Loan Modification Limbo & Questions
Recorded live: Feb 4, 2010
Ryan Rockwood: Hi everybody and welcome. It’s Ryan Rockwood and Mike Rockwood and this is the Loan Modification TV.
Mike Rockwood: This is the 60–Minute Loan Modification Teleconference series that has now become a videoconference series and we welcome you all. Thank you for joining us tonight. We bring you the latest information on loan modifications, and everybody on the call tonight should be an existing client so we can cut right to the chase. What Ryan and I do all day long, absolutely every day, is work on foreclosure alternatives, foreclosure workouts for customers all around the country. So we help people with short sales, with deeds in lieu. We help people with loan modifications and just all manner of foreclosure workout. Then on Tuesdays and Thursdays, we push back from the desk, put on these headsets and get in front of the camera and talk to you about what we’re learning, what we’re hearing and answer questions about loan modifications.
Tonight, specifically, we’ll focus in on loan modification and what we do is we spend time just sharing, giving away lots of information because we really believe in the do-it-yourself method of solving your foreclosure issue and working out a solution with your lender. So we like to help people with a lot of information about how to do that effectively, and we provide forums and disseminate a lot of information to help people be more effective with their lenders. Now, all of you, probably everybody on the call has already purchased our 60–Minute Loan Modification Kit and we thank you for that. We hope you found it useful and we hope that by way of this videoconference and teleconference, we can kind of keep that information fresh and updated and then even more important is to make it timely for you because as you go through the whole process, you need to have that information at the right time. So these twice a week meetings where we really filled your questions about what you’re facing today, I think are really important part of the whole service that we provide.
We always want to start off the program by reminding you that we’re not lawyers and we’re not CPAs. So don’t take our advice as legal or tax advice, but we are realtors and we are extremely experienced in the foreclosure process. So what we bring you is street smarts and retelling you tales that we’ve been told about how our clients have solved their foreclosure situations, their foreclosure workouts with their lenders. You can get questions to us this evening either by emailing them to questions@60minuteloanmodification.com or you can also join in the chat that you can see off to the side of us there and that seems to work pretty well. Ryan watches the chat as it goes on and kind of jump in.
Ryan Rockwood: It’s easy to miss a question or two.
Mike Rockwood: Yes.
Ryan Rockwood: So don’t put a question there and feel like if some — you could feel like, oh, they’re ignoring me or something like that, and the truth is you can’t –
Mike Rockwood: Yes, I see.
Ryan Rockwood: — keep up if it gets going fast.
Mike Rockwood: All right. Is there anything else that you want to add, Ryan, before we get started?
Ryan Rockwood: No, I don’t think so. Someone mentioned that the sound is a little scratchy and we’re trying out a new video compression tonight and the sound, it did seem to be a little scratchy too and to test which is two bagasse of picture. I think it’s pretty good but the sound kind of gets short shrift. Hopefully, it will be enough after really examining it, we’ll replace it. Let’s try to focus ourselves a little bit more, which I think would be you going this way just a tad. Can you move?
Mike Rockwood: No, I think it’s the other way, isn’t it, Ryan?
Ryan Rockwood: Let me see.
Mike Rockwood: No, you’re right. You’re correct. Go away from you.
Ryan Rockwood: Yes. Yes. So let’s just move this down a little bit.
Mike Rockwood: It’s a mirror of a mirror image.
Ryan Rockwood: Then people can be looking at that.
Mike Rockwood: You just wanted more of the screen.
Ryan Rockwood: Yes, more screen time. But anyway –
Mike Rockwood: — because you’re hoping to be noticed. You’re hoping to be noticed like by CNN or maybe ESPN.
Ryan Rockwood: All right. Well everyone, welcome to the call. Tonight’s call especially we’re going to seriously try to hit questions hard. The topic at tonight’s call, in case you don’t know, we do two calls a week and a third now for helping people out with credit cards, that’s on Wednesday. Tonight’s call is about getting stuck in loan mod purgatory, which is where–
Mike Rockwood: Yes.
Ryan Rockwood: You know, like maybe in your past life you were quite good. You’re doing a really great loan mod application, but you weren’t really that bad. So you just try to –
Mike Rockwood: So you went to purgatory.
Ryan Rockwood: Yes. What else they used to call it? I couldn’t remember. I wanted to make it clever for the thing. They used to call it something else, limbo, yes.
Mike Rockwood: Oh, you.
Ryan Rockwood: Yes.
Mike Rockwood: Good catholic son.
Ryan Rockwood: I did a little reading. Then so anyway, we’re going to talk about what to do because I mean, I would say the number one frustration people have is loan mods in, not hearing back.
