Advanced Loan Modification Course

Transcription

1 Advanced Loan Modification Course Richard Geller: Hey, it s Richard Geller. I want to welcome you to our Advanced Loan Mod Teleseminar. We ve had a number of teleseminars on loan mods in the last number of months, but this is the very first advanced one that we are doing. Anybody who is actually on here is either in the loan mod business, or a realtor, or a multi-property investor; somebody that s in business doing loan mods. So, we are not actually going to be covering peoples' individual situations tonight. We re going to be talking to you from a client perspective. And, we are going to be going in it very deeply, more than we have been able to in the past, because this is just professionals on the line. We are, of course, not lawyers. The disclaimers apply. You've got to investigate things for yourself. Some states have bond requirements for people doing loan mods. Many, many states don't allow payments upfront for work. We re going to address some of these things in the call. We re going to address the most common, high level, professional-type things that we get, and we re going to do it from a perspective of you being in practice to help your practice go better, and smoother, and help you help people better, and help you make your business more profitable. I think some of you know Barbara Cruz. I want to introduce you to Barbara. Barbara, how are you doing tonight? Barbara Cruz: Great, Richard. Thank you very much. Barbara is an amazing person. Barbara, you're going to have to pretend I am not talking about you here. I wrote 'Mortgage Relief Formula' back in the first version in September of 2007, and for many, many months, I could not find anybody that I trusted to do loan mods for my subscribers. That s until I ran into Barbara. She was actually referred to me by one of my early subscribers who I really have to express grateful appreciation for her. And she doesn t work for me, and we re not really affiliated, but Barbara has helped countless of subscribers of mine. She does loan mods on a wholesale basis for people that are actually in the business of loan mods. So if you are interested in just doing marketing, and getting clients, and developing Advanced Loan Mods v1_1 Page 1 of 45

2 your base, you could use Barbara s company to do the loan mod processing for you. And so she has a tremendous amount of expertise. And I want you to know, one of things I ran into when I was looking for a company to do loan mods for my subscribers, is that so many loan mod companies collect fees and don t work with anybody. They ll promise principal reductions, they'll promise unrealistic things. In fact, you see this in their marketing material. And then they ll often simply drop the ball. Some of them won t work their files correctly. They won t be persistent. They won t make all the calls they need to, and a lot of them will accept the standard offer the lenders are going to make to anybody at a certain point. Then they just accept it, and they just submit the file, accept what the lender comes back with, and then they ll tell the client, "Too bad." And that s been my experience. Barbara, I know, you don t want to criticize other people in the business, but I am sure you have a horror story or three from people that have come to you who have work with other companies, isn t that right? Oh, absolutely. I hear stories everyday. And I don t definitely want to criticize other companies either. There are a lot of good loan mod companies out there as well. But, we are different in a lot of cases in comparison to other companies. We receive files constantly, and we see a lot of files have the high DTI ratios, high debt, the borrower's selfemployed, and we get this all day long. What we do is we run our files through a quality assurance process, and we will provide feedback to our affiliates on every single file. In that sense, that offers an opportunity to decide whether or not they would like to go ahead and proceed with the case on behalf of their homeowner. And a lot of people appreciate that, so we do offer that service on every single file. We also rework cases, times until we essentially receive a positive response from the lender. And in some cases, that can take 3 to 6 months. I have a number of people that will call me every week, giving me stories that they've worked with another loan modification company. They were able to provide a service as far as getting an approval, but it wasn t great terms, and although they did provide the service within 30 days or so, they were not willing to negotiate better terms on behalf of their homeowner. So I get a lot of calls like that, and I actually, the most recent call was the worst I had ever heard. This poor homeowner had gone through a 6- month process with this loan modification company, and when it came down to getting an approval, what happened was the homeowner was Advanced Loan Mods v1_1 Page 2 of 45

3 quite a bit behind. They were about $40,000 behind, because it had been nearly a year. They hadn t made that mortgage payment. What had come back was an increase in their monthly payments from approximately $3, to $3, and that payment was only good for 2 months. After the 2 months, they had to come up with a balloon payment of $35,000.00, and I had never heard of such horrible terms. So, when the homeowner came to me, I explained to them that although they are that far behind, what should happen is, this is the time where negotiations are to happen. And apparently, when this client had called the mod company and was trying to fight for better terms, the representative apparently started yelling at them and saying, "You haven't made your payment in almost a year, and this is what the lender's offering, and take or leave it." And I was quite taken back by that response. That s one of the worst things I had ever heard, and I don t take that approach personally with the people that are getting deals like that, and especially that bad. Obviously, a $35, balloon payment, someone is going to have difficulty coming up within 3 months. So, that was the worst story I had ever heard. And then, I just get other regular calls. Other people who are just asking general questions and want to see if they can get better terms, and typically, it is they get what they get. They're getting reasonable terms. Countrywide, for example, is giving 3% interest rates, and some homeowners aren't happy with that, but I'll pretty much be honest with them with terms like that, tell them that that s a great deal. And, you have to decide whether you're comfortable with that or not. So, that much pretty explains what we do in a nutshell. Really good. So, speaking of this, I would say the problem that you mentioned, Barbara, lenders are just taking far too long. This is something we get again and again, or they're making an offer that's just not good. And the question that a lot of professionals are asking us; what can they do about it? What can they do if the lender is taking so long and they're not making a valid offer, or they're not doing anything? What can the practitioner do? Well, I know a lot of lenders are holding off sometimes with finalizing loan mods, because they're trying to get a feel for how the market is and where the government is going with what they are doing and that sort of thing. So, we only have so much control. I know that persistence really helps, staying on top of the file, and talking to the lenders, and getting a feel for what that particular lender is doing with their loan mods. Advanced Loan Mods v1_1 Page 3 of 45

