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.

Related posts:

1. Loan Mod TV | Hardships and Questions Recorded Live: Jan 28, 10 Here is the transcription of...
2. May 11|Loan Mod Questions and Answers ...

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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1. Ethics in Foreclosures Clients struggle with the ethics/morality of asking for a modification...

Here is the transcription of this class. Enjoy!

 Ryan Rockwood:  Hello everyone and welcome.  You know, I really want to start out by saying unfortunately we’re really behind in our correspondence to people. If you’re watching tonight and you’re thinking gosh, I just haven’t got an email back.  I bet I’m five days behind and I’m very sorry about that.  Hopefully, I’m going to catch up this weekend.  So anyway, let’s start off on that note.  Welcome to the members of the Loan Modification Teleseminar.  I’m a little sick so pardon my voice, but I’m here with my father and business partner, Mike Rockwood and of course we do these calls to — and actually we have a third class now each week for out Credit Card Cure and that’s to help you eliminate your own credit card debt.  So really we’re on three days a week now.  This is a form where if you have some questions, you can go ahead and jump on that chat.  You can send your questions to questions@60minuteloanmodification.com or you can use the telephone number, the e-mail, actually call in and we’ll see if we can take some questions tonight.  Hopefully that will work out.  Okay, so welcome to the show tonight.  We’re going to talk about hardship letters and we’re going to take your questions and you know even though it’s hard to know if this is interesting to members or I mean because certainly we’ve got over a million times but a lot of people are maybe new to the call and might be wondering about it.  So if you’re wondering why we’re covering it again.

Mike Rockwood:  Well, the main reason I wanted to get, we need to get to tap into the audio guys.  The main reason that I push to have another session on hardship was because twice in the last week, I’ve had the experience that I related to you guys in the past and that is where you’ll — I was talking with a client about a short sale and happen to talk a little bit about loan modification and they made the statement that well, you know, we really don’t have any hardship.  You have to really have a hardship and have it, and then just pushing a little bit on and probing a little bit, came to realize that they had very significant hardships.  So I think — I asked Ryan that I think it’s time that we remember that we have to keep going back to basics all the time because a lot of people have misconceptions about a lot of the basics about loan modification.  So let’s talk about hardship and what qualifies as a hardship, what qualifies you for a loan modification.

But first of all before we get too far along, we want to be sure that you understand that we provide this information as a service to our clients and that we are not attorneys and that the advice that we provide is just really reporting about what we see and what we hear in the business of doing loan modifications.  We are not tax advisers.  We are not CPAs.  So anything that we say with regards to taxes really is just repeating what we have been told from clients or had experienced on our own.  You should consult a lawyer or a CPA with any specific questions about the legalities or about the tax consequences of your situation.

Now, Ryan and I are realtors in Southern California and we are also fulltime foreclosure experts.  We do seminars and we produce products and we work on loan modifications and we help people with deed in lieu applications.  We do just about every type of foreclosure workout there is.  So we kind of follow the market into really being foreclosure experts here in Southern California and if you’re here with us tonight, it’s because you’ve purchased some product from us so we kind of cut to the chase a little bit and get right into questions and get right into our topic of the evening, okay.

So we’re talking about hardship and what qualifies as a hardship.  First of all, the hardship letter itself used to be really a significant part of the application process and we would go to great lengths to craft nicely worded hardship letters and we would always recommend that clients hand write their hardship letters.  Now we still do, but in the acceleration of things, as things have gotten so crazy busy in the last year with sometimes as many as 10,000 applications in a single day for loan modifications.  All of the lenders have really streamlined the process and they have most of them settled on either a brief explanation — asking for a brief explanation of your hardship and they’re really looking for keywords or they actually give you a checklist and ask you to sign an affidavit that this is indeed your hardship.  So I mean they reveal to you what the 10 acceptable hardships are and they are the things that you would expect, a death in the family, divorce, a reduction in income, lost of hours at work, no more overtime, no bonuses this year, illness, time off work et cetera, et cetera.  So anything that impairs your ability has impaired your ability to make your mortgage payment is a legitimate hardship.

I want to go over some of the more kind of — the ones that are kind of on the fringe because I want to jog your thinking a little bit and help you realize where some of the hardships can come from.  Sometimes I encourage people to think through whether or not their child care expenses have increased or their elder care expenses have increased.  Just last week I had a client.  I have been working for them for quite a while telling me that he forgot to relate to me earlier that he and his wife were spending two weekends a month driving all the way to San Francisco to care for her mother and that all the kids were kind of chipping in and this was their portion of the support.  Well that’s a significant expense just being away from home and traveling as well as the time spent caring for their mother.  You know they really could hire out and pay probably you know $1,500 a weekend for.

So think about whether or not expenses have gone up, whether or not your mortgage has adjusted and gone up, your adjustable rate mortgage whether you’ve had some reduction in your income and that could from a reduction in hours or the loss of one of your jobs.  I can’t believe how many of our clients have two and three jobs.  It’s really amazing how hard all of us are working just to keep up with all these debt loads that we’re caring.  But at any rate, what we want to emphasize to you is that hardship is a real broad category that has become really just a gating factor for a loan modification.  Sometimes indeed after really pushing and pushing and pushing, we just can’t find a hardship.  A person doesn’t have a hardship and in fact you are SOL, you’re out of luck.  You can’t get a loan modification without a hardship but 9 out of 10 times when we interview clients, we can find that hardship because usually what brings people to us is they’re having difficulty paying their mortgage so you kind of peel back the onion ask question after question as to exactly why is that high credit card debt is reduction in your hours at work or just what is it that’s causing you to have trouble making that payment.

So more and more, we’re encouraging people to use those affidavits, and we’re encouraging people when they are asked to craft a hardship letter to be just that brief and just use those keywords.  So Ryan really coaches people on just using, my hardship has to do with income reduction, job loss, reduction in hours, increase expenses.  So just be very, very clear and then we always like to hang a very specific number on it.  So if your income has decline by 20%, we’d like to say that or if an expense had — you’re now encouraging — incurring about a $1,000 month in elder care than say $1,000 or say what a percent that is of your income so that they have some sense of the magnitude.  But realistically, here’s what happens.  When your file shows up, it gets passed to a number of people that are screeners and these are administrative people that really are trained in looking just for one thing.  When it gets to the hardship person, he takes your file and he has a good understanding of this hardship checklist and he will read through your hardship letter to find those keywords and when he finds them, he will check them.  He will take that checklist and include it in your file and pass it outside of his department.  So it’s really that simple.  They’re just looking for keywords and they’re looking for you to attest to the fact that that is true, all right.  All right, I got questions right away.  Do you want me to take mine or have you got some coming in on my email?

Ryan Rockwood:  I do have a few in my e-mail.  Up to you which ever one.

Mike Rockwood:  Right.

Ryan Rockwood:  I want to try to cut tonight a little bit short because I’m a little bit sick but…

Mike Rockwood:  Hey, I don’t know if we told you but send in your questions to questions@60minuteloanmodification.com.  All right, Neil wrote in to just about half hour ago.  “How can I get my second mortgage lender to just settle with me?  If I sell the home short, they will only get about half of what they are owed, so this is the second mortgage.  Why not just settle with me for that much?”  Neil, I think you know you’re applying logic to the whole thing and that’s always dangerous, number one.  Number two, what you’re saying makes a ton of sense and I think if times were different, you might be able to get that kind of a settlement and maybe in a year or so you will when principal reduction and settlements like that are more common.  But right now there are still great deals of resistance to principal reductions.  I know there’s a lot of talk very recently about how principal reductions would help all of us to stay in our homes long term rather than just the short term interest rate reductions.  There’s some movement to spend some of the bailout money doing that but so much more bailout money would be needed if we’re going to really take our program like that.  So here’s — I can’t really say why you, I don’t think you’ll be successful in getting that settlement unless of course your second mortgage is just 10 or $20,000 but if it’s like most of our seconds and it’s $100,000 or $300,000 it’s just not likely to happen because then the bank has to accept that loss and currently what they’re doing is they have it on their books as a full asset for the full asset value and because you’re making monthly payments, they carry it on their books.  So it’s a really big deal for them to write off that much money.  So I just don’t think you’ll be successful.

Tom says, “The fact that this home is now over $100,000 underwater and that this loan is interest only, those are my two hardships.  Nothing has really changed in my finances but I’m just so stressed out about paying so much for something that is now worth so little.  Will Aurora,” his lender, “consider a loan mod in my case?”  Okay so here’s the situation Tom is making a point to us that because his home has declined so much in value and he’s only paying interest only so he’s not even buying the bad asset.  So number one, it’s a bad asset.  Number two, he’s not even buying it.  He’s just basically renting the money that he overpaid on it so he stressed about that and he wonders if that qualifies as a hardship.  Nice try Tom but no, it actually doesn’t.  If nothing has changed in your finances, really the value of your home is really irrelevant in the loan modification application so as much as that seems right, a loan mod is not for you if really, if nothing has changed.  If you’re $100,000 underwater and that’s a significant amount of the home’s value which it’s got to be unless it’s — if it’s a $2 million home then that’s not so bad but if it’s a $300,000 or $400,000 homes like a lot of those in Southern California that are $100,000 underwater, it’s not going to recover during the time that you own it, you’re not going to recover that value so you really should investigate a short sale.  Remember we would love — Tom, remember we would love to do the short sale for you especially if it’s in Southern California, but really in any state that you’re in.

