Morgage debt-to-income ratio|Mar. 18

Mike Rockwood: Good evening everyone. It’s Thursday evening. It’s 6:00 p.m. It’s time for the Foreclosure Doctor Teleconference and video conference. Hi everybody, this is Mike Rockwood from 60-Minute Loan Modification. I’m here with Ryan.

Ryan Rockwood: I’m Ryan Rockwood

Mike Rockwood: And we are – we just pushed back from our desk working Loan Modifications, no lie and are glad to have this time to share with you some insights from this week’s work on Loan Modifications, and also to answer your questions about Loan Modifications. We should say when we start that you can send questions to us and you have been sending questions to us at questions @ 60minuteloanmodification dot com.

Ryan Rockwood: Well, you know looks like we have 24 – 22 seconds here before …

Mike Rockwood: Before they join us.

Ryan Rockwood: Before everyone join us. It didn’t come to rest. So, let’s stall [phonetic].

Mike Rockwood: Do you have the intro Rocky?

Ryan Rockwood: No.

Mike Rockwood: Or no?

Ryan Rockwood: Do we have one?

Mike Rockwood: Yes.

Ryan Rockwood: All right, hello everyone. This is Ryan Rockwood and we’re going to start the call in about 10 seconds. Remember that when I had you announce that all the time?

Mike Rockwood: Yes.

Ryan Rockwood: Because, I guess we didn’t have video? We were so worried about it. Anyway, welcome to 60-Minute Loan Modification insider secrets teleconference series. We’re here to cure sick homes one mortgage at a time. My name is Ryan Rockwood. I’m here with my father, my business partner, Mike Rockwood. He’s the author of the 60-Minute Loan Modification and 60-Minute Loan Modification Kit. Anyway, welcome to the call. Tonight’s call is for clients only. And as you might notice, we fixed the bug we’re sending this out to everyone. So, hopefully, we’ll get more and more focused higher level call.

Mike Rockwood: And we’ll be able to just talk ninja.

Ryan Rockwood: Yes.

Mike Rockwood: On Thursday nights.

Ryan Rockwood: Yes, we’re now getting into the basics. OK, but anyway, just a quick announcement before we could begin. Principal reductions are not happening. We all know that we’ve want them to happen, okay? And there is some hope on the horizon in the form of a new financial product. Here’s how it goes basically. First of all you must be over – the first mortgage on the home has to be more than 120% of the home’s fair market value. Did I say that right?

Mike Rockwood: You did but it is a little bit hard to follow.

Ryan Rockwood: Yes. Okay, so…

Mike Rockwood: So, you have to be upside down like 30% or 35%. Is that what you’re saying?

Ryan Rockwood: Well …

Mike Rockwood: That’s right.

Ryan Rockwood: Well, not really because – just 20%. You have to have a second mortgage. Yes. So, okay, here’s how you describe it. Are you seriously underwater on your home to the extent that a Loan Modification is only going to be part of the problem? If so, pass to the next level. If that’s you, if you could sell your home right now with the first mortgage only get 80%. Hey, does that work?

Mike Rockwood: You got to get better at this.

Ryan Rockwood: Does that work?

Mike Rockwood: Yes, but that’s – it’s pretty complex, Rock.

Ryan Rockwood: Okay. Forget it. Send an e-mail to help @ 60minuteloanmodification dot com and call it mortgage restructuring. And we’ll get you on our list for a new book and new video that’s coming out.

Mike Rockwood: We think it’s a great product. It is going to be for a narrow niche [phonetic] but if it’s for you, this is your solution. This is a long term solution like a 30-year fixed solution.

Ryan Rockwood: Okay. So, anyway, welcome to the call. Tonight’s call is on income less than you hope and more than you thought.

Mike Rockwood: I saw that. Now, it’s pretty good.

Ryan Rockwood: Do you like that?

Mike Rockwood: You’re quite a wordsmith.

