it certainly is, I guess, now’s the time to slip up on your diet if you’re going to, I think.

Mike Rockwood:  [laughs]

Ryan:  You know what I mean? You can relax a little bit, maybe not do your calls that you meant to do or something like that. And the worst might not happen. But, let me remind you that some people don’t have that option. We have a lot of people that, or I have one couple who’s got a foreclosure scheduled in early January.

[off microphone production talk]

And that’s not gonna stop.

Mike Rockwood:  Early January? I’ve got one on Monday, Ryan.

Ryan:  Whoa, wow.

Mike Rockwood:  A foreclosure and trustee sale.

Ryan:  …sale….

Mike Rockwood:  And they are refusing to put it off. Unless today we agree to pay them $100 a day, in a reduction in the realtor’s commission. It’s a short sale because we asked for a few more days to put the deal together and we agreed to it.

Ryan:  Wow.

Mike Rockwood:  Just because it’s Christmas week, yeah right. Yeah right, we’re gonna agree to let this single mom ‑ you know, she works like seven days a week and we’re gonna agree to let her get kicked out on Monday? I don’t think so. So, yeah, there were a couple banks. Let’s see, I believe it was Chase or Citi that today, along with Fannie Mae and Freddie Mac agreed that they would… No, the bank agreed that they would not foreclose. That they would not…let’s see take to trustee sale during the next 10 days. And Fannie and Freddie said that they would not…what was it? Issue notices of trustee sale for the next 10 days. So, there is some good spirit out there, holiday spirit.

Ryan:  Oh, really?

Mike Rockwood:  Yeah. Yeah. And it probably will spread to other banks. Mostly because they might as well jump on the bandwagon because they are missing the boat. They’re so far behind. They’re so backlogged with their work right now. They might as well take some political goodwill for it.

But no, it’s always difficult to work with the lenders during this time. And it’s always at the end of the year. Realtors know it, mortgage brokers know it, escrow officers know it. Everybody in the industry knows it. It’s just a difficult time of the year because of vacations, and parties, and vacation mentality.

So with regards to your loan modification, while Santa is checking his list twice you need to be checking your loan modification twice because you need to be sure that there are no errors in it. It’s not that you want to wait three or four weeks before you submit it. But more than ever, you have to redouble your effort to make sure that your application is perfect. Impeccable.

This is the time to triple check yourself before submitting your application because more than ever, your file will have inertia. File inertia. And I say that file inertia is the scientifically proven, galactically accepted fact that a file in motion tends to stay in motion. And a file that is stopped tends to stay stopped. And you know what? I say that kind of in jest, but it’s huge if you think about it.

Think about yourself in a cubicle, and on your screen and literally at your door are 150 to 300 files. And every time you pick one up, open one up, begin to learn about this file, you have a time of gathering information and learning. There’s almost like five minutes sometimes, of uptime just coming to get familiar with the situation involved, here. And what’s missing, what’s good about this one, what’s not?. What action is required, what action did you leave it off with, and has that action been taken?

I mean, file inertia is very real. And so during this holiday season, you want your application from beginning to end to be seamless.

So I thought it would be really timely to share with all of you some of the tricks and some of the tips that Ryan and I have been using in the loan modifications that we do because you all know we do full‑service loan modification. Absolutely every day of the week, we are working on loan modifications. That’s how we can continue to bring you fresh, new, street‑smart ideas on how to make your loan modification work.

So, for all of you do‑it‑yourselfers, we’re kind of like the professional. And we sit down with you once a week and give you the tips and I think it’s time to just take a few minutes and kind of remind all of you of some of the things that we’re doing to make sure our modifications sail through.

So I’ve got 14 tips here that I want to share with you.

The first one is that you should prequalify early and prequalify often. Learn what the lender needs. Learn their opinion of your modification application. Learn everything you can.

In fact, I’ve kind of gotten into the habit. I bet I contact the lender four times now before I submit an application. Generally when I start it, as I’m assembling the paperwork, I’ll dial the lender. And I’ll just chitchat with them about the status of the loan. You know, because I want them to read to me from the file. I want them to tell me what they know about the situation. Because very often they’ll reveal, ah! This customer was put on a forbearance plan one year ago and failed to live up to it.

