Duration: 00:59:00
Mike Rockwood: And ask you to send in your questions. Many of you have already started since the first email went out early in the day reminding everybody. Questions tonight are going to be specific or we’re going to try to focus a little bit teaching on loan modifications because we have a couple of very interesting instances in recent days in which people were so surprised that they got rejected for loan modifications and in reviewing their budget, we realized that they were just way out of whack.
What a lot of clients rely on us for is hopefully before, but sometimes not until after they get rejected in their loan modification efforts. A lot of clients will just call us and really go onto our website to schedule a time with me to talk about their workout solutions. It’s really easy. Our website at 60minuteloanmodification.com makes it really easy for you to schedule a time to talk with me. And what people find useful about that is it’s really good to talk to somebody who, you know, can kind of come around to your side of the negotiating table and help you square off because a lot of people have been getting assistance either from any of the nonprofits or sometimes from, you know, HUD-sponsored agencies or from the bank themselves they’re getting help in their loan modification effort or their workout effort.
And it’s really good to be able to inexpensively be able to spend 20 minutes or 30 minutes talking to someone like me who’s kind of a hired gun, a gunslinger you know, who’ve done all kinds of street fighting for loan modifications and all manner of foreclosure workout for years now. And just to review with me you know what your approach is you know what the facts are, how you’re negotiating and what kind of issues you’re having. So, a lot of people do that is they’ll call and they’ll say man, I’m just breaking a pick on this one with this or that bank. Can you review my documentation and give me your advice?
Well, in the last couple of days, we had some real show stoppers, people who had a really good opportunity for a loan modification but kind of blew it because they submitted an application that just didn’t make sense mathematically. It’s all about the math after all. It’s really not about your personal saga, your personal issues. It’s really just about math because the lenders are running so fast and trying so hard, you know, not to come under more governments and public scrutiny and criticism for not having approved more of these. So, they’re really trying to go fast and you have to accommodate them by submitting applications for modifications that make mathematical sense.
So we’re going to focus a little bit. Like Ryan said in his e-mail invite to all of you, we’re going to focus a little bit tonight on the numbers before we jump into questions. What we do is we’ll take questions from you at questions@60minuteloanmodification.com. Also if you have – if you’re watching this video live, the live feed as a chat right alongside at there where you can also chime in with questions. However, sometimes those get missed because we get so many of them.
Ryan Rockwood: So, don’t get mad if I missed you.
Mike Rockwood: Yes.
Ryan Rockwood: Don’t send me a nasty grin [phonetic]. But if you – anyway, I also want to – this is Ryan Rockwood. I want to welcome everyone to the show. As promised here, we’re going to give everyone a budget spreadsheet. For those of you, there are clients – it’s the same budget spreadsheet that we had given you as part of your kit that you purchased, so it’s just a little freebie we’re giving out to people. If you tuned in though to this broadcast a couple of minutes ago, what you’re going to have to do is hit refresh on the page. Now wait, before you do that, don’t do that if you’re already a client because you’ll lose your chat log in and have to log in which is a bit of a hassle but feel free to – if you want to go through the processes, feel free. But if you’re just coming to the site now and you just want to get your budget spreadsheet and look at it while we talk, feel free just to jump on there. Now, I got a feeling [phonetic] we’re not on the same plane here.
Mike Rockwood: Yes. You got to move over closer to me.
Ryan Rockwood: There we go. Was that decent enough? But anyway, welcome everyone to the show and yes, we’re ready to get going. We got lots of questions already, questions@60minuteloanmodificaiton.com. And again, if you have joined us more than three minutes ago, you’re going to have to refresh the page and what you’ll see at the top is a form that you can fill out and you get e-mailed that spreadsheet that we promised you, okay. We’ll just jump into it.
Mike Rockwood: All right everybody, so tonight we’re going to talk for about 10 minutes about the mathematics of a loan mod application. Loan mods are really the easiest, fastest, simplest, cheapest way for you to get some immediate relief while you think of a long term fix for you mortgage problem. And the reason I say that is because we’re really only seeing interest rate adjustments and payment adjustments. We’re really not seeing any magnitude at all of principal reduction which has to come eventually.
But at least, it gives you some time to stay in the home and, you know, until you figure out a longer term strategy. So it’s incredibly popular and contrary to public opinion in a lot of commentary in recent weeks. There actually is, you know, a great opportunity for you particularly if you’re talking about modifying the mortgage on your own primary residence. We’re having great success, all be it. They’re taking a long time and you have to know a lot of tricks. And in this forum each week we share with you some of the tricks that you need to keep those modifications going.
And tonight we’re going to talk specifically about the mathematics because if the math isn’t right, the application just has absolutely zero chance of getting approved. So, I mean, it’s just full hardy [phonetic] to be something any application in which the math isn’t right and there really are three factors that you have to be considering – you have to consider when talking about the mathematics. And they all have to do with your budget. So, for those of you who are just downloading a copy of that budget, here’s what you need to know.
Three things: one is your ratios must be correct. There are two ratios that must be correct. They’re both debt-to-income ratios. One is called the front end debt-to-income ratio. And this is really was stipulated by the Making Homes Affordable program that was introduced one full year ago by President Obama and has become kind of the standard for loan modifications throughout the industry whether it be for your primary residence and whether it be Making Homes Affordable mod or any other mod. It’s the standard. And that frontend debt-to-income ratio works like this. It must be over 31%, and the higher it is, the better.
Now, here’s how you calculate it. You take your gross household income and that itself is an issue for a whole another teaching but you take your gross household income and you divide it into your mortgage payment. It’s your first mortgage payment only and it’s the full payment, principal, interest, tax insurance and homeowners association. So there’s all five factors fully loaded up and what that payment is, divide that by your gross household income, that’s called your frontend debt-to-income ratio.
And if that is – well I kind of had a client this morning whose frontend debt-to-income ratio, on a failed loan modification attempt, was 11%. And I said to him why did you even waste your time and, in fact, he had wasted like six weeks. Why did you even waste your time sending in an application like that? You’ve got to, you know, you’ve got to think through your application and you got to torture those numbers until they confess to what you want them to say.
