Ryan Rockwood: Hi, everyone and like my dad, Mike, said welcome to the Foreclosure Doctor Teleconference. We’re here to secure sick homes one mortgage at a time. My name is Ryan Rockwood and as usual, I’m joined by my father and partner, Mike Rockwood.
Mike Rockwood: Hi there.
Ryan Rockwood: Before we get started, a couple of quick announcements. Like my dad said, we do basically have – if this is your first time with us, welcome. We have a pretty standard format and that is what we try to do is let you know kind of what’s going on in the world of loan modifications and workout options. We do try to take questions. And we found out that a lot of people are more comfortable e-mailing in questions. So if that’s you, feel free. That e-mail address is questions@60minuteloanmodification.com.
Now, it’s also important to note that we are also streaming this video on Ustream. And so if you go there and you search for 60-Minute LM Teleconference, 60-minute teleconference, something like that, you should find our show and be able to get it. Otherwise, you can also try – you know what, before I announce it, I’ll try to verify it a little bit later before I give it out. We’re trying to do an online streaming thing as well, okay.
Announcement number one, because of the title of today’s call, we had a couple of listeners who thought this is going to be a political rant. Sorry to disappoint you, but that’s not what we’re here for. A lot of people get excited when – I don’t know. Something seems to anti-Obama. I just feel like there’s like brewing class of people out there that are just dying to jump on the anti-Obama bandwagon. But we think he’s pretty cool.
And so sorry to disappoint, but anyway, that’s not really the issue. We’re here to talk about Obama’s administration policies and how they affect you and your mortgage, okay. Announcement number two, in case you’re new here, it’s Tuesday night. Tuesday night calls are for everyone. But Thursday night calls are for clients only. Basically people who have our loan mod kit or who are Done For You application clients. Tuesday calls are generally more information for getting started. And on Thursdays, we dig deeper into some of the issues that are rarely discussed.
Now that said, Tuesday calls are a little bit more fun usually because when you get into the specifics, it gets a little bit more narrow, and dull, and, you know…
Mike Rockwood: Details, you hate the details.
Ryan Rockwood: Maybe. But when it’s wide open, it is pretty fun. So, feel free to e-mail in your questions, questions@60minuteloanmodification.com and I look forward to hearing all your questions. Right now, let’s get into it, the truth about Obama Making Homes Affordable Plan.
Mike Rockwood: Okay, yes. What I would like to say about the program, first of all, just to give you an update, let’s go back in time. And we had hopes to play video as part of our streaming video for all of you. But it was as the President announcing his program back on March 4th. And on March 4, the President announced a new program that his administration was implementing that was going to cure all the ills of the programs that the previous administration had tried. And those programs had been dismal failures. And Making Homes Affordable has just been a failure so far. It certainly has been very well conceived. But it was full six months before it was implemented at all.
And a lot of pundits are taking shots and trying to figure out exactly why it took so long, why it isn’t working, and why it hasn’t stop the rising tide of the numbers of foreclosures. And so I don’t want to try to recreate any of what the political pundits are saying or certainly not what the economists are saying because that’s well beyond my scope and well beyond the scope of the folks that are involved in this teleconference. What we’re interested in is, specifically, is there something for me in this program and if not, why not? And how can I optimize my situation because that’s what it’s all about right now.
All of you are thinking about and taking action on your situation. So, whether or not the President has made a mistake or the Treasury Secretary or the FDIC Chief is out to lunch, that doesn’t really matter. What really matters is how can I get this screwed up mortgage fixed up so that I can either stay in my house long enough to either get the kids through school or until the economy recovers or until I can get a principal reduction modification on my note or whatever. But your primary driving force right now and your financial life has to do with trimming your monthly cost. And that’s what loan modifications are intended to do.
Now, the president’s program has not gotten any attraction yet. The special departments in all of the major lenders have been established and they have set up their criteria and they have started to operate their processes. But they still warn you right upfront that it will certainly be 120 days minimum before you hear back from them as oppose to the other programs that are much, much faster, usually four to six weeks. And those programs are not compensated by the government but they are modeled after the government program. And they are primarily given to people who are late on their mortgage.
Now, another disturbing fact about all these special departments that have been set up to handle the Obama administrations program, two things. Number one is they never say no. I probably deal with at least one everyday. And they never say no to us. So, they keep requesting additional information and asking us additional questions but they never say no. And I think, I’ve come to think, that it has to do with politics that it’s a political situation that and as long as they have 150,000 or 200,000 of these applications in the system, that politically they’re kind of off the hook. They can report that to the senators and they can report that to all the regulators. And they don’t have to report all of those that they have rejected. And they don’t have to diminish the numbers that are in the queue. So, I think that’s what’s going on there. But it is extremely frustrating for clients who are trying to get into that program and trying not to have to go late in order to do it.
Now, let’s just review the program a little bit. It’s called the Making Homes Affordable Program. And primarily the part that we’re interested in is the modification part of it. If you qualify for the refinance part of the program, number one, I’m not really as well versed as I should be on that program but primarily that’s because I don’t deal with anybody who qualifies for refinance if you have plenty of equity in your home.
Ryan Rockwood: Yes, we sure hadn’t had anyone.
Mike Rockwood: No. We just have not had anybody. So, the issues are you have to have some equity in your home, obviously. Your home can’t have diminished and valued too much, and you can’t have gone late on your mortgage, you can’t have a bad FICO score because you need to refinance. And also you must be willing, able and willing, to pay the fees that refinance costs. And these days, people are bristling at that a little bit when loan modifications are being handed out for free.
So, we’re mostly interested in the home modification part of it. If you were to — there really are five criteria that dictate whether or not you are maybe qualified for the President Obama’s Home Affordable Modification and that is if the loan you’re talking about is on your primary residence, if it is not a jumbo. In other words, if it’s low…
Ryan Rockwood: Let me jump in to remind people that they can send in questions at anytime to questions@60minuteloanmodification.com. Also, I did find out where you can go to see the show live right now. And it’s actually last week’s web page. So I apologize. The date’s wrong but it is live. Go to 60minuteloanmodification.com/september24 and hit play there and join us. Okay. Could I get you to move this way about six inches?
