Ryan Rockwood: Hi, everyone and welcome to the call. Welcome to the 60-Minute Loan Modification Insider Secrets Teleconference Series. We are here to beat the bank, to save your home, and help you escape bad debts forever. My name is Ryan Rockwood. This guy right here is Mike, my dad.
Mike Rockwood: Hello, everybody.
Ryan Rockwood: Actually this is the Thursday night call, so all of you are…
Mike Rockwood: You know who we are.
Ryan Rockwood: You know the stick. Before we get started, a couple of quick announcements. You can get questions to us today several ways. You can go ahead and e-mail them in, questions@60minuteloanmod.com. And also you may speak up when we go to live questions. Also, we are streaming the show live today at 60minuteloanmodification.com/october1.
Mike Rockwood: October 1
Ryan Rockwood: Yes, October 1, /october1, and there’s a little chat dialogue there too. So, you can jump in there if you want and ask some questions. We’ll try that out. Give us your feedback and hopefully, you’ll find it in [Indiscernible].
Anyway, announcement number one, we are again doing a live stream at tonight’s call. Knock on wood. You can see us online at 60minuteloanmodification.com/october1. Announcement number two, we have had some e-mails last week about how to lower your debt and, is it even possible? And the quick answer is yes. If you have a car, you have a student loan, you have a credit card. There are all kinds of options to get rid of debt. And most people we talk to are not thrilled about getting rid of that, that great Mercedes or whatever they got during the salad days. Is that the right expression?
Mike Rockwood: I don’t know.
Ryan Rockwood: I think so. Anyway, however, you may be thrilled when you get rid of that ridiculous $900-a-month payment. So, consider sucking it up. The first thing we hear is there’s no way I can cut anymore. And then you go, oh, yes. Well, how about this? Oh, well yes, but I’m not willing to, is the real answer there, okay. So, that’s fine and dandy and everything. Just get straight on whether it’s a matter of being unable or unwilling.
So, if your DTI is too high, always think creatively about both lowering your debt and increasing your income. A couple of other things I will mention is that tonight’s call is also broadcast live on the internet. However, you’ll get yourself very mixed up if you listen on the phone and watch on the computer. So, if you don’t have speakers on your computer, it’s probably best just to glance over at our handsome faces online from time to time, okay. So, on with tonight’s call, Loan Mod Success Stories.
Mike Rockwood: Okay, so what we’re going to do tonight is intersperse throughout all the calls and all the questions, stories of success. Just as a way of kind of encouraging ourselves as well as encouraging you. So, rather than just run right through six or eight or 10 really cool success stories, and these are extremely current success stories, what I’m going to do instead is jump right to questions and then we’ll intersperse some success stories throughout the call. I think that’s the best way to do it. And you know what usually happens when we do that is that we find that there is a success story that kind of addresses an issue that the caller might be questioning right now.
But Ryan, before we jump into the questions, and I see there are several questions already in the queue, I wanted to just make a couple of comments here. Some kind of housing highlights from the last time we were together last Thursday night. It was reported this week or early in the week in the Wall Street journal that homes valued over $1 million dollars or nationally actually over $2 million are now the ones that are being hardest hit in terms the devaluation. There are a lot of statistics that say that the price plunge has really slowed and that in fact, house prices are starting to edge back up. But in fact, those statistics are a little bit skewed because they are reported by FHA. So, those mortgages that they’re talking about are the conventionally – the ones that are FHA. So, they’re either below $419,000 in most of the country or 729,000 in some of the higher price parts of the country.
So, what’s misleading about that is that there’s an awful big percentage of homes that are way beyond that that are now starting to catch up to the rest of the country in terms of decline. The Wall Street Journal estimates that up to 20% to 30% declines are seen in some more affluent areas. And on average across the country, it seems to be about 14%. That’s year to date. And that, of course, is really alarming to places like along the coast here in Southern California, Manhattan Beach, or on the Palos Verdes Peninsula, or in Malibu. Those people have felt a little bit mugged because they have been somewhat insulated from declines. Maybe they’ve experienced a 5% decline in 2008. But this year to date it has gotten significantly worst and by all reports, it’s likely to get quite a bit worst before the end of the year.
Another thing that is way fun to report, Ryan. I know you saw this because we yucked it up about this but wait until you hear about these folks. It’s so exciting to hear some lawyer loan modifiers getting in trouble in California. Did you hear about this? The State Bar, the California State Bar in an unprecedented move named…
Ryan Rockwood: And it’s probably illegal.
