Announcer: Welcome to Creating Wealth with Jason Hartman, President of Platinum Properties Investor Network in Costa Mesa, California. During this program, Jason is going to tell you some really exciting things that you probably haven’t thought of before and a new slant on investing, fresh new approaches to America’s best investment that will enable you to create more wealth and happiness than you ever thought possible.
Jason is a genuine self-made multimillionaire, who not only talks the talk, but walks the walk. He’s been a successful investor for 20 years and currently owns properties in 11 states and 17 cities. This program will help you follow in Jason’s footsteps on the road to financial freedom. You really can do it. And now, here’s your host, Jason Hartman, with the complete solution for real estate investors.
Jason Hartman: Good day and welcome to another edition of Creating Wealth. This is Jason Hartman. Glad you’re with us today. We have had a lot of questions from listeners on various topics and this one, I think, is extremely timely. With all of the news we’re hearing about the mortgage meltdown and the irresponsible lending practices the last several years, I wanted to get someone in here to talk about loan modification and mortgage auditing. And there is a difference. I’ve learned a lot from this interview, which we’re about to play for you, and I think you will learn a lot as well.
Again, I want to say as a general statement with all of our shows, make sure you do your due diligence on these topics. There are a lot of people providing services out there in these new fields, whether they be credit repair, loan auditing, loan modification, etc, etc. Do your due diligence. Be smart about whom you hire to do this. Check them out and make sure that you’re getting a fair deal because, again, we have not used all of these services ourselves. We want to show this to you for educational purposes so that you can make more informed decisions.
So I think you’ll learn a lot. This is a great segment and it’s also very timely with what’s going on out there in the marketplace, so let’s listen in as I interview our next guest on loan modification and on mortgage auditing. Listen in.
Jason Hartman: I’m here with Bill Boren, who is CEO of Saving the American Dream. Bill, welcome to the show.
Jason Hartman: Glad to have you here. This is a subject we’ve been very, very anxious to have an expert, such as yourself, talk about. I was going to call this a segment on loan modification, but before we started recording, you told me there was a distinction between loan modification and what you do. So what is that distinction?
Bill: Well, the largest distinction of what we do is we’re not a loan modification company. We actually go through and we audit your loan docs from the lender and we actually make principle and interest reductions. We’re not a loan mod company. Loan mod basically goes out and they just reduce one thing, which is always your payments. Without a principle reduction, you’re no better off than you were to start.
Jason Hartman: So in other words, what you’re saying is there are people out there who are trying to get loan modifications. Some succeed, some don’t, and when they succeed, all they do is tack the amount owed onto the back end of the loan, kind of like a negative amortization loan.
Bill: Right. They tack everything on the back of the loan to get you into your house, but 2 – 5 years from now, you’re sitting in the same boat you are today.
Jason Hartman: Unless your situation improves a lot. I don’t know if any of us can count on that in the present economic outlook.
Bill: No. Property values aren’t going to go up any time soon. So in 2 – 5 years, you’re right back where you started.
Jason Hartman: By the way, speaking of property value stuff, where are your clients from? Are they all California, Southern California? Are they all over the country?
Bill: We’ve got the ability to do, I think, 11 states right now, maybe 12.
Jason Hartman: Okay, are you mostly in the bubble market states, like Florida, California, Nevada, Arizona?
Bill: Actually, we really like California and the biggest reason behind that is everything we end up doing is from a legal standpoint. When we go through and we audit the loan docs, we actually correspond the violations. So we know what the legal violations are in California. We know the legal violations in Florida.
Jason Hartman: Okay, so let me just back up on that a little bit because for some listeners that don’t know, it sounds like what you’re saying – and I’ve read articles on this and talked to people about it – is that a lot of these lenders have not really followed the law when they’ve made the loan or there are mistakes in their loan docs or things like that. Is that what you’re referring to?
Bill: That’s what we’re referring to, but the reality is of all the audits that were done, we’ve got maybe two that were close to right. Ninety-nine percent of the loan docs out there are mistakes. There’s tons and tons of mistakes.
Jason Hartman: Really, wow.
Bill: Yes, it’s amazing.
Jason Hartman: What kind of mistakes do you find?
Bill: Let’s see. Everybody out there seems to have forgotten the fact that California has a 55 percent max debt-to-earnings ratio and they got around it with a stated income loan. So most of the loans out there that were stated income, the brokers would go in there and inflate the income to get them into the loan. They broke the law. You can’t go over 55 percent debt-to-earnings.
