This week we are discussing a painful, but important situation that a lot of American consumers are facing. It is so scary to think that you might lose your home, but we want you to know that there is hope. We want to be a resource to those folks because we have been there and understand how scary it can be.

There is a lot of misunderstanding surrounding the Loan Modification process. We are here to shed the light on these myths and provide the resources necessary to get you a lower payment. Here are a few important tips that will help you complete your objective.

1. Be Kind. As the old adage goes, “One gets farther with honey than with vinegar.” You mortgage lender is not like the collection agents that hound you day and night. They are civil and most really want to help. The best way to get what you want is to make the person on the other end of the phone your best friend.

2. Understand The Process. If you go in with intelligence and explain to the Loan Modification Dept. your situation, the chances are actually pretty good you will walk away with a lower payment. The good news is that they do not want your house, they just want your monthly payment.

3. Have your paperwork ready. This will be the most impressive thing you can do. If you are prepared they will be much more likely to work with you.

Here is what they are going to require:
 
                1. Hardship letter – This is an important piece to the puzzle. Type it up so it looks professional. The letter needs to include the reason for your request (i.e. job loss, sickness, divorce), why you feel you  should qualify for  a lower rate, and that you are willing to do what it takes to maintain your home.

                2. Budget – Many times they will go over the budget during the initial call so have this ready to read to them. Also, fax it with the other information. 

                3. Pay Stub – They are going to require proof of income.

                4. Tax Returns – You are going to need to prove your income for the last two years.

                5. Bank Statement – Usually they need at least the last two bank statements.

4. Ask Questions. Be proactive and ask for the next step. They receive a lot of request so you will need to give them time to do their job, but you don’t want to get lost in the avalanche of paperwork.

5. Keep paying your mortgage payment. Do not expect to be able to skip a payment. The Loan Modification approval is based on you continuing to pay your payment on time.

        

 

A few days ago I received a frantic phone call from a friend of mine. He asked to meet me at my office and before he hung up he said, “I am in a real mess, Matt. I am not sure what to do.”

He and I met on Wednesday of this week. He came in with a handful of documents and when we sat down he was visibly anxious. He laid out before me his story and as he did he showed me the supporting documentation as if he were on trial.

Unfortunately, his story is all too common in my line of work. He, like so many, bought a house and had to use a sub-prime mortgage in order to get the financing. He did well for the first two years, but last year his interest rate went adjustable. As was the case with most sub-prime loans the lender did not require the borrower to escrow his taxes and insurance. Sub-prime lenders did not have to work under the same stringent rules as conventional and FHA lenders.

So, about the same time his interest rate went from 8.99% to 11.95% in a period of six months he also noticed they started taking $125 a month out for taxes and insurance. Sub-Prime lenders were notorious for forcing escrow if you have not paid your taxes. To make matters worse since he had not paid his taxes they started another account for future taxes to be taken. His total payment went up about $425.00 a month.

Then, Murphy decided to just move his whole family in my friend’s life. He ends his story by saying, “Now my wife has lost her job. I can’t keep doing this.” He then looks at me with pleading hope that I will have a magical answer.

I ask a few prodding questions. Does he want to keep the house? Yes, he says. How long does he have left until his negative escrow account is back to positive? We figure out that it’s about six months. So $177.00 a month will be freed up in about six months. The good news is that he has been making the payments on time and it looked to me like he would be a perfect candidate for a Loan Modification, which is fancy speak for a lower rate without refinancing.

We call his lender and after about 20 minutes he has qualified for the Loan Modification. He is approved for a 5.75% interest rate fixed for five years which will reduce his payment by about $300.00. In six months his payment will actually be lower than when he first got the mortgage. He walked out of my office on cloud nine!

The bottom line is that it is imperative to speak to your lender well before you get into trouble and before you are late on your mortgage payments. Talk with them about your situation. They have enough empty houses on their roster – they do not want you house! Call your lender today and see if they can help you get some breathing room.

