HOW TO WRITE A HARDSHIP LETTER

HOW TO WRITE A HARDSHIP LETTER
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Ryan: Hi everyone and welcome to the 60 Minute Loan Modification Insider Secrets Teleconference Series. Welcome. Thank you, all of you, so much for being here. We’ve got a lot of people on the call right now tonight and we’re excited about that. We’ve got a timeless topic–hardship letters. We want to make sure that every one knows how to reach us. We’re going to take some questions–we always take lots of questions. There’s several ways to get them to us. One is by e-mail and you can e-mail them to questions@60minuteloanmodification.com.

That’s questions@60minuteloanmodification.com. And the next thing you can do is jump right on line when we un-mute the call and ask your question and we’ll try to answer your question. We’ll have to mute you again so every one can hear us because it’s incredibly hard to hear, when we un-mute the call but then we’ll try to take care of everyone’s questions. For everyone here that’s new, we’re here to beat the bank to save your home and help your escape bad debt forever. My name is Ryan Rockwood and as usual I am joined by my father and business partner, Mike Rockwood, on today’s call.

Mike: Hi, everybody.

Ryan: Now, announcement number one. As a reminder we have a teleconference every Tuesday, and Tuesday’s calls are primarily beginner topics. Thursday we have a client’s only teleconference for people who own our 60 Minute Loan Modification Kit. On those calls we’re able to take more live questions and explore more complicated and aggressive tactics for saving your home. So basically what I’m trying to say every one here is that we’ll try to–well, you’re saying I don’t know if I’m a beginner. If it’s your first time on the call, then you’re a beginner and very rapidly you’ll blow past the beginner questions and you’ll have something that a little bit more complicated. Like in my situation I got a response from the bank that was a little bit different. What do you take on this? Something like that. Advanced questions, okay. Take those to our Thursday night classes and we will solve them for you. You know, your home is a very emotional investment but in order to secure a great loan modification it’s very helpful if you can take a step back and look at this from the bank’s perspective. The bank has their best interest in mind and in many cases foreclosure is not in their best interest. You staying in your house and continuing to write them checks each month is usually in their best interest. And with that in mind forget the sob stories of doom and gloom and focus on the real issues at hand. Your hardship, your expenses, getting your loan modification done. Ultimately it doesn’t matter where the real estate market’s going. It doesn’t matter if this guy does fall in.

Right now, you have an opportunity to get a loan modification so you can deal with this the situation as it stands right now. Of course, if the real estate market blows up, if it goes high, if it goes low, we’ll try to bring you the strategies to respond to those situations as well. So for the past month we’ve been getting numerous complaints about B of A Countrywide. I’m happy to report that our clients started getting loan mod offers again last week. It’s unclear if this is just a fluke or how long it will continue, but it’s good news for those of you with B of A Countrywide loans. Mike, I didn’t tell you this I got a e-mail today from a client that said that B of A told him that they don’t do loan mods now on HELOCs. Have you had any direct experience with a HELOC with Bank of America recently?

Mike: Boy, now that you mention it I guess I have not. The one that I was working on earlier today was Wells. No, I have not.

Ryan: What about all your loan modifications weren’t any of them with Bank of America and HELOCs?

Mike: No, those are–all of them I have are first mortgages. So let’s ask our listeners to be on the look out for more information from Countrywide and B of A about a change in their actions on modifying HELOCs. It would be a really weird time to start getting more stringent on HELOCs and on second mortgages. My goodness, those are the ones that are really at risk along with credit cards debts.

Ryan: Particularly this is a second mortgage that had no equity

Mike: Yeah so lots of luck trying to get that one.

Ryan: I asked our client to call back again. It sounded like he only got that answer once and so I’m hoping that he’ll be able to check back in with me and report that it wasn’t an error or something like that and I’ll let everyone know on that.

Mike: You know, Ryan, I suppose it’s worth repeating and I’m sorry, you guys, if I say this to many times. But our advice always is when you get an answer that seems weird and with all these untrained representatives working for the loss mitigation departments and collection departments and customer service departments at the lenders you get a lot of rookies and a lot of people that just don’t know what they’re doing. They’re put on the phone like after two or three days of training. So remember our recommendation in terms of what we do with these people is we ask five times. In other words, we’ll call back five times. If we’re still getting the wrong answer, we’ll escalate it to a supervisor and of course you all ways do that with as much diplomacy as you can.

And then the third line of offense is a qualified written request. So when you get a statement like this, like B of A is no longer modifying HELOCs or you sometimes get people that just say–reps who tell you, no we don’t. Like Saxon was telling me this last week. Saxon doesn’t modify mortgages unless it’s owner occupied. And I in fact, just about two hours ago got them to agree that in fact they do and they accepted this mod application. So it took three times. I had to call back three times. That’s the chain of command you go through when you’re getting a weird answer.