4 We ask Countrywide, Aurora, and all the lenders that we speak to at least on a weekly basis if they have a new programs coming out. What are they doing to expedite these requests, and usually, we can get some really great feedback from them, and they help us. When you ask the right questions, they will help you get the loan mods expedited faster. How often are you following up with them on a typical file? It depends on the lender. Typically, it s once a week, because WaMu for instance, they take quite a while. But usually, depending on what they're looking for and where the file is, it s 3 to 5 days, every 3 to 5 days that we are calling. Even if they say, "Check back with us in 2 weeks", you're still calling in 3 to 5 days? Yes. Because within that 2-week timeframe, they usually will come up with something that they're needing and they are not contacting anyone about it. It's just sitting there on the note, waiting for someone to call in. So yes. If they say 2 weeks, we'll call in 5 days split the time in half. Now if this time is going by and weeks and weeks are passing, are you finding that lenders are halting foreclosure proceedings? Are they putting them on hold while they take their time, or are they proceeding with those foreclosures? Yes. I haven t had a foreclosure yet knock on wood - in 6 months. Most of them are getting halted, even extended necessarily, especially if the loan mod has already been put in place. They're not foreclosing. Okay. So, I am definitely seeing that more and more. So, when you're engaging in discussions for loan mod, the lenders are not continuing with the foreclosure process in general? No, that has not been my experience. No, they're not. That s interesting. Now, one of the things that we get a lot on this is, there's just the total runaround. It's just absolute failure to engage or do anything just this deafening silence. Do you have any suggestions for people that are facing that problem? Again, persistence. I know we have a lot of runaround with the authorization posting. We are able to talk on behalf of the homeowner. That s the non-stop problem we seem to have, and we try be persistent, and calling and talking to the right people, escalating it to a supervisor if Advanced Loan Mods v1_1 Page 4 of 45

5 need be if too much time is passing, that they are not getting paperwork posted. So I think definitely, persistence is the answer to that, and getting the right people. So when do you go to the supervisor level? What s the point when you escalate? Well, if there isn t a foreclosure date, we go by importance, so to speak. If I have file that there's no foreclosure date yet, but there is on another, I am going to escalate that one that s closest to the foreclosure date. And usually, after two people that I've talked to that have gotten me nowhere, I will escalate it. So that could be I guess it depends really on whether their foreclosure's eminent and just what type of runarounds you're getting? Right. How often [00:12:06] accept my call, because you don t want to be too much of a pest either. They have hundreds and thousands of files that they're working on. So it s definitely a priority that you want to maintain, as they do. And one mistake I find people make is they don t submit a completed package, or there's things missing, and then they try to escalate, which I think is a big mistake, don t you? Right. The lenders will get a little annoyed at that, and sometimes, give you an attitude. So, you definitely want to be sure to get all the documentation in. Sometimes, what we do to push a file along is sometimes, homeowners might tiptoe around getting paperwork to you. So if it's a bank statement, for instance, or just a W2 that s missing, we submit the paperwork and let the lender know in writing that that specific document has not yet been received, but it will be subsequently sent. So, that at least, gets the ball rolling. So, once we do receive that document, hopefully within a week or so, then we ll fax it separately and it works out pretty well. So, that s just like one bit of missing paperwork, but it s complete other than that? Right exactly. They do get annoyed when you call and there's missing documents, but if you let them know that it s pending, it s okay, because it takes them a couple of weeks anyway to get the process moving, and that s why we like to at least get the ball rolling. Advanced Loan Mods v1_1 Page 5 of 45