Mike Rockwood: Yes, they’ll probably certainly get sued, right. But they decided to go ahead and make public the names of attorneys against whom they’ve had a lot of complains because of their loan modification work. Now what’s unprecedented about that is the California Bar, just like all the bar associations, have a policy that they do not disclose the names of any attorneys that are under investigation for obvious reasons. Number one, they could be innocent and number two, it’s just kind of bad press for the attorneys.
But the California Bar decided to go ahead and name these guys because the number of attorneys using their law licenses to essentially take money from unwary but trusting consumers is astounding. This Interim Chief Trial Counsel Russell Weiner reports. There are literally thousands of victims who have lost money they could not afford to lose. Under the circumstances, the need for public information and protection is paramount. And why I think this is so funny is because the lawyers operate under this shield, you know, in the State of California as in a lot of states, you have to have an attorney’s license to charge an advance fee to help someone negotiate a contract. And it’s been a real sticking point with us because we feel like we are at least as well qualified as an attorney to negotiate a modification. But we have to pay an ungodly amount to an attorney just to use his license to do loan modifications.
We do have a part of our business where we do loan modifications. You know that the biggest part of our business is Do-It-Yourself Loan Modifications and we’re free to sell that package to you. But I just think this is so funny to have 15 of these attorneys named. And some of them are the ones that you hear on the news all the time. You know, call Paul Lucas at the Lucas Law Center. “I’ll stand by you. I’ll get you a modification.” Well, it turns out Paul’s one of those that are busted. Steve Feldman at the Feldman Law Center, “You don’t need a miracle. You need a Feldman Law Center.” Well, I guess Steve, you need some help right now. Nicholas Chavarela, Robert Buscho, Brandon Moreno, Gregory Paiva, Adrian Pomery, you know, these are kind of well-known attorneys and some of them actually have nationwide firms that are just getting pressure here in California. So, anyway, I’m gloating a little bit because these guys get special protection and shame on them for having abused it. I mean, we don’t get special protection and we don’t abuse it.
And the last report that I want to make is something that I kind of got interested in last week when I was preparing for that report that we talked about on Tuesday about the Obama administration and progress that has been made. One of the articles that I read in preparation for that, I think was particularly interesting I’d like to dwell on it just for a minute before we keep going. I think you’ll find it interesting too.
The question that the senators asked this guy and this guy’s name is – well he’s the Director of Financial Regulations Studies At The Cato Institute, Calabria. Calabria is his last name. And the question was, why haven’t previous efforts stem to the foreclosure tied? The short answer to why previous federal efforts to stem the current tied up foreclosures have largely failed is that such efforts have grossly misdiagnosed the causes of mortgage defaults. Now this is a quote. And implicit assumption behind former Treasury Secretary Paulson’s Hope Now Program, and FDIC chair Sheila Bair’s IndyMac model, and for that matter the Obama administration’s current foreclosure effort, is that the current wave of foreclosure is almost exclusively the result of predatory lending practices and exploding adjustable rate mortgages where large payment shocks upon the rate reset cause mortgage payments to become unaffordable.
Well, it turns out that that was just an easy political target. That was an easy boogeyman to name. But now, the senators are realizing there may be no boogeyman to blame. The simple truth may be that that the vast majority of mortgage default now are being driven by the same factors that have always driven mortgage defaults. This is a quote. That is a generally negative equity position on the part of the homeowner coupled with a life event that results in substantial shock to their income. Most often a job lost or reduction in earnings until both of these components – negative equity and negative income shock – are addressed, foreclosures will remain at highly elevated levels. Now isn’t that kind of like a duh to all of us? Because I mean what we all know is, yes, sure some of us have adjustable rate mortgages that are more expensive now than we expected them to be. But quite frankly because of mortgage rates, a lot of them are lower than we expected them to be.
The real problem is that I owe $800,000 on a home that’s only worth $590,000. So, that’s an – and my income took a dump. So, I not only can’t afford it, I feel bad about affording it. Used to be that I wouldn’t mind taking a second and third and fourth job to pay that mortgage because the darn thing was appreciating at $160,000 every year, right? So, it’s kind of a duh and it’s kind of interesting that the senators and congressmen are just now starting to really get the message.
Then when queried about what could reduce the levels of foreclosure, he goes on to do the duh and say, well, you got to get job creation back. Fifty percent of the current foreclosures are driven by job loss. So, this job lost situation that we’re in and we’re just getting into is going to be the central issue with regards to foreclosures going forward and throughout 2012. Okay, so those are three items that I wanted to bring up.
Ryan Rockwood: I don’t know if you ever have followed that Cato Institute but I lived there in Washington for a little while. For some reason, I was just obsessed with social security. Don’t ask me why, it’s really a weird issue. But they were really into the privatization of it, which now – which for many years looked like a god-sent. Now, who knows? You know what I mean?
Mike Rockwood: Right.
