What Is Mortgage Modification?

This is a overview of Mortgage Modification
Mike Rockwood: Yeah. Yeah. And it probably will spread to other banks. Mostly because they might as well jump on the bandwagon because they are missing the boat. They’re so far behind. They’re so backlogged with their work right now. They might as well take some political goodwill for it.

But no, it’s always difficult to work with the lenders during this time. And it’s always at the end of the year. Realtors know it, mortgage brokers know it, escrow officers know it. Everybody in the industry knows it. It’s just a difficult time of the year because of vacations, and parties, and vacation mentality.

So with regards to your loan modification, while Santa is checking his list twice you need to be checking your loan modification twice because you need to be sure that there are no errors in it. It’s not that you want to wait three or four weeks before you submit it. But more than ever, you have to redouble your effort to make sure that your application is perfect. Impeccable.

This is the time to triple check yourself before submitting your application because more than ever, your file will have inertia. File inertia. And I say that file inertia is the scientifically proven, galactically accepted fact that a file in motion tends to stay in motion. And a file that is stopped tends to stay stopped. And you know what? I say that kind of in jest, but it’s huge if you think about it.

Think about yourself in a cubicle, and on your screen and literally at your door are 150 to 300 files. And every time you pick one up, open one up, begin to learn about this file, you have a time of gathering information and learning. There’s almost like five minutes sometimes, of uptime just coming to get familiar with the situation involved, here. And what’s missing, what’s good about this one, what’s not?. What action is required, what action did you leave it off with, and has that action been taken?

I mean, file inertia is very real. And so during this holiday season, you want your application from beginning to end to be seamless.

So I thought it would be really timely to share with all of you some of the tricks and some of the tips that Ryan and I have been using in the loan modifications that we do because you all know we do full‑service loan modification. Absolutely every day of the week, we are working on loan modifications. That’s how we can continue to bring you fresh, new, street‑smart ideas on how to make your loan modification work.

So, for all of you do‑it‑yourselfers, we’re kind of like the professional. And we sit down with you once a week and give you the tips and I think it’s time to just take a few minutes and kind of remind all of you of some of the things that we’re doing to make sure our modifications sail through.

So I’ve got 14 tips here that I want to share with you.

The first one is that you should prequalify early and prequalify often. Learn what the lender needs. Learn their opinion of your modification application. Learn everything you can.

In fact, I’ve kind of gotten into the habit. I bet I contact the lender four times now before I submit an application. Generally when I start it, as I’m assembling the paperwork, I’ll dial the lender. And I’ll just chitchat with them about the status of the loan. You know, because I want them to read to me from the file. I want them to tell me what they know about the situation. Because very often they’ll reveal, ah! This customer was put on a forbearance plan one year ago and failed to live up to it.

Or, this client promised us this ‑ like today, actually I called on one that I was just preparing. And they said, “Well, gosh, this client promised a big payment back in August and then just has never talked to us since then.”

As you’re putting together the file, and as you’re putting together your own file, you begin to get the bank’s attitude about your opportunity.

So, I say pre‑qual early, and pre‑qual often.

Get them on the phone, as much of a hassle as it is to get them on the phone. I don’t know if I’ve just gotten used to it. It must be it, because it just doesn’t bother me anymore to dial them, put it on speakerphone. Then I just work until I get to them, and then I ask them the questions that I was prepared to ask them. So, pre‑qual early and pre‑qual often. It’ll make your applications sharper.

Then the first tip about the application itself that I would like to pass along is one that I’ve always talked about, and that is make it personal. And the way that I make it personal… These days I want you to even make it more personal, less professional because currently, there’s kind of a backlash against third‑party help, because a lot of the lenders are saying that the third‑party people are in fact clogging up the lines, and needlessly forcing the lenders to do an awful lot of work. Now, personally, I understand that, I guess, but I think that a third party can actually add a lot of value.

But at any rate, I downplay the professionalism of the presentation and I up‑play the fact that this is a real person and a real family with real hurts and real needs and that you’ve got a program for them. You should bring that program to bear for them.

