Duration:  00:58:00

Mike Rockwood: Because all day long, every day we are working with people to help them modify their mortgages around the country, help them to save their homes.  So, what we bring you on Tuesday and Thursday nights is an opportunity to ask us questions and we bring you kind of latest information about how we’re doing in the loan mod game because it changes so fast, you know.  It’s a year now since president Obama announced the Making Homes Affordable program, which has really been the only government program that has had any success – the limited success it has had.  But it’s been the only one that’s had any success.

And really, with that July to September push, you get all those trial mods in and then the September to the December push to turn some of those trial mods into real mods.  We’re actually seeing some progress, and there are hundreds of thousands of people who have had significant modifications and are going to be able to stay in their homes for years because of the modifications.  And we know that hundreds of those winners are our clients.  And some of you are on this call.

But at any rate, every Tuesday and every Thursday we get together and share with you information and answer your questions.  We always want to remind you that we’re not lawyers or CPAs.  Don’t take what we tell you to be tax law or tax guidance.  Don’t take what we say to be legal advice.  In fact, we’re just rumormongers.  We’re passing on information that we have learned and others have told us about the successes they’re having and the pitfalls they’re running into, falling into, in the loan modification game.

Still a torrid pace.  In fact, one of the negotiators at Bank of America this week told me that it’s gone bad to just horrendous.  Hey says they literally only work on short sales –this was a short sale conversation – short sales that are going to trustee sale or share of sale this week.  So he said, and it’s just overwhelming that even with all the hiring they have done and, you know, they have been hiring and training now for 18 months.  So, the pays continues.  It’s still, they tell me, still over 10,000 people every working day apply to their lender for a loan modification or some other workout because they’re going into default or soon will go into default on their mortgage.

So, our key, our advice has always been that you should do loan modifications yourself just like the banks and the government tell you.  However, we say do not do it alone.  Get the advice of someone who has done hundreds of them and who kind of delights in finding the tricks to get to the front of the line and get good modifications.  Because remember for the first year, those modifications we’re getting were crap.  They just weren’t any good and, in fact, like eight out of ten still went to foreclosure like some six months after Kevin [phonetic] gotten the modification.

So, the key is get out of line, get a mod and get a good one and move on to the other parts of your financial life that need fixing because, you know as a country, we’re in financial and we’re in economic trouble, and you got to protect your job and you got to protect your budget.  And part of that is getting a loan modification.  Is there anything else we need to say in terms of intro?  Well, you’re going to tell people how to get questions to us, I guess.

Ryan Rockwood: Yes, I just posted on that the chat is, of course, notoriously flaky.  So, if you are looking and would like to participate in the chat, please feel free.  However, the login has nothing to do with us.  So, you do have to go through the process of creating an account, a Ustream account, and going through that process.  Otherwise, you can always just e-mail in a question to help@60minuteloanmodification.com.  All right, and …

Mike Rockwood: So, tonight’s topic, what we usually do as you guys notice, we usually spend a little bit of time giving you a little tutorial on some part of loan modification and then we take questions.  And honestly, Tuesday, we didn’t get to about 12 of the questions that we’ve gotten and – that we received – and I’ve already gotten …

Ryan Rockwood: Well, that’s true.

Mike Rockwood: I’ve already gotten 10 here.

Ryan Rockwood: I could go back too because we – things had just been so crazy.  We had a weird real estate emergency this week which – there’s almost no such things as a real estate emergency except when it really hits the fan.  So, anyway, we’ve been pretty preoccupied.  And in fact we sent out this message so late that I doubt we’ll have many people to able to make this call.  You know what I mean?

Mike Rockwood: Yes, you can see you’re wrong, Ryan.  Check it out dude.

Ryan Rockwood: All right.

Mike Rockwood: You’re a real draw [phonetic].

Ryan Rockwood: Yes.

Mike Rockwood: All right.  And then – so I got some questions left from Tuesday and then I also – I already got six during the workday today.  So, we have questions galore and we decided this today that we’d really focus on just get pounding out a lot of questions.  So, these questions that we’ve chosen, we kind of call it through and we picked out those that are of general interest.

But honestly, before I get started in that, I do want to do a little tutorial on a topic that has kind of become a bug-a-boo for me because so many people are asking me why are your modifications being successful, the ones that I actually do for clients full service.  And if you remember a few weeks ago, we kind of outlined eight steps, eight tips that I thought were particularly good reasons why my modifications are working.  And then people have been asking about what I called file inertia about how once a file is in motion at the lender, it tends to stay in motion.  And once your file stops, it tends to stay stopped.  And I call that file inertia.

And I just want to review with you how very easy it is for the lender to put your application on hold by finding something wrong with it, thereby clearing his cubicle and making his numbers work.  And the supervisor does it and he advises all of the people who work for him to do it.  The manager does it.  He advises all the supervisors to do it.  So, it’s part of the process and you have to design and you have to build your application so that it’s absolutely bullet proof.  But here are some of the reasons that files get put into the recycle bin and come back to you asking for additional information.

The first one and the biggest one is incomplete documentation.  Everything has to be there.  Don’t miss a thing.  Number two, miscalculations particularly with regards to debt-to-income ratio.  If the math isn’t right, the application is going nowhere.  So, I mean, don’t even submit it if the math isn’t right.  The third one is you’re told that the investor will not modify.  Many, many times, as much as 50% of the times, in fact, that is a lie or it’s misinformation.  It’s wrong information but that comes back frequently.

The bank statements were taken off the Internet.  Sometimes the lenders reject your application and then it suffers from file inertia from being stopped because the bank statements that you sent in with it came off the Internet.  Now you know – who knows why they have to have ones that were actually printed by the bank.  And honestly, only about 10% of the time do I get that request.  But that happens.

Then there’s the problem of the out-of-date 4506-T.  Isn’t this a laugher?  That form that you signed to allow the bank to ask the IRS to confirm your tax information, they say goes out of date every 60 days.  Well, okay, so you got to keep remembering, make sure you have a fresh one there every time you update your financials, send a new 4506-T.

