File Name: March 16
Duration: 00:23:00
Mike Rockwood: So always offer to fax to their personal number or email them directly to get forms to them that they need in a hurry. Always be prompt and complete in your responses to their request. Help them do a good little job. Keep it in mind, they do have a dumb little job. Their job is really dumb so help them do a decent one so they can feel good at the end of the call with you, would you? That’s smart – smart negotiating. Don’t give anything away without getting something in return. Count every item offered as won and negotiate from that – w-o-n, you know you won that term. Now move on from that one. Never accept offers that they make to you. Just graciously accept them under advisement. Just say, “Listen that’s great. My wife and I will get together tonight and we’re going to be talking with our attorney to see if this makes sense for us.” And when I’m talking about getting negotiated terms accepted and considering them won, I’m talking about like when you’re offered a special forbearance or you’re offered a modification or you’re offered a deferment or something like that, count that as won and then fold that into the rest of your negotiations. Number 7 is ask for what you want. I always recommend that people ask for very specific dollar amounts and create some rationale around it. That’s the total amount that we have in savings or that’s 31% or our income. The government says that’s what we should be spending on housing expenses etc.
Tip number 8 is never lie and here’s the reason. It’s just way too hard to keep track of lies. No, I’m just kidding. Don’t lie because it’s just wrong and I always get caught at it. I always have, ever since I was in grade school. I’m actually a pretty good liar but I always seem to get caught at it. And number 9 is keep good records. There’s no negotiator saying that he who has the information wins so keep really good records of the names. I always get the name of the person that I’m talking to and then I put very specific statements that they say because invariably, in the coming weeks then you have to refer – tell Edna that Arnie said and tell Mark what Tina said; it just adds credibility to your whole case so use a journal to record everything in your workout process. All right, that’s all I got on negotiation tips. I see you’ve got the ebook queued up there.
Ryan Rockwood: Yeah, I do have that.
Mike Rockwood: Okay.
Ryan Rockwood: Looks like our questions are answered.
Mike Rockwood: Oh, ok. Good, good.
Ryan Rockwood: Yeah.
Mike Rockwood: I’ve got questions that came in just before I came over here. Sheldon says, “From what I’ve read, it sound like a deed in lieu is appropriate for my situation. How do I get that to work? How do I propose that to Wells Fargo?” Sheldon, it’s as simple as dialing them and asking them what the requirements are but I can tell you what they are so you can get a little head start on it but you want to contact their loss mitigation department or you can just start with customer service, it doesn’t matter but the deed in lieu for those of you who don’t know is giving your home over to the bank in lieu of foreclosure instead of forcing them to go through the foreclosure process or instead of forcing you to go shoot through a short sale process. You just deed the product or the home over to them. it is by many measures a very elegant and good solution and it’s not being used very much anymore for several reasons. One, is property values have declined too much so it’s not like they even get close to the value so if you’re in a place—you know, the value that you owe them—so if you’re in a part of the country where values have not declined too steeply, too much it may be a good solution for you.
Secondly, the banks are interested in their lien on your property so you would be giving the deed over to the first mortgage. Going through the foreclosure process or the sale process strips the other liens for the bank so if there’s a second mortgage or a mechanic’s lien or a tax lien, that has to be dealt with and netted out for the bank and even if they have to pay for it, it goes through the process and gets that done for them so they legally can take title to the property in a clean and safe kind of way – safe foreclosing. They practice safe foreclosing, that’s important these days. So that’s another reason why they don’t like the deed in lieu because then they have to go outside of their mainline systems and get an inspection and get an appraisal and etc. and because it doesn’t strip the other liens, ok? So there are several reasons, Sheldon, why it’s not real popular right now. I have had several clients in 2009 that were successful in turning the home over the bank deed in lie. They were very careful on my advice to get a very clear statement from the bank that they accepted the deed as payment in full and that the bank would not pursue them for short fall.
All right, Herminie had asked, “How do the short refi’s work?” and I think we have answered that already but the way the short refinances work is there’s a third party that comes in to negotiate with your bank to request really what is the short sale of your mortgage? They offer about the same price probably that the bank would get in foreclosure, about the same price that you would get in short sale or the bank would net in a short sale but it gets in the money faster and without all the time and hassle and expense of foreclosure. You know, sometimes foreclosure costs can run the bank 50 to $80,000 on a home, particularly foreclosure because very often—well, not very often but quite often, whatever. They have to incur quite a few costs in securing a vacant home and repairing damage done by vandals or by angry homeowners on their way out so the short refi company or the homeowner mortgage restructuring company, principal reduction agreement company comes in as a third party and offers to give the bank money right now, comparable to what they would get in a short sale so there’s some advantage to their time and money.