Mike Rockwood: Yes.
Ryan Rockwood: In many cases, there really isn’t anything you can do. It’s just about everyone feels like, oh man, I wish I could push some more, like force their hand, something like that.
Mike Rockwood: Yes.
Ryan Rockwood: But anyway, in many cases, there isn’t. You do want to call and make sure obviously that some things are in order. What do you think? Do you have some things you want to talk about?
Mike Rockwood: Okay, yes.
Ryan Rockwood: About dealing your loan mod out of.
Mike Rockwood: Yes and bring together or bring some information that we’ve had in the last few calls, kind of bring it together and really hammer on this whole issue of when your modification application gets set aside or when it gets into purgatory or limbo. I want to talk about that and then give you some solutions. Now, remember that there is a lot of incentive on the part of the lenders to put your application into a holding pattern. If any of you have ever been in situations where you are dramatically, drastically, unbearably overworked, your business is just booming incredibly or your staff is short, whatever, and you’re just way, way over extended, you get really creative about finding ways to shift certainly the blame from you but also to slow the process down. In my days when I worked in the assembly — on this electronic assembly line at Honeywell in Minneapolis, Minnesota, we used to find creative ways to pull what was in fact an emergency switch that would stop the production line and engineers would come running out and help us solve whatever quality problem was, whatever technical problem it was, and a similar kinds of thing happens in a very large call center or very large debt –
Ryan Rockwood: Why would you want to do that?
Mike Rockwood: Well, if you were overworked. I mean, if you just had too much stuff and was stacking up and you had to stop the input. So instead of you can’t stop the input, people can’t stop us all from applying for loan modification so what the lenders do, of course, is find ways to put 60%, 70%, maybe 80% of these into some kind of holding pattern, and they do that by finding things that are wrong with them, first of all, and if they can’t do that, they make up things that are wrong with them. I’m not exaggerating. I’m telling you what I know for a fact is the truth. They have to somehow manage that cue so that because they only have certain resources to get the work done. So they established this cue and they’ll put your modification into that cue if they at all — if it’s at all possible.
Here are some of the things. Here are 15 different reasons why I have heard that clients’ modification applications have gotten put into this cue. One is an incomplete documentation. That one is easy for them to spot. Their first few poorly trained employees have simply have a checklist to make sure that the application has absolutely everything on it and if you don’t think that there’s a lot of missed faxes of missed pages that either got jammed on your sending or jammed on their receiving or dropped after they turn it into paper, you’re wrong. So there’s a lot of incomplete documentation. That’s a big one.
Another one is miscalculating things like debt-to-income ratio. So they’ll put you in a holding pattern because your application quite frankly doesn’t meet their criteria. What if on quick calculation, they realize your application in fact shows that you have a debt-to-income ratio a front-end of 29%? They know they don’t have to approve your modification but they won’t reject it quickly either. Who knows why they don’t do that? They don’t. I mean, sometimes it absolutely does take just as long you get rejected as it does to get accepted. How bizarre is that? A third reason is that they often –
Ryan Rockwood: All right, but if they reject people too soon, they’ll just reapply again and clog into the systems.
Mike Rockwood: Yes, and then they get bad press for rejecting. So for them to reject is negative as well. So if you think about how they’re being monitored and measured by either the Federal Trade Commission, or by the Obama administration, the Making Homes Affordable people, it’s much better for them to show a 125,000 people in the queue than to show 65,000 that were rejected and 45,000 in the queue. So another one is that they will very often tell you that this investor will not modify your — they’ll blatantly tell you incorrect information. Things like your investor will not modify your mortgage. They will tell you that your bank statements were taken off the internet and they can’t be off the internet. They’ll tell you that you have an out of date 4506T, which is the document you signed to allow them to ask the IRS for information about your taxes out of date. I’m telling you, okay, but we keep signing those. Every 60 days they say they’re out of date so we resign them. It’s just bizarre. Bank statements that are too old, alimony award letters that are incomplete, that was kind of interesting because I’ve had that on more than one occasion and sometimes it’s that the person doesn’t really want to submit the entire thing because it has a lot of really personal information on it. So you have to submit the whole thing.
Another one is the tax 1040 is not signed. That’s a real common one because so many of us go to tax preparers and so we don’t actually sign the document itself. Your income is miscalculated, that one is huge. Income is not documented properly, that one is probably even bigger. Proof of occupancy is omitted. Rental income is not calculated correctly, that’s huge. It seems to be that the different negotiators of the same lender will force you to calculate it differently so it’s very frustrating. Sometimes you’ll be told that there are no modifications for non-owner occupied properties. Sometimes you’ll be told that your loan mod did not qualify for the home — for the HAMP, the HAMP program, Making Homes Affordable, the Home Affordable Modification Program.