Ryan says, “How can I know if my lender will sue me for the amount left after my short sale?  If they will not then, it seems like a good option.  We owe much more than the home is worth.”  Well, that’s good, clear thinking.  You do have to get clarity on that before you decide on your workout option.  There really are — those two things are absolutely imperative that you did clarity on.  One is are you vulnerable, liable for deficiency judgment and the second is what are your tax liabilities if the bank forgives a major part of your debt?  The beauty of those, both are that you can get absolute clarity, 100% clarity by visiting with an attorney.  Now, I’ll give you just a little bit of my own advice but the absolute — the way to absolutely nail it in your instance is just to dial a local attorney and have him look at your loan papers for you.  Here’s the situation.  You can be held personally liable for debt even if the collateral, the house, even if that has declined in value, you can be held accountable for the shortfall in some states under some circumstances.  Now many, many states, I think it is 33 or 34, are non-recourse states.  So if the loan you’re talking about is the home that you’re living in, then you very likely are not going to be held personally liable.  There are some exceptions on second mortgages particularly if you refinanced a number of times which so many of us have done, use the home like a piggy bank in order to finance other ventures.  So you can really only nail that answer by getting a specific answer from your attorney on your situation.  So that’s what I recommend.

Okay.  Then Jill asks, “Is it always best to say just a little about your hardship?  The book says to be brief and all of the examples are very brief.”  Yes Jill, brevity is best here, number one because they are cranking through so many files.  They’re just looking for keywords.  You might as well just cut to the chase and just use those keywords.  Actually two or three sentences is plenty but most people don’t feel comfortable with that.  They want to give a good explanation of the hardship.  So yes, keep it very brief.  It’s always best.  Honestly in general, in dealing with negotiations, brevity is best because when you’re talking and when you’re giving away information, you’re doing just that.  You’re giving away information and then in negotiation information is power, right?  So in general you want to just apply information that you’re asked for and in every conversation and in every way, be as brief as you can.  Less said is always better when you’re in the negotiations and you are.  Believe me right from the start.  Don’t believe any of the propaganda that you believe about — they’re not trying to make your home affordable one bit.  They’re really trying to mitigate their losses, all right.  I’m going to keep rolling or are you answering on email instead of sharing with our friends?

Ryan Rockwood:  Well, actually I do have a question that I’d like to share.

Mike Rockwood:  All right, go ahead.

Ryan Rockwood:  Teresa wants to know how she can schedule an appointment and the way to do that is to schedule an appointment to talk and in case you don’t know, every kit that we sell comes with a free 20–minute call.  Even if you haven’t done that or purchase the kit or if you want to talk more, you can always go to 60minuteloanmodfication.com/schedule and there’s a drop down arrow at the top left of the screen there.  Actually, it takes a minute to load so be patient.  There’s a drop down thing there on the left and you can select the product whether it’s a free consult or it’s a paid time or something like that.  What will happen there is that it will allow you to select the time and then it will come to us and we’ll either approve it or deny it based on what else we have going on.  Okay, so…

Mike Rockwood:  That’s usually — that’s really a value.  People really like that.  I mean, because you pay a little bit so you don’t feel like you’re asking for more than you bought from us and we don’t feel abused either, and you get to tap in to all of our experience with loan modifications or any foreclosure-related question, whatsoever.  It’s really a pretty darn good value.  I mean, where else can you, for that little bit of money, get — I mean you get professional help but what’s nice about our help is that it is so current and so up-to-date.  I mean, we will literally be turning away from a loan mod application to talk to you.  I mean that’s what we do is the loan modifications all day long.  Okay, here’s a good one.

Ryan Rockwood:  And someone just did it.  So we’ve got a 10:00 am tomorrow.

Mike Rockwood:  Okay.

Ryan Rockwood:  Okay.

Mike Rockwood:  Dan says, “My lender just approved our short payoff application without any cash from us and my brother is trying to get his short sale approval.”  Yes, this is a Florida deal.  This is an interesting one.  Dan and his brother bought homes right next to each other from the builder before they were done and before the builder finish the homes, the builder went bankrupt and stops development.  So Dan says, “My lender just approved our short payoff application without any cash from us.”  Congratulations, Dan.  “But my brother is trying to get his short sale approved right next door same floor plan, same issue but the lender wants him to accept a $50,000 promissory note.”  Now for — and he says why is this and what can he do?  Well that might be shocking to some of you but some of the values in Florida — I mean I know this one was originally like about $650,000 gorgeous home that is now selling for about $145,000.  So I mean this is like an extreme example of the decline in values.  So sometimes when the lender, and sometimes when there’s a private mortgage insurer involved, the negotiations get pretty heated and the lender or the insurer will turn the screws on the owner to accept some portion of the shortfall.

Now, in this case I think it would be about, they’re asking for 50.  I think it’s like 250 so it’s like 20% or so of the shortfall and that’s not unusual at all for them to be asking for 20%.  A lot of times the promissory notes are extended over a 15-year period and there’s no interest so the payments are pretty minimal.  Honestly, Dan, it doesn’t sound so extraordinary and the reason that it happened was because your brother has some assets that you don’t have.  Either he has a high paying job or he has a lot of assets that are not protected by a trust fund or social security or pension funds.  He has some assets and the lender or the private mortgage insurance company can see it.  They have amazing information technology capabilities to find out information about you and so they have decided that they want to, rather than just let the deal go through like yours was allowed to go through, they want to turn the screws on and get some of the money out of him.  They’re probably pretty much prepared.  Very likely, they’re prepared to let the deal fall through because they sort of feel like, “Hey, if we get this deal now, we can get another one in a month or two.”  They’re probably right.  So he might just be stuck.

Honestly, a lot of folks are actually accepting those kinds of deals that and a lot of our Florida short sales come along with the buyer either bringing some money to the close — or the seller bringing some money to the closing or accepting a promissory note.  Remember then that becomes an unsecured note.  It becomes an unsecured loan just like a credit card.  So I got to be honest with you.  Some of our clients are accepting those knowing full well that that’s not collectible, like some of our clients have absolutely no assets that are not protected by a pension, no assets that are not protected by social security or a trust fund.  So they’re really not afraid of an unsecured promissory note and the ability of that bank to be able to collect that from them.

All right, Bob says, “How do I know how to price my home for a short sale if the lender won’t let me know how low they will go?”  We’re getting a lot of short sale questions on our loan modification evening.  Well Bob, you don’t know and the lender will not tell you.  In fact, they usually don’t even want to talk to you in the short sale department until you have an offer.  They don’t know because they don’t know.  They won’t tell you because they don’t know.  They honestly don’t know until you have an offer, a current offer that they can send a local agent out to do a broker price opinion and figure out if that offer is reasonable, and then they begin to run the numbers on whether the implications of accepting it.  So there’s one thing about whether or not it’s reasonable and here’s — maybe this gets to the heart of your question is what’s reasonable. I always say that any offer that’s within 10% market value is reasonable in a short sale.

So here’s what you do.  Ask your realtor to do a broker price opinion themselves or what they might call a CMA, Current Market Analysis, and price the home 10% below that.  If that doesn’t get you an offer within two weeks, then drop it another full 10% because remember the key is to get that offer from a good qualified buyer. Even if it’s an investor who’s just looking for a great deal, the bank may be very interested in doing a deal and may just approve it and after all you don’t care because it’s a short sale after all.  The only one who cares is the bank.  Okay.  Am I going to keep going?

Ryan Rockwood:  Let me jump in with a couple of -

Mike Rockwood:  Okay.

Ryan Rockwood:  – questions.  Let’s see.  Maria B. has a question.  “Six rental properties, I bought three of them as a primary home not an investment.”

Mike Rockwood:  Yes.

Ryan Rockwood:  “How will the mortgage company know if I don’t live there anymore and how like [Indiscernible] [0:25:29] is it what they want proof?”  It’s a likely scenario.  “I am a member and would like to watch previous Thursday night recordings.  Can I do that online?”  Yes, you know where you can get the recordings right now is go to 60minuteloanmodification.com and in the very top in the menu bar is something that says something like Articles.  You click on that and unfortunately you just actually have to go back and go through them.  They are organized.

Mike Rockwood:  It’s in the Articles file?

Ryan Rockwood:  Yes.

Mike Rockwood:  Is it?

Ryan Rockwood:  Yes, everything goes there.  Every blog post, everything.  So it’s like reverse chronological order.  So you can get that there and just when you get down to the bottom of the page, it will be something like view last or view next or something like that.  So go ahead and check that out.  The transcripts are there more and more as well.  So enjoy that.  She needs to schedule of real estate owned.  You know, you can find that in your black belt CD.

Mike Rockwood:  Yes.

Ryan Rockwood:  While we’re talking here, I’ll see if I can just find it on my computer that I have right here and e-mail it to you.  I maybe lost the CD or something.  Then, but the major question is here’s what they want to going to know.  The question here is can you get away with — I think what you’re asking is can I get away with doing multiple primary homes as the investment property thing?  The answer is I’m really not sure.  I don’t know.  Here’s what they’re going to want though.  They’re going to run a utility bill in your name, okay, and you either going to want to sign legal affidavit from you saying that it is your primary home.  So to be honest, it’s totally believable to me that you could get two primary or three primary property HAMP loans even from the same bank and it’s totally believable to me that you can get them from separate banks.  But -

Mike Rockwood:  But that’s going to be your call.

Ryan Rockwood:  Yes.  But I just don’t know.

Mike Rockwood:  Yes.

Ryan Rockwood:  Yes.  Okay, she also asked, “She gave us a formula that we can calculate what you expect from a loan mod.  Take the loan amount multiply it by 0.055 divided by 12, et cetera but my loan is an interest-owned.  How do I calculate that?”

Mike Rockwood:  Yes.

Ryan Rockwood:  “I have six properties.  Three have arm that are interest only rates are 3.25, 3.65 and 5.125.  They adjust annually which I asked for how much of relief should I ask for?”