So, we, you know, there always seems to be a way to be able to reorganize your finances particularly if you are self-employed to show your income appropriately. But at any rate let’s review. That front-end debt-to-income ratio is the first ratio that you need to make sure is over 31%. Over 31%. If it’s 29%, it’s not good. If it’s 30%, it’s not good enough. If it’s 30.9%, it’s not good enough. And actually to tell you the truth, 31% really – we got an awful lot of problems with because you get into arguing with them about this or that. So what I really like you to see is when I can go in with the frontend debt-to-income ratio of over 35%.
Now, the second ratio you have to be concerned with is your total debt divided by your total household gross income. So, you add all your car loan, student loans, all your credit card loans and remember it’s got to be those minimum payments, just the minimums, and divide that into your – or by your household income and that ratio, which is called your backend debt-to-income ratio, needs to be certainly less than 70%. Now, on occasion, I do go ahead and submit some that are like 72, 74 and even 75 but you know you’re going to have arguments about those so try not to do that. Try not to do that.
Now, here is a problem we ran into this past week with a very, very good client who has a lot of credit card debt, very high and minimum payments. I think they have a $150,000 worth of credit card debt on five different cards. Now, that real heavy credit card debt, put them in a position where – and she has kind of flexible income because she’s on a real high commission basis. She has a steady base salary but a real high commission. So she’s kind of, you know, she has a great deal of control over how much she shows as a monthly bonus.
So she really has great flexibility but that high credit card debt gives her no flexibility because her backend debt-to-income ratio requires that she show a real high monthly income so that she doesn’t have like an 80% backend debt-to-income ratio. But then when she shows that high income, she takes her frontend debt-to-income ratio too low. So she’s really got a problem trying to straddle that line where she can make the frontend ratio high enough and the backend ratio low enough. I hope all of you appreciate this hand gestures for that use to help you understand. I don’t know why I do that. Okay, so those are the two ratios that you have to be concerned with.
The last thing I want to talk about is your costs of living. Here’s how it works. The bank really doesn’t care if you spend $300 on utilities or if you spend $100 on utilities. They could care less if you spend $400 on groceries or $40 on groceries. They really don’t care about your cost of living and they’re not going to make any kind of judgment – value judgment whatsoever on where you spend that money. It’s just that they need to hear from you that it’s all spent. In other words, it’s all gone that’s all they care about.
Ryan Rockwood: I mean there has to be some – I mean, doesn’t there have to be some logic [indiscernible].
Mike Rockwood: Some sanity too, yes.
Ryan Rockwood: I mean you can’t.
Mike Rockwood: But here’s the thing. See, some people get into well, you know. I spent – we spent quite a bit on food because we eat you know organic food and it’s really expensive or I talked to a guy the other day who spent over $700 a month on life insurance because that’s just their thing. They just believe in it. And the truth is those kinds of things don’t really matter because the bank really is now – the major banks are all sophisticated enough to where they take a ratio of your cost of living to your total income. That’s really all they care about, and which bucket it’s in, they don’t care about.
So don’t spend a lot of time scrutinizing how much you give to church, how much you spend on clothing, how much is dry cleaning, how much is groceries, life insurance, elder care, child care, tuition, gasoline, phone, fax. You know all that stuff doesn’t matter. Just be sure that you show them that the money is all gone. The budget you submit should not have a big positive or a big negative. Just another one of the clients, who kind of made us think that it’s time to have this little talk again, had submitted an application in which he was $1,800 a month negative. And he wondered why in the world he didn’t get approved because he needed that much relief on his mortgage payment. It just doesn’t work that way. These days the bank really wants to see and we always turn in for our clients plus or minus $100. Seriously, I’d like to go like $50 or so plus or minus, okay, a positive or negative.
So those are really the three things you need to be concerned with and once you have your budget in place, you’re ready to talk to your lender because now you know that, you know, no matter how the conversation goes, you’re in control because you know that your application qualifies. All right. Good enough.
Ryan Rockwood: Sounds good.
Mike Rockwood: Should we jump to some questions. I got some questions early on about debt-to-income ratio. Do you want me to go ahead and take them?
Ryan Rockwood: Yes. Let’s see if we have any – I don’t know how many join us by phone anymore but let’s see if we have any people that are actually by phone.
Mike Rockwood: Okay. I think it’s nine [phonetic] isn’t it?
Ryan Rockwood: I don’t know.
Mike Rockwood: There you go.
Ryan Rockwood: Hello. Is everyone online that wants to ask a question by phone?
Male Speaker: Hello.
Ryan Rockwood: Hi, go ahead.
Male Speaker: I just want to say hello and thank you and glad to hear you’re feeling better. Your voice has come back and your hair has too.
Ryan Rockwood: Yes. I’m feeling better. Thanks a lot.
Male Speaker: [Indiscernible].
Ryan Rockwood: Okay. Anyone else have a loan mod question we can help you out with?
Male Speaker: I just [Indiscernible] that’s all.
Ryan Rockwood: Thanks a lot.
Mike Rockwood: We should go to the teleconference more often.
Ryan Rockwood: Okay. Yes.
Mike Rockwood: All right, let’s jump in to some of the questions that have come in the last couple of hours. Tim says – are you still live here Rocky? Because it’s sounding a little funny.
Ryan Rockwood: It shouldn’t be sounding funny.
Mike Rockwood: Okay. Tim says, “The Bank of America says I can’t get modified because I have too much total debt. Can this be right?” It’s absolutely can Tim. You can have too much total debt and in the loan modification guidelines …
Ryan Rockwood: We can and that’s all anyone has got is too much debt.
Mike Rockwood: Yes. We’ve all got too much debt. The whole darn society does. Our whole economy is tipping over because of it. But if you have too much debt, you can’t get a loan mod. And here are the guides: Specifically anytime you get up over 60%, you may be asked to agree to take some kind of loan counseling, debt counseling and I mean who cares. That’s fine. But anytime you get up over 70, you’re really in jeopardy of being rejected.
