File Name: 01.05.10.LoanMod.DoItYourself.wma
Duration: 00:53:00
Ryan Rockwood: My name is Ryan Rockwood. This is my Dad my business partner Mike Rockwood. He wrote the book on loan modification. It was originally one first do-it-yourself style book back when everyone was into charging many, many, many, many, many thousands of dollars. And we thought wouldn’t it be a big success if everyone could go get a do-it-yourself book and do it on their own for a 100 bucks. You know that results were really mixed to tell you the truth. We’d had good results with the book but it turns that out do-it-yourself loan modification just isn’t for everyone. And I think we kind of being do-it-yourself we’re kind of guys, we didn’t pay as much attention as we might have to the fact that there is a point I think where you want to turn over to someone and that the thing is that people have vastly different scenarios here. I mean a lot of people will call and say, “Hey I want to do my loan modification myself.” Great! They’ve got 1 loan, 1 house, a W2 income (claps hands) it’s either they’re in or not. But other people have 6 houses and we had some people that it doesn’t sound like 6 to 12 different houses. And when you have that many houses they are not naturally income sources, so naturally you pretty much have to – you start getting 15, 20 income sources coming in and then you’ve got tax things going on, then you’ve got issues with court ordered childcare with all kinds of different funky ways that your income comes in and your income goes out. So anyway, we (laughs) do it for people as well and if that interest you I check in to that it’s very reasonable. But also the main thing we do here on these calls is just tell you that for most mere mortals it’s well within your grasp to do this yourself. And so we give you the tips and the tricks that you need and as well as the changing environment I mean we print our book on demand however, things change so rapidly that one week something maybe, the next week it may not be true. And I was just talking to someone today and saying that we’re just talking about the budget now it’s important these days really right at zero.
Mike Rockwood: Yeah.
Ryan Rockwood: Yeah, or a little bit positive, you’re really in big, big trouble with your budget.
Mike Rockwood: Last summer we were having success with loan modifications that were 3 and $700 negative.
Ryan Rockwood: Yeah.
Mike Rockwood: That’s weird.
Ryan Rockwood: So, anyway that’s the importance and then the idea behind the community. And like someone just said yeah, it is kind of a dark science, the dark science of loan modification. So,
Mike Rockwood: Well the whole dark science of foreclosure workouts. You know what I mean? The whole dark side of this credit implosion or the credit bus that we’re in, its dark stuff and its difficult stuff. It’s emotionally draining stuff and its stuff that a lot of us never thought we would have to learn.
Ryan Rockwood: You know I heard listening to something today that put it well. It’s saying something like the heart of this is that we have to disassociate our emotions with these problems until we can look at them as simply a mathematical problem.
Mike Rockwood: Yeah.
Ryan Rockwood: And no one ever got – been out of shape about not being able to complete an algebra equation. Well actually I’ve got quite an out of shape about that actually in math class [Inaudible – 00:03:42] but no one walks away from the exam as stupid human being for not being able to do trigonometry or something like that. But plenty of people when they get their notice from their bank and they sit around feeling like I’m a horrible human being and blah-blah-blah, so we’re going to try to help you look at this as a simple math problem ‘cause that’s really what it is.
Mike Rockwood: Yeah and recently I was interviewing an Indymac negotiator who has become over the years kind of a good friend. I first got to meet him when I was modifying my own mortgage about a year and half ago and he was very informed, very articulate kind of a high ranking guy at Indymac even back then. And so he stayed in touch when I was kind of reviewing with him, kind of an update on particularly about third parties and hiring people and the way that the bank seemed to be working against third parties. And that his comments kind of echo what Ryan was just talking about how he says he thinks it’s very interesting that homeowners call with such anxiety and such so apologetic about the fact that this deal went south. And he made a comment just like Ryan said, that you know it’s just math. And it’s not like you came in and stole $200,000 from the bank. What you both invested in decreased in value by hundreds of thousands of dollars. Now what are you going to do about it? You got to settle it. You have to settle, you have to write off some principal, you have to short sell it, you have to let it go in foreclosure, you have to give it to them in a deed and lieu. You have to do something or modify the loan. Something, something needs to be done. And it’s strictly business and he says to them in their meetings it is strictly business. But they realized that they can take advantage of the fact that homeowners are in distress and have great anxiety about saying I can’t afford to make the payment, I realize I’m in default just saying those words and actually you know having to face the Trustee’s Sale and maybe even having to lose the home. They’re just very emotionally laden things but he made the same observation that Ryan did that people will be better off if they just realize it’s just business, let’s settle it. And millions, literally millions of people are arguing with the banks and negotiating with the banks right now about what to do.
Ryan Rockwood: It is -
Mike Rockwood: That’s what the foreclosure doctors are all about.
Ryan Rockwood: It is interesting no one at the bank is ever like in a meeting and they’re saying – well they probably do call homeowners a-holes and stuff like that to tell you the truth. But (laughs) not from the same personal – you do get the sense that bankers do really despised homeowners and the homeowners in distress especially.
Mike Rockwood: Their customers, yeah.
Ryan Rockwood: Yeah. However, it’s not personal as much as it is the woman who’s sobbing on the phone and saying she can’t pay when- Well what can you pay? We’ll take it. And then we’re foreclosing. Anyway, as with introduction we have kind of a -
Mike Rockwood: You already said that.