Mike Rockwood:  Yes.  That’s a good question.  Hey, you know the key though is you’re not going to get significant month-to-month relief, but how much of a relief would it be to have fix mortgages on all of those because we’re coming up on — there is no way that we’re not going to have higher interest rates in the next five years and probably for the next 10 years.  There’s just no way that can ever happen, so try as the government might to suppress that.  It is absolutely coming our way so we’re going to see 10% and 12% mortgages again within five years.  So walking in those adjustable rates is a beautiful thing even if you don’t get any — you don’t get much relief Maria.  So I’d be all about that if I were you.

Ryan Rockwood:  Okay.  So the answer to your question Maria, how can you calculate it?  The truth is that, I mean these are really good rates and these are industrial properties.  So I mean your chance, frankly, aren’t looking too good.  If you — now that’s not just saying don’t try, but I think that the very best you could hope for would be 30–year fully amortized payments around that amount.

Mike Rockwood:  Yes, around 4.7 or 4.8.

Ryan Rockwood:  Yes.

Mike Rockwood:  But you know, I think you’ll accomplish your goal.  If you just have realistic expectations, it will be plenty of work and you will only get a modification to a fixed rate but that’s worth it.  That’s worth doing.

Ryan Rockwood:  Okay.  Now, I’m going to send her something, so why don’t you do it.

Mike Rockwood:  Okay.  Joan says, “We have been waiting for weeks to hear about our mod.  Now, Saxon says they won’t even offer a mod after all this time because the home is rented.  Is there any way around that?”  Yes Joan, there is.  Saxon is one of about three or four lenders that really tries not to do any other than the Making Homes Affordable Loans but they do have an in-house staff.  It’s actually quite considerable and I have personal experience getting around it.  So what I did is I just kept pushing and pushing and asking for an in-house modification expert negotiator.  You might have to escalate it to a supervisor or you might have, I hope that you have gone late on your mortgage because if you haven’t, there’s no way in heck you’re going to get their attention.  But what I did on my own property, I just went late until they would talk to me and late until they would talk to me about modifying a rental property.  So yes, there is a way around it but it’s harder at Saxon.  It’s harder now at IndyMac and it’s harder at AmTrust and a couple of others.

All right, Sheldon says, “How can I get a Deed in Lieu?  From what I’ve read that seems to be the best solution for me and for Wells Fargo.”  Well Sheldon, it is a great solution, a Deed in Lieu of Foreclosure is when you just turn the property over to the lender and they don’t have to take it through the foreclosure process.  You don’t get a foreclosure on credit.  They get the home a lot faster and they save a lot of money.  So it’s faster.  It’s cheaper.  It’s better for your credit.  But it doesn’t work very often for a number of reasons.  Number one is a lot of people have second mortgages or other leans on the property.  If they take it without foreclosure, those leans don’t get stripped away.  So that’s one issue.  Another issue is through the foreclosure process and the real estate owned process, they have all kinds of safeguards in place.  There’s an agent involved and he’s got an insurance policy, and there is an inspector involved and he’s got an insurance policy, there’s an appraiser involved and he’s got an insurance policy so there’s a lot of insurance for them that the property is taken correctly.  They don’t have that infrastructure in place to take property directly from you, so it’s not as safe for them to do so.  So I think that’s another reason Deed in Lieu is not being used very often.  Then the last one of course is that values have fallen so dramatically that the property is usually worth considerably less than it’s owed.  Very often the bank would just assume go through the short sale process to get good appraisals, inspections, et cetera.  Okay?

Then Mel says, “Why do the few percent of loan mod applications that are getting approved,” there’s been a lot of press about that lately, “why do they get approved?  Are there tricks?”  I would say to Mel, you should have listened to us on Tuesday night.  Go back in the archives.  Tuesday night will be posted, right.  Go back and watch Tuesday night.  We talked about eight specific good, good, good tricks, great ones that I recommend for why I think it is that my loan modifications, 96% of mine that I’m working on are getting approved, although I did get just get turned down today, but 96% are getting approved as opposed to 96% getting denied.  So there are tricks and I’ve divulged all of them on Tuesday.  You know what?  I think I posted that too.  So you’ll both be able to see it if you want to or you can just download it and read it.  I posted it as a blog post and I’m sure it was something like something having to do with 96%.  Yes.  Why are 96% — no, it’s about Loan Mod Mercenary and it was posted on Tuesday night after the show.  All right, Mel.

Ryan Rockwood:  All right.  We’ve got a question here from Lizette who says that the lender is not allowing her to — they say no to the loan mod and the reason is because they have not paid in 12 months.  Have you heard of that?

Mike Rockwood:  No.  That’s a phony answer.  There’s another reason why.  They’re just giving you a hard time about not having paid for 12 months, but there’s another reason why you’re not qualified.  If you live in the home and you qualified for the making homes affordable program, I think you can argue your way back out of that one point.  There are some other reasons why they’re rejecting.

Ryan Rockwood:  Yes.  I mean here’s the thing.  You want to make sure that you didn’t just get a collection call from the bank.

Mike Rockwood:  Yes.

Ryan Rockwood:  I mean, they might have just said it.  No, no, this isn’t the load mod.

Mike Rockwood:  Yes.

Ryan Rockwood:  To tell you, you don’t qualify because you haven’t paid, perhaps, a month.  Now, there was something about not being over three months late.

Mike Rockwood:  Yes.

Ryan Rockwood:  Do you remember that?

Mike Rockwood:  Yes.  But honestly, I’ve heard that, read that, but it hasn’t been my experience so -

Ryan Rockwood:  Yes.

Mike Rockwood:  – I just have to discount it.

Ryan Rockwood:  Okay.

Mike Rockwood:  We get plenty of people who — I’ve got several that are almost a year without making a payment and they get a modification.

Ryan Rockwood:  Then, I have had some clients who paid up to get under the three-period or three months and they got denied again.

Mike Rockwood:  Yes.  So Lizette I would just say keep pushing, pushing, pushing.  That answer isn’t good enough, call back.  I always recommend you call back five times, talk to five different operators and just say, “This doesn’t make sense to me.”

Ryan Rockwood:  Yes.

Mike Rockwood:  “I don’t understand it.  Please can you help me?”  Then if that doesn’t work, ask for a supervisor to call you back.  If that doesn’t work, send a Qualified Written Request and then, of course, you have to kind of check your own sanity and think about if you haven’t paid for in a year, you’re playing a high stakes game there.  So I hope you either fully intend to lose this house, or if you fully intend to keep it then what do you care if you are required to because imagine if they refused you for a loan mod, they offer repayment program.  So if you plan to keep the house and you think you’re going to keep the house then you don’t care about, a repayment plan is okay to get you back on track, right.  So if, on the other hand, you are just getting out from underneath this loan and you’ve already gotten a year’s worth of free living, boy, you should count yourself really lucky and start laying plans for a new place to live.

Ryan Rockwood:  Yes.  I mean maybe it’s time for a short sale.

Mike Rockwood:  Yes.

Ryan Rockwood:  And hopefully, yes, you’ve got some money saved up.

Mike Rockwood:  So -

Ryan Rockwood:  Well, let’s wrap it up because I’m melting.

Mike Rockwood:  Okay, you’re dying.

Ryan Rockwood:  Yes, let’s see if we’ve got anyone on the phone here.

Mike Rockwood:  Good.

Ryan Rockwood:  That has a question before we go.  Hi there.

Male Speaker:  Yes.

Ryan Rockwood:  Yes, go ahead.

Male Speaker:  [Indiscernible] [0:37:19].

Ryan Rockwood:  Tell me like if we perform that service for people.  Well, I’ve never actually heard that term.

Mike Rockwood:  Well, you’re using it like a proper noun, like it really is something.  Tell us more.

Ryan Rockwood:  Have you write into it?

[Audio gap]

Ryan Rockwood:  No.

Mike Rockwood:  Who is it?

Ryan Rockwood:  Home rescue.

[Audio gap]

Ryan Rockwood:  Well you know -

Mike Rockwood:  Really?

Ryan Rockwood:  Someone else on the call thinks there are scam home rescue.

Mike Rockwood:  But accelerated -

Ryan Rockwood:  Most people actually — it’s a funny thing to call it because maybe they just branded their process or something.  But most people, when they’re doing short sale, I mean you can do a short sale fast or slow.

Mike Rockwood:  No, he said about loan mod.

Ryan Rockwood:  No, he said short sale.  Did he?

Mike Rockwood:  Oh.

Ryan Rockwood:  Did you say short sale?

Mike Rockwood:  Yes, sorry.

Ryan Rockwood:  Most people don’t want a fast short sale.  What do you think that would benefit you, like less damage on your credit?  Is that your main motivation?

[Audio gap]

Ryan Rockwood:  Sure.  Yes.

Mike Rockwood:  Yes.  When we have a client who tells us that they want the short sale to happen fast, it’s pretty easy to make it happen fast because you know you just accelerate everything.  You just take action right away.  You advertise it right away.  You lower the price dramatically maybe even each day and usually it’s pretty easy to get an offer within a week or two if you’re really aggressive about pricing and advertising.

Male Speaker:  [Indiscernible] [0:39:33].

Mike Rockwood:  Do you get it out?

Male Speaker:  [Indiscernible] [0:39:39]

Mike Rockwood:  Yes.

Male Speaker:  [Indiscernible] [0:39:50] have your heard of them?

Mike Rockwood:  No, we haven’t heard of them but an accelerated short sale is something that you can do.  Here’s the deal.  You can move as fast and get an offer and get your packet submitted as fast as you want but it’s pretty hard to get any lender to approve them in less than 30 days these days.  There is a — now, what was the program we just read about, Ryan about — that’s pre-approved.  That’s something that National Association of Realtors is working on so that’s a waste off.  But see, we have trouble like even if we slam an offer in the same day that we list it, we have a hard time getting it in front of a negotiator for two weeks, and then the negotiator always gets 20 days, 20 working days, before his company demands that he take action before the file turns into a pumpkin or whatever.  So it seems to always take at least a month before we get that settlement offer so -

Ryan Rockwood:  But I guess it really depends on what someone by accelerated, right?