And so, Tim I suspect that you have more than 70% of your monthly payment is going to debt payments. And you see the problem that they have with that is their underwriter is going to have get heartburn over that because he figures if you have to spend 70% of what you earn just on debt payments and you certainly have to spend about 10% of what you earn on taxes, that only leads you 20% of what you earn to live on, and cost of living are generally higher than 20%. So, they think you can’t make and in fact, you’re going to fail so that’s why you get de-queued [phonetic]. So yes, it’s true and that’s the guideline is the 70% gets real iffy.
Minnie says, “If I am not paying on my credit card debt, can I exclude it from my loan modification application? Will they accept that?” And Minnie, as strange as it seems to me, they do. They do accept that routinely. I’m just kind of shock by it but they routinely accept it. If you say listen, I’ve got $28,000 on a credit card with Bank of America, I stopped paying it four months ago. I intend to never pay it again. I mean, in settlement negotiations with them. They will exclude that debt payment from your loan modification calculation. Just kind of baffles me that they accept that, you know, so many other things they don’t accept. But that’s actually has become kind of a common strategy now that so many people are beginning to negotiate to settle those credit card debts.
Speaking of that, can I see it under the screen Ryan, right down the below?
Ryan Rockwood: Yes. If you scroll down a little bit and you haven’t yet, scroll down and sign up for the Credit Card Cure program that we have and that will teach you how to get rid of your credit card debts.
Mike Rockwood: Yes. For those of you who are really struggling with credit card debt, and we are amazed at how many people we’re helping with foreclosure workouts that have, you know, that use the home as a piggy bank for the last decade like the rest of us. But at the same time build up so much credit card debt. Some people, like the person I am referring to you just a few minutes ago, have as much as 150,000 and more of credit card debt and it just weighs them down. It’s like an anchor. And so, the Credit Card Cure system is based on Ryan’s own experience in settling credit card debt. He kind of expanded it and built a four-stage system that really helps people move through debt settlements. So if you’re considering bankruptcy, if you’re behind on your payments, if you’re getting threatening calls from your credit card companies, really take it seriously and join the Credit Card Cure Co-Op online and you get support from the forum as well as tons of great information on how to get free of that crap.
Ryan Rockwood: Now, we said that everyone who joins the call today, we get that free budget worksheet and you can get that by filling out that form above us. But in the email, I talked about, you know, math in general but then you talked about DTI. Is there anything else that you think people might be, you know, if they tune in to hear about all the math you need to know for loan mod.
Mike Rockwood: Honestly, that’s the simplicity of the loan modification is really that math. Other factors that people often think should come in to play like the home value, your credit score. Those numbers don’t mean a thing. It’s really the three biggies are your debt-to-income ratio, front-end/back-end, and your cash flow. And of course when you say debt-to-income ratio, you’re really talking about two factors. The debt and the income and a lot of times most questions have to do with income. How do I document it? How do I show it? How do I calculate it? And you really have to put, you know, think of it from their eyes. They really need to be able to see and really clearly document what your income is.
So, we spend a lot of time with clients making sure because very often people don’t even though, you know. They say my income is you know $4,895 a month. Well, it turns out it isn’t bad at all. It’s $2,400 every other week and they get 26 paychecks or they completely disregard their annual bonus or et cetera or they think only in terms of net. A lot of times people are that way. They think only in terms of net. They don’t realize that all of the ratios are driven off of gross.
Ryan Rockwood: Okay. And the good thing about the spreadsheet is that it is active. So, if you know anything about spreadsheets that means that the, you know, they’ll add it. It will add it up. It will create some nice things so don’t go messing it up if you can help it.
Mike Rockwood: Yes.
Ryan Rockwood: Now, the problem with that is that sometimes you have to double click or triple click in there. It will switch pass the information and go to the, you know, the programming behind it and that’s really hard to get out because then sometimes if you could click somewhere else, it will start linking that sale and stuff like that. So, what you might want to do is just keep the copy of that budget.
Mike Rockwood: Yes, that’s a good idea.
Ryan Rockwood: And not work off of it and then save it as your backup copy, right.
Mike Rockwood: Yes.
Ryan Rockwood: And then if you blow it, which I tend to do with spreadsheets every now and then because I’m not exactly sure how they work, so I start trying to undo and stuff and that doesn’t work a lot of times.
Mike Rockwood: That’s a good idea.
Ryan Rockwood: Then, you got out that you kind of restart.
Mike Rockwood: Yes. So the spreadsheets have, you know, an active sell, kind of, auto sum and it will calculate already populated. So, it will calculate your front-end and back-end DTI for you. A lot of times a front-end DTI is called the HTI, housing-to-income. It’s that first mortgage payment.
Ryan Rockwood: And then, if you do, a lot of people decide to buy the kit and have us review it, review their budget as part of that comes free or sometimes they just use that, the blue schedule button on this page. It will say – it says it’s the top of the bottom of this picture video. It says something like schedule an appointment. You can go there and you can just pay $50 to talk for half an hour. But I can’t express to people how much money – how much more value is to someone if they take the time to fill out that or another sheet ahead of time and actually send it to us. Just be – I mean, believe me, we’re paying – in that case by the hours so I will listen to you tell us about your grandma’s peach cobbler recipe if that’s what you want. But –
Mike Rockwood: Yes. You know, you’re so right Ryan because sometimes …
Ryan Rockwood: Yes.
Mike Rockwood: We spend 10 minutes just getting established.
Ryan Rockwood: And I mean, there are problems, even if you say I know all the numbers. Yes, OK, but then there’s always something and then – and anyway, enough said right. Fill out the form to get the most value for your money.
Mike Rockwood: Yes.
