December 29th Loan Mod Class: FICO 911
Call the doctor, my FICO needs emergency surgery
Prefer reading to watching video? Well you are in luck, here is the transcription!
Ryan Rockwood: Hello, everyone! Hello, and welcome to the call everyone. My name is Ryan Rockwood and my dad, Mike Rockwood, is the author of the “60-Minute Loan Modification” kit.If you’re new to the call, welcome. We do these calls for the public, and for all of our clients as well, every Tuesday. Then we have another call on Thursdays for clients only.
Feel free to ask questions during this call. Can you hear me now?
Mike: Yep.
Ryan: OK, good. Just want to make sure the people on the phones can hear. Feel free to ask questions during this call. There is a chat at 60minuteloanmodification.comlive.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.
Related posts:
- Fast FICO Recovery In The Credit Card Cure, Ryan recommends7 Best Practices to...
- Credit Card Debt Settlement and Credit Score Pain Members of the Credit Card Cure Co-op often ask (entry...
- Members Loan Modification Class | Dec 17 We just received this transcript of our recent class. If...
- Fast FICO Recovery In “The Credit Card Cure“, Ryan Rockwood details 7 Credit...
- Loan Mod TV | Hardships and Questions Recorded Live: Jan 28, 10 Here is the transcription of...