Mike Rockwood:  Yes.

Ryan Rockwood: It is like accelerated less to 8 months.  If you want to -

Mike Rockwood:  Yes, we can do them in less than 60 days if you tell us to.

Ryan Rockwood:  Would you like us to, like we’d like to schedule a time to talk about what your specific situation and see if we got any advice for you.

Male Speaker:  [Indiscernible] [0:41:17]

Ryan Rockwood:  Would you like to schedule a time to talk privately to see if we might have some advice for you?

Male Speaker:  [Indiscernible] [0:41:23].

Mike Rockwood:  Yes, okay.

Male Speaker:  [Indiscernible] [0:41:36].  Have you heard of them or anything?

Ryan Rockwood:  No.

Male Speaker:  It doesn’t matter if you heard [Indiscernible] [0:41:41].

Ryan Rockwood:  Okay.

Male Speaker:  A part of, Barack Obama, what have you done for us?  Nothing.

Ryan Rockwood:  Okay.  Hold on one sec.  Hold on one sec.

Mike Rockwood:  Hey, wait a minute.

Ryan Rockwood:  Okay.  Sorry about that.  It’s hard to hear the callers and also repeat a little bit of it, but this guy is asking have you heard a particular company that has done something that they called accelerated short sale.  We don’t actually get that too often where someone wants to know or wants a short sale done fast.  I can tell you that.

Mike Rockwood:  Yes, more often.

Ryan Rockwood:  Yes.  More often they say, “Hey, I need some time to figure out where the heck I’m going to go from here.”  So that maybe just clever marketing on their perspective or whatever, but you going to do shop around.  What we do is concentrate in getting the short sales done right.  The key thing there is that you have to make sure that the second lean is taken care of and the vast majority of people don’t know what they’re doing.  So they may get that second to release the lean on the home or the first or whatever.  However, they haven’t tied up the end.  So what’s going to happen is these guys could come to you, even in California, and they’ll probably end up selling it to someone else, a collector who will eventually sue you.  So I would prepare for that.  You can talk to — it doesn’t sound like you’re ready to talk now — but if you are ready to talk, you can always send us an e-mail.  My name is ryan@60minuteloanmodification.com and we do short sales nationwide.  Yes, we can do it as quick or as slow as you need.  Of course, we prefer quick because then it’s over.  But -

Mike Rockwood:  Running faster is always better.

Ryan Rockwood:  Yes.  But also short sales don’t cost you anything.  A typical question we get on short sales is, “Should I make that my next tax payment?  Should I make my next HOA payment?  All I can say on that category is we have a lot of success getting the bank to pay those things along with know all costs associated with the sale like realtor and stuff like that.  So anyway, when you’re ready to reach out and talk, we’ll be happy to talk with you.

Okay, so I just want to wrap it up and thank everyone so much for joining us.  Thank you so much for — and congratulations on getting a week closer to getting your loan modified.  Also, be sure to check out our new credit card program, it’s the same thing do-it-yourself.  We’re teaching people how to do-it-yourself settle your credit card debt instead of paying some guy 5,000 bucks and sending him all your credit card payments for the next couple of years.  How about if you just take a couple of months and do it yourself and you’d be done with it?  That’s a pretty cool program.  It costs 20 bucks a month.   So you should check it out.

Right now, you can go to 60minuteloanmodificaiton.com/credit and join that program.  You should definitely do that.  We had one member this week settled $28,000 with Bank of America for $9,000 and this is a client that was in extremely for negotiating situation in regards to who could not get a judgment for personal reasons, could not file bankruptcy.

Mike Rockwood:  What he means is he couldn’t tolerate the judgment so he couldn’t let the creditor take him to court.

Ryan Rockwood:  Yes.

Mike Rockwood:  So he wasn’t in a strong negotiating position and he had high income and he had some assets.

Ryan Rockwood:  Yes.

Mike Rockwood:  That they could see.

Ryan Rockwood:  So anyway, that’s going well, but I invite you all to that.  All right, thank you so much everyone.  Have a great week.

Mike Rockwood:  All right, good night.

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2. May 11|Loan Mod Questions and Answers ...

You have probably heard 94% of Loan Mod applications fail.You may even wonder, ‘is it worth trying?’ The answer is, ‘YES! Absolutely!’
Tonight’s video broadcast is dedicated the 6%’s SUCCESS SECRETS!

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Mike Rockwood:  Good evening everybody, this is The Foreclosure Doctor. Welcome, this is our weekly teleconference on foreclosure topics, and we’re here to discuss anything about foreclosure. We’re going to answer up to 20 questions, as well as give a little bit of teaching about just plain walking away from your home, as on of about seven or ten workout options we also counsel people on. Walking away is one that’s emotionally kind of appealing to a lot of people, because you don’t have to deal with all the crap. And if you fully intend to lose the home at the end of the foreclosure workout, it can be really tempting. But we’re going to go over some of the pitfalls today.

Ryan Rockwood:  Even if you’re not going to walk away from the home, everybody wants to know exactly what’s going to happen throughout the process, what the worst case scenario is. So it’s relevant for more people than just those that are going to walk away.

Mike:  OK, I’m Mike Rockwood, and I’m here with my business partner Ryan Rockwood. Together we have done foreclosure work in southern California for many years. In the last two years with the housing downturn escalating of course, the housing crash, we’ve become full‑time foreclosure experts working short sales, really throughout the country. And lone modifications through a kit that we put together called “The 60 Minute Loan Modification Kit.” Many of you have probably found your way onto this Ustream video broadcast by virtue of our loan modification work, because we’ve been really wildly successful with that. In fact, it’s the dominant do‑it‑yourself kit for loan modifications in the country.

So we’re both realtors in southern California. We have a good, solid real estate practice, but our main business is helping people who are facing foreclosure, be that through a short sale, through helping them figure out how to work a deed in lieu, a loan modification, or bankruptcy.

So we work closely with bankruptcy attorneys, we work closely with lenders to figure out refinance opportunities, and short refinance opportunities. And we negotiate with the banks on our client’s behalf, absolutely everyday.

So this Foreclosure Doctor is our Tuesday night call, it’s open to the public and we will answer questions that are emailed to questions@60minuteloanmodification.com. Questions, with an S, at 60minuteloanmodification.com. We’ll also go live to take callers for those of you who are not on a computer, and are just listening on the teleconference, we’ll go live for question from you as well.

We always want to start the show, and periodically, at least quarterly, our attorneys counsel us that we should do this more frequently. We should announce and clearly disclaim that we are not attorneys, we are not tax advisers, CPAs. We are in fact laymen helping other people through foreclosure.

So what we bring you is not a lot of academic smarts, you will see that. But what we bring you is a lot of street smarts, a lot of street smarts about what’s really happening. What’s happening good, and what’s happening bad and how your neighbors and friends are figuring out a way to work through this foreclosure storm, or this housing meltdown.

Ryan, are you broadcasting? Have we got all out technology working right for us now?

Ryan:  Yeah, well someone has said that we’ve got some echo‑y audio. So I apologize for that. It’s not on the phone, it’s on the computer.

Mike:  It’s not on the phone?

Ryan:  No, it’s on the computers. So audio quality, not as good as normal. What a drag, shoot. We’ll try to think of some was to troubleshoot that while we go. But anyway, let’s move on. All right, so we usually like to begin these teleconferences by talking about a topic that’s of general interest. I usually give an introductory teaching, or talking about an area that’s of interest to most people.

Tonight’s topic is just walking away, or what happens when the bank takes your home. Either on purpose, or just because the foreclosure work out didn’t work out. This happens more frequently than I would like to see, where the bank actually becomes the owner of you home, and you’re living in someone else’s home. Or they just take over your home after you have abandoned it, or walked away.

Just walking away, like I said, is kind of a tempting option. The reason for that is that a lot of folks are very anxious about foreclosure. Most people, most of 15 million people who are currently facing foreclosure. That’s actually probably 30 million people, it’s 15 million households. Most of those people never wanted to learn about foreclosure, they don’t think of themselves as someone who defaults on loans.

They don’t think of themselves as someone who have to settle debts. They don’t think of themselves as someone who can’t make good on a promise that they made, which is sometimes how they feel about reneging on their mortgage. And they certainly aren’t the people who feel very good about have a bad FICO score.

However, when the tables turn, your back is to the wall, you have absolutely no options. Either you’ve lost you job, there’s been a divorce, there’s been a death. Your mortgage payment went through the roof, and your hours at work got cut back. Whatever your hardship situation is, you have to reprioritize. Your paradigm kind of shifts, and all of the sudden your have to rethink what’s really important, and “What can I really do?”

Because after all, you don’t want to do what millions of Americans have done. And that is burn through you 401k, burn through any kind of pension that you can cash out. Cash out all your life insurance and use that to pay your mortgage on a house that’s underwater, and not coming back.

You’re going to have to have that horrible moment where you have to say, “I need to take action.” Let the pain happen now, as opposed to any later, as opposed to a day later. OK?

Mike:  Literally, Ryan and I talk to people at least monthly who should have been talking to us a full year ago, or more. And they’ve just…

Ryan:  I don’t like to say that because it makes it sound as if we think they’re so crazy. We’ve been in the same situation. Truth is it’s human nature to do everything that you can do to avoid any sort of pain or change, right? But we have to try to shake ourselves up, especially in the interest of people who have some money. When I ran into trouble I was fortunate enough not to have any money. I’m sure that I would have burned through all of it.

Mike:  That’s very true.