Ryan Rockwood: Ops (laughs)
Mike Rockwood: (Laughs)
Ryan Rockwood: We basically, our educational outreach is this. We have a Tuesday night and a Thursday night class like this. If you have questions you can send them in right now to questions@60mintueloanmodification.com and I will get those. You can also ask on the chat screen there. You can also ask your question there. However, sometimes I get moving too fast and I can’t follow while we’re on the call, okay?
Mike Rockwood: So these teleconferences are kind of a natural extension of the work. You know we work right up until this time and we get on the phone and we get on the video and we talk about what we’ve been learning because Ryan and I are working foreclosure workouts every single day. So we’re working with banks, working with homeowners, figuring out short sales, arranging for deed and lieu transfers, working short sales all around the country. So what we bring you is not academics but street smart information about what’s going on. And we always like to bring out a little bit of good news. So today I will share with you a couple of good tidbits. One of them is you know we’ve been a little bit concerned. If you remember during the July – September time frame the President really got over the banks for not working on his Making Homes Affordable Program and not actually getting very many people started in modifications? And he put a lot of pressure or the Administration put a lot pressure on the banks and so in a short period of time, they got 650,000 people on to trial modifications. Well the fear was that those trial mods were not going not be turned into permanent mods. And today I have a real great story to tell you. We had -
Ryan Rockwood: However, I’d like to say, we have good news to tell you but those concerns are certainly [Inaudible – 00:08:54]
Mike Rockwood: No, they’re very valid. But I do like to pass on good news when there is good news. And that is that a client this morning was approved for exactly a renewal or an extension of the trial modification payment. So his payment had been reduced by almost 30% for the 3-month trial and then when the trial ended they – indeed it was Indymac sent him confirmation that he could continue at that payment for 10 more years and then the loan would convert to – it’s going to be interest only for a period of time. This is kind of a unique one. And then after 10 years, for the remaining 15 years on the loan, it is an amortizing loan so the payment goes up but it’s principal. He got a real nice interest rate and just a real sweet deal. So that’s good news and hope, hope, hope for the future that more and more of these trial mods are just going to be – you know maybe if you can validate the information upon which you got the trial mod then you should be right in there. And that’s what this client did. All right, shall we start talking about short sales?
Ryan Rockwood: Yes, let’s do it. Now, I would think if I was – and let me also – I should say we do so many of these that we forget that some people are joining us for the first time. If you are, welcome. I don’t want you to feel overwhelmed. When we get into this discussion of things, just let get go over your head. If it’s going to over your head kind of-
Mike Rockwood: [Inaudible – 00:10:18]
Ryan Rockwood: file it away and recall this sometime in the future when you get to that stage where the question is appropriate for you. So don’t be overwhelmed and zone out and go away. Anyway, what we’ll do is today we’re going to talk about short sales versus loan modifications. We talk about all kinds of things too but I do want to say that don’t be surprise that we’re huge advocate of short sales. You might be surprise because we don’t really have a short sale product to sell here. We’ve got a loan modification product to sell. But short sales are a fantastic solution -
Mike Rockwood: Yeah.
Ryan Rockwood: -to a lot of life’s problems today and you may it’s something of a mistake to think that you may only need one or the other. In many cases, it may be appropriate to do a loan modification and a short sale even if you have no intention of ever doing a loan modification or going through with it or something like. It’s a nice tidy way to stall things for a good 4 to 6 months.
Mike Rockwood: Well either can use to stall your foreclosure and sometimes clients just plain need to delay the foreclosure because they’re not sure about the best work of strategy and so either of these can be good delay tactics. But ultimately, loan modification, we always advocate that everybody do loan modifications because they’re so cheap and they’re so easy. I mean our kit is like a 150 bucks and it takes you an hour to prepare your application. Unfortunately, these days it takes you six weeks to follow-up on it. But loan modifications are easy and a lot of our clients see them as short term solutions to their problem. Let’s say you’re 25 to $250,000 upside down on your home and you’d love to stay there if you could but honestly, more than 50 or $100,000 upside down, you’re not likely to ever see that recover over that time that you left on the mortgage or heck even in your lifetime maybe. So it doesn’t really make sense and at some point you’re going to have to make an agreement with the bank if ever you’re going take the house bank because the collateral just imploded, the value of the collateral declined or you’re going to have to sell a short in the future. So a lot of people just see that loan modification as a temporary band-aid. An opportunity to stay in the home for a year or 2 or 3 or if you get a really good modification maybe 10 or more but ultimately if their values don’t increase in those hardest hit areas like Florida, Southern California and Nevada, Arizona, couple of parts of Texas. If those values don’t come back, then ultimately you’re going to have to deal with a short sale. And short sales Ryan is right. We absolutely love them. Most realtors will tell you that they are the sale from hell and you don’t want to get involve in them. They take forever and they don’t take forever I mean they can, we’ve had short sales that have taken 2 full years but we’ve also have had short sales that take 45 days. A lot of it has to do with the intent of the seller. If the seller really does want out of the home fast, then we generally can get them out of the home fast. A lot of times clients will say to us, “Listen, I don’t see any way out this. I’m going to stop my payments, sell this thing short for me and honestly I wouldn’t care if I live here for another year.” And so that’s what we set about doing. We set about meeting their best need. So, that’s beauty of the short sale as you can kind of travel it. You actually are – it’s pretty easy to travel the speed because the banks I’m telling you, if you weren’t all over the banks the banks would take 6 months to approve a short sale in the first place.