Then a good one that always surprises people, but I’m telling you it happens absolutely all the time is you are simply not in default and people will go, “Say what?” But that’s another reason why your modification got put into purgatory or into limbo. So those are 15 common answers that when really pushed and pressed, those are the answers for why your modification is not moving forward, your modification application. So it’s bizarre and absolutely every day a client will say to me, “Are you serious?” They’re really asking for this for the third time. They really misplaced it. They really care that that’s not an online or that is not a statement that I got from the — mailed to me from the bank. They really care. The truth is they really don’t. These are just trumped up excuses for them to leave your modification in the queue and not have to deal with it until they can get around to it.
So now what I want to do is very quickly repeat for you something that I shared with you couple of weeks ago. My eight suggestions for how to keep your modification from or to take advantage of what I called file inertia. That is keeping your file moving. You really want to submit a bullet proof application that keeps moving. Never get set aside and stops moving because files in motion have a tendency to stay in motion and files that are stopped have a tendency to stay stopped. That’s the law of loan modification application file inertia and I think I’m going to get like a Nobel Prize in –
Ryan Rockwood: Theoretical physics or something?
Mike Rockwood: Yes, theoretical physics or administrivia or something like that for having developed this theorem. I think I should get it published in some technical journals. The first one is your income must be documented correctly and extremely clearly. Everybody, I would go way beyond what they ask you to do in this instance because really they just ask you to fill in information and attach documentation. But here, if you’re self–employed, get a PNL and write a statement that says this is my profit and loss statement from this period and the circled item is my income during this period, and sign it. In other words, make a statement that is crystal clear and sign it so that the underwriter can even hang his head on it. Your social security and unemployment EDD information, I always send checks and the award letters. Just do it. They don’t require it but do it. It seems like you send checks and they ask for the award letter. You send the award letter and they say, well, let us see some checks. You send checks and they say let us see the deposit. It’s bizarre. All right, then I want you always to calculate the monthly for them. Don’t just attach three checks. Circle the dates that the payment period is from and then write and say, this is a twice monthly paycheck or this is a biweekly paycheck. So I get 26 of these every year. Twenty-six times this amount is this much divided by 12 is the amount I’m claiming for my monthly. Write it down. Don’t assume they’re going to do the math correctly. If your 1099 use — again, explain the logic that you’re using to divide that into a monthly. So if you’re submitting a 1099.
The second tip is rental property must be handled correctly, and it’s especially important if you’re applying for a Making Homes Affordable Modification. Now with three or more properties I always advise clients to separate it on a separate PNL, and present it to your lender no matter who he is. I mean some of them — some of the lenders claim they don’t like this but I’m successful with all the lenders handling it this way. If you have five, six, seven properties or more, bust it up off into a separate schedule of real estate owned, and profit and loss statement, and then bring the net of that over to your personal budget. That’s the very best way to handle it because lenders, even though they say many of them will say no, we want you to incorporate it all into your personal budget. They have a real hard time ferreting out your debt-to-income ratios then and they trip all over themselves disqualifying you for programs because of a DTI et cetera, et cetera. So that’s what I recommend.
Number three and four are all about debt-to-income ratios. Remember your front-end DTI has to be higher than 31%. That’s your total household gross income divided into your first mortgage payment and that payment is principal, interest, tax, insurance, and homeowners association all added up. So remember that has to be higher than 31%. Your back-end DTI has to be right as well. It should always be below 70% or else you’re going to have to do some pretty fancy footwork. All the debts on your credit report should be addressed even if you can skid by the initial loss mitigation officer and even the negotiator, the underwriter will catch you. So be sure all of your debts are mentioned on the application. Now some people these days, because so many people are having such crushing death problems, are needing to submit an application that in fact ignores three or four or five credit cards that they’ve stopped paying on. Their argument is I’ve stopped paying on them. I’m going to settle with those credit card lenders so I don’t want that included in my debt-to-income ratio. You know what? The lenders are — the mortgage lenders are agreeing to it. So that’s a strategy you can use if you have way too much credit card debt.
Now, your cash flow. Remember your cash flow has to be zero. You must absolutely, must be late on your payments — you don’t even want to talk about it — and your application has to be flawless. No loose ends and exceptionally easy to understand. All right, so those are my eight tips. I actually did publish that so it’s an article on the website if you want to go to articles and look for Why 96% of My Loan Mods Succeed? You’ll see those eight recommendations listed there. All right, let’s go to questions.