Ryan:  You know what I mean? But there are a lot of folks that have $30,000, or last year it was $60,000 in the bank. They’ve just been paying that mortgage every month, in the hopes that something would come up. They’ve just been murdering that bank account. The truth is that there’s nothing more ethically better or worse, on anything like that about it, despite what they might tell themselves. What they are doing though, is they’re postponing this inevitable pain. Really at their own expense because who’s else expense are you really sparing? Citibank, Chase?

I’ll tell you what, the bad news is these guys don’t have a lot of love for you back. Should you need some help, you can feel free to give them a call right now if you want to judge for yourself the caring nature of that relationship. Ask them if they will cut you a break. And they’ll say…

Mike:  No, ask them if you can’t just skip half a dozen payments or so, and see it that would be all right.

Ryan:  All right. So, that should kind of clue you in on the actual type of relationship you have. A lot times, in all of our life, we think that “Oh, we’re friends with our boss.” You’re not friends with your boss, you know what I mean? Or your co‑worker, whatever. When push comes to shove, whatever. So don’t let your relationship with your mortgager be another kind of …

Mike:  It’s not one of those things, it’s self‑deception. We deceive ourselves into thinking that we are somehow in this together with Bank of America, or Country Wide, our Chase, of Citi, or Wachovia, or Wells, or any of those people. Come on, get real. We’ve all been had, we’ve all been part of it. For 30 years we’ve just been over‑spending, borrowing, borrowing, borrowing, borrowing. The only thing that put off the Armageddon, or this difficult time that we’re in, is the housing market bubble. That took over where credit cards left off.

For 20 years we built up all this mass of credit on our credit cards, and then for the last 10 years we just built up this massive credit bubble feeding off our home equity. So now it’s time to pay the piper, it’s time to rethink that way of living. That’s why so many of us are struggling with it emotionally.

So walking away from the problem can be really attractive, emotionally. I’ll tell you again, it’s not the best idea though.

Ryan:  It can be attractive emotionally, but it can kind of be a false attraction. Tell them why, Dad.

Mike:  OK, there are really three myths that people often think are true. The first one is that they think that the bank really wants your home anyways. The bank is really after your home, and that fighting them for it is a losing battle. Well the truth is they don’t want you home, they want your money. Money is much more important to them because real estate is difficult and it’s messy and it has all kinds of risks. They lose a lot of money when they take back your home. The truth is, get real about it, they would rather get you back online paying.

Myth number two is “I’m not responsible for paying the bank’s legal fees if they foreclose, etc.” Well, don’t be so sure because, depending on the state that you’re in, the bank may very well sue you butt for any kind of shortfall between what you owe them, and what they sell you house for on the real estate owned, or REO, market.

Believe me, they will include any attorney’s fees, any trustee fees, any realtor fees. They’ll hit you for everything, and they will pursue you, especially if it’s over $50,000. That of course, is if you’re in a recourse state.

Myth number three is, “I’m done with it once the bank takes it back.” This is the biggest reason of all not to just walk away. There are many other options that are available to you, in fact there are nine other options. None of them leave you as long term vulnerable as just walking away.

Just walking away leaves you vulnerable to the bank just selling your home at the lowest price, and then suing you for a deficiency. And then you being tax‑liable for the forgiving amount. It leaves. You liable for all kind of crap.

So it really is a mess way to handle things. I don’t recommend it unless you really intend to flee the country, or if you’re at the point in your life were you just have no other options. But honestly, when people come to us and they’re just totally frazzled like that, and they just tell me, “I just want to walk away.”

I say, “Listen, you need to hire somebody like me to manage this thing for you and close it up, tie it up neatly. Let us short sell the property for you, get deficiency judgment, disclaimers, or payment in full notices from all of your lenders. Let’s tie it all up neatly, neat as a drum, and let you walk away. You can stop thinking about it right now and start down the short sell path.”

But for tonight’s lesson, what I’d like to do is just take a few minutes and explain what happens when you do just walk away. Or when you just stop paying, and just let the foreclosure process take its course. Unfortunately we have too much experience at this because some of our clients decide to do this, and some of our clients’ short sale applications, for whatever reason, fail to get accepted.

So what happens, generally, is that it’s generally pretty easy to get a foreclose trustee, or share of sale trustee sale, or share of sale delayed. So usually the prescribed number of months you have, usually gets at least doubled. So that in states like California where it is three months before you get a notice of default, three months afterward. Those six months, almost always, can be stretches into 12 months.

So let’s say you’ve been living in you home payment‑free for 12 months, but you just really are done with it, and you’d just assume let it got to foreclosure and the bank does take it in a trustee sale. Well what happens then is it would be offered at auction on the courthouse steps in a district right near your home. And these days, nobody will buy it because so much more is owed on it than it’s worth. So the opening bid will be lousy, it won’t be market rate. The banks just aren’t smart enough to get it sold right them.

So what they do is they take possession of it, and they turn it over to a real estate owned… what do they call those guys?

Ryan:  REO?

Mike:  Yeah, the REO agents. They turn it over to syndicate, an REO syndicate. So IndyMac Bank takes ownership, they call the syndicate, and they, “Say here is the property, get rid of it for us.” The dole is out to a local agent. The agent comes, knocks on you door. This is probably three days after the trustee sale, at minimum. More likely, in most of the big foreclose states like Arizona, Nevada, and California, Florida. Oh man, in Florida it might be two months later. But generally in California, it’s about three weeks later before the real estate agent knocks on your door, call you up and says, “Hey, I’ve been hired by your bank to sell your home on the open market, and I want to know what your intentions are.” To which most people say, “Well, I intend to move along, but I haven’t got enough money to move.”

To which the real estate owned agent says, “We can offer you $2,500 and we would ask you to vacate the house within two to four weeks.” To which most homeowners say, “Thank you very much.”

That’s called cash for keys, and it become standard operating procedure for bank‑owned properties where the homeowner stays in the home. Because you see, their alternative is to start the eviction process, which in many states can take up top three months, or even more if you contest it.

So they would much rather pay you a little bit of money and have you leave on reasonably friendly terms, rather than to really piss you off and have you leave the house messy, shall we say. Copper‑less, shall we say. Fixture‑less, shall we sayl. Window‑less, door‑less, shall we say. “De‑featured” is the way that Ryan and I often describe it.

So very often, the home owner will settle for $2,500 up to as much as $5,000, unless you’re in some of the really high‑rent areas where it would be really expensive, or they’re losing a lot of money every month with your there. Then settlements can go up to $10,000, or more. So if you’re in southern California and you’re in Beverly Hills, or Manhattan Beach, or Malibu, or on the Palos Verdes Peninsula or something like that, you can expect easily $10,000 cash for keys.

Then you move out, they put it up for sale, and it generally is sold pretty quickly because the REO, the real estate owned market, works like a well‑oiled machine. They price right, and it covers all their risks. So at that point, they’re really interest in covering their risks. With an inspector, with an appraiser, with a realtor. Plenty of insurance policies there, plenty of other companies for them to sue if things go wrong. So it usually happens pretty quickly, and the home is sold usually within 30 or 60 days.

So from the time of the trustee’s sale another month to two months before they take over the house, and then it’s another month to two months before they go into escrow, so it’s really another six months before the bank gets their money.

So that when you’re dealing with them in terms of a short sale, or a deed in lieu or some other kind of negotiation like a loan mod, keep in mind that if they foreclose on you, not only are they talking about less money but they’re talking about money later, as much as six months later. That’s pretty significant.

All right, how did I do?

Ryan:  Well, do you think we ‑‑ I might have zoned out, but did you tell people there’s the whole timeline and how…

Mike:  From the start of foreclosure?

Ryan:  Yes. Did that want to be part of it? The 90 days and the…

Mike:  Yes, I think so. Let me just review. In most states, you have to be in default for at least three months before you get a notice of default and the process formally starts. But that’s not always the case, and technically it’s not legally the case; it’s just common practice. Usually if you stop making your payment, if you stopped a couple weeks ago on January 1, it’ll be March 15 before you get a notice of default. That will begin the process, and then it’s two to three months before they schedule the trustee’s sale or the sheriff’s sale, depending on which state you’re in, or the court date, depending on whether or not you’re in a judicial or non‑judicial foreclosure state. Then at that point, it’s usually three weeks or 30 days before the trustee’s sale takes place.

I always say you usually can double that whole period of foreclosure because it’s pretty easy to do. You just request a delay, or you request some workout option, or you go down a workout option path for a couple of months and then determine that one’s not right.

So usually you fumble and bumble your way through doubling the normal foreclosure process. Keep in mind the banks are so incredibly busy these days that they’re not really highly efficient in forcing the foreclosure process either.

But do be aware, once you piss them off you do tend to get a little red X on your file, and they can cop an attitude towards you. So you don’t want to lie. You don’t want to deceive. You don’t want to miss deadlines. You don’t want to miss commitments that you’ve made.

So make commitments with caution and with care, because you don’t want these guys to cop an attitude because they’re powerful, and they can hurt you.

All right, let’s take questions.

Ryan:  Well, what happens here then? Is it clear to everyone, do you think? I don’t want to beat a dead horse.

Mike:  Yes, I went over it. I think the whole timeline is clear. You understand that this is one of 10 foreclosure options that we counsel our clients about. It’s one that I routinely discourage people to take, and in fact, I can only think of in the last two years two clients who just plain insisted and took this option.

Ryan:  All right, we’ve got one from a client named B.B., trying to help her brother with a loan mod from Wells Fargo First. The loan amount is $200,000, APR 7, fixed 30 years, monthly PITI is $1,695. They’ve offered him a special forbearance plan for a trial period of three months at $811 PM. What is PM, do you think? $811 per month?

Mike:  Per month, probably. $811 per month.