Ryan Rockwood: But anyway, they’re always saying stuff like that. We’re like, “Oh yes…”
Mike Rockwood: The blinding glimpse of the obvious.
Ryan Rockwood: Does that make sense? Anyway if you are listening on the phone, hopefully our audio has been cleared up online. Thanks to Kelly and Lisa for the shout out there as we try to get the broadcast go online.
Mike Rockwood: All right, let me go ahead and take one of the questions. And the first question that I got earlier was from a guy in Nevada who says that he grossly, he says, grossly exaggerated his income in order to get the loan. And now he’s nervous that as he applies for a modification, because his income is so low, that they may in fact charge him. He says, “Charge me with fraud.” Well, John, the truth of the matter is in a loan modification, the lender at this point is really interested in how much money you make now and whether or not you can afford the mortgage that you have now and whether or not they can help you get to an affordable level through a modification.
You’re in good company. There were tons of us who, and our brokers and everybody involved, who exaggerated incomes when we were invited to do so on stated income loans. And whether or not it was the right thing to do, it probably was not the right thing to do. All of us should admit that but it was easy money and it seems like brilliant investing, and we and our brokers all jumped in. But at this point I have no experiences that tell me that your lender is in anyway going to be concerned about that at this point. It kind of seems to me that all the lenders have kind of left that issue in the dust. It is not a current issue. I’ve never had it brought up on any of my applications and we have now done hundreds of loan modification assistance packages. So, don’t worry about it, crash forward, your lender won’t bring it up. They have plenty of blood on their hands as well.
Ryan Rockwood: So, if this is your [Indiscernible] issue, it is hard to convince you, otherwise, I have found. I got this one gal that she wants – I mean, and she’s calling in – she’s a local gal. She’s calling in and wants us to rewrite listing agreements after the date that she talked to them on the phone about a loan modification.
Mike Rockwood: It’s like they’re going to hire a private investigator and put this whole thing together.
Ryan Rockwood: I mean, like it is invalid to think about many things at the same time. You know what I mean?
Mike Rockwood: Yes.
Ryan Rockwood: Just think of multiple options. Now, in her case, this is the situation where we have her for the first time from Bank of America that a loan modification and a short sale cannot be pursued at the same time. However, this is a week before the — consistently a week before
Mike Rockwood: Yes. That’s only because it’s so late, Ryan. It’s got to be because that’s the first time we’ve ever heard about that. All right, now, I want to bring you a local story. This is a feel-good story. We should have like a little bell, Ryan, that we ring when we talk about feel-good stories. But this one I just want to really feel good about because this was a retired CPA in Rolling Hills, California, an affluent part of Southern California, and he had retired and thought that it would be smart with some of this retirement money to invest in real estate in 2003. And he bought – I believe it’s nine properties. And he had 14 mortgages on these nine properties and their values started to sink just like all of our properties. And he attended one of our live events here on the Peninsula about six months ago and started using our program. And Wayne has now gotten modifications on 11 of his 14 mortgages. And he reports that now he writes checks for $2,500 less than he did in the spring. And he’s hoping to be able to get another $1,000 per month cut off on these last three mortgages.
So, he is having a little bit of trouble with his one and he is going to – he is having to threaten to let it go to short sale and he’s in the foreclosure process. He has avoided foreclosure up until this point. But kudos to Wayne. Thanks for that good story. But $2,500 a month, that feels pretty good, Rock. Isn’t that sweet?
Ryan Rockwood: That’s amazing. Well yes, and he persisted through all those loans.
Mike Rockwood: Yes. But he attests to the same thing that I’ve told our clients right from the start that that first one is so difficult. But then, you just pound them out until we’re now. I do reapplications from my own loan modifications in 15 minutes. Just wham bam, thank you ma’am because you know all the parameters. All right, so there’s a feel-good story for you. You want to take a question.
Ryan Rockwood: Yes, sure. We’ve got – let’s call this client P. I think you know this person but I can’t pronounce her name. “The online website has the message that says, please be advised that all collection activities have been temporarily suspended.” She’s trying to do a short sale.
Mike Rockwood: Okay.
Ryan Rockwood: “If I stop making my monthly payments, will they still report it to the credit bureau or does the above message mean they will not report it?