Jason Hartman: Okay, so what happens? So you find that, you look at the person’s loan app, there’s a lie, but didn’t the borrowers sign the loan app? Or does the borrower just not know what they’re doing?
Bill: That’s one of my favorite stories, yeah.
Jason Hartman: I don’t know. This is such a crazy world we live in.
Bill: Okay, I’ll just ask you the questions. Are you considered to be an accredited investor?
Jason Hartman: Yes.
Bill: Okay, well, then you’re an exception. If you’re a mortgage broker or an attorney or an accredited investor, technically if somebody hands you a set of 200 pages of legal documents, then you can sign it without a lawyer present. But if you are a homeowner and you’re just an average Joe, if somebody hands you 200 pages of loan docs, says sign here, sign here, sign here, and the notary’s on the clock –
Jason Hartman: And nobody’s reading [inaudible].
Bill: You don’t read it. And if you read it, I’ve stepped in front of a roomful of mortgage brokers and I’ve asked them what is an APR and how is it calculated? One person in the room puts up his hand and knows the answer. Nobody else does. Everything you’re signing is a legal document. You’re not qualified to sign them. So nobody reads the loan docs, so the way that the industry works is the brokers tell you one thing, they don’t disclose anything until the loan doc day. You never read the loan docs and two years later, your payment jumps up.
Jason Hartman: You know what’s interesting about that? I purchased a property or a couple properties, and I believe they were in South Carolina, maybe North Carolina – I’m not sure which – but a lawyer called me on the phone.
Bill: It’s an attorney state.
Jason Hartman: Yeah and they’re actually required by law to talk with me for an hour about the loan docs before I sign them. I’m like, gosh, I purchase tons of properties. I don’t have time to talk to you.
Bill: There’s two reasons in that state. One’s a wet state. If you purchase or refi in those states, the moment you sign the loan docs, you’re done. You own the house. On a refi, you still have the federal three-day right of rescission, but on a purchase, you’re done. So in attorney states, they’ve got some strange laws. That’s one of the reasons we’re only doing some states at a time because every state has different laws. But California’s not an attorney state.
Jason Hartman: Okay, which is actually better for you because these are the states where the borrowers haven’t really read what they’ve signed at all times and they’ve gotten themselves into a mess.
Bill: The truth is Florida’s an attorney state, but it doesn’t make any difference because people still walk in there, the attorney doesn’t answer the questions. It’s like an escrow here. The attorney sits there and just signs loan docs.
Jason Hartman: It’s an assembly line.
Bill: It is. He’s getting paid X number of dollars to sit there and get the loan docs signed. That’s his job. If you have questions, you need to go back to your lender. The attorney’s not going to sit there and answer questions on 200 – 300 pages of loan docs.
Jason Hartman: Okay, good. So we were talking about the difference between loan modification and what you do. What do you call what you do, if it’s not loan modification? What is the name for it?
Bill: Well, it’s a principle reduction. We call it loan audit.
Jason Hartman: Loan audit.
Bill: Right. It’s basically a principle and interest reduction on your loan, depending on how bad your loan was done, and the worse your loan was done, the more money, basically, we get you off on the principle and lower the interest rate [inaudible]. But you have to understand most people can’t refi a house right now. But they can – if they’re late right now, they’ve got credit issues. So if they could refi, their interest rates are going to be 7 – 8 percent. We’re actually getting 5.5 – 6 percent interest rates without running your credit, without doing a refi, and without doing anything with appraisals or anything. We just simply go with what we have and the lenders are basically doing the negotiations with us.
Jason Hartman: Okay, so it sounds like then, if I’m understanding this correctly, you audit the loan documents, you look for errors in the loan documents, right in the package, and then you go to the lender and negotiate with them on the borrower’s behalf.
Bill: On the borrower’s behalf.
Jason Hartman: Okay, who is the prime candidate for this type of program?
Bill: Pretty much anybody who owns a mortgage or anybody who owns a house that has a mortgage.
Jason Hartman: And do they need to be in default or can they be totally current with payments, but they realize a problem is coming?
Bill: By California State law, because I am not a law firm or a lawyer, I cannot take people in notice of defaults. I can’t do it.
Jason Hartman: So in other words, what you’re saying is if they’re before an NOD or notice of default has been filed, then you can help them, but once they have an NOD filed, you can’t help them.