Your bank statements are too old.  Are you sure that when you submit your application, you’re sending the most current two to three months of bank statements.  You alimony award letter is incomplete.  They want to see the whole thing.  They want to see the whole award letter, not just the piece that says what the amount is going to be.  Your 1040 tax form is not signed.  This is really kind of a common one.  You should all be really aware of this one.  You got to be sure you sign it.  So many people have preparers these days that they don’t actually sign it.  The preparer signs it or files it electronically.  So, when you’re sending it in with your loan mod application, sign page 2 of your 1040.

Then very often your income is miscalculated.  This one is huge.  Honestly, you got to think about – think of yourself like the underwriter at the bank that’s going to think of you.  Think about your income or be sure you’re talking about gross income.  Be sure it’s well documented and be sure you go through the exercise of showing them how you turn that paycheck into a monthly calculation.  If you’re paid biweekly, then multiply it times 26 and show them the math, and then divided by 12, show them the math.  Okay, so that there’s no question about how you arrived at that number on your budget.

And then here’s a big one.  Your rental income is not calculated correctly.  That’s huge.  The way that we’ve been doing it for the last six months is the way that I recommend that you do it and that is to take your gross monthly rents.  Let’s say you have three houses, $1,000 each.  Take $3,000 and then multiply it times 75% because that’s – even if the bank’s negotiator doesn’t do that, I think the underwriter will.  Almost all of them are using that process now.  So, take gross rents times 75%.  That’s 25% for vacancies, maintenance and management, that’s pretty fair estimate, and then take the remaining rent and subtract from that your principal interest tax insurance, private mortgage insurance and HOA payments.  So, PITI, private mortgage insurance and HOA payments.

And for those of you who own rentals in California, that number will be a big, big negative.  And for those of you in the rest of the sane world, there may even be a little bit of money left over at the end of the month. And in that case you’d bring that negative or positive number to your personal budget.

Okay.  And then here’s another big one that a lot of people are getting rejected for these days and that is you do not qualify for the Making Homes Affordable or the Home Affordable Modification Program, HAMP.  And the unfortunate thing about it is that all the banks, without exception, I don’t know why they’re doing this but when they reject you for HAMP, they never seem to think to tell people that there are other programs and that they may very well qualify for an in-house or some other modification program.

So, an awful lot of clients come to me and say, no, we got rejected.  And I look at the numbers and I say, “I don’t think you got – why would you get rejected?  Your numbers are right.”  And they say, “I don’t know.  They told me I didn’t.”  So, we’ll call the lender together and it turns out the HAMP Department rejected out.  So, I mean, it seems bizarre but that’s what’s happening.

And then the last one reason that people aren’t getting modifications in their perfectly good file is sitting on someone’s desk is that they are not in default.  Make no mistake about it.  The same is true now as it was 18 months ago as it was 12 months ago, as it was 6 months ago in spite of what the government and the banks tell you, you do not get a loan modification, a good one, in a reasonable amount of time unless you are in default.  That is more than 30 days late on your mortgage.  And technically it’s more than 60 days because all of the banks now have gone to holding on to those that are 30 and 60 days late in their imminent default department.

They call it imminent default because they try very hard not to let you get into default.  And the way they do that is by continually abusing you and not giving you any respect and not modifying your mortgage. And they do that for 30 days.  And then if you go late and they’ll try harder for another 30 days to try to get you to make payments and if you do not then they pass it on to the default department or the loss mitigation department and then they treat you with respect and they expedite the processing of your modification because now you have gotten their attention.  Of all the 10,000 people that applied that day or the 10,000 people that are in their cubicle, yours stood out because guess what, you aren’t paying.  Yours has now become, you know, a red flag.  You’re in default.  They have to work on yours.  So, strange but true.  That’s the way it is. That’s life in the big city.

All right, so that’s the little tutorial I wanted to do with regards to how easy it is for them to put your file and to stop it.  So, don’t let them.  Cover all those bases.  Make sure your application is bullet proof.  It can sell through.  It can happen.  Plenty of our plans are getting good modifications in six weeks particularly if they’re in default and if it’s on their own home.  Otherwise, I got to admit, it is really getting drawn out.

All right, can I start taking some of these questions, people that owed?

Ryan Rockwood: Yes, but you know.  No, you know, let’s – let me – let’s take someone that just e-mailed in because those people might not be back on today’s call.

Mike Rockwood: All right, go ahead.

Ryan Rockwood: Okay, this person’s name Surrie [phonetic].  Let’s just say Surrie [phonetic].  That’s half a name.  Mike, thank you for the opportunity to ask questions.  I have applied for loan modification request on November 12 and currently late on four payments.  After talking to the lender several times, I recently received a special forbearance agreement from Wells Fargo.

Mike Rockwood: Ah.

Ryan Rockwood: According to the agreement, each payment must be remitted according to the schedule, copy below.  Upon successful completion of the agreement, if approved for loan modification request based on investor guidelines, this will satisfy the remaining past due payments on your loan and we’ll send you a loan modification agreement.  That’s weird.  So, especial forbearance is – wait, it sounds like what they were calling a trial modification.

Mike Rockwood: Yes.

Ryan Rockwood: Does that sell [phonetic] you the same thing?  Do you know anything about that?

Mike Rockwood: Yes.  The special forbearance, and I’m not really sure when they decide to use them or why they decide to use them.  It has to do with something, something in the cosmos.  But a special forbearance, it’s about a 50/50 deal.  Sometimes, you know what it depends on is the payment.  If your payment is satisfactory, in other words if it is a payment that is significantly lower than the one you’ve got and you have reasonable expectations that that’s the payment you can make and keep making, and if you got that one in a modification you would continue, then I would advise accepting it.

What I ran into earlier this week was where a client had been offered a special forbearance and it was kind of used as a teaser saying, yes, we’re not going to lower your rate.  The forbearance price – the forbearance payment actually was slightly higher than the payment they had been making.  So, in that case they chose to reject the special forbearance and resubmit their loan mod application because they realized that their modification had actually been entered incorrectly when we all reviewed it with the negotiator.

So, the special forbearances, I would recommend you just take a look at the payment.  And if you fully intend to keep the house and you can accept that level of payment as an ongoing payment for your loan modification, then I would say go ahead and go forward with it.

Ryan Rockwood: Well, as a followup she writes in here that payments for March, April, and May, yes, $3,466, a month.

Mike Rockwood: Okay.