Mike Rockwood: Away from you?
Ryan Rockwood: Yes. Sure. Thank you.
Mike Rockwood: Hey, Ryan, I had one person report a time lag on the audio.
Ryan Rockwood: You can’t do both. You can’t – you can’t listen on the phone and watch on TV unless you know…
Mike Rockwood: Unless that time lag doesn’t bother you. [Indiscernible]. If you’re watching on the web, listening on the web as well, right?
Ryan Rockwood: Yes.
Mike Rockwood: Okay, now, the second thing for the Making Homes Affordable Modification is that it can’t be a jumbo. In other words, it has to be under $729,000, $750,000 the mortgage. You have to have a hardship. Well, you know, I should say – some of the folks are new to the call and don’t’ realize that you actually do have to have a hardship. That is your expenses must have gone up or your income must have gone down. Otherwise, lots of luck. Number four.
Ryan Rockwood: Well, I mean, a lot of people say, “Well my home equity loan, I spent it all.” So, that really isn’t…
Mike Rockwood: I can’t refinance this year like I have every other year for the last five.
Ryan Rockwood: So, I mean that’s somewhat in the middle.
Mike Rockwood: Yes. So, what Ryan and I do with clients like that is we help them dig a little bit deeper and see what is the cash drain that is ultimately draining their finances every month, and it’s really very helpful than to construct a budget and figure out where’s the money going. And honestly, that was a pretty common thing here in Southern California, in Florida, in a lot of parts of the country, Nevada, Arizona, to be refinancing every 18 months with nothing over the last five or six years. I mean you could easily pull out $50,000 or $100,000 each time and buy a car, pay for that year’s tuition for your kid, grant it for the kitchen, right, SUVs, trips. So, we use our homes like piggy banks and now, it’s kind of coming home to roost for us because the values have turned south. You can’t do that anymore.
The fourth criteria for the Obama plan is did you get your current mortgage before January of this year. So, the program obviously is just intended to help people who got mortgages before the major downturn. And number five is the payment on your first mortgage. Listen to this now. On your first mortgage including principal, interest, tax insurance, and HOA fees if applicable, more than 31% of your current gross income, now that is right from the Making Home Affordable website. So let’s be sure we’re all clear on that. If you take your first mortgage, taxes, insurance, principal, and interest, and HOA and if that amount is 31% higher than your gross income for your household every month, then you may qualify for the President’s program.
Now, if you pass those five criteria, then it’s possible that you will qualify. And then you must pass the additional hurdles which, of course, have to do with how much income you have, how many other debts you have, and what kind of loan you’ve got, what the current interest rate is, et cetera. So, what has generally been perceived as what would have been a very proactive and a very aggressive program to stem the foreclosure tide, it’s generally thought that the reason that hasn’t been very effective, number one, is it hasn’t been implemented? Number two, there’s a general feeling that we probably misdiagnosed the housing foreclosure, kind of the main tenants of the housing foreclosure rise.
The first six months of the housing downturn really was fueled by the failure of a lot of those what we call predatory lending practices. A lot of those stated loans, a lot of the adjustable rates that started out with no equity or even negative equity to begin with and then when values took the slightest tip then, of course, those homeowners were in trouble. But after a few, like, maybe probably six months, the foreclosure tide really started to be fueled by the traditional reasons for foreclosure.
Negative equity, that is the values of property nationwide, had sunk by 50%. So, when a homeowner has negative equity and has a traumatic financial event like they have to sell their home, they have to move, they lost their job, their hours got cut back, divorce, death, sickness disability, whatever, those two things intersect to cause foreclosure. And it’s not estimated that almost 60% of the current foreclosures are in fact those. They are, in fact, what you would call structural foreclosures. They’re in the system. They would be in the system. Whether or not, we had this meltdown in our financial institutions.
So, the remedies for that really are a pick up in the economy. We really need to get people back to work and we really need to stabilize home prices. And the only way we can stabilize home prices is to stop that foreclosure decline. So, the program absolutely has to work as much as it may be, as much as many people may disagree with it or disagree with targeting the money to be spent in that way. It absolutely has to slow the rising tide of foreclosures or the values are going to continue to drop. And with rising unemployment, this foreclosure wave is going to just topple all of us.
So, it has to absolutely – it has to work. And it feels to me in the last 30 days. And the only way I can really give you any guidance on this is to tell you my own personal experiences working with clients and on mastermind groups that I’m in across the country talking to other people who are doing loan modifications for a living. In the last 30 days there certainly have been more activities in the President’s program. So, it feels like absolutely positively does seem to be some action and some traction. And so we’re hoping that it is the beginning of some real significant movement in that area because if it isn’t, then we’re going to intersect another failed program with the seasonal downturn in the economy, in the housing market with the uptake and the unemployment. And this could be a very cold and long winter.
So, in summary, the Obama plan update is it seems to be starting to be employed or operational. Good thing, six months after it was announced, and it better be successful in the next six months or we’re really in trouble. And honestly, I think we all have to agree that we are really all in trouble because no matter how it goes, there are over 10,000 applications everyday still being submitted. That’s for loan modifications alone. So, that tells you there is general calamity and it’s a feeding frenzy. And so I encourage all of you to get super aggressive and super street smart.
I absolutely do not recommend what the government is recommending and what the banks are recommending that you get in line with everybody else at the non-profit and at your lender and you take their queue and you take their guidance for how to get a loan modification. It’s suicide, it’s asinine, it’s naïve as can be, so don’t believe it. If you are willing to let the government and the banks tell you how to get a loan modification, then I would like to sell you about a half a dozen short sales that I’ve got going in Florida right now because you are gullible.
So, don’t believe it. We’ve got to get out of line. We’ve got to get extraordinarily aggressive. We’ve got to understand street smarts. And that’s why you need to do your loan modification yourself. Don’t hire any of these loan modification outfits because generally they are a rip off. You need to do it yourself. You need to add the passion of what you have in the game, the skin you have in the game.