Bill: Can’t help them. The California State law. They’ll put me in jail.
Jason Hartman: Really. So who has to help them? An attorney?
Bill: An attorney or a law firm.
Jason Hartman: Oh, wow. Okay. I didn’t know that.
Bill: There’s a lot of foreclosure consultants out there who are running around telling us that they can get people out of foreclosure, but if they take money from the borrower upfront to get them out of foreclosure, they’re breaking California State law and those people can be put in jail.
Jason Hartman: Wow.
Bill: So we stay away from that because I don’t want to go to jail.
Jason Hartman: So are these people – are they behind on payments then, but no notice of default has been filed yet?
Bill: It doesn’t matter. I have a person who walked into my office and said very clearly he doesn’t understand why his mortgage kept going up every year. So I looked at his loan docs and he has a neg-Am; he has a variable interest rate loan with a negative amortization feature.
So every year, his payments go up and he didn’t understand why. He was sitting there slamming his head on the desk, saying I have a 5 percent fixed. And I have a piece of paper in front of me that says no, you have a 4.95 percent neg-Am. And he was pissed. This guy had $1.5 million in the bank when he got the loan. He lives in a house two blocks off the beach in Manhattan Beach. There’s no point to putting him in a loan that had a negative amortization on it. He should have gotten a 5 percent fixed. So we did that for him. He’s never been late. He’s never had an issue. And all he wanted was the loan that he went in to get.
Jason Hartman: He did not even miss one payment –
Bill: Never. Never missed a payment.
Jason Hartman: And you successfully renegotiated his, too?
Bill: Well, his was actually easy because he never signed anything upfront. It’s a TILA violation not to sign all disclosures upfront.
Jason Hartman: TILA?
Bill: Truth-in-Lending Act. So when we were done, it was a fairly easy mod because all he wanted was the interest rate he was told he got.
Jason Hartman: And he was financially solvent and everything.
Jason Hartman: Okay, good.
Bill: But we’ve had some other people, too. We’ve got a lot of people out there, Spanish-speaking borrowers in particular, who didn’t understand what the broker was telling them, didn’t understand the loans they were getting into. Now, they’re in trouble. They really don’t understand what they signed.
Jason Hartman: Tell us about the other language, the issue of people with other languages. I mean the loan docs are obviously in English.
Bill: By California State law, you have to provide the loan docs in the language of the person that signed the loan docs. So any Spanish-speaking borrower, who is not English literate – a lot of Spanish-speaking people can speak English, but they can’t read it – if the person can’t read and write literally in English, you’re supposed to provide the loan docs in their language. If you don’t, you’re breaking California State law.
Jason Hartman: Okay, now I assume other states don’t have that law.
Bill: Again, the reason why we’re not nationwide is because every state is different.
Jason Hartman: It’s so different, right.
Bill: And we’re very good in California right now. We’re pretty good in Florida. We’re really good in Nevada.
Jason Hartman: So talk to us about the Spanish-speaking market for a moment. So a lot of times, did they sign loan docs that were in English, but they really shouldn’t have because they weren’t literate in reading and writing English?
Bill: I have never seen a set of loan docs in Spanish.
Jason Hartman: Oh, really?
Jason Hartman: So a lot of these modification customers are Spanish speaking or maybe English-speaking, but not English reading.
Bill: English literate.
Jason Hartman: English literate, yeah.
Bill: I actually love Spanish borrowers because they’re pretty much a slam-dunk. As soon as they come in the door, it’s really easy to start the negotiation process.
Jason Hartman: With the lender.
Bill: Yes, because they didn’t understand what they were getting into, they never understood what they were signing. Even if somebody disclosed to them, they couldn’t read it. I’ve had Spanish-speaking borrowers actually have their houses taken away because they couldn’t read the Notice of Default. They didn’t know what it was that came to the door because it wasn’t in Spanish. Unfortunately, I can’t help them because that’s [inaudible].
Jason Hartman: It’s too late then. Yeah, right. So other prime candidates for your service, who else? I mean you talked about the non-English speaking or the non-English literate. We talked about the guy that was solvent, but just got a loan that he should have never really been given. It was sort of a rip-off is what it sounds like.
