Ryan Rockwood: Hello and welcome to the call. This is Ryan Rockwood with the 60-Minute Loan Modification Teleconference Series. We’re here to beat the bank, to save your home, and to help you escape bad debts forever. As usual, I’m joined by my father and business partner, Mike Rockwood, on evening’s call.
Mike Rockwood: Good evening, everybody.
Ryan Rockwood: He’s the author of the Loan Modification book that probably resulted in all of you getting here today, I think, because this is a member’s only call. All right, before we get started, when you’re calculating your debt-to-income ratio, remember that your credit card debt is your minimum monthly payment only, not the outstanding balance. With that in mind, if you’re having problems with too much debt, meaning too high DTI, paying off credit cards is a good way to fix your DTI.
Now, you may be thinking well great, “If I could pay up my credit card, I wouldn’t be in this situation.” However, it’s something you consider especially if – it’s something to keep in mind, at least, especially because a lot of the people that we talk to have stopped or paused making their mortgage payments. Don’t waste that money. Paying off credit cards is a good use of it.
Announcement number two, if you have two mortgages on your property like most people, you’ll usually have to do modifications on both loan separately even if the first and the second are with the same bank. First and second mortgage departments are often separate. More importantly the investor who owns the note is usually almost always different. That’s just an FYI.
Also, the income used to calculate your DTI must include the income of everyone on the mortgages. But if your husband or wife is not on the mortgage, then it’s up to you to decide if you want to include their income on your budget. The decision should be base on your DTI. Remember, your bank has no legal recourse for the income of the spouse unless they’re on their mortgage. So, it’s an opportunity for us to play hard ball and really make our application look as good as it can. Okay.
On to the night’s call. Thank you everyone for being here. Tonight’s call is on “Getting Past the Gatekeepers”. As usual, we’re going to take some calls. Also, you can e-mail questions in to help@60minuteloanmodification.com. Also, I want to acknowledge that I dig – it’s an e-mail actually, before the call, from Jolene. So, Jolene if you’re listening, we’re going to try to get your questions answer on this call. You don’t need to resend them by e-mail if that’s what you’re thinking. Anyway, dad why don’t you go start
Mike Rockwood: Are we ready to go? Okay, everybody. Before I start talking about Getting Past the Gatekeepers, I did want to bring to your attention an announcement earlier today that foreclosures last month exceeded 330,000 nationwide. So, that’s the third month in a row where there’ve been over 300,000. That’s one million foreclosure notices in the last 90 days. So, it’s really overwhelming, the system. And it really indicates that to date, all the money that has been spent, all the action taken really has not slowed that progress at all, has not slowed, it continues at a real high clip.
Most experts are projecting that the rate is going to continue at a high clip at least for the next few months. But gosh, with layoffs coming and the commercial real estate bust that is just starting to unravel, I got to think that maybe the rest of the year could be this bad. So, that means the line up for loan modifications, the line up for short sales, the line up for distressed – for handling distressed property is going to get longer. And so that’s why I really encourage you to take aggressive action now while there still is bailout money available to make these modifications.
And then I also wanted to emphasize what Ryan said about settling debt and dealing with your credit cards. You know when you have a couple of extra thousand dollars because you didn’t make that mortgage payment and you got a $6,000 or $7,000 credit card debt, that’s the time to give them a call because you can settle it right then.
Ryan Rockwood: That’s a good point, so not paying credit card debt potentially settling.
Mike Rockwood: Oh, man and they settle fast these days. The book that you guys have all received that Ryan wrote. The booklet about settling credit card debt is really important and it’s becoming more and more validated. More and more people are writing us saying that they had similar success. And you can accomplish it very often in short order. Well, I say short order but that is if you stop paying. You really think like there’s no other way to settle those credit card debts except by stopping your payments and then making them an offer they can’t refuse. But at any rate, that’s the time to negotiate when you can close it right now.
Ryan Rockwood: You know it’s an interesting thing because not everyone, they just seem to see the statistics because not everyone has a mortgage but almost every adult has credit cards. So, with the foreclosure, the foreclosure problem is affecting most of us, right. But the credit card crunch and collapse that’s coming is going to affect everyone. And imagine how that’s going to happen when – imagine the cash getting effect there. If people right now are feeling frustrated and not wanting to pay their mortgage, imagine how people are going to feel after reading my book and others like in many thousands that will probably come out. Then they realize everyone else is getting out of their credit card debt too. They’re going to want a piece of that.
So anyway, the financial pull has hardly stopped rippling. And I don’t know. I just find it astonishing. I read an article earlier today that said that people are just ridiculously optimistic. And we’re probably actually kind of those kinds of people generally. But this article was saying – you may have read it too in the New York financial section, big interview. Everyone should check it out if you could.