But you don’t need to do it alone and you shouldn’t do it alone because you shouldn’t have to go through the learning process that I went through. It shouldn’t take you three to six months to figure this out. You should be able to put together your loan mod application in 24 hours and get it submitted. That’s right, 60-minute loan modification application is what you really should be able to do and get it submitted within an hour or within a day. Pre-qualify the next day and then submit it that next day. All right, should we go to some questions, Ryan?
Ryan Rockwood: Yes, let’s do it. Remember you can send your questions into questions@60minuteloanmodification.com. That’s questions, ending in an ‘S’@60minuteloanmodification.com. And also, you can join us at 60minuteloanmodification.com/september24 – I know that’s not for today’s date but that’s where you can see us live. Okay.
Mike Rockwood: Can I take this one Ryan because this is kind of a lengthy one or you got one in the queue you want to grab?
Ryan Rockwood: No, go ahead. You’ve got one written down from earlier.
Mike Rockwood: Well yes, this is one caller who I told I would answer this one online.
Ryan Rockwood: Okay, one sec. Okay, go ahead.
Mike Rockwood: Okay, the client called from Florida. She’s a 62-year-old single woman, works full time, makes just enough to make her mortgage payment, owns a duplex that she thought would be a good investment for retirement, and now both homes are underwater. Her personal residence is underwater 45%. In other words, she owes an additional 45% on the home more than its worth, and the duplex an additional 35%. Now, she has adjustable rate mortgages on both properties and the current rates are quite low.
So, it isn’t really a payment issue. It’s an equity issue. She is able to make it a month in and a month out except that. Now she, next week, is going to lose – on the 1st of October – lose one of her renters. So, then she’s about $800 short every month. And so what she was looking for is some assistance. “Is there any way that I can work loan modifications or how should I think about this duplex?” She has significant savings that she could use to pay down some of the mortgages if that was in her best interest.
And the reason that I think this is a good one for all of us to hear is because it does represent the dilemma that lot of us are in because a lot of us bought additional properties during the property run up, right? And so we own homes that maybe used to be our own home, but we moved out of it because of value kept building, we just held on to it and we hold it as rental property.
But like this woman, Nancy is her name, we have to kind of rethink the whole thing in light of the fact that everything changed. Values dropped so significantly that we have to look at it with objective eyes and think about whether or not this is a smart investment for the next 10 years. It seemed like it would have been two years ago. But is it now? As particularly salient to people like this who are 62 years old, she estimates that she has to work at least five more years before she can afford to retire.
But think about it, if she just hangs on to that rental property, it’s more than 50% underwater, how is she ever going to recover that in her lifetime? Because if she’s 62, she’s probably not going to live to be more than 102, and it will take that darn long for that thing to recover at a 2% or 3% appreciation rate, which will probably get to in five or six years, right?
So, if she’s going to lose another 10% before we flat line for five years, before we start to appreciate, realistically she needs a wholesale principal reduction on that and her primary residence in order for this to make sense at all. So what she and I are doing is because she has kind of a unique situation, Ryan, she’s got a larger second mortgage than her first as one of the Florida properties that appreciated so fast that she took out a huge second mortgage.
And so what she and I are doing is putting together a very aggressive proposal for a loan modification requesting a reduction in principal on the second mortgages. And I think we’re probably about a year ahead of the curve but we’re doing everything we can to put together a real aggressive proposal that I think the bank will probably reject. But she and I are hoping that it’s going to be aggressive enough to trigger a very, very aggressive interim interest rate reduction modification by her lenders that will give her the two or three years that she needs so that she can hang on long enough to get a principal rate or a principal reduction in two or three years when you got to believe those kinds of modifications will be available.
So, I think this is just a good example, Nancy, of where we have to get super aggressive. We have to think out of the box and we have to do everything we can to be on the leading edge of getting principal reduction modifications.
Ryan Rockwood: If you are new to the call, just by some way of background, my father and I are both involved in real estate professionally. And when our income nosedived a while ago with the market, we learned about loan modifications the hard way. My dad actually took six months to get his first loan modification done. What did you get? Turned down at least six times or something?
Mike Rockwood: Yes, I started over three times just because they got so followed up. That was a joke.
Ryan Rockwood: So, the pain was so great but for some reasons, determination was also there and he finally got it. And he felt like to crack the code. He went on to write a book on it and that’s basically became the 60-Minute Loan Modification book and kit. And we recorded him actually talking to lenders on the phone. That’s part of our CD. We put all the forms together and so on. And since then, if anything – things have become a little bit more streamlined, I would think. I mean, it was really crazy out there for a while. So, it’s definitely gotten better. But what we’re seeing, we’re continuing to experience people that – or kind of target people are the people that don’t want to pay $3,000. They have someone do it for them. But you need some help. It’s a kind of person that gets by the tax book, reads the tax book and fills out their taxes, okay.
You’re not dumb enough to do it all on your own. But you have some time, you have some energy. And so we have a very moderately priced kit, which is fully guaranteed and you can go by that and live happily ever after. And then recently we added – it’s like another $150 now. The price just went up a little bit, but it’s called Done For You. And basically it’s the kit plus we call you, write your hardship letter with you and actually fill out your budget with you, you know, put pen to paper. It’s less the great value that we bring to it although actually that is pretty helpful. But what it really is about is ending the cycle of procrastination, fear, enough said, right and get people off their button.
Mike Rockwood: Well, Ryan, I think it takes that budget, which honestly people can spend days on it. And they use to spend days on it even with our kit. And it boils it down to about a 30-minute discussion because there are a lot of questions about the budget. And so it’s really helpful to have somebody on the phone where you can ask the question and get the answer right then. What does my ratio need to be? How will I document my income? What do I do about if I’m self employed? What is the housing-to-income ratio all about? How is my credit card? Do I use the minimum payments? There are probably 20 questions about the budget alone and it’s very helpful to have us on the phone, not like getting it done but actually creating it on a spreadsheet and e-mailing it to you at the end of the call. So, that has become crazy popular. In fact, that is going to become a standard product, I’m sure. And we’ve certainly seen an uptake in request in the last 30 days. There are a lot of activities.
Ryan Rockwood: And so just going through the different products for people and then also we have a traditional loan modification service where you send us $3,000 and we do the whole thing for you.
Mike Rockwood: Yes.
Ryan Rockwood: And so we did that because – no, no, honestly it made sense for a lot of people.