6 Now, when you initiate contact with an office, I know a lot of my subscribers say that the lender or servicer is asking for money. They're asking for some kind of a payment even before they consider loan mod. So, how do you handle that, and do you find that this is something that your affiliates are running into quite a bit? Yes. There are some lenders that that's just their standard practice. Some of them, for instance, Aurora, will want to see that even though the homeowner is in a hardship, they want to see that they can make some kind of efforts to make the payment. Because, they do ask, this person does have a job, they do have some savings, so they want to see something coming in. And that is just a guideline that they have, and you can t necessarily get around that. It s more common when a homeowner is 6 month plus behind, because it s almost possible to do a loan mod when you got $50,000 arrearage. I see. Right it typically will end up being forbearance. So, that is common. So, there's not much you can do about that with those lenders then, is there? No, because it's a standard guideline that the investors that s what they want. And, when it comes down to them coming back with an offer, then you can negotiate those terms. But, if they want to seek some kind of persisted payment history while they're in the hardship, can t really negotiate those terms. Now, let s look at a case when you're working with the lender, you're initiating a discussion and let s go back to a person that s in foreclosure. We have a lot of subscribers who are having clients in Florida, and Florida is a judicial foreclosure state. So, let s just say that a complaint's in a file, the lis pendens is on the property, there's a court date. How are things handled differently in this case, Barbara? Right. With cases like that such as Florida being judicial, once there is a court date and the lender has a lis pendens on the property, you cannot work a loan modification with the lender. They will not work with you until the homeowner has met with the judge and the judge has decided whether or not they will continue the case, which 9 time out of 10, they are doing. At that point, once the case is continued, then you can go back and pursue a loan mod. What we typically recommend, and what we do for our clients is if it has gotten to the point of lis pendens, prepare all the paperwork for the homeowner. It's a great thing, get together, it sets the precedence with the client, and so when they do go through court, they will come back to Advanced Loan Mods v1_1 Page 6 of 45

7 you to go ahead and proceed with the loan mod, and their paperwork will already be in order. So, it's almost like they're presenting their loan mod paperwork to the judge? Exactly yes. That s interesting. And so the usually, the judge will continue the case and then they're able to pursue the loan mod with the lender? Right exactly. And I wish all 50 states would work like this, because it s nice to have the judges have control over that, because as I understand it, the judges are being a lot nicer than the lenders. So, more is getting accomplished with the judges continuing these cases. It s showing the lenders, "We got to get this taken care of." Interesting. Now when we're dealing with the lender and initiating a discussion, there's sometimes TILA violations, which maybe on the table, Truth in Lending Act violations, or the RESPA violations. Do you get into that at all with the lender? Do you use that as leverage? Do you mention it on the phone? Do you put it in your paperwork? Do you do anything with that information? We do at some point. We don t usually initiate that issue with the lender unless the lender wants to play hardball. I did have a case a couple of days ago where there was a foreclosure date within just 3 days, and come to find out, this homeowner actually had a forensic loan audit completed year ago, and the conclusion was that there was fraud that was committed, and somebody during the loan process, had forged the homeowner s signature. And, it was a pretty strong case that actually was going to the DA, and that sort of thing. But, within that year, this homeowner had been struggling making the payments, eventually fell behind, and got the foreclosure date within 3 days. For whatever reason, the homeowner is just nervous dealing with the lenders, went to one of our affiliates and told the story of what they were going through, and the affiliate actually called us, frantic, not knowing what should be done with the 3 days coming up. So, what ended up happening was the affiliate had contacted lender with the homeowner right there with them, and we never used any outcome of the forensic loan audits upfront, as I was saying. We will initiate the conversation by saying, "We have a client here. Their foreclosure is 3 days away. We would really like to see about getting a loan modification accomplished for this borrower. "What are the chances of receiving an extension so we can expedite this request?" Advanced Loan Mods v1_1 Page 7 of 45

8 Well, in this particular case, the lender was not interested. They wanted to go ahead and foreclose. Well, at this point, this is where the gentleman went ahead and said, "Well, as a matter of fact, my client who had a forensic loan audit done, and we found out that there was a fraud that took place. So, maybe there is something we can do about this before you foreclose, because this is kind of an issue." So, what ended up happening was the representative took the story to a supervisor, and the supervisor actually decided to go ahead and extend this sale based on that information. So, that has bought them some time in getting that loan audit over to lender, and the lender is going to be able to research exactly what happened with those loan docs. So, cases like that very, very good leveraged to use. Good that s very good. I ve seen many times when subscribers and clients have told me that the mortgage broker or some officer forged the proof of income on the loan, and I ve had many people who d never even knew what their income was, according to the lender, because they had nothing to do with the income that have been on the loan papers? Right. Those stated income loans? That s right. So, if you found out that that s happened, you could use that as leverage, and that can be an effective way of getting the lender to give you a more favorable outcome on loan mod? Right absolutely. And as I understand it, even fixed loans or adjustables, it really doesn t seem to matter. Nine times out of 10, or 9 out of 10 audits are showing some kind of violation. Wow. Yeah, I heard that It doesn t matter how small the violation, there's still leverage with any other violations. Right. No, I ve heard the same thing. Now do you find that it s more effective to lead with a standard kind of hardship letter? Here is the budget approach. If you ve done a forensic loan audit and you ve shown some lender vulnerability, then do you talk about that right off the bat, or do you go in with the standard approach, the hardship budget approach, or a combination? No. It's the same approach that we take. It s just the hardship budget approach. We will talk to lender; get a feel for how they feel about a particular borrower's situation, go through processing and the review period. And usually, don t have to use a forensic loan audit unless you get down to the wire, they're not cooperating with the foreclosure date, Advanced Loan Mods v1_1 Page 8 of 45