So let’s just review a short sale or a short payoff is when the lender agrees to accept less than is owed on the property. For an awful lot of properties that were purchase in the housing run-up between like 2002 and 2008, there were an awful lot of homes that had second mortgages, first and second. And because values have declined in many parts of the country more than 25 or 30%, a lot of times that second mortgage is toast. They’re actually – they have no equity left in the home on which they lent the money. So you have a little bit of a negotiation that has to go on between the first mortgage and the second mortgage. Sometimes, the first mortgage is in fact going to be able to cash out completely. I’m just closing one this week in Southern California in which that’s the case. The first mortgage is going to be completely on hold. So, they of course approved this deal. There’s nothing for them to approve really. But we had to negotiate hard with the second because they were only going to get about $3500 of a $150,000 that they were owed. Normally in California that wouldn’t be a problem because if it was purchase money loan, there’s recourse they’ve got to accept it. The seller, the individual is not personally liable. That’s the beauty a non-recourse state. However, this seller had refinance and taken some money out of the home and the seller’s lawyer determined and consulted with us, determined that in fact the second mortgage did have a recourse.
So like we’re doing with all kinds of folks in Florida, we came to an agreement and took the seller’s bringing some cash. Most sellers in cases like that have to bring between 10 and 25% of the short fall to pay off or to strike a deal with the lenders. So a short sale is selling the home short, all lien holders have to be satisfied and have to sign off on the deal. It’s extremely easy to do and so many of our clients are so relieve that – cause from the seller’s perspective, let’s say you’ve a got house, your $200,000 upside down, it’s a $600,000 house and you owe 800 on it. Getting out from under that $200,000 loan can be very, very freeing. You stop your payments; you don’t make payments during the short sale process at least 99.9% of clients stop making their payments. You are not charge any of the closing expenses. The reality is you already lost all of your down payment and all of your investment and all of the sweat equity that you put into the home during the time that you’ve owned it. That’s all lost. The bank is losing now and taking their lost and taking it on their books. So that’s what the short sale is all about. And then at the closing, very often we can time the closing in such a way that it makes it really convenient for the seller to get out at a convenient time with plenty of warning. You always have at least 30 days notice of the closing date. So it’s really quite a good solution and then the beauty of it also is that you wrap up all those liens. You get them to sign off as payment in full and they are precluded from taking any kind of court action to getting any kind of judgments against you in the future.
So people leave short sales knowing that everything is wrapped up thick as a drum. You do have to be concerned like you in all workout solutions about the tax liability ‘cause any forgiven amount can be a tax liability. And again, like Ryan was saying we very often counsel our clients to use short sale or loan modification sometimes even in conjunction with one another because you don’t know what will be your best solution. If you get through the loan mod process that maybe takes 6 or 7 weeks, and you don’t get a good offer, let’s say you just can’t find a way to qualify for a good loan modification, then you might want to go ahead with the short sale process. And very often finding a buyer takes you 6 weeks. So we often recommend that customer start the process in parallel. Now there are lenders like B of A who have a hard time with that and don’t like – won’t work with us to let the lender be considered for either. So when that is the case, you just don’t notify the lender that you have the home up for sale. It’s really none of their business. It is after all your home and you have a right to put it up for sale. So there you go. We will not take your questions on short sales, loan modifications, deed in lieu or any kind of workout solutions including short refis, settlements -
Ryan Rockwood: Hey, Scott -
Mike Rockwood: -walking away,
Ryan Rockwood: Scott’s chatting in with a question here.
Mike Rockwood: Okay, go ahead Scott.
Ryan Rockwood: He’s asking, is there a difference between eminent default HAMP and regular HAMP modification? Did you know of anything?
Mike Rockwood: Yes, yes. Good, good question.
Ryan Rockwood: I may have misspoken that I told him that I don’t so.
Mike Rockwood: Yeah.
Ryan Rockwood: He follows it up with by saying that he’s reading a directive 95 I think it is something like in which Directive 09-05 are sounds like they calculate income differently like allowing negative rental income to factor in. Know anything about that or do we need some more research?
Mike Rockwood: No, that’s very – I’m glad he actually gave us a call. We’ll actually look that up and figure that out. But here just ‘cause – I’m sure a lot of us don’t know what this eminent default is, I kind of laugh when I hear about it because it was really a term coined by the Obama Administration in the kickoff of making homes affordable back in March of 2009. And it became laughable because all the big banks formed this eminent default departments which became – I mean some of them literally were just a phone number and -
Ryan Rockwood: A warehouse in Nebraska.