Mike Rockwood: Oh, it does.
Ryan Rockwood: If you’re earning a hundred grand a year and your mortgage payments are six grand a year and you haven’t made them in three months, $3,000 guaranteed is just not a big deal.
Mike Rockwood: What’s so sweet about it is you pay the money and then you just keep on with your life because you don’t have to do the follow up, you don’t have to do the final negotiations. So, honestly I joke about it but if there is a market for it, obviously, because that’s the one that all a loan mod companies are going after, all the loan mod companies go after. That’s the one that all the attorneys are getting busted about by the way. So, there’s obviously a huge market for it. We just don’t think it’s in most people’s best interest. But an awful lot of our clients are very satisfied with that service and they gets some good loan mod. And you know Ryan, if you save $1,500 on loan modification, pays for itself in two months.
Ryan Rockwood: It’s a no-brainer for someone that has a big mortgage and a big income you can spend sometime working instead of doing this junk. So, anyway, those are the basic products and I want to announce a promotion this week to see if we have any capers for it. You know, we’re always trying to – I’m not going to talk about products anymore tonight so don’t worry. But basically, here’s the new idea. This is only to new customers but I guess old customers can do it too, I guess. But basically you have 24 hours if you want to take us up on this. It’s a new service. The idea is to take away all the barriers to getting your loan modification done. And that is you pay after you get it done. How cool is that?
So, here’s what you have to do. If you want to get that, you do have to buy the kit. The kit is like $250 or something like that. And then every month, there’s an $84 administrative fee. That’s billed at the end of the month, so you’re paying $84 a month. And then at the end, once we get you a loan modification, you will less three times whatever amount we save you on your mortgage. And that builds you over the course of six months. So, standard example, you save $1,500 on the loan modification. And I’m sorry; the cap on the modification is $2,500. Okay. So…
Mike Rockwood: So, nobody would have to pay more than that even if they got…
Ryan Rockwood: Right. Even we save on $1,500 on the loan modification; they would only pay $2,500 over the course of six months in equal payments. Okay. So, it’s a no-brainer. I don’t know if anyone’s going to be interested in it frankly, but everyone hates to put money upfront.
Mike Rockwood: I don’t know why others haven’t done it so far. It makes sense.
Ryan Rockwood: Well, the problem is no one believes that they can get paid – they’re going to get paid afterwards.
Mike Rockwood: Yes. Yes.
Ryan Rockwood: And we’re just – we’re always trying to figure out – well we’ll cancel it as soon if there’s a problem.
Mike Rockwood: But it ripped off past the time.
Ryan Rockwood: We just think let’s just give it a shot a little bit because we really do deal with nice people. We attract nice people and I believe that it’s a value, so whatever. If you’re interested in that, give us a holler. You better send an e-mail on that to help@60minuteloanmodification.com and just put in there that you’re interested in – watch should we — Pay As You Go. Let’s call it Pay As You Go loan mod. Okay, Pay As You Go loan mod. Okay so, let’s forget about that stuff and jump online here and see if we can help some people live. Okay. Here we go.
Male Speaker: Hello, hello.
Mike Rockwood: Like as you go.
Male Speaker: Yes. Hello, hello.
Ryan Rockwood: Hello, can we help anyone on the phone?
Male Speaker: Yes. Yes. Me, me, me.
Ryan Rockwood: Hey go ahead.
Male Speaker: Okay, that was second mortgage, anyone wants to do a loan mod, you would do the same way that you would do the first mortgage, right?
Ryan Rockwood: For the most part, yes.
Male Speaker: Okay, all right. I got some other questions too. What about if you’re not behind your payments but you’re upside down and your arm is getting ready to adjust in a couple of months though, you should still be able to get a loan modification, right?
Ryan Rockwood: Well, it all depends. Let’s write down all your questions first and we’ll go through them, okay. So, that’s one basically if you’re not late but you have something coming up or a loan modification that’s coming up. And then we’ve got your first question. Do you have any others?
Mike Rockwood: No, I didn’t understand the second one, Ryan. So, if you’re upside down in a home and you’re not late…
Male Speaker: So you’re upside down on your home and you’re not late and you have an adjustable rate mortgage and it’s getting ready to adjust in a couple of months, they should do a loan mod for you, right?
Ryan Rockwood: Okay and then any other questions?
Male Speaker: Yes one more.
Ryan Rockwood: Yes, go ahead.
Male Speaker: Foreclosures, I know a couple of people who are experiencing foreclosures. You know the best way that they can handle that?
Ryan Rockwood: Yes absolutely. Okay. Let me mute you. I’ll repeat the questions for everyone. Sorry if you’re hearing my little 3-year-old there in the background. Hold on one sec.
Mike Rockwood: Do you want me to take the first one?
Ryan Rockwood: Yes, but I want to make sure. Okay, so we got a gentleman calling in with some very good questions there. This is probably a guy that’s heard about loan modifications. It’s all over the television, the news, the radio, right. But it’s kind of like, okay, but is this for me? Okay, so you got standard, very standard three questions that he’s got and let’s just fire through them because these are pretty good questions.
Mike Rockwood: Okay, so the first one is a second mortgage. Is it the same process as the first? And the answer to the question is absolutely but you’re in a much better negotiating position because the second mortgage is after all second. So, you have a lot more power with the second mortgage. So you should probably negotiate from a position of strength and expect more. You really want to have a good notion for whether or not that lender has any equity left in your deal at all because it often times, like in California, Nevada, Florida, they don’t have any equity. In fact – you know what I mean – even the first mortgage is negative.
And in those cases you want to negotiate really hard either to settle for 15% or 20% or wait for a while and try to settle for less or you want to negotiate a really what you might call just kind of a temporary payment just to keep it alive. Because they don’t want to have to charge it off, they know they can’t foreclose because there’s nothing for them to get in a foreclosure because they have to payoff the first, first.
So, they’re really powerless. So, if that’s the case, then you’re in a great negotiating position to get like a 1% interest-only payment for like three years or even better, even better, maybe just some token payment until you both figure out how to deal with the situation. So, second mortgages are really vulnerable right now. So, deal with them. The application process is the same but you’re in a much stronger position. Do you want to take the second part?
