They can’t hurt you if you don’t care

The Credit Card Cure is simple but not easy. You will face powerful emotions like fear, embarrassment, humiliation, disappointment, anger and discouragement.

You will face these, because they will be “thrown in your face” by banks to leverage your personal dignity for their own gain. That is, having stolen your financial future they now attempt to take your dignity as well by humiliating and disgracing you with credit score haranguing and verbal harassment from their agents.

These little minions will question your very “personhood” and your worth. Interestingly, you would not think of accusing them of immoral, unethical or undignified behavior if they failed to suspend payments during a time of your unemployment or during your chemotherapy. It’s a business transaction for both of you. But a one-sided moral obligation for you – an unfair “asymmetry of values”.

Don’t take it. The ultimate defense is to change the paradigm, to truly “not care”. Anyway, if your self-worth is dependent upon what some global financial juggernaut “thinks” of you then you’re in trouble.

Loan Modification Limbo & Questions

Recorded live: Feb 4, 2010

Ryan Rockwood: Hi everybody and welcome.  It’s Ryan Rockwood and Mike Rockwood and this is the Loan Modification TV.

Mike Rockwood: This is the 60–Minute Loan Modification Teleconference series that has now become a videoconference series and we welcome you all.  Thank you for joining us tonight.  We bring you the latest information on loan modifications, and everybody on the call tonight should be an existing client so we can cut right to the chase.  What Ryan and I do all day long, absolutely every day, is work on foreclosure alternatives, foreclosure workouts for customers all around the country.  So we help people with short sales, with deeds in lieu.  We help people with loan modifications and just all manner of foreclosure workout.  Then on Tuesdays and Thursdays, we push back from the desk, put on these headsets and get in front of the camera and talk to you about what we’re learning, what we’re hearing and answer questions about loan modifications.

Tonight, specifically, we’ll focus in on loan modification and what we do is we spend time just sharing, giving away lots of information because we really believe in the do-it-yourself method of solving your foreclosure issue and working out a solution with your lender.  So we like to help people with a lot of information about how to do that effectively, and we provide forums and disseminate a lot of information to help people be more effective with their lenders.  Now, all of you, probably everybody on the call has already purchased our 60–Minute Loan Modification Kit and we thank you for that.  We hope you found it useful and we hope that by way of this videoconference and teleconference, we can kind of keep that information fresh and updated and then even more important is to make it timely for you because as you go through the whole process, you need to have that information at the right time.  So these twice a week meetings where we really filled your questions about what you’re facing today, I think are really important part of the whole service that we provide.

We always want to start off the program by reminding you that we’re not lawyers and we’re not CPAs.  So don’t take our advice as legal or tax advice, but we are realtors and we are extremely experienced in the foreclosure process.  So what we bring you is street smarts and retelling you tales that we’ve been told about how our clients have solved their foreclosure situations, their foreclosure workouts with their lenders.  You can get questions to us this evening either by emailing them to questions@60minuteloanmodification.com or you can also join in the chat that you can see off to the side of us there and that seems to work pretty well.  Ryan watches the chat as it goes on and kind of jump in.

Ryan Rockwood: It’s easy to miss a question or two.

Mike Rockwood: Yes.

Ryan Rockwood: So don’t put a question there and feel like if some — you could feel like, oh, they’re ignoring me or something like that, and the truth is you can’t –

Mike Rockwood: Yes, I see.

Ryan Rockwood: — keep up if it gets going fast.

Mike Rockwood: All right.  Is there anything else that you want to add, Ryan, before we get started?

Ryan Rockwood: No, I don’t think so.  Someone mentioned that the sound is a little scratchy and we’re trying out a new video compression tonight and the sound, it did seem to be a little scratchy too and to test which is two bagasse of picture.  I think it’s pretty good but the sound kind of gets short shrift.  Hopefully, it will be enough after really examining it, we’ll replace it.  Let’s try to focus ourselves a little bit more, which I think would be you going this way just a tad.  Can you move?

Mike Rockwood: No, I think it’s the other way, isn’t it, Ryan?

Ryan Rockwood: Let me see.

Mike Rockwood: No, you’re right.  You’re correct.  Go away from you.

Ryan Rockwood: Yes.  Yes.  So let’s just move this down a little bit.

Mike Rockwood: It’s a mirror of a mirror image.

Ryan Rockwood: Then people can be looking at that.

Mike Rockwood: You just wanted more of the screen.

Ryan Rockwood: Yes, more screen time.  But anyway –

Mike Rockwood: — because you’re hoping to be noticed.  You’re hoping to be noticed like by CNN or maybe ESPN.

Ryan Rockwood: All right.  Well everyone, welcome to the call.  Tonight’s call especially we’re going to seriously try to hit questions hard.  The topic at tonight’s call, in case you don’t know, we do two calls a week and a third now for helping people out with credit cards, that’s on Wednesday.  Tonight’s call is about getting stuck in loan mod purgatory, which is where–

Mike Rockwood: Yes.

Ryan Rockwood: You know, like maybe in your past life you were quite good.  You’re doing a really great loan mod application, but you weren’t really that bad.  So you just try to –

Mike Rockwood: So you went to purgatory.

Ryan Rockwood: Yes.  What else they used to call it?  I couldn’t remember.  I wanted to make it clever for the thing.  They used to call it something else, limbo, yes.

Mike Rockwood: Oh, you.

Ryan Rockwood: Yes.

Mike Rockwood: Good catholic son.

Ryan Rockwood: I did a little reading.  Then so anyway, we’re going to talk about what to do because I mean, I would say the number one frustration people have is loan mods in, not hearing back.

Mike Rockwood: Yes.

Ryan Rockwood: In many cases, there really isn’t anything you can do.  It’s just about everyone feels like, oh man, I wish I could push some more, like force their hand, something like that.

Mike Rockwood: Yes.

Ryan Rockwood: But anyway, in many cases, there isn’t.  You do want to call and make sure obviously that some things are in order.  What do you think?  Do you have some things you want to talk about?

Mike Rockwood: Okay, yes.

Ryan Rockwood: About dealing your loan mod out of.

Mike Rockwood: Yes and bring together or bring some information that we’ve had in the last few calls, kind of bring it together and really hammer on this whole issue of when your modification application gets set aside or when it gets into purgatory or limbo.  I want to talk about that and then give you some solutions.  Now, remember that there is a lot of incentive on the part of the lenders to put your application into a holding pattern.  If any of you have ever been in situations where you are dramatically, drastically, unbearably overworked, your business is just booming incredibly or your staff is short, whatever, and you’re just way, way over extended, you get really creative about finding ways to shift certainly the blame from you but also to slow the process down.  In my days when I worked in the assembly — on this electronic assembly line at Honeywell in Minneapolis, Minnesota, we used to find creative ways to pull what was in fact an emergency switch that would stop the production line and engineers would come running out and help us solve whatever quality problem was, whatever technical problem it was, and a similar kinds of thing happens in a very large call center or very large debt –

Ryan Rockwood: Why would you want to do that?

Mike Rockwood: Well, if you were overworked.  I mean, if you just had too much stuff and was stacking up and you had to stop the input.  So instead of you can’t stop the input, people can’t stop us all from applying for loan modification so what the lenders do, of course, is find ways to put 60%, 70%, maybe 80% of these into some kind of holding pattern, and they do that by finding things that are wrong with them, first of all, and if they can’t do that, they make up things that are wrong with them.  I’m not exaggerating.  I’m telling you what I know for a fact is the truth.  They have to somehow manage that cue so that because they only have certain resources to get the work done.  So they established this cue and they’ll put your modification into that cue if they at all — if it’s at all possible.

Here are some of the things.  Here are 15 different reasons why I have heard that clients’ modification applications have gotten put into this cue.  One is an incomplete documentation.  That one is easy for them to spot.  Their first few poorly trained employees have simply have a checklist to make sure that the application has absolutely everything on it and if you don’t think that there’s a lot of missed faxes of missed pages that either got jammed on your sending or jammed on their receiving or dropped after they turn it into paper, you’re wrong.  So there’s a lot of incomplete documentation.  That’s a big one.

Another one is miscalculating things like debt-to-income ratio.  So they’ll put you in a holding pattern because your application quite frankly doesn’t meet their criteria.  What if on quick calculation, they realize your application in fact shows that you have a debt-to-income ratio a front-end of 29%?  They know they don’t have to approve your modification but they won’t reject it quickly either.  Who knows why they don’t do that?  They don’t.  I mean, sometimes it absolutely does take just as long you get rejected as it does to get accepted.  How bizarre is that?  A third reason is that they often –

Ryan Rockwood: All right, but if they reject people too soon, they’ll just reapply again and clog into the systems.

Mike Rockwood: Yes, and then they get bad press for rejecting.  So for them to reject is negative as well.  So if you think about how they’re being monitored and measured by either the Federal Trade Commission, or by the Obama administration, the Making Homes Affordable people, it’s much better for them to show a 125,000 people in the queue than to show 65,000 that were rejected and 45,000 in the queue.  So another one is that they will very often tell you that this investor will not modify your — they’ll blatantly tell you incorrect information.  Things like your investor will not modify your mortgage.  They will tell you that your bank statements were taken off the internet and they can’t be off the internet.  They’ll tell you that you have an out of date 4506T, which is the document you signed to allow them to ask the IRS for information about your taxes out of date.  I’m telling you, okay, but we keep signing those.  Every 60 days they say they’re out of date so we resign them.  It’s just bizarre.  Bank statements that are too old, alimony award letters that are incomplete, that was kind of interesting because I’ve had that on more than one occasion and sometimes it’s that the person doesn’t really want to submit the entire thing because it has a lot of really personal information on it.  So you have to submit the whole thing.