Mike Rockwood: Yeah. And a website you know but non-website. There was no staff; there was nobody to return your call. There was nobody to talk and treating people who are in eminent default was thought that it was going to be a great way to prevent people from getting into default. So what the thinking was that you expedite their modification because they’re almost in default. It’s eminent. But as it turned out in fact, they turned out to be just a wolf in sheep’s clothing. And in fact just prolonged the agony and really just became a collections department that put off and put off the modification just to get more payments out of the homeowners. And I’m sorry if you don’t think that’s true, I can tell you case after case after case in which it was true. I’m sure there are hundreds of people around the country who have worked in this eminent default departments and think that they’re doing some good. But I got to tell you, it was a laugher. And actually, in recent months I haven’t even heard much about those organizations because most people have come to accept the fact that if you want a modification, you go into default. That still is the case coming up on a year since Making Homes Affordable was introduced. But that was – so the eminent default treatment of your Making Homes Affordable modification is supposed to be expedited but in fact it never was. The actual terms of the modification I don’t believe are any different. But we’ll sure look into that. Thanks for the question.
Ryan Rockwood: Okay, so we got another question here from -
Mike Rockwood: I’ve got half a dozen of that I was given before I sat down to if you want to take some of those Ryan?
Ryan Rockwood: Okay. Yeah, why don’t you go while I find a good one that will make -
Mike Rockwood: Okay, I got half a dozen that came in the last hour. Shirley says, “I’m making offers on short sales and my agent always resist making low offers. And we argue about it. Shouldn’t we be offering low and let the seller counter?”
Okay, let’s just think for a minute. So Shirley is a buyer and she’s out shopping in some of the homes that she likes are short sales. She wants to offer real low and her agent gives her some push back and says you know he’s arguing to offer closer to list price and the agent’s motivation could be suspect because the agent obviously just wants to collect the commission. But the agent could also be well informed about the fact that’s it’s not going to go for much less that list price.
So let me give you my 2 cents worth on that. It’s pretty easy to predict what the bank will accept on a short sale. By and large, we routinely get short sales sold for 10% below market price. Now, in recent months it hasn’t been so difficult but last fall it was almost impossible to tell what market price was because it was dropping so steadily. But now things have kind of stabilized. So what we do is we get market price and of course you use comes within a mile and within 60 days like the appraisers have to do. Those are real comes. So you use those comes, you get market price and then offer 10% lower. And you sure should be good. But here’s the other problem, good properties always draw a crowd. And these days there are actually are a lot of buyers out there and there a lot of investors out there. And so particularly in homes that are below FHA and below Fannie Mae and Freddie Mac guidelines. There are a lot of buyers and so what we find is when we have buyer who’s making low ball offers on short sales. Sometimes they really do lose out on a lot of them because there are 6 or 8 or 10 people that are offering on that. And so you really have to just use common sense in terms of what you’re going to offer, number 1.
And number 2, if you’re going to use that strategy of making low offers on short sales, got to make a lot of offers. You got to make an offer on almost everything that fits into your description. You know your geography, the size, the type of home, so I mean literally you have to put a machine together that can make 2 or 3 offers a day.
Ryan Rockwood: Yeah.
Mike Rockwood: So you got 20 or 30 offers.
Ryan Rockwood: That depending on which state you’re in. You got to stop going to see these homes or it’s really lame.
Mike Rockwood: Yeah.
Ryan Rockwood: Get a criteria down, how many bedrooms, how many square feet,
Mike Rockwood: What’s it [Inaudible – 00:25:40]
Ryan Rockwood: and write 20 offers.
Mike Rockwood: Yeah.
Ryan Rockwood: I mean throw something out there or it’s kind of those the universe can’t throw one back unless you throw a couple (laughs) of house there.
Mike Rockwood: Well in fact I’ve got one client who has had success in recent weeks. He’s gotten 3 short sales approved in recent weeks but honestly he spent 3 months making offers. So all of them take long time and you lose out on 75% of them. So you got to have a lot offers out there. Okay that’s to answer Shirley’s question. So Shirley, you’re both right. You’re right and your realtor is right. But honestly, you want to be in lockstep with your realtor. So settle it with him about your strategy so that you don’t have to argue about it all the time. Okay.
Ryan Rockwood: I got another one here.
Mike Rockwood: Okay.
Ryan Rockwood: We are about 3 months, this is from Michael Pea, we are 3 months late or our mortgage and car, my wife is worried that we are getting a certified mail. If I go and sign for the certified mail, will it put in some of sort of a disadvantage? Is there anything they can give me that I can’t get over the phone? What do you think about that?
Mike Rockwood: Well, you want to -
Ryan Rockwood: I don’t think that I can – I don’t think you can ever say like, “Hey, I just didn’t get my certified mail. You can’t foreclose on me, can you?”
Mike Rockwood: Yeah, but what they’ll do is they’ll serve you with papers and they’ll be Notice of Trustee’s Sale 3 months from now. So you don’t want -
Ryan Rockwood: Yeah, but they don’t have -
Mike Rockwood: You see there’s something wrong of getting -
Ryan Rockwood: They don’t have to do that certified mail, do they? Can’t they just serve it at the house? C3an’t they lose it on the house?
Mike Rockwood: Yeah, yeah you’re right.
Ryan Rockwood: You know what I mean.
Mike Rockwood: You’re right.
Ryan Rockwood: So I don’t -
Mike Rockwood: No, there’s nothing. You should go ahead and get that stuff.
Ryan Rockwood: I think as far as we know. And you got to – get your stuff. It’ll give you peace mind and it’s not also like you’re running from stuff.