Mike Rockwood: No, collection activity has stopped but they’re certainly going to keep dinging you and causing you as much pain as they possibly can. So, don’t dream that you won’t be continue to be reported. And the beauty of the short sale is, of course, it cost you nothing. Virtually, everybody, except one or two clients that I’ve got, has stopped the paying immediately as soon as they decide to go into the short sale, so you save money. And if it’s rented, all the happier. And the beautiful thing about it is immediately upon conclusion of the short sale you begin to cure or heal your credit, recover from that FICO hit because the short sale is reported to the credit bureaus as paid as agreed, as part of our closing agreement with the lenders. So, it’s reported as paid as agreed. So, right from that moment on you are healing your credit. You start to heal. As oppose to just letting it go to foreclosure and then worrying about deficiency judgments and also having that foreclosure reported to the credit bureaus and that stays there for 10 years and really hurts you for two or three.
Ryan Rockwood: Well, the other thing is won’t that kind of – let’s say you’re going to foreclosure with the collections. Would the collection dings only continue if there was a deficiency judgment? Do you think that’s like – you know they can…
Mike Rockwood: Yes. They wouldn’t start again until a deficiency judgment. So, you go through foreclosure and then there would be no reporting until the deficiency judgment is granted.
Ryan Rockwood: So, you don’t think that they would continue to ding you for all of your late charges and lawyer fees for the next year?
Mike Rockwood: No.
Ryan Rockwood: Huh.
Mike Rockwood: No. As soon as this is foreclosed, then they take the property and then they have the legal – and then some states have very short statute of limitations to pursue a deficiency judgment against you. And at the point that the court agrees that you are personally liable for that bill, then they would start reporting to the credit bureau that you’re late.
Ryan Rockwood: All right, questions can be sent to questions@60minuteloanmodification.com or you can type it in the chat at /october1. If you got your story line here [phonetic].
Mike Rockwood: Let me tell another good story. We have a client on the Central Coast of California. Denise is her name and she is about as industrious as a person can be. And you know what Ryan, unmute for a minute if she’s on the call and we’ll tell her story.
Ryan Rockwood: Denise, are you there?
Denise: Yes I am.
Mike Rockwood: Hey, hey, and we hear you pretty clearly. What do you think Rock? Should we just ask Denise?
Ryan Rockwood: Well.
Mike Rockwood: Hey, Denise. Say a few words about your experience, will you, to encourage the rest of us?
Denise: Well, I was really very confused because I have one property that I live in and two rental properties. And I didn’t think that I had a chance to get all of that modified. But right now, I’ve got one totally approved which was about – and that was on my rental property. I’ve got about 30% reductions in my payment, on the second, on my rental property. And on my primary, I had a negative amortization payment of $3,400 a month. The principal and interest thing was around $6,000 and they reduced my payment to $1,900 a month at 2%. And I’ve been approved for the modification. But the only thing is I don’t know exactly how many years yet because I haven’t received the finalization of that program yet.
Mike Rockwood: Hundred dollars. You know that I think it’s so exciting about your case that had so many issues because you have such variable income from the seasonal rentals and your own business and a complicated tax situation with your own personal business besides the vacation rentals and some really whopper mortgages. So, you had kind of a complex bunch of stuff you had to work through it. It really took some hard work.
Denise: Yes, it was not very clear how to proceed with it because of the situation that was – it was very complex. And everybody was asking to me for a lease payment or lease contracts for the rentals because they had never dealt with vacation rental property before.
Ryan Rockwood: Okay. We’ll get [Indiscernible] this call. Thank you so much Denise. Okay, well, that was the first…
Mike Rockwood: Yes, thanks Denise.
Ryan Rockwood: That was the first in-their-own words. That’s one that we’ve ever had. That’s cool.
Mike Rockwood: Yes.
Ryan Rockwood: Okay.
Mike Rockwood: Big savings and now she’s on to two other modifications. So, she’s going to have even more savings. So, literally, that’s going to change her financial life. Month in and month out, she’s going to be able to meet her obligations and keep some beautiful properties. And she had all kinds of problems. I remember I made notes here.
Ryan Rockwood: What city does this gal live in?
Mike Rockwood: She’s up on the Central Coast.
Ryan Rockwood: Monterey because I talked to someone several months ago from there.
Mike Rockwood: Really? Oh, she’s been with us for a while. Yes.
Ryan Rockwood: Since that criteria.
Mike Rockwood: Yes.
Ryan Rockwood: I think she was interested in the product. So, that’s fun, awesome.
Mike Rockwood: Yes, but her mortgages adjusted higher and she was in a near fatal auto accident about a year and a half ago.
Ryan Rockwood: Well the thing that she was telling me – she was telling me that she wanted to pull the – she’s the one who said she wants to pull the Charlton Heston.
Mike Rockwood: Yes, yes, yes. Fight, fight, fight. And I think she’s going to win. She’s going to get with these properties.
Ryan Rockwood: She’s told me she has some really sweet properties, actually. I told her to dump them all. I said, “Forget it. This is like you’re acting like away.” She said, “No, I’m off for the fight.”