Or, this client promised us this ‑ like today, actually I called on one that I was just preparing. And they said, “Well, gosh, this client promised a big payment back in August and then just has never talked to us since then.”

As you’re putting together the file, and as you’re putting together your own file, you begin to get the bank’s attitude about your opportunity.

So, I say pre‑qual early, and pre‑qual often.

Get them on the phone, as much of a hassle as it is to get them on the phone. I don’t know if I’ve just gotten used to it. It must be it, because it just doesn’t bother me anymore to dial them, put it on speakerphone. Then I just work until I get to them, and then I ask them the questions that I was prepared to ask them. So, pre‑qual early and pre‑qual often. It’ll make your applications sharper.

Then the first tip about the application itself that I would like to pass along is one that I’ve always talked about, and that is make it personal. And the way that I make it personal… These days I want you to even make it more personal, less professional because currently, there’s kind of a backlash against third‑party help, because a lot of the lenders are saying that the third‑party people are in fact clogging up the lines, and needlessly forcing the lenders to do an awful lot of work. Now, personally, I understand that, I guess, but I think that a third party can actually add a lot of value.

But at any rate, I downplay the professionalism of the presentation and I up‑play the fact that this is a real person and a real family with real hurts and real needs and that you’ve got a program for them. You should bring that program to bear for them.

So, make it personal, not professional. The way that you do that is, again, I still recommend that even if you’re still using an affidavit for the hardship, that you handwrite it, because it’s just better. Handwritten is just better. I recommend that you put footnotes throughout the application really carefully explaining and even insert a whole other page explaining the documents that follow in your own words.

For instance, if you have a checking account only, which really quite a few people do, explain that in a footnote or in a whole other page, saying, “Yes, this is a checking account only, and you ask for checking and savings. I do not have a savings account.” And then sign it.

Going to great lengths to do things like that and to try to second guess every question they might have about your application will go a long way to preventing yours from getting stopped, because as soon as the negotiator or the phase one loss mitigation officer goes through and they see something for which they can stop the application, they will. And then they just pass it off to somebody else and say, “They’re missing the savings account.” Now your file is stopped, and it will stay stopped, and it has a tendency to stay stopped, whereas if it stayed in motion, it would tend to stay in motion.

I’m telling you, sometimes, even in these difficult times, we’re getting sometimes responses on our applications in as little as two weeks when they’re perfect. So, you go through phase one and they just can’t find anything wrong, any reason to bounce it, so they pass it to the negotiator. And then very often, by several days after they get it, they can respond to it, because it’s complete.

Next tip: I’ve been using a cover page, in which I…. And I don’t know if you can see this. Ryan, can you see this at all on the screen? Some of the examples I’d like to be able to show.

Ryan:  No.

Mike Rockwood:  OK, sorry. But this is actually a submittal that I did today. It’s a fifty page fax. Some of your faxes are going to be that big. It’s a submittal for a loan modification. I’m using a cover page and I either on this page or on the next page, I do a table of contents.

I love this idea, because first of all, remember, we always number the pages in very big numbers in the lower right, every single page, 49 pages. And then I do a table of contents explaining what is on those pages, so that the negotiator doesn’t have to fumble through 49 pages. Because it’s right on top, if he’s looking for the 2008 taxes, he can see, “Oh, that’s on page 32.” He can go right to it. I think that’s a great idea.

I also, on the cover page, state any really important points that you want to reemphasize from your hardship letter. Like, if this is a neg‑am loan, or if it’s even an interest‑only loan, and you’re in a real hard‑hit ZIP Code, then I mention that always in the introductory letter. I mean, in the introductory sentence here above the table of contents, because I want them to pick that up right away. This is a loan that your bank wants you to get rid of. There’s a lot of inertia here.

All right, then, number five is, obviously, there should be nothing missing. That’s part of the pre‑qual process. Very often the lenders these days are, again, back to asking for fewer things instead of more things, because when they know that you know what you’re doing, they want and you want your application to go fast.