Another one is the tax 1040 is not signed.  That’s a real common one because so many of us go to tax preparers and so we don’t actually sign the document itself.  Your income is miscalculated, that one is huge.  Income is not documented properly, that one is probably even bigger.  Proof of occupancy is omitted.  Rental income is not calculated correctly, that’s huge.  It seems to be that the different negotiators of the same lender will force you to calculate it differently so it’s very frustrating.  Sometimes you’ll be told that there are no modifications for non-owner occupied properties.  Sometimes you’ll be told that your loan mod did not qualify for the home — for the HAMP, the HAMP program, Making Homes Affordable, the Home Affordable Modification Program.

Then a good one that always surprises people, but I’m telling you it happens absolutely all the time is you are simply not in default and people will go, “Say what?”  But that’s another reason why your modification got put into purgatory or into limbo.  So those are 15 common answers that when really pushed and pressed, those are the answers for why your modification is not moving forward, your modification application.  So it’s bizarre and absolutely every day a client will say to me, “Are you serious?”  They’re really asking for this for the third time.  They really misplaced it.  They really care that that’s not an online or that is not a statement that I got from the — mailed to me from the bank.  They really care.  The truth is they really don’t.  These are just trumped up excuses for them to leave your modification in the queue and not have to deal with it until they can get around to it.

So now what I want to do is very quickly repeat for you something that I shared with you couple of weeks ago.  My eight suggestions for how to keep your modification from or to take advantage of what I called file inertia.  That is keeping your file moving.  You really want to submit a bullet proof application that keeps moving.  Never get set aside and stops moving because files in motion have a tendency to stay in motion and files that are stopped have a tendency to stay stopped.  That’s the law of loan modification application file inertia and I think I’m going to get like a Nobel Prize in –

Ryan Rockwood: Theoretical physics or something?

Mike Rockwood: Yes, theoretical physics or administrivia or something like that for having developed this theorem.  I think I should get it published in some technical journals.  The first one is your income must be documented correctly and extremely clearly.  Everybody, I would go way beyond what they ask you to do in this instance because really they just ask you to fill in information and attach documentation.  But here, if you’re self–employed, get a PNL and write a statement that says this is my profit and loss statement from this period and the circled item is my income during this period, and sign it.  In other words, make a statement that is crystal clear and sign it so that the underwriter can even hang his head on it.  Your social security and unemployment EDD information, I always send checks and the award letters.  Just do it.  They don’t require it but do it.  It seems like you send checks and they ask for the award letter.  You send the award letter and they say, well, let us see some checks.  You send checks and they say let us see the deposit.  It’s bizarre.  All right, then I want you always to calculate the monthly for them.  Don’t just attach three checks.  Circle the dates that the payment period is from and then write and say, this is a twice monthly paycheck or this is a biweekly paycheck.  So I get 26 of these every year.  Twenty-six times this amount is this much divided by 12 is the amount I’m claiming for my monthly.  Write it down.  Don’t assume they’re going to do the math correctly.  If your 1099 use — again, explain the logic that you’re using to divide that into a monthly.  So if you’re submitting a 1099.

The second tip is rental property must be handled correctly, and it’s especially important if you’re applying for a Making Homes Affordable Modification.  Now with three or more properties I always advise clients to separate it on a separate PNL, and present it to your lender no matter who he is.  I mean some of them — some of the lenders claim they don’t like this but I’m successful with all the lenders handling it this way.  If you have five, six, seven properties or more, bust it up off into a separate schedule of real estate owned, and profit and loss statement, and then bring the net of that over to your personal budget.  That’s the very best way to handle it because lenders, even though they say many of them will say no, we want you to incorporate it all into your personal budget.  They have a real hard time ferreting out your debt-to-income ratios then and they trip all over themselves disqualifying you for programs because of a DTI et cetera, et cetera.  So that’s what I recommend.

Number three and four are all about debt-to-income ratios.  Remember your front-end DTI has to be higher than 31%.  That’s your total household gross income divided into your first mortgage payment and that payment is principal, interest, tax, insurance, and homeowners association all added up.  So remember that has to be higher than 31%.  Your back-end DTI has to be right as well.  It should always be below 70% or else you’re going to have to do some pretty fancy footwork.  All the debts on your credit report should be addressed even if you can skid by the initial loss mitigation officer and even the negotiator, the underwriter will catch you.  So be sure all of your debts are mentioned on the application.  Now some people these days, because so many people are having such crushing death problems, are needing to submit an application that in fact ignores three or four or five credit cards that they’ve stopped paying on.  Their argument is I’ve stopped paying on them.  I’m going to settle with those credit card lenders so I don’t want that included in my debt-to-income ratio.  You know what?  The lenders are — the mortgage lenders are agreeing to it.  So that’s a strategy you can use if you have way too much credit card debt.

Now, your cash flow.  Remember your cash flow has to be zero.  You must absolutely, must be late on your payments — you don’t even want to talk about it — and your application has to be flawless.  No loose ends and exceptionally easy to understand.  All right, so those are my eight tips.  I actually did publish that so it’s an article on the website if you want to go to articles and look for Why 96% of My Loan Mods Succeed?  You’ll see those eight recommendations listed there.  All right, let’s go to questions.

Ryan Rockwood: Do you think that article is a recent one that they’re going to be able to find?

Mike Rockwood: Yes.  It’s probably about the fourth to the fifth one down.  Why don’t you take a look for it right now?

Ryan Rockwood: Let’s see.  You know, I have on that side of posting the transcripts of these talks when I can.  So there’s a good spot to go and check it out for the transcripts of anything you might have missed, but –

Mike Rockwood: It’s right over there.

Ryan Rockwood: It’s right over there?  It could have been that long ago, do you think?

Mike Rockwood: No.  I’ll post it again.

Ryan Rockwood: Okay, I’ll post it tomorrow morning.  But if you want a shortcut to that page, you can look on that page on the right–hand side.  There’s an index.  It’s not very clear what it is.  Just a monitored headlines and what is it is they’re headlines to all the articles that are linked on that page.

Mike Rockwood: Right.

Ryan Rockwood: And on the site staff, so you can check that out.  Okay.  Michael asks, from Rhode Island, he asks, “What is your biggest success from a loan mod that you thought would never go through and what are the biggest mistakes some people make in the process of getting mortgage mods?”  Maybe we’ve answered some of these.

Mike Rockwood: Yes.  Honestly, the big — the humongous mistakes are when people submit an application with wrong financial ratios.  That just freaks me out.  I mean, what do you expect?  I don’t think I’ve ever — we’ve ever had experienced with anybody submitting an application that didn’t have a qualifying hardship.  That would be a real laugh or two.

Ryan Rockwood: Well, you know we got that.  Someone, I think they upgraded to — well, if you give me — they upgraded, remember they might have.  Entry that you probably read the other day, but one guy wrote to us and he wanted us to go over with this information, maybe Wally or something like that.  Anyway, I e-mailed it to you guys, so please go over the financials so keep an eye off of that.  But anyway, he wrote to me and he said — I said you — he said no, you don’t have a hardship, and his business closed, his wife had cancer, and then he had cancer.  I said is this the hardship that you wrote in?  He said no, he had improved it since reading our — and this is the new one, but that was real one.

Mike Rockwood: If you can’t find the hardship in that, Wally you’re a–

Ryan Rockwood: Yes, well no.  That’s a cold-hearted bank, I guess.

Mike Rockwood: Yes.

Ryan Rockwood: So you said you don’t know hardship.

Mike Rockwood: Okay.  Some of the most grievous — clearly the most grievous error is sending in an application when your ratios are out of whack.  There’s just no sense in doing that.  What do you expect them to do?  They’re absolutely going to reject it.  So it’s really clear.  I mean if you run the numbers and figure out that you qualify for a loan modification using the kit, there’s just no question that you’re going to qualify.  Now, it’s just the matter of how do you get through this mess.  So really the biggest mistakes are when people send in.  That’s the biggest laughter is when people send something.  They’ll come to us saying, gosh, I got rejected.  I’ll say well duh, you told them this?  You sent this information?  So that’s the biggest one.  Then what was the second part of this question?  What was the biggest win?

Ryan Rockwood: Mistake?  Yes, biggest win.

Mike Rockwood: Biggest success is, well I think we had a fun one the other day where for six months, a homeowner couldn’t break the log jam of why they couldn’t get a modification and they had spent a lot of time on the phone with me trying to figure out what in the world is wrong with this application.  Everything seemed right but they threw all — they threw many of the excuses at her in terms of in all these, investor won’t modify.  No, you don’t qualify for a Making Homes Affordable.  No, no, no, no, no, no.  I mean, they gave her all these no’s and finally she said, listen will you just take this over and run with it for me, and so I just — I guess just because I could ask the right questions and get pushy enough, I pushed and pushed and pushed and it wasn’t 30 days later when they got just a breakthrough modification like a 2% modification down from 7%.  So it was like a complete about face.  Six months of absolute rejection after rejection, and just to have it turned around and get a really killer modification in fewer than 30 days.

All right, here’s a question from Josh.  “Why does my banks,” ah here, this is a good one, “why does my bank seem to lose documents?  The process is so screwed up.  I have resubmitted almost every one of the documents and now they are asking for updates on certain things?”

Ryan Rockwood: Hey, look.  People probably don’t know that in addition to having loop with us everyday — my son Wilson at the at the loan modification puggle.

Mike Rockwood: Yes.  This is the loan modification puggle.

Ryan Rockwood: Seriously all in the office each day together, all right.

Mike Rockwood: All right, so Josh wants to know why they are asking for updates on things and why do they lose things.  Well Josh, I think I kind of answered your question by my earlier explanation of why they want to keep your modification kind of in limbo because they can’t get to it.  So they find reasons to put it in the queue instead of actually dealing with it.  But do take hard because you say now they’re asking for updates on things and that’s often a good sign.  Often it’s a good sign when they’re asking for more recent bank statements and more recent pay stubs.  They usually ask for that when it finally does get to a negotiator and they’re ready to do business.  So it takes an encouragement from that.

