April 13, 2024 • 53 mins
Facing foreclosure can feel like standing on the edge of a cliff, but with the right guidance, there's a path back to solid ground. This week, Julia Iden from Advanced Mortgage Education joins us to illuminate that path, revealing the workout options that can either anchor you to your beloved home or provide a parachute for a controlled descent. We unravel everything from moratoriums and loan modifications to short sales and deeds in lieu, equipping you with the knowledge to navigate the stormy seas of financial hardship with confidence.
The specter of foreclosure doesn't have to spell doom—there's hope in the form of special forbearance plans and the stories of those who've walked through the fire before. Our candid conversation with Julia peels back the layers of these plans, including the COVID-19 forbearance, offering a glimpse at the real impact on credit and the intricacies of repayment. We also highlight crucial advice for real estate professionals to prevent any surprises during property sales, ensuring a smoother transition for all parties involved.
Lastly, we address the often-overlooked world of private mortgage insurance and the powerful strategy of mortgage assumption. With Julia's expertise, we dissect the possibilities that claim advances and assuming a loan can offer, presenting them as viable lifelines in challenging times. As we close this episode, we leave you with a message of perseverance and the reassurance that help is out there. Julia's parting wisdom? "Don't give up, there are people out here that can help you." And this episode is the first step in finding that assistance.
Be the first to know about the next episode of Foreclosure Chronicles by signing up at foreclosurechroniclespodcast.com
By signing up you also get access to special bonus recordings.
Amy is a licensed Realtor in North Carolina. She is affiliated with Buy Homes with Rose LLC brokerage. This is not a solicitation to get a listing. This is a podcast to provide you with options for your situation.
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:18):
The views and opinions expressed on this
podcast are those of thepresenter and do not necessarily
reflect the views or positionof the podcast host.
All right, welcome back.
Welcome back to another episodeof Foreclosure Chronicles,
(00:39):
where we help homeowners thatare facing foreclosure with
options so that they can makethe best decision for their
situation or exit the propertywith dignity.
I am your host, amy Ellis, andwe have her back again, second
time in a row, ms Julia Iden,the president of Advanced
(01:04):
Mortgage Education, and she'sgoing to talk about the workout,
and it's not that workout thatyou know we need to be doing to
get that body in shape for thesummertime, but it's the workout
with your foreclosure.
So, miss Julia, welcome backand thank you again.
Speaker 2 (01:26):
Well, I'm excited to be here and talk with the
listeners today about whatoptions may be available to them
Now.
In our last podcast we talkedabout hardship and that one of
the most important things is thehomeowner's desire.
What do they want to do?
Do they want to stay in thehouse or do they want to get out
(01:47):
?
So the workout options fallinto two buckets cure related
workouts those options thatwould cure the delinquency, turn
the loan back into performingassets.
So if the homeowner were sayingI really want to stay in the
house, then I would be thinkingabout the cure-related workouts
(02:08):
moratoriums, forbearances, loanmodifications, claim, advance,
borrower assistance.
So there's several of them thatfall into that bucket.
But if the homeowner wants toget out, they're fighting over
the money like cats and dogs andif they're not divorced, one of
the two of them is going to bedead.
If they just want to get out,okay, then it's the non-cure
(02:29):
related workouts, and there areseveral that fall into that
bucket the deed and lewd, theshort sale, foreclosure sales,
full guarantee sales, and sowhat we'll talk about today is
we'll talk a little bit abouthow those programs work and when
would be a good time to usethem.
(02:49):
Okay, when it might beapplicable for that homeowner.
So we'll start talking aboutthose cure related workouts.
So the homeowner wants to stay.
And we talked about hardshipslast time in our podcast and one
of the hardships was disaster.
So if there is a earthquake, atornado, a hurricane, a
(03:10):
snowstorm, a flood, a fire, amudslide, if this governor of
the state has declared it adisaster, okay, then you qualify
for what is called a moratorium, and moratoriums go with
disaster and disasters go withmoratorium.
So as soon as I started talkingto the homeowner and they said
(03:33):
some kind of disaster, the firstthing that popped into my mind
was moratorium.
So here's how a moratoriumworks.
It's the legal authorization todelay the process and to put
off accepting money.
So the loan just sits stagnant.
We don't report anythingthrough to the credit bureau, so
there are no late pays beingreported through.
(03:55):
And so let's say your house wasdamaged by a hurricane and you
called into the mortgage companyand you use the little trick
that we talked about in the lastpodcast to get to the right
department in the lossmitigation.
And if you didn't listen, youmight wanna go back and listen
to that podcast.
There were some good tidbits inthere.
(04:16):
So you get into the lossmitigation department and you're
gonna pull your financialpackage together and when
they're talking to you and yousay the word earthquake, flood,
blizzard, whatever it was,tsunami, whatever the disaster
was that impacted my house, andso in loss mitigation, what
they'll do is they'll let you gofor a certain period of time.
(04:37):
Typically it was six or 12months, depending on how much
damage was done to the property.
Now I am going to want to seephotos of the damage and repair
bids, but usually the way yourhomeowner's insurance works is
they only give you a portion ofthe insurance proceeds up front.
So you use that as a downpayment with your contractors so
(04:58):
that they can get started onthe work, and then, once all the
work is completed, they sendout their inspector and they go
yep, everything's been completed.
Now we release the rest of thefunds.
So I know the homeowner is goingto have to be putting out some
money to try to get everythingfixed and, as an investor or an
insurance company, ok.
So I got a call from ahomeowner who had a house that
(05:20):
was a block away from Disney.
Had a house that was a blockaway from Disney, okay.
And she said look, I know thatthe mortgage company, they want
to own my house because it's ablock away from Disney.
And I said no, we don't.
We want your money, we don'twant your house, we're not in
the business of owning homes andwe don't want to own your home.
We want you to make the payment, okay, and if you can't, then
we want you to contact a realestate agent and list and sell
(05:41):
the house.
Okay, and if you can't, then wewant you to contact a real
estate agent and list and sellthe house.
Okay.
So if they've had some kind ofdisaster, we will let them go
for six to 12 months, dependingon how bad it was and how long
it's going to take to get theproperty back in to condition
where they can live in it.
And a lot of times, if theycan't live in it, they're having
(06:02):
to rent something else whilethey're working on getting the
house fixed.
So what the mortgage companiesdo is called a moratorium and we
let you go six or 12 monthswithout making any payments.
You just focus on getting thehouse fixed.
We don't report anythingthrough to the credit bureau, so
there are no late pays beingreported through, no negative
(06:23):
ding happening to your creditscore.
Okay, and so that is a bigpositive for the moratorium and
we are helping that homeownerout by not reporting anything
through and letting them get thehouse fixed.
Now, at the end of the timeperiod, what we'll usually do is
just take however much moneythat comes to and just add it
(06:46):
back into the mortgage, tack itback on to the end.
So we'll just let you go aperiod of time you don't get
referred to foreclosure attorney, you don't get reported to the
credit bureau, and then at theend of that period of time you
just pick up right where youleft off and we'll just tack
that year on to the end of themortgage.
No big deal, okay.
Speaker 1 (07:06):
So let's talk.
Can we talk about, like theCOVID moratorium?
Speaker 2 (07:14):
Oh, girl, okay, special forbearance.
That's the next one on my listOkay.
Historically, there's a thingcalled a special forbearance
where again, we let you go aperiod of time without making
payments but those are reportedthrough to the credit bureau.
So, for example, when I wastalking to the homeowner and
(07:37):
they said to me Julie, I workedat the mall, at a big chain
store, in retail, and then afterthe holidays they laid me off.
And so I'm thinking to myselfwell, she works in retail, so it
probably in two or three monthsat tops, she'll find another
job in retail.
So I just need to buy her acouple months to get reemployed.
(08:00):
So I said I'll tell you whatI'm going to do.
I'm going to put you on aspecial forbearance of making
half payments for the next sixmonths.
So the money you would haveused to make the next three
mortgage payments, we're goingto spread that out over six
months.
So you're only going to make ahalf a month, half a payment.
So if your payments were $1,000a month, you'll only pay $500 a
month for the next six months,for the next six months Now at
(08:26):
the end of the six months.
Well, we stretched that moneyto cover the three payments out
to get you through six months.
At the end of the six monthsyou're going to be three
payments behind.
You're going to have three latepays on your credit report, so
we'll have to do something atthat point to bring your loan
current.
But I bought you time to getreemployed, to get better.
Okay, you've had to have somekind of surgery and so now you
(08:48):
need a couple months to get backon your feet before you can
make the payments again.
I had a gentleman once who hewas a single man, who lived in
San Francisco.
He did not have any significantother and he didn't have any
children, and when I was lookingthrough his financials, I
(09:09):
noticed that he had a $500,000life insurance policy and the
problem was he had AIDS, and sohe was going through some
treatments and some remissionsand having some issues.
So that's why I couldn't makethe mortgage payment, because he
was having to stay home fromwork, because he was sick.
And so I said to him hey, I'mgoing to put you on a special
(09:34):
forbearance.
Have you ever heard about thosecompanies?
You see them on TV.
We buy life insurance annuities.
Did you win the lottery andyou're tired of getting your
money in little bitty payments?
Come to us, we'll give you abig payment.
I said go to those companiesbecause sometimes what they'll
do is give you like 50 cents onthe dollar for the insurance.
You don't have a spouse orchildren, so it's not like
(09:56):
you're leaving it to somebody.
Go ahead and cash that in.
Get that money out and use itto enjoy the rest of your life,
however long you have.
You'll be able to make themortgage payments.
You'll be able to pay forwhatever treatments you need to
have and enjoy the rest of yourlife.
Well, you can.
And so I used it to buy timefor him to get that taken care
(10:18):
of.
So a special forbearance I'musually buying time to get them
better, to get them reemployed,to get whatever you know,
whatever it is that they'retrying to get settled.
Sometimes they're in a lawsuitand the attorney has sent me a
letter said yes, we won thelawsuit, but we're waiting for
the settlement check to come.
And I said I'll tell you what.
(10:38):
I'll put you on a specialforbearance till the settlement
check comes, cause your attorneywrote me.
The letter said yes, you won,we're just waiting on the check.
So I'm using it to buy time toallow the consumer to fix
whatever the issue is.
It will have a negative effecton their credit because there
will be a few late pays by thetime you get to the end of it.
But that's the way that I'musing the special forbearance.
(11:01):
And then came along 2019 andcover Pearl.
If you had told me that thatwas going to happen back in 2012
, I'd have said you were crazythat nothing like that would
ever happen in this country.
But it did.
And a lot of people were notable to make their mortgage
payments, so they have what'scalled a special COVID
(11:24):
forbearance.