Ryan: I suppose that that some one didn’t probably end up changing their mind ultimately. What probably happened is that along the administrative roadblocks that are set up, someone was genuinely misinformed. That’s their role–to turn down things that don’t meet certain criteria and approve others, right. So they were just trying their best to get that criteria reviewed. It’s not going to be the easiest thing. After all, that’s what they’re there to do is enforce that criteria, not justify it. So keep that in mind and I know it’s difficult. With that in mind, today’s call–The Three Minute Hardship Letter.

Mike: Okay, so let’s just kind of review our ideas about what use to be called the hardship letter. Now Ryan and I are starting to call it the hardship statement because, like we said in an article several months ago, your hardship hardly matters any more. I was on a radio show earlier today in Kentucky from my office here in LA and the host was a bankruptcy attorney and he took the opportunity to go through the modification that he was working on currently. And I got to tell you he got into such complexities and some of you listeners may actually have been tuning in because you heard me on that radio station.

But he got into such complexities about the guy’s hardship and about the situation and about pending bankruptcy and relevancy of the bankruptcy to this property versus other properties. I’m telling you, he violated a major premise of our recommendation in terms of hardship letters–that is hardship statements. And that is you’ve got to dumb it down. You can’t make this overly complex because you’re not dealing with people who can deal with complexity. The people who look at your hardship statement, who look at your hardship letter, are looking for key words just like Google does. They’re looking for key words like illness, divorce, death, reduction in pay. And as soon as they spot those they go right over to their check list and they check it. So give them the key words and help them find it and check it off and move your hardship application along.

I always recommend that you say as little as needed to get past this objective. These days a lot of lenders are, in fact, sending you kind of a check list of six or seven common hardships and asking you to check which ones apply and then explain if your hardship is different then that.

Ryan: But then that is hit or miss. Some of the time they’ll do that and even some of the same lenders don’t do the same thing all the time consistently. So don’t count on that. It’s worth a little bit of mental strain but it’s basically–people say, well if people go on and on in their hardship letter, in my opinion that’s okay. The worst that’s going to happen is they’re going to bore the pants off of someone.

Mike: Yeah.

Ryan: And hopefully they’ll get all the reasons up there in the first paragraph and it’ll just be kind of a novella. But what is not good is that people usually want to know, well does my hardship qualify.

Mike: Yeah.

Ryan: So that’s kind of part of the “how do I make a hardship letter” problem and so I don’t know. I wish we had an easy way to tell people if their hardship qualifies in a real easy way.

Mike: Yeah. Let’s talk around that issue for a minute. Does my hardship qualify? Let’s think about it. That is a common question. People call in, and in fact I’ve got three on my screen right now. I’ve got three questions that have come in in the last couple minutes that we’ve been on and all three of them are whether or not this particular hardship qualifies. It is a burning issue and many people–first of all it always amazes me that people are reticent to admit that they have a hardship. There’s just some bit of pride in all of us that just says, “Admitting you have a hardship is being weak,” or “being needy.” So a lot of people don’t like to admit that they have a hardship and they put it off to long before they will admit that they do. And it’s usually one spouse or the other that first says, you know what? This pain is just getting too bad. I like how Tony Robbins always talks about running toward pleasure or away from pain and it really is a pain / pleasure thing. When the pain gets bad enough–when it’s so bad that you’re literally getting ill at the first of the month when you have to make that mortgage payment because you just can’t do it, you don’t have enough money in the checking account, that’s when the pain is bad enough to where you will take action to change your situation.

So that hardship, getting back to the topic, your hardship–lately I’ve been using this recommendation with clients. Try to fit into the grid. You know the grid that they provide. I know Indy Mac and Countrywide occasionally, like Ryan said, are using this grid that they send you with seven hardships. Check yours and you really want to, if you can, fit into that grid. A lot of people will give extra explanations and a lot of times I think its emotional and they just want to get a really good hardship instead of just checking that one applies. Because really the hardship really hardly does matter any more. There just has to be one and if you can honestly fit into one that’s on the grid, do it. And just get up to the front of the line. The point of the hardship letter is to get you past that gate keeper. You remember, we’re all trying to get up to the front of the line because there are so many people applying for loan modifications we can’t wait in line. So we have to get by that gate keeper and the way you do that in many cases is just fit into the grid. right?

Ryan: I guess if people have one of those horrible hardships they know it. Like someone died or a job has been lost. An injury has been sustained. They’re the ones not asking about this question. I guess the ones asking are the ninety percent of the people who’ve had a reduction of income but they’re kind of good natured. Their honest sense of fair play kind of doesn’t allow them to think about that as a hardship because they think, if think about it as a hardship, I can’t. I must put a positive face forward and if I think about that as a hardship I’m going to be feeling sorry for myself.