Anyway, he was saying this is like some old cantankerous billionaire that crunched over his computer with throwing down pain killers for his cancer that he has, right? But he was saying that he can’t believe it that the slightest uptake on the market. Everyone’s excited and happy, and buying, and people are buying houses again. He’s like – these people just have to be unbelievably idiotic, you think. Anyway, will the market turn around? I don’t know. I hope that were proved wrong. But I mean, I think that we’re coming to a stage where everyone’s going to have – home prices could easily drop by half nationwide. And that’s in luxury areas too.
Mike Rockwood: Yes. We had some pretty startling news earlier in the week about – gosh, it was about half a dozen zip codes in Southern California where prices had fallen more than 75% since their peak. The story kind of featured a guy who bought in 1989 and he paid $122,000. And his neighbor just sold his place for $66,000 20 years later.
Ryan Rockwood: Wow.
Mike Rockwood: So, we’re back in many zip codes. Well, many zip codes. Half a dozen zip codes in Southern California. We’re back to 1982 levels and still dropping. I mean, a lot of people thought we’d go back to 2002 levels. And apparently that is where we are at nationally. But in many areas like Nevada, Arizona, Southern California, Florida, and now apparently even because of unemployment issues in Idaho and Utah we’re seeing foreclosure rates really high and prices continuing to drop. But anyway, let’s get on to the topic of today. A lot of folks had asked us to address how, if at all possible, you can speed your application. And so that’s really the topic that I want to talk about and gatekeepers are just part of it.
Ryan Rockwood: You want to talk about settling the recent movement we’ve seen on settling second mortgages right now?
Mike Rockwood: Yes you know…
Ryan Rockwood: Or might as well bring up that now. It’ll probably be more exciting than the topic.
Mike Rockwood: You’re bored already. Wait a minute.
Ryan Rockwood: Well no, this is the big news.
Mike Rockwood: Well the second – like I think we want to talk about on everyone of these calls for the foreseeable future is what’s happening with second mortgages. We should all have that. We have a real keen sensitivity for what’s going on because there’s going to be some exciting things happening with extinguishing second mortgages.
And as we mentioned on our call on Tuesday, I got an offer from Wells Fargo to extinguish a second mortgage at 65% of the value. Well, that isn’t a great offer and I’m not going to take it. It is a huge breakthrough that an outfit like Wells Fargo, you know, proactively – well, maybe not proactively, I’ve been asking them for the settlement, but responded in a way like that. That’s the first time I’ve had a second mortgage offer to be bought out.
Ryan Rockwood: I think it’s amazing and I don’t know. I’ve never heard of anyone. I mean basically, folks, what we’re talking about are all the seconds out there with no equity and no recourse, right? And so I mean, I just want to make good on our commitments and stuff. But at some point, if you’re paying someone for something that you don’t need to pay them for and they have no ability to punish you in anyway for it.
Mike Rockwood: Well, and the product went away that you both invested in.
Ryan Rockwood: Yes.
Mike Rockwood: And there was a contractual agreement about what would happen if you couldn’t pay on this.
Ryan Rockwood: At some point, you’re a crazy person to keep paying on this thing.
Mike Rockwood: Right.
Ryan Rockwood: So anyway, I think everyone’s kind of getting that itch getting out of your skin. Sure we can get a good loan mod on a second 2% or something. And that’ll probably satiate us for a couple of years. But no one’s going to be – when that thing starts to reset and they want to go up whatever, they’re going to have another thing coming.
Mike Rockwood: Yes. Well, the reason I’m so into it is because we do so many short sales. And in almost all cases, the second mortgage is entirely wiped out and they do accept every lender including, the toughest one is always GMAC, but every lender that holds those seconds gets bought out.
Ryan Rockwood: Yes. And they accept like 1%, not 65%
Mike Rockwood: Yes, 1% is real common, $1000 is common, $5000 is not uncommon. For them to get $10,000 is outrageously uncommon. It never happened.
Ryan Rockwood: It’s so uncommon that the first won’t allow it in most cases.
Mike Rockwood: Most cases they won’t.
Ryan Rockwood: The first will not allow it because they have to approve it if they get paid first.
Mike Rockwood: Very extraordinary. So, after doing that so many times, I get frustrated in loan modification situations where, you know, the seconds – and the seconds have gotten very aggressive lately in terms of their offers they’ve been offering like 0% interest. You know, principal only payment of a $100 for as many as three years just to keep loans active while this whole thing gets worked out. So, it’s the beginning of their admittance or admitting that their goose is cooked. So, I’ll keep you up to date on each of these calls with what we’re learning about second mortgages.