Okay, and so what they said isif a homeowner calls into the
mortgage company and they say Ican't pay because of COVID, for
whatever reason, but due toCOVID I can't pay, then what we
were going to do is we weregoing to put them on a special
forbearance, not making anypayments over a period of time.
(11:46):
We would not report it throughto the credit bureau, so it
wasn't going to have a ding ontheir credit.
Now here's where we have to becareful, because, okay,
consumers don't read Right.
Speaker 1 (12:00):
They do not read.
Speaker 2 (12:01):
And even if they did read, these documents are
written by accountants andattorneys.
So even if they did read theletters coming from the mortgage
servicers to the homeowner,most of the time they have no
idea what they just read on thatpiece of paper.
So here's what the homeownersaid.
They heard on the phone callwith the mortgage company.
(12:21):
They heard the person say tothem look, if you say the word
COVID to me, that you can't pay,then I'm going to put you on
the phone call with the mortgagecompany.
They heard the person say tothem look, if you say the word
COVID to me, that you can't pay,then I'm going to put you on
the COVID.
Special forbearance.
And, depending on who theinvestor on the loan was,
because VA had a certain termthat they would go out to Fannie
Mae did Freddie Mac.
So I looked at all of them andthe longest one was 24 months,
(12:42):
but most of them were 12 to 6 to18 months.
Okay, so know that it's goingto be anywhere between 12 months
to 24 months.
They got to go without makingany mortgage payments.
We didn't report anythingthrough to the credit bureau.
Uh, so they had no negativeimpact on the credit, kind of
like the moratorium when theyhad the hurricane.
We're not holding it againstyou, okay, we're not going to
(13:04):
ding your credit for it.
And so now, what happens,though, is they said to the
homeowner don't worry about it,we're just going to tack it onto
the end.
And what the homeowner heard wasokay, those 24 payments when I
make my last payment on December2030.
(13:25):
Okay, then those 12 paymentsthat you didn't allow me not to
make, and then, on January one,I'll make the first payment, on
February, I make the secondpayment, and I'll just make them
for 12 months until I've paidit off.
But that is not what thepaperwork says.
The paperwork says that, onDecember 30th or 31st, when you
(13:49):
make that last payment underthat mortgage, that the entire
lump sum.
So if it was a thousand dollara month payment, and you went 12
months, $12,000, then, onJanuary 1, $12,000 is Wow, and
on January 1, $12,000 is done.
And so I think there are goingto be a bunch of homeowners who
get surprised, because theythought they were just going to
(14:13):
pick up right where they leftoff and make those 12 or 24
payments until they were done,when, in fact, it's going to be
what we call, in the industry.
A balloon payment, one big,giant payment that all comes due
at one time.
Okay, now, if I were talking toreal estate agents, here's where
(14:34):
I'd be saying to them if you'retaking a listing on a sale for
a property, you need to ask yourseller did you participate in a
COVID special forbearance?
Because a lot and I mean a lotof people did.
And if the homeowner says yes,I did, then you need to do some
math in the back of your head.
Okay, your mortgage paymentsare $12,000 a month.
Even if you got the max of 24,that's $24,000, because $24,000
(15:00):
to find out about that a fewdays before the closing on a
transaction, $24,000 could putyou in a short sale situation.
Speaker 1 (15:07):
Yep, okay.
Speaker 2 (15:11):
And so it's good to ask about that.
If the listing agent were takinga listing today, I'd not only
be asking about who, how manylien holders and how much you
owe them, but also, did youparticipate in a special
forbearance COVID program?
And so that's what that was, anda lot of people benefited from
it over the last couple of yearsand it's done.
(15:32):
They're not doing them anymore.
That program is over, but a lotof people did participate in it
.
So that's the specialforbearance.
Now a repayment plan this, ofall the options that we're going
to talk about today, therepayment plan is the only
option that the collectors areallowed to offer to a homeowner.
(15:54):
So if you wanted one of theseother plans that we're talking
about today, you really have toget into the loss mitigation
department.
And again, if you didn't listento that last podcast, better go
back and listen to it.
So when you get into the lossmitigation department and again,
if you didn't listen to thatlast podcast, better go back and
listen to it so when you getinto that loss mitigation
department, okay.
Then the repayment plan.
So here's how a repayment planworks.
(16:16):
Let's say the homeowner was onthe phone with the collector and
the homeowner has lost theirjob.
They have not been able to findanother job.
And the collector called andsaid here's what you're going to
do You're going to go and getyour checkbook and you're going
to give me a check today tobring this loan current.
And the homeowner said I don'thave the money to pay to bring
the loan current today.
I lost my job.
And the collector said well,the only other option available
(16:39):
to you is to make a payment anda half until you bring the loan
current.
Other than that, we're going tosend you to foreclosure.
So the homeowner thought thatthat was the only option
available to them.
So they said yes, I'll take therepayment plan.
They took the last.
So they got a thousand dollar amonth mortgage payment, but
they got to make a payment and ahalf.
So they got to make a $1,500mortgage payment.
(17:00):
So that's every penny they'vegot, or they borrowed it from
their parents, their siblings,their business partner got
advance on the paycheck.
They scrape together thatfifteen hundred dollars.
They make the first payment onthe plan and they cross their
fingers and hope that, beforethe next payment comes due, that
they have a job.
But they don't, so they breakthe plan.
(17:20):
Collector calls them up andsays you got three options Pay
today in full, make a paymentand a, or we are sending you to
foreclosure.
What's it going to be?
And so the homeowner said signme up for the payment in a half.
I'm going to do that becausethat's the only option that I
can do right now.
I don't have the money to payin full and I don't want to go
(17:41):
to foreclosure.
So again, I borrow $1,500 frommy parents, I make that first
payment and I cross my fingers,by the time the second payment
comes due, that finally I'mhoping I'm going to have a job,
some kind of job, something, soI can do this.
And so then I missed the secondpayment.
Again I break the second plan.
They call me up and they saidJulie, three strikes and you are
out paying full.
(18:01):
Today you pay a payment and ahalf, or you go to foreclosure.
What's it going to be?
And I said sign me up for thepayment and a half, because
that's all I can do.
And so I make the first paymentand then again, I don't make
the second payment.
So inside the mortgage servicingworld, that's what we call a
chronic delinquent, when ahomeowner goes in and out of the
(18:24):
default three times like thatand they break three plant.
They are coded as a chronicdelinquent and after the 90 days
of being in default remember wetalked about this last time
after 90 days, then they'rereleased to the loss mitigation
department because collectionswants to get their crack at
collection so they can get theirbonus at the end of the year,
(18:46):
and so all chronic delinquentsare called out of the loans that
are referred to loss mitigationat the end of the 90 days.
So by agreeing to these threerepayment plans because you
thought it was the only optionthat you had available to you
Now, you have undone youropportunity to do a workout deal
(19:08):
with the department whose jobit was to help you, because
you're coded as a chronicdelinquent and they can't help
you.
Remember when I said thesehomeowners go off in the wrong
direction into collections andthey die here and they can't get
past it.
They wind up at foreclosuresale and they just don't
understand what's going on.
And they agreed to somethingthey never should agree to.
(19:31):
Now think about this If for thelast three months they have not
been able to make a thousanddollar mortgage payment, what
makes you think for the next sixthey're going to be able to
make 1500?
.
Speaker 1 (19:44):
No way.
Exactly.
Speaker 2 (19:46):
Okay, and even if they do, the homeowner called up
and said for the last sixmonths I haven't eaten nothing
but ramen and I have not left myhouse because every penny I
earned went to pay that $1,500 amonth.
And I have not left my housebecause every penny I earned
went to pay that $1,500 a month.
And I did it.
I just sent in the final, thesixth payment.
Yoo-hoo Called to the mortgagecompany, said girl, that last
(20:09):
check is on the way.
I'm so happy I'm done.
And they said stop, I got totell you something.
You see, for the last six monthsyou've been in default, so
there's been a $50 late feeevery month.
For the last six months you'vebeen in default, so there's been
a $50 late fee every month forthe last six months.
So you owe us $300 in late fees.
Plus, we hired an agent to do adrive-by Now, don't mean the
bang bang bang drive-by, butthey drove by the house and that
(20:31):
cost us $150 a month.
So that's $200 a month timessix months.
You still owe me $1,200.
So you are not done.
I'm going to have to put you onanother repayment plan.
And at the end of the repaymentplan, what are they told Sorry,
there's been late fees anddrive-by fees, so you're still
not current.
And so the homeowner gives up.
(20:52):
They stop answering the phone,they stop opening the mail, okay
, because they can't take itanymore.
They just don't understand.
Speaker 1 (21:03):
So they've been given pretty much the runaround
because they didn't listen tothe last podcast show to get
that special trick and number tobypass all this runaround,
exactly.
Speaker 2 (21:23):
And you can see why, really, dealing with losing a
job and getting a divorce andyour mortgage company and all
your credit cards, you could seewhy someone really could be at
the brink.
Okay, and so if anybody everdoes say I'm at the brink, they
really do need to talk to acounselor.
All right, there are optionsavailable out there.
You just got to get to theright department.
Okay, you know, one day I'mgoing to stand before my maker
(21:47):
and he's going to say what didyou do with the talents I gave
you?
And I'm going to say, well, atfirst I made a bunch of money
for the mortgage companies, butthen, at the end, I used my
skills and my talents to helpyour people who fell to their
knees and prayed out oh God,there's got to be somebody out
there who can help me.
Ok, this thing is going toforeclosure.
(22:08):
I can't seem to get anybody onthe phone.
I'm trying to do the rightthing and I'm desperate, and you
know it.
You know it, amy.
That's why you're doing whatyou're doing today.
Speaker 1 (22:20):
That is true, because there's there's nothing out
there for actual homeowners.
There's things out there forreal estate agents or real
estate investors, you know, totry to help the homeowner, but
information to actually help thehomeowner few and far between.
And that's why I have you hereand a host of others, because we
(22:45):
got to get the word out.
We do.
Speaker 2 (22:47):
We do, we definitely do, and it really is the
homeowners.
This is the biggest financialinvestment they have made in
their life and they need to besmart about the decisions that
they're making and they need tomake a good decision.
Not for their mortgage company,not for their investor, not for
their insurance agents companyOkay.
(23:07):
Not for the real estate agentsand the attorneys.
They need to make the bestdecision for themselves
personally, okay and so as ahomeowner, okay and so.
Uh, as a homeowner, if you wantto stay in that house, we've
talked about the moratorium.
If you've had a disaster,that's applicable for you.
We talked about the specialforbearance to buy you time to
(23:30):
get re-employed or to get betteror to get back on your feet,
and so might have a little dingon your credit, but we'll do
something at the end to bring itcurrent.
We talked about the COVIDspecial forbearance and how
that's going to work and howthat helped a whole bunch of
people Loan modification.