So, sometimes I’ll get off the second or third pre‑qual call, and I’ll learn that they only need four things from me. And I never miss a single thing. If they ask for three months of statements, I send three, and if they ask for two years of taxes, I send two, and I send every schedule. And I have the applicants sign every single page of the fax because that’s a verification to the lender and to the underwriter that the person has seen that page and agrees with that page, and the third‑party guy isn’t trying to pull anything over on them.

The next thing I want to encourage you to do is nothing is missing, and it’s neat as a pin, and there are footnotes galore. When I say neat as a pin, a lot of times what people send to us is really confusing and hard to determine what it is. So, if this is payroll, then write “Payroll, ” and if it’s Jim’s payroll, put “Jim’s payroll.” If it’s Arnie’s checking account, write it with a Sharpie at the top, “Arnie’s checking account.”

So, really go to great lengths to make this clear. Some of the people who will be initially ‑ like in the phase one ‑ reviewing your application, I’ve said this before, they’re young, they’re not well‑trained, they’re not well‑prepared, and anything you can do to help them move your file off their desk onto the phase two negotiator’s desk is in your best interest.

Gosh, it took me this long, people, to just get a technical problem taken care of, so I apologize. If you have problems logging in and seeing this, check out sixtyminuteloanmodification.com\live2‑‑the numeral two. Lord knows what it is, but it seems to be working now.

All right, another tip. That is, remember, nothing missing, neat as a pin, footnotes galore. Think of it this way: Your application is literally sitting next to as many as they could fit on their desk. It should look good, OK. They should want to go to it because there’s clarity about it, there’s that table of contents, every page is signed, every page is numbered, named at the top what it is. So, it’s an easy file to work on.

Next tip is and this is a really important one and an awful lot of people mess me up on this one and that is fully document your income. Don’t think that you’re going to get by without fully documenting. Sometimes fully documenting can mean just writing a letter and explaining what the situation is, because sometimes people work on cash, have cash businesses, or they get tips, et cetera, but go to great lengths to explain it.

I’ve gotten in the habit now, when I use contribution letters, or if there’s cash or anything like that, I use an affidavit. You can just Google an affidavit for your state. Like for the state of California, I use an affidavit and I have the client go to a local notary, and pay $10 and have it notarized. It’s just one more step so that the underwriter feels greater comfort.

For instance, on a contribution letter, this will say, “Sworn before me, the notary, this person…” You know, I got their identification, here’s their license number, and they’ve signed it, and they say the following. And then the person writes their contribution note write on the affidavit. You know, “I, John Anderson, brother of Jim Anderson, can commit to 24 months of $1, 000 a month to help my brother during this difficult time. The money will come from the following sources.” And then name the sources. So it’s just one more step to prevent any kind of kickback or pushback on your file. Don’t let them find any reason to slow the inertia of your file.

The next is, I’ve gotten in the habit now of using the lender’s forms at all times. So if you’re applying to Chase, go to the Chase website and use their forms. It’s just one more thing. I didn’t used to do that, I used to use my own forms. But I’ve acquiesced and gone over to their forms. It’s just one more thing that they just can’t argue with.

The thing I find kind of difficult is transposing from the calculators that we use and the Excel spreadsheets that I provide that make it easy for you to calculate HTI, and DTI, and your cash flow. I’m telling you, in the transposing of those numbers onto the lender’s forms, I think there’s something magical about the lender’s forms or something. They just screw things up. But very often, I have to check two and three times and throw away the copy two or three times before I get it right. What’s with that? I don’t know what that’s all about.

But I always use the lender’s own forms. And I’m very certain about the financials. Be very certain that what you put on there results in the debt‑to‑income ratio that you need to qualify for the program that you’re qualified for. OK?

All right. Next, another common mistake that people make in sending me their stuff is, not sending every page of the checking and savings accounts. The top page with all the activity summarized is not good enough. They want to see the activity. And also, do things like checking… If it says page two of three, there’d better be three pages there. Because what they’re looking for is any way for you to be hiding any assets from them or hiding any cash flow from them. So if it says, page one of one that’s fine. If it says page three of three, make sure there are three. Or else, get rid of that note.

The next is footnotes. Again, I guess I’ve already said that I recommend that you go to great lengths to explain things throughout. Even inserting whole pages just to explain what’s coming next. Like, if you have income from three sources, it’s pretty smart to insert a page saying, “the pages that follow verify my income from source one, my job, source two, my rental company, source three, my part‑time job.” And explain them. Just like you would try to explain it to them in person. So you’re making it personal.