Ryan Rockwood: $3,466, a month.

Mike Rockwood: It’s a healthy mortgage.

Ryan Rockwood: Her normal payment is $2,700

Mike Rockwood: Ah, not good.  No, not good.  That’s a repayment plan.  Yes.

Ryan Rockwood: Yes.  Well look what they said.  This will satisfy the remaining past due – well yes, because you’ll pay the darn thing out.

Mike Rockwood: Yes.  No, you’re talking to the collection department and they pulled the bull over your eyes and they’re trying to convince you to accept something that’s very good for them but it may not be good for you.  So, what you need to do is, let’s get real confident with how good a candidate you are for a modification because if you’re a good candidate then they’re just jerking you around.  But if you’re not a good candidate, you should know that so that you can think through whether or not you want to play this game with them.

Ryan Rockwood: No.  Yes, and she’s worried of course that they’ll say, well you did it.  Keep doing it.

Mike Rockwood: Oh, yes.  Yes.  Don’t worry.  That’s absolutely what will happen.

Ryan Rockwood: So, the thing is here is that, Surrie …

Mike Rockwood: Do we know what state Surrie is in?

Ryan Rockwood: No.  However, I can tell you this that a lot of people that – a lot of people like this, this is kind of, you know – so, here we’ve got your special circumstances, right?  You follow the program, follow the kit, receive the response even.  It’s just a little weird, right?

Mike Rockwood: Yes.

Ryan Rockwood: So, Surrie, the only thing that I would say is that included in the kit that you’ve purchased already is the ability to e-mail us your hardship and your budget.  We’ll go over it.  In addition to that, you can get on the website right above and below the video, it says schedule an appointment, the blue button.  And you can schedule a time where we can talk on the phone.  And preferably it should be probably done in that order.  Get us the documents then schedule.

Mike Rockwood: Yes.

Ryan Rockwood: Whatever.  But that’s all included in your kit.  So, make sure you’ve used that.  Now, if you haven’t used that just go on that 60-minuteloanmodification.com/schedule and schedule a coaching call.  That’s fine.  You could just pay $50 for it.  And in that time …

Mike Rockwood: If you have already used the coaching call that comes with the kit.

Ryan Rockwood: Yes, yes.  And during that time we’ll say, okay, what do you want to do?  Do you want and – someone called me up earlier saying, what should I do?  What should I do?  And so, well, here are your options.  If – you know some people don’t want to spend $50 to save their lives and, whatever, that’s cool.  I told her keep on doing what you’re doing.  Well, she wasn’t paying so she wasn’t qualifying.  And so I just said because she was paying.  I said, “Will you just keep not paying.  Start not paying and you’ll eventually figure it out.  But if you want to figure out a little sooner, jump online, pay the $50, do a consult.  We’ll see if we can punch holes in that – what do you call – the decline.

Mike Rockwood: Oh, yes.

Ryan Rockwood: The loan modification denial.  If we can’t push …

Mike Rockwood: Yes.  Honestly …

Ryan Rockwood: [Indiscernible], we can get on the phone with you and call the bank and all that kind of stuff.  And so [phonetic], it’s probably worth doing because you save yourself, I don’t know, three months or so of hassle.  So, consider that as some options for you because what I want to do is try to punch some holes in this and say, well, did they consider that, did they consider this, did they consider that?  And then the client, in this case Surrie [phonetic] goes, what is that?  I don’t know, I don’t know, I don’t know.  So, then, you kind of have your homework and then you do another, you know, two weeks to follow up or whatever.

The other thing I wanted to tell people is in the e-mail about tonight.  I included an actual audio link to a guy named – was it Willie or Willard or something like that?  I forgot his name.  But anyway, great guy.  He came to one of our first seven hours.

Mike Rockwood: Willard.  Was he, you know, Wrat [phonetic]?

Ryan Rockwood: What?

Mike Rockwood: Oh, never mind.

Ryan Rockwood: Anyway, check it out and listen to it.  He is calling to tell us thanks because he modified like 11 properties.

Mike Rockwood: That was Wayne.

Ryan Rockwood: Wayne.

Mike Rockwood: Yes.

Ryan Rockwood: And in addition to that, the documented one recently.  He called the bank 98 times.

Mike Rockwood: Yes.

Ryan Rockwood: So, a lot of people say, “Ah, I’m so frustrated.  It’s like I’m going to do this forever.

Mike Rockwood: Yes.

Ryan Rockwood: Listen, this blows as like an activity.

Mike Rockwood: Yes.

Ryan Rockwood: You know what I mean?  No one is ever going to like invite their friends over for a drink.

Mike Rockwood: And work on their loan mod.

Ryan Rockwood: And they kind of work on their loan mods, you know what I mean?  This is not going to happen.  It stinks.  However, the payoff’s good enough that it’s worth doing.

Mike Rockwood: Yes.

Ryan Rockwood: You should try it, okay?

Mike Rockwood: Yes.

Ryan Rockwood: So anyway, let’s see if we got anything.  Do you want to jump to one you’ve got?

Mike Rockwood: Yes, Dan says, “On Tuesday night, you talked about debt-to-income ratio.  Please go over it again.  I think I understand it but I wish you’d clarify about HTI.”  Okay, DTI or debt-to-income ratio, I think we kind of – we just talked about that on Tuesday didn’t we?  Yes.  DTI and yes.  We did the math.  Yes, it was the math on Tuesday.

Ryan Rockwood: Okay.

Mike Rockwood: So, let’s just review real quickly debt-to-income ratio.  When we’re talking about loan modifications, we’re talking about debt-to-income ratios, two of them – your front-end debt-to-income ratio that is sometimes used to be called HTI, housing-to-income.  You calculate your debt-to-income ratio, the front-end or HTI by taking your mortgage payment on the home that you’re living.  The first mortgage payment only.

Many, many millions of Americans have more than one mortgage.  But take that first mortgage payment with principal, interest, tax, and insurance, everything, the whole payment including private mortgage insurance, if you have some, and including homeowners’ association dues.  Take that number and divided by your gross household income and that is your front-end DTI also called HTI.  And that number to qualify for loan modifications has to be higher than 31%.