9 they don t want to extend. In many cases of course, if we get a bad offer, it s good to use that as leverage. But, it s never necessary to use that in my opinion. I see. So you feel - is too confrontational to lead off with and unlikely to get a good result, or something you keep in your arbor mentarium when you need it? Right. That s my opinion on that, that's it a little confrontational. Even though it does have good leverage one way or another, I think it s better to lead up to it, because most of these lenders are willing to work with the homeowners. There are few out there still that are little unwilling to work with homeowners, but most of them are very willing, very open to help people, so I don t like to just throw that out there. Right. Do you have somebody that you work with for a forensic loan audit or do you have a recommendation as far as people who may almost spend an arm and a leg and who think that they re been violations? I do actually. I do have a lawyer in an escrow company, and a broker as a matter of fact it's all three in one who does the audit. Yes. And, I've suggested to people - this is not a substitute for a lawyer who really knows what they're doing. But, I have suggested to the people that a good mortgage processor or mortgage broker who processes mortgages can often spot violations very easily. And, it s not a substitute for getting some really competent help, but it certainly can provide you with ammunition if you don t want to spend a lot of money and just want to get some of the opinions, who s got informed opinion. Right exactly. In fact, we had a subscriber who's a mortgage broker and he spotted lots of problems with his loan, and many other loans, and so, that s where I realized that this could be accomplished this way. Do you find that you have to show, if there has been a forensic audit, that there's evidence? Do the lenders expect you to show them the evidence or do they just take your word for it? Is just what you're putting in the letter in writing, or do you have to actually show it to you them? Yes. You typically have to send the review along with all the documentation back up to them, and then fax it over to them. And you've had better success when that s happened? You've had some success that's better than you would have just with the standard approach? Advanced Loan Mods v1_1 Page 9 of 45

10 Right. Yes absolutely. We just implemented the loan audits only about 2 months ago, so it hasn t been that long that we've been doing them, but we ve had more success by using them. What are you doing in terms of deciding whether you should recommend a forensic audit or not? It basically will come down to how the feedback that the lender is providing to us. If they are trying to dance around the whole loan mod idea, then we go back to the affiliate/homeowner, whatever the case may be, and I ll recommend it based on that. Or if the terms come back poor, or a foreclosure day is come up, then we can use it as leverage in that case. I see. Interesting. So, are there violations that you're finding are pretty common, particular violations that you are seeing? Yes. A lot of them have been the origination fees were not appropriately disclosed, the back-end fees. And, other things would be overcharges, and lot of title and escrow overcharges weren't lender-specific, but it's things that they had found. Fraud, of course, with the signatures, quite a few of those, actually. And interesting enough, I know that I was hearing some stories about some brokers that had those experiences where, not the full doc loans, but the stated income loans, where if a homeowner was on vacation and it had to be closed that day, there was people - I can t name names or who it might have been - that were forging documents. So, they are finding a lot of that. Right. The TILA or where the rate was not appropriately calculated, a lot of those are coming up as well. I see. Well, very interesting. Back to submitting things to lenders. When you're talking to the lenders, are you finding any success in talking to lenders about loans where the homeowner is not late? Oh, yes. Actually, it s a good about 70% of the lenders are accepting requests where the homeowners it s not late. Just recently, IndyMac, for instance, was not FDIC had just taken over couple of months ago, and they were in the process of putting together some programs. But during the interim, they only had their loan modification or the specific loan modification program offered where they had to be 3 months late, and they would not do anything without that homeowner being 3 months late. But now, however, they have put out four different programs, and one being that they do not have to be late. Advanced Loan Mods v1_1 Page 10 of 45

11 Do they have other criteria on those? For example, does the loan have to be one is going to reset soon? Not that I know of. It doesn t have to be within a certain amount of time, not with IndyMac, no. I know other lenders that do. They won t do it. Aurora is one of them. They won t do it until it s actually reset. So, some lenders will talk to you about an eminent adjustment and actually, will work out a mod for a client, and some will not until it actually adjusts? Right exactly. And what about investment properties? We haven t seen lenders working on loan mods at all in the past with investment properties, but now, I am seeing that they are starting to work with investors on their investment properties. What are you finding? Right, they are. The numbers are slowly creeping up in them considering investment properties. I know it does depend on how the loan was originated, not necessarily, but what the property's being used for today, but how the loan was originated. So in many cases, the loans can actually be looked at without the owner realizing that it could be, because their mind, freezing an investment property, it s not going to fly. But, if the loan was originated as a primary residence, it could be considered. Even if it s not the primary residence now, if it was originated that way, it could be considered in one of the standard programs? Right exactly. So, we are seeing more and more of those being accepted or considered. There are still a number of banks that just want nothing to do with them, especially if there is a cash flow going. But, they are loosening their belts on investment properties. I really discourage investors from doing loan mods on investment properties. I encourage them to do short sales if they can. And the reason is that if it s an investment property and you're under water, it could take you many years to break even in your equity. And you are putting in all the work, and the risk, and the time, and I just think it's a shame when if you could do a short sale, you can get out from under. Take advantage of the today s real estate market and get something where you're not upside down, or even where you have positive equity. Right absolutely. Because, basically, in many cases that I see, a lot of these investment properties, for what they can charge for rent, even doing a loan mod isn t going to give them a cash flow. Advanced Loan Mods v1_1 Page 11 of 45