Mike Rockwood: Yes.
Ryan Rockwood: But tell me, she has some sweet properties.
Mike Rockwood: Oh, no kidding. Yes, they rent for thousands of dollars a week. Thousands a week, yes.
Mike Rockwood: Okay. Do you want me to tell more stories or you’re going to take some questions?
Ryan Rockwood: Oh, let’s take a question.
Mike Rockwood: Yes.
Ryan Rockwood: And I think we’ll just have to let the viewers online. I think they’re not going to be able to hear the questions until we get a better speakerphone system because we’re having a lot of feedback there.
Mike Rockwood: That’s our next technical challenge.
Ryan Rockwood: We’ll try to – as you can see we got a better camera. Okay. Hopefully you’ll notice that. All right, does anyone have a question? Hi, go ahead. Speak up if you have a question.
Male Speaker: I have a question.
Ryan Rockwood: Yes, go ahead.
Male Speaker: Hi, this is [Indiscernible].
Ryan Rockwood: Hi, there.
Male Speaker: I want to ask, how are you guys doing? I wanted to ask, actually it’s two parts in reference to, how do you determine that the loan is an FHA loan, number one? And could you explain the partial claim that they do loan?
Ryan Rockwood: Partial claim?
Mike Rockwood: Yes. I can do that and then – gosh, we did take that question two days ago and we should have gotten an answer.
Ryan Rockwood: Hold on one sec. I’m going to mute this call and repeat the question so everyone can hear it.
Ryan Rockwood: Okay, we got a caller and his first question, “How do you know if your loan is FHA?” Second question is…
Mike Rockwood: The second question we want to handle.
Ryan Rockwood: The first one, we were asked this question and I think neither of us actually done it personally. However, it’s easy to do. You need to let your social security number.
Mike Rockwood: Here’s what we do, Ryan. Here’s what we do. I answer the second part of this question while you do it online.
Ryan Rockwood: All right. This is supposed to be me.
Mike Rockwood: All right. All right the second part of this question was – the first part of the question was how do you tell if your loan is FHA? And Ryan’s got to tell us the answer to that in a minute. It’s really easy to do it. He’s going to figure it out. The second part of this question was how does the partial claim work? And the partial claim works for FHA and also it is extended to VA loans. And it is just what it says. It’s a partial claim on the insurance that they provided to the lender. It’s a partial claim. Think of it that way.
And here’s how it works. If you are behind on your payments and you want to file a personal partial claim, you can contact FHA and borrow up to 12 months of your payments. You can use that amount to get your loan current and do not owe that money. It’s non-interest bearing and there’s no payments required until you sell your house or pay off the note. If you pay off the note then you must begin to pay off that loan. If you sell the house you have to pay off the loan in full.
So, it’s a way, way, way good way for people who find themselves deep in foreclosure, deep in default, and they have an FHA loan. It’s a very slick way because all of a sudden, you have access to let’s say $25,000 or so, $10,000 to $25,000 that you can use with your lender. You get it to the lender and then you get it interest free until – and so it’s obviously better than wrapping it into your mortgage which is what your lender will try to get you to do because this is interest free.
Ryan Rockwood: All right well, online – and you know maybe our lenders have some sort of access that we don’t. Because we’ve always – I’ve always called someone to get the answer to that frankly. And all I’m coming up with online is ask the person who you send money to when you send your billing, okay.
Mike Rockwood: I know there’s a site though, Ryan, where you go.
Ryan Rockwood: Yes but maybe it’s not a consumer site. You know what I’m saying?
Mike Rockwood: Okay.
Ryan Rockwood: Maybe it’s not because I think it has something to do with our loan mod business.
Mike Rockwood: Okay, so there’s a pretty good answer.
Ryan Rockwood: But the ultimate thing is that if you have your original paper work, apparently you should know because you’d be paying a monthly mortgage insurance premium is what someone says here. Does it sound right?
Mike Rockwood: Yes, it’s written and you might not see it except if you have your original documents. And some people do.
Ryan Rockwood: Yes, actually, impressively. All right, let’s jump back online here.
Mike Rockwood: Now let me tell you a story.
Ryan Rockwood: Okay.
Mike Rockwood: We have seven of these we want to get through during the call but I want to tell you a story about Pat in Fontana. And I consider this a complete whacky incredible success story. You know success is really measured. We each measure success differently, right? And here’s how I measure success and I know Pat feels the same way. Pat came to us for a loan modification and we failed her. In other words when we put everything together and got prepared to submit her loan modification, we had to break the news to her that she wasn’t going to qualify. It wasn’t going to work. We would get rejected because her income has dropped so substantially and she has a beautiful home in the Inland Empire.