Ryan Rockwood: Do you think that article is a recent one that they’re going to be able to find?
Mike Rockwood: Yes. It’s probably about the fourth to the fifth one down. Why don’t you take a look for it right now?
Ryan Rockwood: Let’s see. You know, I have on that side of posting the transcripts of these talks when I can. So there’s a good spot to go and check it out for the transcripts of anything you might have missed, but –
Mike Rockwood: It’s right over there.
Ryan Rockwood: It’s right over there? It could have been that long ago, do you think?
Mike Rockwood: No. I’ll post it again.
Ryan Rockwood: Okay, I’ll post it tomorrow morning. But if you want a shortcut to that page, you can look on that page on the right–hand side. There’s an index. It’s not very clear what it is. Just a monitored headlines and what is it is they’re headlines to all the articles that are linked on that page.
Mike Rockwood: Right.
Ryan Rockwood: And on the site staff, so you can check that out. Okay. Michael asks, from Rhode Island, he asks, “What is your biggest success from a loan mod that you thought would never go through and what are the biggest mistakes some people make in the process of getting mortgage mods?” Maybe we’ve answered some of these.
Mike Rockwood: Yes. Honestly, the big — the humongous mistakes are when people submit an application with wrong financial ratios. That just freaks me out. I mean, what do you expect? I don’t think I’ve ever — we’ve ever had experienced with anybody submitting an application that didn’t have a qualifying hardship. That would be a real laugh or two.
Ryan Rockwood: Well, you know we got that. Someone, I think they upgraded to — well, if you give me — they upgraded, remember they might have. Entry that you probably read the other day, but one guy wrote to us and he wanted us to go over with this information, maybe Wally or something like that. Anyway, I e-mailed it to you guys, so please go over the financials so keep an eye off of that. But anyway, he wrote to me and he said — I said you — he said no, you don’t have a hardship, and his business closed, his wife had cancer, and then he had cancer. I said is this the hardship that you wrote in? He said no, he had improved it since reading our — and this is the new one, but that was real one.
Mike Rockwood: If you can’t find the hardship in that, Wally you’re a–
Ryan Rockwood: Yes, well no. That’s a cold-hearted bank, I guess.
Mike Rockwood: Yes.
Ryan Rockwood: So you said you don’t know hardship.
Mike Rockwood: Okay. Some of the most grievous — clearly the most grievous error is sending in an application when your ratios are out of whack. There’s just no sense in doing that. What do you expect them to do? They’re absolutely going to reject it. So it’s really clear. I mean if you run the numbers and figure out that you qualify for a loan modification using the kit, there’s just no question that you’re going to qualify. Now, it’s just the matter of how do you get through this mess. So really the biggest mistakes are when people send in. That’s the biggest laughter is when people send something. They’ll come to us saying, gosh, I got rejected. I’ll say well duh, you told them this? You sent this information? So that’s the biggest one. Then what was the second part of this question? What was the biggest win?
Ryan Rockwood: Mistake? Yes, biggest win.
Mike Rockwood: Biggest success is, well I think we had a fun one the other day where for six months, a homeowner couldn’t break the log jam of why they couldn’t get a modification and they had spent a lot of time on the phone with me trying to figure out what in the world is wrong with this application. Everything seemed right but they threw all — they threw many of the excuses at her in terms of in all these, investor won’t modify. No, you don’t qualify for a Making Homes Affordable. No, no, no, no, no, no. I mean, they gave her all these no’s and finally she said, listen will you just take this over and run with it for me, and so I just — I guess just because I could ask the right questions and get pushy enough, I pushed and pushed and pushed and it wasn’t 30 days later when they got just a breakthrough modification like a 2% modification down from 7%. So it was like a complete about face. Six months of absolute rejection after rejection, and just to have it turned around and get a really killer modification in fewer than 30 days.
All right, here’s a question from Josh. “Why does my banks,” ah here, this is a good one, “why does my bank seem to lose documents? The process is so screwed up. I have resubmitted almost every one of the documents and now they are asking for updates on certain things?”
Ryan Rockwood: Hey, look. People probably don’t know that in addition to having loop with us everyday — my son Wilson at the at the loan modification puggle.
Mike Rockwood: Yes. This is the loan modification puggle.
Ryan Rockwood: Seriously all in the office each day together, all right.