Ryan Rockwood: Yes. Well, and let’s also add on that. You know, we get that people are really starting from a point of and this is all new to them. So, when my father says that the second mortgage can’t foreclose, that might – what do you mean? Well, the point is that the first always gets paid. So, it doesn’t matter who forecloses. They got to pay the first. Okay.
So, while yes, they could foreclose if they chose to, we say they won’t foreclose typically because they will have to come in and actually bring money to the table. Kind of like you selling your house when it’s underwater. Okay, so you don’t have to worry about that and I will say that you do have to basically make a copy of the entire loan modification process. Even if it’s package, even if it’s with the same bank, same lender, you do have to treat it separately.
Also, I would also want to point out that it’s an excellent one to stop paying if your budget will not allow you to get a loan modification on the first. For example, if your budget’s just blown, right? We’ll talk about budget in great, great detail. But basically your monthly budget has to be very close to neutral. Okay. Your intake has to equal your outtake pretty much. And if it’s not close to there because of expenses and stuff an excellent bill to stop paying is the second mortgage and make the argument that you have simply stopped paying on it and see if they can get that to a fact or debt-to-income ratio.
Okay, I’m getting a little too complicated but now upside down, not late, Option ARM soon. Upside down is terrible, right? Not late is terrible for loan modification. Option ARM soon is the only possible reason that they’ll look at you. Okay so that’s the thing you have to emphasize is that you’ve got – well thing looks good now. Coming on down the pike you see some catastrophe and you can exaggerate it a little even if it’s not so horrible, right.
Mike Rockwood: Well you know, here’s another angle to think of, Ryan. Because a lot of people mistakenly think that they want to get rid of their Option ARM when in fact they’re paying some really killer rates. And so I encourage people to think about it and maybe you don’t want to get rid of that one nearly as fast. Maybe it wouldn’t be in such a hurry to get rid of that Option ARM if the current rate is so low.
Ryan Rockwood: But here’s the thing with the Option ARM. People are much less than they would often times on a 2% fixed. Okay, so you know what I’m saying…
Mike Rockwood: If you’re paying interest only on them? Yes, so you really have to be clear about what you’re trying to do. If it’s monthly payments you’re trying to impact, then you might not want to monkey with it, but people generally have soured on interest only and certainly have soured on Negative Am loans. I mean, what could be worst than not even paying the interest on a depreciating asset? Holy cow.
Ryan Rockwood: Yes.
Mike Rockwood: So, the answer to the upside down is it doesn’t matter. The value of the home doesn’t matter. Not being late means you won’t get priority on loan modifications, and the Option ARM coming soon, just be careful. Be sure you know what you’re doing.
Ryan Rockwood: The other thing there is that in this sort of situation, the idea is you have to get rid of this crappy loan, right? Consider that you may have to get rid of your crappy house, you know, nothing personal. But when you’re looking at payments like that and interest only is better than a 2% fixed on a home. You know what I mean? You’re not in a great – we’re not looking at a great asset there to talk about. When 2% interest on your loan doesn’t cut it, you just have a flat-out, rotten amount of mortgage. You know what I mean?
Mike Rockwood: Yes.
Ryan Rockwood: So, ultimately we’d love to shed that. We’d love to shed that mortgage. We’d love to short refi that mortgage and so on. That is not happening. The only way to get out of it now is to short sale. And we’ve talk extensively about that.
Mike Rockwood: You know, what Ryan and I are experiencing a lot is that when Ryan will break the news or I’ll break the news to a client like that, that you know you probably should start thinking about this house a little bit differently that, in fact, it isn’t a good investment that it was when you picked it up three or four years ago and then, in fact, the prospects for it to become that are not really good. There would be a lot of emotional energy and a lot of financial energy in your life freed up if you were to get out of this debt. And there is a way to do that right now with a short sale.
So, a lot of times, it’ll take kind of a shocking intervention kind of a discussion with people before they’ll start to get conditioned to that. And I’m telling you; sometimes it takes a month or more of that kind of discussion with people and going down some other workout paths with them. But we really need to get real about real estate, get sober in our assessment of what the opportunities are in the real estate market. And for those properties that were purchased, those 15 million or so homes that were purchased in the last three years, the prospects are not really very good at all that they will return to that kind of value.
So, really there are 15 million candidates for foreclosure coming up here in the next three years. And that’s the kind of magnitude of problem that we’re all staring at and we’re all sitting on and not really doing anything about. Hey now, you asked the question also. Man, this is going to get tricky – got a trifecta [phonetic] about Notice of Default or foreclosure process. And I really want to encourage you to go to our website. Can they get this book on our website now, Rock? I hope they can. This book is…
Ryan Rockwood: No. Remember we have it – we had to send it out digitally.
Mike Rockwood: Oh, yes.
Ryan Rockwood: And we asked some – so don’t promote that one because that’s not going to come in a hard copy until later this week.
Mike Rockwood: Okay, but we do have an answer for those of you who in foreclosure and just want to think about all the options. That is the book called the Notice of Default handbook and it goes through the seven options that it tells you lots of good stories about strategies that people are using to get through foreclosure on their terms. In other words to take control of the situation and get through it to make happen what they want to happen, not what the banks wants to happen. Do you have another one?
Ryan Rockwood: Okay. Yes. Let’s get through like five web questions if that’s cool. Okay, Tim asks, “For the government program, I’ve heard your loan also needs to be backed by Fannie Mae or Freddie Mac. Is this true? And if so, how do I find out who backs my loan?” And that’s a good question. I haven’t done it myself. However, I can tell you that – I can tell you that this is very easy to do. So, what I would do is you simply shoot us an e-mail. You do have to send us your loan account number, your lender, and your social security number and then we can take over your life and get some credit card – no, I’m just kidding.
Mike Rockwood: No, that’s a different message.
Ryan Rockwood: Yes. Actually we do need your social security number to check that. Okay. The other thing you could do is call your mortgage lender.
Mike Rockwood: And Ryan, there is a website.
Ryan Rockwood: I know you can just punch it into the website.
Mike Rockwood: Yes, I was on it today, in fact.