In other words, if you don’t spend more than 31% on your first mortgage payment on the home you’re living, you ain’t got problems, at least from a mortgage – a modification standpoint, you might have some real severe problems.  But you haven’t got problems enough to qualify for a loan modification, so don’t even bother trying.

Now, whenever we counsel people about that, we always say, no.  Let’s really stare at that income number, make sure you got it right.  Remember, you only have to take the income from people who are on the loan.  So, if you’ve got married couple and only one of them is on the loan, you don’t need to take both couple’s income in order to qualify for loan modification, just the person who is on the loan.

All right, so that’s called HTI or front-end DTI.  The other ratio you need to be concerned about is the back-end DTI and that is your total indebtedness that you make payments – the payments that you make every month divided by that gross household income.  So, to the number that you already have, add your second mortgage payment, your student loans, your car loan, your credit card, your installment loan.  Every other debt you’ve got that shows up on your credit report, take the minimum payments on all of them, add it up and divide that by your gross household income, and that is your back-end DTI, and it’s got to be less than 70%.  If it’s higher than 70% the bank thinks, and right fully so, you got too much debt.  You’re going to tip over.  You’re in trouble and we don’t want to modify your mortgage, we got to get ready to take your house from you.

So, those are the ratios and those are the guides.  More than 31% and you need help, so they’ll modify your loan for you to get that first payment down.  More than 70% on the back-end DTI and you need help, all right, but they’re going to throw you an anchor instead of a life jacket.  So, less than 70% on the back-end DTI is what you’re looking for, all right.

Bob says, “How much will the whole loan modification process hurt my credit score?  How long will it take me to recover?  Currently, I have a 780 score.”  Well, Bob, the loan modification process likely will hurt your credit score more than 50 points and less than 150 points.  Here’s what hurts your score is missing loan payments, and that is completely under your control.  So, while some people suffer a 50-point decline, some people suffer a 250-point decline because they don’t pay for six months.  So, it’s really kind of up to you.

Every time you miss a mortgage payment because a mortgage payment is a serious default, it impacts your credit score.  Depending on how many lines of credit you have, it can impact your score, like, between 25 and sometimes as much as 45 points every time you miss.  So, if you miss half a dozen, you know, it’s going to really hurt your credit score.  And it terms of recovering from 100-point drop, let’s say you’re at 780 now, if you’re at 680, like in August you’re at 680, it will take you, depending again, on how many lines of credit you have.  It will take you 6 to 12 months to recover to get back up to 780.

Part of the kit, the 60-Minute Loan Modification kit and also in Ryan’s Credit Card Cure book we have a section that talks about rapid credit score recovery.  And in it, we have a program that takes you through three months, 90 days, 12 weeks, of credit – of 12 different habits that you develop during that time to really rapidly recover that credit score.  And honestly, you can recover from the deepest, darkest holes with all kinds of ugly stuff, you know, like liens and levies and wage garnishments and judgments and things like that, you can recover in 12 to 24 months if you just apply those practices and turn them into habits.

So, honestly, you know credit score, it’s a beautiful thing, it’s a nice thing, and it has become kind of a status thing.  But honestly, for people whose backs are to the wall and they’re very, very upside down on their mortgages and they have tons of credit card debt, they’re kind of a luxury you can’t afford anymore.  You need to get serious about cleaning up your act.  You got too much debt that you have to get out of it.  So, you have to honorably settle with your credit card companies and you have to arm wrestle with your lender to take some responsibility for the fact that the value of the collateral that you both agreed upon has evaporated, all right.

Ryan Rockwood: Okay, I got a question here on DTI again.

Mike Rockwood: Okay.

Ryan Rockwood: So, ended up accepting the bank’s offer, sucked it up, paid the contribution, planning to apply again now that I can afford the payment.  Read this thing, will you?  I think we just had a phone consult with them and …

Mike Rockwood: Yes, Chase.  Chase, yes.

Ryan Rockwood: And anyway …

Mike Rockwood: We get recently.

Ryan Rockwood: Paid the contribution, remember that.  And they had a weird situation.  And do you think that would be worth telling people about how – do you remember they had to accept a modification that kind of stunk in order that they could …

Mike Rockwood: Yes, oh.

Ryan Rockwood: Potentially qualify or have their payments in the DTI in light of according to this.

Mike Rockwood: Yes, get a load of this everybody.  I remember it real clearly now.  They had an instance in which they weren’t being offered a very good modification.  Had they been – I think they had an interest-only situation where they were paying interest only on their mortgage.  The modification, of course, came back as a fully amortized 30-year fixed rate loan and it bumps their monthly payment up just enough to make them eligible for Making Homes Affordable modification.  Well, we couldn’t think of anything else to do, so they decided they accepted it.  And now, they’re fully qualified for a good modification.  Isn’t it just bizarre?

Ryan Rockwood: Maybe you should say that again slower because I’m not sure if they know what the implication is.

Mike Rockwood: Let me say it slowly.  Their front-end debt-to-income ratio was too low to qualify for the Making Homes Affordable program.  Let’s make up a number.  Let’s say it was 29.5% and it needed to be 31%.  Could they make less money?  Probably, but who wants to do that in order to qualify to get some assistance?  That doesn’t make sense.  So when their offer came back from the bank, in fact it was not a Making Homes Affordable modification at all.  It was some sort of a special forbearance or some sort of an accommodation.

But that payment was slightly higher and it made their ratio, their front-end debt-to-income ratio over 31%, in fact, that they went up to like 33% or something.  So, they accepted that and now they are fully qualified to apply for a Making Homes Affordable modification.  This is really a beautiful thing.  So they accepted it.

Ryan Rockwood: Well, we have to see if it all works out, okay.

Mike Rockwood: But it will.

Ryan Rockwood: It is somewhat creative.  It is creative.

Mike Rockwood: Yes, they accepted a $200 increase on their mortgage in order to qualify for what will probably be a $900 reduction.

Ryan Rockwood: And you know, maybe Bank of America or whoever bank it was, maybe there [indiscernible] fox.  Maybe if we take at closer look at all these crappy loan mods we had that in the past.  They were trying to tell us.

Mike Rockwood: You are absolutely correct.

Ryan Rockwood: Here is our olive branch [phonetic], idiot.

Mike Rockwood: No, we talk so smart.

Ryan Rockwood: They didn’t want to say it, you know what I mean?