Mike Rockwood: All right, so Josh wants to know why they are asking for updates on things and why do they lose things. Well Josh, I think I kind of answered your question by my earlier explanation of why they want to keep your modification kind of in limbo because they can’t get to it. So they find reasons to put it in the queue instead of actually dealing with it. But do take hard because you say now they’re asking for updates on things and that’s often a good sign. Often it’s a good sign when they’re asking for more recent bank statements and more recent pay stubs. They usually ask for that when it finally does get to a negotiator and they’re ready to do business. So it takes an encouragement from that.
Claire asks, “After eight months of getting nowhere, I finally took your advice and stopped paying.” Now, they are all upset that my application is so outdated. It’s comical.” Okay, so Claire doesn’t even have a question. She’s just making a statement. So, and this is not unusual. Eight months she had been applying for modification and keeping current, got nowhere. I’m telling you they didn’t even looked at your application because it was with the people in imminent default. Every one of the lenders has an imminent default department and their job is to make sure that people stay imminent and not going to default, and they know that a full 97% of homeowners will stay in imminent default rather than defaulting because of a whole bunch about five or six social pressures that are on all of us not to default. It has to do with our bias towards the status quo. We feel safe where things are. We hear selectively about information about how bad things are so we kind of filter that to our own liking. We have a terrible fear of the consequences of foreclosure and we have a crazy fear about bad FICO scores. So the imminent default department really is established to watch those 97%. I mean, they have a 97% batting average, 970 batting averages, just by watching us poor blokes consternate over defaulting. So fool them, default, take back the only power you have in this relationship. Stop the cash flow and get them to treat you like a citizen, like a customer. It’s comical but it’s true. You won’t believe how the relationship will change once you stop paying. So Claire, thank you for that.
Ryan Rockwood: Hey, Gamblen [phonetic] [0:28:06] Bob has a comment here. He says he called Chase today and they now say they have their called imminent default at Chase, and they have their own underwriting. They do their own underwriting in decision making on loan mods.
Mike Rockwood: Oh, the imminent default people do?
Ryan Rockwood: Yes.
Mike Rockwood: It’d be good to see because it’s been kind of a battle cry of the administration for a long time that people shouldn’t have to sacrifice their credit score. But I guess, I’m kind of way beyond that. I’m kind of like screw the credit score. The heck with this credit score. It’s a paper tiger anyway. We can recover from FICO hell in 12 months. So FICO score doesn’t scare me anymore. It shouldn’t scare you. There’s a lot of talk these days actually about eliminating the ability of having lenders be even able to report to FICO on defaults and even on foreclosures because many people realize that in fact the lenders are using that to manipulate the 97% of us to put unfair sociological pressure upon us not to treat them in a business-like fashion. There’s a clause in your contract that says when you stop paying, they get your house. It takes them a year to get it from you but it’s a business arrangement. It’s not a moral or ethical thing and if you were to look at the relationship, if you were to be able to stand outside of it and look at it, you’d realize they’re manipulating you. They’re berating you and belittling you with things like FICO score and things like moral responsibility and ethics and you promised to make these payments. Well –
Ryan Rockwood: You know, we have the recording of a class we did on Tuesday if you missed it. It’s pretty interesting about this topic, the ethics, and I guess social management of the housing crisis about a professor at University of Arizona put out. It’s pretty provocative and pretty interesting.
Mike Rockwood: Is that an on this thing now?
Ryan Rockwood: The video is but the transcript’s not up yet. But yes, it’s up and they can watch it.
Mike Rockwood: Okay.
Ryan Rockwood: It’s up on the side.
Mike Rockwood: All right, Yes. Get that, it’s interesting.
Ryan Rockwood: So check that out if you missed that. I want to say that we got — Adrian’s got a question here. Mike, please define back-end DTI under 70%.
Mike Rockwood: Yes. Okay, so your back-end DTI means that all of your debt payments added up as your student loans, all of your mortgages, your credit card debt, any installment debt that you have, all your debt payments added up divided by your gross household income. If that’s more than 70%, the lenders want to disqualify you because they feel like you have too much debt that after you pay your taxes and you try to live on what’s left, you won’t be able to do it. So once you get up above 60%, it’s not uncommon to have the lender suggest or even require that if they modify the loan, they want you to go through some kind of credit counseling class which can actually be quite unlikely. So that’s what back-end DTI is. That’s your total debt payments and it’s the minimum, but it’s the total debt payment. Okay. So that’s what back-end DTI is.
Okay now, Maria asks, “Is there any advantage to go into these live events? PNC bank is conducting one next week and has invited me. Are these events beneficial?” Maria, I really think that they are beneficial and you guys all know what she’s talking about.
Ryan Rockwood: Yes.