Ryan Rockwood: Were you?
Mike Rockwood: Yes. So, just Google around and see if you can find…
Ryan Rockwood: I’ve always had a helper do that for us. I could Google it right now but there’s no, you know what I mean?
Mike Rockwood: We’ve got questions to answer.
Ryan Rockwood: Yes. Okay, Devlin, she’s got a question. She finally spoke to someone at pre-qual at Wells. “After sharing the expenses, Mike and I prepared.” That’s my dad. “The result was a small positive cash flow of about $300. I was told that I qualified for Wells’ owned forbearance. The deal they offered is three months payment of $4,200 versus the $5,700 I’m currently paying. It seems I need to be in a negative cash flow. Reran it with a negative cash flow of $800 on $11,000 of net income, I still didn’t qualify for anything. And I didn’t mention the three credit cards I’m behind on either. But it seems like they’re looking for a big negative cash flow. Is this correct? I plan to call the rep back with it and talk about it. But, how do I improve my odds of qualifying for something other than three months forbearance?”
Mike Rockwood: Hey, let me do a little bit of explaining about Devlin. Devlin’s well into a modification application and has been offered what has become common place now is a three-month initiation or was formerly called a repayment plan in which they give you their best estimate of what your loan modification will turn out to be. And then you make those payments for three months before they confirm that in fact – because what they do is they underwrite the loan during that period of time.
Ryan Rockwood: You think that was going on here?
Mike Rockwood: Yes.
Ryan Rockwood: He you says the forbearance, not a trial loan mod, you know?
Mike Rockwood: But it’s not though. They call it by different things but, in fact, I think what they’re doing is they’re estimating, Devlin, that that is going to be what your payment is.
Ryan Rockwood: Let’s hope so.
Mike Rockwood: Yes.
Ryan Rockwood: Because that would be a savings of a…
Mike Rockwood: Yes. And Devlin, I think we should jump all over that. We should back into that, figure out exactly what you had told them by that point and see if we can construct your finances in such a way that you nail that one. Once you are given a – whatever they call it, if they’re going to call it a forbearance or if they’re going to call it a repayment plan or whatever they call it, if it is in fact the payment that leads up to a loan modification, 95 plus percent of the time my clients have been able to, in fact, nail down that payment or very, very close to that payment. So, it’s an extremely good sign. And Devlin, I’m forgetting exactly what your numbers were right now. But if that $4,200 excites you, then let’s pull out all the stops to make that happen and I know because of your income situation. But I bet we can do that.
So, let me just repeat. Very often the lenders are estimating what your loan modification will be and asking you to make those payments for a period of three months. So, they’ve kind of merged what used to be called a repayment plan in which they used to ask you for a down payment. They stopped asking for the down payment, but they put you on the three payment plan with a tentative approval. And I’ve had really good luck getting final approval of that amount, okay.
Ryan Rockwood: I think the down payment blows. So, anything other than that, that’s good. However, I don’t like the idea of them saying it’s not a trial modification. It just seems like well, other ways that they can get out of it if they want to.
Mike Rockwood: You know Ryan, no. I don’t think it’s bad. I think this might be a good one. I think this might be in fact…
Ryan Rockwood: Well, imagine if this works, he’s going to save $1,500.
Mike Rockwood: Yes. Well, see here’s the beauty of it is I think it’s a way for them to move faster because they can approve, approve, approve, approve. And then if you can’t validate that kind of income and expenses, then you get busted.
Ryan Rockwood: That’s your problem.
Mike Rockwood: And in fact, you should not enter into these things lightly because that fine print actually says you are liable for the difference between the $4,200 and the $5,700 as it builds up. It’s absolutely no risk to the lender. Big surprise.
Ryan Rockwood: Okay, let’s pile through because we’re getting late.
Mike Rockwood: Oh, you want to do five [phonetic].
Ryan Rockwood: He was also saying that you were going over the Obama plan requirements. He missed the details. Where can he get a recap of those five requirements?
Mike Rockwood: Making Homes Affordable, Google it, Devlin. Just Google Making Homes Affordable and you’ll see several sites – you’ll see the official site, the government’s own site. I think it would be something having to do with HUD or FDIC. Just look in the URL and find out a real government site, not one of the modification companies. Okay. You got another one, Rock?
Ryan Rockwood: Yes, sample HAMP. We have a client here who’s offering to show people a sample HAMP offer package if they’d like to do that.
Mike Rockwood: Very good.
Ryan Rockwood: So, give us a shout out. That’s very cool. Thank you to our listeners and readers. Okay, I’ve got a question from Kelvin. “My home and investment properties are all upside down. I hear you. I’m self-employed and it’s going through financial hardship due to income loss and other factors. I saw your program, purchased it.” Oh, cool. “For the modification on my investment property, when doing the monthly budget, do I only put in a rental income and a mortgage payment for that property or do I include my regular income and home mortgage as well?”
Mike Rockwood: Okay, very good. Now what we always had – and it gets a little complicated if you have many properties. If you have just one, then just include it in your budget as rental income as a line in your income and the mortgage amount as a line in your expenses, and I always recommend that you go ahead and just discount your gross rents by 25% because they will. The 25% is what they’ll expect that you lose from vacancies, maintenance, and management fees. So, I always add in 75% of the gross rents. And I add in all of the principal, interest, tax, and insurance, and homeowners association as an expense. And that goes, of course, in the debt section of your budget.
Now it gets complicated if you have more than one property. And so what I always like to do is bust it off and do a separate schedule of real estate owned. And you got one of those with the kit. It’s in the book. It’s printed in your appendix. And it is on the Black Belt CD in step number 6, I think. So, use that to a list. And I would forget about all the expenses, things like that, because the lenders have gotten very standardized. And what I recommend you to do is just list all the properties by address so that they can correlate it easily to your credit report. So, list it by address, name of the lender, name of the loan, the payment, and the rental, the gross rent amount that you get.
And so then, let’s say you have 6 or 8 or 10 properties, you’ve got that on separate schedule, and then you just take over from the bottom line of the rents, 75% of that, and put it in one line item as additional income from rents. And then take over from the mortgage payment line 100% of the PITI and HOA line and put that as an expense line in the debt portion. So, then that will give the appropriate impact to your debt-to-income ratio.