Ryan Rockwood: Yes. Anyway, I’m just glad to get the e-mail out for goodness sakes.

Mike Rockwood: But, you know, listen. We want to remember – We want to remember to remind all of you that we’re not lawyers. He’s not and I’m not. He’s not a tax adviser and I’m not. So, what we’re passing on to you is information that we have heard from clients and experienced ourselves in Loan Modification. Don’t take our information as legal or tax advice. Use it at your own risk. We really recommend that you use it though because we know of what we’re talking about. Really on loan modifications, we really know what we’re talking about.

All right, so on tonight’s call you can continue to get questions to us at questions @ 60minuteloanmodification dot com and we’re going to talk about income. And the reason that we wanted to have a whole module just on income is because in a conference today with another leading loan mod expert, we really were bemoaning the fact that documenting and getting income accurate is such a hassle. It seems like it shouldn’t be so difficult because after all, all of us are proud of what we earn, right, or embarrass of what we earn. But we all certainly should know what we earned but we agreed, this other expert and I, that it’s really difficult working with people and it’s not uncommon for us to get all the way to submission of their loan modification and find out that their income isn’t at all or isn’t exactly what we thought it was.

And because the budget is, you know, always based on the ratios and the cash flow, anyone of those elements that gets out of whack screws up the other. So, if you’re really close, if you’re just barely over 31% debt-to-income ratio on the front-end, and your income isn’t exactly as you said it was, it can really mess things up. And then the more we talked about it, the more we realize it is a little bit more complex than at first blush.

So I want to spend about 10 minutes talking to you about how I handle the issue with clients and how you guys should handle it in your own loan modification. Any other announcements before I jump into it?

Ryan Rockwood: No.

Mike Rockwood: Okay. All right, here we go. There are four elements that I want to talk about. Calculate it correctly, document it precisely, augmented, or diminish it. First part, calculate it correctly. The first point I want to make is that all that matters is gross. And what I mean by that is all that matters is your gross income. All the debt-to-income ratios are calculated off of gross. And so you really need to make sure you get that figure 100% correct. Calculate net this way. Go to your 1040 and figure out – you know, your IRS tax form, Federal Tax Form 1040, last year and figure out how much tax you pay at the end of the year.

A lot of people get kind of confused about net. Well, isn’t net just what I take home? Well, it may be if you don’t have any medical, if you don’t have any union do’s [phonetic], if you don’t have any 401k savings coming out of it. If all you have is your federal and state taxes coming out of your check, then maybe what you receive each month is net. But that would also require that when you do your taxes on or before April 15th, you don’t get a dollar back and you don’t have to pay a dollar. So, in other words, it’s not really your withholding, it’s the amount you end up paying.

So, to be really accurate about your net income, you want to go to your 1040. And on the first page, one of the first lines is your gross wages. Take that number and then take the total tax paid, which is about line 60 on the second page. I forget which tax year I was looking at when I looked it up. But it’s about line 60. It says this is your total tax. So, take your total tax and divide it by your total wages. And that’s about the percent that you pay. Most people are really astonished to learn that they pay so little taxes. Because after all of our deductions and everything, most of us end up paying 5% to 15% of our income and taxes feels a lot worse. But it’s really not as bad as we all think.

So it’s 5% to 15%. And that’s the number that you want to use because you’re going to put your 401k, you’re going to put your medical, you’re going to put everything else later in the budget. Okay. So, that’s the way you figure your net income. Now you have a lot of wiggle room with regards to your net income. So, if it behooves you to show a little bit less on your budget for your loan modification application, go right ahead and do it. If it behooves you to show a little bit more, go ahead and do it. I always feel safe using anything between 5% and 20% of gross income as net income, okay. But remember your ratios are going to be calculated off of gross.