Mike Rockwood: This live events are when a bank, a lot of times for public relations reasons they hold these live events where they will invite thousands of people to come and talk to them about their loans. Sometimes they do it in conjunction with some a nonprofit organization and they make a big fair of it and that attracts tens of thousands of people sometimes. But very often a bank just will do it themselves and they’ll invite thousands of people and hundreds will show up. They have dozens of their negotiators ready to sit across the table from you and talk about your specific application for a modification.
I really do think it’s unusually helpful, extraordinarily helpful. You’ll spend a lot of time at it but a few things are working for you in this regard. Number one, they appreciate the fact that you took time to come and see them. Number two, they don’t. They do not look forward to any bad press that you might give them about wasting your time and saying they’re going to help you and then not helping you. Then also the division that runs those public events also wants to demonstrate not only for the press but for their management that this system pays off.
So I think their negotiators are highly incentivized to really do workouts with you. So very often I’ve heard people get good results and I personally have gotten good results at those as well. So I recommend you go take the time and really be ready to negotiate though. Have your budget just locked uptight at everything in order and then go for a good modification. It will be a good way to get started or to give it that extra push that it needs.
Jack says, “I have two loans with Litton Loan Servicing.” Those guys are some of my favorite people. “The second is only $17,000. Can I try to get the second wrapped into the first?” Jack, I think that is a logical thing to pursue but I have not seen it done. I have seen a lot of people try it and I think in the future, we’re going to see more of that but right now, I just don’t think you’re going to have luck with it and you might kind of waste some of your negotiating power trying to get that done. What I would do instead is negotiate on each loan separately because remember they might be owned but they’re very likely owned by separate people. You know what I mean? If one is the first mortgage and it’s — I don’t know — $100,000 and the other one is $17,000 they’re probably owned by very different kinds of investors. Litton might actually own $17,000 one. So it really is kind of separate issues and so I don’t think there’s a lot to be gained by doing it. Keep in mind negotiating on that second, how much leverage — how much more leverage you have than that first particularly if you live — I see Jack lives in Arizona where values have fallen so far. So that 17,000 is probably toast and you probably could convince them to keep it on their books for $50 a month until you decide what you’re going to do tell them you need that at least for a year until you decide if you’re going to short sale or modify instead.
Ryan Rockwood: Okay. I got a question here from one of our members who the e-mail address includes wind stream and I’m sorry, I can’t remember the name. But this person says just cut them under six months trial mod with just over last month but no clear instructions as to what to do now. How to get a different verge or whatever? Do you — what do you recommend?
Mike Rockwood: Okay. First of all, I’m troubled by the fact that it was a six-month trial mod. That sounds like a special forbearance instead of a trial mod. Usually the trial mods only last three months so the six-month things are usually something different like a special forbearance. So if you really did have a trial mod then they’re, of course, are going to be all crazy all over you to get you onto a permanent modification. So my first question would be was it a good mod? If it was, then you’re interested in making it permanent. So be proactive. If it was not and you’re not satisfied with it, then let the chips fall where they may and start the process of negotiating with them all over again when they start rattling your cage. See now, what we also don’t know is your strategy to keep the house and stay there or is your strategy — do you know in fact that you’re so upside down that you want eventually get out of this mortgage? If that’s the case then, you’re going to want to just let them come and find you to make this thing permanent, right. So there are too many variables here. You need to send us a little bit more information and please feel free to do that by e-mailing and we’re starting to get caught up on some of on our e-mails so we’ll be as responsive as we can.
Ryan Rockwood: Yes, Sean writes saying, he says hell the second lien holder City Bank and they say he has too much equity for a modification and that he should try refund. But he says it’s probably not going to work because it’s been recently 30 days late on the mortgage and high credit cards. So what would this — what do you think equity has to do with that?
Mike Rockwood: Yes. The second lien holders are kind of on a tear. Second mortgage, it’s not just my opinion. It’s in all forums and all the chats. They’re all talking about how the second lien holders and hillock holders are all in a tizzy and it dug their heels in and are giving everybody fits not only homeowners, their clients, but also first mortgage holders and they’re not agreeing to short sales and they’re asking for more and more and more and more. So we can’t say really for sure what it’s about. It may be — I’ve run into a lot of this kind of stuff where the second lien holder will say no, we’re not going to play ball with you because your current and all your other debts, ours is the only one you’re going late on. So we don’t think you really have a problem and they’re banking on the statistics and the statistics are in their favor that in fact you won’t default. In fact, you won’t let them charge it off. In fact, if they pursue you with an attorney in fact, you’ll pay up instead of settling. So I don’t know how to get more specific than that without knowing more.