Claire asks, “After eight months of getting nowhere, I finally took your advice and stopped paying.”  Now, they are all upset that my application is so outdated.  It’s comical.”  Okay, so Claire doesn’t even have a question.  She’s just making a statement.  So, and this is not unusual.  Eight months she had been applying for modification and keeping current, got nowhere.  I’m telling you they didn’t even looked at your application because it was with the people in imminent default.  Every one of the lenders has an imminent default department and their job is to make sure that people stay imminent and not going to default, and they know that a full 97% of homeowners will stay in imminent default rather than defaulting because of a whole bunch about five or six social pressures that are on all of us not to default.  It has to do with our bias towards the status quo.  We feel safe where things are.  We hear selectively about information about how bad things are so we kind of filter that to our own liking.  We have a terrible fear of the consequences of foreclosure and we have a crazy fear about bad FICO scores.  So the imminent default department really is established to watch those 97%.  I mean, they have a 97% batting average, 970 batting averages, just by watching us poor blokes consternate over defaulting.  So fool them, default, take back the only power you have in this relationship.  Stop the cash flow and get them to treat you like a citizen, like a customer.  It’s comical but it’s true.  You won’t believe how the relationship will change once you stop paying.  So Claire, thank you for that.

Ryan Rockwood: Hey, Gamblen [phonetic] [0:28:06] Bob has a comment here.  He says he called Chase today and they now say they have their called imminent default at Chase, and they have their own underwriting.  They do their own underwriting in decision making on loan mods.

Mike Rockwood: Oh, the imminent default people do?

Ryan Rockwood: Yes.

Mike Rockwood: It’d be good to see because it’s been kind of a battle cry of the administration for a long time that people shouldn’t have to sacrifice their credit score.  But I guess, I’m kind of way beyond that.  I’m kind of like screw the credit score.  The heck with this credit score.  It’s a paper tiger anyway.  We can recover from FICO hell in 12 months.  So FICO score doesn’t scare me anymore.  It shouldn’t scare you.  There’s a lot of talk these days actually about eliminating the ability of having lenders be even able to report to FICO on defaults and even on foreclosures because many people realize that in fact the lenders are using that to manipulate the 97% of us to put unfair sociological pressure upon us not to treat them in a business-like fashion.  There’s a clause in your contract that says when you stop paying, they get your house.  It takes them a year to get it from you but it’s a business arrangement.  It’s not a moral or ethical thing and if you were to look at the relationship, if you were to be able to stand outside of it and look at it, you’d realize they’re manipulating you.  They’re berating you and belittling you with things like FICO score and things like moral responsibility and ethics and you promised to make these payments.  Well –

Ryan Rockwood: You know, we have the recording of a class we did on Tuesday if you missed it.  It’s pretty interesting about this topic, the ethics, and I guess social management of the housing crisis about a professor at University of Arizona put out.  It’s pretty provocative and pretty interesting.

Mike Rockwood: Is that an on this thing now?

Ryan Rockwood: The video is but the transcript’s not up yet.  But yes, it’s up and they can watch it.

Mike Rockwood: Okay.

Ryan Rockwood: It’s up on the side.

Mike Rockwood: All right, Yes.  Get that, it’s interesting.

Ryan Rockwood: So check that out if you missed that.  I want to say that we got — Adrian’s got a question here.  Mike, please define back-end DTI under 70%.

Mike Rockwood: Yes.  Okay, so your back-end DTI means that all of your debt payments added up as your student loans, all of your mortgages, your credit card debt, any installment debt that you have, all your debt payments added up divided by your gross household income.  If that’s more than 70%, the lenders want to disqualify you because they feel like you have too much debt that after you pay your taxes and you try to live on what’s left, you won’t be able to do it.  So once you get up above 60%, it’s not uncommon to have the lender suggest or even require that if they modify the loan, they want you to go through some kind of credit counseling class which can actually be quite unlikely.  So that’s what back-end DTI is. That’s your total debt payments and it’s the minimum, but it’s the total debt payment.  Okay.  So that’s what back-end DTI is.

Okay now, Maria asks, “Is there any advantage to go into these live events?  PNC bank is conducting one next week and has invited me.  Are these events beneficial?”  Maria, I really think that they are beneficial and you guys all know what she’s talking about.

Ryan Rockwood: Yes.

Mike Rockwood: This live events are when a bank, a lot of times for public relations reasons they hold these live events where they will invite thousands of people to come and talk to them about their loans.  Sometimes they do it in conjunction with some a nonprofit organization and they make a big fair of it and that attracts tens of thousands of people sometimes.  But very often a bank just will do it themselves and they’ll invite thousands of people and hundreds will show up.  They have dozens of their negotiators ready to sit across the table from you and talk about your specific application for a modification.

I really do think it’s unusually helpful, extraordinarily helpful.  You’ll spend a lot of time at it but a few things are working for you in this regard.  Number one, they appreciate the fact that you took time to come and see them.  Number two, they don’t.  They do not look forward to any bad press that you might give them about wasting your time and saying they’re going to help you and then not helping you.  Then also the division that runs those public events also wants to demonstrate not only for the press but for their management that this system pays off.

So I think their negotiators are highly incentivized to really do workouts with you.  So very often I’ve heard people get good results and I personally have gotten good results at those as well.  So I recommend you go take the time and really be ready to negotiate though.  Have your budget just locked uptight at everything in order and then go for a good modification.  It will be a good way to get started or to give it that extra push that it needs.

Jack says, “I have two loans with Litton Loan Servicing.”  Those guys are some of my favorite people.  “The second is only $17,000.  Can I try to get the second wrapped into the first?”  Jack, I think that is a logical thing to pursue but I have not seen it done.  I have seen a lot of people try it and I think in the future, we’re going to see more of that but right now, I just don’t think you’re going to have luck with it and you might kind of waste some of your negotiating power trying to get that done.  What I would do instead is negotiate on each loan separately because remember they might be owned but they’re very likely owned by separate people.  You know what I mean?  If one is the first mortgage and it’s — I don’t know — $100,000 and the other one is $17,000 they’re probably owned by very different kinds of investors.  Litton might actually own $17,000 one.  So it really is kind of separate issues and so I don’t think there’s a lot to be gained by doing it.  Keep in mind negotiating on that second, how much leverage — how much more leverage you have than that first particularly if you live — I see Jack lives in Arizona where values have fallen so far.  So that 17,000 is probably toast and you probably could convince them to keep it on their books for $50 a month until you decide what you’re going to do tell them you need that at least for a year until you decide if you’re going to short sale or modify instead.

Ryan Rockwood: Okay.  I got a question here from one of our members who the e-mail address includes wind stream and I’m sorry, I can’t remember the name.  But this person says just cut them under six months trial mod with just over last month but no clear instructions as to what to do now.  How to get a different verge or whatever?  Do you — what do you recommend?

Mike Rockwood: Okay.  First of all, I’m troubled by the fact that it was a six-month trial mod.  That sounds like a special forbearance instead of a trial mod.  Usually the trial mods only last three months so the six-month things are usually something different like a special forbearance.  So if you really did have a trial mod then they’re, of course, are going to be all crazy all over you to get you onto a permanent modification.  So my first question would be was it a good mod?  If it was, then you’re interested in making it permanent.  So be proactive.  If it was not and you’re not satisfied with it, then let the chips fall where they may and start the process of negotiating with them all over again when they start rattling your cage.  See now, what we also don’t know is your strategy to keep the house and stay there or is your strategy — do you know in fact that you’re so upside down that you want eventually get out of this mortgage?  If that’s the case then, you’re going to want to just let them come and find you to make this thing permanent, right.  So there are too many variables here.  You need to send us a little bit more information and please feel free to do that by e-mailing and we’re starting to get caught up on some of on our e-mails so we’ll be as responsive as we can.

Ryan Rockwood: Yes, Sean writes saying, he says hell the second lien holder City Bank and they say he has too much equity for a modification and that he should try refund.  But he says it’s probably not going to work because it’s been recently 30 days late on the mortgage and high credit cards.  So what would this — what do you think equity has to do with that?

Mike Rockwood: Yes.  The second lien holders are kind of on a tear.  Second mortgage, it’s not just my opinion.  It’s in all forums and all the chats.  They’re all talking about how the second lien holders and hillock holders are all in a tizzy and it dug their heels in and are giving everybody fits not only homeowners, their clients, but also first mortgage holders and they’re not agreeing to short sales and they’re asking for more and more and more and more.  So we can’t say really for sure what it’s about. It may be — I’ve run into a lot of this kind of stuff where the second lien holder will say no, we’re not going to play ball with you because your current and all your other debts, ours is the only one you’re going late on.  So we don’t think you really have a problem and they’re banking on the statistics and the statistics are in their favor that in fact you won’t default.  In fact, you won’t let them charge it off.  In fact, if they pursue you with an attorney in fact, you’ll pay up instead of settling.  So I don’t know how to get more specific than that without knowing more.

Ryan Rockwood: You know the HAMP Refi maybe something that what I’m going to do Sean is e-mail you the name of a lender that we’ve had on the show and that works with us a lot.  Her name is Kennedy and she does — she among others, she could do the HAMP Refis.  Now, HAMP Refi is something that if you qualify for, it may work even though you had some lates and stuff.  So see her about that.  Her e-mail address is kennedi@tmglending.com and write her and say, “Do I qualify for the HAMP modification and if so, can you do it?”  I see that would be HAMP Refi, and if — because if that’s the case, it might be actually easier in getting a loan mod and it’s a pretty killer deal apparently.

Mike Rockwood: Yes.

Ryan Rockwood: From what I’ve heard.

Mike Rockwood: If you qualify.

Ryan Rockwood: Yes.

Mike Rockwood: All right.  Will says, “We had a rough time during 2009 but now my income is back almost to normal.  We incurred about $35,000 in credit card debt during the year though and now those payments are a burden.  Can I use that as a hardship?”  Yes, absolutely Will.  So here, Will had a lousy year.  They used their credit cards to keep current on everything and now those payments are burden and that’s absolutely a hardship as defined by Making Homes Affordable Program and as accepted by all of the modification programs.  So go ahead and use that as a hardship, Will, and also get on those credit card debts $35,000 in credit card debt, I would encourage you to think about if you are, if you find it — if you find yourself back to the wall and can’t repay those credit cards, I would really consider settling them, and I don’t just jump to that solution.  It’s a solution that an awful lot of people are finding the only one that is really a good tolerable solution.