Ryan Rockwood: Okay. And we have some pretty interesting stuff here written in by a client, Machico [phonetic], sorry if I said that name wrong.
Mike Rockwood: No, you said it right.
Ryan Rockwood: Oh really? Okay. Well anyway, she got an awesome, awesome loan modification of like 2% interest. And it turns out that they wrote it for the wrong home and they didn’t read that she had indicated that it’s an investment property. So, she told them about it. And now they have to go back and redo it apparently.
Mike Rockwood: So Machico [phonetic], let’s talk about it. Who’s the lender?
Ryan Rockwood: Wells Fargo
Mike Rockwood: Oh man.
Ryan Rockwood: But anyway, it sounds like three months in the queue, the whole thing 2%, five years, 3% in the sixth year. I mean, it’s a sweet mod but it’s such a bummer for me that you had to go back and couldn’t just sign the sucker but, you know…
Mike Rockwood: Machico [phonetic], here’s what we do though. I mean, we got to torture this. One thing that some people don’t think about…
Ryan Rockwood: Well, let me get to the question because she’s gone back and ask them to re-look at it. They’re doing it. But what she’s asking is – she doesn’t think that she’ll get the 2% because it’s not owner occupied when it comes back. So, how could she convince the lender to honor the original 790 offer amount that was the monthly payment on an investment property even if the interest rate would only be 2%? But from a negotiation, how would you try to get them to commit to that offer? They made a mistake mostly because they took them four to five months to get it wrong. Thanks for your help.
Mike Rockwood: Yes. Machico [phonetic], couple of things I would do to torture this. The first thing I would do is ask you if you ever lived in this property, particularly if you lived in it during the last five years, by any chance that you lived there over the last five years. If the answer is yes to any of if you have a questions, I think you can make a real strong case with the help of your CPA that, in fact, this is a primary residence. Okay. That’s number one.
Number two, if we fail there, then I would think you could make a strong case for pleading that you had been, in fact, pleading that you had been in fact abused, mistreated. In fact, you made some commitments based on their commitment. And try to argue for at least one year of the payments that they had recommended. I kind of think you could be successful for that reason because they made a mistake.
Ryan Rockwood: You know on that, I would recommend try it and argue it with all your heart. But in your mind, don’t get yourself believing it. You know what I mean? You know, when you’re bullshitting, it’s always best to remember that you are bullshitting. You know what I mean? So that when they just absolutely spur you, should they do that, you don’t start saying crazy things like you want to call your congressman and stuff like that. Okay.
Mike Rockwood: Yes. But Machico [phonetic], let’s work together on this one because I know that would really be sweet and I would love to help you get creative and try to find out of the box solution to it.
Ryan Rockwood: Yes. All right, awesome. So, let’s see the scope and see if we can help anyone more live.
Mike Rockwood: One more live?
Ryan Rockwood: Yes.
Male Speaker: Hello, hello.
Ryan Rockwood: Hello, got a question?
Male Speaker: Yes I do.
Ryan Rockwood: Go ahead.
Male Speaker: Okay. I received a letter in the mail and I’m trying to figure out whether this is the beginning of the foreclosure of it’s just a Florida attorney…
Ryan Rockwood: Yes, I totally understand what you’re talking about. There’s some pretty tricky stuff that come to the mail. Tell us about it.
Male Speaker: Okay. It says this law firm. It’s called the Florida Default Law Group, PI. And it said they’ve been retained by the bank. I’m going to try to make this as short as possible. And it said with regards to interest and promissory note and mortgage executed by me and my wife on January 10, 2007. First of all, this mortgage has been sold three times. And so we didn’t do it on 2007. That’s when they bought the mortgage evidently. Secondly, it says pursuant the terms promissory note mortgage, our client has accelerated all sums due in owing, which means that the entire principal balance and all other sums recoverable under the terms of the promissory note and mortgage are now due.
And as of the date of this letter, the amount owed and the given amount, which includes the unpaid principal balance, accrued interest today [phonetic], late charges, and other default related cost recoverable under the terms of the promissory note and mortgage. Additional interest will accrue after the date of this letter. Correspondence is being sent to comply with the Fair Debt Collection Practices Act and should not be considered a pay off letter. And you know, I’m just trying to figure out, is this the beginning of the foreclosure or is just…
Ryan Rockwood: Well, let me ask you a couple…
Male Speaker: And at the bottom it says unless you notify this firm within 30 days after you receive this letter that the validity of this debt or any portion there is a dispute, you know which is similar to what a debt collector would say.
Ryan Rockwood: Well, how late are you? How late are you?
Male Speaker: Well I made – what I was doing is I was making my regular payments, okay. And I’ve never been late on my mortgage. Never. And what happen is that there were two years of taxes owed that my son was suppose to pay and didn’t pay. And so now I’m in this position because of it. And you know he just couldn’t do it. So, I’m not really blaming him. But anyway, what they did is they added it to the mortgage and now they’ve put it in as a part of the payment. And so what my payment was $1,327 a month, and now some became $1,965, which is like impossible. I’m 78 years old and I have a lot of medical problems and I don’t work. And my wife is the only one working and her hours have been cut into half and less. So, you know, I don’t know what we’re going to do.
Mike Rockwood: What have you done so far?
Ryan Rockwood: How late are you?
Male Speaker: Well, they’re figuring, I would assume because they’re not counting the payments that I’ve made before. So, if they’re counting those as being late, which I assume they are, then we’re talking maybe five months.
Mike Rockwood: Okay.
Ryan Rockwood: Okay, so let me mute you and we’ll repeat the question to there for folks and go over it. Thank you so much for joining us.
Male Speaker: Thank you.
Ryan Rockwood: Okay we’ve got a gentleman, fixed income, Florida. And what’s happened here is that the taxes on his house haven’t made for two years. So, let’s assume that that is – how much? What do you think? $20,000 or something like that?
Mike Rockwood: Probably not even that much.
Ryan Rockwood: So, he’s got a chunk of change that has been added and they’re making him pay it off quick. That’s the problem for it, right?