Now, in the loss mitigationdepartment, where it is a
(23:52):
negotiator's job to helphomeowners, we do this the most
because it is so versatile andwe are.
What we're doing is we'remodifying your promissory note
and we can modify a coupledifferent things.
I can change the type.
So if, when you originated theloan, you got an adjustable rate
mortgage and rates are going up, up, up and it's putting you in
(24:14):
a position where you can'tafford to make the payment, I
can change it from an adjustablerate to a fixed rate, okay.
Or if you had an extremely highfixed rate and the rates had
been going down, down, down,then maybe I could change you
from a fixed to an arm to dropthe interest rate lower, to make
(24:36):
it more affordable for you tobe able to make the payment.
So I can change the type.
I can change the rate.
Okay, I just talked about how Icould do that.
I can capitalize thedelinquency.
I want you to think about itlike rolling your closing cost
into the refinance.
So all those late pays, all thedrive-by fees, all the late
(25:01):
fees, I tell you what homeowner,don't worry about bringing a
dime to this deal.
We're just going to take allthat and we're going to add it
to your unpaid principal balancecalled capitalizing the
delinquency, and thenre-amortize the whole thing so
we can change the term.
So we can change the type.
We can change the rate.
We can change the term.
(25:23):
So if, when you got the loan itwas a 30-year mortgage and you
have been paying for 10 years.
And I add 10, I take all thatstuff, capitalize it, I add it
on to the unpaid principal bonds, but then I take that and
re-amortize it over 30.
Now, on loan origination, theyusually don't go much more than
30 years.
But on the backend and workouts, I've seen them take the term
(25:47):
up to 40 years.
And if I could take you from 20to 40, I could take your
mortgage payment and cut it inhalf by doubling the term and
make it affordable for you ableto make the payment.
So I can change the type, I canchange the rate, I can change
the term, I can capitalize thedelinquency Okay.
(26:08):
And then the last thing they cando is what's called a cram down
.
So when everybody's value hitthe bottom back several years
ago, what the mortgage companiesdid is they said I'm going to
order an appraisal on yourproperty, okay, and you owe me
$200,000.
(26:28):
That's your unpaid principalbalance.
But the appraisal came in at150.
So what we're going to do foryou is we're going to cram down
your balance from what youcurrently owe me down to what
the current value is.
So you owe 200, but it onlyappraised at 150.
So I'm going to drop it to 150,which sounds like a great deal.
(26:52):
However however however, at theend of the year, on that loss,
the investor could file a 1099with the IRS.
And in accountant speak, whenthe investor files a 1099 with
the IRS, the IRS says you,investor, you had a $50,000 loss
(27:17):
.
That's just terrible.
But in accountant speak, if youhad a loss, somebody else had a
gain.
And they turn to the homeownerand say we view that as if they
stroked you a check for $50,000.
And it could put you into likea bonus check.
Okay, it could wind up as highas a 50% tax bracket On $50,000,
(27:39):
that's up to $25,000.
So if I were the homeowner, Imight be saying mortgage company
, you can change my type, youcan change my rate, you can
change my term, you cancapitalize the delinquency, roll
it all in there and amortize itover 35 years okay.
But I don't want you to touchmy balance because I feel that
(28:01):
in the future the values willcome back and if I don't have to
pay taxes on a loss, then Idon't want to have to pay taxes
on a loss.
That might be better for me allthe way around.
Okay, so that's a loanmodification and that's how it
would work and you could see why, as a negotiator, they would
use this the most because theycan really use this to cut a
(28:23):
payment way, way down.
Now my rule of thumb on a loanmod is if I look at their
mortgage payment so let's sayyour mortgage payment is a
thousand dollars a month andthen I looked at your financials
, I remember one of our littletidbits in our last podcast was
don't fix the numbers becauseyou could undo your opportunity
(28:47):
for a workout deal.
Needs to be true, needs to beaccurate, needs to be correct.
So when they looked at theirfinancials and I see that they
earned $5,000 a month but theyspend $5,500.
So they're $500 in the haul.
My rule of thumb here is as longas you don't have to cut your
(29:10):
mortgage payment more than 50%,we might be able to make it work
.
When you've got a 40-yearmortgage and you've only been
paying for three years so youstill got 37 years to go, okay,
and you only put 3% down on thehouse, so there's no equity in
(29:30):
there and it's more than a 50% Igot to cut your mortgage
payment by 75% in order to makeit affordable then the loan mod
is probably not going to workfor you.
So when a homeowner says I'dlike to try a loan mod.
My question is is how much isyour mortgage payment and how
far in the negative are you?
Is it going to be more than a50% reduction?
(29:52):
Because if it's more than 50%,let's not waste our time.
Let's not waste four monthstrying to do a loan mod.
That's not going to work foryou when you need to call a real
estate agent list and sell yourhouse because you cannot afford
to make the payments.
Eventually the mortgage companywill turn you over to a
foreclosure attorney.
Homeowner thinks that there's amanila folder with their name
(30:15):
on it that's been lost at themortgage company and they're not
going to get referred over.
No, everything's doneelectronically.
If you're not making thepayments, you are being referred
to an attorney.
You're not falling through thecracks.
Okay, you need to be talking tothe loss mitigation department.
Try to work out a deal.
But if a loan mod's not goingto work for you, if it's more
(30:35):
than 50, then you're going tohave to probably go with a
non-cure workout deal.
So that's a loan modification.
There is the claim advance, andthis was the couple that had the
young daughter who had leukemia, who had reached out to their
mortgage company and said we'regoing to be on family leave so
we won't be getting paychecks.
(30:57):
Here's a letter from the doctor, here's a letter from our
employer.
And I at the mortgage insurancecompany said, hmm, I either
advance the $3,000, $1,000 foreach month's mortgage payment
the $3,000 that covers them forthree months or I pay a $10,000
claim payment, and so a claimadvance is where we advance the
(31:19):
money to the homeowner.
We do never send it to thehomeowner, we always send it
directly to the mortgageservicer who puts it in suspense
.
Each month, as the paymentcomes due, they take the money
out of suspense and apply it tothe account.
They don't get anythingreported to the credit bureau,
they don't get any collectioncalls.
Okay, so claim advance is comingfrom private mortgage insurance
(31:42):
, okay.
So when I was a negotiator andI was calling those homeowners
and they answered the phone andI said, hey, this is Julia Iden
with the mortgage insurancecompany.
I'm calling you to talk withyou about your loan, and they
said, oh yeah, that's theinsurance I like.
Quack, quack the duck.
If I get hurt and I can't makemake my payment, you make the
(32:02):
payment for me.
I said, no wrong insurance yeah, okay.
So what's the deal?
Then I said remember, when youbought the house, you didn't
have 20 to put down.
Ergo, they required privatemortgage insurance on the loan.
So the two benefits to privatemortgage insurance is, one, you
got in with less than 20% down.
And two, if you were ever introuble, that mortgage insurance
(32:26):
company will bend overbackwards to try to help you
because they don't want to haveto pay that claim.
And if I could do a loan modwith you and fix it so you can
pay on a go-forward basis, then,hey, I don't have to pay a
claim at all.
That's a great thing.
Let's try to work that out.
So, claim advance I helped youbefore you were even in default.
(32:47):
Or I think I used the example inour last little podcast about
the engineer.
He's a train engineer and hadan accident in the train and
when they took him to thehospital he didn't pass the drug
test.
He was on 12 months suspensionfrom work, no pay, okay.
(33:07):
And so the mortgage companycalled me up and said hey, you
have the private mortgageinsurance on this loan.
It's six payments behind.
We're about to refer this overto a foreclosure attorney, but I
thought that maybe you mightwant to help this guy out.
I said I do.
I advanced 12 payments to themortgage company.
Six brought the loan current.
So the premium started comingback in the door.
(33:29):
The loan was current, thehomeowner was able to make the
payments.
No more late fees, no morelates reported to his credit
report.
All right, and so claim advanceborrower assistance.
They are coming from privatemortgage insurance.
So if you have private mortgageinsurance, there are additional
(33:50):
benefits to you should you findyourself in trouble, available
through the loss mitigationdepartment.
So if a homeowner was sayingthat they wanted to stay, those
would be the options that wouldbe floating around in the back
of my mind.
Okay, now they want out.
They're not interested instaying in the house, they want
(34:10):
to get out.
They've had it.
They've had it with themortgage company, they've had it
with whatever it is that'shappened to them.
They just want to get out.
So what are the non-cure?
Okay, so most of the loansoriginated today are what we
called non-assumable instruments.
They have a due on sale clausein them that says if you sell
(34:34):
this property, your loan is dueand payable at full at that
point in time.
But there are some loanproducts out there, for example,
va, that allows them to beassumable.
Now most vets don't want to dothat because they used their
certificate to get their VAbenefits benefits.
(35:00):
But when they sell the housethen the benefits come back to
them and they can use them tobuy another house.
But if they let it be assumedthen it ties up their
certificate.
So while most of the VA loansare assumable, most people don't
assume them because they'retrying to use that cert to buy
the next house.
So the vast majority of loansout there are not non-assumable
instruments.
Now, when my husband and Ibought our first house a long,
(35:22):
long, long, long time ago, girl,the interest rates were 12% at
the time and we bought anon-qualifying assumable
mortgage at a fixed 9% and wedanced in.
Okay, we danced in at 9%.
So even when I hear the buyerstoday going, oh, I'm like honey,
(35:44):
right, don't complain to meabout seven.
Okay, so an assumption it maybe.
And I've seen fannie andfreddie wave the do on sale
clause in the loss mitigationdepartment and allowed the loan
to become assumable.
Okay, so the homeowner foundsomebody who wanted to buy their
(36:06):
house, but for whatever reason,let's say the interest rate is
a fixed three and a half percentand the buyer's like, hey, if I
go to get a loan today I'mpaying twice that.
I want to go through lossmitigation.
Let's see if we can do anassumption, and I can assume it
Now.
The way it works is we take thenew homeowners and we add them
(36:28):
onto the loan and for 12 monthsit's both the old homeowner and
the new homeowner.
We go 12 months of good, cleanpay history.
Then we do a quick claim deedfrom the old homeowner to the
new homeowner and we do arelease of liability for the old
homeowner.
So they're now off the mortgageand it's just the new people.
And if during the first 12months the new people don't pay,
(36:50):
now I've got two people on thehook for this loan the old
people and the new people.
No skin off my nose.
I'll waive the due on saleclause and allow it to become
assumable to get a workout dealto go through.
So assumptions are in ournon-cure bucket.
Then, after our assumption, wehave what's called a make
(37:11):
wholesale.
Now this is your traditionalresidential real estate
transaction where the seller,the lien holders, are paid 100%
in full and the seller walksaway with cash in their pocket.