Now another item where people often make mistakes is they use 24 paychecks when in fact they get 26 paychecks. So, if you get paid every other week, you get 26 paychecks in a year. So, if those are always the same, take that number times 26 and divide it by 12 and that’s your monthly income. Let me say that again. So, if you get paid every two weeks, let’s say you get paid every other Friday, which is how my wife gets paid. So, we take her paycheck, multiply it and hers is always the same. So, we multiply it times 26 and divide it by 12. That’s her monthly.

She gets 26 paychecks in a year. There are 12 months in a year. That’s her monthly gross income. That’s the number we need for her. If you get paid at twice a month like on the 1st and the 15th or the 15th and the last or something like that, then you get 24 paychecks. So, then for you it’s easier. You can just two of those paychecks and that’s your monthly income, right? Now I know for some of you, this sounds really crazily basic. But honestly, I know awful lot of people who make a lot of mistakes on it.

Now let’s talk about self employed, people who own their own business. Someone’s a realtor or if you are a commission sales person working on contract, if you’re a speaker, an entertainer. A lot of people are self employed. And so, in fact, at the end of the year you get one or many 1099s from all your employers verifying to you and to the IRS how much they paid you.

Now you can use those 1099s if the time of the year is correct. Like, let’s say, during January and you’re submitting a loan modification, then your 1099s from last year are pretty useful. However, they may or may not show what you want to show for your income. So, let’s say – because a lot of times self employed people have real variable income. They might have a real good quarter and a bad quarter. And so if over the course of the year it doesn’t really reflect what you’re earning now, then you’ll want to change how you calculate it. And here’s what the lenders actually want you to do.

They really want a good indication of what your current income is like your last 90 days. So, I advice you to use your 1099s or use a checking account or you can show steady deposits. Sometimes you can even sort your checking account by just deposits that are from a particular bank or from, you know, the check is named. You know what I mean? You can sort through and actually see the checks and you can show copies of the check.

So, if you are self employed, you either show a profit and loss statement. And on that profit and loss statement, you want to have a line item that says your draw, you know, Mike’s draw, Jim’s draw, Annie’s draw or Annie’s paycheck, or whatever it says, you wanted to be real clear. If it’s not real clear, circle it, write a note and say this is my draw for the quarter or for the year and divided by the number of months, and sign it. Okay.

So, the point I want to make to calculating that correctly is spend a lot of time on it because you can go through a lot of work and submit a very comprehensive loan modification application and just totally blow it because you miscalculated your income because they’ll calculate it correctly. They’re actually kind of good at that.

All right, so now we know how to calculate it correctly. Now we want to document it precisely. This is some advice that – this is just kind of – these are tricks that I’ve learned after having made just about every mistake in the book. So, take it as pretty darn good advice. If you have alimony or child support that you need to document, I want you to include not only the checks but go beyond that and show the deposit into your account and go beyond that. And supply the award letter, the judgment letter.

I know you’ve kept that because you need that for a lot of purposes throughout the year like pursuing payments, right? So, include that. It’s better to provide too much information than too little with regard to your income. You really want them to have no question about your income.

Social security, I recommend the same thing. Not only provide three checks that give a real clear indication of what you make each month but also your annual award letter, the same thing with EDD, with unemployment compensation. Supply the checks but also supply the annual award letter. It’s really important.

Okay, now I’m going to talk about how people augment their income because an awful lot of clients need to make up their income. Need to get their income up a little bit higher in order to qualify. Because an awful lot of people are suffering, you know, one of their hardships is the decline in income, right? They lost their jobs. Hours got cut back. No bonuses this year. Whatever the problem is, so a lot of people are really struggling with how to raise their income up to a level where their debt-to-income ratio comes down to points that are acceptable. When your income goes up the ratio, of course, will go down, the ratio of your debt payments. You like the hand gestures? I hope that helps all of you. I hope you can see that clearly and that’s a big help.