Ryan:  ”It’s getting to the end of that trial period soon, three months. They’re going to reevaluate for a permanent loan mod. What numbers are the bank looking for, as we just can’t seem to get them right? Expenses are either way too low or way too high. Is there a DTI ratio they’re working off or a percentage of his income of mortgage payment? Any help would be greatly appreciated. Thanks.”

Mike:  B.B., it is extremely predictable. The answer to your question is it is 100% predictable in terms of what they’re looking for. If you have not purchased our kit.

Ryan:  She hasn’t.

Mike:  The 60‑Minute Loan Modification Kit, it describes in very good detail exactly what they’re looking for. Let me outline it here for you. I bet, from the fact that your trial modification payment was cut down so low, it was cut in half, I’ll bet that you were put on a trial mod for the Making Homes Affordable program. So you have a really good chance, like a 95% chance or better, of getting that modification turned into a permanent mod.

You have to take this very, very seriously, and the ratios that they’re looking for are as follows. They’re looking to confirm that your front end debt‑to‑income ratio is higher than 31%. Now I’ll tell you what that figure is.

That is that first mortgage on the home that you live in, that’s your primary residence, first mortgage only, principal, interest, tax, insurance and homeowner’s association, all that added up needs to be more than 31% of your household income.

Keep in mind the household income is the income of those people who are on the loan and anybody else that you want and need to put in there, friends, relatives, anybody else ‑ no, I’m just kidding ‑ anybody else who’s in the household and contributing money.

You do not have to put their income in there, into that gross household income. You only have to put the income of the person who’s on the loan. That’s the ratio they’re looking for.

Now in terms of expenses, keep in mind that front end DTI and all your other debt payments, like credit cards, car loans, et cetera, student loans, all those need to come up to a back end DTI, debt‑to‑income ratio, of no more than high 60s. If it’s over 70%, that’s going to be tough. So in the high 60s.

In the remaining 30% of your income, or 40 or whatever is left, you need to spend every penny of it. So in your expenses, don’t show them a budget that shows that you’re $500 negative or that you’re $500 positive. Show them a budget that shows that you eat up all the money that you’ve got.

I know that defies logic because you’re asking for some assistance, so everybody thinks I should show them a budget that shows that I’m wildly overdrawn every single month, that I can’t make it unless I get help. But that isn’t the truth. You need to come up with these days right about zero, a goose egg.

So B.B., that is the specific answer. I hope you heard every word of that because if you follow that formula you’re going to get that $800 made into a permanent modification, and that’s enough to change your financial month to month.

Ryan:  Michael P. writes in. He’s the one that received an acceleration last week when he went to check his mail. Here’s the situation with this one. Michael, the one thing I don’t understand here is it says that you’re having a hard time getting the bank to tell you what you owe. That should be something that you could get any old service person to tell you just by calling in anytime.

Mike:  He probably means arrears. Who knows why they wouldn’t tell him that.

Ryan:  Anyway, he’s got this house, and he wants to focus on his primary in Rhode Island, but he got an acceleration notice on this other one. Here’s the thing. He’s concerned because he says he’s still current with the payment on the first, and the second is with B. of A., a payment of $681. The second is pretty darn large, and it sounds like the first ‑‑this sounds backwards, but it sounds like he’s saying that the first has $50,000, and the second is a second of about $100,000.

Mike:  That’s a whopping payment for a $100,000 mortgage.

Ryan:  Or more. Well, how could it be that he could wind up with such a big second and not a refinanced first? You know what I mean? Would a second ever do something like that?

Mike:  Yeah. Yeah. If you have all that equity in the house, they would have, in the go‑go days, lent you as much as you wanted.

Ryan:  Well, he’s saying the value is $150,000 max.

Mike:  Crazy.

Ryan:  Perhaps he’s got these mixed up, mixed up the first with the second or else maybe something weird has happened here. The thing that I would consider on the second is, it sounds like the second is the one that wants to accelerate and sell the house. Typically, in a situation like this, the second would have the $50,000, and they wouldn’t really have any equity left to foreclose on. I would say, “Why would you bother?” Just stop paying them and take the FICA hit. Let them moan all they want.

Mike:  But, Ryan, let’s just say we have the math right. So he says he has a little first and a big second. The second maybe has eyes wide open and they realize they can sell this for $150,000, and they can walk away with $50,000, at least. Maybe that’s what they’re up to.

Ryan:  Yeah, true.

Mike:  It usually doesn’t happen that way because the numbers are usually reversed. Usually the second is…

Ryan:  I guess that all we can do is assume that he’s right, right?

Mike:  Yeah.

Ryan:  So, in that case, I guess you do have liability.

Mike:  And, Michael, if we totally biffed your question, clarify, would you?

Ryan:  So, anyway, he wants to know if he can maybe make a partial payment to stop the acceleration. I’m sure you can. They’ll certainly probably accept some money from you, unless they really want to foreclose and not get into the finances. It looks like he wants to stop. He wants to not worry about that home while he worries about his Rhode Island home. What’s the best advice that we can give him? Should he pay them a little bit?

Mike:  Yeah.

Ryan:  Should he call them up and tell them he wants to get a loan modification?

Mike:  I would say, if that really is your strategy, you want them off your plate for six months or so, then I would just start making payments again. It’s not necessary, in my mind, to go ahead and get current, but at least stop that foreclosure process. So get back under 60 days late or something like that. I think that’s really the best. There are a lot of other things you can do, but they’re high intense work and they’re risky, so why do it? You want it off your plate for a few months while you fix the Rhode Island home.

Ryan:  Oh, here he clarifies $50,000 on the first and $70,000 on the second.

Mike:  Oh.

Ryan:  The second wants to foreclose. Yeah, they want to get a few bucks. They want to get anything they can.

Mike:  Yeah.

Ryan:  Now here’s the good news on that, oddly enough.

Mike:  There’s good news.

Ryan:  I shouldn’t say this is true, absolutely, with Arizona, but I bet it is. It’s true here in California. That is, if they should sell your home for $150,000, they will be writing you a check for $30,000. So that’s the good news.

Mike:  The bad news is nobody’s motivated. They’ll price it so low because they could care less about you.

Ryan:  That’s true. They’ll let the auction take care of it and it will go for a low market price. Yeah.

Mike:  Yeah. All right. I’ve got a couple of questions that were handed to me and one is from Libby. It says, “If the bank takes my home, this place,” she says. It’s in Minnesota. “I understand that I can still redeem it for several months afterwards. Is that so? If so, will my renters still owe me rent?” Very good. Yes, it is true and yes, they will still owe you rent. Here’s the caveat. In your mortgage, I’ll just bet you, if you bought it as a rental property, there is an addendum. It’s a “Rental Property Addendum,” or something like that, that most states use that specifies very clearly that, during the redemption period, or after foreclosure or, you know what, it may even be while you’re in foreclosure, technically that rent is owed to the lender.

Now, common practice is that they don’t sue you for that or they don’t pursue that. It’s really only because they’re so overwhelmed right now with legal action. All of their attorneys, every attorney that they hire, is tied up in foreclosure action, so they’re not going after these settlements. That’s one thing. Technically, you cannot keep that money. Technically, they have a right to get it from you. I’ll just bet, the likelihood is 90%, that you have that kind of a rider on your mortgage.

Secondly, there’s always the risk that your renter is going to hear that you are in fact in default. A lot of renters cop an attitude when they know that their landlord is not paying the mortgage. They feel, and a lot of time renters’ rights organizations tell them this, that if your landlord is violating his agreement, you have every right to stiff him because in fact the lender might sue you someday for the money. Not true, but these renters’ rights organizations tell them that. So you have to be afraid, Libby, that that might happen and then you’re going to have trouble collecting. You sure as heck don’t want to evict them.

My advice is, when you go into these situations, you wait as long as possible. When you do have to break the news to your renter you do it in a conciliatory kind of way and you explain to them what you’re trying to work out with your lender. If need be, you ask them to make some kind of an arrangement whereby if they can pay early, you’ll give them a 15% reduction or something like that to incentivize them to continue to make their payments to you.

It’s risky. In Minnesota I know for a fact it’s six months of a redemption period. That’s one of the longer ones in the country. So, for six months after the sheriff’s sale, you can go back and redeem that home. Take it back, if you can get financing somewhere. All right?

Ryan:  All right. We have a gal’s name that I can’t say. She doesn’t want me to announce it on the air.

Mike:  Mystery caller.

Ryan:  Her name is “M” and she lives in…

Mike:  Well, don’t say it if she’s…

Ryan:  I want her to know we’re talking about her. She lives in Ohio or in Iowa or something like that. Anyway, I’m going to read just a couple points from her letter, which is long. In fact I didn’t know a subject line could be that long. See that?

Mike:  Yeah, wow.

Ryan:  Neat. Anyway, I’m just going to read a couple things from it because there’s some relevance just in knowing what other people are doing. She’s giving me the latest. “Moved into my rental property and updated all info with Well so now it can be owner occupied. Have just completed three months of on‑time trial payments. Am supposedly in the home stretch for the final mod.”

See what’s she’s doing there, folks? Obviously taking advantage of the president’s homeowner occupied thing. So that’s cool. OK.

“Still no income coming in. Retraining to get certified in new lines of work. Relying on boyfriend’s W2 job and his letter of contribution” for her loan modification application. OK? She’s taken all these tips and put them to good use. In her case, this is dramatic. She doesn’t even have an income. She’s not letting anything stop her.

“Negotiator made a mistake and calculated the trial payment as 31% of boyfriend’s entire take home pay, not the contribution. So obviously that’s going to be a lot less.” Here’s the thing, M. She’s in Idaho, sorry. Anyway, here’s the thing. She’s saying, “Since this was a mistake, what I’m asking them to do is set the payment to 31% of the old mortgage payment, interest, tax, and insurance.” which actually doesn’t make any sense.