Mike Rockwood: Yeah. No, absolutely. You got to just go get that stuff and figure it out. And remember the clock started ticking a couple of weeks ago when they first sent the certified mail, better that you know about it. And everything is so predictable in the foreclosure process that you just don’t want to be afraid of it all. It’s very, very predictive, you’re very, very well protected and it’s real clear what’s going to happen at every stage.
Ryan Rockwood: And leave those variables out there too. You’re always wondering what else is out there? What’s going to come and hit me and-?
Mike Rockwood: Yeah.
Ryan Rockwood: Okay, he follows it up saying him and his wife travelling back and forth between 2 cities for work. What are the pitfalls of showing her expenses up to the place where is staying at her job?
Mike Rockwood: Sure.
Ryan Rockwood: What will the mod people think of me using my account in the Southern City? Must we give them all our bank accounts? And the answer here Michael is going to be – it’s going to depend on who’s on that loan. If you’re both on the home loan, you both are going to have to do it. If it’s just you or just her on the home loan, then you have a great deal of flexibility. Meaning that you can show all or part of your spouse’s income and that’s a big, big tip that has gotten a lot of people loan mods who -
Mike Rockwood: But Ryan, what I don’t get here is I think Michael that you’re thinking you’re going to get too much underwriting scrutiny. You really aren’t going to get a lot. Remember if this is a modification on your primary home, the lender is very motivated and compensated to get you a modification and they want to give you a modification. They will cooperate with you They’re not going to be looking to think like where your charges were made and that kind of stuff.
Ryan Rockwood: Well he has been turned down in the past when he was still current so he’s probably feeling like, “Hey, I don’t want to screw this up again.” You know what I mean?
Mike Rockwood: Yeah.
Ryan Rockwood: So I can understand. The thing is must we give them all of our bank accounts? The answer is I mean like technically you have to give them what they ask. However, we have had clients with great deal of success ignoring request.
Mike Rockwood: Sure.
Ryan Rockwood: Or certain things like -
Mike Rockwood: Well here’s the deal Ryan-
Ryan Rockwood: a 4 in 1 key balance or something like that or something like that, a print that can’t lie.
Mike Rockwood: You know there’s a checklist that says what they need and they were given that by a lawyer and it says checking and savings account.
Ryan Rockwood: Yeah.
Mike Rockwood: So give them a checking a savings account. If one of your savings accounts has an awful lot of money in it, don’t give them that one.
Ryan Rockwood: Yeah. That you know maybe – I mean each case is unique. I mean if your are person that is * self-employed and uses a husband and wife checking account, now you get into some difficult area because proving your income maybe – it may not be that they want your bank statements as part of routine, it might be that they want that as part of proof of your income if you want a W2. So then it gets a little bit more complicated. You see what I mean? But you try to give them the simplest thing, meaning that if you’re both W2 and you have 3 checking accounts, absolutely you try to get by with giving them one. Okay and then lots of people are in your situation Michael with having to travel and in fact, some people have to go so far for work that they have to get another place and they have to show another rental and stuff like that. So all you can do is just try to make the best of your financial situation, put your best foot forward with them.
Mike Rockwood: But let’s remind everybody that it is predictable about whether or not you will get approve for loan modification, it’s crazy predictable. And in our 60-Minute Loan Modification Kit, we explain to you real clearly what ratios you need to have for you frontend and your backend DTI and what kind of cash flow you need to have and how you need to substantiate your income. So it’s not really magical and it’s not squishy at all. It’s real simple. All right, let me take a question here Ryan.
Ryan Rockwood: Well I think this might be a follow-up?
Mike Rockwood: Okay.
Ryan Rockwood: Should I pay my taxes and insurance separately? We are 3 months behind.
Mike Rockwood: It doesn’t matter.
Ryan Rockwood: Okay.
Mike Rockwood: It doesn’t matter.
Ryan Rockwood: Doesn’t matter meaning?
Mike Rockwood: It doesn’t matter if you do it or not. It’s entirely up to you if you intend to get a loan modification and keep the house – either way you have to pay the insurance. But here’s the deal, some people feel like they should stop making all payments if they fully intend to let the house go eventually. If all the workout, foreclosure workout efforts really they know are going to end in losing the house one way or the other because they’re just too upside down? If that’s the case, then I wouldn’t be making be my tax payments because that’s going to come out of the settlement.
All right, I think I just told somebody not to make a tax payment. Woo! What, do not show this one to the attorney would you? We should – we got to do – remember that more often these people -
Ryan Rockwood: We really supposed to say, we’re not attorneys and -
Mike Rockwood: I’m just saying we should think about a disclaimer.
Ryan Rockwood: We’re not attorneys and we’re not -
Mike Rockwood: What else aren’t we?
Ryan Rockwood: surgeons, airline pilots -
Mike Rockwood: And we’re not CPAS.
Ryan Rockwood: Yeah. And so anyway, all we’re telling you here is what other people are experiencing if that’s financial advice in fact. I think it’s just like -
Mike Rockwood: This is just we’re reporting.
Ryan Rockwood: – a club or something.
Mike Rockwood: We’re reporting the way that we see it. Hey, here’s a guy. Wait ‘til you hear this one Ryan.
Ryan Rockwood: Okay, I do want to say though we did talk about some credit stuff, (laughs) and I want to tell everyone that if you have credit card debt, if you are on a call you sign up below for the little option box like right here. Put your name and e-mail or better yet just go to -
Mike Rockwood: Nobody can hear them.