Bill: My favorite loans are the negative-Am loans, the ones where you’ve got your 1 percent start rate or your 1.25 or whatever. The marketing on that was – I don’t know if you remember or not – was you can get into a $1 million house for less than your car payments. That was about a year ago. I could tell you who the lender was, but I don’t want to have it on the radio. The other one was California properties are your best investment. Everybody in California has to have a place to live. Property values will never go down. Another marketing thing. Look at what’s happened. We’re at 50 percent of value of what it was a year ago.
Jason Hartman: It is amazing how quickly this market declined. I’ve been through other cycles. I’ve been in the business 22 years now, but this one happened so quickly. It’s like turning the faucet on and off. I couldn’t believe how quickly it happened this time. Usually, the declines are slower than this. This was pretty sudden.
Bill: Usually, the clients are market adjustment. This was simply like somebody shut the faucet off.
Jason Hartman: Right because they did. Last August, they shut the credit faucet off.
Bill: Actually, it was before that. It was the Fremont debacle when the New Century gang shut down because of the Fremont debacle. That was February, March last year.
Jason Hartman: It seemed like February of last year was really the beginning of it, but it didn’t really, really rear its head until August.
Bill: August 17. That was [inaudible] insolvency and it destroyed the industry.
Jason Hartman: Incredible.
Bill: So you’re sitting in an adjustable rate mortgage that’s going to go up and you can’t refi your house, and if you try to refi your house, the property values have dropped so much and it’s a snowball. If a bank takes a house back right now and turns it into a bank-owned piece of property, the bank’s going to sell it at less than everybody else in the neighborhood is valued to dump the property. That pushes everybody’s property down.
Jason Hartman: It’s a snowball effect. It’s really bad. So you can’t help them if they have NODs. Any other prime candidates? Neg-Am candidates are good customers for you. Who else?
Bill: Well, anybody who’s in adjustable, any kind of adjustable rate mortgage. I have a five-year interest only with an interest-only running after five years after that. So when my interest-only is expiring, I’m going to be at 7 – 7.5 percent or something. When that happens, I’m in trouble. Well, not trouble, but I should be in trouble. So anybody who’s got an interest-only feature in their loan should probably talk to us because we can get it into a fixed.
Jason Hartman: What about someone – now does this work for investors and homeowners?
Bill: It works. I don’t care if it’s an owner-occupied investment property or a second home.
Jason Hartman: It doesn’t matter.
Bill: It doesn’t matter. Everything that matters to me is in the loan docs.
Jason Hartman: What if – we had a client I talked to a few weeks ago, who didn’t follow my advice, unfortunately, and got into a little bit of trouble, and I’m thinking maybe this person should be talking to a loan modification person, okay. What about an investor fixed-rate loan, but bought in some of the wrong markets, markets I didn’t recommend to them? They did that outside of our network and got over leveraged, didn’t have reserves, things like that. Can you help that person?
Bill: Maybe. And the reason I say maybe is it more or less depends on who the lender is and I can tell you some of the good ones right now we’re working with. Countrywide’s actually really, really good right now.
Jason Hartman: And when you say “good,” you mean willing to negotiate.
Bill: Willing to negotiate.
Jason Hartman: Who’s bad?
Bill: Wachovia right now is not negotiating with anybody. They’re a really tough one right now to deal with. It seems as though the bigger banks are the worst ones to deal with.
Jason Hartman: Okay, so let’s make –
Bill: IndyMac, right now, isn’t doing anything because they’re in Chapter 11 or Chapter 13 or Chapter 7 or something. But until they get out of bankruptcy, they’re not able to do anything.
Jason Hartman: So the FDIC isn’t negotiating those loans on their behalf?
Bill: Actually, when it became IndyMac Federal Bank, it was really great. They started helping. They started doing a lot with us. But then IndyMac Bank went into bankruptcy. Now they’re in front of the bankruptcy judge and everything’s –
Jason Hartman: And everything’s frozen.
Bill: Everything’s been suspended, so they’re not really doing anything.
Jason Hartman: How is Chase or B of A?
Bill: Chase is okay. B of A is non-existent. There’s no real loans with B of A. The only loans we’ve done with B of A are seconds, like HELOCs.
Jason Hartman: Can you negotiate those?
Bill: Sometimes. Sometimes. It depends on the circumstances. There’s a lot to this. If a HELOC was done at the same time the first was done on the property.
Jason Hartman: Yeah and by the way, everybody, HELOC is home equity line of credit.
Bill: Home equity line of credit. And anyway, if you did a first that was anything and a HELOC for a second and you drew 100 percent on the HELOC, that’s not a good thing. The lenders have a liability on that. You can’t do a HELOC because a HELOC is exempt from Section 32.