The topic of today’s call is going to be Getting Past the Gatekeepers. And really that topic has to do with speed. How do you get your application, your loan mod application to go faster than average because the average has gotten really drawn out? For those of you who are submitting and not going late on your mortgage, who knows what the average is? And we just keep working them in and many of them are at 90 days and we just keep working on them. For those of who you do miss payments, the average, it has crept up past four weeks but you still seem to be getting pretty darn good treatment.
But at any rate, let me talk about speed. The first think I want to mention to you and encourage you is to have realistic expectations. If you’re not going to go late on that mortgage, then you really have to be ready just to keep paying and keep paying for at least three or four months. It’s just taking that long.
The second thing is you want to apply very, very well. And that means following – taking all the insider tips and following all the rules that we give you. Joining these teleconferences and putting together an application that just hits the bull’s eye. Understand the ratios, understand the hardship, and present a flawless application. With every document that they request, they’re requesting fewer and fewer but make sure that you have everyone that they’ve requested, that there’s a clear explanation of any exceptions, anything that’s exceptional about your application. Make it real clear.
The third thing is when you submit the application when you fax it, be sure that the pages are all numbered and that they all have the account number on every single page. Because when they print out these faxes – you know, these are 20- to 50-page faxes. Very often, they get jammed, they get mixed up, and it’s very easy for them to put yours back together if every page is numbered and every page has the account number on it.
Ryan Rockwood: That’s quite a hassle.
Mike Rockwood: It’s a terrible hassle.
Ryan Rockwood: You do that when you have a page packet or something.
Mike Rockwood: Yes, but none of the callers should feel bad for themselves. We have to do it several times a day. But when you do it on your own, it’s that last tender care. No, it’s a real pain. And then I’ve been submitting online as well as faxing. And I would say that USPS by sending it by USPS is an option as well. You should consider that as well. And then getting past the gatekeepers really has to do with your follow up. So, I want to emphasize that everybody pay attention to Chapter Six.
Ryan Rockwood: You know what; I have a tip on that. Maybe it’s silly. I don’t know but one thing I did, I just got fed up with having a right – a 10-digit account number on every piece of paper in a [Indiscernible] packet. So, I did that thing where you like print out a bunch of them and then put it back in the printer.
Mike Rockwood: That was a good idea.
Ryan Rockwood: I did, it worked. I’ve also done that actually photocopying them.
Mike Rockwood: That’s a very good idea.
Ryan Rockwood: You got to get it right a little bit because the first couple of times I did it, it was in the wrong spot on some pages and I messed it up.
Mike Rockwood: No, that’s a very good idea.
Ryan Rockwood: But whatever. If that helps anyone.
Mike Rockwood: So, let’s return to Chapter Six and remember our automated follow up magic. And I want to remind all of you about the departments that we’re working with. There are really are four of them that we need to be concerned about. Customer Service, and that’s the first level of customer care, then there’s Loss Mitigation. And that is really a department that kind of flexes with defaults. So, it’s a department that’s almost didn’t exist three years ago. You know what I mean? Almost gone out of business. They didn’t really need to interact much with customers and now it’s a very big department. Then there’s the Collections Department, which is just focused on tracking you down and getting you to pay. And lastly, the negotiators themselves or the Loss Mitigation Officers.
And so of course at each level, we have different ways that we can get past the gatekeepers and there are different gatekeepers, of course. But here’s the first most obvious step that I want to encourage everybody to remember is that there are these various milestones that get you through that organization from the customer service department all the way to the loss mitigation officers.
And remember in Chapter Six where I give you those faxes with the questions, suggest questions like, turn to page 67. That makes for a good phone question as well. So you can double your efforts if once a week you want to – in addition to your daily faxes, you want to call that question in to the appropriate department. In other words like on page 67, you would call the Customer Service Department and ask that question.
And then once it gets assigned to a negotiator, look on page 69, then you get through to the negotiator and you ask that question. So, you see what I mean? And then of course I recommend that if you’re really crazy about pushing your application as fast as possible, you can fax these questions, you can phone them in, you can e-mail them or you can even send them in a knuckle note on a little scrap of paper through the USPS or FedEx. And honestly, I’ve done that through FedEx when I just can’t get a response from a negotiator. Because some of the negotiators just have work habits. They just don’t seem to get it and they don’t get back to people. So, what I’ll do is I’ll send them on slow FedEx, you know the slowest one costs about $10, three day. But FedEx envelopes really get attention. So, that’s another way to get your question answered.
But the tips that I want to give you is called Crud it comes from my sales training. That’s C-R-U-D. And I want you all to think about how this is kind of an obvious trick, but sales people are always using it. Sales people are always reminding themselves to ask questions that create real unique dialogue. Crud – Create Real Unique Dialogue.