And the third thing is they ask for 20 to $100million worth of these at a time. So a bank, you know a large bank like Chase or Wells Fargo or Bank of America has the opportunity to deal with hundreds of these toxic assets at once so if your mortgage is in default and you have the income to qualify for this new mortgage that the third party will offer to you, then it’s a great solution, elegant solution. It’s a beautiful solution. And you know what? It’s pretty inexpensive because the third parties, are they’re evolving—these parties are just coming on to the market now—they make a really good dime just on the margin that they can make on the sale so they don’t have to charge you all kinds of fees. They can offer you a principal reduction at a pretty good price. You’ll be pretty pleased. Ok I think I already answered this one about Saxon. “Saxon says they won’t offer us a mod because the home is a rental.” Saxon really gets nailed for this – Saxon and IMG and one other. Try really hard not to give out loan modifications and on rentals they’re a real bear but they have in-house departments so you have to keep pushing.
You have to be willing to go into default and honestly with Saxon I’ve been successful a number of times in getting in-house modifications done. So you just have to keep pushing and you have to be willing to go into default and you have to be willing to go almost the sheriff’s sale and almost the trustee’s sale. So that is, Joanna, the only way around it. You have to play hard ball with them but there is a solution. Ken says, “I’ve done a forensic loan audit myself, got information from the Internet but don’t I now need an attorney to pursue these violations and get a settlement?” and the answer to that is maybe. For all of you on the call forensic loan audit is—we all know that during the housing boom like the 2002-2006 timeframe, things were going so hot and heavy that a lot of legal consumer protection safeguards were ignored by lenders in their haste and also just to cut corners and get loans made that shouldn’t be otherwise be made. They cut corners and actually did things that are technically illegal and in some cases fraudulent. Like in some cases they inflated appraisals so they could lend more. In some cases they unstated income loans, they fraudulently named the person’s position at the company; like you might say that I work for Keiser Permanente.
Well, there are people who work for Kaiser Permanente who make $30,000 a year and there’s quite a few of them that make a $130,000 a year so depending on what you say your position is at Kaiser Permanente you could fall into the underwriting guidelines for a vastly different income than you actually make. So there are a lot of fraudulent things done and there were a lot of things that were violations of the Real Estate Settlement Procedures Act and the Truth in Lending Act. So by identifying those which Ken has done, you should be able to force your lender into agreeing to modify your mortgage under the threat of suing them but some of these violations, an awful lot of them, the vast majority of them are not in fact very big violations in terms of their ability to be litigated. They’re not the things that court cases are made of and if you have one like fraud, you probably do need a lawyer to pursue it. So what I’ve begun doing is—because I’m really interested in how legal loan mods are evolving and difficult loan mods—and so what I’ve begun doing is sending my own forensic loan audit information to the lender upfront.
Now I don’t divulge all the details of all the violations but I name the violations. I say, “These violations happened on this loan,” and what I do is I put it in their lap. I’m interested in whether or not these violations require that I hire an attorney to talk to you about them or if you can settle this issue by offering me a loan modification along the terms that I have submitted to your loss mitigation department. S so I do that routinely and I do have some templates that I use that I can share with you and some best practices for how to submit it, follow up on it and use it effectively and I think it’s smart because I personally think it helps my loan mods. Number 2, it puts me in great position if I refused on the loan mod to just turn it over an attorney if I do have enough ammunition; then I’ve already set the stage. They’ve already in my face refused to negotiate with me in good faith in spite of the fact that I think there are some violations. So I think it’s a smart move. Ken, I recommend that you do it and I think it’s effective. All right, let me just keep going?
Ryan Rockwood: Yup.
Mike Rockwood: “Will I be able to negotiate with repairs after a short sale is approved?” This is something Al, that I don’t recommend that you try to do. Al asks if after he gets an approval on his short sale, they’ll try and negotiate repairs. I always try to get an approval on a short sale. Get everything that you want upfront because once they approve that short sale you’re on a short leash. They usually give it an approval and it has a 30-day ticker on it and for them to extend it is extraordinary from the bank’s perspective, from manager’s perspective. They’ve already spent time now evaluating this situation. Don’t throw them curve balls. That’s not to say that curve balls can’t be handled in a short sale. In fact, we closed one today that just last week required a re-appraisal and a $10,000 drop on the price and we overcame that hurdle in like 4 hours.