12 Right. So, what you're suggesting is probably a better course to take in those cases..yes, it is. It really is, and just deal with it. That s what I recommend, but a lot of people don t want to do that. I think one reason is clients don t want to accept the fact that they ve lost this huge amount of money that they put in the property. And I understand that s human nature, but it does make more sense from a rational point of view to move on, and try to do a short sale instead of trying to hold on to that do a loan mod, and suffer these rents that are not even paying the cash flow? Right exactly. It could be very well inevitable that it s going to end up they're going to go under anyway, so is it now or later. That s right. Let s talk about terms that you get out of loan mod. I'm going to start out with a biggie that everybody's interested in hearing about. The best term you can get from a lender would be on reduction in the amount of the borrower, your client, owes. We know that it's rare, but I think recently, you had a principle reduction story, didn t you? Yes. I finally got one and it was interesting, because we didn t really even hint that we wanted one. They actually refused the file and decided that they were going to go ahead and forgive. It was $80, that they forgave, and this was Chase. It was a nice reduction, because that $80, forgiveness reduced $ right there in the payment, and then just the Firsta alone, having a Firsta loan actually save them an additional $ The payment went from $3, down to $ Did you ask for a principle reduction, or how did this come about? I don t understand. Well we didn't verbally. We do put in our cover letters that we would like them to consider a principle reduction, but we didn t have to go as far as this fighting for it because they just did it. But, that s only one that we ve had so far. Wow. I know we ve had people, they ve called in some on these calls, said they've had a principle reduction. It s rarely advanced, and there doesn t seem to be any system to it. I've pretty much validated it. One of my subscribers, George, who told me he was 1 of about 3,400 people I think it was, who actually got a principle reduction from one lender, one particular situation. But, normally it just seems to be very, very Advanced Loan Mods v1_1 Page 12 of 45

13 haphazard. There doesn t seem to be any system to it of getting principle reductions. It just seems like occasionally, you're able to get one. We're going to talk a little bit later on about some pending changes in the law and what that might mean in terms of principle reductions, but I still want to focus on this portion of our teleseminar on working with lenders. I don t want to get quite there, but we will. What are the terms though, can you get from a lender in terms of interest rate, in terms of what can be done for the borrower? What s the rate that's being done today? Well, they definitely vary. So, I could give you an example this person does what we ve seen thus far. We had a 10.35% interest rate that was reduced down to 2.1%, and ultimately, saved over $1, for the homeowner and it was for 10 years. It was fixed for 10 years. That was the best one that s I could testify to. Wow. Yes, that was a good one. And, I can give you an opposite end to that one. I don t like to talk negatively, but the worst one that we ve had we actually had to fight was only a 1% reduction, and that was just absolutely insane. So we had to fight for that one, and eventually got it down by another 5%. But, we're seeing some pretty good, good terms coming back. Seconds have been the best to deal with thus far. There are a few that they wouldn t go beyond a year. I actually had spoken to a couple of reps in the last 5 days trying to get a feel for what these lenders are looking at, especially with the new plan that was coming out with the government. And, a few had actually told us that they were holding off to see what the government was going to offer, so then they could decide what they were going to do in terms of new programs, or backing out some programs, readjustment programs. So that was the [00:34:54]. I think we re going to see far more. Initially, we're not going to have to negotiate so much, but I think we are going to see better terms. Let me throw some terms at you. Are we getting 5-year fixed or 10-year fixed? We're seeing either or. Usually, the 10-year fixed coming from the government loan, the investment loans that being FHA, Freddie Mac, and Fannie Mae. Just your conventional loans are typically 5 years, and a lot of the seconds are coming back 30-year fixed. Advanced Loan Mods v1_1 Page 13 of 45