Okay, and because all the lienholders are made whole.
We call them make wholesales.
So that's your traditionalresidential real estate
(37:31):
transaction.
Okay, it's a make wholesale.
Then we have what's called ashort sale.
Now let me tell you the onlything short about a short sale
is the payoff on the loan.
Okay, so when you owe $100,000,but fair market value is
$90,000.
I as an investor, I as aninsurance company, I as a
(37:53):
mortgage service company, no, itdoesn't matter what you owe me,
it matters what fair marketvalue is.
You can owe me $100,000 all daylong Doesn't mean you're
getting an offer for $100,000.
So we agree to accept a fairmarket value offer of $90,000.
That's called a short salebecause the proceeds from the
closing are short, the payoff onthe loan.
(38:15):
So that's a short sale.
So it's possible to do those.
Then we have what's called ashort sale.
So it's possible to do those.
Then we have what's called ashort sale pre qualification,
like the buyer went to the loanofficer and got pre-qualified
for a mortgage loan before theywent riding around with a real
estate agent to make sure thatthey could afford the property
(38:36):
that they were about to write anoffer on and before they go
into a legally binding contract.
They wanted to make sure thatthey could afford the property.
So when the homeowner wrotetheir hardship letter and said
we're fighting over the moneylike cats and dogs, we just want
out, is what they wrote aboutthem in the letter.
And they said and what we wantyou to do is go ahead and order
(38:57):
an appraisal, take my financialsthey are attached Load it all
into your computer system andgenerate me a short sale
pre-qualification letter.
Amy, we pre-qualified the saleof your property.
Now we know you owe $100,000,but we're going to give you a
pre-qualification letter thatsays we'll accept $90,000.
(39:19):
We're going to pay 6% incommissions, we're going to pay
2% in closing costs and thisletter is good for 90 or 120
days.
So as soon as you get an offerthat meets these requirements,
we are ready to go to closing onthis transaction.
Short sale all right, then wehave a full guarantee sale.
(39:46):
So this is when you're gonnahear the words black mold, lead
paint, toxic waste, meth, lab,chinese drywall.
Something has happened to thisproperty severe insect
infestation and there is no waythat it is worth.
Look, the homeowner packed uptheir stuff in the middle of the
night and they moved out andleft the house vacant and there
(40:08):
are unscrupulous people drivingaround in the towns looking for
these houses so they can get inand cook, crack and run drug
rings and prostitution rings Imean all kinds of bad stuff they
do in these houses, amy, okay,and so that's why we're having
these drive-bys done everysingle month when this
(40:28):
homeowner's not paying, to makesure this stuff isn't going on.
All right, we don't want this.
I've gotten those calls fromDetroit when the person said to
me I'm the only person living onthe block, every other house is
vacant and half of them aredrug houses and the other half
are prostitution.
And I'm leaving and I'm takingmy children because we can't
(40:49):
walk to the car for fear oftaking our life into our hands
because of the kind of peoplewho are roaming around this
neighborhood.
Wow, and it's a legitimateconcern.
Wow, and it's a legitimateconcern.
And, as an investor, when Iunderwrote and invested on all
these loans and they're going toforeclosure, I'm the one who's
taking the loss on the back end.
(41:10):
I think about that.
Okay, so the homeowners packedup in the middle of the night.
People got in there, startedcooking meth and we didn't
realize it till the agent foundit a couple months later.
And so now, because all thatstuff soaked into the drywall
and down into the floors, it'sall got to be and it's got to be
carted off to a hazardous wastedump because it's considered to
(41:31):
be hazardous waste.
Now all we have left is avacant lot.
We sell the lot for $30,000.
It was a $100,000 loan with 10%private mortgage insurance.
So the insurance company writesa check for 10% of $100,000,
$10,000.
So the mortgage company getsthe $30,000 check from the lot
(41:53):
sale.
They get the $10,000 check fromthe insurance company.
They have surpassed their fullguarantee of coverage and they
are still in a lost position.
So when it's a full guaranteesale, I'm hearing words like
black mold, lead paint, meth,lab, toxic waste.
Something really bad hashappened.
Okay, that's going to be yourfull guarantee sale.
(42:19):
And the reason that this isimportant to the mortgage
company is because when theagent called up or the homeowner
called up and started tellingthe negotiator about this, the
negotiator called me at theinsurance company or the
investor and said, hey, thisthing's supposed to go referred
over to the foreclosure attorneynext month, or there's a
foreclosure sale date two monthsaway.
I said, whoa, hold the phone,call the foreclosure attorney.
(42:44):
Postpone that sale.
I do not want to be in thechain of title because in the
future, when somebody turnsaround to sue over this black
mold, lead paint, toxic waste,meth lab, I, the investor, have
deep pockets and I don't want togo to court over this.
So tell that attorney topostpone the foreclosure sale.
(43:05):
I want to give the agents twoyears to sell this house and
I'll sell it for 20 cents on thedollar to an investor buyer and
I don't care, because I justdon't want to be in the chain of
title on this property.
So the homeowner was bringingit up, the agent was bringing it
up and when the negotiator wassmart enough to realize, oh,
we're going to be in a lostposition here for the investor
(43:25):
in the insurance company and letme get them on the phone
because they might not reallywant title to this, we might be
willing to work with that agentand an investor buyer and sell
this house.
Ok, so that's our fullguarantee sale.
Then we have what's called adeed in lieu.
That's think about it like avoluntary repo on your car.
(43:49):
You said to the bank look, Ican't afford to make the
payments on the car anymore.
You don't have to repo it fromme.
I'm just going to give it backto you and we're going to call
it even.
Okay, and so and so thehomeowner said I can't afford to
make the payments anymore.
So I tell you what I'm going todo.
I'm just going to deed thehouse back to you.
You don't have to hire aforeclosure attorney.
You don't have to spend monthsand years trying to foreclose on
(44:11):
me.
I'm just going to deed it backto you Deed in lieu of
foreclosure.
The benefits to a consumerhistorically with a deed in lieu
have been no deficiencyjudgments and no 1099s.
Okay, Now we're going to requirethat the homeowner list it with
a real estate agent at fairmarket value for 90 days.
(44:33):
So I want you to at least tryto sell it first.
If at the end of the 90 daysyou haven't got an offer, then I
will take it back as a deed inlieu.
Now, remember, the benefit tothe mortgage industry of doing a
deed in lieu is we get toforego all the time and all the
expense associated with theforeclosure itself.
(44:54):
So two days before theforeclosure sale, when the
homeowner talked to theforeclosure attorney and said
isn't there something we couldhave done?
I heard about this thing calleda deed in lieu, where I can just
deed it back to the mortgagecompany okay, in lieu of,
instead of foreclosure.
And that's when they called meup and I said too bad, so sad,
(45:16):
spent all my time and all mymoney.
There is no benefit to me nowin doing a deed in lieu.
So, homeowner, if you want todo a deed in lieu, you need to
get into the loss mitigationdepartment as soon as possible.
Know that the closer you get toforeclosure, the less likely
they are going to take this as adeed in lieu.
Speaker 1 (45:38):
So can I ask a quick question?
So in North Carolina they cando a deed in lieu, or is that
they?
Speaker 2 (45:45):
can do the deed in lieu in any state.
It's just that, remember, thecloser they get before, see what
happened is the homeowner hadno idea about this and they
found out at the very lastminute about it and now it's too
late.
So if they wanted to do thatand they needed to know in the
very beginning, now something tothink about.
So I'm talking to the homeownerwho says I hate mortgage
(46:08):
companies because of the waythat I have been treated.
I do not think it's fair.
I'm never going to buy anotherhouse again.
And when I'm talking to grandmaMary, who is 80 years old and
she is telling me that when shegets out of this house she's
going to the rest home andshe'll leave there in a pine box
.
She's never going to ownanother home, okay, she just
(46:31):
wants out.
I say to her go deed in lieu.
Okay, list it for 90 days witha real estate agent at fair
market value.
At the end of the 90 days, ifyou're not done, deed it back to
the mortgage company Now tostart over again and get another
mortgage loan.
The rule of thumb is if you doa short sale, it'll be one to
(46:51):
three years depending on wherewe are in our origination market
, but one to three years fromthe time you close on to that
short sale to the day that theywill originate another mortgage
loan for you.
Ok, if you did a deed in lieu,ok, we didn't have to spend all
the money and go through thelong foreclosure process, but we
still had to take it as aforeclosure.
(47:12):
You deeded it back to us fiveyears before we give you another
mortgage loan, and if you letit go to foreclosure, seven
years, ok, before we'll give youanother mortgage loan.
And if you let it go toforeclosure, seven years, okay,
before we'll give you anothermortgage loan.
So when I'm talking to ahomeowner, I'm thinking about is
your hardship voluntary, is itinvoluntary, is it temporary or
(47:33):
is it permanent?
Okay, do you want to stay inthe house?
Are we talking aboutcure-related workout options or
you just want out?
So we're talking aboutnon-cure-related workouts.
And if you just want out, areyou going to start over again?
Am I talking to a nice youngcouple who are in their 30s?
And then?
In which case I said I don'tknow, deedon.
(47:54):
You could go, deedon, lou, butyou'd be better off to do the
short sale or make wholesale,because then you don't have to
wait as long and I know thatthey are going to say that they
are never going to buy anotherhouse and I've gotten this call
before.
Ok, I don't care.
I don't care how bad the dingis on my credit report.
Let it go to foreclosure.
Ok, I don't care if it's sevenyears, but after two or three
(48:18):
years of paying somebody else'spaying rent, somebody else's
mortgage payment, they're goingto come back and they're going
to say I wish I had done this adifferent way, julie.
I wish somebody had told me thatif I had done a short sale I
only would have had to wait oneto three years.
Okay, but if I did a loan mod Iwas going to have to wait five
years and if I let it go toforeclosure I was going to have
(48:39):
to wait seven.
Because now I really want tobuy another house and I believe
in homeownership.
Okay, you would think ifanybody was on sour on
homeownership it might be me Allright, the whole career talking
to homeowners who couldn't pay.
But I believe in homeownership.
It's a wonderful thing.
But if you are not financiallymature or something bad happens
(49:02):
to you, a mortgage just couldreally, really really hurt your
credit.
And so those are the options.
There are a bunch of options tohomeowners and there are a
bunch of homeowners who'dqualify.
They just got to get to theright department and that was a
workout.
Speaker 1 (49:20):
Wow, this was great information.
There was a couple of them thatI didn't even know, especially
the the crunch down was.
Is that what you call it down?
the cramp on your balance.
Never heard of that one, wow.
So, everyone, you must listento the last episode to get that
(49:44):
nugget that Julia talked about,to get you to the right
department.
Just calling that number onthat statement once you're in
default is not going to cut it.