Mike Rockwood: Yes, but I’m telling you Ryan, we talk so smart and we feel so smart because we modify these mortgages and we get our payments down and we’re marching down the road fat, dumb, and happy thinking we ripped off Goldman Sachs, yeah right, or we ripped off Bank of America doesn’t happen.  Truth is we’re still making payments on something …

Ryan Rockwood: Well, no, no.  What I mean to say is maybe that’s what they’re saying.  They’re saying we can’t qualify you for the Home Affordable plan which we’d like to do because we could get, like, $3,000.

Mike Rockwood: Yes, [indiscernible].

Ryan Rockwood: But.

Mike Rockwood: Yes, cured.

Ryan Rockwood: And we can’t tell you – we can’t – I’m sure it’s against their policy.

Mike Rockwood: Yes.

Ryan Rockwood: The government’s policy to manipulate.

Mike Rockwood: To manipulate people into it.

Ryan Rockwood: Into it.

Mike Rockwood: Yes, so many it’s all orchestrated.

Ryan Rockwood: You know, maybe they’re just like – and some of these guys got to learn, yes.

Mike Rockwood: Take this way, sink a little bit deeper.  Now, you got real problems, let me help you.

Ryan Rockwood: Yes.

Mike Rockwood: But honestly, I think my point was correct too in that all of this loan modification stuff is just so much blah, blah because we’re still – we still have, you know, trillions of dollars that we’re staring at in terms of the evaporated equity that somebody has to take responsibility for.  And I’m sorry but Mr. and Mrs. Middle Class America can’t do it because they’re losing their jobs and they just don’t have the resources to do it.

Ryan Rockwood: Here’s another one from Richard.  “How do you deal with PMI on a short sale?”  PMI is Primate Mortgage Insurance.  He says – it says – he goes on to say, they get [phonetic] kill a sale, he started out a short sale with the realtor.  Only has a first mortgage, non-recourse state, 150 mortgaged worth $100,000.  You know, I don’t know, we had some initial problems with PMI.

Mike Rockwood: Oh, we always do, Ryan.

Ryan Rockwood: I’m not sure that we actually mastered at any sense.

Mike Rockwood: No.

Ryan Rockwood: We may have just stopped working on.  I don’t know.

Mike Rockwood: That’s true.  We don’t – I don’t know that we know any tricks.  All we can do is tell you a bunch of war stories.  They are absolutely show stoppers with regards to short sales.  They insist.  You know, they’ve got their ratios.  So, just so everybody understands, they are insurance policy that the home buyer, homeowner, bought to, as part of the deal, to protect his lender.  And now that the lender is perfectly willing to accept a short sale because they know that property devalued, right, and they’re willing to accept this $100 payment for $150,000 because they have to and it makes business sense to do so.  But the Private Mortgage Insurance Company comes in and says, no, we’ve got every right to force you to reject that because we don’t want to pay the difference.

The bank says, well, that’s what insurance is all about.  But it’s like classic argument between whether or not the insurance company can stop the deal or not and we have gone round and round and round.  We particularly had a lot of trouble with it in Florida where the values have declined so dramatically and Private Mortgage Insurance was used so extensively.

And honestly, I think that if there’s anything that I – any advice I would give you is to look at your vulnerability to lawsuit.  And here’s what I mean – here’s why I say that.  Some of our clients who have Private Mortgage Insurance who are absolutely untouchable from a lawsuit standpoint, in other words they ain’t got not assets, they ain’t got nothing but retirement income like a lot of our Florida investors, they have nothing but pension money that’s protected in a lawsuit and they no assets because any real estate they owned has devalued so much.

Those people are tax or lawsuit bullet proof.  And I think the Private Mortgage Insurance companies can do that profiling and they know whether or not they can push this person to accept some promissory note for a portion of the shortfall or they know that they can stop this deal and the person will cure the problem themselves or the bank can sue them or the bank can take their assets and then go after them for a deficiency judgment later.

So, I think it all has – it has to do a lot, I think, with your wealth and your position in terms of being vulnerable to being sued.  Because sometimes we’ll get clients who will just get approved.  Private Mortgage Insurance Company will just say and sometimes, you know, it’s big, big decline from mortgage value.  So, it’s kind of mysterious, kind of unpredictable but if there is any threat to it, I would say it has to do with the wealth of the homeowner.

All right, Tina says, “We got rejected by Aurora Loan Servicing because we do not have enough income to qualify.  I lost my job and my husband’s hours are cut back too.  How long before we can reapply because I think I can pick up part time work and get our income up?”  Well, good for you Tina.  You can apply immediately and that’s a good idea.  Get a part time job.  Honestly, I mean sometimes you have a household that only needs an additional $500 or $1,000 a month to be able to qualify for the loan mod.  But I really would encourage you, Tina, to know exactly what that dollar amount is because you may be able to get there easier than you think.  Renting a room, you know, for $300 a month or $500 a month, renting out your garage for $150 a month, getting a contribution letter from a brother, sister, friend, uncle, parent, wealthy child.

A contribution letter is a great idea.  That’s just a letter where someone with enough resources writes a letter, you know, three-sentence letter saying I have enough resources and I fully intend to support my sister to the tune of $750 a month and I can do that for the next 18 months.  And then they just staple that to, like a paycheck that shows they make that kind of money or a bank account that shows that they have that kind of money and the bank will accept that.

So that may be a fast way to up your income a little bit and get Aurora to reconsider your loan mod.  Tina, because one thing that is kind of nice is that restarting a loan mod is a heck of a lot faster than starting it over again.  In other words – anyway, that wasn’t exactly clear but when you update your financials as opposed to close out your file, you’re much better off.  It cuts the time in half in terms of response.  So, what I would recommend is you get with Aurora right away and make sure you understand how much you missed the income target by and ask them if, you know, if you can update your financials and then think through some of the alternatives that I just mentioned and see if you can even get it started right again within a few days.

Ryan Rockwood: Okay, Theresa asks, “B of A tells me I have a $700 positive income after the full monthly payment the debts are made.  You calculated my budget sheet for me last year and there is no way that I have any money left over at the end of the month as I am only using my savings to make the payments right now.”  So, well, first let’s hope she’s not talking about her mortgage payment she’s making.