I would encourage you Will to do something that most of us do not do.  Take a look at $35,000 in credit card debt.  Look at the interest rate you’re paying.  You probably are in denial.  You probably selectively filtered out the interest rate that you’re paying.  Go to an amortization table on the internet.  Just Google an amortization table for credit cards and plug in your minimum payment and take a look at how scary it is, how much money you will pay, and how long you will be in debt.  You have not just incurred $35,000 in credit card debt, you have sold your financial soul because I’m telling you it’s going to be on the order of, I’m just guessing but it’s going to be on the order of $100,000 in interest that you’re going to pay and it’s going to be on the order of 20 to 25 years before you dig out of it.  All along the way, you’re going to incur some late fees.  You’re going to incur other penalties, and guess what?  You’re going to use this card for something else.  So it’s going to be longer than that.

In other words, what I’m saying is you got it.  You and we all have to wake up to what this incredible indebtedness is doing to us.  It is literally mortgaging our retirement and I’m 55 years old so I really feel it.  But even people like this guy who is 35 years old should be feeling it because man, you don’t want to spend.  Here’s the thing Will, not only are you trapped by that 35,000 and you’re going to take 20 years and $100,000 of your income to repay it but you’ve missed the opportunity on that $100,000 to make a million that you can retire on.

Ryan Rockwood: Okay, well let’s go on.

Mike Rockwood: So it’s a shame.  Okay, sorry.

Ryan Rockwood: This guy wrote back to us about the forbearance.  “I had a three-month forbearance then they said paperwork total is six-month agreement.  I’m not sure whether it was a forbearance or a mod.”  Wow, I assumed it was a mod.

Mike Rockwood: Yes, that’s a forbearance.

Ryan Rockwood: “It was $600-lower payment but they did nothing to change the second with B of A too.  But how is it going to pass the way just now begun kind of think clearly enough to face this?  Wants to keep the house, it’s not upside down, in fact that’s great value based on resale.”  So we were talking here about the six–month modification person.

Mike Rockwood: Yes.

Ryan Rockwood: And what they should do –

Mike Rockwood: That’s the same person, right?

Ryan Rockwood: Yes.

Mike Rockwood: Okay.  So they had three-month and then it went to a six-month.  Okay.

Ryan Rockwood: Then another three-month.

Mike Rockwood: Yes.  Here’s the deal though.  You are in fact, in all those, you’re paying below the minimum.  I recommend you check your credit report because I’ll bet you’ve been recorded late every one of those nine months.

Ryan Rockwood: Yes, late.

Mike Rockwood: I bet you’re also — they’re also lumping the shortfall onto your mortgage every month.  So it’s good news but bad news.

Ryan Rockwood: No big deal.  It is what it is and you know what it is.

Mike Rockwood: Yes.

Ryan Rockwood: But moving on.

Mike Rockwood: Right.  Moving on, you have to get after them and get a good modification and if now you have much less income because of the situation, you got a real challenge ahead of you.  But the numbers are really easy to predict.  So if you have our kit, fill out that the budget and get it to us and fill it out as best as you can, get it to us.  Schedule your 20–minute teleconference with us and let’s dial that budget in to see if you can convince these guys to go with the Making Homes Affordable Modification for you.  That’s what you need,

Ryan Rockwood: Yes, clients don’t cry.  You can send us your budget and your hardship letter and we’ll go over those by e-mail with you.  We also have a 20–minute phone call that you can schedule just by clicking that button right there on the screen, Schedule and Appointment, okay.  So do it.

Mike Rockwood: Let me take this one from Tina.  Tina says, “My Florida rental home is a real money maker and I want to try to keep it but Saxon says they won’t modify non-owner occupied properties.  The loan is a jumbo almost $1 million but it’s at 7.65%.  Any tips on getting them to change their policy?”  Yes Tina.  Saxon is a real stickler when it comes to this non-owner occupied properties.  They were probably the toughest one of all but they do in fact have an in-house team.

So here’s what I’m going to recommend Tina.  First of all, clarify first who your lender is.  They have to tell you who they are.  So if they won’t tell you over the phone then send them a qualified written request asking for the name of your lender, the name of the owner of your loan.  That owner is obligated by law to modify your mortgage if they accepted any TARP funds.  So that’s issue number one.  Number two, ask Saxon if this loan — this really makes me mad — if this loan has been reviewed by the in-house loan modification team because here’s what happen.  You just get so pigeon-hold into these different departments so maybe your application ended up in the Making Homes Affordable and they saw no, this is a jumbo.  It doesn’t qualify so they reject you but what they don’t tell you is they’re the Making Homes Affordable Department.  There is a HAMP or there is an in-house department and there is a jumbo department.  So you got to push back on them.  Make sure that it was evaluated by the in-house specialists at Saxon and if the negotiator or the loss mitigation officer that you’re talking to.  Be sure you’re not talking to a customer service person.  Be sure you get to Loss Mitigation Department and when you get there ask them to talk to a supervisor because you have to get it straight.  Has it been evaluated by an in-house loan modification officer because the Making Homes Affordable people will reject it.

Ryan Rockwood: All right.

Mike Rockwood: Then also I got to say, ultimately Saxon will go to bath for you and try to get your investor to modify your mortgage but they really resist.  So you have to push.  I’ve been successful with them on three occasions but only after a real fight.  I mean a real fight, lots of defaults.

Ryan Rockwood: All right.  Well, let’s wrap it up.  I think…

Mike Rockwood: Okay.

Ryan Rockwood: We got a good class.  I’ll just follow this up.  You did the budget for her on this and the loan mod application was sent to B of A that’s why she thought it was a loan mod.

Mike Rockwood: Okay.

Ryan Rockwood: It is personally named as Theresa.

Mike Rockwood: Yes.  Well Theresa, we wouldn’t have let you send it in unless the ratios were right and the cash flow was right.  So stick to your guns.

Ryan Rockwood: Yes.  But now, so to the follow up, the good news is you’re ups done.  Now, the follow up now is on you Theresa, and I think what you need to do is call them and make sure they’re considering your loan mod application, right.  Isn’t that the best thing to do?

Mike Rockwood: Yes, yes because it may be in one of these queues that honestly can, if you’re not in default, can last four months or more.  So yes, you got to be proactive in your followup and ask the right questions.  Make sure that you don’t go more than 30 days without getting assigned to a negotiator and once you get assigned to a negotiator, very often the customer service rep or the loss mitigation rep that you’re talking to can e-mail the negotiator.  Most often, they won’t give you that person’s name anymore or e-mail address or phone number certainly.  But what they will usually agree to do and they’ll read you exactly what they’re going to e-mail to them.  They’ll ask you to contact them and you want to know if there’s been any progress or you want to know if they have a projected time when they’re going to be able to get to your modification et cetera, okay.  All right, thanks everybody.  We got to remember to…

Ryan Rockwood: Why don’t you tell everyone about the program in case they’re not clients and they got on call?

Mike Rockwood: Okay.  If you got on the call and you’re not a client, I want to recommend to you that you go to — that you do look into the products that we sell, the 60–Minute Loan Modification Kit is the premiere Do-It-Yourself Loan Modification Support Kit.  We always recommend that you do loan modification yourself and we always recommend that you never do them alone.  You got to remember that the banks and all the non-profits, all the government agencies are on the other side of the table and you need somebody on your side of the table giving you good advice about insider tips on what’s working and what’s not, what they mean by certain questions, what ratios they’re looking for, insider tips to make your modification successful and that’s what we provide.  So the kit is very, very inexpensive and enables you to kind of level the playing field with the lender.

Ryan Rockwood: That’s our show for today.

Mike Rockwood: That’s the information we’ve got for you.  We’ll be back on Tuesday and next Thursday.  We look forward to helping you and I really want to encourage all of you to get after loan mods.  They can be a significant part of the way that you help prepare your family for tough economic times.  So best of luck to everybody.  Good night.

Ethics of Loan Modification and Walking Away

Rec live: Feb 2, 10

Many folks still ask me if it is unethical or immoral to either seek a loan modification or walk away from their underwater home. It’s a question close to my heart, because of my own deeply held religious beliefs and the life circumstances I have experienced under which they have been thoroughly tested.

Recently I was pleased to learn about an academic paper published by Law Professor Brent White out of the University of Arizonia. The paper is titled, “Underwater and Not Walking Away: Shame, fear and the Social Management of the Housing Crisis.”

Join us for tonight’s live show – open to everyone – during which I’ll do my best to highlight some of these issues. Prepare to be a little challenged in your way of thinking! And don’t worry, it’s not an academic discussion. It’ll be light and fun as always!

Now: read the transcript!

Mike Rockwood: All right everybody it’s that time of week again.  It’s 6:00 on Tuesday evening, and it is the Foreclosure Doctor.  It’s Mike Rockwood and Ryan Rockwood from the 60-Minute Loan Modification Company and we’re here to talk to you — kind of Open Mic about foreclosure topics anything related to foreclosure not just loan modification, of course, also short sales, just walking away negotiated settlement, deed in lieu, any kind of workout of arrangement you can imagine we’re here to talk about.

Ryan Rockwood: Why don’t we say it again just because these people couldn’t hear?

Mike Rockwood: Okay.  All right, do you think we’re ready to go?

Ryan Rockwood: Yes.  We’re ready to go.