Ryan Rockwood: No.
Mike Rockwood: There you go.
Ryan Rockwood: There you go. And let’s just go to cc.ryanrockwood.com and sign up right now for our credit card club. It’s like 25 bucks a month and we’re walking people through the step of settling their credit card bills themselves. It’s not like you pay us any money to do it. You just do it yourself. The thing is that I talked to one guy today and he’s nice a guys, he said that you really [Inaudible – 00:33:44]. I said, hey you might want to check his credit card, we have 2. You know I don’t want to declare bankruptcy. I don’t want to mess with my credit.
Mike Rockwood: Really?
Ryan Rockwood: Stuff like that. And I got quite a bit of pushback and I felt like I was being silly by telling about and I thought well… so when I do explain it to him that selling credit debt yourself is something that you can do and it 2 years have a fantastic credit report as opposed to bankruptcy-
Mike Rockwood: Right.
Ryan Rockwood: -were you still got to probably a big chunk of that money back and your credit going nuclear for like 7 years.
Mike Rockwood: And you spend 2 to $5,000 on an attorney to help you with that.
Ryan Rockwood: Yeah, well that’s true.
Mike Rockwood: Yeah.
Ryan Rockwood: So anyway, I just somehow we have to start to break down some of those barriers around – a lot is that just like we were talking about bankruptcy is a legal system that’s in place.
Mike Rockwood: Yeah, so people trusted.
Ryan Rockwood: And people trusted.
Mike Rockwood: Yeah.
Ryan Rockwood: You know its okay to go that route. But credit card debt settlement like loan modification is somewhat -
Mike Rockwood: Sure.
Ryan Rockwood: – of a Wild West.
Mike Rockwood: That’s why I think the service that you’re providing and having a community of people, a coop where people can hear from one another and get case studies and testimonies about what people are doing right now with the various lenders is the way go. Because that’s what I want to hear about if I’m in that, if I’m in a corner and I have no resources to pay off my credit card debt. I want to know what somebody is doing, all around the country I want to hear from 10 people that I’m working with, Bank of America on their credit debt right now. What are you doing and what kind of success you’re having? So that’s the beauty. That’s the beauty – see that’s why I think that information needs to be timely. I call information that isn’t timely, just data. You get these books with all these data and it’s on the shelf and you know it’s on the shelf but you need an answer to a question you have, you need application right now. So if you need information and you get information from these forums that you’re providing and the teleconferences that you’re providing, that’s good stuff.
Ryan Rockwood: Okay, sorry go ahead I know you have lot of questions.
Mike Rockwood: I love this question because we haven’t had it ask for months. I wonder why. But it says, “Can I pay the realtor for giving priority to my offer on his short sale? Don t you love that?” That’s only if it’s my short sale (laughs). It’s patently illegal, blatantly illegal, crazily unethical.
Ryan Rockwood: I don’t know is that you?
Mike Rockwood: No but it’s done all the time.
Ryan Rockwood: (Laughs)
Mike Rockwood: That’s just very, very frustrating to me because in all the short sales we do, we do have to sign a form that says, that we in fact are not related to the sellers. The buyer is not related to the seller, there’s been no agreement about long term rental. There’s been no agreement about buy backs. There’s been no agreement about any money exchanging hands and anything other than this contract and we have to sign it. I don’t know about you but signing contracts means a ton to me, it means a lot to me. So I just plain and I have people offer me all the time, “Here, let me give you money as a kick back for giving me priority on the offer on this deal.” And I just won’t do it and if your realtor will then I’d be suspicious of that realtor. But I know that a lot of people are doing that just because so many people offer it. But it is a no, no.
Ryan Rockwood: Okay, we’ve got one here from Fred, I’m self-employed for a seas Corp, primary residence, [Inaudible – 00:37:19] 50% of the mortgage to the corporation since home based business, no other residence. First is 25,000, second is 1200, primary income reduced by 40% due to reduced business income, ouch, income flow equals 2,000 a month, income cash flow 2,000 for all expenses.
Mike Rockwood: You’re totally screwed.
Ryan Rockwood: What are the chances? I’m afraid your analysis isn’t too far off because I think what it’s saying here is-
Mike Rockwood: No, he’s totally screwed, yeah.
Ryan Rockwood: -is that his income is $2,000 a month.
Mike Rockwood: And he’s got almost $4,000 worth of mortgage payment.
Ryan Rockwood: He’s got-
Mike Rockwood: So he had credit card debts, he got car loan -
Ryan Rockwood: And he’s got another 1,000 [Inaudible – 00:38:00] right?
Mike Rockwood: Yeah.