Jason Hartman: Which is the recourse statute?
Bill: No, Section 32 is maximum interest rates. You can have a 20 percent rate on a HELOC, but you can’t have a 20 percent interest rate on a second. So if you are doing a HELOC to circumvent the law in place of a second, then you can get in trouble for that and the way that –
Jason Hartman: When you say that, you mean the lender can get in trouble.
Bill: The lender can get in trouble.
Jason Hartman: Okay, right.
Bill: And the way that you can always spot it is if you took 100 percent of the HELOC on the first draw, which is what they do when you buy a house or refi a house, and you have a HELOC in place for the second, then basically, the lenders try to circumvent the whole second loan with a HELOC to make more money and again, it’s not a good thing. They’ll get in trouble for that.
Jason Hartman: Okay, so that one you can negotiate because the lender did wrong. The premise of this whole thing is really the lender did something wrong or it’s just smart business for them to negotiate.
Bill: It’s smart business for the lender to negotiate. The one bank I’m not having a lot of luck right now is Wachovia, and Wachovia had an eight point some odd billion-dollar loss last quarter.
Jason Hartman: So why is Wachovia – I mean I know you’re just –
Bill: I don’t know.
Jason Hartman: — just sort of suspecting here, but why would they be so rigid about it?
Bill: I don’t know.
Jason Hartman: Yeah.
Bill: You know everybody else sees our point of view. If you take the property back, it’s only going to get worse. If you can keep the borrower in the property, you’re going to make your money back. Perfect example is this: If I get you a $200,000.00 principle reduction over the course of 30 years, that principle reduction of $200,000.00 now is worth about $600,000.00 plus to you. If Wachovia or B of A or somebody takes and renegotiates the loan with us, where they’re losing a bit of principle reduction, let’s say the principle reduction on a home from $500,000.00 to $300,000.00. Over the course of the 30 years, there’s still –
Jason Hartman: So they would reduce – wow! I mean listen, folks. You listening everybody? So a $500,000.00 loan, the principle, is reduced to $300,000.00. You get a person potentially $200,000.00 knocked off the loan.
Bill: Which is $600,000.00 over the course of the loan, but –
Jason Hartman: Because you’re tripling it for the interest.
Bill: Right, because that’s reality. That’s what it is. But whoever the note holder is is going to make their money back. We’re only giving $200,000.00, but now it’s $300,000.00. They’re going to make $900,000.00 over the course of the loan. So they’re still getting their money back. If the bank takes the property back, it goes into REOs, and they end up selling it at whatever. They lose $200,000.00. So why wouldn’t they want to get the borrower in the house?
Jason Hartman: Yeah, because at least they’re going to have some cash flow. I agree and understand.
Bill: And performing up.
Jason Hartman: And I tell you, I’ve been saying this for a long time. I always ask in my seminars who’s ever loaned money to a friend or family member, and the hands go up and everybody pretty much has had that experience unfortunately. And then I say who was in control of that transaction, the lender or the borrower? And it’s the borrower who’s really in control. I mean it’s a different way of thinking. A lot of people are thinking that the lender is in control and you know the old saying, he who has the gold makes the rules. Well, I’m not so sure about that. It seems like the borrowers are getting all the breaks in life.
Bill: Well, right now they are, but the market’s turned a little bit. But also, the people think that Countrywide owns my loan. Countrywide doesn’t own your loan.
Jason Hartman: Yeah, well, it’s been sold off. It’s been put into a pool and collateralized and some Korean bank owns it or something.
Bill: It could be anybody.
Jason Hartman: Bank of the Netherlands or something like that.
Bill: It could be anybody.
Jason Hartman: And of course, sucker investors on Wall Street own it.
Bill: Well, they’re the ones that actually have to do the principle reduction.
Jason Hartman: Well, and that in all those things. It’s interesting, though, because in all this talk, I’ve been interviewed so many times on this whole mortgage meltdown scenario, right, and I say, look, the people who have been burned the most are the investors on Wall Street. That’s my perception of it because the people that are living in this houses, they live in a better house than they could afford. They’ve lived pretty nice for the last three or four years. I mean it’s a controversial thing to say.
Bill: I think it is the person that got burned the worst is the borrowers who have lost their savings, the people who had the soft limits of the future. They bought a house because it was the American dream.