14 Okay, the seconds are. Now, are we getting 3% interest rates, are we getting 2% interest rates, are we are getting one or two points below what the loan would be otherwise? It s coming back between 2% and 5½%. That s the interest rate that they're going to pay for that period of time? Right exactly. And what about delinquent amount? In some cases, the arrearages are quite substantial. What are the lenders agreeing to do with those? Most of them are deferring those arrearages. Sometimes, they are only offering variance to it or repayment plan depending on the situation. But, a lot of them are deferring the arrearage, and then re-amortizing the loan, either 30 years or 40 years, depending on the extension of loan that they decide. I've got a couple of notes that people has sent me. Actually, there's slews and slews of messages. Thank you so much for it. But, I ve got a couple of people that have had principle reductions, only a few, but there were some. One person has written that he had a loan that a current payment was reduced, and they had monthly savings of $ and it was possible because of a principle reduction from $106, to $77, And, he said his client wasn t too happy about the mod anyway. That doesn t seem right. Oh my goodness. We re going to talk about dealing with clients a little bit later and have some very interesting points on that. Then there is another one that mentioned that he got a principle reduction on a second from $96, to $48,000.00, didn t even have to ask for it. The lender offered it from the outset on the second. Have you found that there are any easier than on firsts or any more likely to be granted? I am sorry you were [00:37:30]. He basically got one offered without asking. On the second, the lender cut the principle half. Are you finding on the second that a principle reduction is any easier to attain? Yes. That s what I feel. The one that we had was a second as well, and they remove the entire amount. It was 80, down to zero. And, Advanced Loan Mods v1_1 Page 14 of 45

15 from a few others, I ve heard even though the first might be the same as the second, the seconds, they seem to be removing much more than the firsts are willing too. And of course, in many cases there were, if not most cases, the second has no equity, have been wiped out already. So, they're lucky to get anything in a way. Now, talking about terms, are we looking at anyone that s giving a 40 year, extending out to 40 years, anything like that? That s more for the government-backed loans. The VA is doing 9 years. FHA is doing 10-year extension. I can t think of any that we're actually getting on the conventional loans, unless they already have a 40-year loan, and say they paid for couple of years. Then, they re-amortize it that for 40 years. It s typically the loan they already have that they're reamortizing from, unless it s government backed. I'm seeing those extending more, more so than the regular conventional loans. And someone's mentioned that they have a Countrywide that s done 40 years for them, interestingly enough. I may have been on the government loan though. Doesn t Countrywide service a lot of government loans? Yes they do. Now, is there anything that s different on HELOC's, in your experience, in modifying HELOC's and the seconds? What are we able to do in terms of terms? What s typical? With the HELOC's, they are typically reducing down to 1%, ½%. I have seen some insane terms on those. Obviously, it's no longer revolving, so everything is frozen. And with those being the higher interest rates, they are reducing. I'm seeing as low as 1%, actually. And they're working out just the same as regular seconds as far as terms go. I don t get too many HELOC's really, but when I see that we do, that's been as low as 1% on those. Is there any difference when the two loans, be it a HELOC or just a second mortgage when they were with the same lender and same servicer, are you finding, Barbara, that it's any easier or the process is any different? No difference with the process, but I do think, to give the statistics, when it s a different lender, it s a lot easier to get better terms than if it s the same lender. Advanced Loan Mods v1_1 Page 15 of 45

16 It s actually easier to get better terms if they're different lenders? Right. Now, why is that? That s counter intuitive. To be honest with you, I'm not sure of the rhyme or reason to it. That s just what I'm finding. That s what I'm getting back. So, dividing and conquering is easier than dealing with a concentrated show of force when the servicer is handling both mortgages? Right. I'm guessing that if it s two different lenders, that second being different from the first, that second has no leverage whatsoever. It s the first that controls everything, and I think that s why they're a little more wiling to give better terms. Wow. When it's the same lender, they can kind of play around and give good terms, but not necessarily as good, because they own same note. That s interesting. That s very interesting. Are there other considerations that you're finding when you have to handle two loans with the same servicer, any things that you're doing differently when you submit your package and enter into negotiations? No, not too much difference. Basically, we're submitting just one package with the two different loan numbers, and when we call in, we talk about the two different loan numbers. But, there's no separation to it unless it is a HELOC. Usually, with HELOC, for instance, Washington Mutual, they have a different division in whole different states that handles those. So, that you have split out sometimes. I see. So, it's as though they're separate lenders. You're submitting it to two different parties even though they work for the same lender. Right exactly. That s interesting. Let s address some of the finances on the part of a borrower of a client. For example, let s look at someone who's self-employed. There are many people that have difficultly providing proof of income. How strict are the lenders in requiring proof of income before they're going to grant a loan mod? I am sorry. How strict are they? Advanced Loan Mods v1_1 Page 16 of 45