Ryan Rockwood: Because, you know, when we call and we charge you 50 bucks, we really want you to walk – first of all, we can’t make a living off of $50, so it’s not like we’re going to be able to make a living off of that scheduling appointment thing. So, in order for both of us to be happy – us and you – you want to walk away from that appointment thinking, oh killer, I just save you know –
Mike Rockwood: Right.
Ryan Rockwood: –$400 lawyer fee or something that I don’t have to do without the lawyers, but something that I don’t have to do, I wanted just walk away cool, you know, like oh wow, that’s a bargain [phonetic], okay.
Mike Rockwood: OK, René writes, “How can I get my second mortgage to accept …” Oh, this is a short sale question. “… to accept the terms offered by the first on my short payoff?” All of you understand how in a short sale if you have two mortgages, a first and a second, the first very often will accommodate the release of the lien or will encourage the second mortgage to release their line by giving them some token amount of money. Usually it’s 1,000 to 5,000 max.
And René writes, “How can I get my second to accept the terms offered by the first on my short payoff. They seem not to care at all. I’ve paid them faithfully for over five years. They just do not respond.” Well, René, part of the problem might be that you paid them faithfully. I certainly hope you haven’t paid them in recent months.
But anyway, here’s how you can get them to respond, René, because first of all they can drag it out a considerable length of time before they’ll respond. To them, it isn’t the high priority because you’re about to give them some token amount of money so you just – you’re not going to get them to feel a sense of urgency about it. It’s going to go into their queue and they’ll get to it when they get to it. It could be two weeks, you know, it should be about a week but it could be two weeks. I’m working on one right now where it’s been a little bit – it’s been like five weeks.
But here are a couple of suggestions on what to do. First of all, when you first send the application for short payoff, in other words you have your offer, you have your acceptance letter from the first loan, you send it to the second mortgage, you want to send that as a qualified written request. Under section 6 of the Real Estate Settlement Procedures Act, you are guaranteed a written communication vehicle between you and your lender and it’s called the qualified written request, QWR. So, send that as a QWR. State it. Write down the facts that this is a qualified written request. And I know you will abide by the regulations and respond to me within 20 days. And within 60 days, you will give me a full investigative report. Now, 20 days and 60 days doesn’t really feel real good when you’re on the verge of a short sale like you are René, but at least that gets, you know, puts a line in the sand and has a date that they have to respond by.
And secondly, I would send a legal letter because by not responding, they are, perhaps, pretty new in financial harm. They are harming you because if they don’t accept the token offering from the first, you might be foreclosed upon. So, if your foreclosure date is coming up, I would send them a copy of that Notice of Trustee Sale or Share of Sale depending on how your state handles it judicial or non–judicial. Send them that and make it very clear that you understand that if they don’t respond in time for you to take advantage of the short sale, they’re going to cost you great financial harm because you’re going to have a F, a foreclosure, on your credit report for 10 years as opposed to a, you know, paid as agreed and, you know, recover from that really fast. And I would send that. If you got attorney, I would have your attorney send it to the legal department as well as the loss mitigation department and I would get kind of get right on that.
Second mortgages have become kind of the pain in the butt in short sales. Short sale is what Ryan and I consider a beautiful thing. It’s like the most elegant foreclosure workout because you walk away without spending any more money and with all – everything all tied up neatly. It’s really a great way to handle a foreclosure. However, second mortgages have become a real pain in the butt and so we just don’t mess with them. We send this legal letter and a qualified written request right from the start.
You have questions or you want to keep me going?
Ryan Rockwood: Yes. I have a question.
Mike Rockwood: You probably should go ahead and ask it or else nobody will know what it is.
Ryan Rockwood: Hey, where did you go? Here it is. I got a client – an e-mail here from Pat. I think he’s new maybe not a client. He write a long story – long story shortened. “Home modification has been going nowhere for four months until my last call to customer service when he told me my file was assigned to a negotiator. He even game me her name.”
Mike Rockwood: Good sign.
Ryan Rockwood: “On February 5th. But they keep telling me the investor group of the loan from Bank of New York has not yet approved it but Bank of America has. In other words, they’re waiting for its investor approval since it was sent on 12/15/09. Why do you think a negotiator has been assigned if the investor hasn’t been approved yet or they just, you know, is it because they’re lying to me, whatever? And in my opinion, this sounds fantastic, and of course, you know, most people in the world think you know I want to do something four months seems like a long time to do it, right. You want to get haircut, you generally go. You want to get dental appointment, schedule it, go in two weeks. But loan modification, four months, you’re still on the fast track to success my friend. You know I hate to say it but, you know, and who knows where you are – and that’s assuming that you have paid those whole four months and probably many more beyond earlier than that.
Mike Rockwood: If you’re paid, you’re much [indiscernible].
Ryan Rockwood: So now, that’s the good and the bad news. Now, Bank of New York isn’t that one of those banks that we ran into some problems.
Mike Rockwood: No, you’re thinking of Chevy Chase.
Ryan Rockwood: Okay.
Mike Rockwood: Yes.
Ryan Rockwood: So that’s good news and, no, I think you should have a negotiator. I think that Bank of New York, it sounds fantastic. So, what I would do right now is, if I were you is, you know, just based on how far you are in the process based on, you know, research the information available on this site and buy our product or if, you know, another product that you find that allows you and teaches you to go back through that application with a fine-toothed comb.
Mike Rockwood: Yes.
Ryan Rockwood: And you could – because if it’s going to fail, it’s much better if you realize it now.
Mike Rockwood: Yes.
Ryan Rockwood: And can resubmit and update.
Mike Rockwood: That’s a good advice.
Ryan Rockwood: Before you get the failure from Bank of New York.
Mike Rockwood: That’s a very good advice because honestly sometimes those last minute updates are just exactly what it takes to get approved. In other words, what Ryan is saying is it’s very predictable as to whether or not you’re going to get approved. So, if you’re not real super knowledgeable about the mathematics involved in your application, get that way quickly because you can make financial changes.