Now, a lot of questions that normally we would ask and we get frustrated, so we call the Customer Service Department and we say, “How much longer do I have to wait?” Or we’ll call loss – we’ll get into Loss Mitigation and we’ll say, “Can you tell me the status of my application?” or “Is there anything I can do to beat things up?” or “How long do you think it will be before I hear a response?” Think about those questions. They’re not unique. They don’t encourage dialogue and they’re easily dodged. In other words, the person on the phone under the pressure that they are to crank through calls, crank, crank, crank, when they get a question like that from you they just say what they’re taught to say. You know, there’s nothing you can do to speak things up. It’s going to take several more weeks. How much longer do I have to wait? Quite a while, do you know what I mean? They’re just so easy to deflect.
So, you need to be much more specific and ask actionable dialogue, unique kinds of questions like, “If I make a change to my financials online.” As you know most of the banks these days are allowing you to enter your financials online or by fax. So, you ash the question of the loss mitigation reception or the person you’re talking to, the officer, the rep. “If I make a change to my financials online, will you be notified or will the negotiator be notified? Or do I need to also fax it in as well?” It’s a unique question, it requires dialogue, it requires them to get back to you. Another question is, “If I miss a payment, will my application get priority?” Another one could be, “Can I please confirm that my 2008 taxes were included in my file?” It’s not clear from my records if I included them. So in other words, you ask questions that require a response, require them to get back to you, check with someone, et cetera, take some action.
Ryan Rockwood: You know the most important thing about followup I think is – I don’t think there’s a whole lot of like – well the stuff that we’re telling you we’re obviously sharing is just basic stuff. It’s basic stuff. There’s no real trick or anything. And I don’t know if this happens to you but I’m one of those people like I get started on. Sometimes, I get really excited about it. I want to pound it through. But that kind of energy can only be sustained for 7 days, 10 days at most. And then I just have a tendency to just let it go and not check on it.
Mike Rockwood: So, you’re kind of a digital. You’re on the topic then you’re off the topic instead of being good at followup which is really…
Ryan Rockwood: People like me I don’t think we have the best success with it. People who are naturally like me, I think that the price goes – because you can’t call them everyday and expect to get something new. I mean you have to expect for a period of time that you’re just bugging them. Notice that and don’t get offended if the file hasn’t changed in the first five days.
Mike Rockwood: That is correct. You have to know yourself and know what to expect of yourself. But if you really want this to happen, you have to do something extraordinary and that is to force yourself to do something that’s out of your comfort zone.
Ryan Rockwood: The other thing is about what if people expect out of the call? I don’t know whoever talked about that but when you call the second day after it’s been in or maybe the seventh day, don’t expect anything to happen. The best you can hope for is 30 days, okay.
Mike Rockwood: Right. Don’t get frustrated. Yes.
Ryan Rockwood: So, don’t fool yourself into thinking, so yes, if you keep this thing on track, 30 days is the best. Okay. Don’t get frustrated when they tell you they can’t speed it up. Just be happy that you’re getting a negotiator. You’re assigned to a negotiator. You should be assigned a negotiator that files it. You just got to be content that it’s making its way through the process because there’s no way you’re skipping that.
Mike Rockwood: And you know it gets so frustrating with people who are trying to protect their FICO score and try not to miss a payment. Those are the folks that really get frustrated because they think “Man, here I am making my payment and it’s the third month, and I just can’t seem to get this thing off a dime.” It’s pretty understandable that they’d be angry and honestly put off because it’s their bailout money too. Just like the folks that have decided to miss payment.
So at any rate, those are the tips in terms of getting things moving. They are the best I could do. They are the practices that I do and that I see clients doing. They are not magical. And there is really no way to speed this thing up very well except to really apply smart, really have a good application that doesn’t get bounced, doesn’t get rejected, doesn’t need to have any modification, clarification, et cetera, okay?
Ryan Rockwood: Got a quick question here, an e-mail from Paul. It says – what are you saying is that the bank, CitiMortgage is not asking for Real Estate Owned and they don’t seem to have any interest in seeing it. Should you send it anyway?
Mike Rockwood: It’s like all of a sudden about a month ago; banks started asking us to integrate our Real Estate Owned into our budget. And I guess that’s just the way it is. I mean you have to go with the flow. I assume they want you to integrate your rental income into your income and your mortgage payments into your expenses. Now it does somewhat complicate things or at least it changes things because we have to think through the implications for our debt-to-income ratio because so many people have poor cash-performing rental real estate. At least a lot of folks in California do.
So, you have to kind of massage that. The banks are routinely expecting that you’re going to write off at least 25% of your rental income as loss from, you know, into maintenance, management, and vacancies. And if you have anything different than that, then I recommend that you explain it and you can be real successful doing that. Like let’s say you have a rental that’s right at the college campus and it hasn’t had a vacancy in five years. I think you could argue real strong for just a 10% loss on your rentals for maintenance and management and no vacancy, et cetera.