So, ways that people augment their income are the following. Number one, if you’re self employed, use your very best period. In other words if the last 30 days were not the best, then use the last 90 days, use the last 120 days, use the last six months or even the last 12 months. Skip this month and go back a month. In other words you have the flexibility to be able to use a period of time within reason to show the kind of income that you need to. A lot of people find it very easy to rent a room on short notice. Like when I’ll tell them, listen, you’re really $500 short of getting a really good loan modification. I suggest them, you know if you got a big house, maybe your empty nesters, why don’t you rent out our room. It’s usually pretty easy to do and you can get a signed contract and then you have that for proof.”

Some people have rented out a garage space for an extra $150 a month or like in an apartment complex. Let your space go rented out. Some people have taken on a temporary second job. Sometimes it’s really that – sometimes it can really be that important like today, I met with a gal who I think honestly is going to save $1,600 to $1,900 a month because she is an absolute perfect candidate for Making Homes Affordable modification. So, for her to go out to get a second job in order to qualify for this is absolutely doable because it’s going to be kind of life changing. She’s going to be able to keep this house now.

Another option that a lot of folks employ is have their kids pay rent. And awful lots of people have adult children living at home. Ryan finally moved out of the house when he turned 45. No, I’m just kidding. But a lot of people have, you know, 18 to 25 year olds still living at home. And it’s really easy to have them pay rent. Now it might not be easy to get the rent payments but they certainly can sign an agreement that they’re going to pay the rent and, you know, reasonable room rent is usually $300 to $500 a month. And then sometimes also, young adults are using the family car. And so I’ve had other clients who have had their kids write contribution letters toward the car payment.

Now another thing that’s kind of common these days is for people to be caring for their elderly parents. And a lot of times people provide all kinds of care and don’t charge for it, number one. Because I mean you’re really going to charge for driving your mom to the doctor? But honestly a lot of times parents have the wherewithal to be able to pay or at least to commit to paying monthly for driving service, for any other care that they need that they otherwise would pay for. So, they’re perfectly willing sometimes to write a contribution letter saying, “You know, I do in fact pay my daughter $300 a month for driving me five times to the doctor or whatever the services are.” So, parents pay for a room. Parents pay for driving. Parents pay for their care. That’s not uncommon.

And then, I really wanted to talk a lot about contribution letter because that’s a great one. When you just need an extra $500, you need another $1,500 something like that to qualify. You’re unemployed and your unemployment is like one-third of what you used to make. A contribution letter can be a great way to make it up and here’s how it works.

You get a friend, a good friend or a relative, parent, child, brother, sister. Someone who will sign the document saying, “I am Sarah’s brother. I have the wherewithal and I will pay Sarah $1,000 a month for up to 18 months until she finds her, you know, gets back on her feet financially after the divorce or until she gets a full time job because she lost her full time job and now she’s just part time.”

And then what I do is I take that letter. It’s really on the length of three sentences like I just said. Take that letter and attach proof of funds like I’ll attach either a paycheck or a savings account that has enough in it to make those kinds of payments. And then I always advice people to take the extra step to go down to a local notary and have your brother or your mother, or your sister, have it notarized. Have the signature notarized.

Ryan Rockwood: Not by brother or sister.

Mike Rockwood: No, by the notary. Right, so they have to do it so that they sign. And I always have them write on there, how do you contact me for any questions about this and a good contact number? Then that becomes every bit as valid to the underwriter as a paycheck.

Ryan Rockwood: One of those guys outside of the inner city Starbucks or something should offer that, you know, next to their cup for change or next to the on ramp, I should say …

Mike Rockwood: Contribution letter notarized…

Ryan Rockwood: Notarized contribution letter 25 cents.

Mike Rockwood: Maybe we get start an affiliate program all over the city.

Ryan Rockwood: I’ll tell you that would create, that would be a funny YouTube video, like that would get our sites on traffic. That would be awesome. People pulling over, unwrap, you know. It would be cute.