Then, Ryan, in terms of handwritten hardship letters, can you give the folks any ideas that you have recently come to in terms of hardship letters? Any recent innovations that you feel are making a more effective…. Do you have things that you’re doing?

Ryan:  Well, no, not really. The only thing that I can say on hardship letters is that I used to be a lot more clever with them than I am now and creative. Now it’s just been so many dozens, or hundreds, or whatever of them now that have never met with a single resistance in the hardship department that I’m not really too worried about writing it out anymore. I don’t really think that that’s very important. Although, again, it’s not like I have evidence for that. It’s just a gut feeling.

Mike Rockwood:  Yeah.

Ryan:  OK? And I have really poor handwriting also. So, I’m inclined not to do that.

Mike Rockwood:  Well, just, like yesterday we had two clients. One who had wonderful handwriting. So we had her hand write the letter. And this other guy, his came back so terrible that we had to just say, “Hey, forget it. Just sign that document that we sent you.”

Ryan:  Oh, really?

Mike Rockwood:  So, yeah. A lot of people have lousy handwriting , so that’s it. But in terms of actually things you’re stating though, Ryan, one thing I like that you’re doing is you’re making statements at the end asking for a particular amount ad saying in no uncertain terms that this is a number that I know that the payment that I can make on time, every month.

Ryan:  Yeah.

Mike Rockwood:  I like that.

Ryan:  Well, the other thing that I should probably mention is that sometimes my wording is getting a little bit more aggressive and I guess if you are gonna walk away from the house, and if you don’t get a good loan mod, I fail to see why anymore you shouldn’t just say that. I guess in the past, I felt like it was rude or maybe somewhat posturing. Or something like that. Yo.

But, I mean, if you’re willing to back it up, hey fair warning is my kind of thought right now. Also, in regards to the language and reasons for hardships, that’s always kind of a creative necessity to kind of come up with some way to label it well. Like, if someone loses money I don’t call it loss of money. I call it investment loss or something like that. I try to make it so it seems like it’s a thing instead of a description. It’s like a brand name or something.

The other thing I’ve written a lot about recently is eldercare. What I write is something like, elderr medical long‑term care. Just to get some keywords in there, you know, that they’re probably trained to identify.

I try to get those in there, elder medical care, unexpected, you know. You might say, “Well, didn’t you kind of expect to have to do this thing?” Well, you could always throw an “unexpected” into the sentence there, and then you’ve got a more recent hardship. The unexpected medical deterioration or something like that.

Mike Rockwood:  Yeah.

Ryan:  Someone recently had ‑ well, that’s probably a little too specific to really help people out.

Mike Rockwood:  Well, another thing you’re doing that I like is you’re using three or four bullets.

Ryan:  I am using bullet points.

Mike Rockwood:  Yeah, I like that.

Ryan:  And I am actually using bold.

Mike Rockwood:  Yeah. Yeah.

Ryan:  Because, keep in mind now, these are phase one loss mitigation people are really just scanning for keywords and they’re looking for whether or not your hardship letter passes their hardship filter. So they’re really just looking for those key phrases like, “lost work, reduction in income, divorce, death, ” et cetera. OK?

Mike Rockwood:  All right. And then lastly, just in the presentation, there’s a couple of things. I always have clients, like I said, sign every single page, account number in the middle and page number over on the right. The lenders ask you to do that because they say that if it gets printed out and gets separated it’s easy for them to get it back together in the right order. All right? So, some of that is just housekeeping. Some of it is administrivia, but some of it, I think, can really help you to get your modification inertia to continue.

Now, in terms of follow‑up, in the book we recommend a daily fax and honestly I got so much pushback on that and I think I was the only one for almost a year, I would think I was the only one that really did that. So I have gone to a twice‑a‑week fax program and then I call once a week. I find that really adequate, about once a week. And every time I call, I always call for a reason. I really advise that you do that. Not just call and ask them for an update because that’s irritating to them because you’re taking their time and it’s not really moving anything forward.