Mike: Yeah, it’s a psychological barrier.

Ryan: I’m sure that does a lot of good things for us as Americans, but one of the things is also it probably does a lot of good things for rich Americans who benefit from this sort of attitude of all the poor people.

Mike: Here, give me another ton of bricks I can carry it.

Ryan: Hardship, shmardship. Really that’s the way we’ve always thought of it too. If someone calls us to say, “Do I have a hardship?” We kind of say well yeah, let’s figure out one for you. You kind of have to decide. If you’re on the edge there you can’t say, “Oh does my hardship qualify? I’m going to get it, maybe. I’ll do the best I can and it’s not really that bad. Or maybe I would just see if–” No. You have to dig in your heels and say, “I don’t care what it takes. If I got a sprained ankle last month, I’m going to make my hardship letter sail through without any–” I really think that people need to look at the hardship letter not like, “Will I qualify?” but “I do qualify and this is how I’m going to blow it by this hardship letter reader and never think about it again.” Because you can’t go in there half straddling it.

Mike: If you’re going to go into a fight with one hand tied behind your back you’re going to lose. Yeah, you’re right in terms of when people have a problem–they are struggling to make their mortgage payment, believe me, it’s because of a hardship. I mean something changed, right.

Ryan: Yeah. Are you going to Vegas every weekend and blowing it? No, you’re not. Probably working 80 hours a week and paying everyone else except for yourself.

Mike: Yeah. So let’s think about it. What changed? What got harder? Why did it finally come to your attention that this is too much pain, I can’t endure it any more. Was it the credit limits on your credit cards? Was it the end of your savings?

Ryan: Maybe they revoked your home equity line of credit.

Mike: There you go. Or was it the change in the terms of your loan that jacked the price up $500 or $1000. What was it?

Ryan: Maybe you spent all of your savings at this point.

Mike: Yeah I ran out of savings. Does that qualify? Well, I think so.

Ryan: Yeah. But you don’t say that. You say, “Hey, I have been so desperately attempting to–I’ve been so committed to paying this I have actually, even when I haven’t been making that money, I’ve been paying this out of my personal savings account, my retirement account. I have been managing to do this for two years. Now I’m destitute.

Mike: You see now, Ryan, you and I have become super sleuths. You know, when we hear people say that we say now okay, that’s not the hardship but it is a symptom of a hardship. If you were dipping into your savings every month to make that mortgage payment, there’s a hardship there. Now keep talking to me. Where do you spend your money? How much do you make? Where does your money go and invariably nine times out of ten or even higher we come up with a hardship. So lets talk through–let’s be sure to go through some of the hardships that our clients are currently using just to name them so that people are familiar with hardships that people are using successfully and those that are actually named by Countrywide and by Indy Mac and we’ll go to some questions.

I’ve got some of them right here. Okay, now here are ones that people have used recently. One is a death of a relative who was contributing to household income, even though that person was not on the loan. Another one is that the person had received no bonus this year. Now on a month to month basis that wasn’t a reduction in income but over the course of the year, that was. Now another one is unemployment benefits are too little to make ends meet. Well, you know the real hardship was first he lost his job. Another hardship is laid off from job and the replacement job is less pay, so that’s a reduction in income. Here’s another one that’s reduced hours. They had become dependent on overtime–that’s not uncommon–and now they are unable to work any over time so there back to 40 hours a week and that’s a reduction in pay.

Another one is a spouse’s job loss, even though the spouse was not on the loan. And that, in fact, is a good answer to one of the questions I see before me on the screen here. And then this I mentioned in past teleconferences. This guy had a child who lost their scholarship late in their college and so he had to come up with about 800 dollars a month to help the kid finish his college. And then, of course, the old traditional. The ARM–the adjustable rate on my mortgage adjusted and the monthly payment was up. So those are some of the common hardships that are qualifying for loan modifications.

Ryan: I’m just trying to check the dates on my information because her concern–this is kind of off topic–but she was concerned because she was under the impression that the Bank of New York was buying Indy Mac.

Mike: Yeah, that would have been about Christmas, the first quarter of the year.

Ryan: But she was greatly disappointed because the Bank of New York– they’re payments for not doing loan modification but I don’t think that that’s going to fly. I don’t think the new bank, and I don’t know if that is the case, this document I have before me says it isn’t. And the FDIC assures that any Indy Mac loan modifications will still be going on. But if, in fact, the Bank of New York buys Indy Mac, I don’t see how they’re going to get out of the federal requirement to do loan modification.