And another thing to remind him is Patrick – negotiators at B of A are given 30 days to work on the file and to either updated it or they lose it. And they don’t care if they lose it. It’s just that they’re measured on how many they can get done in a month. So once they have been assigned to it, they’re only going to have it for 20 working days, four weeks, before they either lose it or they provide an update. So it’s a really good sign once you get a negotiator and you very rarely get a response until that final week that they have it.
Honestly, I talked with B of A today at length and I got a negotiator who is just willing to chat. We had a little bit of extra time. So, we were chatting and he was – kind of gave me a hard time because I was pushing him about an application that we’ve had in for longer than yours, Patrick. And he said, hey, it’s gone from bizarre to just off the planet bizarre. He said, really the only ones that we’re told to work on are ones that the bank is almost going to own like several days from now. So, he said really in less foreclosure is imminent, I mean like this week, we’re not working on it and we’re just trying to you know keep from owning all this property. So Bank of America, like all the others, but Bank of America more than others, because between them and country wide they were really the dominant forces out there, they’re really behind.
Ryan Rockwood: All right, let me jump in the next one. I got it [indiscernible] today, a lot of stuff.
Mike Rockwood: All right.
Ryan Rockwood: Maria B says, “Thank you so much for everything.” We’re great. Thanks Maria.
Mike Rockwood: Hey, Maria, thanks.
Ryan Rockwood: That’s nice. Now, “I thought I understood this and all of a sudden I’m confused again, okay. So DTI and some of the examples I heard you guys say you take your monthly mortgage amount and divide it into your gross monthly income.”
Mike Rockwood: The other way around.
Ryan Rockwood: Okay. So, let’s say that again Maria. In her example here, she’s saying let’s say $1,400 is the monthly mortgage.
Mike Rockwood: Yes.
Ryan Rockwood: Divided by $2500 which is my monthly gross income.
Mike Rockwood: Yes. So, it’s going to be, you know …
Ryan Rockwood: It makes 55% [indiscernible].
Mike Rockwood: Yes.
Ryan Rockwood: So, is she doing it right?
Mike Rockwood: It’s more than half, yes.
Ryan Rockwood: So, she’s doing it right but she’s describing it wrong. So, let’s go through this again. It says you take your monthly mortgage amount and divide into …
Mike Rockwood: No, divided by.
Ryan Rockwood: Divided by, maybe that’s what she means when she says into.
Mike Rockwood: Yes.
Ryan Rockwood: Your gross monthly, because your example is correct. It makes you gross – your DTI 55%, which is fine for modification, okay. “But then I read that the DTI ratio is total of all of your debts and not just your monthly mortgage amount but everything else.” Okay, debt-to-income ratio. Okay, so you’re correct.
Mike Rockwood: Yes, she has gotten [phonetic] it.
Ryan Rockwood: So, the 55% is not her DTI. It is her HTI.
Mike Rockwood: That’s correct. It’s actually her front-end DTI or HTI.
Ryan Rockwood: Yes. And you’re getting at something that is very critical and you can see how I just missed the new ones because I read over it very quickly. But 55%, it is your DTI, your starting point where your HTI, which is housing to income ratio, OK. So, now, what you are misinformed on Maria is that you don’t head in all of your other expenses like food and utilities and stuff like that. You only add into that the amount you pay monthly to debt. Debt is – I know, it’s a little confusing – things that you are already receiving the benefit for but have not paid fully yet. For example, a car, a credit card, student loan, things like utilities, and rent, and food. Those aren’t; consumables in that sense. That’s kind of pay-as-you-go sort of thing, right?
Mike Rockwood: Right.
Ryan Rockwood: And so do not include those, OK. But obviously, your debt-to-income ratio, you’re thinking it gets up to 94% in the light of all those things. Well, let’s take away the food and let’s take away the utilities. What else is the common one that people get confused? Credit cards must be only the minimum amount due, okay. So it doesn’t matter if you got 2,000 in credit card debt, you calculate based on the $20 a month or whatever.
Mike Rockwood: Right.
Ryan Rockwood: That your credit card makes you.
Mike Rockwood: Even if you pay $500 a month. It doesn’t matter the minimum due.
Ryan Rockwood: Okay. It doesn’t matter what you pay. “Ideally, the debt-to-income ratio should be what? Less than 70%?” Ideally it should be, it must be more than 31% and sometimes 34% and you want to start getting pretty concerned once you get to, what, 70%.
Mike Rockwood: Yes. So, if she said 55 just with her mortgage, if you add a second mortgage, you add a credit card and a car loan, you’re in trouble.
Ryan Rockwood: Yes. And it all depends on how you live there, you know, it depends on what’s going on because sometimes, you know, someone’s budget will be at 55% with just their housing, but they don’t live on credit cards.
Mike Rockwood: Yes.
Ryan Rockwood: They don’t have student loans.
Mike Rockwood: Pay off the car.
Ryan Rockwood: They pay off cars.
Mike Rockwood: Yes.
Ryan Rockwood: You know what I mean? Or this could be a very horrible situation in which, you know, you get into that 80% or 90% that debt-to-income ratio. In that case, you are not going to get a loan mod.
Mike Rockwood: No.
Ryan Rockwood: In which case, it really is, you know, an insane way to live. Believe me, I’m speaking from experience. And it’s not your fault at some level. You’re not, I mean, however you got there sure, that’s all of our fault, right. But the bottom line is fighting this fight to get the loan mod on this is, you know, it’s really just sticking your finger in the damn sort of thing.
But pursue some other options. Schedule the consult that you get for you with the kit and we’ll talk about short sale, we’ll talk about bankruptcy, we’ll talk about some other ways to deal with this because it’s just – it’s an impossible weight that you’re holding up if that truly is to be the case, okay.
“Also, I’ve also heard you say you want to break even in the budget bottom line but that I’ve heard that ideally your bottom line should be a negative number equal to the number that you want the bank to discount the mortgage.”
Mike Rockwood: Yes.
Ryan Rockwood: “Which one?” We used to say …
Mike Rockwood: Yes.