Mike Rockwood: All right and then now I want to talk about diminishing your income because it isn’t that uncommon that people have too much income. And in fact …

Ryan Rockwood: Prolonged modification.

Mike Rockwood: Prolonged mod, yes, too much income for a loan modification. Let’s say they have so much income that only their payment is only 25% of their gross household income. Well, the first thing I do when we have that problem is ask people, now tell me exactly, read to me from your loan document, who’s on the loan? When you get your statement, whose name is on it? Because honestly, sometimes people get it mixed up, they think they’re both on the loan. Sometimes married couples will think, yes, we’re both on the loan. We’re both on the deed as what you are on. You’re both own the home but only one of you signed for the mortgage. It’s not uncommon. So, if that’s the case then you can greatly diminish one or the other of your income because remember the only income that they have full claim to is the person who’s on the mortgage. Any other household member whose contributing income toward the mortgage, it’s up to you how much of their income you include. Let’s just hover there for a minute because that’s a really important point.

Ryan Rockwood: That’s an important point.

Mike Rockwood: Yes.

Ryan Rockwood: When it comes to the income.

Mike Rockwood: Yes. If you’re the only one on the mortgage, your entire income needs to be disclosed for the loan mod application and for a loan modification or for loan application. Anybody else who’s contributing to the family household income, you can disclose as much of their income as you want by way of a contribution letter. So, if you have a wife who makes $10,000 a month and that puts you way over, you can, and that person is not on the mortgage, have your wife sign a contribution letter that says she’s willing to contribute $5,000 a month or whatever the right number is toward the household budget. You don’t need to supply any, you know, further information about their income. Just do the same thing on the contribution letter. Staple a copy of a paycheck or whatever, proof that they can contribute that much.

And then I always remind people, “Do you have any untraceable income?” A lot of people get tips and they consider that income. And of course it’s declared income. But if it’s untraceable then you have some leniency in terms of what you report on your loan modification application. And then also keep in mind that bonuses based on sales or bonuses based on the performance of the organization that you haven’t received this year yet, you need not divulge but you can if you want and if you need to. So, if you want and need to, then you will probably have to get some kind of verification letter from your employer that you’re likely to get that kind of a bonus. And sometimes you need to do that and that can be very easily done. But if you want to exclude it, you can as well. And in fact their under writer would just assume [phonetic] you excluded it because it is at risk income.

All right, so that’s my little teaching on income. A lot bigger deal than you think.

Ryan Rockwood: All right, let’s jump in to questions. We’ve got one from Machiko [phonetic] here. And she says, “You know, frankly it looks, Machiko, like you don’t have enough income to get this loan modification.” But let me get into it. So we got to boost up that income somehow. Right now, she’s got – when you say old mortgage, I think she means current mortgage. She’s got it hoping that – it’s basically $1,300. Current documentable projected – current documentable gross income $1,060, car cost then of another – she has expenses, another $150 hillock and, you know, then no matter how much of a miser you are you’re going to spend another $500 every month. You got to heed [phonetic]. So unfortunately, that’s going to – what do you think because she qualifies for half, do you think they might allow that much negative amount?

Mike Rockwood: No. Machiko, don’t even try to get a modification with less income than your mortgage amount. Here’s what you do. Here’s what your goal is. Take that $1,300. Now, let’s make sure that the $1,300 is right. Remember if you have your principal interest, tax, and insurance, and homeowners association.

Ryan Rockwood: Well, she says PITI

Mike Rockwood: And if you got homeowners, wrap that in there too. So, it’s everything. That payment is $1,300 then I would divide it by 0.7. And I would say you don’t have a prayer of getting loan modification. I mean not ever a prayer unless you’re at least $1,800.57 a month.

Ryan Rockwood: Okay. So, that would be, that would make it 30%.

Mike Rockwood: No. Then she’s 70%. That’s as high as you could ever go.

Ryan Rockwood: That’s DTI but weren’t you calculating it as 30% of her – the opposite of 30% for gross income?