Mike: Won’t slow them down at all.

Ryan: Just because they’re Bank of New York. So, anyway, that’s one thing that hopefully will encourage her.

Mike: Along those lines too, I want to remind everybody that even though that sometimes your loan, or you, or your situation may not qualify for the (A) loan modification paper–that’s A as in A-B-C–so there’s (A) loan modification paper and those are the ones that are owner occupied and that qualify for the President’s Making Homes Affordable program that I now call making banks profitable. But any rate I call that (A) loan modification paper because it’s there very best because it lines up all of the benefits. The bank is making the most money on you and you’re getting the best loan modification. That’s when are tax dollars really do us some good. But remember, there’s all kinds of (B) paper out there. You don’t necessarily have to qualify for the (A) paper. The bank, on the loans, that they own, that don’t happen to qualify for the President’s program, are just as interested in modifying your mortgage. They’re several thousand dollars less interested because there not going to take money from the government, but they still want to keep you in your home.

They still want to keep the asset on their active asset, performing asset list. So there’s all kinds of reasons why banks are modifying loans beyond the government program. So don’t let that stop you. If you think for some reason you can’t get your–you know, the bank’s never going to be able–your HTI, your mortgage-to-income ratio down to thirty-one percent. You’ve got to apply anyway. It doesn’t matter what program or it doesn’t matter what kind of qualification. You can get a modification and you might not get down to two percent, but there’s nothing wrong with getting down to three or four percent if you’re at an adjustable rate or a high fixed rate, right.

Ryan: Good.

Mike: all right let me take a question on my screen. My hardship is a dramatic increase in expenses due to divorce but my wife was not on the loan. How should I explain that? And I think that this writer is assuming that because that income, the wife’s income, was not on the original application, that in fact that the bank gives a hoot about that. And, in fact, they don’t. In fact, there not even resurrecting your application and they’re not even doing all kinds of investigation. All they want to know is, do you have a hardship? So tell them what they want to know. Yes, I have a hardship. My household income was cut dramatically when my wife and I divorced. And that is one of those hardships that are usually on the checklist and that’s one that will immediately get you right past the hardship gate keeper. So don’t even consternate about any problem explaining that. It is a reduction in household income, even though she was not on the loan. Now you have to assume all kinds of payments that you use to split with her. So that one is a bonafide slam dunk. Right, Ryan?

Ryan: Absolutely. And back to this other person who wrote me a lengthy letter, I want to say that what she says in here is a lot of details on her hardships specifically she asks us to comment, and she talks about investment property. Some problems with Idaho changing the homeowner’s exemption taxes. She talks about real estate dropping. She talks about being actually scammed in real estate and perhaps some TILA violations in not being told something. Man, it gets complicated, doesn’t it, real quick. But I think what I recommend here is–I mean obviously you have a hardship.

And the hardship at the heart of all of this is that–well, I’m trying to think of one sentence to some it all up and then you can describe it with all these things. Perhaps, “My hardship is decline of income due to the housing crisis–due to the U.S. housing crisis.” And then you support it with, “While my property value has dropped in half I’ve been unable to fill it with renters and in addition to that to make up for budget short falls the State of Idaho has decided that they are not going to allow my home owners exemption, which increases my taxes, increases my expenses, decreases my income.” So the key is, when you boil it down, all the explanation in the world is fine. I, unlike my dad, don’t mind a three page hardship letter as long as the first two sentences of the first two paragraphs give nine different reasons for the hardship in exactly why it’s going to be there. You don’t need to blather on.

Mike: Yeah, I understand.

Ryan: Someone wrote a nice letter here she says thank you for helping us when no one else seems to be trying to help. That’s pretty cool. She also asks is HSBC Mortgage Services hard to get a loan mod with.

Mike: Oh no, not harder then any other. I mean, the same as any other. The ones that I consider the easiest are Wells Fargo and Indy Mac and you get other loan modification experts that would say, are you kidding? So a lot of it just has to do with your experiences and the types of modifications that you brought to those people. But remember, everything, everything, everything has to do with your application and your follow up. It’s up to you. The system is in place. It’s a well oiled machine. It just isn’t very intelligent. So you need to submit a killer application and follow up on it and you know when you submit your hardship or when you submit your application what you qualify for if you’re using our system.

Ryan: Here’s an interesting one. Denise asks, what about over qualifying? And she goes on to list medical disaster, business down turn, family medical problems, used all the savings to make payments, lost a million in equity, purchased everything between 2005-2006, income is short term weekly rental that can’t be counted on. How much do you reveal?