17 How strict are the lenders in terms of looking for verification, for proof of income, before they ll grant the loan mod? They're pretty strict. Especially with self-employed, I am getting that a lot where in some cases, the bank statements aren't enough. A P&L statement isn t enough. As we know, a lot of self-employed people don t necessarily pay themselves a salary, and I ve had a handful where the lender wasn t happy with that. They want to see something consistent. The company might have $50, in assets sitting there, and that s their assets, but what are they paying themselves. And, I'm having a hard time having to prove that, and we have to sometimes get a little creative with that and show some kind of statements as proof, even though they don t have a regular salary. Is a profit and loss statement that someone's prepare themselves or had their bookkeeper or their computer system prepare, is that acceptable for proof of income for self-employed? It is acceptable, but I tell you, a lot of that I've received most recently, the profit and loss statement they are showing too much cash flow. So, it s really not in their benefit, necessarily, to even provide that document. Wow. Because I had one that had showed $150,000.00, and the lender's looking at that. "Well, pay yourself more money", that s their perspective. So, the way that we're starting to get around that, as I'm saying, is trying to provide some kind of paystub or a check showing the actual proof of what they're paying themselves. So basically, it's as if they're employed even though it may be their company. Trying to find some way to show a paycheck, or a paystub, or something that would be equivalent to a salary, and use that rather than giving a P&L. Right...exactly, because, they're getting paid somehow, either by check, transfer of bank account to another bank account. They ve got to have some kind of proof that they're paying themselves, and that s what we have to seen is that proof. You know, one thing that I'm confused about a little bit is there seem to be two criteria lenders look for to the term eligibility for a loan mod. I know a lot of people get turned down for a loan mod because they have insufficient income, and it seems to be the biggest reason they are turned down. And, the lender's looking at the debt-to-income ratio, and they're Advanced Loan Mods v1_1 Page 17 of 45

18 seeing that they have too many debts. There's too much debt service every month in relationship to their income. But, there is also lenders that look at their household expenses and household income, and they want to see how much disposable income is leftover at the end of the month to make the payment on a loan and the PITI. They seem to be different ways of underwriting a loan mod or evaluating a loan mod. So how do you find lenders how do they determine which way they look at client? How do you determine what you submit to the lender? Well basically, the lender is looking at if they are going to modify the payment, how much of the loss they're willing to take each month to get them to the DTI that they're looking for. They do look at housing, of course, but those are more controlled than the debts, of course. They don t want to see excessive spending. I am not seeing too much of that. They don t have extra money to spend. But, they are looking at say, a payment is $3,000.00, the PITI, and when it comes down to crunching the numbers, it looks like the homeowner will only qualify if they reduce that payment down to $2, The lender has to look at that or the investor has to look at that as are they willing to take that loss. And is the homeowner going to be able to afford that payment still, because you might have somebody that is making $5, a month, and that $5, versus $2,500.00, the modified payment, is only 50%. That s not considering the other debt. So, it s a serious number game with the lender, and we can t always determine exactly what they're looking at because it s constantly changing. They don t divulge all the details. So, that s what it comes down to is those numbers, and I don t necessarily suggest people necessarily look at the PTI, because it s not the only thing that they're looking at. And, they're not only looking at the hardships. So sometimes, it can be a little difficult to determine without talking to lender what they are looking for. It seemed like before, they were really focused more on debt-to-income ratio, but now they are looking at other things more than that. Right. And that s why it is so confusing. It's absolutely confusing. Everybody's confused. It even drives me nuts trying to keep up with it, and that s why we talk to them on a regular basis, on a case-by-case basis, because X is going to get a different response than Z. Now, if it's debt-to-income ratio issues, the person has too much debt in relation to their income, are you doing things that will lower someone s debt payments so that they do qualify? Are there things that an affiliate Advanced Loan Mods v1_1 Page 18 of 45

19 can do? For example, having their client contact the credit card companies to get a forbearance on credit card payments and lowering their minimum payments in order to qualify for a mod? Yes. We ve made those suggestions and a lot of people are actually doing that, because they're getting to a point now where some of the clients have so much debt that the credit card companies increase their rates. Where they once had a 3% interest rate, now they're up to 24.99%, and now they really can t afford those payments on top of the mortgage. So, they have some concern with how does "E" trying to settle my debt affect a loan mod? I want to do the loan mod, but I also want to get my debt settled so I could show the lender, these are my payments now." It s really complicated. But, a lot of people are doing that. They really do want to get out debt and show the lenders they really want to keep their house. They may not get other debt, but at least they lowered their monthly obligations that are counted in the debt-to-income ratio? Right exactly. Which are, just to remind folks, it s credit card minimum payments, car payments, retail installment loans. What if those don t show up? Let s say someone has a business credit card that they're paying on. It doesn t show up on their personal credit report on Experian, Equifax, and TransUnion. Many times, business cards don t report, assuming you're not very, very, very late. Does that still count for the debt-to-income ratio? Actually, that s a good point to bring up, because what people need to be clear with, with their clients is that when they're doing a financial statement - and I see this a lot they are not necessarily accounting for all of their debt that is on credit. Now, in some cases they might not realize it s on credit for whatever reason, but they are not disclosing it on their financial statements. That s really important, because that can be a definitely a deciding factor for a lender with the loan mod. It looks like they're trying to keep information from them. So, you definitely want to make sure that it s clear to the homeowner you've got to be honest about your debt. Complete and honest. Complete and honest, and we actually had some people that in their minds, they were thinking, "Well, I'm not paying my credit cards anymore. Advanced Loan Mods v1_1 Page 19 of 45