That’s a misunderstanding of what we were talking about earlier. It doesn’t make any sense to cut your payment by one third, in and of itself. Don’t continue to push along that line. 31% is something that a lot of people get…

Mike:  Yeah, they get messed up on.

Ryan:  Hung up on and get moved around. Here’s the best that you can hope for: a 2% or 3%, fully amortized, fixed rate loan, or you could get maybe a couple years interest free at 2% or 3%. What other kind of options can she…

Mike:  Interest only.

Ryan:  I’m sorry, interest only.

Mike:  Yeah. You’re right. This is one smart person. This person is very aggressively going after the very best, fighting to keep their home. I think by virtue of the fact that they made the mistake on the calculation, and if you think you’re right there, why don’t you push that for another three‑month mod? It sounds to me like you think the trial payment should have been lower. Maybe you’re going to be able to jump right on to another three month, but…

Ryan:  I don’t know. Here’s my thinking. To get approved on your boyfriend’s income is a long shot, at best. If they decide to go with 31% of his income, if he makes somewhat of an average salary, don’t rock the boat.

Mike:  Yeah, you make a really good point. There are times when you just need to say, in this craziness of loan modification, I had a guy get a good offer the other day and he just said, “Should I go for better?” I just said, “No. Run to the notary. Run. Get off the phone. Get in your car. Get over to a notary and get this thing signed. FedEx it back, overnight. This is such a good deal.”

Ryan:  Now let me go on….

Mike:  Yeah, if this is as good as it sounds, M, just take it.

Ryan:  Yeah. Is he a millionaire? Is he pulling down $100,000 a month? Then, I’d say I don’t want to pay 31% of his income. If he’s anywhere near the $60,000 income or $30,000, whatever’s the median in that area, you’ve got a rocket, OK? Otherwise, I do see here, though, that she says that the trial payment is better, but it is not sustainable.

Mike:  Oh.

Ryan:  OK. So given that, given what we’ve said, I think it’s time to take a long, hard look at this. Consider transitioning from is fight, one day, into a short sale. I think a loan mod is a very legitimate part of it. Whatever you want to do, you want to make the most you can out of this property, whether it’s renting out for as long as you can, whether it’s living in it for as long as you can. You’ve certainly extended it, but if it’s not sustainable and his income is somewhat normal, it’s time to shift gears.

Mike:  Do you want me to go on here?

Ryan:  No, she’s got more. Also, she’s asking about exposing and disclosing cash and investments. Like a lot of people, she says she has some cash, but she has a lot of debts so it’s not really hers. Also, she has some investments in some LLCs and some businesses that don’t show up on her personal credit report.

Mike:  Yeah, sure.

Ryan:  Here’s the thing. She asks me, “Do I have to disclose this? Do I have to disclose that?” The answer, I’m afraid, is that you do. The caveat to that is that we certainly haven’t seen any investment police out there catching people on these things. A good number of clients have had extreme success with simply not answering. I guess that would probably be a lie, according…

Mike:  Well, here’s the thing, Ryan. If you’re talking about a loan modification, M, you’re getting underwriting lite. If you’re talking about a settlement, or a deed in lieu, or a foreclosure settlement or a short re‑fi, then you’re going to get more underwriting scrutiny. Realistically, on a loan modification, what they do with the information that you put in assets is the clerk who’s looking at it goes over to a checklist and checks off the box that says, “Did they include their assets and liabilities?” and they check it. That’s the degree of scrutiny that you get, because you’re talking about a modification and, especially with Make Homes Affordable, they get paid to modify you. They want to help you. I wouldn’t be paranoid about that.

The way you should always start your foreclosure workout, whether or not you’re living in the property, whether or not it’s investment property, whatever, you have to take a sober look at how much your creditors can sue you for. How much is not protected by a trust? How much is not protected by a pension fund, 401k or Roth, or some kind of pension fund? How much is very liquid? The judge will, of course, just be looking at liquid assets.

They will be friendly to your real estate investments and they’ll be friendly to your pension investments. Of course they can’t touch any social security or anything in a trust. So step back and have a look at it. Maybe even ask an attorney to give you an analysis of what your liabilities would be in court if this company brings suit against you. For right now, you’re just talking about a loan modification. I wouldn’t be concerned about divulging everything.

Ryan:  Well, no, we’ve had people, several people recently, who have been told they have too many assets. They had pretty modest assets, as far as I’m concerned.

Mike:  No, I don’t know about that, but that’s my input.

Ryan:  No? OK.

Mike:  I don’t think so.

Ryan:  All right. Carl P. writes in that he paid up for last month and he feels that he got the attention of Loss Mitigation after not having paid for a little while.

Mike:  That’s nothing.

Ryan:  He did pay up, so it didn’t go to long. He has not paid January mortgage yet and he has an opportunity here to work on something for about a week and make $1,000. Should he do that or should he decline the money and work on the loan mod full time? Doing this, I’ll say I never got a question like that before. What I can say is I’d take the money. Personally, you’re not that far in the late, late process, so I’d make money where you can.

Mike:  Yeah.

Ryan:  I think he says he’s a freelancer or something. Jobs come, jobs don’t come, you know how it goes.

Mike:  And there’s nothing going to change in a week on your loan mod. So write them a letter and ask them a question. That will tie them up for a week.

Ryan:  Take the money and run, Carl.

Mike:  Yeah.

Ryan:  OK.

Mike:  Tim says, “How does the bank deal with damages done to this home after I move out?” Oh, this is a question with regards to abandoning your home. “If it is vacant for a while before it is owned by them, could they come after me for damages to it?” It used to be that we would just think that a vacant home, in some neighborhoods, they might get vandalized. Well, it’s become a big, big deal to the point where the banks are asking us now to confirm every time we’re calling in on a client’s loan mod application. Is the house vacant? Is the house vacant? Is the house vacant? Because, boy, they want to know if it is.

They want insurance and they want to accelerate everything because there’s been such a high incidence of break‑ins and vandalism. Once you abandon the property, thinking, “Doggone it, I should go back for that $400 door or I should go back for that $300 dishwasher or I should go back in and take out those windows. My cousin could use them.” That is a real threat, Tim. They’re very concerned about it. In terms of coming after you, it would be just added to their losses. So if they’re going to sue you and pursue a judgment against you for their losses, they could include the damages, yes.

Ryan:  OK. Let me get this in. Fred is on the call and he wants to know is the window closing fast for loan mods. He’s part of our credit card settlement club, which is cool. We have some really awesome stuff coming out with that. Also, if you’re not a member be sure to sign up at the little box below, if you have any credit card debt.

Mike:  Below the screen that they’re watching now?

Ryan:  Yeah. How many missed payments would be motivation to a lender? Any experience with Bayview Loan Servicing? What’s the success of loan mods for seconds? Why don’t I let you have that one?

Mike:  OK, the question is how many missed late mortgage payments, motivation to the lender for what?

Ryan:  A loan modification, I think.

Mike:  OK, for a loan modification as soon as you are in default, you are no longer being treated by their imminent default department, if there even are such things. I’ve begun to believe that, in fact, they’re just figments of our fragment. Immediately you are in default. That means 32 days after your mortgage is due, you’re in default. Whether or not you go 60, 90, 120 days late, it’s entirely up to you. You’re going to get treated with respect as long as you’re late.

What some people do to minimize the FICO damage ‑‑ and I don’t know whether or not it hurts their negotiating stance, sometimes I think it’s more work than it’s worth ‑‑ they make a payment, but they never get current. They’re always 30 days late throughout the loan mod process. Just one payment is all you have to really be late, but believe me, you have to at least do that one.

Then, no. No experience with Bayview.

And then what is the success for loan mods for second is loan mods for second are powerful, however, they usually don’t mean that much money to you because they’re usually insignificant compared to the first.

In many of the states that are deep in the foreclosure muck like Florida, Arizona, Nevada, California, Ohio, Michigan, in many of those states, the seconds are literally without any equity. So there are really easy to negotiate with. They’ll threaten to sue, they’ll threaten to foreclose, but they’ll also take your offer of some kind of minimum payment during your difficult period.

So if in fact your workout is a loan modification and you intend to modify your first, and then modify your second, it’s easy to get a modification out of a second. You should be able to get down to 1% interest or even lower. Even just a $75 to $200 payment every month just so they can keep from charging off the loan. They don’t want to do that anymore than you want them to at this point. They’re easy to negotiate with.

Ryan:  OK, we have Kevin and Michelle. “How do you postpone a trustee sale,” is the first part of the question. The second is, ” have a first and second on my investment property. The rent will only cover the first. Will I qualify for a mod on the first? Thank you.” What other information do you need to know? It really doesn’t have a whole lot to do with…

Mike:  What was the first question, Ryan?

Ryan:  The first question was how do you postpone a trustee sale?

Mike:  First of all, postponing a trustee sale means at once you pay a little more, bankruptcy. Let’s introduce it.

Ryan:  OK.

Mike:  When you get a notice of trustee sale, you’re on a short fuse, three weeks or so before they’re going to take your home. So you need to intervene real quickly, and you do that with ‑‑ take it away, Ryan.

Ryan:  Hey.

Mike:  Hey.

Ryan:  Bankruptcy.

Mike:  Bankruptcy.

Ryan:  What else we got? We have…

Mike:  Our favorite.

Ryan:  Which is?

Mike:  Submit a short sale offer.

Ryan:  Oh, short sale. Yeah.

Mike:  They love short sale offers because it’s cash now instead of six months from now.

Ryan:  And that consideration can often take four months.

Mike:  Exactly. Short sale is the sweetest one. And the other one that Ryan didn’t mention is just plain ask them. If you haven’t got any big red Xs on your file and you just say, “I need you to postpone it,” you’ll be surprised. If there’s a reasonable reason for you to need to postpone it, you say, “Listen, my wife is in the hospital. We can’t really work on this for two weeks. We think we have a solution.” In other words, just ask for it is the first one you should try as well.