So, you might think, why am I talking about that in regards to successes? Well, Pat was heads up enough to realize that she could put all kinds of bandage on it. She could get contribution letters from significant others. She could rent out a part of her house. She could go to extraordinary means to get a loan modification. But she had the wisdom to see that the handwriting was on the wall. This house wasn’t part of her future. It wasn’t a good investment at the amount that she owed. And so she really should move on. So, we put her house out for short sale and it’s such a beautiful home that sold immediately. I mean like within three or four days.
We got an offer from people who love the house so much that we’re really confident they’re going to stay with us through the short sale. And the reason I bring this up as a success story because it is a success in that during this time now when Pat has stopped making her payments, she has gone out and put an offer on a short sale herself. She had enough saved up money that she could go ahead and qualify for a mortgage at this point and so it’s going to have such a happy ending. Not only is it happy ending financially, but the timing of it was just uncanny. She had a desire to be into this new home on a particular date and her buyers were able to accommodate her and stay out of her house e after the close of escrow just long enough for her to move – only have to move once. And she has beautiful belongings so that’s really a good thing.
So, it’s just a crazy whacky success story about people being heads up and being street smart during a tough economic time. She’s going to end up living in a house that is probably – she’s going to have about $200,000 mortgage where she had a $500,000 mortgage and the house is comparable in beauty, so way to go. Good one, that’s a good one.
Ryan Rockwood: All right, cool. All right, who else has a question?
Male Speaker: Can I ask about short refinances?
Ryan Rockwood: Sure. Sure. You got a little chapped out there what I heard was that you’re interest did in short refinances. Is that the gist of it?
Male Speaker: There was a lot of interference. Short refinance, I want the definition, what is short refinance?
Mike Rockwood: Can you think of one?
Ryan Rockwood: Well, that caller there, I’m going to mute him so everyone can hear. That caller asked, what is the definition of a short refinance? You know, I think I know, although it’s totally – I mean I know but it might not be…
Mike Rockwood: What is it?
Ryan Rockwood: Well, it’s basically like the idea that you call up the bank and you say “Hey, I don’t want to short sell the home. I want you to whack off the lost principal, the underwater amount and we’re just going to call it – I’ll get to stay here and I’ll keep making payments, and it will be wonderful happy day.”
Mike Rockwood: And that happens a lot, does it?
Ryan Rockwood: No. It never happened as far as I know.
Mike Rockwood: It’s fairytale. It’s a fairytale and it is very much a part of the Obama Making Homes Affordable Refinance Program. The proposal is that if you are underwater 25% or less, that in fact the program will help your lender refinance your home to, I believe it’s 90% of its current value. Now that’s a mythical, magical, politically, astute thing to have put into the program. And as soon as I hear about anyone who has benefited by it, I’ll report it to you, guys.
I really, honestly don’t know that that is working. I have had heard no reports of it and it’s so mystical, magical, and wonderful that you would have. The big problem with it is, is the lender has to take that big right down. And the lenders just don’t seem to be able to be willing to do that voluntarily. They seem to have to be forced into foreclosure and reselling the property in order to take that hit. They’re not writing down principal and they’re not taking this hit, and taking advantage of the government refinance program.
Ryan Rockwood: You know the first time I heard about that and probably the last was a couple of years ago, when we started gearing up and learning about short sales and foreclosures and we didn’t know these terms. And we would go to seminars. As real estate guys, we go to seminars and we’d learn about it. And apparently they did some in the 90s or something because all these old guys that were big in the 90s included it as part of their training in short sales and so on and so forth. And apparently, they were successful enough that they charge fees based on how much they were able to lop off the loan balance. I’ve seen absolutely no one ever do it.
Mike Rockwood: No.
Ryan Rockwood: Ever even entertain it slightly – that’s in hundreds and hundreds and hundreds of situations or whatever you want to call it.
Mike Rockwood: You want me to tell a good story?
Ryan Rockwood: Yes. Go ahead.
Mike Rockwood: Okay. A good story is Neil who is an Atlanta-based attorney. And I said a little bit about this one on our last call but it’s such a good story that I want to repeat it. Neil had a dramatic decrease in his income in the last couple of years because of health problems and owned three homes – two of them in kind of resort areas, very lovely vacation kinds of home, and then his own residence in Atlanta.
And because of his decrease or dramatic decline in income and because of the decline in the values of the home, he decided that he would have to short sell one of them. He went ahead and did that. And then he was preparing to short sell – or no, preparing to sell the other one. He still have a little bit of equity in it, the second vacation home when he and I hooked up and we started talking about our program and thinking through things in the ways that we do. And as we put together his budget and looked at his ratios and try to figure out for which loan modification programs he would qualify and how we should present his situation in the best light in order for it to qualify from modification, we thought listen, before we put that second property up for short sale, let’s call the lender and talk about a modification on your own home.