Mike Rockwood: Okay.  Sorry about that everybody.  We had a little bit of technical difficulty as we often do.  We need a new technical director, I think.  But at any rate, it’s Mike Rockwood and Ryan Rockwood and we’re here.  It’s Tuesday evening at 6:00.  That means it’s time for the Foreclosure Doctor Teleconference and videoconference series.  Ryan and I literally pushed ourselves away from the desk working on loan modifications and foreclosure workout to spend the end of our day answering your questions about what we’re learning in the area of foreclosure workouts.  Our lawyer always wants us to start every teleconference by telling you that we are not lawyers.  He is the lawyer and you have to send him money if you want legal advice.  Don’t take our advice as legal advice, it ain’t.  All it is is telling you what we’re hearing on the streets, what we are seeing, what clients — what kind of deals clients are working out, what banks are up to, and how that home negotiation process is going.  We are also not CPAs or tax advisers, but we also do pass on to you all kinds of information about what our clients are finding out in terms of the tax consequences of forgiven amounts and short sales and loan modifications, et cetera, et cetera.  So don’t take our word as tax or legal advice, but believe me you should take our advice.

So we’re here to tell you that as bad as everything sounds in the loan modification game, it continues to go quite well for our clients.  Now, we don’t stay as in touch with all of you as we should or we could but we do take on number of clients where we do the modifications for them.  We’ve always told you that we’re really strong proponents of the Do-It-Yourself Loan Modification effort and really all the foreclosure workout efforts.  We really advocate that people do them themselves for a number of reasons, but we also do loan modifications for clients because plenty of people just can’t do it, won’t do it, that they know they’ll never going to get around to it or they don’t have the right temperament for it so they hire us to do it.  We got to tell you, in spite of all the bad press, we are — we continue to have good success.  Over 95% of our clients get approved.  We had two approvals this morning.  So we’re very pleased to report that a couple of clients who got really wonderful, wonderful loan modifications, shaving for an $800 respectively off of their mortgage.  But you know, those numbers kind of sometimes hide the fact that an even more important thing has taken place.  A lot of folks are going from negative amortizing loans — which one of these was this morning — to a slightly lower payment, a fixed rate fully amortized.  How beautiful is that?  I mean it’s just an about face.  This one client yesterday had already — or earlier today had already accumulated $50,000 in negative deferred credit — debt deferred interest.  So this just turned it around from each month paying about a month short — or about $100 short, so each month they were digging another $100-hole, little $100 deeper in debt.  Well now, they are like full $700 to the positive every month, so it was just extremely beneficial to them.  So a lot of good things are happening in spite of all the bad news but today –

Ryan Rockwood: You know it is true.  You do think that everyone has gotten out of those horrible arms already but that’s not true.  Are you there?

Mike Rockwood: Yes.

Ryan Rockwood: Yes, sit there.

Mike Rockwood: Even some of the neg-ams, you know?

Ryan Rockwood: Yes, that’s one [Indiscernible] [0:05:08] today.  It was 200 neg-ams still, and I said, “How much you’re going negative each month?”  She said, “You know what?  I’d say I don’t even want to know.”

Mike Rockwood: Yes.

Ryan Rockwood: Yes.

Mike Rockwood: Yes.

Ryan Rockwood: Yes.

Mike Rockwood: Oh, that hurts.  All right, so…

Ryan Rockwood: Anyway, for those of you that are new to the show, I want to thank you for coming.  I want to thank for stopping by.  Basically my father, Mike Rockwood, and I put on this show and another one for our personal clients.  We put another show on a Thursday night.  On Wednesday night, we put on a similar webcasting program for people who want to settle their credit card debt, which is often the next step after getting your mortgage handled as you kind of triage your financial life.  But excuse my voice.  I got a bit of a cold.  But basically, my father — this broadcast tonight is designed to answer questions and to provide up-to-date information on loan modification and foreclosure options which, let’s face it, it’s really hard to find some objective, current information on those topics.

Mike Rockwood: Yes.

Ryan Rockwood: Usually you can find someone espousing a loan modification or maybe short sale or something like that.  These are competing voices in the market place and that’s the best you can get.

Mike Rockwood: Usually there are siren song singing you over to their particular solution that, oh yes, also cost you an awful lot of money.

Ryan Rockwood: Yes.  So I mean, what we wanted to do is create an environment where we could try — what we’ll try to do is diagnose a client and try to say okay, is the loan mod the perfect thing?  If not, let’s recommend something else and push you that way, and so on and so forth, all over the country.

Mike Rockwood: So we help you think through the options because there is a right option for you.  There is a way forward and sometimes it doesn’t seem like it but with our experience in all the different foreclosure workout options, we can give you as close to an unbiased opinion as you’re going to get.  But we’re very experienced opinion, and we’ve been down all these paths.  We really got into this business not by great strategy but actually by financial need.  I got forced to pursue loan modifications for myself almost two full years ago now, and the thought — the things that I learned after so many fits and starts and failures and mistakes was that there are an awful lot of tricks to it.  So I wrote the 60–Minute Loan Modification Kit to kind of pass all those tricks along to other people, to show people how, yes, you do need — I recommend you do it yourself just like the government does and just like the banks do, but I don’t recommend you doing it alone.

Everybody on the other side of the table, believe me, they’re on the other side of the table.  You need someone on your side of the table to interpret the questions for you to help you understand the financial criteria that the banks are looking for so that you can see things.  You can level the playing field a little bit so that it’s at least somewhat fair, right?  Bank holds all the cards, but with our help, with the help of somebody who has done now almost 200 modifications, you get insider street smarts about how to make it work and that’s what we like to bring to the table.  But what we always do is start off this teleconferences with some kind of commentary and latest news update and maybe a teaching on a particular part of foreclosure workouts, and tonight I want to talk –

Ryan Rockwood: We should tell everyone before we get started, how they will contact us.

Mike Rockwood: Yes.

Ryan Rockwood: If you’re watching online, you can sign on to the chat that, frankly sometimes work, sometimes doesn’t.  If you have a real burning question, go ahead and email it in to questions@60minuteloanmodification.com.  We’ll try to tackle it live on the air.  Also, if you have to tuned in on the phone, we will try to give our phone callers their due time and switch over there and ask a phone question but that just never goes great because with all the people on the line, all the background noise and that’s not the best way to get your questions.  All right, but you got to do what you got to do.  You got to operate with the resource that you got available to use, so based on whichever one of those options you can select, do it.  Okay.  Now, get back to you.

Mike Rockwood: Okay, so tonight I want to deal for a little bit — I want to dwell for a little bit maybe 10 minutes or so and Ryan, I kind of want to draw you into this conversation because I know you feel passionately about this and I really kind of wanted to be a back and forth, maybe a dialogue between us about why this whole housing mess seems so unfair.  There’s really been something just kind of nagging at me since the whole thing started. As it grew and grew and grew and as we realize that at the core of it was an awful lot of, oh, the securitization of our mortgages, the globalization of our financial markets acted like a big sucking vacuum that just pulled mortgages out of thin air actually created some of them, actually gave them to people, encourage people to take mortgages and encourage property values up, up, up so that we get more mortgages so that we can sell more.  That whole thing collapsed didn’t it?  Now as we all American homeowners are left holding the bag.  I’ve increasingly become angry, frustrated, and just had this gnawing sense that doesn’t everybody else sense how unfair this all it is, and of course you get plenty of people who says, “Yes, those bunch of dummies getting those subprime stated loans, buying more home than they could afford.”  The people that I call smugglers, I called them smugglers now because, gosh, they were so smug sitting on the sidelines in the greatest housing run up of all time, of all time, of all time.  Did I say of all time?  We have just experienced the biggest run up of all time and the biggest collapse of all time in the real estate world in the history of mankind.

So the people who sat on the sidelines smug.  I’m telling you, they did so because they couldn’t afford to get in.  They did so because they didn’t have the nerve to get in or they did so because they didn’t have the brains to get in.  Give me a break, to not have gotten in on the housing boom in the last 15 years.  If you didn’t do it, you simply are what I call a smuggler.  Now, you sit back and you point fingers at people who got caught with all that real estate.  Well, okay.  But –

Ryan Rockwood: Well you know the other thing is that there is a trace amount of — I don’t know how exactly to describe it but we’re so — it seems like here in — I really don’t know if it’s our country but certainly in our society.  We’re so eager to hate ourselves as we hate people who fail.  It’s just like the question is these people who are criticizing you today are just making it.

Mike Rockwood: Yes.

Ryan Rockwood: About to fail — they’re tomorrow’s failure.

Mike Rockwood: Yes.

Ryan Rockwood: You know what I mean?  They just haven’t admitted it yet.  So anyway, what I mean to say by that is all this is basically, I think what you’re doing is setting us up to talk about this article, this academic paper.  They kind of touches on some really powerful topics, right?

Mike Rockwood: Yes.

Ryan Rockwood: Well, I mean basically the whole idea being — I mean, I don’t know anything how we got here.  I don’t know how it happened.  I don’t know who’s to blame.  I don’t know whatever.  But I can sit in this particular situation from right here where I am and say okay, I have a house that won’t return to its value for five years and to hold it for five years is going to cost me, I don’t know $100,000 in holding cost more than it would to rent.  I can say I mean, am I — is there any reality to me being able to carry this housing burden personally, the American — I mean, there are government programs to bail out banks because everyone knows a bank can’t carry it, right.  Everyone knows the bank can’t.

Mike Rockwood: Right.

Ryan Rockwood: Bear the brunt of it.  Everyone knows that insurance companies can bear the brunt of it.  Countries, their treasury bonds can’t bear the brunt of it, whatever, right.  But somehow the American…

Mike Rockwood: Yes.

Ryan Rockwood: Is making 30 grand a year, is supposed to be…

Mike Rockwood: Yes.

Ryan Rockwood: The one that the dog that carries that thing home.

Mike Rockwood: Well, let me start by kind of setting the stage and a little bit of a preamble as to how bad the situation really is because most of us are so optimistic that we really don’t like to look at how bad it is, and I don’t either but let’s just talk about for a minute.  Right now, today, 15 million homeowners are underwater.  That’s about 1/3.  So as you look down your block, about 1 in 3 is underwater.  They owe more on their home and their home’s worth and most experts agree that by this time next year it will be 50%.  Don’t be fooled.  We’re not at the bottom.  Housing prices have not stopped to decline.  The foreclosure rate continues to be strong, so most experts are agreeing we’re going to get to 50% where every other house on the block is upside down.