Ryan Rockwood: The latter that you wanted to be the amount of help you need. But recently we’ve got turned down on about 100% of those. So, now we’re going with zero. “Would you mind giving us a couple examples tonight live, which shows exactly how you calculate this numbers and the formulas that you use. Thanks so much. I’ve attached my cues as an example.” Oh, okay. “Are you guys [phonetic] have already gone over with me? And now it doesn’t make much sense anymore because she forgot.” Okay. So let’s see if this –
Mike Rockwood: Wait a minute. You mean she talked to us and now, she’s confused?
Ryan Rockwood: Yes.
Mike Rockwood: I’m not surprised.
Ryan Rockwood: That would happen to me too.
Mike Rockwood: Yes.
Ryan Rockwood: Because then you step away from – it makes sense in a minute and then it’s kind of like, okay, so income one.
Mike Rockwood: Yes.
Ryan Rockwood: Okay, so we’re just going to take a sec here and do this live. If everyone is looking at their budget they’ve downloaded from us, we’re looking at income number one, income source two, equals a gross monthly income of $2500, a monthly net income of $2400 which sounds just about impossible.
Mike Rockwood: That means the last year you really only paid $1,200 in taxes seems too low.
Ryan Rockwood: Yes.
Mike Rockwood: First of all so.
Ryan Rockwood: Believe us, you know, we got a good tax guy but he’s not that good. So, contribution from fiancé is income number two. Anyway, bottom line, I don’t think we’re looking good here with taxes first of all and if we don’t buy it, the bank is not going to buy it. Okay, Maria B. So, but let’s just move, proceed, because it’s not really issuing at.
Mike Rockwood: Sure, we should answer [phonetic] the DTI question.
Ryan Rockwood: Yes. So now …
Mike Rockwood: How does the DTI calculate?
Ryan Rockwood: We got four – oh, we’ve got – it’s not live anymore.
Mike Rockwood: Okay.
Ryan Rockwood: But we’ve got on her is we’ve got a first. We’ve got four small credit cards with small payments. Other debts, almost nothing on here and the thing that I would question is where is the car, okay? Is there a second that was accidentally missing from here?
Mike Rockwood: And does that mortgage payment include taxes, insurance, any private mortgage insurance, and homeowners’ association duties. It has to Maria. It has to fully, you know, make it as big as it can be.
Ryan Rockwood: But other than that, I don’t see anything on here that’s debt, so real fast we could just – I wish there was a way that we could share this with the people a little easier but …
Mike Rockwood: Well, we need a technology guy who could put that spreadsheet …
Ryan Rockwood: Yes.
Mike Rockwood: – Like on [indiscernible] or something and show it live.
Ryan Rockwood: Yes. But not – oh, Lord we need so much.
Mike Rockwood: You know anybody like that?
Ryan Rockwood: Yes. Replace that chap teacher while you’re at it too. They re-do the site.
Mike Rockwood: Okay. So it’s 1,400, 1,600, 1,700 so it’s about 1,700 of 2,500. Can anybody do that in their head or else work it on the spreadsheet there real quick with you Ryan.
Ryan Rockwood: Well that’s not a spreadsheet anymore so I’ll just punch it in. So what should I punch in here?
Mike Rockwood: 1,700 divided by 2,500.
Ryan Rockwood: 68%.
Mike Rockwood: Okay, so that’s still good Maria B.
Ryan Rockwood: It’s high. It’s high.
Mike Rockwood: Yes, your total debt income or your back-end, as they call it, back-end debt-to-income ratio that is 68%. So I would go with that. I think you got a successful budget there. We didn’t look at the bottom line cash flow. Where does she end up with cash flow Rocky? Yes, ended up with 20 bucks, so this is a good budget.
Ryan Rockwood: Yes. We probably need it for, but the key is going to be the taxes issue there, and if we made this budget for her it works.
Mike Rockwood: Yes.
Ryan Rockwood: Probably Maria B [indiscernible].
Mike Rockwood: I would go back and check your taxes because I would think that they would argue with that’s a little bit low, but just look on your last filed taxes and take your – the first line which shows you total wages and salary and then go to page two on your 1040. About line 63, there’s a line that says your total tax and take that number divided by your total wages and then you’ll know about the percent that you end up paying in taxes every year because it’s probably about the same percentage every year and use that percent as a percent to subtract from your gross to get your net. You don’t want to take just what you net on your check because that’s – it can have a pension in here. It can have a medical insurance deduction and it can be withholding way too much. You know what I mean? And you might get a rebate at the end of the year or refund.
Ryan Rockwood: All right, let me keep killing this thing because we’ve got people asking like crazy.
Mike Rockwood: Okay.
Ryan Rockwood: My phone battery is going dead here but –
Mike Rockwood: Okay. Yes, that’s enough [phonetic].
Ryan Rockwood: Let’s see. Okay. Oh Maria B, let’s see. Here’s another one of my houses. The bank is Wells Fargo. It has a first and a second mortgage at Wells Fargo. On the phone, they offered me a temporarily loan mod of 785 on the first loan. It was 952 and I thanked them but rejected the offer. They mentioned something called the moratorium in which they make the monthly payments a very low or nothing for three or six months. I like that idea. That sounds good to me too. They needed me to send a hardship letter proving income and budget. I have attached budget for your review hopefully on the show. Can you help me clean it up?
And it turns out now she’s our biggest fan. So great. We’re moving up in her steamer [phonetic]. Let’s see. It is a primary residence, loan balances 140. Payments are 952. It’s a high for such a low loan. But it’s a 3.25R. That’s not the payment on the 3.25R.
Mike Rockwood: No. Maybe it’s a real high tech. It’s in Texas or California with some pretty steep property taxes.
Ryan Rockwood: Yes. But not – probably not. The loan balance is 140, you know.
Mike Rockwood: Yes.
Ryan Rockwood: Anyway, also second mortgage, okay our contact, this is totally kills our time. So, why don’t we do this on e-mail and try to get it back to Maria B by tomorrow.
Mike Rockwood: All right Maria.