Mike: Yeah, that’s a really good question. I go back to my basic premise that you reveal only as much as you need to. So I would pick one of those hardships and use it and leave the rest alone. There’s just no point. You’re not going to get any kind of gratification out of explaining it to them. You’re not going to get any sympathy out of them. Hardships have become, like I said, just a gatekeeper. You just want to get past it. So don’t look for any thing more and honestly any one of those qualify.

Ryan: You know, depending on how you word it, I wouldn’t mind throwing in a little trifecta.

Mike: Yeah, three isn’t bad.

Ryan: Just have something to fall back on if something gets knocked out.

Mike: Well, how about the danger of coming across destitute.

Ryan: Right. Well, that’s the thing. On one hand we have to prove a verifiable hardship and medical disaster is going to be pretty easy to prove. Business down turn due to the economy. Family medical problems, and then I would go to used up all the savings on payments. So you’ve got those three and each can be explained basically in one sentence, a three sentence paragraph that starts out the letter. You know, “I never wanted to have to write a letter like this. However, I hope beyond hope I can keep the home and not let it go to foreclosure. This year I had a number of very serious set backs which qualify me for a hardship.” And then such and such medical disaster happened to me, my brother, my dad, my dog, whatever. “And the total bill is pending at x and then due to the slagging economy my own personal business which is x has been beat up and profits are–”.

Mike: How about you use a percentage?

Ryan: Yeah, “profits were down twenty percent. Furthermore…” Anyway, you get the idea but the next sentence is about savings account, about depleting the savings account.

Mike: Yeah, and I like the point you always write in the hardship letters about the good faith effort. You always mention the fact that they’ve depleted savings or run their credit cards up and I think that shows intent. It shows that you intend to and you really want to be responsible to this debt but you are at wits end. So I think it’s a good reflection on the borrower.

Ryan: You know, I think it’s basically–it’s down toward the bottom of the paragraph. The first sentence really has to say something like “medical emergency.” The point is the first sentence. Very hard stuff and if you want to get in a little supporting argument down there get it in after you’ve got the kickers in. Never lead with it and always remember that these letters are read by people who have to run their credit card up to put gas in their car to get to their crummy job in the morning. Everyone is in the same boat and obviously–I mean reading this e-mail I feel like, oh no, all the savings is gone. You know, I can identify. My savings is gone. Check, boom, gone.

Mike: Yeah, get this off my desk and get this over to a negotiator quick.

Ryan: Don’t get me wrong there not going to get passionately behind you or anything but all we’re looking for is a check box and get it moved on to the next person.

Mike: Well, you see that’s the thing. You want your application to move on from desk to desk to desk to desk because these guys in their cubicles have literally dozens or even hundreds of these files and once they open yours, you want them to close it and move it on to the next cubicle. Not set it aside for review later, right.

Ryan: You know, a good thing to recall–and we’ve been doing this for so long that I know I’ve forgotten–is that first time you do the hardship. Like I said you’re usually looking for some validation in a sense. And you’re not going to get it. No one is ever going to call you up and say, you know what? You have a certifiable hardship. We feel terrible and we’re going to approve your loan mod. Even the best case scenario, no one’s ever going to talk to you about it again. That might help people think about it. It’s like, you don’t have any thing to prove to anyone. All you have to do is get through the system, disappear, and move on with your own life, right.

Mike: Well, it’s like Ryan for that kind of thing you go to church or you go to talk to a family member, you know, for emotional support. Don’t look to these guys for emotional support. Look to these for money.

Ryan: I mean honestly, I think that my first one I wrote, I thought maybe– you know, it’s hard to recall. You can easily see someone thinking, okay, they’re going to write me back and say we approve the medical but send us copies of the bills. They’re not going to do it. That doesn’t happen. It either gets approved right then and there or it’s off the desk, failed. I would say you got one shot but you don’t. We’ve written plenty of second hardship letters. You’ve really got to go at it. Whack at it. In our book we actually provided real life hardship letters that have been approved and just feel free to borrow the language exactly. It’s not copywritten, for goodness sakes. You know, it’s not plagiarism either. You’re not asked to write a creative writing assignment here. You’re basically filling in the blanks on a form. They want it in a letter and they’ll get in a letter. Use these as they work. Don’t worry, they’re not going to think that the language is too similar or anything like that. We haven’t had anything like that ever happen.

Mike: Hey, Ryan, you touched on a topic the other day that I know a lot of people have mistaken misgivings about, have some mistaken concepts about and that is about rental market. A lot of our clients own rental properties and everybody has this intuitive sense that because everybody’s losing their homes to foreclosure–four million foreclosure notices in 2009, there will be–that there’s a flood of people looking for rentals and so then you think the rental market would be hot. Vacancy is way down, prices up, but the opposite is actually what’s happening. And who knows exactly why that is? I’m sure economist does, but for general economic reasons–in fact, the rental market stinks. And vacancies are very high and rental rates have been slipping for about fifteen months.