Ryan Rockwood: You know the HAMP Refi maybe something that what I’m going to do Sean is e-mail you the name of a lender that we’ve had on the show and that works with us a lot. Her name is Kennedy and she does — she among others, she could do the HAMP Refis. Now, HAMP Refi is something that if you qualify for, it may work even though you had some lates and stuff. So see her about that. Her e-mail address is kennedi@tmglending.com and write her and say, “Do I qualify for the HAMP modification and if so, can you do it?” I see that would be HAMP Refi, and if — because if that’s the case, it might be actually easier in getting a loan mod and it’s a pretty killer deal apparently.
Mike Rockwood: Yes.
Ryan Rockwood: From what I’ve heard.
Mike Rockwood: If you qualify.
Ryan Rockwood: Yes.
Mike Rockwood: All right. Will says, “We had a rough time during 2009 but now my income is back almost to normal. We incurred about $35,000 in credit card debt during the year though and now those payments are a burden. Can I use that as a hardship?” Yes, absolutely Will. So here, Will had a lousy year. They used their credit cards to keep current on everything and now those payments are burden and that’s absolutely a hardship as defined by Making Homes Affordable Program and as accepted by all of the modification programs. So go ahead and use that as a hardship, Will, and also get on those credit card debts $35,000 in credit card debt, I would encourage you to think about if you are, if you find it — if you find yourself back to the wall and can’t repay those credit cards, I would really consider settling them, and I don’t just jump to that solution. It’s a solution that an awful lot of people are finding the only one that is really a good tolerable solution.
I would encourage you Will to do something that most of us do not do. Take a look at $35,000 in credit card debt. Look at the interest rate you’re paying. You probably are in denial. You probably selectively filtered out the interest rate that you’re paying. Go to an amortization table on the internet. Just Google an amortization table for credit cards and plug in your minimum payment and take a look at how scary it is, how much money you will pay, and how long you will be in debt. You have not just incurred $35,000 in credit card debt, you have sold your financial soul because I’m telling you it’s going to be on the order of, I’m just guessing but it’s going to be on the order of $100,000 in interest that you’re going to pay and it’s going to be on the order of 20 to 25 years before you dig out of it. All along the way, you’re going to incur some late fees. You’re going to incur other penalties, and guess what? You’re going to use this card for something else. So it’s going to be longer than that.
In other words, what I’m saying is you got it. You and we all have to wake up to what this incredible indebtedness is doing to us. It is literally mortgaging our retirement and I’m 55 years old so I really feel it. But even people like this guy who is 35 years old should be feeling it because man, you don’t want to spend. Here’s the thing Will, not only are you trapped by that 35,000 and you’re going to take 20 years and $100,000 of your income to repay it but you’ve missed the opportunity on that $100,000 to make a million that you can retire on.
Ryan Rockwood: Okay, well let’s go on.
Mike Rockwood: So it’s a shame. Okay, sorry.
Ryan Rockwood: This guy wrote back to us about the forbearance. “I had a three-month forbearance then they said paperwork total is six-month agreement. I’m not sure whether it was a forbearance or a mod.” Wow, I assumed it was a mod.
Mike Rockwood: Yes, that’s a forbearance.
Ryan Rockwood: “It was $600-lower payment but they did nothing to change the second with B of A too. But how is it going to pass the way just now begun kind of think clearly enough to face this? Wants to keep the house, it’s not upside down, in fact that’s great value based on resale.” So we were talking here about the six–month modification person.
Mike Rockwood: Yes.
Ryan Rockwood: And what they should do –
Mike Rockwood: That’s the same person, right?
Ryan Rockwood: Yes.
Mike Rockwood: Okay. So they had three-month and then it went to a six-month. Okay.
Ryan Rockwood: Then another three-month.
Mike Rockwood: Yes. Here’s the deal though. You are in fact, in all those, you’re paying below the minimum. I recommend you check your credit report because I’ll bet you’ve been recorded late every one of those nine months.
Ryan Rockwood: Yes, late.
Mike Rockwood: I bet you’re also — they’re also lumping the shortfall onto your mortgage every month. So it’s good news but bad news.
Ryan Rockwood: No big deal. It is what it is and you know what it is.
Mike Rockwood: Yes.
Ryan Rockwood: But moving on.
Mike Rockwood: Right. Moving on, you have to get after them and get a good modification and if now you have much less income because of the situation, you got a real challenge ahead of you. But the numbers are really easy to predict. So if you have our kit, fill out that the budget and get it to us and fill it out as best as you can, get it to us. Schedule your 20–minute teleconference with us and let’s dial that budget in to see if you can convince these guys to go with the Making Homes Affordable Modification for you. That’s what you need,
Ryan Rockwood: Yes, clients don’t cry. You can send us your budget and your hardship letter and we’ll go over those by e-mail with you. We also have a 20–minute phone call that you can schedule just by clicking that button right there on the screen, Schedule and Appointment, okay. So do it.