Similarly, if you have a lot of vacancy and you want to only use 65% of your rental income, then I think you should argue for that in a note.
Ryan Rockwood: You know what I would be concerned about is – I mean, you don’t want to give them something they didn’t ask for because why, you know, convoluted. However, what do you think about asking them if they want it. Because usually we avoid everything we can but maybe, it’s best to ask so that if they do want it and the rep just doesn’t think they want it…
Mike Rockwood: Yes, well see, here’s the problem is even if the rep that you’re talking to doesn’t tell you that they want it, when it gets to the underwriter for final approval, you know, maybe actually you’re already delighted with the modification, it goes to final approval and then he says, “Wait a minute. What are these other mortgages on that credit report? This thing is rejected.” And then in some instances you have to wait 45 days before you can clarify it. So, in the case of anything that’s on your credit report, I wouldn’t even try to avoid it. You have to make sure that you’re doing what they want you to do with that information.
Ryan Rockwood: Okay. He also says that before they’ll go forward, they want an appraisal on his house, that’s the interesting one, huh?
Mike Rockwood: Before they go forward on a modification. That makes no sense.
Ryan Rockwood: Yes. Well, here’s all I can think about that one. I thought maybe he would be in some crazy state with devastated mortgage or something, devastated market or something but no. He’s in California looks like it’s your Belinda [phonetic] and your Belinda [phonetic] is not bad. The only advice I can give you Paul is people use the word appraisal rather loosely. And if someone told you that they need an appraisal, I would encourage you to dig a little deeper. And here’s what I would ask them. I would say by an appraisal, do you just mean a professional’s estimation of the price? There’s something else called the BPO, a Broker’s Price Opinion. And let’s say someone’s new with the bank and they’re actually referring to the BPO which is what they do. So that might, of course, they’re never going to do a – I’m thinking of short sale. Do they do a BPO for a loan mod?
Mike Rockwood: No.
Ryan Rockwood: No, okay. So forget that.
Mike Rockwood: No. You make a really very good point though, is they probably mean a BPO.
Ryan Rockwood: A BPO is done by your local real estate agent. And actually to get someone actually fill the thing out is an incredible chore and I wouldn’t do it for less than $100 but you might deal to find someone that could, would. Another option is what type of appraisal you might ask them. And if they’re stuck on it, heck, give them an appraisal. Who cares? A full appraisal can cost you $500 or $600 though.
Mike Rockwood: Well, it costs $500, $400 or $500.
Ryan Rockwood: Okay.
Mike Rockwood: And Ryan, a lot of appraisals, remember a lot of appraisals do the – what do they call that?
Ryan Rockwood: The drive by.
Mike Rockwood: The drive by. And that’s like half price.
Ryan Rockwood: Yes. And so Paul, if they want it for some reason then you can’t figure out why, ask them what level of appraisal they want.
Mike Rockwood: Yes, because you’re talking about $50, $250 or $500, big difference.
Ryan Rockwood: Yes. So, I’m going to need to swap. Someone’s out here but basically, oh thanks. But basically what I would ask them is surely for what you’re doing a drive by appraisal should be sufficient. And in fact, they don’t even drive by. They just get on the phone and look at Zillow or something. So hopefully, that will help you out. You want to take one of those questions you have there?
Mike Rockwood: Yes. Let’s get to a couple of these. Jolene writes that she wants to get her – she had her application denied. And she wants to really get on the stick and get the application resubmitted so they don’t escalate on us. And I really want to mention that to everybody on the call because it is important to stay out ahead of foreclosure as much as you can to be really proactive because all these things take so long that honestly once you get that notice of default, you think you still have 90 days. But man, you just turn around and it’s 60 and then it’s 30. And now you’re really racing to get a modification.
So, Jolene makes a good point. Let’s get these things submitted quickly so that we can negotiate on our terms. That’s what a lot of this is all about is, you know, this is ugly. This is hard. It’s difficult where a lot of us are facing a lot of things we wish we didn’t have to. But let’s face it on our terms. You know what I mean? To the extent we can, let’s control our destiny here and make things happen the way we want them to. Okay now, let’s see.
Ryan Rockwood: Okay, go ahead.
Mike Rockwood: Okay now, I understand this part of the question Jolene is where you are explaining that you think it might be too hard or too difficult for the bank to get your DTI down into the 38% range that the Obama plan compensates the bank to do that. But honestly, when I run the numbers that you sent here, I don’t think that’s the case. And I think you’re going to be just fine. And keep in mind now that the bank really has three tools to use to get your DTI, which is actually your HTI. Just that first mortgage divided by your income down to 38% and those three tools are first, they take your mortgage down to 2% then they take – if that doesn’t do it then they take it down to interest only. No, 40 years so you stretch it out and that’s pretty significant to stretch out for another 10 years.