Ryan: People are hunkering down. Moving in with family. Getting some savings built up. Rightly so. It’s true. It doesn’t make any sense from the supply side economics, but you know, we were calling around for a family member, my wife and I, this week, and I was stunned at how many landlords–we were driving around the beach cities trying to find a places that looked neat. I couldn’t believe at how many landlords picked up the phone and called me back and I got to tell you, I have looked for rentals in the past and I have never been treated with such respect and this time I wasn’t even looking. I even left a message saying I’m calling for my family member. You know, like the typical call that gets deleted, never returned. The property management company doesn’t give a darn anyway. There’s plenty of spots, and you know what? They were even saying stuff like that this unit use to be $2100, now it’s $1800. You should move on it really quick, and you know you’re kind of like, whoa, this is beach property they’re looking at. This particular one was a one bedroom apartment looking at the Pacific Ocean.

Mike: Well, see here’s the deal. So many of our clients have reduction in this rental income and they wonder if that’s a hardship. Well, that’s a duh. That’s your income. That’s a bonafide slam dunk hardship. So if you have rental properties and your vacancies are up, your maintenance is up, whatever. Your net income is down–that’s a hardship that qualifies. Here’s another one off my screen. My married son and his wife and his son are having financial difficulties and recently moved in with us at a very tough time for us financially. I’d like to think a loan mod could help us. Will this situation qualify as a hardship? And the answer is “yes” because your expenses just went through the roof. You have three more people probably, $450 to $500 just in groceries alone, much less utilities, and etcetera and etcetera.

Ryan: And because the natural assumption is there is, well, sure you get some more expenses. However, it’s going to be offset by the additional income of two people–I would maybe not be so specific and just say, you know, due to family member emergency my grandkids and their family are now living with me and under my financial responsibility.

Mike: Yeah, that’s a good way to put because then think about all the expenses they’re incurring now. If the son and his wife, in fact, can’t make their medical premium payments every month, this couple might have to help them. There’s car insurance, there’s car payments, there’s gas, there’s all the expenses. So, yes, your expenses increase dramatically. You have a verifiable slam dunk hardship.

Ryan: Here’s one. Will the fact that I rented out my house a couple months ago and now live in my apartment behind the house and drawing unemployment qualify as a hardship. Let’s take a one step further from that I would not go with that. What I would use that as a supporting evidence of my hardship, but some things happened that caused you to move out of the house and live in an apartment and draw unemployment. Let’s get to that. You lost your job. You’ve been unable to get another job although obviously trying for x amount a month. In an effort to make good on your commitment you’ve actually rented out your own home in a desperate attempt to make that monthly mortgage payment, which of course you cannot make with rent if you’re in most areas of country. And you can continue this uncertain living situation if you’re certain you can continue this.

Mike: You know you can make those payments but you need some help.

Ryan: We should have stressed that earlier on the other call where the women had to many problems. You’ve got establish the problem and then move on because you also have to qualify for enough income. No one who’s not drawing an income has ever gotten a loan modification that I can think of. So you’ve got have that income. You’ve got to put it in there, whether it’s in a couple months I will be back working the full hours. In a couple of months I will be better and going back to work. What’s the hope on the horizon? My grandmother is on her death bed and I’m going to inherit a ton of money–no, I’m just kidding.

Mike: We always advise in terms of good news on the horizon that it not be to soon, because you don’t want them to offer you a deferment or a forbearance, and it not be too late because, you know, it can’t be out there for five years. I don’t like to say when the economy recovers. I like to be a little more specific. So I always recommend that people say that in 18 to 24 months I’m going to be back or something like that, or I hope to recover.

Ryan: Okay, sometime in the near future.

Mike: Not in this month.

Ryan: Yeah. Near future is pretty new, honest.

Caller: My name is Dell. Hi. I wanted to know if this would qualify me. About six years ago I became a legal guardian for my grandchildren. I have minimal help from the state. Of course my expenses have increased dramatically. I have two rental properties that would only decline because of the housing prices. I’ve used up all of my savings and refinanced all of my properties and my home just to stay on top. I ran out my credit card. I am now out of my resources. Would this qualify me or how do I go about this?

Ryan: Well, that’s a great question. We’re going to need a little bit more information. What do you want to know there?

Mike: Well, Dell, there must be some recency to the hardship. So they’re going to be looking for what has changed now as opposed to two years ago and I know from what you’ve told us already this has been getting worse and worse and worse. I’ve done the credit card thing, I’ve done the refinance thing, but it’s going to be easier for them if you can point to some point in the last year that’s making it just unable to go on.