It's not going to cut it.
Oh goodness, this has beenwonderful, wonderful.
Any last parting words, missJulia, to our audience.
Speaker 2 (50:07):
You know, don't give up, don't give up, those are my
parting words.
Speaker 1 (50:14):
Right, that is, and that that is true.
Do not give up.
There are people out here thatcan help you, and that is true.
Do not give up.
There are people out here thatcan help you.
There are resources out here.
You just need to do yourresearch and find them, and
hopefully you're getting gettingthat information on this
podcast.
Julia, thanks again fordelighting us and giving us a
workout today, and hopefully wecan have you back to talk about
(50:43):
something else, because you arejust a wealth of knowledge from
the back end of the mortgageindustry.
I really do appreciate you.
All righty, I'll talk to youlater, all right, thank you so
much.
Bye-bye, bye.
The views and opinions expressed on this
podcast are those of thepresenter and do not necessarily
reflect the views or positionof the podcast host.
All right, welcome back.
Welcome back to another episodeof Foreclosure Chronicles,
(00:39):
where we help homeowners thatare facing foreclosure with
options so that they can makethe best decision for their
situation or exit the propertywith dignity.
I am your host, amy Ellis, andwe have her back again, second
time in a row, ms Julia Iden,the president of Advanced
(01:04):
Mortgage Education, and she'sgoing to talk about the workout,
and it's not that workout thatyou know we need to be doing to
get that body in shape for thesummertime, but it's the workout
with your foreclosure.
So, miss Julia, welcome backand thank you again.
Speaker 2 (01:26):
Well, I'm excited to be here and talk with the
listeners today about whatoptions may be available to them
Now.
In our last podcast we talkedabout hardship and that one of
the most important things is thehomeowner's desire.
What do they want to do?
Do they want to stay in thehouse or do they want to get out
(01:47):
?
So the workout options fallinto two buckets cure related
workouts those options thatwould cure the delinquency, turn
the loan back into performingassets.
So if the homeowner were sayingI really want to stay in the
house, then I would be thinkingabout the cure-related workouts
(02:08):
moratoriums, forbearances, loanmodifications, claim, advance,
borrower assistance.
So there's several of them thatfall into that bucket.
But if the homeowner wants toget out, they're fighting over
the money like cats and dogs andif they're not divorced, one of
the two of them is going to bedead.
If they just want to get out,okay, then it's the non-cure
(02:29):
related workouts, and there areseveral that fall into that
bucket the deed and lewd, theshort sale, foreclosure sales,
full guarantee sales, and sowhat we'll talk about today is
we'll talk a little bit abouthow those programs work and when
would be a good time to usethem.
(02:49):
Okay, when it might beapplicable for that homeowner.
So we'll start talking aboutthose cure related workouts.
So the homeowner wants to stay.
And we talked about hardshipslast time in our podcast and one
of the hardships was disaster.
So if there is a earthquake, atornado, a hurricane, a
(03:10):
snowstorm, a flood, a fire, amudslide, if this governor of
the state has declared it adisaster, okay, then you qualify
for what is called a moratorium, and moratoriums go with
disaster and disasters go withmoratorium.
So as soon as I started talkingto the homeowner and they said
(03:33):
some kind of disaster, the firstthing that popped into my mind
was moratorium.
So here's how a moratoriumworks.
It's the legal authorization todelay the process and to put
off accepting money.
So the loan just sits stagnant.
We don't report anythingthrough to the credit bureau, so
there are no late pays beingreported through.
(03:55):
And so let's say your house wasdamaged by a hurricane and you
called into the mortgage companyand you use the little trick
that we talked about in the lastpodcast to get to the right
department in the lossmitigation.
And if you didn't listen, youmight wanna go back and listen
to that podcast.
There were some good tidbits inthere.
(04:16):
So you get into the lossmitigation department and you're
gonna pull your financialpackage together and when
they're talking to you and yousay the word earthquake, flood,
blizzard, whatever it was,tsunami, whatever the disaster
was that impacted my house, andso in loss mitigation, what
they'll do is they'll let you gofor a certain period of time.
(04:37):
Typically it was six or 12months, depending on how much
damage was done to the property.
Now I am going to want to seephotos of the damage and repair
bids, but usually the way yourhomeowner's insurance works is
they only give you a portion ofthe insurance proceeds up front.
So you use that as a downpayment with your contractors so
(04:58):
that they can get started onthe work, and then, once all the
work is completed, they sendout their inspector and they go
yep, everything's been completed.
Now we release the rest of thefunds.
So I know the homeowner is goingto have to be putting out some
money to try to get everythingfixed and, as an investor or an
insurance company, ok.
So I got a call from ahomeowner who had a house that
(05:20):
was a block away from Disney.
Had a house that was a blockaway from Disney, okay.
And she said look, I know thatthe mortgage company, they want
to own my house because it's ablock away from Disney.
And I said no, we don't.
We want your money, we don'twant your house, we're not in
the business of owning homes andwe don't want to own your home.
We want you to make the payment, okay, and if you can't, then
we want you to contact a realestate agent and list and sell
(05:41):
the house.
Okay, and if you can't, then wewant you to contact a real
estate agent and list and sellthe house.
Okay.
So if they've had some kind ofdisaster, we will let them go
for six to 12 months, dependingon how bad it was and how long
it's going to take to get theproperty back in to condition
where they can live in it.
And a lot of times, if theycan't live in it, they're having
(06:02):
to rent something else whilethey're working on getting the
house fixed.
So what the mortgage companiesdo is called a moratorium and we
let you go six or 12 monthswithout making any payments.
You just focus on getting thehouse fixed.
We don't report anythingthrough to the credit bureau, so
there are no late pays beingreported through, no negative
(06:23):
ding happening to your creditscore.
Okay, and so that is a bigpositive for the moratorium and
we are helping that homeownerout by not reporting anything
through and letting them get thehouse fixed.
Now, at the end of the timeperiod, what we'll usually do is
just take however much moneythat comes to and just add it
(06:46):
back into the mortgage, tack itback on to the end.
So we'll just let you go aperiod of time you don't get
referred to foreclosure attorney, you don't get reported to the
credit bureau, and then at theend of that period of time you
just pick up right where youleft off and we'll just tack
that year on to the end of themortgage.
No big deal, okay.
Speaker 1 (07:06):
So let's talk.
Can we talk about, like theCOVID moratorium?
Speaker 2 (07:14):
Oh, girl, okay, special forbearance.
That's the next one on my listOkay.
Historically, there's a thingcalled a special forbearance
where again, we let you go aperiod of time without making
payments but those are reportedthrough to the credit bureau.
So, for example, when I wastalking to the homeowner and
(07:37):
they said to me Julie, I workedat the mall, at a big chain
store, in retail, and then afterthe holidays they laid me off.
And so I'm thinking to myselfwell, she works in retail, so it
probably in two or three monthsat tops, she'll find another
job in retail.
So I just need to buy her acouple months to get reemployed.
(08:00):
So I said I'll tell you whatI'm going to do.
I'm going to put you on aspecial forbearance of making
half payments for the next sixmonths.
So the money you would haveused to make the next three
mortgage payments, we're goingto spread that out over six
months.
So you're only going to make ahalf a month, half a payment.
So if your payments were $1,000a month, you'll only pay $500 a
month for the next six months,for the next six months Now at
(08:26):
the end of the six months.
Well, we stretched that moneyto cover the three payments out
to get you through six months.
At the end of the six monthsyou're going to be three
payments behind.
You're going to have three latepays on your credit report, so
we'll have to do something atthat point to bring your loan
current.
But I bought you time to getreemployed, to get better.
Okay, you've had to have somekind of surgery and so now you
(08:48):
need a couple months to get backon your feet before you can
make the payments again.
I had a gentleman once who hewas a single man, who lived in
San Francisco.
He did not have any significantother and he didn't have any
children, and when I was lookingthrough his financials, I
(09:09):
noticed that he had a $500,000life insurance policy and the
problem was he had AIDS, and sohe was going through some
treatments and some remissionsand having some issues.
So that's why I couldn't makethe mortgage payment, because he
was having to stay home fromwork, because he was sick.
And so I said to him hey, I'mgoing to put you on a special
(09:34):
forbearance.
Have you ever heard about thosecompanies?
You see them on TV.
We buy life insurance annuities.
Did you win the lottery andyou're tired of getting your
money in little bitty payments?
Come to us, we'll give you abig payment.
I said go to those companiesbecause sometimes what they'll
do is give you like 50 cents onthe dollar for the insurance.
You don't have a spouse orchildren, so it's not like
(09:56):
you're leaving it to somebody.
Go ahead and cash that in.
Get that money out and use itto enjoy the rest of your life,
however long you have.
You'll be able to make themortgage payments.
You'll be able to pay forwhatever treatments you need to
have and enjoy the rest of yourlife.
Well, you can.
And so I used it to buy timefor him to get that taken care
(10:18):
of.
So a special forbearance I'musually buying time to get them
better, to get them reemployed,to get whatever you know,
whatever it is that they'retrying to get settled.
Sometimes they're in a lawsuitand the attorney has sent me a
letter said yes, we won thelawsuit, but we're waiting for
the settlement check to come.
And I said I'll tell you what.
(10:38):
I'll put you on a specialforbearance till the settlement
check comes, cause your attorneywrote me.
The letter said yes, you won,we're just waiting on the check.
So I'm using it to buy time toallow the consumer to fix
whatever the issue is.
It will have a negative effecton their credit because there
will be a few late pays by thetime you get to the end of it.
But that's the way that I'musing the special forbearance.
(11:01):
And then came along 2019 andcover Pearl.
If you had told me that thatwas going to happen back in 2012
, I'd have said you were crazythat nothing like that would
ever happen in this country.
But it did.
And a lot of people were notable to make their mortgage
payments, so they have what'scalled a special COVID
(11:24):
forbearance.
Okay, and so what they said isif a homeowner calls into the
mortgage company and they say Ican't pay because of COVID, for
whatever reason, but due toCOVID I can't pay, then what we
were going to do is we weregoing to put them on a special
forbearance, not making anypayments over a period of time.
(11:46):
We would not report it throughto the credit bureau, so it
wasn't going to have a ding ontheir credit.
Now here's where we have to becareful, because, okay,
consumers don't read Right.
Speaker 1 (12:00):
They do not read.
Speaker 2 (12:01):
And even if they did read, these documents are
written by accountants andattorneys.
So even if they did read theletters coming from the mortgage
servicers to the homeowner,most of the time they have no
idea what they just read on thatpiece of paper.
So here's what the homeownersaid.
They heard on the phone callwith the mortgage company.
(12:21):
They heard the person say tothem look, if you say the word
COVID to me, that you can't pay,then I'm going to put you on
the phone call with the mortgagecompany.