Mike Rockwood: Yes.

Ryan Rockwood: Let’s hope she’s talking about HUD payments.  “Could it be the bank is calculating the rental income as income and the payment offsets …

Mike Rockwood: Yes.

Ryan Rockwood: And the payment offsets most of it?”  I don’t really think I sounded [phonetic] to make a lot of sense but I think that rental income is a huge problem.

Mike Rockwood: Yes.

Ryan Rockwood: In loan modification.  It’s just annoying.

Mike Rockwood: Mishandle.

Ryan Rockwood: Yes.

Mike Rockwood: It’s always mishandled.

Ryan Rockwood: It’s always a question mark.  Is it 75% of the rents.  Is it income?

Mike Rockwood: Do I just put all the mortgages on my budget?

Ryan Rockwood: So, that’s the first place I had looked.

Mike Rockwood: I’d also think about taxes, Ryan, because that’s the kind of figure that a lot of people pay in taxes so she might not have calculated income taxes correctly.

Ryan Rockwood: Well, gross, net …

Mike Rockwood: Yes, you got to be sure that, you know, when you’re working your budget, you have a line item for income taxes and that should be, you know, whatever you pay in income taxes, not what’s withheld but what you pay and that’s generally between 5% and 15%.  And everybody always goes, no, I pay way more than that.  Well, you probably don’t.  Most of us don’t at the end of the day.  Now when you check is just to go to your 1040 and divide your, you know, the first – the wages and tips, salaries line, that’s the biggest number on your 1040 by line 63 or right around 63 that says your total tax divide one by the other and you’ll get the percent that you actually pay and it’s probably 5% to 10% to 15%.  So, be sure you reduce your gross income by that amount.  Have a line item in there for your taxes before you subtract your debts and then before you subtract your cost of living.  And remember that budget at the end of the day has to be very close to zero.

Ryan Rockwood: Okay, she goes on to say a follow-up e-mail.  “I’m confused about this budget sheet because of my rental income.  The balance sheet calculates that income toward HTI.  Then it calculates the rental first and the second mortgage payment as debt in the DTI figure.  That makes the HTI very low and the DTI very high.  Should I calculate the rental, debt, and income somehow different from other monthly income?”

Mike Rockwood: Yes.

Ryan Rockwood: Does that make sense?

Mike Rockwood: Yes, definitely, yes.  Theresa, if you have only one other rental home, you’re going to have a hard time getting away from doing it the way you are doing it.  But if you have more than one, you’re on pretty solid ground to argue that it’s actually a separate business that you own and run because it is.  And you have to present it to the bank in that way.  Break off your rental properties in to a separate schedule of real estate owned and then argue and argue and argue with the bank about keeping it that way.  They get so wrapped around the axle if you put your rental income into your budget income because it just hoses up the debt-to-income ratios.

So, really try to avoid that, but it’s really hard to avoid if you only have one rental property.  So, that’s my advice.  And feel free to send me your budget if you haven’t already, Theresa, to update before you talk to him again.

Ryan Rockwood: “B of A is saying if I can’t do anything, they can’t do anything for me as far as a loan mod but I think I could change that if I resubmit my budget sheet.  Will B of A accept a new budget sheet?  I’ve been in a forbearance for six months that expires at the end of this month.  I thought I was in a loan mod trial.”  Bummer.  “If I can’t bring it current, which I can’t, to make the regular payment, which I can’t, they say foreclosure without further notice.  I need to have a little more time to try to sell my house in the coming season that is so far have held well in my area plus we bought another home from my husband’s death $75,000 below the market 2006.”  Well, I can’t say, Theresa, what they mean without further notice.  You’re still going to get lots of notifications.

Mike Rockwood: Yes.

Ryan Rockwood: It’s not like a big surprise they just claim they don’t have to do further legal proceedings maybe or something like that.  But that would be pretty hard for me to believe that they could do that.  A lot of times they don’t use technical terms.  They’ll say something like that or they’ll say we are going to accelerate the foreclosure process.

Mike Rockwood: Yes.

Ryan Rockwood: Accelerate foreclosure or something like that.  But still, it’s going to have to be there in their 90-day notice, their Notice of Trustee Sale, their Notice of Default, Notice of Trustee Sale, all that kind of stuff, okay.

Mike Rockwood: Yes, and you’re still protected by all the foreclosure laws, so you know, it’s not like it’s imminent.

Ryan Rockwood: Yes.  Now, do you know where she lives?  Do you remember where she is?

Mike Rockwood: I think it’s in South — southeastern part of the United States.

Ryan Rockwood: Anyway, a couple [phonetic] – people ask me this week what can – how can you help me and other parts of the country?  And as you know we do short sales nationwide.  Here’s how we’re doing it at this current moment is if the home is under $300,000 in today’s value, we’ll do a lot of research, a lot of phone calls, and a lot of interviews for you and find you a good local agent that can do it, that’s no charge, and dump that short sale for you, okay.

If it’s over that amount, we’ll do that short sale for you.  Neither the options actually cost you anything out of your pocket.  So, avail yourself of that.  The bank pays for all of it, it’s ridiculous but they do.  And so, avail yourself of that expertise if that’s something that, you know, would benefit you, all right.

Mike Rockwood: All right, here’s a question from Mike.  He says I have three rental homes.  Yes, okay, so this is exactly what we just were talking about.  Mike has three rental homes that jack his gross income up so high, he says, that he can’t qualify for a modification on his own home.  All that income makes my front-end DTI only 21% and we all know it needs to be 31%.

So, this is a real good example where Mike was adding the gross rents into his personal budget and it made his first payment on his primary residents too small a percentage of his household income.  So, Mike, the same advice I just gave a minute ago for Ryan’s caller I give to you.  You have to bust that off into a separate schedule and really push because the bank will accept that eventually but you got to just push and push and push.

Look at you.  Do you want to say something?

Speaker: Yes, because I lost my – I lost my – I lost my lotion, my baby lotion [phonetic].

Mike Rockwood: All ready?

Ryan Rockwood: Chabbie [phonetic] has lost his ChapStick.

Mike Rockwood: We just got it.

Ryan Rockwood: He’s lost his ChapStick.  We are going to find it right after this call.  All right, buddy?