Ryan: So right off the bat can you think of something that’s changed in the past two years or we could help you think deeper.

Caller: I think I would have to dig deeper. I don’t know.

Ryan: Well, for one thing I can think of, you know, you have recently used up all of your resources and you have a good faith effort to make good on your commitment. Okay, yeah. It’s kind of weak, but you know you have a big family to support. I don’t think there going to care if they’re your grandkids and it was six years ago and stuff like that, but you still have a family to support and the rental incomes don’t, in fact, cover the mortgages and stuff like that.

Mike: Wait a minute, Ryan. I bet–Dell, if you really study it I bet you got ten percent less here then you did in 2007, and I bet you’re getting ten percent less this year because I bet you’re going to have more vacancies.

Caller: Correct, yeah.

Mike: It’s kind of a confluence.

Ryan: Okay, so what they were talking about here is decline of income.

Mike: Yeah.

Ryan: We’re talking about a decline of income on–

Mike: At a time the grandchildren are getting older and more expensive.

Ryan: Increase of expenses.

Mike: Yeah. And I bet your credit cards have about hit their max and I bet they’ve tried to lower the limit on your credit card.

Ryan: And they’ve increased her rates probably.

Caller: Well, what I did Is I went on this program where you do the monthly thing and I did it for five years so it’s like I closed off those credit cards and I’m on a program.

Ryan: Did you do that through a third party company or did you do that directly with the credit card company.

Caller: I went directly to the credit card company.

Ryan: Okay, so that’s fine. That can be an example of extinguishing all of your resources and a good faith effort to deal with all of your problems the best that you can. So I think that could be both. Now the other thing is, it’s probably beyond the scope of this conversation, but you have to figure out what good are those properties doing you. And if, in fact, these are maxed out properties and a loan modification isn’t going to get them cash neutral for you, I would suggest you think about short selling these homes and getting them off your books because rental income isn’t going anywhere in the next ten years. Now, of course, if you can cash flow it and you can handle the stress, go with it, but consider–of course, pursue the loan modification, but in the back of your mind and maybe at the same time consider short selling. And we could help with that to if you want to drop us an e-mail.

Caller: Well, I just recently joined your kit so I’m going to be setting up the 20 minute one on one.

Mike: Oh, good. Then we’ll dig a little bit deeper on the refinance and on your credit cards because I think somewhere in there, and your decline in your rental income, I think that’s where your hardship lies.

Caller: Thank you.

Ryan: We look forward to hearing from you, Dell.

Caller: Yes, hi. My name is Claudia. My situation is that I just got my bankruptcy Chapter 7 discharged and I got an e-mail yesterday from the (inaudible) and I really want to save my houses. And my husband and I had to go out of business in January. We closed our only source of income but we have four tenants in the two properties that are rentals. And we are not paying the three houses–the one that I live in and the other two and we’re living with these rentals and now in September I have a promise of a full time job which will give me $35,000 a year. And now I don’t have that with the credit cards, that was huge. Do you think that I would be okay for the modification if I give up one of the houses?

Ryan: Yeah. Well, there’s several things at play here. One, I’m assuming that the homes are not part of the bankruptcy, right? So they were never included in it?

Caller: We included and we asked–how you say–released or foreclosure. They just started foreclosure again.

Ryan: And the judge released them?

Caller: Yes, so they will foreclose if I don’t do anything.

Mike: And you want to try to hold on to them, is that right?

Caller: The one that we live in, we love to live here. Of course, we cannot afford $4,000 dollars mortgage, but if it was $2,000 or even a little more we could work three jobs and try hard. But the second one is a very good house with two tenants. They are awesome and we would love to get loan modifications and get a little profit instead of having no money left over because this house is $4,000 dollars. The third one, it’s too much of and expense because the gas/electricity is in my name and it’s all together–the second and first floor, so I’m tired of that house. But I like the rent that is coming in, so I don’t know what to do.

Mike: Here’s some off the top of my head thoughts about what you’ve said. Now keep in mind that I think it’s a good strategy to be pursuing short sales and loan modifications at the same time because there’s no reason why you can’t stop the short sale if you get a good loan modification.

Caller: And play the game. Like I’m trying to sell to help the bank and then suddenly I’m qualified I keep it.

Mike: Yeah. So I think it’s actually the smarter strategy. And, Claudia, it seems to me that you need to be pursuing loan modification on all three properties at once.

Caller: Yeah, okay.

Mike: Now is your own home in foreclosure?

Caller: Yes. Let me think if we got a letter. Yes, we got a letter that they ask to be relieved and start foreclosure.

Mike: Okay. So you’re going to be on a short leash. You need to be really proactive on at least one or two or maybe all three of those. You only have three months to resolve this. So you want to take action, proactive action right away so you can go through this on your own terms and if you have to let one of them go, it sounds like you already know which one that is.