They heard the person say tothem look, if you say the word
COVID to me, that you can't pay,then I'm going to put you on
the COVID.
Special forbearance.
And, depending on who theinvestor on the loan was,
because VA had a certain termthat they would go out to Fannie
Mae did Freddie Mac.
So I looked at all of them andthe longest one was 24 months,
(12:42):
but most of them were 12 to 6 to18 months.
Okay, so know that it's goingto be anywhere between 12 months
to 24 months.
They got to go without makingany mortgage payments.
We didn't report anythingthrough to the credit bureau.
Uh, so they had no negativeimpact on the credit, kind of
like the moratorium when theyhad the hurricane.
We're not holding it againstyou, okay, we're not going to
(13:04):
ding your credit for it.
And so now, what happens,though, is they said to the
homeowner don't worry about it,we're just going to tack it onto
the end.
And what the homeowner heard wasokay, those 24 payments when I
make my last payment on December2030.
(13:25):
Okay, then those 12 paymentsthat you didn't allow me not to
make, and then, on January one,I'll make the first payment, on
February, I make the secondpayment, and I'll just make them
for 12 months until I've paidit off.
But that is not what thepaperwork says.
The paperwork says that, onDecember 30th or 31st, when you
(13:49):
make that last payment underthat mortgage, that the entire
lump sum.
So if it was a thousand dollara month payment, and you went 12
months, $12,000, then, onJanuary 1, $12,000 is Wow, and
on January 1, $12,000 is done.
And so I think there are goingto be a bunch of homeowners who
get surprised, because theythought they were just going to
(14:13):
pick up right where they leftoff and make those 12 or 24
payments until they were done,when, in fact, it's going to be
what we call, in the industry.
A balloon payment, one big,giant payment that all comes due
at one time.
Okay, now, if I were talking toreal estate agents, here's where
(14:34):
I'd be saying to them if you'retaking a listing on a sale for
a property, you need to ask yourseller did you participate in a
COVID special forbearance?
Because a lot and I mean a lotof people did.
And if the homeowner says yes,I did, then you need to do some
math in the back of your head.
Okay, your mortgage paymentsare $12,000 a month.
Even if you got the max of 24,that's $24,000, because $24,000
(15:00):
to find out about that a fewdays before the closing on a
transaction, $24,000 could putyou in a short sale situation.
Speaker 1 (15:07):
Yep, okay.
Speaker 2 (15:11):
And so it's good to ask about that.
If the listing agent were takinga listing today, I'd not only
be asking about who, how manylien holders and how much you
owe them, but also, did youparticipate in a special
forbearance COVID program?
And so that's what that was, anda lot of people benefited from
it over the last couple of yearsand it's done.
(15:32):
They're not doing them anymore.
That program is over, but a lotof people did participate in it
.
So that's the specialforbearance.
Now a repayment plan this, ofall the options that we're going
to talk about today, therepayment plan is the only
option that the collectors areallowed to offer to a homeowner.
(15:54):
So if you wanted one of theseother plans that we're talking
about today, you really have toget into the loss mitigation
department.
And again, if you didn't listento that last podcast, better go
back and listen to it.
So when you get into the lossmitigation department and again,
if you didn't listen to thatlast podcast, better go back and
listen to it so when you getinto that loss mitigation
department, okay.
Then the repayment plan.
So here's how a repayment planworks.
(16:16):
Let's say the homeowner was onthe phone with the collector and
the homeowner has lost theirjob.
They have not been able to findanother job.
And the collector called andsaid here's what you're going to
do You're going to go and getyour checkbook and you're going
to give me a check today tobring this loan current.
And the homeowner said I don'thave the money to pay to bring
the loan current today.
I lost my job.
And the collector said well,the only other option available
(16:39):
to you is to make a payment anda half until you bring the loan
current.
Other than that, we're going tosend you to foreclosure.
So the homeowner thought thatthat was the only option
available to them.
So they said yes, I'll take therepayment plan.
They took the last.
So they got a thousand dollar amonth mortgage payment, but
they got to make a payment and ahalf.
So they got to make a $1,500mortgage payment.
(17:00):
So that's every penny they'vegot, or they borrowed it from
their parents, their siblings,their business partner got
advance on the paycheck.
They scrape together thatfifteen hundred dollars.
They make the first payment onthe plan and they cross their
fingers and hope that, beforethe next payment comes due, that
they have a job.
But they don't, so they breakthe plan.
(17:20):
Collector calls them up andsays you got three options Pay
today in full, make a paymentand a, or we are sending you to
foreclosure.
What's it going to be?
And so the homeowner said signme up for the payment in a half.
I'm going to do that becausethat's the only option that I
can do right now.
I don't have the money to payin full and I don't want to go
(17:41):
to foreclosure.
So again, I borrow $1,500 frommy parents, I make that first
payment and I cross my fingers,by the time the second payment
comes due, that finally I'mhoping I'm going to have a job,
some kind of job, something, soI can do this.
And so then I missed the secondpayment.
Again I break the second plan.
They call me up and they saidJulie, three strikes and you are
out paying full.
(18:01):
Today you pay a payment and ahalf, or you go to foreclosure.
What's it going to be?
And I said sign me up for thepayment and a half, because
that's all I can do.
And so I make the first paymentand then again, I don't make
the second payment.
So inside the mortgage servicingworld, that's what we call a
chronic delinquent, when ahomeowner goes in and out of the
(18:24):
default three times like thatand they break three plant.
They are coded as a chronicdelinquent and after the 90 days
of being in default remember wetalked about this last time
after 90 days, then they'rereleased to the loss mitigation
department because collectionswants to get their crack at
collection so they can get theirbonus at the end of the year,
(18:46):
and so all chronic delinquentsare called out of the loans that
are referred to loss mitigationat the end of the 90 days.
So by agreeing to these threerepayment plans because you
thought it was the only optionthat you had available to you
Now, you have undone youropportunity to do a workout deal
(19:08):
with the department whose jobit was to help you, because
you're coded as a chronicdelinquent and they can't help
you.
Remember when I said thesehomeowners go off in the wrong
direction into collections andthey die here and they can't get
past it.
They wind up at foreclosuresale and they just don't
understand what's going on.
And they agreed to somethingthey never should agree to.
(19:31):
Now think about this If for thelast three months they have not
been able to make a thousanddollar mortgage payment, what
makes you think for the next sixthey're going to be able to
make 1500?
.
Speaker 1 (19:44):
No way.
Exactly.
Speaker 2 (19:46):
Okay, and even if they do, the homeowner called up
and said for the last sixmonths I haven't eaten nothing
but ramen and I have not left myhouse because every penny I
earned went to pay that $1,500 amonth.
And I have not left my housebecause every penny I earned
went to pay that $1,500 a month.
And I did it.
I just sent in the final, thesixth payment.
Yoo-hoo Called to the mortgagecompany, said girl, that last
(20:09):
check is on the way.
I'm so happy I'm done.
And they said stop, I got totell you something.
You see, for the last six monthsyou've been in default, so
there's been a $50 late feeevery month.
For the last six months you'vebeen in default, so there's been
a $50 late fee every month forthe last six months.
So you owe us $300 in late fees.
Plus, we hired an agent to do adrive-by Now, don't mean the
bang bang bang drive-by, butthey drove by the house and that
(20:31):
cost us $150 a month.
So that's $200 a month timessix months.
You still owe me $1,200.
So you are not done.
I'm going to have to put you onanother repayment plan.
And at the end of the repaymentplan, what are they told Sorry,
there's been late fees anddrive-by fees, so you're still
not current.
And so the homeowner gives up.
(20:52):
They stop answering the phone,they stop opening the mail, okay
, because they can't take itanymore.
They just don't understand.
Speaker 1 (21:03):
So they've been given pretty much the runaround
because they didn't listen tothe last podcast show to get
that special trick and number tobypass all this runaround,
exactly.
Speaker 2 (21:23):
And you can see why, really, dealing with losing a
job and getting a divorce andyour mortgage company and all
your credit cards, you could seewhy someone really could be at
the brink.
Okay, and so if anybody everdoes say I'm at the brink, they
really do need to talk to acounselor.
All right, there are optionsavailable out there.
You just got to get to theright department.
Okay, you know, one day I'mgoing to stand before my maker
(21:47):
and he's going to say what didyou do with the talents I gave
you?
And I'm going to say, well, atfirst I made a bunch of money
for the mortgage companies, butthen, at the end, I used my
skills and my talents to helpyour people who fell to their
knees and prayed out oh God,there's got to be somebody out
there who can help me.
Ok, this thing is going toforeclosure.
(22:08):
I can't seem to get anybody onthe phone.
I'm trying to do the rightthing and I'm desperate, and you
know it.
You know it, amy.
That's why you're doing whatyou're doing today.
Speaker 1 (22:20):
That is true, because there's there's nothing out
there for actual homeowners.
There's things out there forreal estate agents or real
estate investors, you know, totry to help the homeowner, but
information to actually help thehomeowner few and far between.
And that's why I have you hereand a host of others, because we
(22:45):
got to get the word out.
We do.
Speaker 2 (22:47):
We do, we definitely do, and it really is the
homeowners.
This is the biggest financialinvestment they have made in
their life and they need to besmart about the decisions that
they're making and they need tomake a good decision.
Not for their mortgage company,not for their investor, not for
their insurance agents companyOkay.
(23:07):
Not for the real estate agentsand the attorneys.
They need to make the bestdecision for themselves
personally, okay and so as ahomeowner, okay and so.
Uh, as a homeowner, if you wantto stay in that house, we've
talked about the moratorium.
If you've had a disaster,that's applicable for you.
We talked about the specialforbearance to buy you time to
(23:30):
get re-employed or to get betteror to get back on your feet,
and so might have a little dingon your credit, but we'll do
something at the end to bring itcurrent.
We talked about the COVIDspecial forbearance and how
that's going to work and howthat helped a whole bunch of
people Loan modification.
Now, in the loss mitigationdepartment, where it is a
(23:52):
negotiator's job to helphomeowners, we do this the most
because it is so versatile andwe are.
What we're doing is we'remodifying your promissory note
and we can modify a coupledifferent things.
I can change the type.
So if, when you originated theloan, you got an adjustable rate
mortgage and rates are going up, up, up and it's putting you in
(24:14):
a position where you can'tafford to make the payment, I
can change it from an adjustablerate to a fixed rate, okay.
Or if you had an extremely highfixed rate and the rates had
been going down, down, down,then maybe I could change you
from a fixed to an arm to dropthe interest rate lower, to make
(24:36):
it more affordable for you tobe able to make the payment.
So I can change the type.
I can change the rate.
Okay, I just talked about how Icould do that.
I can capitalize thedelinquency.