Now, this kind of hides the fact or kind of masks the fact that in certain states like Florida, Arizona, Nevada, Texas, California, the rates are almost double that and already almost 70% of the homes in Nevada are upside down, 70% are upside down.  So and many — because the homes in a lot of — in the states were so expensive, you know what I mean, these are the states that really climb high by 2005.  So a lot of these homeowners are upside down by more than 3 to 5 times what they earn in a year.  So let that sink in for a minute.  They are upside down more than traditionally we have recommended people even borrow to get a home.  They’re upside down by that much, much less owing that value on the home.  They’re upside down by that much.  Let it sink in.  As you let it sink in, it should freak you out.

Ryan Rockwood: But to the extent that homeownership is no longer — I mean, when we get to 30% and 50% underwater, our perspectives of homeownership has to change so much so that when you meet someone at the park, then say, oh, we own our home, it’s like telling someone that’s bad freaking news.  You know what I mean?  It’s going to be shocking to the extent of, oh God, you own a home.  That’s not necessarily good news.

Mike Rockwood: Right.

Ryan Rockwood: I mean it is news.

Mike Rockwood: Right.  Okay, so — but with such high instance, and remember I said 66% in Nevada.  With such high instances of people being upside down, only 3% are strategically defaulting.  A strategic default — all of you should get familiar with that term because this is going to become really popular — what that means is that people just playing the side not to make their payment for either because they’re going to decide to leave the home or because they’ve decided they need to do that to get to negotiate, to get the lender to negotiate with them in good faith for a short sale or for a loan modification or a deed in lieu or for whatever.  So get a load of that, 50% are going to be upside down yet only 3% are walking away.  Why is that the case?  Well, we can think of several reasons off the top of our head.

Number one is we love our homes.  We really do.  We have a crazy love of home.  Number two, it costs money to move, right?  It’s a hassle.  Number three, Americans are eternal optimists about home values.  After all, it’s been the way.  It’s been this way all of our lives.  Homes have appreciated all of our parent’s lives, all of our lives.  It’s always been a good investment.  We have a hard time starting to realize that things have changed.

Then there are three reasons that maybe you haven’t thought of.  The first one is we’ve never experienced this before, nobody has and we don’t know how we think about it yet.  Then there’s the desire to avoid the shame of foreclosure, and then there’s the exaggerated anxiety about the consequences of foreclosure.  These last two, avoiding the shame of foreclosure and having exaggerated anxiety about the consequences, are the topic of a paper that I really recommend you get and read if this topic is a whole ethical topic of the morals and ethics of the housing downturn if that fascinates you.  The study was done by the University of Arizona Law School, and the study is called Underwater and Not Walking Away: Shame, Fear, and the Social Management of Housing Crisis.  The author says that those two things are really — that the government and the banks unfairly coerce homeowners into shouldering a larger share of the housing crisis burden then they should.

That’s what Ryan’s referring to.  The mortgage contract is real clear.  Homeowner make payments or else bank take home.  The bank rather than just exercise that legal contract, we get into quite at tizzy because of those factors.  They’re socially managing us into shouldering a burden that they’re not willing to shoulder.  In other words, if it’s financially beneficially for them to foreclose on your home, they simply do whether you’re a single mom, whether you’ve lost your job, it doesn’t matter the morals or the ethics of it.  The legally binding contract is as stated and the bank is expected and none of us judge them morally or ethically.  But somehow for individual homeowners, we judge them morally and ethically and we say they’re doing a shameful act or an immoral act or an unethical act.  But the authors identify many current proposals that I wasn’t aware of for handling the crisis.  You’ll get to kick out on some of these Ryan.

Ryan Rockwood: Oh yes?

Mike Rockwood: Then the authors do have their own recommendation which I am going to become the number one proponent.  I’m going to start writing about it.  I’m going to start really becoming an advocate of it.  Okay, so the first one is should the government in fact be sending money to homeowners instead of to the banks?  Would it have been better to have establish or could still be better to establish some kind of fund that would allow — that would either subsidize payments to do the same thing that the banks are doing with homeowners or to actually write down principal, which is something the banks are not doing?  Would that have been smarter than to just give banks money that you know by the way that they have not lent the money to homeowners or small businesses, right?

You know that they haven’t passed that money along.  I mean, just so we’re clear.  That money was used to get a return in 12 months big enough to pay it back and that money was not used for the intention that it was lent out or that it was given out.  So that’s the first proposal.

A second one is that we should empower the bankruptcy courts to cram down just like they do on car loans or other installment loans.  They can cram down and that proposal has come around a couple of times in the legislature, but the banks have successfully lobbied against it.  So that would enable a judge to look like in Chapter 13 and say as they reorganize their debts, I’m going to take that mortgage down from, say, $750,000 on the single family home in Riverside, California down to 85% of today’s current market value, $185,000 in Riverside, California.  So what’s good about that proposal is, I mean, that’s what eventually has to be done.  That’s what happens when the bank forecloses and resells it anyway.  But that would allow the bankruptcy courts a great deal of power.  People would flock the bankruptcy.  The bankruptcy would be overwhelmed and it would also limit the relief to people who can qualify for bankruptcy.  A lot of us cannot because we have a good steady income.

A third proposal is a prepackaged cram down that we could just apply for without going to the bankruptcy, without actually filing bankruptcy.  So you got the same kind of cram down but you just apply for it by zip code.

Ryan Rockwood: Oh, that would be cool.

Mike Rockwood: Yes.  So here’s — the proposal was that if your zip code has declined by more than 20%, your zip code qualifies.  Everybody within the zip code could apply for one of these prepackaged cram downs.  The cram down would require that your lender write down your mortgage to 85% or 80% of market value.  So some of these things are just absolutely powerful and they kind of turn the current.

Ryan Rockwood: But where are these recommendations from?

Mike Rockwood: These are from various academic sources that have…

Ryan Rockwood: Looked at it.

Mike Rockwood: Submitted proposals to congress.

Ryan Rockwood: In his document that we found, they’re presented?

Mike Rockwood: Well, no.  He just references them because he builds up and talks about pros and cons of each of those, but then kind of builds up to a proposal that he thinks is even better.

Ryan Rockwood: Okay.

Mike Rockwood: So this prepackaged cram down one I think is really, really sweet.  But you see what these three have done so far is they kind of turn everything on its ear.  They kind of say, power is no longer only the hands of the banks to make us afraid of our FICO score, to make us afraid of the shame of foreclosure, but it kind of just turns things on its ear.

The fourth one is at least the government should fund a massive educational campaign and a PR campaign to retrain and educate people that it is not morally and ethically wrong to walk away from an upside down mortgage.  See, the author feels like the government is unethically supporting the banks by allowing them to — I mean, they got this big FICO monster that they sick on us.

Ryan Rockwood: Well, that what I feel like too because you get the impression that the President is trying to save the banks.

Mike Rockwood: Yes.

Ryan Rockwood: You know, like I mean, I know he’s trying to save housing through the banks.

Mike Rockwood: Yes.

Ryan Rockwood: But you still get the distinct impression that hurting your bank would be hurting the housing economy.

Mike Rockwood: Right.

Ryan Rockwood: In fact, I heard one lady at NPR say how she came to that thinking that she’s just going to walk away and people wrote in and said is that kind of selfish — she was way underwater.

Mike Rockwood: Yes.

Ryan Rockwood: It was never going to make it back.

Mike Rockwood: Yes.

Ryan Rockwood: She was just going to walk away and no other options.  But that is a good option.

Mike Rockwood: Yes.  The offer goes to great length.  In fact, there’s a whole section of the study that makes it very, very clear that it’s a smart financial decision and it’s best for your family, it’s best for you, and ultimately maybe best for society.

Ryan Rockwood: It can — yes.

Mike Rockwood: Yes.

Ryan Rockwood: In two years he says –

Mike Rockwood: Yes.

Ryan Rockwood: — you can buy another house.

Mike Rockwood: Yes.

Ryan Rockwood: She was kind of like…

Mike Rockwood: Yes.

Ryan Rockwood: What other option is there that doesn’t cost you anything?  There’s no paperwork or –

Mike Rockwood: — or you scoop a quarter of a million dollars.

Ryan Rockwood: Yes.

Mike Rockwood: Yes.

Ryan Rockwood: Also, people wrote in and they said — one guy said is this kind of selfish out for themselves thinking they got us into this kind of mess in the first place.  I thought, well, I mean…

Mike Rockwood: Yes.

Ryan Rockwood: I guess.

Mike Rockwood: But it was.  There are the banks.

Ryan Rockwood: Yes.

Mike Rockwood: Okay.

Ryan Rockwood: So again, we’re asked.  You’re right.

Mike Rockwood: Yes.

Ryan Rockwood: So we’re asked to shoulder the burden there.

Mike Rockwood: Yes.

Ryan Rockwood: These are people that cannot.

Mike Rockwood: Yes.  So you go to green lights to look at the mortgage contracts.  You realize that it really it should be a shared equity kind of situation.  I mean, the equity went away and if you want to, the government — he says, he proposes that the government at least should enter into a very expensive and aggressive educational program to make all of us understand that this is purely a business transaction that you’re in with the bank.  He recommends — his best recommendation for what to do is to level the playing field a little bit by at least preventing precluding the banks, preventing the banks from reporting mortgage lates and defaults and foreclosures to credit bureaus.

Ryan Rockwood: Wow.

Mike Rockwood: Yes.  He says that, at least, or take away this ethical, moral baton that they’re being us with and so then at least homeowners would say, well, we’ll give us some more clear picture on what the implications are in terms of defaulting and walking away from these loans.  I’m telling you, my mind has been in this place for so many months that to read this report is just like — it’s like how when you read some holy word or something and it just exactly says exactly what you’ve been sensing or feeling or knowing deep in your soul.  That’s how I am with this darn study.  It’s just like every page is like yes, yes.  So for those of you who have been laboring under the burden of the shame of foreclosure, the shame of the reality that you’ve been casts into.