Hey, I’ve got a question here from Shahid. It says, “How long will the F for foreclosure stay on my credit report and how long will it affect my FICO score?” When you do, if you do walk away from your home and you indeed get an F foreclosure on your credit report. They report that to FICO which reports that as a credit score hit.

It’ll hurt your FICO score for the 10 years that it’s on your credit report. It really impacts you for two to three years very seriously. Depending on how aggressive you get in terms of credit recovery, you can probably cut that down to about a year and a half, but certainly you’re into deep FICO problems, credit score problems for 18 months.

But if you get on a good regimen of FICO improvement practices like Ryan describes in “The Credit Card Cure,” and that we describe in the 60‑Minute Loan Modification Kit, I think there are seven of them. Those practices can cut in half the time that it normally takes to recover your FICO score.

Mark asks, “Will the bank sue me for the difference between what they get for my home and what I owe them?” Mark, that completely depends on whether or not you are in a recourse state. That is, does your bank have recourse to hold you personally liable to the debt, or is it tied only to the collateral that you put up for the loan, which was the home.

Now, you can find out if you are in a recourse state by Googling recourse states or by emailing me and asking me. The actual whether or not they really will pursue you, my street smarts says that it’s usually at about $50,000 where’s it’s worth it for them to actually pay $15,000 for an attorney to go after you.

If it’s in the neighborhood of less than $50,000, you might not ever hear from them again, but they have the right to pursue you for quite a few years. The statute of limitations in one state ‑‑ I think it’s Kentucky ‑‑ is only three years, but in most states it’s five to seven years.

You can find that also by going to statute of limitations on debts. They’ll take you to some site that will have a grid telling your state and the statute of limitations. Got some more?

Ryan:  Yeah, I got a guy here, Richie, and he’s actually got a loan modification here. It’s a rental house and it’s converted from an ARM to a 4.5% for five years, PMI, and after five years, to the end, 5%. That’s pretty good.

Mike:  That’s pretty good, yeah.

Ryan:  Payment is still the same, OK?

Mike:  They just amortized.

Ryan:  OK, so I’m $500 negative cash flow amount a month.

Mike:  OK.

Ryan:  House is only worth $100,000, mortgage is worth $152,000.

Mike:  I know where this is going.

Ryan:  Yeah, BFA said it’s the best they can do. So, the good news is that it’s $500 negative a month only. You’ll be paying this off, right? So you won’t just be paying interest. The house is in Arizona, which is a non‑recourse state for now. I thought it was a recourse state now. Wasn’t Arizona?

Mike:  I forget.

Ryan:  I don’t know. I’d double check that, Richie, because I’m pretty sure they changed that the other day. I want to see if they’ll make it into a 40‑year. That’s a good idea.

Mike:  That’s a very good idea.

Ryan:  ”Should I reject their offer? Should I submit my own financials, or should I just short sell it. I like collecting rent while I’ve not been paying the last six months.”

Mike:  No kidding.

Ryan:  Good for you. But I’m afraid they will send it to foreclosure while I’m submitting for a loan mod the second time. I doubt they’ll send it to foreclosure while you’re submitting a second time as long as you’re in good touch. And it looks like you are one of these people who is able to communicate with your tenant well enough to keep him paying, which is important. OK? And the explanations are pretty easy, if you can just get over it.

Mike:  I’ve got one just like that Richie, where I’m really arguing with the bank. Because I got to a point where I just said, “No, I’m not putting another penny of my money into this loser.” It’s only worth half of what I owe on it, and I already lost so much money on this one. I just said, “You know what? I’m done.” I’m stopping the bleeding, so until the bank gives me a modification that equals the rent, so that it’s a break even, until they do, I’m not paying. And I honestly don’t care if they push me right up to trustee’s sale, I’ll just short sell the thing. But it’s in such a hard‑hit area that I believe that they will accept it. I’ve been negotiating hard with them now for about nine months. I believe that they will acquiesce, because they understand that there’s just no options. I think I’m getting through to them. So you might try that, but it takes a lot of nerve.

Ryan:  Kevin and Michelle follow up. We forgot their second one. They’ve got a first and a second on an investment property, rent only covers the first. “Will I qualify for a mod on the first?” I guess, Michelle, we have no idea.

Mike:  Yes, because that isn’t the only factor. They take in your entire financial picture. That’s what matters, not whether or not their rentals are going to break even.

Ryan:  Ultimately, if the rent covers the first and the second is a smaller amount, the ideal thing would be to get that thing to break even and hold onto it right? So that’s what you got to shoot for. But there’s just more to it.

Mike:  Yes, we need more information than just that.

Ryan:  OK, so Sean and Leah. You know, he says he hasn’t received a package. I thought we got that one out. Anyway, let’s check that.

Mike:  Let’s skate.

Ryan:  Don’t know. “I will not be paying the January payment on one of my rental properties. I have received a short sale offer, and the realtor says it is in the acceptable range she has been seeing. Can you go over what I should do with regard to the lender and a little bit about the ratios on a short sale?”

Mike:  Yes, the first thing is you want to be sure that the realtor that you’ve hired does short sales, and I mean does a lot of short sales. Because honestly, you don’t want them learning on your dime.

Ryan:  You know what I saw? There this guy named Frank, he’s a realtor in Manassas or something. And he does a lot of really innovative stuff online. And his property search rates the listing agent on short sales for how many short sales they’ve closed. Pretty cool, huh?

Mike:  Yes, honestly that’s a good way to do it. I mean just cut the crap, don’t just hump. Because in any given geography there is one outfit that is doing the majority of the deals, because you get expert at it.

Ryan:  So anyway, talking about ratios in regard to a short sale, that’s another problem. Because truly nothing matters on a short sale. What matters is that you’re not going to pay any more for it, you’re not going to bring any money to the table, more is owed on it, and can you get everyone a little bit of money. Ratios really don’t factor into it.

Mike:  You think he’s referring to like debt to income ratios when he’s…

Ryan:  I think he’s thinking debt to income ratios.

Mike:  Yes, none of that stuff matters.

Ryan:  Yes, none of it matters. And some people…

Mike:  You see the key here is the bank is going to determine whether or not you have a hardship. You can’t make this payment. And if you convince them of that, because of a hardship and you show them financial numbers that say I can’t continue like this, and they agree, then they’re going to look at the deal, and they’re going to say, “Is this a reasonable market offer?” They’ll either pay a hundred bucks for a BPO agent locally to give them a price or they’ll hire an appraiser to come out and give them a price, and they’ll evaluate the offer in terms of whether or not it’s reasonably close to market. And I would say anywhere within 10% of market is likely to get accepted. And then they’ll just accept it. Because that’s what they’re going to get if they push it further and take it to REO.

Ryan:  OK, so we need to cut it off. Why don’t you wrap it up, and I will cue our new deeply thoughtful and contemplative theme music.

Mike:  Thanks for listening and we provide this teleconference and video conference as a service as part of our effort to proliferate street information, street smart information about foreclosures going on around the country. You find us at 60minuteloanmodification.com, for more information about what we do and how we help individuals get through the foreclosure process. Ryan is the author of a children’s book on foreclosure to help families talk about the emotional difficulties that they’re going through, and to help kids understand that the world is going to continue to spin, and that everything is going to be OK. You’re going to stay together as a family, etc, etc. That book is called “Mia’s Home.” And that book is available on our site.

We also have all kind s of loan modification support for you, in the 60 Minute Loan Modification kit. We have a notice of default handbook that’s available, and as Ryan talked about briefly we also have a membership only site called “The Credit Card Cure.” And on that site, people support one another, and help one another, and with Ryan’s good information through the “Credit Card Cure” book, they get through credit card debt settlement. So that is also a very important service we provide.

So we hope that these teleconferences that are on Tuesday, Wednesday, and Thursday nights are of service to all of you. Please join us again next Tuesday might, when we’ll talk about Foreclosure Doctor topics.

And join us Thursday if you are a client of ours, 60 Minute Loan Modification client, where we dig into the nuts and bolts of the street smart loan modification. And if you’re in credit card debt, please join us tomorrow night for our teleconference, the Credit Card Cure Co‑op. And you learn how to sign up for that apparently, right below me. All right?

Thanks everybody, and good night.

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

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

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

Mike: Yep.

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

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

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

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

Mike: It’s not as easy as it looks.

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

Mike: Credit score recovery.

Ryan: Recovery, damage…

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

Ryan: Yeah, please.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Get overdraft protection on your checking account.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Mike: You scan it faster than you can…

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

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

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

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

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

Mike: Yes, go ahead. Start us off.

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

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

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

Mike: You lose.

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

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

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

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

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

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

All right, got another question?

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

Mike: Yes.

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

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

Ryan: Why do you say that?

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

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

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

Mike: No.

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

Mike: Un-spam us.

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

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

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

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

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

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

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

Do you have a question, Rocky?

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

Mike: [blows raspberry]

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

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

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

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

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

Mike: Sure, what state is he in?

Ryan: Doesn’t say.

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

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

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

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

Mike: Don’t get current.

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

Mike: And he’s prepared financially.

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

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

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

Mike: Bingo.

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

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

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

Mike: Bob, the collector.

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

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

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

Mike: Kelly M?

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Mike: You’re getting inundated.

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

Mike: They have a right.

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

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

Ryan: Sean M.

Mike: Oh, Sean M.

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

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

Mike: Till February 1.

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

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

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

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

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

Mike: My turn?

Ryan: Yes.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Mike: Yeah, we were all over the place.

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

Mike: Have an attorney work on it.

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

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

Do you have anything else to add?

Ryan: No, that’s it.

Mike: All right. Good night.

Ryan: Happy New Year.

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