So, we did that and I mean just jump right in with both feet. We had all the budget figured out. We had the hardship figured out but we just jumped in and we asked the lender who was GMAC who is not a friendly lender. Not at all, not by any stretch of the imagination but we locked out and we got a really knowledgeable and a very helpful loss mitigation rep.
And within an hour, we had a $1,200 reduction in his monthly payment on his primary home first mortgage, $1,200 and he’s got that for four months. And we know that the application that we’re submitting is going to verify all the numbers that we submitted. So, we know he’s going to nail that one down. And now he’s working on whether or not he should go ahead and sell that other property or maybe even try to modify that one. So, it’s just a really feel good story where a person just went that, presented things correctly and walked away in that day with a $1,200 savings every month. Pretty sweet.
I know you guys, it gets kind of discouraging because sometimes you get told no one. You get told no one. You get told maybe and you get told we lost your file, and you get told we lost this part of file, and you get told we need an update on this and we haven’t got into that. So, it can be discouraging but every single day, Ryan and I get encouragement from stories like these. And so it’s fun to be able to share them with you, guys. Do you have a question?
Ryan Rockwood: Yes I got a question here coming in from a client. I think it’s a current client named Theresa. And she says she’s concerned. She’s asking if her bank is not doing loan mods on investment properties. I think we actually answered this question last Tuesday. But the idea being – there are some banks that aren’t but they do make exceptions, okay.
Mike Rockwood: Yes. Yes.
Ryan Rockwood: What can I do to get your help? What are the options to get our help? And unless anyone thinks this is self serving. This is actually not.
Mike Rockwood: Print it out so we’ll show everybody.
Ryan Rockwood: Okay, but there are couple of different options, okay. You all own the kit. The second option is to upgrade it, get it done. If you already own the kit, I think it’s like $100.
Mike Rockwood: No, the price is more. We’ve been saying a $100, $107. It’s $147.
Ryan Rockwood: Even for people that are upgrading now. Yes, okay. Well, it’s a bargain at $147.
Mike Rockwood: But it’s still at bargain, yes.
Ryan Rockwood: And we do the application with you on the phone. Okay that’s for when you need to get the application done. The other thing you could do is you could schedule a 20-minute call with mike. It’s real cheap.
Mike Rockwood: Yes, it’s like $49 for 20 minutes.
Ryan Rockwood: A bargain.
Mike Rockwood: Oh man, it’s a steel.
Ryan Rockwood: And that’s at 60minuteloanmodification.com/talkwithmike. Sounds dumb, talk with mike, but…
Mike Rockwood: Hey, you know, and the truth is we get a heck of the lot done. And it‘s not like I watch the clock. You know what I mean? So, what we do is we have a call and we get things done. So, if it takes 20 minutes or it takes 50 minutes, we get it done.
Ryan Rockwood: We don’t realize how insulated, so many of these people are from anyone who’s actually doing these. All you hear about these crazy stories on the news, dumb stories from relatives, and [Indiscernible] in guessing yourself the whole way. So anyway, you need someone to talk to every once in a while.
The last option, and this is like a trial thing we’re doing with zero interest as of Tuesday is our Pay-as-You-Go Program that if you buy the kit and pay $84 at the end of each month, it’s $84 is for administrative fees and we do a loan mod for you. And you can quit at any time and all that kind of stuff. And if you want, should we get you a loan modification, you pay us three times the amount we save you.
Mike Rockwood: The monthly savings.
Ryan Rockwood: Up to $2,500. So, it’s actually cheaper than our loan mod do-it-yourself when you pay upfront. I don’t know why.
Mike Rockwood: And it’s risk free.
Ryan Rockwood: Actually, I shouldn’t have – that was very smart of me to …
Mike Rockwood: Right. Price it that way.
Ryan Rockwood: But it’s in beta mode. So, anyway, that’s called Pay-as-You-Go. Okay. Anyway, let’s jump online here and grab another question. Yes, go ahead.
Male Speaker: Can I ask under the Obama plan, how do they figure final rate? Was it a [Indiscernible] or it’s five years down the road?
Ryan Rockwood: Okay so that’s the question, how do you figure the final rate under the Obama plan? Would that be correct?
Male Speaker: How would you – is it upfront on your first loan modification or it’s five years after you finalize your loan payment, you have to pay your loan payment?
Ryan Rockwood: Got you. Let me mute you and repeat the question. Thank you very much. Okay, so that question was from a caller and he says, under the Obama plan, how on earth do they schedule the payments?”
Mike Rockwood: And the rate, how do they figure the rate?
