3/28/10: Principal Reduction – The Holy Grail of Loan Modification
Principal reduction on your mortgage is like sex: more people talk about it than actually get it (sorry… we’re guys 
). And with so much of the government’s efforts focused on homeowners, what’s an investor to do? We discovered some exciting news about a new private sector program that promises practical help for homeowners and investors alike, so we invited back a special guest to tell us all about it.
Hacking our way through the dense tropical forest to take our places behind the golden microphones in The Real Estate Guys’ studio:
• Swashbuckling, whip cracking, Fedora wearing adventurer and show host, Robert “Indiana” Helms
• Studious and professorial co-host, Russell “Marcus Brody” Gray
• The not ready to retire yet and still swashbuckling Godfather of Real Estate, Bob Helms
• Special guest and our guide to the Grail, David Lies
This is one topic we couldn’t wait to explore! The ink had hardly dried on the headlines before analysts began to surmise that the real world effect of the government’s plan to “shrink some home loans” and Bank of America’s plans to “forgive some principal for homeowners” would be modest at best. So you can imagine we were VERY interested when our good friend David Lies said that he had found a principal reduction program that really works – even for investors!
Before we get into the meat of the matter, we talk about principal reduction from the bank’s perspective – and the obvious and not-so-obvious reasons why lenders are highly resistant to lopping off large chunks of debt from your balance sheet.
Next, we delve into the government’s HAMP initiative and the underwhelming results thereof. Is government really the answer? Or, as Ronald Reagan said so long ago, could it be the problem? We don’t know either, but we aren’t aware of anyone in our circle (which is pretty big) that has had any meaningful success with HAMP, HEMP or any other controlled substance.
Meanwhile, what is private industry doing to address the huge opportunity to help banks and borrowers brush up their balance sheets? This is where the conversation gets fun! For most borrowers, the only way to get out from a severely underwater mortgage is to walk away from the property through foreclosure, short sale or deed-in-lieu. Then, you have to deal with a 1099 and income tax for debt forgiveness. Talk about salt in a wound. Ouch!
While walking away (or in some cases, running just as fast as you can) might be better than sticking it out – what if you really want to KEEP the property? After all the problem is the paper, not the property.
Speaking of paper…David gets out his treasure map and guides us to the location of one of the most elusive treasures in mortgage mitigation: how to turn negative equity into positive equity with no fees! What?!? REALLY? Wow!
By now, we couldn’t help ourselves. We wanted – correction – we NEEDED to know ALL the details, which David was kind of enough to provide. And while not everyone will qualify, for those who do this new program could just be the Holy Grail of Loan Modification. This is one episode of The Real Estate Guys Radio Show that you do NOT want to miss (why would you dare miss any???).
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2/7/10: Renegade Strategies for a Changing Economy – When Your Workout Options Fail
Super Bowl Sunday! While most people were guzzling beer (we are SO jealous), gorging themselves on chips and salsa, and cheering on their favorite team, The Real Estate Guys dedicated broadcast crew faithfully showed up for yet another edition of real estate broadcast excellence.
And with all the hype about offensive, defensive and special team strategies, we thought it would be fun to do a show on renegade strategies for property owners when lender workout options aren’t working.
Taped up and dressed out in shoulder pads, helmets and eye-black for today’s broadcast are:
- Your Quarterback, Robert Helms
- Your Not So Tight End, Russell Gray
- The Head Coach and Godfather of Real Estate, Bob Helms
- Trick Play Coordinator and Special Guest, Trustee Verification Specialist, Tyler Cohee
After the coin toss and handshakes, we kick off with a discussion about the ethics of loan agreements. Of course, when you can’t make the payment, your options are limited. But what about when you can afford to make the payment and choose not to? Strategic defaults are growing in number and popularity. What are they? Do they make sense and if so, when?
When it’s late in the 4th quarter, you’re way behind and you can’t get your loan modified; the lender won’t forbear, your property is headed to auction; and you just need a little more (a lot more?) time – it’s time to call a trick play! Our special guest Tyler Cohee dials up just the thing when he calls in to explain how trustee verification works. VERY interesting!
Now in the Red Zone, the Guys call several renegade plays for reducing your loan balances, holding onto your properties and gaining more control over precisely when turn a doomed property over to the lender.