Ryan Rockwood: All right. And it’s also detail for everyone to benefit, I think. Let’s see. Okay, we have a no name. Confidential please. Okay, I have been paying this hillock for the past four years and it’s a straight interest loan. It has not come down nearly anything on the principal. I called to modify the loan with WAMU and they said they do not modify modifications on hillocks. Well, this was about six months ago. I need to ask if they’re – if you are having satisfactorily results with these loans or whatever. I need to convert to a second mortgage loan and they said I would need to refinance and qualify first with our credit score wellness market. The prices have dropped. So this sounds like a problem.
Mike Rockwood: Yes, I think anytime we’re dealing with the second mortgage, the big issue that I always bring up is, you know, what state are you in, what kind of value.
Ryan Rockwood: Yes.
Mike Rockwood: What has happened with the value of the property because a big question in this hillocks and on second mortgages is, is there any equity left, you know, or have – has the value of the price – value of the home dropped so much that there really is no equity there. And if there is none, then you’re in a really strong negotiating position, number one. And number two, you’re in deep dodo because you owe on nothing, I mean you lost all your down payment. You lost all your sweat equity. They’ve lost all their equity and nobody settled it yet.
Ryan Rockwood: Now, a couple things on confidential here. I fear that you may be making a bad matter worst, okay. And that’s totally has nothing to do with you but everything to do with most of the people in this situation whom we talk to, okay. And so this is – let me go through the situation here just little by little. Okay, this is Illinois and you’re writing to me about a second mortgage and it’s for $80,000 and I don’t know. But in most of the people we talk to, the $80,000 mortgages have no more equity or you won’t be in the situation, right. You will refinance it. So I’m guessing that this mortgage has no equity left in the property. So the question I really got to ask you is this should be the last – is this the last of your concerns? And it looks like it’s not because down later in the e-mail you indicate that you’re dealing with, what, $80,000 worth of credit card debt you’re trying to settle and …
Mike Rockwood: Oh, I see where you’re going, yes.
Ryan Rockwood: It looks like you’re paying a firm to do it for you and you’re paying into this fund for the last year and a half so they can one day settle with you and stuff. So what I would encourage you, you may have fantastic wonderful solution going on. I don’t mean to bug you out but I just want to make sure that we’ve got the first modify and taken care of. If the second – if you paid on, you know, no guarantees. Hey, you’re on your own buddy. But if you stop paying on it today and never answered another call from them, it would probably be 10 years before they would have there will be an equity in the house maybe longer for them to foreclose on you. So that’s one thing that they have nothing on you and what you should be thinking about with them is settling that for $8,000 not getting a loan modification. If they got a loan modification on that date, it should be like $40 a month to tie you over until you’re ready to deal with this sucker, okay.
Mike Rockwood: You know that’s a good – that brings up a good thing Ryan. It reminds me that a lot of our clients are having success with just calling and almost dictating to the second mortgage how much they will accept. Because a lot of these guys are just very interested in not charging off this loan and not having to write it off eventually and not having to pursue you in court for it. They’re really just interested in maintaining it as a performing asset for now. So they’re very often very open to just some minimum monthly payment. I mean like, Ryan said, like $40, $70, $100 a month just so they can keep on their books as a performing asset. It stays on their books as a performing asset. It has all kinds of benefit for them in terms of how much they have to retain for loan, for lent dollar.
Ryan Rockwood: I got to tell you something. I’m reading further down and the story gets worst. And I don’t mean to beat up on you confidential because, believe me, I’ve made every single mistake in the book and that’s only why that I feel that my guess is pretty accurate most of the time when people I read down. I found out he’s considering bankruptcy, of course, and is also negotiating an offer and compromise with the IRS for a debt that I have accrued for $235,000 and then, he’s already paid the county $16,000 for some late stuff. So this hillock is just starting to seem like this is a mosquito.
Mike Rockwood: Yes.
Ryan Rockwood: You’re an elephant. You know what I mean?
Mike Rockwood: Yes.
Ryan Rockwood: So, here’s what I got to say here. Make sure you’re spending the money on a kick-ass IRS lawyer. You know what I mean? And maybe that’s why you’re with us tonight ‘cause you are spending all every ounce of your money of an IRS lawyer and you got to do this yourself, okay.
Mike Rockwood: So, you’re saying in other words if you got the IRS calling and you got Chase calling …
Ryan Rockwood: Yes.
Mike Rockwood: On a second mortgage.
Ryan Rockwood: Yes.
Mike Rockwood: Don’t answer the Chase call.
Ryan Rockwood: I wouldn’t. Yes.
Mike Rockwood: I mean the IRS is going to kill you.
Ryan Rockwood: Yes. Chase has nothing on you.
Mike Rockwood: Yes. Not compared to this.
Ryan Rockwood: But the IRS will be, oh my goodness gracious, you know.
Mike Rockwood: Yes. They’ll eat you.
Ryan Rockwood: Yes.
Mike Rockwood: They can eat you.
Ryan Rockwood: And we all know that settlements, I mean for IRS, the good Lord, we’ve all seen the commercials, get one of those guys.
Mike Rockwood: Yes.
Ryan Rockwood: And kill that thing. In the meantime, I would honestly think if you’re – if you got the $235,000 burden with the IRS, believe me, I’m not scared to the IRS. I don’t mean to overemphasize it but I just don’t – it’s a pain in the freaking [phonetic] butt. It will wreck your life.
Mike Rockwood: Yes.
Ryan Rockwood: So, but I know that losing a house to foreclosure will not wreck your life. You know what I mean? So, order of – you may be listening as this is going. Ryan, you’re an idiot. You don’t know anything about me. I am doing this all perfectly. And if so, I apologize but for everyone else that might benefit, this is the order of taking care of things, okay. Make sure you’re spending tons of money on a guy to sell that IRS debt.