Ryan Rockwood: So there is no way on God’s greener Fred that you’re going to get a loan mod under these circumstances. Now he is saying here that he has rented half of the stuff to his business. So he’s saying to us that he’s eliminating half his mortgage expenses, however it’s still going to show up as a negative. You know what I mean? Is there a way to structure it so that his business -
Mike Rockwood: Well, at the bottom line is either you or your business, it doesn’t matter where you put the house, put the home mortgage in the house if you want. It just sounds like you business revenue is just gobbled up by all your expenses. So here’s just the rule of thumb is you want to take your mortgage, you want to take your monthly debt payments and divide them by .7. Take all of your debt payments, your car loan, all your credit card minimum payments, your mortgage, your second mortgage, taxes, insurance, property taxes that is, homeowners’ association, all that stuff that they’re going to use to calculate your DTI, your Debt to Income Ratio, take that number and divide it by .7. So now you will have the income that is the minimum threshold that you’re going to need to qualify for loan modification. So you need at least that extra 30% ‘cause if you have a back-end DTI of over 70% they just won’t approve it. Their underwriting criteria will say this person is in too much debt, they can’t make it. Don’t throw them a life preserver. Throw them a rock so that they can sink faster (laughs).
Ryan Rockwood: How about -
Mike Rockwood: Sorry, was that unkind?
Ryan Rockwood: I hope not. He sounds like a nice guy and I sure feel your pain.
Mike Rockwood: Yeah.
Ryan Rockwood: The problem is -
Mike Rockwood: So you got to go crazy and get a few more thousand dollars a month in-
Ryan Rockwood: You got to-
Mike Rockwood: -more income.
Ryan Rockwood: You got to get more income.
Mike Rockwood: Yeah and remember Fred, get creative about ways to do that. The banks will accept letters from relatives committing to pay you money. If you have a relative that sees that you’re just in an income slump and has the where with all to pay you a thousand dollars a month to help you through this difficult time and will write that in a commitment letter, the bank will accept that.
Ryan Rockwood: Contribution letters, rent rooms out of the house,
Mike Rockwood: Yup.
Ryan Rockwood: Figure out,
Mike Rockwood: Rent your garage out.
Ryan Rockwood: Yes, figure out what you can do to make that happen. That’s definitely a tough situation. Someone who really needs a loan mod and is not going to get it unless he jumps through some hoops. The other thing I can about that -
Mike Rockwood: I got a client in kind of a similar to this today and they were a little closer. They just needed to scope another 12 or 1300 bucks. And as they went through it, the wife was kind of going, “Well, I don’t know, maybe we just can’t do this.” And I said, “Okay, but I think you’re resigning to lose your home because look at how much of your income that was over 80% is going toward debt payment and this Making Homes Affordable Loan Modification that you’re trying for is going to shave a quick thousand dollars off of your payment. It’s the very best modification you can get. And Fred if you can quality for that one, it’s worth jumping through hoops. You know contact your rich uncle or your best friend and just explain what you’ve got to do and get a contribution letter from each of them. And rent a room or do, just put tape and hairpins and bubblegum and hold those whole thing together and get that modification ‘cause it can mean a thousand bucks a month for you. And if you’re only making 2,000 bucks a month, that’s a 50% income increase. It’s significant. So fight on.
All right, I got a question here from Al, he says, “Will I be able to negotiate repairs after a short sale approval?” I think he means after his offer gets accepted by the lender and the seller. Will he be able to negotiate for repairs? That’s a good question Al. And my advice always is to not expect it. Here’s why. When you submit an offer and the realtor agrees to submit that offer to the bank. They attach to it – I had one form that is the housing development form that is required by the Real Estate Settlement Procedures Act that stipulates exactly where all the money will go. All the fees, all the payments, the commissions, all the costs are there. And when a lender approves that and sends it back to the Title Company, back to the Escrow Company, back to the Realtor, back to the seller, they agree and they say in writing that’s how much money you have to get. Not a penny less and that has to be in our account by a particular date. So any negotiation that you do in the ensuing month that you’re working on getting it all closed really puts the whole deal into jeopardy. So I never advice people to go after short sales betting on the come like sometimes you do when you see that the roof is going to need repair and you know that you’re beating out some competition by a higher price. Don’t do that on a short sale ‘cause you won’t get the money out of the bank. You’ll waste your time and your agent’s time and you might lose another buyer for the seller. So don’t do it.
John Ax asks this is a forensic loan audit question. Forensic loan audits for those of you who are new, are audits of your loan process to see if there were any illegal activities having to do with predatory lending, what’s come to be known as predatory lending, that maybe use as leverage against your lender in a negotiation for a deed in lieu or for loan modification or for short sale. So, John asks, which violations that you get from an audit do you see getting results with lenders? And so his question is, here’s the deal there’s all kinds of violations that took place. Some of them were just inadvertent errors that had to do with the fact everybody; everybody was rushing to do loans, appraisers, inspectors, brokers, realtors, buyers, sellers. Everybody was going so fast that some things got overlooked. Those are violations that the lender knows full well they will get a hand flat for, they’ll get a citation, and they may get nothing at all. So those violations while they are important, they won’t hold up in court and get you any money and that’s what you really care about. There are an awful lot of violations that will however discrimination, fraud, consumer protection law violations, those will and it takes an attorney to kind of tell the difference. However, here’s what has been my experience that generally speaking, it’s very easy to pick out 3 or 4 violations of RESPA and TILA, Truth and Lending Act and Real Estate Settlement Procedures Act. It’s pretty easy to usually find 2 or 3 or 4 of those and usually we do that in conjunction if we find more serious violations like discrimination or inflated appraisal or an annual percentage rate miscalculation, misstatement on the Truth and Lending Act form. What we’ll do is we’ll use those in conjunction with the more serious one to paint a pattern or show an intense to deceive. So naming the violation, you can’t really say which violations that you get for an audit you see getting results, it’s more in the presentation. And people find that that’s more difficult than actually finding the violations, is present again in such a way that is effective.