And then lastly, they take it to an interest only payment. So, I think you’re going to be absolutely fine. I wouldn’t worry about part two of your question. Part one is – oh, okay. Including things on your budget that you’re not currently making payments on but that will show on your credit report.
Ryan Rockwood: It’s not a big one.
Mike Rockwood: Yes.
Ryan Rockwood: It’s just some kind of…
Mike Rockwood: Okay, so here’s the issue everybody. Jolene is wondering she has certain debts that she has stopped paying that show on her credit report, but she hasn’t been paying them for many months and intends to try to settle them for pennies on the dollar. Now her bank, Bank of America, I believe, has advised her not to include those on her loan mod application and she is listening to my advice about including everything on the application that’s on your credit report.
And so here’s my advice in light of what you learned from B of A. I would cooperate with them because – what do I know – no, it would surprise me that they would accept that you are in the process of either getting those charges off, either settling them, getting them charged off or however you’re going to handle that they would accept that, that the underwriter would accept that. But if they’re saying to go ahead and do that, then you certainly should go ahead and do it. And the reason I say that is number one, because they’re telling you that. Number two, because to include those payments with all the penalties and everything would absolutely knock you right out of the running. So, I think the answer is yes.
Ryan Rockwood: Yes, I think you only got one choice.
Mike Rockwood: Yes, you only have one choice. Just go for it and run hard with that one.
Ryan Rockwood: Okay. And a reminder, everyone can e-mail us questions at help@60minuteloanmodification.com. Let’s jump on the phone here and take a caller. Callers, if you’d like to talk, just say your name. For example, Bob.
Mike Rockwood: Yes, there like Bob.
Ryan Rockwood: And I will say Bob. And then you’ll say your question so that’s how you’ll know that…
Mike Rockwood: Let’s just run through it again.
Mike: This is Mike.
Ryan Rockwood: Hey Mike, go ahead.
Mike: Hi, I submitted a loan application and I just got a denial about two weeks into a file of policy. So, I put those rather quick. But I was denied due to my ability to pay. And my situation is I do have some rental properties and I set the schedule of real estate. And I evidently was using 100% of my rental income minus the expenses on my budget. And they only applied 70% of the rental income. So, that brought it down quite a bit with a [Indiscernible] figures.
Ryan Rockwood: Just to clarify Mike. When you say ability to pay, you mean lack of ability to pay.
Mike Rockwood: Yes inability.
Ryan Rockwood: Inability to pay?
Mike: Yes, inability to pay. Sorry.
Ryan Rockwood: Okay, got you. Okay so they just counted your rental income so that basically took your income down a little bit.
Mike: Yes, way down enough where they just denied it. So in terms of recourse, I did not put my wife’s income on the application in our budget. But some of the recourse I do have –what do you recommend for recourse to resubmit?
Mike Rockwood: Yes perfect. You understand exactly what you have to do and honestly when I submit…
Ryan Rockwood: Hold on. I’m going to mute this so that everyone can hear the answer. Okay, I’ll just repeat that question real quick. Mike was just declined for a loan modification application, very rapidly by the way.
Mike Rockwood: Yes, wow.
Ryan Rockwood: So anyway, he was declined because they said he didn’t have enough money to pay. That’s actually hard to believe the most common reason for getting declined on a loan modification. The problem is you don’t have enough money to pay. That is the problem obviously.
So anyway, regarding this part of the issue from Mike that part of the issue or a problem he had was that the bank took his rental income down to 75%, which is probably pretty standard. And he was counting on that extra 25% to boost [phonetic] his income so that he could qualify for that loan modification.
Now, he’s got a secret weapon. He’s got his wife’s income in his pocket that he did not include and can include on a future application. So, that’s his secret weapon and he is asking, “How should I best deploy this? How should I best reapply?” Won’t you go ahead?
Mike Rockwood: Yes so, this is a real – a great question. And Mike, you know the answer. You have to go back and increase your income and you have that secret weapon of your wife’s income that you can use to dial in exactly the amount that you need to make up for that deficit. However, having done this so many times, I know that it’s going to be like trying to nail Jell-O to a tree every time you think you’ve got it and you’re going to be over on expenses and the cost of living expenses, you’re going to have to really hammer to be able to come out with not too much money at the end of the month. In other words, when you get more income up at the top, yes, it fixes your DTI but now you also have to deal with the cash flow.
Ryan Rockwood: No, this is your cash flow. But it messes your DTI out.
Mike Rockwood: No, just the opposite. He’s got a DTI problem. He’s going to fix it by adding more income. So, he’ll dial his DTI into an appropriate range by adding some of his wife’s income. But now listen; he’s got more income down to bottom of the page.