I want you to think about itlike rolling your closing cost
into the refinance.
So all those late pays, all thedrive-by fees, all the late
(25:01):
fees, I tell you what homeowner,don't worry about bringing a
dime to this deal.
We're just going to take allthat and we're going to add it
to your unpaid principal balancecalled capitalizing the
delinquency, and thenre-amortize the whole thing so
we can change the term.
So we can change the type.
We can change the rate.
We can change the term.
(25:23):
So if, when you got the loan itwas a 30-year mortgage and you
have been paying for 10 years.
And I add 10, I take all thatstuff, capitalize it, I add it
on to the unpaid principal bonds, but then I take that and
re-amortize it over 30.
Now, on loan origination, theyusually don't go much more than
30 years.
But on the backend and workouts, I've seen them take the term
(25:47):
up to 40 years.
And if I could take you from 20to 40, I could take your
mortgage payment and cut it inhalf by doubling the term and
make it affordable for you ableto make the payment.
So I can change the type, I canchange the rate, I can change
the term, I can capitalize thedelinquency Okay.
(26:08):
And then the last thing they cando is what's called a cram down
.
So when everybody's value hitthe bottom back several years
ago, what the mortgage companiesdid is they said I'm going to
order an appraisal on yourproperty, okay, and you owe me
$200,000.
(26:28):
That's your unpaid principalbalance.
But the appraisal came in at150.
So what we're going to do foryou is we're going to cram down
your balance from what youcurrently owe me down to what
the current value is.
So you owe 200, but it onlyappraised at 150.
So I'm going to drop it to 150,which sounds like a great deal.
(26:52):
However however however, at theend of the year, on that loss,
the investor could file a 1099with the IRS.
And in accountant speak, whenthe investor files a 1099 with
the IRS, the IRS says you,investor, you had a $50,000 loss
(27:17):
.
That's just terrible.
But in accountant speak, if youhad a loss, somebody else had a
gain.
And they turn to the homeownerand say we view that as if they
stroked you a check for $50,000.
And it could put you into likea bonus check.
Okay, it could wind up as highas a 50% tax bracket On $50,000,
(27:39):
that's up to $25,000.
So if I were the homeowner, Imight be saying mortgage company
, you can change my type, youcan change my rate, you can
change my term, you cancapitalize the delinquency, roll
it all in there and amortize itover 35 years okay.
But I don't want you to touchmy balance because I feel that
(28:01):
in the future the values willcome back and if I don't have to
pay taxes on a loss, then Idon't want to have to pay taxes
on a loss.
That might be better for me allthe way around.
Okay, so that's a loanmodification and that's how it
would work and you could see why, as a negotiator, they would
use this the most because theycan really use this to cut a
(28:23):
payment way, way down.
Now my rule of thumb on a loanmod is if I look at their
mortgage payment so let's sayyour mortgage payment is a
thousand dollars a month andthen I looked at your financials
, I remember one of our littletidbits in our last podcast was
don't fix the numbers becauseyou could undo your opportunity
(28:47):
for a workout deal.
Needs to be true, needs to beaccurate, needs to be correct.
So when they looked at theirfinancials and I see that they
earned $5,000 a month but theyspend $5,500.
So they're $500 in the haul.
My rule of thumb here is as longas you don't have to cut your
(29:10):
mortgage payment more than 50%,we might be able to make it work
.
When you've got a 40-yearmortgage and you've only been
paying for three years so youstill got 37 years to go, okay,
and you only put 3% down on thehouse, so there's no equity in
(29:30):
there and it's more than a 50% Igot to cut your mortgage
payment by 75% in order to makeit affordable then the loan mod
is probably not going to workfor you.
So when a homeowner says I'dlike to try a loan mod.
My question is is how much isyour mortgage payment and how
far in the negative are you?
Is it going to be more than a50% reduction?
(29:52):
Because if it's more than 50%,let's not waste our time.
Let's not waste four monthstrying to do a loan mod.
That's not going to work foryou when you need to call a real
estate agent list and sell yourhouse because you cannot afford
to make the payments.
Eventually the mortgage companywill turn you over to a
foreclosure attorney.
Homeowner thinks that there's amanila folder with their name
(30:15):
on it that's been lost at themortgage company and they're not
going to get referred over.
No, everything's doneelectronically.
If you're not making thepayments, you are being referred
to an attorney.
You're not falling through thecracks.
Okay, you need to be talking tothe loss mitigation department.
Try to work out a deal.
But if a loan mod's not goingto work for you, if it's more
(30:35):
than 50, then you're going tohave to probably go with a
non-cure workout deal.
So that's a loan modification.
There is the claim advance, andthis was the couple that had the
young daughter who had leukemia, who had reached out to their
mortgage company and said we'regoing to be on family leave so
we won't be getting paychecks.
(30:57):
Here's a letter from the doctor, here's a letter from our
employer.
And I at the mortgage insurancecompany said, hmm, I either
advance the $3,000, $1,000 foreach month's mortgage payment
the $3,000 that covers them forthree months or I pay a $10,000
claim payment, and so a claimadvance is where we advance the
(31:19):
money to the homeowner.
We do never send it to thehomeowner, we always send it
directly to the mortgageservicer who puts it in suspense
.
Each month, as the paymentcomes due, they take the money
out of suspense and apply it tothe account.
They don't get anythingreported to the credit bureau,
they don't get any collectioncalls.
Okay, so claim advance is comingfrom private mortgage insurance
(31:42):
, okay.
So when I was a negotiator andI was calling those homeowners
and they answered the phone andI said, hey, this is Julia Iden
with the mortgage insurancecompany.
I'm calling you to talk withyou about your loan, and they
said, oh yeah, that's theinsurance I like.
Quack, quack the duck.
If I get hurt and I can't makemake my payment, you make the
(32:02):
payment for me.
I said, no wrong insurance yeah, okay.
So what's the deal?
Then I said remember, when youbought the house, you didn't
have 20 to put down.
Ergo, they required privatemortgage insurance on the loan.
So the two benefits to privatemortgage insurance is, one, you
got in with less than 20% down.
And two, if you were ever introuble, that mortgage insurance
(32:26):
company will bend overbackwards to try to help you
because they don't want to haveto pay that claim.
And if I could do a loan modwith you and fix it so you can
pay on a go-forward basis, then,hey, I don't have to pay a
claim at all.
That's a great thing.
Let's try to work that out.
So, claim advance I helped youbefore you were even in default.
(32:47):
Or I think I used the example inour last little podcast about
the engineer.
He's a train engineer and hadan accident in the train and
when they took him to thehospital he didn't pass the drug
test.
He was on 12 months suspensionfrom work, no pay, okay.
(33:07):
And so the mortgage companycalled me up and said hey, you
have the private mortgageinsurance on this loan.
It's six payments behind.
We're about to refer this overto a foreclosure attorney, but I
thought that maybe you mightwant to help this guy out.
I said I do.
I advanced 12 payments to themortgage company.
Six brought the loan current.
So the premium started comingback in the door.
(33:29):
The loan was current, thehomeowner was able to make the
payments.
No more late fees, no morelates reported to his credit
report.
All right, and so claim advanceborrower assistance.
They are coming from privatemortgage insurance.
So if you have private mortgageinsurance, there are additional
(33:50):
benefits to you should you findyourself in trouble, available
through the loss mitigationdepartment.
So if a homeowner was sayingthat they wanted to stay, those
would be the options that wouldbe floating around in the back
of my mind.
Okay, now they want out.
They're not interested instaying in the house, they want
(34:10):
to get out.
They've had it.
They've had it with themortgage company, they've had it
with whatever it is that'shappened to them.
They just want to get out.
So what are the non-cure?
Okay, so most of the loansoriginated today are what we
called non-assumable instruments.
They have a due on sale clausein them that says if you sell
(34:34):
this property, your loan is dueand payable at full at that
point in time.
But there are some loanproducts out there, for example,
va, that allows them to beassumable.
Now most vets don't want to dothat because they used their
certificate to get their VAbenefits benefits.
(35:00):
But when they sell the housethen the benefits come back to
them and they can use them tobuy another house.
But if they let it be assumedthen it ties up their
certificate.
So while most of the VA loansare assumable, most people don't
assume them because they'retrying to use that cert to buy
the next house.
So the vast majority of loansout there are not non-assumable
instruments.
Now, when my husband and Ibought our first house a long,
(35:22):
long, long, long time ago, girl,the interest rates were 12% at
the time and we bought anon-qualifying assumable
mortgage at a fixed 9% and wedanced in.
Okay, we danced in at 9%.
So even when I hear the buyerstoday going, oh, I'm like honey,
(35:44):
right, don't complain to meabout seven.
Okay, so an assumption it maybe.
And I've seen fannie andfreddie wave the do on sale
clause in the loss mitigationdepartment and allowed the loan
to become assumable.
Okay, so the homeowner foundsomebody who wanted to buy their
(36:06):
house, but for whatever reason,let's say the interest rate is
a fixed three and a half percentand the buyer's like, hey, if I
go to get a loan today I'mpaying twice that.
I want to go through lossmitigation.
Let's see if we can do anassumption, and I can assume it
Now.
The way it works is we take thenew homeowners and we add them
(36:28):
onto the loan and for 12 monthsit's both the old homeowner and
the new homeowner.
We go 12 months of good, cleanpay history.
Then we do a quick claim deedfrom the old homeowner to the
new homeowner and we do arelease of liability for the old
homeowner.
So they're now off the mortgageand it's just the new people.
And if during the first 12months the new people don't pay,
(36:50):
now I've got two people on thehook for this loan the old
people and the new people.
No skin off my nose.
I'll waive the due on saleclause and allow it to become
assumable to get a workout dealto go through.
So assumptions are in ournon-cure bucket.
Then, after our assumption, wehave what's called a make
(37:11):
wholesale.
Now this is your traditionalresidential real estate
transaction where the seller,the lien holders, are paid 100%
in full and the seller walksaway with cash in their pocket.
Okay, and because all the lienholders are made whole.
We call them make wholesales.
So that's your traditionalresidential real estate
(37:31):
transaction.
Okay, it's a make wholesale.
Then we have what's called ashort sale.
Now let me tell you the onlything short about a short sale
is the payoff on the loan.
Okay, so when you owe $100,000,but fair market value is
$90,000.
I as an investor, I as aninsurance company, I as a
(37:53):
mortgage service company, no, itdoesn't matter what you owe me,
it matters what fair marketvalue is.
You can owe me $100,000 all daylong Doesn't mean you're
getting an offer for $100,000.
So we agree to accept a fairmarket value offer of $90,000.
That's called a short salebecause the proceeds from the
closing are short, the payoff onthe loan.
(38:15):
So that's a short sale.
So it's possible to do those.
Then we have what's called ashort sale.