Ryan Rockwood: I got a question here about forensic audit.
Mike Rockwood: Okay.
Ryan Rockwood: We’ve got a gal named Theresa I believed she’s written before that says that she’s interested in starting a forensic audit and I’m looking for her – although her name is familiar I don’t have any of her background info. So I know we had a – here we go, okay. So, basically how can Theresa get started and get a forensic audit. We offer them – we had a special at 995-
Mike Rockwood: We still do.
Ryan Rockwood: We do? Okay.
Mike Rockwood: Yeah.
Ryan Rockwood: That’s to cost $995, we have a-
Mike Rockwood: Yeah, they’re not cheap Theresa.
Ryan Rockwood: ‘Cause we have to have a professional audit firm do them for you, right?
Mike Rockwood: Yes.
Ryan Rockwood: You had that one handy. We got one back today and it’s about 20-25 pages. It’s a big document.
Mike Rockwood: Yeah.
Ryan Rockwood: Let’s see now. I’m going to look for – Theresa we have a page on the website about that. I think it’s – you know we’ll have to do – because I’m a little bit unprepared with it. Is there anything you want to talk about that?
Mike Rockwood: Yes. Yeah the forensic loan audit is very, very useful in that if – I always go right to the summary page. I guess you can’t make it out at all. But the company that we owe is recommended. Has been noble financial solutions here in Southern California in Foothill Ranch and they just did there – they’re consistently good work and insightful and they never seem to miss a thing and you get a summary that really gives you an indication of whether or not you got any beef, you got anything that you use and then what we do, what I’ve started to do on every loan modification is send – I do my own do-it-yourself loan forensic loan audit. And I send those results to the legal department at the same time that I sent my loan modification. On this particular client, because we did a full forensic loan audit not just my own personal one, we’re going to – she’s going to actually hire an attorney to present this information to her lender because there are some pretty clear violations number 1, and number it’s a like $2.3 mortgage so it’s kind of a high stakes game. So the 3500 bucks that she had to pay in a retainer to the attorney kind of seems reasonable when you’re dealing with that kind of money.
All right, Ken asked, another forensic loan audit one, I didn’t realized I had these couple of guys. Ken asked, even if I can -
Ryan Rockwood: You know what? If you want to see – sorry go ahead do your thing.
Mike Rockwood: Ken asked even if I can do the forensic loan audit myself, don’t I need an attorney to really pursue any of the violation to get a settlement? Ken had heard me talking about my do-it-yourself forensic loan audit but because of legal issues we’re taking a lot longer for us to introduce that product than we thought it would. We thought that we’re going to have it done by Christmas but it turns out, no it’s probably going to be the first of February before it’s done because the legal beagles have taken it from Ryan and me and they’re scrubbing it. I hope it comes back with some usefulness. But anyway, Ken said, don’t I ever need an attorney to really pursue any of the violations? And here’s the key, I don’t think that you do. I think at on a standard loan modification that is highly likely to be approve, a forensic loan audit presented to the legal department and to the lost mitigation department in conjunction with your loan modification is a perfect way to get out of line which is what I’m always counseling people to do. You got to get out of the line up to the front of the line. It sets a tone to your whole loan modification that I know what I’m doing, I’m serious and I’m going to fight to get this modification done. So take me seriously. And so I don’t think that you need an attorney, I think that you may if you get refuse want to take it to an attorney at it just puts you in good stead having already submitted that information to the lender up front and then hire an attorney to pursue it actually in court. And you know I say that pursue in court but 99 – there are almost are no cases that actually get to court because all if these get settled before court. And you’re always offering to settle it with a loan modification, that’s all I want after all.
Ryan Rockwood: You know the I just had another question from Theresa, she said, hey I heard that short sales could take a long time and we kind of touch on that earlier, we said that in one case recently we just did 1-2 years but there are several ways to look at that and it’s not always a bad thing as odd as it sounds. Whether you’re renting in out, it’s wonderful to get rent for 2 years without paying any mortgage, there’s going to be damage to your FICO score but at some point frankly you get over that. And also, if you’re living in the house and can deal with level of on-going uncertainly, I know that’s not for everyone.
Mike Rockwood: Right.
Ryan Rockwood: Again 2 years mortgage free, hey, can’t do anything better for your finances if you can store that money away. So we really had a great call and I want to thank – let’s wrap it up because we’re reaching the end of our time here and I don’t want people to get bored, I don’t want people to be able to tune in here and have fun and turn it off and go on with their life. But if you haven’t become a client yet, for sure do it. You got nothing to lose, our product is 100% guaranteed. So go down on the page right here and sign up for the product. There are also some special offers in the e-mail that I sent out earlier today. So you can check that out. It’s in the P.S. section, at the bottom of the e-mail. Also, don’t forget about our Credit Card Care Program, we’re doing some really neat stuff there. So, thanks for everyone, thanks for chatting and e-mailing, you’ve made it a great call and we’ll see you Thursday. Now if you’re not a client, we won’t see you in Thursday so you still have 2 days to become a client. So don’t let this Thursday pass. All right, see you later.
Mike Rockwood: Good night, everybody.