So the appraisal came in from the buyer’s lender $10,000 under the agreed upon price. Within 4 hours we got the lender for the seller to agree to a $10,000 reduction. So don’t get me wrong, you can get accommodations in a short sale even at the last minute but it’s not revisable, particularly for repairs. They’re just going to say, “Man, you’re already getting a below market price;” probably not. So I don’t advice it as a strategy, Al, but it can be done. All right, I gave the answer to that one. All right, here’s a question. Mark asked how long it will take for his credits score to recover. He has 4-5 mortgage late payments in his workout negotiations so Mark, let me just guess for you. I would say that every time you miss a mortgage payment your FICO declines by 15-25 points so let’s just guess that you declined by 100 points. On average, if you’re proactive about it you can recover from 100-point decline easily in a year and if you’re really proactive, probably 9 months. now we do have a really, really good ebook and it’s another training that I do on introductions to these calls and maybe we should do that again in a couple of weeks. It’s on fast recovery to your FICO score.
We’ve got some great tried and true tips. In fact, there are 9 of them or 12 tips that are really habits for managing your credit, managing your money and we really refined them when Ryan got working on a credit card cure so they’re really proven methods for driving your credit score up so let us know if you’re interested in that and we’ll help you with that and that will be available as an e-product in the future in your ebook. Ok Mike asked—that he’s dealing with Litton and is having similar problems about modifying on a rental property similar to Saxon and he says, “Maybe I should switch over and just sell it short. Number 1, do I have enough time and will that dash my hopes of getting the loan modification?” Well, as most of you know, what I always recommend in terms of short sale is that you begin it well before you let the bank know that that’s your intention because it always takes 30-90 days to get a good offer on a property anyways, not that it has to but if you’re interested in getting just an investor offer you usually can get one of those. Your realtor can get one of those within a 24-hour period but what I always recommend is start that short sale process and when you have a bona fide offer from a bona fide buyer, then submit it and so what if it dashes your hope for a loan modification?
If at that point you’ve resigned yourself to the fact that it’s better to get out from underneath this property, you should go ahead and do it. And I want to say this about that. So many people that we talked to are still working from this old paradigm that says every piece of real estate should just be hung on to like it is your claim to royalty, which by the way, is where the term real estate comes from. It is the real or the regal or the royal estate. It is what royalty has, property.
Ryan Rockwood: Right.
Mike Rockwood: Yeah and so with some history behind it that we all feel that we should never give up property and really for the last 50 years it’s really been true in this country those people who hung on to property did well. But on those days—this has been a big correction that there are so many parts of the country where values are simply not going to regain the values that they had in 2004, in 2005, in 2006. In our lifetime it’s simply not going to happen and you need to start facing it.
But sometimes Ryan and I will be talking to people who are 50 and 60% upside down and they’re struggling to get a loan modification and the property doesn’t have any emotional tie to them. It’s not like it was a family home and they over mortgaged it or something like that. It’s just simply a rental that they bought expecting to flip or expecting to hold for 5 years and then sell so you really have to be thinking clearly and I encourage you to think clearly on whether or not you should be hanging on to some of these properties. Short sales are really a great and elegant way to ditch out on some of these properties that just don’t have a good future. We work with a lot of investors and we help them kind of go through their properties. Last week we were dealing with one guy who had 40 individual single family homes and honestly, as we went through the list there was like 25 of them in my assessment that he should have run from not walked from, but take the opportunity to get away from ‘cause you and the bank both made a bad decision on that one and it’s not coming back. You might as well exercise your option of getting out of that so I successfully convinced him to begin a real aggressive campaign to get those sold short.
All right, that takes care of my questions. I see you’re busily answering questions one on one.
Ryan Rockwood: Yup but not anything that I think—
Mike Rockwood: Not for general consumption, all right. All right everybody, thanks for your questions and thanks for the opportunity to serve you. We’ll be back again next week on Tuesday and on Thursday night, those of you who are clients of ours who buy products from us, we invite you to our Thursday evening clients-only call where we take off the gloves and talk ninja as Ryan says and don’t forget please, to mention our services to your friends and family. Remember, we do short sales, loan modifications and we do principal reduction agreements, short re-fi’s nationwide. So please tell your coworkers, tell your relatives, tell your brother-in-law, your sister-in-law, your mom, your dad, your officemate, your car pool buddy. Please tell your friends because that’s how we do our ad. That’s our advertising budget – that’s you guys. So for 60-minute loan modification and for Ryan and Mike Rockwood, goodnight.
Ryan Rockwood: Goodnight. Thanks so much.