Mike Rockwood: All right.  We’ll go look or it right after we’re done talking about loan modifications.

Ryan Rockwood: Do you want to say bye?  Do you want to say bye?  No?

Mike Rockwood: Say, thanks for watching me.

Ryan Rockwood: All ready.  All right, we’ve got a chat here from Bob and he says, “I sent all new information.  I was told that I still qualify for the program HAMP back a couple of weeks ago.”  This is the guy that he says – he’s saying that, you know, they’ve been just jacking [phonetic] up.  He says he’s hit the – it sounds like he’s hit the hundred correspondence per loan mod ceiling or whatever too.  Anyway, they said they closed the file because of an error after a year and that real [phonetic] – of a year of working on it.  What a heartache, huh.

This is, I don’t know, it’s this kind of thing that make loan mods cost $30,000 if you got someone to do it for you.  Not cool.

Mike Rockwood: Yes.

Ryan Rockwood: Okay, they have told me numerous times that they have closed due to an error, okay, underwriting but it’s never an answer.  Da-da-da-da.  Anyway, we haven’t talked about it a little while.  It just came up with someone today.  They said it’s still my impression that HAMP is still accepting people that aren’t late.  Is that your impression?

Mike Rockwood: Oh, sure.

Ryan Rockwood: So, he’s not late and that’s why he’s getting no respect for a year.

Mike Rockwood: Right.

Ryan Rockwood: But, you know, HAMP hasn’t hanging in there thinking, come on I don’t need to go late, guys.

Mike Rockwood: Yes.  He’s a victim of the department of imminent default.

Ryan Rockwood: I told them – that’s why I said, you know what, how delighted would – as I was writing I said, you know, they just work on it and work on it and send it to different departments and close it out.

Mike Rockwood: Yes.

Ryan Rockwood: While they’re working on it and you’re not late.

Mike Rockwood: While they’re working on it.  Yes.  They’re collecting.

Ryan Rockwood: And then as I was saying …

Mike Rockwood: That means you got to get out of line.

Ryan Rockwood: They’re really smart.

Mike Rockwood: Yes.

Ryan Rockwood: We’re the stupid ones, aren’t we?

Mike Rockwood: Yes.

Ryan Rockwood: Because they must, I mean, they must just laugh at lunch hour in the cafeteria.

Mike Rockwood: Yes.

Ryan Rockwood: They must that …

Mike Rockwood: I can’t believe I told that guy I’m working on his loan mod again and he sent another check.

Ryan Rockwood: Oh, that’s so cruel.

Mike Rockwood: Yes.  It’s true though.

Ryan Rockwood: Yes.

Mike Rockwood: The water cooler would go and …

Ryan Rockwood: Horrible.

Mike Rockwood: Again, again this month?

Ryan Rockwood: Yes.  Look – you can’t – yes.

Mike Rockwood: All right, are you done now?  I want to take one more before we [indiscernible].

Ryan Rockwood: No, okay.  Anyway, current value on home – I think Bob is in Vegas area – “Current value on home $290, balance due $460.  We want to stay in our home with a 2% loan into 40% [phonetic].”  You know, I believe it could happen, Bob, for you.  But unfortunately, I think you got to stop paying that bill.

Mike Rockwood: Yes.

Ryan Rockwood: We’re not supposed to say that.  That’s just a personal opinion.  We’re just seeing – I think we’re seeing less respect than it was.  I think you’re getting less respect today unless you’re not paying.

Mike Rockwood: Yes, he’s paying.

Ryan Rockwood: We thought you were getting no respect earlier but sometimes they did.

Mike Rockwood: You know what?  You know what they really should do is they should get like a Don’t Bother.  And if you’re not in default, don’t bother.  Don’t spend your time and our time.  You can’t have a modification.

Ryan Rockwood: Well, no.  But what they’re doing is so much – they’re like, okay, we’ll just hire a $12 an hour dude.

Mike Rockwood: Just to collect these.

Ryan Rockwood: To take the calls and then we’ll lose it and then uptake [phonetic] it.  It’s a great idea.

Mike Rockwood: And they got a big warehouse off back where they put the files, the faxes.

Ryan Rockwood: Yes, a big round file, a cylindrical file cabinet.

Mike Rockwood: There’s probably shredder.

Ryan Rockwood: Well, sure it is.  I mean, they don’t even print this stuff out anymore.

Mike Rockwood: No.

Ryan Rockwood: They don’t print it out.  Anyway, I feel for you man because, I mean, we’re going through the same thing for clients.  We took out a lot of clients for loan mods because they didn’t want to go late and, you know, a year later we’re …

Mike Rockwood: Oh, boy.  We got done with that part, you know.

Ryan Rockwood: We’re still not paid.  You know what I mean?  We’re still not paid because we get paid to that – anyway, long story longer.  Yes, I think you’re on the right track.  I wanted to say something.  I brought Luke Ian [phonetic] for a doctor checkup today and the doctor was telling me about a co-worker of hers who has a million-dollar second home in Vegas and I belong to, now, I belong to an HMO.  And I guess the doctors weren’t in salary and they’re not rich is what she was telling me.  Anyway, he can’t afford it.  And he says the value today is $400,000.

Mike Rockwood: Oh.

Ryan Rockwood: Yes.  And that kind of make sense though, you know.  You know, super luxury Vegas.  I bet it’s a nice property.

Mike Rockwood: Yes.  It’s really nice.

Ryan Rockwood: It’s a couple years old, hit a million bucks for it.  I’m sure out here it would be $2.5 million.  I think it’s huge, it’s palace.

Mike Rockwood: Yes.

Ryan Rockwood: $400,000 and then, you know, it’s in an HOA so the whole HOA, the whole complex is going to fall apart and everyone will start suing [phonetic] each other and it’s going to be huge mess.  Anyway, the bottom line is the question that he’s really worried about the IRS ramifications of forgiven debt.

Mike Rockwood: Yes.

Ryan Rockwood: And we typically tell people they don’t have to worry about it because I think it’s – I mean, there’s lots of issues but I think that it’s really good if it’s A, your own home, your primary home.  Isn’t that right?  Do you realize the thing, I’ve kind of forgotten because we’ve gone over …

Mike Rockwood: Yes, it’s forgiven if it’s your primary home.