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1/31/10: Underwater or Under Motivated? Options to Rescue Your Property When You Can’t (or Won’t) Pay the Mortgage
Amidst the green shoots, silver lining and contrarian investment opportunities – there are still millions of property owners in America struggling to make the payments. The Real Estate Guys™ Special Report: What You MUST Know Before Attempting a Loan Workout has been (by a big margin) our most requested report. So we know there’s still a lot of working out to do before many people are able to move forward.
Because of all the changes in the mortgage mitigation business over the last several months, we thought it was time to re-visit this fun and exciting (not!) topic. After the show, we decided to lighten up a little and go get a root canal. Of course, dentists like it when people get root canals, so it appears we can’t escape the reality that there is opportunity in pain.
Enjoying the nitrous oxide in the studio for this week’s show:
- Your Host, Robert Helms
- Co-Host and Financial Hygienist, Russell Gray
- The Godfather of Real Estate, Bob Helms
- Loss Mitigation Industry Insider, David Lies
Once the nitrous kicked in and we were feeling no pain, we drilled into our discussion starting with the State of the Union in the Loan Modification business. With changing laws and attitudes, plus bailouts and political pressure – as well as an industry that is no longer considered fledgling or renegade, we had a lot to chew on.
To fill the cavities in our understanding, we quickly turned to our special guest David Lies. Davis is a 20 year loss mitigation industry veteran, 10 of which he spent directing the efforts of lawyers and collectors to reduce the lender’s losses. Even though it’s a whole new ball game, he has a great understanding of what motivates lenders to re-negotiate.
David shared what he sees as the most common misconceptions and misunderstandings about mortgage loss mitigation. He reminded us that lenders are actually the source of some of the confusion – and that lenders loss mitigation department’s mission is to reduce the lender’s loss, NOT the borrower’s.
David also shaped our understanding of who the ideal candidate for a workout or modification is. When time is short, it’s important to know what scenario is most likely to be accepted by the lender – and why professionals often can delay foreclosure faster, better and longer than do-it-yourselfers.
We talked about the government programs like HAMP, HASP and HEMP. Actually, there is no HEMP, but after the nitrous it sounded like a good program. Anyway, when the smoke cleared, David explained the 4 step waterfall process that lenders go through when deciding if and how to modify a mortgage. Then he shared the two things lenders always require before they will consider modifying a loan.
Before we knew it the show was over and we could feel our cheeks again. But it was so much fun, we’re going to do a follow up show on renegade strategies for delaying foreclosure. Even if you are not personally facing the loss of a property (and we hope you’re not), if you’re trying to acquire a property from a distressed seller, it could be very useful to know how to help them hold on until you can get your deal done. Be sure to tune in!
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11/29/09: Coming Up Short – The Realities of Selling Your Property for Less than You Owe
With so many properties with mortgages that exceed the current value, many owners are feeling trapped. When loan modification fails and you can’t afford to pay the mortgage, before you toss in the towel and allow the lender to foreclose, consider a short sale. No, this isn’t a garage sale of your used underwear to raise money for the mortgage. It’s the process of working with the lender to get them to release you from the loan when you bring in a new buyer who pays less than you owe.
In studio to brief you on short selling:
- Your host, Robert Helms
- Co-Host and Financial Strategist, Russell Gray
- The “Godfather of Real Estate”, Bob Helms
The Guys kick off the show with a discussion of what a short sale is and why a property owner would bother. Why not just throw the keys at the lender and walk? And what about the lender? Why would the lender accept a loan payoff for less than the full amount due? This show builds upon a March 22, 2009 show (available to Backstage Pass Members in the Archives) which covered the opportunities for investors in buying short sales.
Moving on from the motivations of the various parties, the Guys delve into the actual process of a short sale. Is this something you can or should do yourself, or does it make sense to get professionals involved? If so, which professionals are needed and what questions should you be asking? While short sales are nothing new, Bob pointed out that it’s been decades since they were a significant portion of the market. Who do you need on your team and how important is experience when seeking professional help?
The Guys also touched on the concept of “deficiency” and the possible tax consequences of a short sale for both homeowners and investors. The show concluded with a discussion of what to watch out for in today’s economic climate. Whether you are someone in need of getting out of a property that’s underwater, or if you’re an investor looking to pick up a bargain by providing a borrower and his lender an alternative to foreclosure, this show will give you some food for thought!
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