Mike Rockwood: Let me take this one from Tina. Tina says, “My Florida rental home is a real money maker and I want to try to keep it but Saxon says they won’t modify non-owner occupied properties. The loan is a jumbo almost $1 million but it’s at 7.65%. Any tips on getting them to change their policy?” Yes Tina. Saxon is a real stickler when it comes to this non-owner occupied properties. They were probably the toughest one of all but they do in fact have an in-house team.
So here’s what I’m going to recommend Tina. First of all, clarify first who your lender is. They have to tell you who they are. So if they won’t tell you over the phone then send them a qualified written request asking for the name of your lender, the name of the owner of your loan. That owner is obligated by law to modify your mortgage if they accepted any TARP funds. So that’s issue number one. Number two, ask Saxon if this loan — this really makes me mad — if this loan has been reviewed by the in-house loan modification team because here’s what happen. You just get so pigeon-hold into these different departments so maybe your application ended up in the Making Homes Affordable and they saw no, this is a jumbo. It doesn’t qualify so they reject you but what they don’t tell you is they’re the Making Homes Affordable Department. There is a HAMP or there is an in-house department and there is a jumbo department. So you got to push back on them. Make sure that it was evaluated by the in-house specialists at Saxon and if the negotiator or the loss mitigation officer that you’re talking to. Be sure you’re not talking to a customer service person. Be sure you get to Loss Mitigation Department and when you get there ask them to talk to a supervisor because you have to get it straight. Has it been evaluated by an in-house loan modification officer because the Making Homes Affordable people will reject it.
Ryan Rockwood: All right.
Mike Rockwood: Then also I got to say, ultimately Saxon will go to bath for you and try to get your investor to modify your mortgage but they really resist. So you have to push. I’ve been successful with them on three occasions but only after a real fight. I mean a real fight, lots of defaults.
Ryan Rockwood: All right. Well, let’s wrap it up. I think…
Mike Rockwood: Okay.
Ryan Rockwood: We got a good class. I’ll just follow this up. You did the budget for her on this and the loan mod application was sent to B of A that’s why she thought it was a loan mod.
Mike Rockwood: Okay.
Ryan Rockwood: It is personally named as Theresa.
Mike Rockwood: Yes. Well Theresa, we wouldn’t have let you send it in unless the ratios were right and the cash flow was right. So stick to your guns.
Ryan Rockwood: Yes. But now, so to the follow up, the good news is you’re ups done. Now, the follow up now is on you Theresa, and I think what you need to do is call them and make sure they’re considering your loan mod application, right. Isn’t that the best thing to do?
Mike Rockwood: Yes, yes because it may be in one of these queues that honestly can, if you’re not in default, can last four months or more. So yes, you got to be proactive in your followup and ask the right questions. Make sure that you don’t go more than 30 days without getting assigned to a negotiator and once you get assigned to a negotiator, very often the customer service rep or the loss mitigation rep that you’re talking to can e-mail the negotiator. Most often, they won’t give you that person’s name anymore or e-mail address or phone number certainly. But what they will usually agree to do and they’ll read you exactly what they’re going to e-mail to them. They’ll ask you to contact them and you want to know if there’s been any progress or you want to know if they have a projected time when they’re going to be able to get to your modification et cetera, okay. All right, thanks everybody. We got to remember to…
Ryan Rockwood: Why don’t you tell everyone about the program in case they’re not clients and they got on call?
Mike Rockwood: Okay. If you got on the call and you’re not a client, I want to recommend to you that you go to — that you do look into the products that we sell, the 60–Minute Loan Modification Kit is the premiere Do-It-Yourself Loan Modification Support Kit. We always recommend that you do loan modification yourself and we always recommend that you never do them alone. You got to remember that the banks and all the non-profits, all the government agencies are on the other side of the table and you need somebody on your side of the table giving you good advice about insider tips on what’s working and what’s not, what they mean by certain questions, what ratios they’re looking for, insider tips to make your modification successful and that’s what we provide. So the kit is very, very inexpensive and enables you to kind of level the playing field with the lender.
Ryan Rockwood: That’s our show for today.
Mike Rockwood: That’s the information we’ve got for you. We’ll be back on Tuesday and next Thursday. We look forward to helping you and I really want to encourage all of you to get after loan mods. They can be a significant part of the way that you help prepare your family for tough economic times. So best of luck to everybody. Good night.
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