Caller: Yeah, okay.

Ryan: I think that you also need some professional stalling tactics here. And you may have to pull out the loan modification card to get some stalling because you do not want to get that notice of trustee sale issued. That’s a real headache when that gets issued. So I think you want to get a couple things in the works in the couple’s apartments right away but now, what was her main question?

Mike: Well, her main question is does she hardship that can qualify her for a modification on her first home and that’s really, Claudia, that’s really the burning issue because the people that can hurt you most right now is the company that owns that first mortgage because they can take away your home. All the other people can hurt you a little bit but those people can hurt you bad. So let’s really focus on financial hardship for you that’ll enable you to qualify for a really good, an (A) paper loan modification on your own home.

Ryan: Certainly, you know, business–going out of business, Chapter 7, shutting down the business is enough I think.

Caller: It’s all done and we are relieved we don’t need to pay any thing.

Mike: Now, Claudia, what they’re going to be looking for is okay, you’ve cleared the hardship hurdle.

Ryan: Now, do you have any income?

Mike: Now, do you have enough income to keep them up.

Caller: That’s the problem. I only have a little part-time but this future full-time job in September. It’s a gymnastics school so only in September they have students.

Ryan: And how about your husband?

Caller: I coach. My husband also is a coach. We both were coaches our whole lives and now we have no gym. We used to have a gym that went out of business.

Mike: Ah.

Caller: So he has no job. He’s been trying since end of January and everybody thinks he’s over qualified so he doesn’t get a job.

Ryan: Okay, I’m telling you right now, the bad, terrible news here is you guys need a loan mod. But with $4,000–we sell loan modifications, right, with our kit. I hope you know what that means. Which we try to encourage people to do loan modification. But in talking to you I really am concerned that this may not be a reality for you and the reason that this may not be a reliable solution, the reason I say that because I know your mortgage on your home is $4,000 and I’m assuming your other properties don’t cash flow. You know, you guys are going to have to show $7,000 in income a month. And if you can’t show that, you don’t have a prayer.

Why don’t I suggest this, Claudia. Consider shooting me an e-mail at questions@60minuteloanmodification.com and I will follow you up with tomorrow and see if we can suggest some good alternative strategies, because I really–from a stalling point of view a loan modification might help you somewhat, right. But I don’t want to give you false hope that what we’re talking about here is the solution for you.

Caller: Yeah. So maybe I would have to have a short sell to gain more time?

Mike: You might have to. Now, a couple weeks ago a conference call on the topic how to bolster your income and I think what Ryan will do tomorrow when he hears from you is brush off some of those notes and tell you some of the ways that people are proactively getting their income built up in order to qualify for a loan modification. It might be that information you need.

Ryan: Write to questions@60minuteloanmodification.com. Thanks for your call. Okay, now we had some good calls. In talking through some of this stuff, although it sounds specific, it’s pretty general. So I do hope that people don’t just zone out when they hear about someone’s specific problem. You know what I’m saying?

Mike: Yeah, because you know the principles are the same in every application. You got to just keep looking for what is the hardship? Because people describe their hardship symptoms to us.

Ryan: Yeah. Absolutely. I agree.

Mike: All right. And Claudia was actually a good example of that. You know, she explained the symptoms and when you’re looking for the hardship, man it was staring her right in the face. They had lost their business, lost their income, and had to file Chapter 7 just for that reason. So the hardship is a no brainer. Then moving on to how do I qualify? is a little bit more complex. Now we got to deal with the income part of it.

Ryan: Yeah, you really should pat yourself on the back for showing up on this call tonight and taking action to save your home and fix your finances. I know it seems like a boulder and, you know, the other options available to you–putting it off another day, that kind of thing, are the kind of things that limit your options ultimately and there’s only one that will be made for you and that’s the one where the sheriff comes and locks up your house. And that’s the very last thing we want to happen. Because no one’s going to come and bail you out unless you raise your hand high. That’s what this process is all about. We are huge advocates of do-it-yourself loan modification, but that doesn’t mean you should do it alone.
We’re here to help and calls like these are hopefully easing you through that can be a very emotionally trying process. If you own our 60 Minute Loan Modification kit, we look forward to having you on the call Thursday night when we talk about advanced strategies for investment properties. If you do not yet own our kit, do yourself a favor and buy it now on the website. It’s a tiny investment. It’ll pay for itself many times over. Now we spend most of the day on the phone, so e-mail is the quickest way to get a fast response to any and all questions. Please e-mail us at help@60minuteloanmodification.com . Thanks so much everyone and have a great night.

Mike: Thanks and have a great night.