So I always call with a need to understand something that we talked about last time, or a need to get clarification on something, or I need to change a financial. And you can just change it a little bit. You know what I mean? Tell them you’ve learned after really figuring, your medical is not $216, it’s $195. So, always call with a purpose but do call once a week. And try to get them to read from the file, any action that has taken place. All right?

Ryan:  All right, very cool. Now, I have a question from one person writing in. What they are asking is, it is actually a client named Teresa. What I am going to do is, I am going to send, you know there is some details here, it is this, this, and this, what we are going to have to do is have a talk. The way to talk to us is actually on the page that you are looking at right now.

There is a schedule an appointment button, and if you click on that, you can select a product, and the product is a free client consult, if you are a current client. If you are not, you can buy time. If you’ve already used your free client consult, buy some time, and book some time where we can talk. That is probably the first step, because whether or not you go this way, this way, or this way, has some particular implications.

Everyone knows, that sometimes you just have to lay them all out with someone, and in a half an hour, we will spend an hour with you if we need to, on the phone, and we will get that taken care of, that is at 60minuteloanmodification.com/schedule. If you go down on the page as well, you will see an interest list where you can opt‑in to find out more information about the credit card cure program.

That is the program that is already responsible now for eliminating about, almost a 100 thousand dollars worth of credit card debt for participants. We are going to do a million dollars worth of debt reduction this year.

Mike Rockwood:  After you get that first client that reduces 60 or 70 thousand, makes you think maybe a million is even a little bit conservative.

Ryan:  Yes, yes it does. It is amazing how fast, we are going to do it. That will be really fun. So anyway check that out, that is at cc.ryanrockwood.com. Just sign up for that right away. OK.

Mike Rockwood:  All right, I have a question here, that came in.

Ryan:  OK, go ahead.

Mike Rockwood:  Mark asked, how can a short sale be pre‑approved? So Mark asks, how can a short sale get pre‑approved? I bet Mark is responding to some news that came out recently, what was it called, part of the Making Homes Affordable program that has to do with short sales, is coming out with a set of guidelines for banks that have taken TARP money.

It does deal with a couple of issues. One of them actually is pre‑qualification, but they are definitely just guidelines, and definitely have not been implemented yet. The hope is that a realtor working in conjunction with a homeowner, could get a pre‑approval to some percentage of market value.

In other words, they would agree that the bank says yes we will accept, and it is going to be high, so it is going to be like 95% of market value, and then over the course of the sale, a current appraiser will assess the current market value. So, that will help the realtor to be able to price it, although it is really for realtors that are not experienced in the field, because experienced realtors don’t have any problem with pricing on a short sale.

So Mark, the whole thing about getting a short sale pre‑approved, now that I think about it, it may really be just for rookies. It is really addressing the whole short‑sale issue from a perspective of the vast majority of realtors who really are not involved in it. My best advice to you, is get a local realtor who is very involved in short sales. That means that they have done primarily short sales for the last year and a half, and not only ask them if they have primarily done short sales, but also, how many have they done, because some darn realtors only do three or four deals in a year. All right?

The next question that I had picked up is from Jill. It says, can a modification be for the entire term of the loan. Jill must obviously be operating under the misconception that in fact that a modification is for a short period of time. Some are, I do not know what percentage are, but it is not uncommon for a modification to have particularly good terms for two to five years, but the modification to be written over the life of the whole loan. So that is actually most common.

Lets say, if you have a 7% loan, you might get written down to a 2% loan for 18 months, and then it begins to gradually come back to a Fannie Mae, Freddie Mac, level which today would be right about 5%, but it would only come back in increments of a half of a point. It would be capped at Fannie Mae and Freddie Mac limits for the rest of the loan. That is a pretty typical one. So, there you go Jill. Very often full term of the loan. Do you want me to keep going?

Ryan:  Yes.

Mike Rockwood:  Melanie says, forensics loan audits, do the violations that are found mean anything or are they just a bunch of hype? Here is my take on that Melanie, if you go get a forensic loan audit, you will be surprised at how many violations were involved in the making of your loan. Particularly, if it was made between 2002 or 3, and 2007. I mean, they are every where. It is really rare that a forensic audit would come back with fewer then six violations. Of those six, it is really common that one or two are really substantial.