So it's possible to do those.
Then we have what's called ashort sale pre qualification,
like the buyer went to the loanofficer and got pre-qualified
for a mortgage loan before theywent riding around with a real
estate agent to make sure thatthey could afford the property
(38:36):
that they were about to write anoffer on and before they go
into a legally binding contract.
They wanted to make sure thatthey could afford the property.
So when the homeowner wrotetheir hardship letter and said
we're fighting over the moneylike cats and dogs, we just want
out, is what they wrote aboutthem in the letter.
And they said and what we wantyou to do is go ahead and order
(38:57):
an appraisal, take my financialsthey are attached Load it all
into your computer system andgenerate me a short sale
pre-qualification letter.
Amy, we pre-qualified the saleof your property.
Now we know you owe $100,000,but we're going to give you a
pre-qualification letter thatsays we'll accept $90,000.
(39:19):
We're going to pay 6% incommissions, we're going to pay
2% in closing costs and thisletter is good for 90 or 120
days.
So as soon as you get an offerthat meets these requirements,
we are ready to go to closing onthis transaction.
Short sale all right, then wehave a full guarantee sale.
(39:46):
So this is when you're gonnahear the words black mold, lead
paint, toxic waste, meth, lab,chinese drywall.
Something has happened to thisproperty severe insect
infestation and there is no waythat it is worth.
Look, the homeowner packed uptheir stuff in the middle of the
night and they moved out andleft the house vacant and there
(40:08):
are unscrupulous people drivingaround in the towns looking for
these houses so they can get inand cook, crack and run drug
rings and prostitution rings Imean all kinds of bad stuff they
do in these houses, amy, okay,and so that's why we're having
these drive-bys done everysingle month when this
(40:28):
homeowner's not paying, to makesure this stuff isn't going on.
All right, we don't want this.
I've gotten those calls fromDetroit when the person said to
me I'm the only person living onthe block, every other house is
vacant and half of them aredrug houses and the other half
are prostitution.
And I'm leaving and I'm takingmy children because we can't
(40:49):
walk to the car for fear oftaking our life into our hands
because of the kind of peoplewho are roaming around this
neighborhood.
Wow, and it's a legitimateconcern.
Wow, and it's a legitimateconcern.
And, as an investor, when Iunderwrote and invested on all
these loans and they're going toforeclosure, I'm the one who's
taking the loss on the back end.
(41:10):
I think about that.
Okay, so the homeowners packedup in the middle of the night.
People got in there, startedcooking meth and we didn't
realize it till the agent foundit a couple months later.
And so now, because all thatstuff soaked into the drywall
and down into the floors, it'sall got to be and it's got to be
carted off to a hazardous wastedump because it's considered to
(41:31):
be hazardous waste.
Now all we have left is avacant lot.
We sell the lot for $30,000.
It was a $100,000 loan with 10%private mortgage insurance.
So the insurance company writesa check for 10% of $100,000,
$10,000.
So the mortgage company getsthe $30,000 check from the lot
(41:53):
sale.
They get the $10,000 check fromthe insurance company.
They have surpassed their fullguarantee of coverage and they
are still in a lost position.
So when it's a full guaranteesale, I'm hearing words like
black mold, lead paint, meth,lab, toxic waste.
Something really bad hashappened.
Okay, that's going to be yourfull guarantee sale.
(42:19):
And the reason that this isimportant to the mortgage
company is because when theagent called up or the homeowner
called up and started tellingthe negotiator about this, the
negotiator called me at theinsurance company or the
investor and said, hey, thisthing's supposed to go referred
over to the foreclosure attorneynext month, or there's a
foreclosure sale date two monthsaway.
I said, whoa, hold the phone,call the foreclosure attorney.
(42:44):
Postpone that sale.
I do not want to be in thechain of title because in the
future, when somebody turnsaround to sue over this black
mold, lead paint, toxic waste,meth lab, I, the investor, have
deep pockets and I don't want togo to court over this.
So tell that attorney topostpone the foreclosure sale.
(43:05):
I want to give the agents twoyears to sell this house and
I'll sell it for 20 cents on thedollar to an investor buyer and
I don't care, because I justdon't want to be in the chain of
title on this property.
So the homeowner was bringingit up, the agent was bringing it
up and when the negotiator wassmart enough to realize, oh,
we're going to be in a lostposition here for the investor
(43:25):
in the insurance company and letme get them on the phone
because they might not reallywant title to this, we might be
willing to work with that agentand an investor buyer and sell
this house.
Ok, so that's our fullguarantee sale.
Then we have what's called adeed in lieu.
That's think about it like avoluntary repo on your car.
(43:49):
You said to the bank look, Ican't afford to make the
payments on the car anymore.
You don't have to repo it fromme.
I'm just going to give it backto you and we're going to call
it even.
Okay, and so and so thehomeowner said I can't afford to
make the payments anymore.
So I tell you what I'm going todo.
I'm just going to deed thehouse back to you.
You don't have to hire aforeclosure attorney.
You don't have to spend monthsand years trying to foreclose on
(44:11):
me.
I'm just going to deed it backto you Deed in lieu of
foreclosure.
The benefits to a consumerhistorically with a deed in lieu
have been no deficiencyjudgments and no 1099s.
Okay, Now we're going to requirethat the homeowner list it with
a real estate agent at fairmarket value for 90 days.
(44:33):
So I want you to at least tryto sell it first.
If at the end of the 90 daysyou haven't got an offer, then I
will take it back as a deed inlieu.
Now, remember, the benefit tothe mortgage industry of doing a
deed in lieu is we get toforego all the time and all the
expense associated with theforeclosure itself.
(44:54):
So two days before theforeclosure sale, when the
homeowner talked to theforeclosure attorney and said
isn't there something we couldhave done?
I heard about this thing calleda deed in lieu, where I can just
deed it back to the mortgagecompany okay, in lieu of,
instead of foreclosure.
And that's when they called meup and I said too bad, so sad,
(45:16):
spent all my time and all mymoney.
There is no benefit to me nowin doing a deed in lieu.
So, homeowner, if you want todo a deed in lieu, you need to
get into the loss mitigationdepartment as soon as possible.
Know that the closer you get toforeclosure, the less likely
they are going to take this as adeed in lieu.
Speaker 1 (45:38):
So can I ask a quick question?
So in North Carolina they cando a deed in lieu, or is that
they?
Speaker 2 (45:45):
can do the deed in lieu in any state.
It's just that, remember, thecloser they get before, see what
happened is the homeowner hadno idea about this and they
found out at the very lastminute about it and now it's too
late.
So if they wanted to do thatand they needed to know in the
very beginning, now something tothink about.
So I'm talking to the homeownerwho says I hate mortgage
(46:08):
companies because of the waythat I have been treated.
I do not think it's fair.
I'm never going to buy anotherhouse again.
And when I'm talking to grandmaMary, who is 80 years old and
she is telling me that when shegets out of this house she's
going to the rest home andshe'll leave there in a pine box
.
She's never going to ownanother home, okay, she just
(46:31):
wants out.
I say to her go deed in lieu.
Okay, list it for 90 days witha real estate agent at fair
market value.
At the end of the 90 days, ifyou're not done, deed it back to
the mortgage company Now tostart over again and get another
mortgage loan.
The rule of thumb is if you doa short sale, it'll be one to
(46:51):
three years depending on wherewe are in our origination market
, but one to three years fromthe time you close on to that
short sale to the day that theywill originate another mortgage
loan for you.
Ok, if you did a deed in lieu,ok, we didn't have to spend all
the money and go through thelong foreclosure process, but we
still had to take it as aforeclosure.
(47:12):
You deeded it back to us fiveyears before we give you another
mortgage loan, and if you letit go to foreclosure, seven
years, ok, before we'll give youanother mortgage loan.
And if you let it go toforeclosure, seven years, okay,
before we'll give you anothermortgage loan.
So when I'm talking to ahomeowner, I'm thinking about is
your hardship voluntary, is itinvoluntary, is it temporary or
(47:33):
is it permanent?
Okay, do you want to stay inthe house?
Are we talking aboutcure-related workout options or
you just want out?
So we're talking aboutnon-cure-related workouts.
And if you just want out, areyou going to start over again?
Am I talking to a nice youngcouple who are in their 30s?
And then?
In which case I said I don'tknow, deedon.
(47:54):
You could go, deedon, lou, butyou'd be better off to do the
short sale or make wholesale,because then you don't have to
wait as long and I know thatthey are going to say that they
are never going to buy anotherhouse and I've gotten this call
before.
Ok, I don't care.
I don't care how bad the dingis on my credit report.
Let it go to foreclosure.
Ok, I don't care if it's sevenyears, but after two or three
(48:18):
years of paying somebody else'spaying rent, somebody else's
mortgage payment, they're goingto come back and they're going
to say I wish I had done this adifferent way, julie.
I wish somebody had told me thatif I had done a short sale I
only would have had to wait oneto three years.
Okay, but if I did a loan mod Iwas going to have to wait five
years and if I let it go toforeclosure I was going to have
(48:39):
to wait seven.
Because now I really want tobuy another house and I believe
in homeownership.
Okay, you would think ifanybody was on sour on
homeownership it might be me Allright, the whole career talking
to homeowners who couldn't pay.
But I believe in homeownership.
It's a wonderful thing.
But if you are not financiallymature or something bad happens
(49:02):
to you, a mortgage just couldreally, really really hurt your
credit.
And so those are the options.
There are a bunch of options tohomeowners and there are a
bunch of homeowners who'dqualify.
They just got to get to theright department and that was a
workout.
Speaker 1 (49:20):
Wow, this was great information.
There was a couple of them thatI didn't even know, especially
the the crunch down was.
Is that what you call it down?
the cramp on your balance.
Never heard of that one, wow.
So, everyone, you must listento the last episode to get that
(49:44):
nugget that Julia talked about,to get you to the right
department.
Just calling that number onthat statement once you're in
default is not going to cut it.
It's not going to cut it.
Oh goodness, this has beenwonderful, wonderful.
Any last parting words, missJulia, to our audience.
Speaker 2 (50:07):
You know, don't give up, don't give up, those are my
parting words.
Speaker 1 (50:14):
Right, that is, and that that is true.
Do not give up.
There are people out here thatcan help you, and that is true.
Do not give up.
There are people out here thatcan help you.
There are resources out here.
You just need to do yourresearch and find them, and
hopefully you're getting gettingthat information on this
podcast.
Julia, thanks again fordelighting us and giving us a
workout today, and hopefully wecan have you back to talk about
(50:43):
something else, because you arejust a wealth of knowledge from
the back end of the mortgageindustry.
I really do appreciate you.
All righty, I'll talk to youlater, all right, thank you so
much.
Bye-bye, bye.
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