Mike Rockwood: No. So, if you wanted to figure out the very highest income you could have, you’d go $1,300 divided by 0.31. So, if you definitely don’t want to have more than $4,000 or $4,200 a month in income. So, somewhere between $1,800 and $4,200 is your magic number. But you got to get up to 18. And then if you got a car loan, any credit cards, student loan, you know, that’s going to push that up. So, take your total indebtedness. Work it backwards. Get your back-end DTI. All of your debts add it together and then divide that number, let’s see that number so, let’s say that’s 13, that’s 2,000. We don’t want that to be more than 70%. So, then divide that all by 0.7. And that will be the number that you have to come up with. Because out of that additional 30%, they’re going to expect that you pay your taxes and all your costs of living. And you’re really on the cost [phonetic] when you’re at 70%.

A lot of times people really have to argue to get their loan mods at 70%. So, that’s a good tip for all of you. You know, you can kind of back in to what the income you want, you know you, need to show. So, Machiko you got to get up from a $1,060. You got to get $800 more. So, some of the ideas that I threw out there, about augmenting your income, you got to use your best period. Rent a room. Rent a garage. Get a second job. You, you could get a second job and a heartbeat with the work – the drawing graphics that you do. Parents, I know you’ve got parents but I think they’re pretty independent. Contribution letter, there you go. Think about of Machiko. Get one of your parents or siblings to write a contribution letter. You know, that until your business recovers, they’re able to supply an additional $700 or $800 a month. And then they just show that they can do that.

Keep in mind it’s not so important that they actually do that. It’s just important that they’ll commit to doing it. And then you are going to get your modification. Okay, so your goal is to show $1,800 and my I go like $1,950. That’s what I would shoot for if I were you, all right. You have – I’m going to take a question?

Ryan Rockwood: Yes.

Mike Rockwood: All right, Mike asks, “If my income stopped last month because I was laid off, what do I show for income?” This is actually a really good question, Mike. So, let’s say somebody was making $7,500 a month and then last month he got laid off and now his income is, whatever his employment insurance is, Mike doesn’t even say here that he gets unemployment insurance. So, we don’t even know that. So, what should I show?

Well, my advice is to apply post-haste and use your income, the income that you were getting, if that pencils out to a good modification for you, Mike. So, again, you kind of have the opportunity and the curse of having income problems. Your income problem might be just great for you because it might take your ratios right down into the area that you want them to be at. You know what I mean? With the other household income, you might be at exactly the place you want to be at. So, without more information, I can’t tell you for sure but I can tell you that you’re in control of whether or not you used the income you just lost or the income that you’re going to have next month. Keep in mind it’s going to take about six weeks to get a good modification if you’re in default. It will take about six months to get one if you’re not.

So, that might color the way you want to approach it. You know, if you think you’re going to pick up work again soon, then you might just want to go ahead and use your income because you probably going to get up to that same figure. All right, you want me to keep going or you got something there?

Ryan Rockwood: Well, I have a follow up from Machiko.

Mike Rockwood: Okay.

Ryan Rockwood: She says the processes are throughout the – anything that, any of her, anything but the renters that she’s renting rooms. So, forget the…

Mike Rockwood: The self-employ income from her graphic design.

Ryan Rockwood: And you know I know that she was out of town recently. I wondered maybe she’s not spending a lot of time pumping up that business. So, it is a little here, a little there. Maybe it does look a little flaky or something.

Mike Rockwood: OK, everything but rental is gone and then they take your rental and they usually knock that down by 25%. So, yes, you’re really at risk Machiko. I think you have to do some of the – I think you should think seriously about a contribution letter. What’s wrong with that picture?

Ryan Rockwood: Well, let’s see what she said. I think she might have said that rejected a non-occupant letter contribution at the last minute, threw my eligibility, and queue [indiscernible] status.