Ryan Rockwood: The rate and why don’t you take it from there?
Mike Rockwood: Okay. And the answer to that question is it’s all calculated upfront. The lender is given really three levers that they can pull in order to pull your debt-to-income ratio down into the targeted range. So, let’s just make up a scenario. Let’s say you submit to them a budget that shows, and listen carefully now, your first mortgage payment, the mortgage that you’re going to modify — principal, interest, tax, insurance, and homeowners association, add all that together and see. If that is more than 38% of your gross household income, then the lender is asked to do – first of all they’re asked to reduce the interest rate until they get it down – they get your monthly payment down into that below 38%.
If by lowering interest rate to as low as 2%, they can’t do that, then they’re instructed to go to an interest-only payment for some period of years. And if that still doesn’t get your payment into that 31% to 38% range, then they are asked to go ahead and extend the term from 30 years as far as 40 years to be able to pull your payment into that range. And the government compensates them significantly for each of those concessions. Well, and by significantly I mean it’s $500 to a $1,000 for each concession. It really isn’t a big deal. But then they do earn an additional $1,000 every month that keeps you on the program. So, it’s like $3,000 to $5,000 for the lender, not a huge deal on a million-dollar mortgage. But it’s a real sweet deal on a $55,000 mortgage.
Ryan Rockwood: Or on a million, $55,000 mortgage, a million, million-dollar mortgage.
Mike Rockwood: There you go. Okay, but what they do is they present to you an offer that specifies what your payment is going to be and they show you how they got to it. So, you’re going to see what that interest rate is. And almost, well I think, not all but like 90% of ours have been temporary. They have been for – like most of them are two to five years in length at which time the rate starts to creep back and the wording is that it will creep back either to the rate that it was if that was low rate or it creeps back to whatever Fannie Mae and Freddie Mac are at that time. Okay. I hope that answered. Will you jump back on it and ask because I want to – and I think he had a real specific.
Male Speaker: Thank you. It game me a reasonable answer. I was just – one more time. Reference that final wait, like after the five years, let’s say I paid 2% for five years. Do I [Indiscernible] to five years when I first start what that rate will be after five years? Is it established at that point or is it established after five years, which means rates could be considerably, considerably higher than they are presently?
Mike Rockwood: Yes, okay. Very, very good point.
Ryan Rockwood: Okay. I’m going to mute you and repeat it.
Mike Rockwood: Yes, okay. The astute point of that listener made was that street smart people are realizing that we’re heading for a time of inflation and that will mean eventually significantly higher interest rates no matter what the fed does. So, in the out-years, and you’re already seeing it in bond yields, in the out-years we’re kind of negative on mortgage interest rates. So, would it really be in your best interest to accept a mortgage modification when after five years, it can creep up to Fannie Mae and Freddie Mac. It might not be. But 100% of the time, those offers that I have seen have a cap.
So, they say they go back to 6% or they will go back to the original which was 5.78% or they will go back to what’s Fannie Mae or Freddie Mac are at the time with a cap of like 6.78% or something like that. So, you do get guarantees. The truth is though, an awful lot of people taking these loan modifications today, the interest rate reduction ones that we’re seeing today, an awful lot of our clients and me included, are willing to just take a temporary fix because we know it’s not the final fix.
Like I referenced earlier in the call, I own a home here that I owe almost $800,000 on and right this minute it’s worth about $590,000. So, even that I can afford to live in it because they lowered my payments, believe me, there’s a day of reckoning coming when I have to move to Montana for my retirement and I can’t get any money, I have to bring $300,000 to the table. There’s a huge issue. So, a lot of us are willing to take temporary relief just betting that something’s going to break and it’s way beyond my scope to fix.
Ryan Rockwood: As you know we’re huge advocates to the Do-It-Yourself Loan Modification. If at all possible, do it yourself, take the time, learn it, but get a coach, get some help, and that’s where we come in. Okay, if you need to schedule additional private one-on-one time with Mike, you can do it at 60minuteloanmodification.com/talkwithmike. Also, as a current client, if you need help literally getting the app done, we have a Done For You service that indeed is $147. For details on that…
Mike Rockwood: We should have read ahead.
Ryan Rockwood: For details on that visit 60minuteloanmodification.com/doneforyou. Again, I’ll plug my idea for the pay as you go plan and we’ll see if that generates any interest. With that, I’ll sign off. We do spend most of the day on the phone. Thank you all of those for bearing with our technical difficulties and being with us here as we try to basically help people get through this tough time.
Please e-mail us at help@60minuteloanmodification.com and thanks so much for joining us. Goodnight.
Mike Rockwood: Thanks everybody. Goodnight.