Ryan Rockwood: You know, there’s even that resistance to doing the loan mod because…

Mike Rockwood: Yes.

Ryan Rockwood: It’s kind of like I don’t want to be a person who…

Mike Rockwood: Has to [Inaudible] [0:28:17].

Ryan Rockwood: Yes.

Mike Rockwood: Yes.

Ryan Rockwood: I don’t want to that puts me into a category that I’m uncomfortable with.

Mike Rockwood: Yes.

Ryan Rockwood: You know.

Mike Rockwood: Yes.

Ryan Rockwood: They say these 81% of people feel that it’s unethical to somewhere in there to not make a mortgage payment.

Mike Rockwood: Well and here’s –

Ryan Rockwood: You know, I don’t think that — I mean, I think that it’s good and kind of neat that people are challenged by these issues.

Mike Rockwood: Yes.

Ryan Rockwood: You know what I mean?  It’s just that I don’t like — I guess like most religion — you know I don’t like where most of the people come out.

Mike Rockwood: Yes.

Ryan Rockwood: Where most of this flushes out.

Mike Rockwood: Yes.

Ryan Rockwood: I think you kind of fall a little bit short in a way of, I don’t know, mental effort or something like that.  You know what I mean?  You don’t stop thinking about right away.

Mike Rockwood: So anyway, we want to encourage all of you to press on.  Press on with you workouts.  You are about the business of taking care of your finances.  Don’t be dissuaded by the fact that — you know, the paradigm that you’re working in says that there is some shame to default, that there is some shame to foreclosure.  Don’t believe it.  Reject it.  It’s a new paradigm.  It’s a new time.  Think outside the box.  Take care of issues.

Ryan Rockwood: Yes, and not to get to like, I don’t know, like what would be the word?  I don’t know not — the conspiracy theorist or something like that — you know, this is where shame of fear really start to become tools of mind control –

Mike Rockwood: Yes, sure.

Ryan Rockwood: — and of slavery and of oppression.  This is where the radical American, in a sense, really has a possibility of — our minds, I think, can probably cut through a little bit easier than some other society because we’ve said “heave ho” we’re not going to be part of this government anymore.

Mike Rockwood: Yes.

Ryan Rockwood: We’re not going to be part of this tax system anymore.  Those are big bull steps –

Mike Rockwood: No taxation without representation.

Ryan Rockwood: — of redefining our reality.  Lots of people and lots of parts of the world said, oh, this sucks.

Mike Rockwood: Yes, and just go about their lives.

Ryan Rockwood: Yes.  But there is something about American mindset that can overcome this.

Mike Rockwood: Yes.

Ryan Rockwood: Now, there’s the competing issue of the conservative religious whatever we have that’s going through our society.  Not that that’s bad but that is going to be competing, I think, on a level of saying morally this, morally that whatever.  But I think that you really have to — it is your duty of some level that says what I’m feeling is shame.

Mike Rockwood: Yes.

Ryan Rockwood: I am embarrassed to feel to let my life be ruled by shame.  You know what I mean?  I want to stand for it and I see it as what it is and that is a tool of powerful.

Mike Rockwood: Yes.  I can’t tell you how important I think this is because I think this kind of stuff just sets you free to all of a sudden because not only on foreclosure, not only real estate related but Ryan and I are over-freaking-whelmed by the credit card debt that people are carrying.  People that are joining the Credit Card Cure Co-Op, unbelievable.  People who earn and $30,000 and $40,000 a year with $40,000 and $100,000 and $150,000 in credit card debt just finally getting to that point where they can’t make the monthly payment and we’ll say to them, who can’t make the monthly payment, “Goodness, goodness girl.  Look at your situation,” and we’ll run the math for and the light will go on and she will realize that she would not have paid off this debt in 25 years.  Twenty-five years she wouldn’t have paid it off, and it would have been three and four and five times what she had borrowed to buy those things so –

Ryan Rockwood: People are really going to really undervalue their own life.

Mike Rockwood: The craziest of it is that — yes.

Ryan Rockwood: They’re really eager to say –

Mike Rockwood: Oh, I can do that.

Ryan Rockwood: Well, my life could be spent paying off US Bank.

Mike Rockwood: Yes, how noble is that.

Ryan Rockwood: That sucks dude.

Mike Rockwood: It does.

Ryan Rockwood: Yes.  I tell you what if — I mean –

Mike Rockwood: See, we got tricked and all.

Ryan Rockwood: If you love US Bank that much, listen, you made a mistake.

Mike Rockwood: Yes.

Ryan Rockwood: It’s that simple.  I mean –

Mike Rockwood: It is that simple.

Ryan Rockwood: It could have got a different way.

Mike Rockwood: You got duped, man.

Ryan Rockwood: It could have got in a different way.

Mike Rockwood: Yes.

Ryan Rockwood: It didn’t.  We got a mortgage at the wrong time and some stuff happened and you suck it up.  There was this one world famous psychologist I read about is retirement party in New York Times a couple of years ago — New York a couple of years ago — and he swears like a sailor and used the “F” word.  But he said he was just so sick of people.  He said every single person — he’s super famous, right, for like pioneer and all that stuff.  He said every single person at the end of every single session, all you could say — all you have to do is look at him and says, “So you’re F infallible.”  What did you think, you weren’t.  They’re just so distraught.  I made a mistake.  The way I treated my son, my dad, my whatever, you know what I mean?

Mike Rockwood: Yes.

Ryan Rockwood: He says, “So you’re F infallible.”  I’ll tell you what, to everyone in the whole world except you.  That is not a surprise.  You know what I mean?

Mike Rockwood: Yes.

Ryan Rockwood: You better stop.  So move on with it.  I don’t think that trying to buy that three–bedroom, two-and-a-half-bath-home is such a bad thing that you try to do that you need to commit the rest of your life to economics, servitude.  But if you do, I don’t know.  We’ve got to get a membership program to help those people to do.  So at least…

Mike Rockwood: All right, we’ve talked.

Ryan Rockwood: All right, we beat that.

Mike Rockwood: But honestly, this is going to become my kind of sidebar for me.  I’m always going to be talking about this topic because I think three years from now most people are going to be going, well duh.  Why didn’t we see that three years ago?  I honestly think this is kind of getting comfortable with a new paradigm, and I think this particular author helps us to see much more clearly what’s going on and when you can see things clearly, you can take appropriate action when you’re duped, when you’re blinded, and you’re handcuffed, you don’t take appropriate action.  Appropriate action is going to be messy, it’s going to be dirty, it’s going to be painful, but oh man, it’s going to sweet when we get through it.

Let’s go to some questions.  Okay, Mark had asked about how long a short sale will take.  Hey Mark, the truth is you just never know and to some extent is it up to you.  In fact, I just sent off a short sale packet to the bank for a homeowner in Fort Lauderdale, Florida who last — let’s see, today is Tuesday.  It was Friday that he listed the property.  He hired me to short sale it for him.  I listed it with the local representative last Friday, and today we already have an offer and it is into the bank.  So he will probably be out of that property 45 days after he decided to sell it.  I have one closing in Southern California on the 16th of February that will have been two years and two months since that homeowner decided to stop making payments and to sell the home short and everything in between.  So really to a larger extent it is up to you.  You can make it go as fast or as slow as you want.  Some people want it to go very fast because they feel like it’s painful.  Some people want it to go very slow because they want to stay in the home or they want the renter to continue to pay them rent to try to recoup a little bit of their lost downpayment or sweat equity or whatever.  It’s all up to the seller to some extent — the lender — just because the lenders are so swamped.  So that’s the answer to that, Mark.  It goes about as fast as you want it to.

Then Tim asked.  He’s in Florida.  I know who asked this question.  He says, “Is it 100% certain that we’re going to have to accept some of the shortfall in a promissory note or bring money to closing?”  The answer to that Tim is no, it’s not 100%.  Here are the factors.  In states where the values have fallen so dramatically and banks have the right to hold you personally liable for the loan, an awful lot of those, the banks are, especially on second mortgages, asking for some kind of settlement.  In other words, they’re asking the homeowner to take some share in the loss.  Sometimes they ask for you to take as much as 25% or 30% of the loss.  Sometimes it’s much less.  They’ll very often offer you a promissory note at 0% interest spread across many, many years if you want that.  But here are the factors that dictate whether or not you can get away without accepting some of the loss.  First of all, if you have private mortgage insurance, you’re going to find that that was a two-edged sword.  It’s good that the bank had insurance but it’s bad for you because now that insurance company is going to negotiate — I mean, they’re going to negotiate like crazy to not let the bank accept too short a deal and not allow you off without taking some of the burden.  So that insurance company serves them.  It was their policy that you bought for them, so I guess it does what it is intended to do.

Secondly, if you have assets, if you have a large CD or you have great big savings account or you have a lot of real estate wealth other than the home you live in, you could be — it could work against you because the bank knows exactly what your assets are.  Don’t think for a minute you can hide anything from them.  So if you have a lot of assets or if you have a real high income, they’re likely to insist on a promissory note.  So those are the factors that really make you a bad candidate to get away without paying anything.  I currently got a client who in Florida, this one is in Port St. Lucie, who says that’s fine.  I’m on retirement savings which is a retirement income which is protected.  I have only 401K wealth, nothing else that’s protected.  So he actually can’t pay anything other than from his pension.  So the lender can’t get any money out of them and I fully expect him to be able to walk away without taking any kind of promissory note.  So that’s how it works, Tim.  Of course, in states that are completely non-recourse on your primary residence with very, very few exceptions, you cannot be held personally liable.  So like in California, you can walk away from that bad situation and they forgive the amount and they cannot pursue you and hold you personally liable.  That’s the goodness.  Okay, you got some other questions coming through?