Ryan Rockwood: Okay. So, he has to take his wife out to dinner.
Mike Rockwood: Yes.
Ryan Rockwood: He’s got to spend it. That’s it. I’ve been going back and forth.
Mike Rockwood: You got to remember to keep in mind the expenses you want to make them really, really valid. The ones that are often understated by folks are their utilities because they often do and include the lawn care. And let’s see another one is medical expenses are crazily understated often. By the time you spend all your company-pays and your deductibles and things that aren’t covered like some of your dental care, some of your eye care, things like that.
Ryan Rockwood: You know maybe there are some things for his wife though that he can include. Perhaps, Mike didn’t include his wife’s car payment or maybe his wife like to go buy a car.
Mike Rockwood: Yes, but see then you get into the problem of putting a debt on there.
Ryan Rockwood: Oh, okay. Okay. Yes.
Mike Rockwood: Yes. It’s a little tricky but Mike, it sounds like you know exactly what you’re doing. If you need any additional help, feel free to e-mail the budget to me and I’ll help you work on it.
Ryan Rockwood: Oh, yes. Take advantage of those free hardship and budget critiques. That’s worth it. Oh you know what I got here? A tip here from Jolene, she says that she prints out ever labels with her account number.
Mike Rockwood: Oh.
Ryan Rockwood: It’s pretty smart.
Mike Rockwood: Yes, great idea.
Ryan Rockwood: Yes.
Mike Rockwood: Yes.
Ryan Rockwood: But who’s got a reliable statement?
Mike Rockwood: They’re expensive. Yes, wait a minute, how can you afford those?
Ryan Rockwood: Don’t put that on your budget. The other thing here we got Veronica. No job for five months, has $50,000 in equity, but has a lousy FICO. So refi is out of the question. No chances of modification. What should she do? You know, first of all this is tough because no chance for a modification with no income.
Mike Rockwood: Oh, no income.
Ryan Rockwood: No income. Well, you know, she says no job. I assume that means no income.
Mike Rockwood: Yes, but Veronica, how about unemployment insurance? How about support, a contribution letter from a brother, a father, a sister?
Ryan Rockwood: No job. No job in it of itself is the problem if you are…
Mike Rockwood: Yes, renting a room…
Ryan Rockwood: Well, maybe you own tons of real estate, right. And you sit around and just…
Mike Rockwood: Yes, but it is a tough one to overcome. So, you got to get creative but some of the things we just mentioned are ways that people who are unemployed. Most of their income like for instance, I have one client who went to work for their brother’s telemarketing firm. It’s just in the evenings. A brother just wrote a letter saying, “Here, you got the job. Here’s what the pay is and here’s how long you can keep doing this for us four hours a day for the foreseeable future and we’ll send paychecks every Friday.” Contribution letters from significant others, from parents, from kids, kids paying rent that hadn’t been paying before. So, there’s lot of creative ways that you can put together income.
Ryan Rockwood: Some way you’re getting income. You’re getting income some way.
Mike Rockwood: Yes. Unless you’re spending your savings which man, too many people are doing.
Ryan Rockwood: Yes.
Mike Rockwood: So many people are cashing in those 401Ks, emptying a piggy bank, and not getting modification help fast enough. I have a client I’m working with who really has – since her husband died had no income. She was between jobs and he had a real untimely death. And Chase is being very proactive with her to try to figure out a way because she is literally eating up her nest egg. The only nest egg she has and she’s over 60 years old.
Ryan Rockwood: That would be cool. I mean everyone does that. That’s cool if there’s eventual solution down the road.
Mike Rockwood: Yes, there will be.
Ryan Rockwood: The bottom line is there are a lot of these people – I don’t have savings so it’s easy for me to say. But man, I’d lose that house in a heartbeat before I…
Mike Rockwood: Before I lose my savings
Ryan Rockwood: Beat up my savings.
Mike Rockwood: You got that right.
Ryan Rockwood: Let that sucker sit. But Veronica, the other thing in here it says, you have $50,000 in equity. I pray that maybe you live in part of the country that has been [Indiscernible] hard and the home prices are very low. You know, maybe a $100,000 to $200,000, something like that. But if you’re in an area that like most places $600,000, $800,000, $50,000 in equity, I would doubt it.
Mike Rockwood: I bet it’s not there.
Ryan Rockwood: I bet it’s not there unless you thought last year that you had $250,000. So you just need to be the bearer of bad news but that may affect how you perceive with things if you’re very unlikely to maintain $50,000 in equity in the house in the past, over the past two years. So, we give her some good advice, I think.
Mike Rockwood: Well only she can be that she is…
Ryan Rockwood: True. Okay we’ve got – let me jump online here and take another call.