Make sure that, you know, a short sale, you’ve already paid the county $16,000 on the back taxes and stuff usually the short sale if you get the bank to pay for all of that stuff for you. So, I know it sounds something you want to hear at this point. But the same thing can be said for if truly this hillock is completely unsecured and they won’t give you a $40-payment easily and they won’t settle with you for $8,000 easily and respectfully, it’s time to short sale or walk away. I mean this thing is, you know …
Mike Rockwood: Yes. Keep in mind in a short sale situation they’ll only going to get chump change from the first.
Ryan Rockwood: Yes. They’re going to get …
Mike Rockwood: They’re going to get 7,000 bucks.
Ryan Rockwood: They’re going to get $1,000 and that’s what they deserve. That’s more than they deserve. So, anyway, have I helped you in any sense here? Let’s see.
Mike Rockwood: I like what you’re saying Ryan in terms of prioritizing.
Ryan Rockwood: Yes.
Mike Rockwood: You have to prioritize.
Ryan Rockwood: We always hold on to in every – in 100% of the situations that people that are going, and I hope that you consider the benefit that we tell you the loan mod might not be good for you. I still think, you know, you should buy the kit. But it might not be the solution for you but …
Mike Rockwood: You know you could put the book like in the bathroom, you know, for…
Ryan Rockwood: Door stop.
Mike Rockwood: Yes.
Ryan Rockwood: Parties.
Mike Rockwood: And like CDs just leave notes hanging around …
Ryan Rockwood: Yes.
Mike Rockwood: Like some of your best music and stuff.
Ryan Rockwood: Yes. So, we’ve got – I mean in 100% of the situation that we see people in really bad shape. They try – 100% of the time, it’s our human nature. We hold on to that which is killing us the most. So, now, I understand if this, you know, if you can’t rent for somewhere else or have the amount of money that you’re spending on this stuff, it is hard to justify but if possible with this much going on, this is where we start selling people cut off the debt weight and that include, you know family, friends, ex’s, kids, tuition, everything. You know what I mean? Because you’re not helping [indiscernible].
Mike Rockwood: You have to switch to survive mode.
Ryan Rockwood: This is the kind of situation where, you know, I don’t want to say it but that is just too much stress.
Mike Rockwood: And now, he says he’s talking to a bankruptcy attorney, right?
Ryan Rockwood: Yes. That’s a good idea.
Mike Rockwood: Yes, good idea.
Ryan Rockwood: Okay. And so then, was there even a question here. Let’s see. Let me go over this for a sec because I’m thinking if I’m listening to this maybe I’m not being helpful or maybe – oh, he purchased the materials. Thank you. Can we talk to see how much you can combine both loans and do it for me, do me residential home loan?
You know what, I love to give the loan modifications for you and usually we do to a full service thing but we’re too backed up. And so, why don’t we do this. What we can do, confidential, use that blue button to schedule an appointment with us, okay by phone, and we’ll talk for 30 minutes and we’ll give you some advice. I don’t think we can take on the full service right now because we have too many files and as, you know, we don’t get paid until the end. We can’t get paid to the end and so …
Mike Rockwood: So, we’re going to be rich someday.
Ryan Rockwood: Yes. But the result is we’re really over. We have too many clients and we’re really broke. So that’s the situation. So anyway, I encourage you to do that. I look forward to talking with you and hopefully that along with your explanations might be helpful. Okay.
Mike Rockwood: What are we doing for time, Rocky?
Ryan Rockwood: Not good.
Mike Rockwood: Oh, gosh. Yes.
Ryan Rockwood: Call is over. Okay, this blast through of you.
Mike Rockwood: Okay.
Ryan Rockwood: Well, I do have to go pick up my wife. So let’s see. “Now, my husband’s income varies up and down each month. How do I calculate the income for that?” This is from Kathy.
Mike Rockwood: Yes. See that’s good Kathy because then you can kind of …
Ryan Rockwood: Average it.
Mike Rockwood: Yes. You have the flexibility to average it and if you need a higher income to get your ratios correctly then you can show it that way. If you need lower, show it that way. In other words, average day preceding 90 days or six months or take the last 30 days. In other words, just calculate it in the way that it is most advantageous for you and then – because here’s the deal. You’re going to submit it to the bank and they’re going to eventually when they get round to it like a month or two from now, they’re going to say okay, we’re ready to make a decision. Give us updated information and then they’re going to want an update. So, you calculate it the way that it is most advantageous to you and just be prepared to document that whether you take the last 60 days, last 30 days, last 90 days. But just keep in mind from this date until the date that they approve, you’re also going to have to provide that income.
Ryan Rockwood: We’ve got a couple of questions here. The live spreadsheet, in order to see the live spreadsheet if you don’t see it right above it, if you don’t see the opt-in form for it, it should be right above the video. If it’s not right above the video, you need to refresh the screen and if you’re not familiar with refresh. Does everyone know what refresh is? It’s like you go up – you basically go up and load the page again. You can open up another tab if you don’t know what the refresh is but it’s a little arrow button that looks like kind of like this and it’s over typically to the right of the address bar. You need to refresh it and you’ll see it. But don’t bother if you already purchased the product because it’s the same one. Okay, so I think we better leave it there. We’re going to have to – we have a lot of e-mails on this one. Thank you guys for participating. That’s always fun when we got lots of participation. But I have to run so what we’re going to do is I have to all these tomorrow specifically Miro [phonetic]. Maybe I should say his full name because it’s kind of distinctive. We owe him a review of some stuff and we’ll kind of get that tomorrow.
Mike Rockwood: Okay. All right.
Ryan Rockwood: Okay. So, we’re going to get that for you and hopefully get caught up on lots of stuff. Anyway, you guys are great. Congratulations on getting a week closer. If you haven’t for good sakes, for goodness sakes, buy the kit and send us money.
Mike Rockwood: And tell – please tell your friends about the Foreclosure Doctor and we’re really – we’re trying to get through as many questions as we can. Obviously, we ended up with a dozen or so tonight that we didn’t get to. But please tell your friends and relatives and people who are struggling with foreclosure to contact us and see if we can be of good service to them. We’d love to help. All right, thanks everybody. Good night.