Tomorrow we will get into more specifics about what you lender is going require before you speak with them.

        

The U.S. Public Interest Research Group Education Fund published it annual report on college students and credit cards. Credit card lending is enormously profitable. According to annual Federal Reserve Board of Governors’  Reports to Congress, it is the most profitable form of banking. This is of course no startling revelation, but it does underscore the harsh disparity between the average consumer and the bank ability to use their marketing power at will.

 

        

My family lives in a small, rural town in Southern Indiana. We are surrounded by a soy bean field with hundreds of sprawling acres across the street and a large lake that adjoins our property in the back. Sounds nice, right? Why am I so discontented?

What is it that continues to drive me toward always wanting more? Every few months my wife and I have these long discussions about getting the house ready to sell. We say we want to move in closer to town, but that is actually code for BIGGER HOUSE!

I hate living like this. I really do. I despise being a hostage to the BMW 325 that I pass every day on my way to work.

The Solution: It is my desire to be satisfied. What I have found so far is that true simplicity is being satisfied exactly where you are in the moment.

        

An article today in the Minnesota Women's Press says that women are much more likely than men to be hit hard by subprime mortgage crisis. There is no doubt that foreclosures are at record levels. It is a good read, but it focuses too much blame on the mortgage broker and places very little responsibility on the borrower. -->  No Happy Ending

        

I began writing about the subject as a result of my daughter and I going on a field trip to our county 4-H last week. All the modern day farmers talking about raising chickens, cows, rabbits, and living of the land made me yearn for a life like that. This is my journey… 

The truth is that money gives you options. I see it in all of us. From my son who has money from his birthday running around Wal-mart like a tycoon to me wanting to take my family on vacation when summer hits. My goal is to ...

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ConusmerUnion.org, the publisher of Consumer Reports has recently put out an alert about the IRS and it's rules when it comes to tax prerparers.

"Currently, IRS rules at 301 C.F.R. § 301.7216-3 permit tax preparers to use confidential taxpayer return information to sell products, such as RALs, RACs and similar products, to consumers. All that the tax preparer needs to obtain for this marketing is the taxpayer’s signature on a piece of paper, which is easily obtained. The preparer is then free to use the information in the taxpayer’s return to promote RALs, and to share the taxpayer’s return ...

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In his book, Halftime, author and successful businessman Bob Buford comments on the purpose of money in the following manner:

Mike Kiami is a strategic planning consultant. He is brilliant. He is intuitive. He is demanding. He slices through all the pretense and posturing, and hones in on the core. He does not believe in God but I can testify that – at least in my life – God worked unmistakably through Mike Kiami.

I went to Mike because I wanted him to do for my life what he does so well for business: Draw up a strategic plan. ...

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“Stop this train, I want to get off!” – Vanilla Ice

Yesterday I touched on the fact that I am soul searching for the simple life. My wife and I used to think the Amish had the answer. I now know, as I mentioned, that I do not have to buy a farm and work the land in order to embrace a life of simplicity.

We all yearn in some way to get off the roller coaster. This life is going way too fast. The highs are way too high and the lows…well that’s for another post. It does help that Laura and I have our own company and we are able to set the pace, which we have, but it goes so much deeper than that. Anyone can set their own pace.

I am learning that there is a lot of work in achieving simplicity. You are going against the culture of working till late at night to get the car (Lexus SC430, anyone?), the big house (Is it on a golf course?), and all the latest trappings. I feel as if I have to daily reboot my hard drive so as not to get caught up in the emotions and desires of consumer America.

We have had friends “upgrade” to that life and we have watched them become isolated from what really matters. I am not anti-wealth. The question is and will always be in my mind, “What price am I willing to pay for it?”

Is it ever enough?

John D. Rockefeller was asked by a reporter when he was at the pinnacle of wealth and late in his years, “How much is enough?” and John D. in startling honesty said simply, “Just a little more.”

What else needs to be said?

        

Purchase it here: Maxed Out DVD