Mike Rockwood: Okay.
Ryan Rockwood: Hi everyone.
Maria: Hi, I have a question.
Ryan Rockwood: Go ahead.
Maria: When the bank asks you, have you had any savings? I think they want to know how much you have now with. They can ask you for a down payment or something. What would you answer?
Ryan Rockwood: I know what you’re saying.
Mike Rockwood: Good one.
Ryan Rockwood: Is that Maria?
Maria: Yes.
Ryan Rockwood: Hi. By the way, we’re going to have a packet for you [Indiscernible] information tomorrow. But I’ll get back with you on that. Good question. Okay, bye-bye.
All right, so Maria asked the question, “What about savings? Sure they don’t have a right to it or they can’t get it.” Technically, but they can ask for a big whopping sum to start up that loan modification. So, what should you tell them?
Mike Rockwood: It’s a great question and here’s what I do for clients. A lot of times clients will tell me, “Listen, I’ve got $15,000 in savings. But I sure don’t want to spend it on getting this loan modification running.” I’m not even sure if the loan mod is going to do anything other than put – let me stay in the home for a couple more years. It doesn’t solve anything. So, they don’t want to spend on something like that.
So, what I advice them to do and what I do from my own is tell the lender how much I would be willing to put into the deal. Like what they’re usually asking for is, how much down payment could you bring to a repayment plan? They’re looking for you to pay as much as half of the arrears but if somebody have been in arrears for six months or so, your arrears are probably $40,000 or $60,000. So, who wants to plunk 20 or 30 as a down payment just to start a repayment plan in the hopes of a modification?
Ryan Rockwood: Yes, really.
Mike Rockwood: So, what I have been successful at getting away with is two times one payment. So, in other words if your payment is about $2,500, I have been successful in getting the down payments negotiate it down to about two payments, so about $5,000. And that is when arrears are as high as $25,000 or $30,000.
So, that’s my guideline. I definitely would advice you not to divulge how much savings you have there when they’re asking. They really are asking how much could you bring to the table to begin this repayment plan so that we could get you back in – you bet your loan reinstated so we could consider you for a loan mod.
Ryan Rockwood: But actionably, what if someone has $20,000 or a $100,000 in a savings, in their savings account? What should they do if they need to give those things to the bank?
Mike Rockwood: Well, you don’t. They’re not asking for assets anymore.
Ryan Rockwood: They’re not asking for – don’t do checking and savings?
Mike Rockwood: Yes, you have to do checking and savings but gosh, nobody keeps that kind of money in a checking.
Ryan Rockwood: You might be surprised.
Mike Rockwood: In a savings account. I don’t know.
Ryan Rockwood: You’re assuming it’s in a CD or something like that.
Mike Rockwood: It’s in a CD in some kind of bond or something like that. So, that’s the advice is whatever you tell them, expect them to ask for it. If you tell them you got $5,000, expect them to ask for it.
Ryan Rockwood: All right. Thanks so much for joining us tonight on the 60-Minute Loan Modification Insider Secret Teleconference Series. Each week, these calls are getting larger and larger with more and more people actively seeking to fix their loan. It’s an excellent news and good work for all of you for taking action.
During the process, inevitably, some of you will discover that you’d rather short sell your property. This can be a great option too. And while we’re best known right now as loan mod guys, we’ve actually been deep into short sales and distressed property relief for a long time. So, if you’re looking for advice or if someone to do it, feel free to drop us a line.
We live and work out of Southern California. So, as you can imagine, we’ve got a pretty full play regarding short sales and loan mods. So, we are limited in terms of the numbers that we can take on. And I really do mean it because we’re small family business. We’ll be taking on three to four clients max next month for those kind of more extensive services. So if you’re interested, please e-mail us at help@60minuteloanmodification.com. We’ll set up an appointment to talk.
Also, we have a very pragmatic short selling system that will help you get out from under that home fast and try to minimize that credit damage. Whatever you do and whatever you decide, the key is to move forward quickly and do not hesitate. Things are going to get worst before they get better. So, plunge through that and keep moving so you can start your recovery right away.
The other thing to recall is that unfortunately, well hopefully it will solve the case for you or solve the crisis for you. But don’t put all your eggs in one basket. You may want – you have to be nimble. You have to be moving at all times and you have to pursue the refi, the loan mod, the short sale, anything else you can think of, you have bankruptcy.
Anyway, you do the dance and don’t wait for one to fail before you move on to the next or you’ll find yourself in very precarious race to the finish line. Again, thanks for joining us today. We spend most of the day on the phone. So, e-mail us the quickest way to get a fast response to any and all questions. Please e-mail us at help@60minuteloanmodification.com. Thank you so much and goodnight.
