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Go to Loan Modification Interview - Part 1

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Michael: Welcome back to the velocity of money I am Michael J Barnes the president of velocity financial and I am also the fonder of ModificationHotline.com

Welcome back once again my guest Brett Fallon, Brett is a regular guest on the show, he is a registered financial consultant with RG Capitol and AIG Financial Advisors Brett W Fallon welcome back to the show.

Brett: I am glad to be back especially when we are talking about such and important topic.

Michael: It is nice to have the financial advisors perspective on some of these things so many people don't have a financial advisor so for thousands and thousands of people listening right now you are there only option for that, financial advisory services are typically not for the masses but again you are here to help and your services are available to quite a number of people you actually work with fortune 500 companies is that correct?

Brett: Yes, I do a number of workshops for fortune 500 companies that are headquartered here around the valley, the idea is to help people create efficiency with all assets understanding that their home and home mortgage is typically the largest asset that most Americans have and if you are not treating that with efficiency the retirement accounts and investments accounts and all the other stuff has to work in concert so I am happy to weigh in with information and give you my viewpoints and my perspective.

Michael: We were talking just a few moments ago about utilizing an expert negotiator when trying to do a loan modification, people are getting mail from bogus service sources, we have already covered that but from their servicers saying if you need help with your mortgage help is here give us a call. I am certainly not going to tell everyone in the world that they can not do their own loan modification because some people are qualified to negotiate on their own behalf though in my opinion they will still be emotionally attached to it and if they hear something that sounds good, it may be enough for them to essentially bite at the offer which is exactly what the loss mitigation department wants you to do.

Brett: It goes back to the disinterested third party, that expert negotiator, negotiator being the key word in that phrase. One of the things we were talking about and I want to make sure that we address this especially in this segment, we are talking about loan modification of mortgages of people that have some finical constraints some pressure whatever the source of pain is for them knowing that this option exists to take an existing mortgage loan and modify it to their best or better interest, from what it currently is so who should and who should not do a loan modification, let's start with that.

Michael: I'll tell you and let's start with people who shouldn't do a loan modification. Someone who thinks their interest rate is too high and owes more than the house is worth feels that they are entitled to a loan modification is not really a good enough reason or a hard enough hardship for those types of people unfortunately. This is essentially a handout that is being offered because of some of the mal practices if you will that were happening within the mortgage industry over the last several years. With these big huge banks offering these products that were teaser loans, toxic mortgages, as we call them now. We certainly didn't call them that then when the consumer calls me up and says I want that 1% loan that's going to be my ticket. Unfortunate people took theses loans but what they did not realize is that someday this loan with the ridiculously loan interest was going to reset and their payment was going to quadruple and who on earth could have known that the economic times would be as bad as they are and they would have no option to get out of these loans.

Brett: So someone who simply finds themselves upside down on their home owing more on the house than the actual value of the house does not necessarily need to consider a loan modification.

Michael: No they may not qualify on those merits alone in most cases, go ahead.

Brett: I just want to make a point I was reading an article in the wall Street Journal about this stuff and basically the gist of the article was that the average foreclosure on any property in the United States costs the lender $50, 000 from start to finish. So it doesn't matter if it is a $100,000 property or a $500,000 property the cost to the lender is $50,000 on the average nationally.

Michael: Essentially yes.

Brett: So the idea of the upside down scenario you may see banks more willing to entertain a broader audience of loan modifications or a broader request of loan modifications based on the fact that they know that now what we are calling toxic assists not only exist on their balance sheets but they want to do something to avoid the additional cost of foreclosing on the property to avoid the additional impact on our economy nationally with all these foreclosures mounting. So a loan modification that may not be the best or most ideal candidate today don't throw the option completely out of the window.

Michael: and to that point I would never tell a home owner to stop making their payments just to get a better loan modification because as of today, this may not be the case two weeks or two months from no but as of today, your servicer is not going to entertain a loan modification unless your late in most cases, here's the situation though at first you may get mad at that and they get mad at me for it but the reality of it is we have a real problem now with lots of people who are two three four months behind on their mortgages this loan modification we are jumping into their business we are getting attorney's involved and getting right in front of the asset managers or the attorney's for the servicers to get these foreclosure proceedings stopped. I am absolutely certain that in the foreseeable future they are going to allow people that are not late yet to do these loan modifications, hold on I said I would never tell a home owner to not make their mortgage payment to get a loan modification, the other thing I would never tell a homeowner to do never ever is to take money out of your 401K to pay their mortgage payment because you can't go forward. There are other stops in place, if you don't make your mortgage payment because of hard times you are going to get a loan modification. I talked to a guy the other day that had a 23 year huge 6 figure income he lost his job big huge firm here in the valley, he is probably listening to the show right now, this guy drained his entire 401K, I mean a huge one just to make his mortgage payments.

Brett: and the average 401K participant, investors does not understand the ramification of what that is just because your company plan allows you to take a loan against your 401K doesn't mean it is the right thing to do. There are ramifications beyond our time and the scope of this discussion regarding that decision. Loan modification first, if you are taking money from a 401K to make a house payment you are not only inefficient in creating the velocity of money but you are costing yourself in penalties, taxes, and that is certainly something we can be forthright about talking with anyone who wants more information.

Michael: and in this case the poor guy used up every dime of his 401K because his lender told him NO, NO, NO three separate times because he was not late, well he wasn't going to allow that to happen. Unfortunately knowing what he knows now he would have looked at it differently. Loan Modification is not for someone who has no income at all, the investor the servicer the bank that holds your mortgagee is not willing to do a loan modification because you do not have the means to pay.

Brett: Even if it is a modified loan, you still can't make the payment.

Michael: Right in some cases where you have significant cash reserves but I have not seen one of those done.

Brett: That wouldn't be the ideal candidate, describe little bit about who should be doing this loan modification and I know we are getting close to a break but people need to know that this option exists. They are hearing all these different concepts in the news and they are hearing in the media the spin about hank Paulson and what the treasury is doing and hearing about this bailout package and what that represents and now they are hearing that the money is not going to be used to buy back bad loans, and mortgages, bad assists. So what does that do to the underling holder of that mortgage? The owner of that house?

Michael: It is pretty scary for the majority of them the loan modification, lenders are getting very aggressive when being approached with a lawsuit or being addressed by an attorney, receiving a subpoena in regard to a specific loan case. They are paying attention to that and those are the people who are going to be getting the best options at this time.

Brett: Somebody feeling this economic pressure, they may be behind on their mortgage payments by one, two, maybe three. What do they need to do? What step do they need to take?

Michael: Go to ModificationHotline.com and we will be back in just a few moments.