Mike Rockwood: OK, no. You got to go back to him and document that contribution letter harder, you know what I mean? Send a loan proof of income. Get it notarized. Ask her who the lender is too.

Ryan Rockwood: Wells Fargo.

Mike Rockwood: They’re easy. All the big ones really have become so standardized that you can usually – I call them easy because they’re predictable.

Ryan Rockwood: Maybe, you know what Machiko, I don’t know if we made that offer her but you never took us up on the standard 20-minute thing, but also maybe we should get together and call the bank or something like that with her and see if we — make no promises obviously.

Mike Rockwood: Yes. Get us to it.

Ryan Rockwood: Yes, I guess you make an appointment. Let’s get together and do that.

Mike Rockwood: OK, Emilia asks, “My income is so erratic. I make it no income this month and $10,000 next month. How do I handle that on my budget?” And Emilia, honestly, I don’t know why people think that is so strange. There’s an awful lot of – but everybody always says that. That’s just crazy. You got to understand. See one month I don’t – and I go, yes, please, please. That’s the way, not most people, but that’s the way a lot of people are. So, Emilia, that’s not unusual and the bank will not miss a beat. And the way that you handle it, again, is to use your best period, you know, whether it’s the last 6 months, or last 12 months, or the last 3 months, or even the last 2 months. Sometimes, I’ve even submitted just the last 30 days – in fact the person we worked with today has just submitted the last 30 days because they are the very best 30 days she’s had in a long time.

So, you’re really in complete control. Don’t worry about the erratic nature of it. You just explain it. I always recommend to people to do lot of knuckle notes on your application. So on your – if you are self employed. If this erratic income comes from self employment on your personal PNL, just write a note explaining that – just like you explained here in this e-mail and then sign it. And remember, I always recommend everybody to sign every page of your application. All right, just interrupt me or else I’ll keep going.

Ryan Rockwood: All right, yes, sorry. “My lender asks me for leases and a letter from a tenant. What is the reason for this document? Thanks. I did not see in the kit manual.” No, I don’t think there is. I mean, you know, but – well, asking for lease is no big deal.

Mike Rockwood: Lease is no big deal but a letter.

Ryan Rockwood: Maybe she didn’t really mean to write that. You know what I mean? Or maybe she said lease or letter.

Mike Rockwood: One or the other…

Ryan Rockwood: Or something like that.

Mike Rockwood: Okay.

Ryan Rockwood: Do you know what I meant?

Mike Rockwood: Yes. It’s not unusual for them to ask for a lease. They need some verification that you’re getting that income so they either wanted to see checking account as a deposit over several months or they want to see the check itself or they want to see the lease agreement. And honestly, I’ve had a lot of people who say, you know what, it’s my mom. We never sign an agreement. She’s been there for five years. I feel a little awkward asking her for an agreement. But you can go and do it for your application. I mean just go to, you know, Google a lease form. Certainly, the Department of Real Estate has standard forms you can use and there are all kinds of other forms that you can use, you know, that aren’t agency regulated in any way. But all you need to show them is what your agreement is the date that it’s good, and that it’s signed and the amount.

So, honestly, just make it up and you don’t even need to postdate it. Date it the day of your loan mod application. Really keep in mind for underwriting of loan modifications, honestly, they’re really not trying to trip you up and they’re not doing like a forensic audit or they’re not trying to find dead bodies or anything in your finances. They really want to just check off on the list that you have done what they ask you to do. And if they’ve asked you to do that, just do it.

All right Jen says, “Our combined income so high that we do not qualify.” Okay, here’s an example of what I was talking about earlier, folks. Jen says, “Our combining come so high we don’t qualify. Our loan amount is interest only.” So, she’s saying that to mean that their payment is low. “And our high income makes it only 28% of our income.” So, she’s got kind of double thing going on. She’s got good strong income and a low payment because she’s got an interest-only loan. And honestly, that is a real unfair disadvantage that interest-only folks have in loan modification that hasn’t been dealt with fairly. Because actually what I tried to on a number of loan modifications is mark it up to a fully amortized 30-year fixed loan and argue that this is what – you know, it’s normal to expect this person to be paying. And this is what you’re going to modify, you know, to a 30-year fix. So, why can’t we use that as a qualifying payment and get them up over the 28% or here, in this case, 25%?