So, make it personal, not professional. The way that you do that is, again, I still recommend that even if you’re still using an affidavit for the hardship, that you handwrite it, because it’s just better. Handwritten is just better. I recommend that you put footnotes throughout the application really carefully explaining and even insert a whole other page explaining the documents that follow in your own words.

For instance, if you have a checking account only, which really quite a few people do, explain that in a footnote or in a whole other page, saying, “Yes, this is a checking account only, and you ask for checking and savings. I do not have a savings account.” And then sign it.

Going to great lengths to do things like that and to try to second guess every question they might have about your application will go a long way to preventing yours from getting stopped, because as soon as the negotiator or the phase one loss mitigation officer goes through and they see something for which they can stop the application, they will. And then they just pass it off to somebody else and say, “They’re missing the savings account.” Now your file is stopped, and it will stay stopped, and it has a tendency to stay stopped, whereas if it stayed in motion, it would tend to stay in motion.

I’m telling you, sometimes, even in these difficult times, we’re getting sometimes responses on our applications in as little as two weeks when they’re perfect. So, you go through phase one and they just can’t find anything wrong, any reason to bounce it, so they pass it to the negotiator. And then very often, by several days after they get it, they can respond to it, because it’s complete.

Next tip: I’ve been using a cover page, in which I…. And I don’t know if you can see this. Ryan, can you see this at all on the screen? Some of the examples I’d like to be able to show.

Ryan: No.

Mike Rockwood: OK, sorry. But this is actually a submittal that I did today. It’s a fifty page fax. Some of your faxes are going to be that big. It’s a submittal for a loan modification. I’m using a cover page and I either on this page or on the next page, I do a table of contents.

I love this idea, because first of all, remember, we always number the pages in very big numbers in the lower right, every single page, 49 pages. And then I do a table of contents explaining what is on those pages, so that the negotiator doesn’t have to fumble through 49 pages. Because it’s right on top, if he’s looking for the 2008 taxes, he can see, “Oh, that’s on page 32.” He can go right to it. I think that’s a great idea.

I also, on the cover page, state any really important points that you want to reemphasize from your hardship letter. Like, if this is a neg‑am loan, or if it’s even an interest‑only loan, and you’re in a real hard‑hit ZIP Code, then I mention that always in the introductory letter. I mean, in the introductory sentence here above the table of contents, because I want them to pick that up right away. This is a loan that your bank wants you to get rid of. There’s a lot of inertia here.

All right, then, number five is, obviously, there should be nothing missing. That’s part of the pre‑qual process. Very often the lenders these days are, again, back to asking for fewer things instead of more things, because when they know that you know what you’re doing, they want and you want your application to go fast.

So, sometimes I’ll get off the second or third pre‑qual call, and I’ll learn that they only need four things from me. And I never miss a single thing. If they ask for three months of statements, I send three, and if they ask for two years of taxes, I send two, and I send every schedule. And I have the applicants sign every single page of the fax because that’s a verification to the lender and to the underwriter that the person has seen that page and agrees with that page, and the third‑party guy isn’t trying to pull anything over on them.

The next thing I want to encourage you to do is nothing is missing, and it’s neat as a pin, and there are footnotes galore. When I say neat as a pin, a lot of times what people send to us is really confusing and hard to determine what it is. So, if this is payroll, then write “Payroll, ” and if it’s Jim’s payroll, put “Jim’s payroll.” If it’s Arnie’s checking account, write it with a Sharpie at the top, “Arnie’s checking account.”

So, really go to great lengths to make this clear. Some of the people who will be initially ‑ like in the phase one ‑ reviewing your application, I’ve said this before, they’re young, they’re not well‑trained, they’re not well‑prepared, and anything you can do to help them move your file off their desk onto the phase two negotiator’s desk is in your best interest.