Ryan Rockwood: Primary home.

Mike Rockwood: There is no tax liability.

Ryan Rockwood: So, second mortgage or second properties, second home I should say, $600,000, potentially a big liability there.

Mike Rockwood: Yes.

Ryan Rockwood: What do you think?  What are your impressions in that?

Mike Rockwood: It is potentially a big liability but a lot of times it helps to show people graphically because a lot of times people don’t admit the terrible situation they’re in owing a million dollars on a $400,000 asset.  You’re in a really bad situation and even though you’re going to owe some taxes on a forgiven amount, when you compare the two situations, it’s bad, you know, it’s bad and worse.  So, you have to be careful that you are trading up to a better situation.  But realistically very few people are ending up having a tax liability because there are so many ways to avoid it.  If it is a business, if the property is run as a business, then it is a business loss that is tax deductible.  If it’s not and it’s personal residence, there are really three ways that people could get out of payment or two others beyond the one that Ryan mentioned.  It was not your primary home.

A lot of times when people own a lot of real estate because of what the market has done particularly in these western states, you’re technically insolvent.  In other words, you owe a lot more than you got.  You know, you have more mortgages than you do income.  So, insolvency also eliminates the tax liability on forgiven debt and there is a – I forgot the number of the IRS form but it’s a really easy form to fill out.  Your CPA can help you or your tax preparer can help you fill out the form to determine if you’re insolvent.  Very likely you are.  You know, you got a $600,000 problem right there.

Ryan Rockwood: And here’s the thing.  He thinks, well, you know I’m well off.  I got some money in retirement accounts and stuff like that. And he doesn’t think of himself as insolvent but …

Mike Rockwood: Yes.

Ryan Rockwood: Let me just say that it has been increase – it has been easy to prove insolvency for most of our clients despite the fact that they are not homeless.  Lukey [phonetic] please do not touch that.  You cannot play with that.

The other thing that I want to say is that, like, I think that you are – I mean, the big thing people think is, oh no, I don’t want to have a tax liability and no house.  Well, yes, that sucks but what sucks worse owing the IRS $200,000 or owing Indymac $600,000.  It’s a no brainer.  And yes, you don’t have the house but I’ll tell you the monthly payments on $200,000 to the IRS are extremely attractive as oppose to the monthly payments on a million dollars worth because it’s a million dollars in Indymac.

Mike Rockwood: You know, and your example is good and it gets even worse when you start thinking about the amount of interest that you’re paying on that $600,000 negative that you’ve got and the opportunity cost that you’re – the opportunities that you’re passing up because you don’t have that money.

Ryan Rockwood: Yes, and the lack [phonetic] …

Mike Rockwood: And the fact that …

Ryan Rockwood: And the lack [phonetic], in fact that your marriage now sucks because you guys are all stressed about it.

Mike Rockwood: Yes.  And the fact that the house continues – it’s continuing to decline.

Ryan Rockwood: Yes.

Mike Rockwood: Price is still going down.

Ryan Rockwood: It’s going to get worse.

Mike Rockwood: You’re going to have a $200,000 house.

Ryan Rockwood: So, here’s the thing.  Let’s just keep in mind that, you know everyone hates paying the IRS but in this case, let’s say worse case scenario, okay.

Mike Rockwood: Yes.

Ryan Rockwood: You wind up with a $200,000 tax liability.

Mike Rockwood: No, they would never be doing that.

Ryan Rockwood: Okay, so let’s say worse case it’s $100,000.

Mike Rockwood: Yes.

Ryan Rockwood: Okay, you get – you spend that $6,000 a month that you’re paying in mortgage and you get a kick ass IRS attorney.  You know, the kind that wear, like, the cowboy hats on late-night TV commercials.

Mike Rockwood: Yes, those guys.

Ryan Rockwood: And I guarantee you those guys …

Mike Rockwood: Sick them on the IRS.

Ryan Rockwood: I bet they make – pay them 18 grand and I don’t know.  I just look at them.  I just think, you guys must make just gobs of money.  You know what I mean?

Mike Rockwood: Correct because nobody wants to take on the IRS.

Ryan Rockwood: No, and you know, they’ve got a cowboy hat and they’re like …

Mike Rockwood: They own a bank.

Ryan Rockwood: They have a commercial on it every half hour, I mean …

Mike Rockwood: Yes.

Ryan Rockwood: These guys, they’ve got to be, you know, anyway.  So, if you don’t like paying the IRS $200,000, pay this dude 30 and I guarantee that I think in a year or two, anyway — you know what the payment is on $200,000, it’s like less than your payment on your car, Mr. Doctor.

Mike Rockwood: Yes.

Ryan Rockwood: You know what I mean?  It’s less than a Mercedes Seal or KL5 [phonetic], whatever it is.  I guarantee you, you know, you’ll have to skip – oh, we’re way over time aren’t we?  Anyway – the state of California.  Regarding the credit card debt, Bob follows up, there’s no recourse if it’s the original loan.  But no, I think it’s confusing.  We better follow that by e-mail.  Anyway, I hope tonight’s call has been entertaining and fun to everyone.

Mike Rockwood: And even, you know some useful information.

Ryan Rockwood: Yes, and thank you so much for joining us.  Congratulations on getting another week closer to getting all these stuff.

Mike Rockwood: Yes, press on.

Ryan Rockwood: Kill.

Mike Rockwood: And we’ll see you on – we’ll talk with you again on Tuesday night.

Ryan Rockwood: And remember, if you happen to already sign up, we’ve created a separate program for getting rid of all your credit card debt and it’s $20 a month.

Mike Rockwood: You can put it on your credit card.

Ryan Rockwood: Yes, put it on your credit card that you’re going to cancel last.  Put it on your credit card that you’re going to cancel last.  And we’ll hopefully see you there and people are having some really powerful success in settling their credit card as well.

Mike Rockwood: Okay, and please, if you like the services that you get from us, please pass along our names to friends and relatives and remind them that they can get by our products at our website at 60minuteloanmodification.com.  They can buy our products and join the Credit Card Cure Co-Op at creditcardcure.com.  And please recommend us because that’s how we – that’s how our advertising budget, it’s you.

Thanks a lot.  Goodnight and see you.  We’ll talk to you on Tuesday.

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