I hope that made sense. But at any rate, it did to me. So, don’t worry if you didn’t do. So, here Jen, here’s what you can do. Sell the home short. No, I’m just kidding. What I would do is if we were talking on the phone, I would encourage you; first of all, I would torture your income. If either of you are self employed, let’s figure out a way to have a worst period. You know what I mean? Go back to your worst period. If you’re self employed and have a separate PNL for your business, give me a break. It’s easy to manipulate the numbers or torture the numbers until they confess. So, do that. Get yourself less income.

If you are strictly paycheck W2 employees, go back and make sure that you’ve calculated it correctly because a slight difference could make all the difference in the ratios, a slight error. So, go back and make sure you’ve done the 24 or 26 paycheck thing correctly. And then get into your payment. Make sure that that mortgage payment is tortured correctly. Make sure that its interest, taxes, insurance, homeowners association, private mortgage insurance, all of those things can be lumped in there and should be lumped in there. So, that’s all of the advice I can give you is torture your income down, torture your payment up.

And then if you still just can’t qualify for a loan modification, you might try that tip that I had argued before. And I don’t know what you’re doing in terms of how you’re handling this. But if you’re really serious about getting a loan modification or keeping the home long term, you might want to think about – you know, if you’re seriously in default, arguing that with them that you’re being penalized because you have an interest-only loan that there should be about $300 or $400 a month in interest or on principal that you’re paying down.

It just might work. The other thing I consider for you or recommend is consider other options like if you do have that good strong income, think about applying – and I don’t know what your house values are. But if your house value has diminished significantly so that you’re significantly upside down, think about this short refi or this homeowner’s mortgage restructuring product that we’ve been talking about. It might be right for you. So, rewrite at your mortgage down to 100% of its today’s value at about 8% interest. So, those are the numbers that you can kind of work with to see if that would be better for you.

All right, I got through my questions. How are you doing on yours? Well, you keep answering them online. Maturities [phonetic] at her bank.

Ryan Rockwood: Machiko says that her bank is trying to make her live in sin. She says, she didn’t actually say that but her bank says that the letter of contribution from the boyfriend won’t apply because he hasn’t physically live with me. That’s pretty shaky.

Mike Rockwood: That is a way shaky. I’ve never heard that before Machiko. Push back on it. Push back on a number one and why not have him …

Ryan Rockwood: Live with her.

Mike Rockwood: Live with her.

Ryan Rockwood: I mean, next time you call…

Mike Rockwood: Yes. Oh, guess what he moved in.

Ryan Rockwood: We got to talk.

Mike Rockwood: And listen, we’re [indiscernible], understand sin.

Ryan Rockwood: Based on – let’s just say Wells Fargo – based on your …

Mike Rockwood: Yes, based on your input.

Ryan Rockwood: On my marriage and we’ve decided to take the next step in our relationship. We’ve taken our relationships to the next level for loan mod.

Mike Rockwood: These people are so bad.

Ryan Rockwood: All right. And that’s it for tonight, I think.

Mike Rockwood: All right. We want to thank you for joining us and we hope that this has been valuable and we want you to remember to spread the word that on Tuesday nights we have the same service available for the public. So, tell your friends, relatives, neighbors and company-workers. And please pass the word around that we are available to work on short sales and loan modifications, and principal reduction products like this homeowner’s mortgage restructuring product nationwide.

So, please be our advertising. We sure appreciate it and hope that you appreciate this effort. Goodnight and good luck. Good?

Ryan Rockwood: Yup.