20 I can afford them. I'd would rather keep my house and make that payment than pay my credit cards." So, they had stopped paying on a lot of cards and they did not disclose it. When it got down to the lender pulling credit, this person had a good $50, they didn t disclose. So, we had to go back and get an explanation, go back to lender and explain what was going on. This is Countrywide, and I'm finding that they don t seem too concerned about the credit cards and how it affects the homeowner s ability to pay them [51:29] really I don t. They just want to feel confident that what the homeowner's earning is enough to pay the mortgage. So, they're looking at income and household expenses, and what s left over. They don t care so much about the credit card debts. Well, they are taking that into play, but it s back to the DTI. A lot of the lenders are not considering DTI. I see. They're not. So, would somebody in a situation having too many debts, would they need to get any kind of letter from their credit card companies giving them two months where they don t have to pay, or do they just simply stop paying and then just tell the lender, "We are not paying on those so it shouldn t count?" Not that I know of, but you would have to get a letter? Fat chance. I just wondered. Sometimes, people officially will call their creditor company. I don t think it's necessarily a good idea, but they'll call and they'll get a holiday on the payments for a month or two. But, that s not what we are talking about here. No. I don t think it makes any difference. No. And then, what about when they do look at debt-to-income ratio, what are they looking for? What are the current ratios they are looking for? Well, the general rule is they want to see a DTI that s between 38% to 48%, and that s with a [52:59] payment. So sometimes, that makes it difficult with us doing audits or other people in this business looking at this. If someone has a 50% DTI, they might think that s too high, but that s not necessarily true. Because, it comes down to the lender deciding whether or not they want to take the loss and whatever that number is that they have to be brought down to meet that DTI. But, most commonly, the numbers that are used are between 38% - they're actually going up a bit now. Between 38% and 48% is what they're looking at. Advanced Loan Mods v1_1 Page 20 of 45

21 Is that on gross or net income? I'm sorry? Is that on the gross or the net, after tax or before tax? The net income. So, after-tax income. Somebody wrote me a note here. It said, "My borrower called the bank - I won t say which one - went over income and expense, and was told does not qualify. I called them 2 months later, went over income and expenses. They said, 'No, he doesn t qualify due to excessive income.' There has got to be some sort of formula." Is there? Right. Excessive of income, so they probably had a [54:15] if I imagine, so it looked like they could afford the mortgage payment. I don t know. That s what it sounds like. Those are tough just because I really don t even have an answer for that, because if there is not a strong hardship to it, then that s why they're considering a surplus. I mean, it depends on how far behind they are. If they're not behind, and they have a great surplus and no hardship, there's nothing to play with their. In the lender s eyes, it just looks like that person just wants a loan mod like everybody else wants. They don t need it, they just want it, and they're not interested in dealing with people just want it. They're interesting in dealing people that need it. Exactly. In that case though, if the story was that there was a hardship, say the person had a heart attack or some kind of health issue that put them out of work for a little bit, but then they were able to go back to work, have the regular salary, which do we see cases like that. Then, there's a good hardship to showing why fell behind, and although there's a surplus, they need some kind of help to get back on their feet because of that hardship. Somebody commented that there's a noise on the line sometimes. I hear that too. I am sorry about that. I don t know why it happens sometimes. I apologize for that. We have another note here, which I think is kind of interesting, which is that a mod was offered on a file. The loan rate will drop from 8% to 7% for the life of the loan, and the balance will drop $258, to Advanced Loan Mods v1_1 Page 21 of 45

22 $185,000.00, which is basically a monthly payment savings $ a month. That's without the principle reduction, and they say they do ask for it in all files and they do get some investors to include it. Now, I think that s interesting. It's definitely worth asking for, I think, in all cases, and we're not saying don t ask for it. But, we're just saying that we wouldn t want to expect it, and we certainly wouldn t want you to imply or promise that s possible when you get a client, because that s really not the right thing to do at this point. Right. Ask for it but don t expect anything. Yes. And don't market based on principle reductions, by all means, because that s very misleading. Right. A lot of people are doing that. Yes, I know. I don t like that. What if a borrower owns other properties? Maybe they have equity in some of them. Are the lenders looking at the equity in other properties at all in determining whether they're going to grant a loan mod, Barbara? Yes, they could. They're looking at the overall assets. So, if they have $50, in equity, which would be odd, but say they had $50,000 in equity. They might consider that as an asset that they are able to cash into. They could possibly refinance that house draw, that cash to live off of. How do they find out about it? They can research. They could do some digging. They find out a lot of things. They can find out how much 401(k) money you have. They can tap into all that stuff. So basically, they're not necessarily asking, but they might come back with this example and say, "We want your client to refinance" or "We want your client to look into other means to make the payments?" Exactly. So, have you have them come back you sometimes and say, "We're not giving you a loan mod. We think your client should sell this property or should refinance this property instead?" No. I haven t had that if they had an investment property, no. If they had [58:05] property being their primary residence and they had equity, they Advanced Loan Mods v1_1 Page 22 of 45