Mike Rockwood: Yes. They’ve added an extra $600 a month to him. They probably went – so, I bet it’s about $12,000 and they probably took it over two years.
Ryan Rockwood: No. Two years is – weren’t they doing it over like five months with someone else?
Mike Rockwood: No, about a year Ryan, I think is this fast as they ever force it.
Ryan Rockwood: Okay. Okay so anyway, how is he going to do this? They’re not accepting as partial payment. Now, his regular payment is considered a partial payment, right?
Mike Rockwood: Right.
Ryan Rockwood: And so anyway, it is what it is. You know, in our experience you won’t have any luck arguing that you’re not late, right.
Mike Rockwood: Right.
Ryan Rockwood: You know, just best to suck it up. You’re late five months and that puts with you in an incredible danger zone. Okay. I would assume just on a background here there’s this process in most states and what happens is once you’re three months late, the bank issues what’s called the Notice of Default. Once you’re three months after that, the bank issues a Notice of Trustee Sale. So, that’s obviously six months. So, if five month you really have to be careful because unless you watch that mail like a hock, you can miss these things. And it’s incredibly likely that you probably already have a Notice of Default on your property and that puts you in the extreme danger zone for having that house sold under you.
Mike Rockwood: Yes. I think that’s a good way to look at it, Ryan, is that you should expect or plan for the worst. You hope for the best and you hope that this is just an advertisement for that outfit.
Ryan Rockwood: Did you follow up to? Shoot. And yes, I’m not sure if – let’s see. Oh, you know what, I’m still online. Sorry, folks. Sorry. We thought we lost the connection there. Yes.
Mike Rockwood: Okay. I got it. But Ryan, what I was going to say is that you should assume the worst and let’s assume that you are well along in the foreclosure process and you are in danger of losing your home. And what would you do then? And what you would do then is take drastic action. You need to have somebody working with you either a local attorney or us working with you to watch every step because you don’t want to loose that home. And you definitely would be an absolutely killer candidate if you have enough income for a loan modification.
Because a lot of times when that tax issue happen and those payments go way up, then that becomes a prime hardship. And especially at your age, I just have a feeling that you’d be a great candidate for loan mod. But if you haven’t applied for it, then we need to do it like tomorrow afternoon because we want to move that fast. So, our advice to you is to take it very seriously. Expect that it is, in fact, the Notice of Default and that you need to take very proactive action to keep your house.
Ryan Rockwood: No, this isn’t the Notice of Default.
Mike Rockwood: No, I think it might be, Rock.
Ryan Rockwood: Really?
Mike Rockwood: Yes. I think it’s Florida so it’s a judicial state.
Ryan Rockwood: Oh, so it comes from an attorney, not the ton [phonetic] of records?
Mike Rockwood: Yes, and I think they’re notifying you that they’ve been retained to wrap it up.
Ryan Rockwood: That would actually be good news probably because I suspect you already have a Notice of Default and this is, you know, they’re one month figuring out things before they sell it. So, anyway, that’s our thinking. But in any case, you’re in a position where I recommend – I don’t think it would be in your best interest to buy something like our kit and spend the week learning about it and another week doing the application. You need some dramatic help whether it’s with us or with someone else, you know…
Mike Rockwood: Tomorrow.
Ryan Rockwood: Yes. So, I urge you to please get that help.
Mike Rockwood: And if you want to hire a local attorney you don’t want to hire us but you need help finding a local attorney. Contact us by e-mail at help@60minuteloanmodification.com because we do a lot of work in Florida. So, we know good attorneys. We can refer it to you if you feel more comfortable working with the attorney.
Ryan Rockwood: The thing is I mean there are solutions bound for situation like this. But they’ve got to be put into motion.
Mike Rockwood: Yes.
Ryan Rockwood: And I’m thinking, you know, let’s say you’re 78, hopefully you have this house forever. I hope you got a ton of equity. Maybe a reverse mortgage would be perfect for you. You know, you can refinance out of this home, thus never making another payment for the rest of your life. Anyway, that’s just one example of a [Indiscernible] of options. So, I’ll just throw that out there for you.
You know, we’re huge advocates of Do-it-Yourself modification, so whenever we can, we urge you that you do it yourself. You go at it. You teach yourself to do it. The other advantage of that is that come in a couple of years you can do it again and you know how to do it. You have that experience.
Mike Rockwood: Or a couple of months.
Ryan Rockwood: Yes. You probably already know this by now, but these calls are just a one part of the tools and services that we have to offer. If you need more help, we’re here to talk to you. To schedule a private call with Mike, my dad, go to 60minuteloanmodification.com/talkwithmike. Talk with Mike. If you’re ready to work on your loan modification application, go to 60minuteloanmodification.com/products. Grab a product. The regular kit comes with a free hardship letter review and a budget review, I mean, by e-mail. So, we actually do it with – we actually look at it. It’s pretty cool.
And if you want a good kick in the butt, we’ll actually do your application for you on the phone with our new program Get it Done, that’s 60minuteloanmodification/getitdone. To anyone who is not the most organized, punctual, hardcore, serious person on earth, I would recommend Get it Done. It’s a couple of bucks more. Everything’s guaranteed though.
So, it’s a couple of bucks more but we call you and, like we can easily schedule you and have it done by Friday. Actually, we got a call or someone e-mailed us while we’re on this conference right now and they want to do it. It sounds like ASAP. So Jean, I’m going to be looking for your answer to that e-mail as to when you can do it.
With that, I’ll sign off. Remember about the special promo we offered and we’ll see if there’s any interest in that. If there’s not, maybe we’ll never bring it up again. But if it’s successful, maybe we’ll talk about it again. But anyway, that’s called the – that’s the Pay As You Go program. Pay As You Go. Just send a note expressing your interest in it. That’s all you have to do for right now. And again, that idea is purchase of a kit, $84 a month. And if you don’t get a loan modification, obviously, you know you don’t pay anything further.
Okay. With that, I’ll sign off. We spend most of the day on the phone, so e-mail is the quickest way to get a fast response to any and all questions. Please e-mail us at help@60minuteloanmodification.com. Thank you so much for joining us. Have a great evening.
Mike Rockwood: Goodnight everybody.