What I mean by that is, a serious claim other then something that would just be either embarrassing, or get a slap on the wrist for the lender from a regulatory agency. Here is how it is used effectively, if you have five or six failures to disclose, then when you list those, you can do just like your lawyer would do, and say that this shows a pattern of deception and gives us reason to believe that we were not fully informed about what we were getting involved in, and therefore we were put at great risk. So even the ones that seem insignificant to you, when they are used effectively, they can be significant.

So lets say you had six, four of which were relatively insignificant, you might even mention that, that these four, of course, seem administrative and just seem to be mistakes, but they show a pattern of disregard for the law and my rights to know about what I am getting into, and then you name the two that are more serious. So it is really all in how you use the results of the forensic loan audit. Actually, the more I learn about forensic loan audits, I think 80& of the magic is actually in how you use the information, not in the audit itself. The audit itself is pretty straightforward. All right? Those are all the questions I had before.

Ryan:  That is all we have tonight, then? I think it is a short one.

Mike Rockwood:  I think we are coming up on the holidays. We should note to everybody that we will definitely won’t be on next Thursday, but Tuesday we are going to have our regular teleconference, right?

Ryan:  Christmas isn’t next Thursday, is it, already?

Mike Rockwood:  That would be Thursday, Christmas Eve.

Ryan:  Yes.

Mike Rockwood:  I don’t know. I don’t think people will gather around the TV set in lieu of opening presents. You think, and chit chat with us about loan mods?

Ryan:  I don’t know. OK.

Mike Rockwood:  Hey, I would like to encourage everybody though, please think about, I am serious, this is a nice gift to give to a daughter, or a cousin, or a friend, or a co‑worker, who you know is having a hard time with their mortgage, give them a gift of one of our kits. It is fully guaranteed, if they get it and they do not find it helpful, they do not use it, they can return it, but it is a wonderful gift.

Ryan:  We got to get one of those bows, like Lexus, like Lexus has a bow on the car.

Mike Rockwood:  Yes, also, please, our books, the kit itself, the do‑it‑yourself kit, is selling like hot cakes, but we have unlimited capability. We literally could sell five times what we are selling now, because our capacity is huge. Everything is printed, everything is done and ready to go.

###

Mommy, where did my home equity go?

Recorded live Dec 22 | Loan Modification TV

Members Call | Dec. 17th

We just received this transcript of our recent class. If you find it helpful please let us know. It’s an expensive undertaking to get these transcribed. But personally prefer reading to watching video. Please let us know if you find this helpful.

-Ryan Rockwood

>>>Transcript: December 17th, 2009 | Members Loan Modification Class

Loan Modification TV | Dec 15

Loan Mod TV: Dec 10

December 1 Loan Modification Teleseminar

We had a powerful (albeit somewhat rambling) call on Tuesday evening. Technical problems blocked our video broadcast. But here is the audio replay!

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Short sales stimulus! MHA Rocks

Short sales got a shot-in-the-arm from the Obama administration today. The Making Homes Affordable Program now offers financial incentives for completing short sales and similar deed-in-lieu transactions, include a $1,000 payment to servicers, and up to $1,000 for investors who sign off on payments to second and third liens. Borrowers, too can receive $1,500 in relocation expenses.

Short sales are a great workout option if you are just too underwater or just can no longer afford your home (or both) – better than foreclosure because they can preserve the borrower’s credit rating. While primary lenders typically realize steep losses, their recovery is typically far better than under foreclosure…which typically means getting money later and risks damage to the home during vacancy, etc.

But short sales have been frustrating for everyone , especially in high foreclosure states, often hung up by negotiations with multiple lien holders and especially if mortgage insurance companies are involved. Sales often fall through as lenders bicker over the sales price, what they should receive from the proceeds, and whether the borrower will be held accountable for the debt in the future.

Program requirements include that mortgage servicers have 10 days to approve or disapprove a request for short sale, and when done the transaction must fully release the borrower from the debt. It also prohibits mortgage servicing companies from reducing real estate commissions on the sale, a practice that has dissuaded many agents from taking short sale listings.

This is nothing but good news for all of us concerned about our fellow citizens in foreclosure!

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