Ryan Rockwood: Yes, an interesting one here.  First of all, I want to tell everyone that there are some blue buttons on the video page where you can schedule an appointment and if you need to schedule your free appointment for clients, go ahead and go there and schedule it.  There’s a drop down on the upper left.  Once you go there, then you can select at it.  If you need — if you’ve already done your appointments, still want to talk or you’re thinking about buying a product that you want to talk, you can schedule a half an hour appointment and pay for it right there on the calendar.  It’s like the time slot.  Okay, it’s the best way to talk to us about something complicated.

Anyway, I’ve got this from Richie.  He says that he got a loan mod from B of A, but he’s disappointed because it’s not good enough, he feels.  So he started the short sale process with the realtor.  He still going to try to get a better loan mod and reapply during the process but he’s relying short sale for now.  So I think this is smart.  What this guy is doing here is he’s saying, hey does it cost me anything?  Keep the short sale thing working and up in the air.  So why don’t I do that at the same time?  I’ll pursue whichever is best for me.  He says he owes $150,000 on a house that’s worth $100,000, so that’s a tremendous amount of equity to make up.  Getting rid of something like that, that’s never a bad thing pretty much.  But anyway, so he’s saying, “How do I delay getting Notice of Trustee Sale so I don’t get foreclosed on while I’m in the short sale process?”  They don’t yet know I’ve started the short sale process.  I just told them I got to reapply for a loan mod, seven months delinquent right now.

Mike Rockwood: Whoa.

Ryan Rockwood: Yes.  So what should I do to keep foreclosure from Bank of America? Da-ra-da-da-ra-da-da-ra-da-da-da.

Mike Rockwood: Well, the good news is, it’s Bank of America, right?

Ryan Rockwood: Yes.

Mike Rockwood: Because they are so swamped that they’ve started subcontracting everything in fact.  They even subcontract the analysis of short sales now, but so that’s the good news.  It’s Bank of America, Richie.  They are really, really still very messed up in terms of just being overwhelmed with the work load.

Ryan Rockwood: We’ll say though, with Bank of America, we have had some cases recently where people doing the dual thing, the short sale and loan mod thing that we have — we always suggest the people to do that.  They’ve kind of got the door slammed shut on that, which I think for you is fine.  If — what you’re going to have to do to get this thing as — I mean, you’re going to have to commit to one thing or another.  Probably, right now, the best thing is to ditch that loan mod and tell them you want to short sale it and get them an offer in the next couple of days.  If you say, “Well, how do I get an offer like this?”  Lower it by 10,000 everyday until someone comes in that’s a solid buyer that could complete the transaction, okay.  This is how you do it.

Mike Rockwood: So you know, the key is if you’re going to run a loan mod and short sale at the same time, you don’t — unless for some reason you need to — don’t tell the bank that you’re doing a short sale because you don’t care.  First of all, it’s none of their business.  You own the home, and you don’t care.  You might not get an offer for three months.  So get out there and figure out what the home is going to — what kind of offer you’re going to get from a good buyer.  Ryan’s point is very well made.  The key is a good buyer not a good price.  You got to have a solid buyer and then make the decision.  Once you get the offer, make the decision if you want to cut the cord on the loan mod because Bank of America does make you do that.

Ryan Rockwood: Okay.  So, and that is just for what it is.  I mean if — it all depends — if you’re seven months in, maybe you already had a Notice of Trustee Sale in the past.  Now if so, it’s all a different ball game.  You need to send them an offer tomorrow and tell them you’re doing a short sale.  You can’t screw around, right.  But if you haven’t gotten any of that yet, you could still apply for a little while but really I don’t see the value.  You know, you’re 30% upside down on the house, 35%.  So might as well go to rather the short sale when you have a good offer in on the short sale.

Mike Rockwood: Yes.

Ryan Rockwood: They will wait but not until then.  Like my dad said there’s not even any point in telling them until you have a good offer.

Mike Rockwood: Okay Linda asks how much does a forensic loan audit cost and do you think that’s a good investment?  I do Linda, and in fact, we offer forensic loan audits through our site.  We have a company that we recommend, that we highly recommend and the cost is still just little less than a thousand dollars.  I used to think that was too much and not really a good value but in the last six months or so, I’ve really come to be a real advocate of forensic loan audits because it has become harder and harder to differentiate your application and it’s become more and more and more critical that you do.  So a forensic loan audit, I think is a good investment particularly if you’re looking at saving $500 to $1,000 per month on your modification.

Now, what I do on modifications for people who hire me to do their modification, I always perform my own do-it-yourself loan modification and I identify kind of low hanging fruit and I include that with my loan applications.  So it has become an integral part of my whole modification effort.  But I particularly recommend it to people who have really big mortgages like the big jumbo ones.  Certainly if you have a mortgage of over a million dollars, I mean that’s a jump change compare to what you’re going to be able to save and a lot of times because you’re not going to be in on the Obama administration’s incentivized modifications because your loan is jumbo, you’re going to need that extra power that extra horse power to get your modification done.  So modification — forensic loan audit will cost you like $1,000.  That’s about as cheap as they come to maybe $3,000 max.  But then if you find all kinds of violations, which you very likely will, you’re going to have to pay $3,000 to $5000 for an attorney to handle the modification for you because it’s really — it kind of goes hand and hand.  If you got those big violations, you might as well pull out the big hammer and nail it down, okay.

So then Tim says, “Why are deeds in lieu not working?  Why don’t you talk more about that option for foreclosure workouts?”  Well, the reason that they’re not working very well is because prices have fallen so much that the banks are reticent to accept the home as deed in lieu because then they realize they just have to go through the same process of a short sale or the foreclosure that you have to go through and sell the property on the market, and it’s going to be really difficult and they’re going to incur all the costs that you would incur in the short sale or that they would pay for in a short sale or that they would incur if they take the home back as an REO.  So there really is no financial incentive for them to do it.  The deed in lieu is certainly preferable for you in terms of how it is handled in terms of the lates on your payment and the way it looks on your credit score.  So it certainly, from FICO perspective, advantageous and it gets the whole transaction done quickly.  But primarily because housing prices have fallen so much, it’s not really being accepted very often, and also the bank doesn’t have in — really they don’t have in-house, the expertise to take property directly from homeowners.  What they do is they take you through an REO realtor who has an appraiser and an inspector and there’s a title insurance company there and there’s a realtor insurance policy there.  So there’s a lot of money to buffer because there’s a lot of risk in taking out property, right.  They don’t really have that in place to take deed in lieu in mass like we’re looking at right now.

Lastly, a deed in lieu is also kind of difficult for the lender because it doesn’t strip other liens.  So if you have a mechanics lien, if you have a second mortgage, or home equity loan that is tie to the house, it doesn’t strip off those mortgages so they get the house.  Sometimes through a deed in lieu, they’ll get the house and then they’ll still take it through the foreclosure process just to get rid of the other guys.  So that’s why has it currently is not great or is not being used broadly.  Good solution though.  Good one if you can’t get it, all right.  How are you doing [Indiscernible] [0:49:06]?

Ryan Rockwood: Good, good.  Boy, we got an interesting e-mail here.

Mike Rockwood: We talked a lot.

Ryan Rockwood: I think we talked to this person.  This person — death of a parent who helped pay the bills who’s [Indiscernible] [0:49:17], I remember.

Mike Rockwood: Okay.

Ryan Rockwood: Did we talk to this person on the phone in get together?

Mike Rockwood: I think so.

Ryan Rockwood: Now we’re getting a mail, death of a dad in this case –

Mike Rockwood: Okay.

Ryan Rockwood: — who we talked to, but the problem was she already had a really good loan.  There’s 3.25 arm interest rate only.

Mike Rockwood: Yes.

Ryan Rockwood: Anyway, they cut it down just by calling with some stuff.  They cut it down from 952 to 785 on the phone, no documentation.  That’s pretty cool.

Mike Rockwood: Yes.

Ryan Rockwood: I mean it’s not a ton, right?  But I mean if you did this, the percentage of it or something, you know it’s not bad.

Mike Rockwood: 20%

Ryan Rockwood: Yes.  Then anyway, she’s hoping to get more but anyway I guess I don’t know how to say it.  Well, she’s kind of, “What do you think I should do next?”

Mike Rockwood: What we don’t know is we don’t know what your debt-to-income ratio is and that’s critical.  Number one, if it’s the home that you live in, that’s really good.  Number two, if your debt-to-income ratio is over –

Ryan Rockwood: — or an occupant.

Mike Rockwood: — 31% that’s really good, so do this.  Calculate right now your payment, your 785, as a percent of your total household income.  First of all, you got to make sure that 785 include taxes.  Principal, interest, tax, insurance, and homeowners association dues all rolled into one.  One mortgage:  Principal, interest, tax, insurance, and homeowners association divide that by your household income.  If it is more than 31% then you have a really great chance of getting an even better modification than this one, okay.  So those are the two factors.  You live there, and Ryan says you do. Then it’s your debt-to-income ratio is the next one, and that’s called the front-end DTI, all right?

Ryan Rockwood: All right, maybe we should sign off.

Mike Rockwood: Yes.

Ryan Rockwood: Because I get beat up.

Mike Rockwood: We talked too long I guess.

Ryan Rockwood: Yes.  Well, thank you all for hanging in there with us.  Congratulations on getting a week closer to getting your own housing financial problems out of the way and gone.  My name is Ryan Rockwood, and again I’m here with my father, business partner, Mike Rockwood.  We’re here every Tuesday for everyone.  For clients, we’re here on Wednesday.  Also we’ve had –

Mike Rockwood: No, for clients we’re here on Thursday.

Ryan Rockwood: Thursday.  Also on Wednesday, we have a really exciting class.  We’re teaching people how to get rid of their own credit card debt.  It’s very exciting.  Last week, we had one guy settled $20,000 with Bank of America for $9,000 and instead of getting wrapped up and imbedded with some kind of weird shady debt settlement company, you just talk to us once a week and pay us 20 bucks a month.  So it’s a pretty good deal.  All right, check it out.  It’s at creditcardcure.com and we’ll see you next week.  Thanks a lot.

Mike Rockwood: Good night everybody.

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