Gosh, it took me this long, people, to just get a technical problem taken care of, so I apologize. If you have problems logging in and seeing this, check out sixtyminuteloanmodification.com\live2‑‑the numeral two. Lord knows what it is, but it seems to be working now.

All right, another tip. That is, remember, nothing missing, neat as a pin, footnotes galore. Think of it this way: Your application is literally sitting next to as many as they could fit on their desk. It should look good, OK. They should want to go to it because there’s clarity about it, there’s that table of contents, every page is signed, every page is numbered, named at the top what it is. So, it’s an easy file to work on.

Next tip is and this is a really important one and an awful lot of people mess me up on this one and that is fully document your income. Don’t think that you’re going to get by without fully documenting. Sometimes fully documenting can mean just writing a letter and explaining what the situation is, because sometimes people work on cash, have cash businesses, or they get tips, et cetera, but go to great lengths to explain it.

I’ve gotten in the habit now, when I use contribution letters, or if there’s cash or anything like that, I use an affidavit. You can just Google an affidavit for your state. Like for the state of California, I use an affidavit and I have the client go to a local notary, and pay $10 and have it notarized. It’s just one more step so that the underwriter feels greater comfort.

For instance, on a contribution letter, this will say, “Sworn before me, the notary, this person…” You know, I got their identification, here’s their license number, and they’ve signed it, and they say the following. And then the person writes their contribution note write on the affidavit. You know, “I, John Anderson, brother of Jim Anderson, can commit to 24 months of $1, 000 a month to help my brother during this difficult time. The money will come from the following sources.” And then name the sources. So it’s just one more step to prevent any kind of kickback or pushback on your file. Don’t let them find any reason to slow the inertia of your file.

The next is, I’ve gotten in the habit now of using the lender’s forms at all times. So if you’re applying to Chase, go to the Chase website and use their forms. It’s just one more thing. I didn’t used to do that, I used to use my own forms. But I’ve acquiesced and gone over to their forms. It’s just one more thing that they just can’t argue with.

The thing I find kind of difficult is transposing from the calculators that we use and the Excel spreadsheets that I provide that make it easy for you to calculate HTI, and DTI, and your cash flow. I’m telling you, in the transposing of those numbers onto the lender’s forms, I think there’s something magical about the lender’s forms or something. They just screw things up. But very often, I have to check two and three times and throw away the copy two or three times before I get it right. What’s with that? I don’t know what that’s all about.

But I always use the lender’s own forms. And I’m very certain about the financials. Be very certain that what you put on there results in the debt‑to‑income ratio that you need to qualify for the program that you’re qualified for. OK?

All right. Next, another common mistake that people make in sending me their stuff is, not sending every page of the checking and savings accounts. The top page with all the activity summarized is not good enough. They want to see the activity. And also, do things like checking… If it says page two of three, there’d better be three pages there. Because what they’re looking for is any way for you to be hiding any assets from them or hiding any cash flow from them. So if it says, page one of one that’s fine. If it says page three of three, make sure there are three. Or else, get rid of that note.

The next is footnotes. Again, I guess I’ve already said that I recommend that you go to great lengths to explain things throughout. Even inserting whole pages just to explain what’s coming next. Like, if you have income from three sources, it’s pretty smart to insert a page saying, “the pages that follow verify my income from source one, my job, source two, my rental company, source three, my part‑time job.” And explain them. Just like you would try to explain it to them in person. So you’re making it personal.

Then, Ryan, in terms of handwritten hardship letters, can you give the folks any ideas that you have recently come to in terms of hardship letters? Any recent innovations that you feel are making a more effective…. Do you have things that you’re doing?

Ryan: Well, no, not really. The only thing that I can say on hardship letters is that I used to be a lot more clever with them than I am now and creative. Now it’s just been so many dozens, or hundreds, or whatever of them now that have never met with a single resistance in the hardship department that I’m not really too worried about writing it out anymore. I don’t really think that that’s very important. Although, again, it’s not like I have evidence for that. It’s just a gut feeling.

Mike Rockwood: Yeah.

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