Jason Hartman: But the question is what house did they buy? Did they buy a house that they could afford or did they get to live in a much better house than they really qualified for, for the last four years, and now they’re saying oh, my gosh, it’s so terrible; foreclosure, blah, blah, blah. Well, you told me the story about that person, who made $30,000.00 a year and is living in a $1.9 million house. I mean gosh, that’s like a gift from a lender.
Bill: But that’s the exception, though. There’s a lot of –
Jason Hartman: I know there’s fraud out there. I understand that and I’m excluding that when I say this.
Bill: There’s a lot of it. But a lot of the people that I’m talking to got into houses. They refied, they remodeled. The house is their best investment. It’s their savings. They’re going to keep this house until they retire. They’re going to sell the house and they’re going to move out to the desert. These are the people that we’re dealing with on a day-to-day basis. Their savings is now gone. They owe more on the house than it’s worth. They’re facing foreclosure because the payments keep going up. They have no control over it. The lender doesn’t work with them. At best, the lender’s going to shovel all that stuff to the back of the loan and they’ll be back in the same boat five years from now.
Jason Hartman: So the person in that example –
Bill: But who created these loans in the first place? The investor.
Jason Hartman: Loose money.
Bill: The investors.
Jason Hartman: Yeah, the investors.
Bill: They kept dropping the bar, dropping the bar, dropping the bar, letting borrowers –
Jason Hartman: And when you say investors, let’s just clarify. You mean investors who bought collateralized debt obligations and who pumped the easy money into this system.
Jason Hartman: And with these stupidly liberal lending standards.
Bill: Twenty years ago, it was S & Ls. Banks loaned the money. They were federally insured and blah, blah, blah.
Jason Hartman: Charles Keating and the whole bunch.
Bill: Now, it’s Wall Street and Wall Street simply buys the pools and then they sell them out to investors, who want a certain return on investment.
Jason Hartman: It’s like a hot potato. They just move it down the line and everybody’s paid to just move it down the line.
Bill: And everybody. Countrywide never did anything wrong, in my opinion. I know a lot of people have that.
Jason Hartman: Yeah, Anthony Mazzola and a lot of people differ, but yeah.
Bill: All he was doing was he was simply reselling a product that was brought to him from the same investors who were now complaining they were losing money.
Jason Hartman: I can see that side of it.
Bill: Borrowers bought into a vista market. Borrowers bought the house because everybody had to buy a house in California.
Jason Hartman: Right, but the question is all I’m saying, my only distinction to that, Bill, is what house should they have bought? What house did they deserve? Should they have been in a $500,000.00 house or $1.5 million house? It’s a matter of degree.
Bill: It is.
Jason Hartman: I’m not saying they shouldn’t have bought a house.
Bill: When we started the company, there’s a certain percentage of people that we can’t help and that’s because they got into houses that they couldn’t afford. There was no way they could afford the house. They got into it anyway and now the house has been foreclosed on. There’s no way I can help certain people. It’s just not possible.
Jason Hartman: It’s because the lender doesn’t look at them. They’re sort of re-qualifying for the loan or sort of un-qualifying themselves and then re-qualifying for a better loan. And so the lender looks at them on that renegotiated loan as not a good borrowing risk, which is probably a prudent decision on the lender’s part.
Bill: Yes. They’re going to lose. We negotiate on good faith for the borrower with the lender. If the borrower ends up going into foreclosure three months out, we lose credibility. So we only help people who can be helped, who can afford their house.
Jason Hartman: Yeah, fair enough. That’s good business. What is your success rate?
Bill: As far as loan docs go, we’re almost close to 100 percent at finding things wrong with every set of loan docs.
Jason Hartman: One hundred percent of the time.
Jason Hartman: There is something wrong with someone’s loan docs.
Bill: Yeah, it’s substantial.
Jason Hartman: Having this conversation with you, Bill, I am tempted to go in the next room where the files are for the couple dozen properties I own and give you my loan docs and say, hey, look at these for me.
Bill: There’s a catch to this. I don’t want to see your loan docs. I want to see what the lender has. When we sign up a customer, we get a limited Power of Attorney from the customer.
Jason Hartman: Oh, to get the lender’s file.
Bill: We want to see what the lender’s got.
Jason Hartman: Oh, tell me about that. There’s a difference?
Bill: Oh, there’s a huge difference.
Jason Hartman: You sign one thing and then there’s another fraudulent set that the lenders use? Or fraud’s a strong word. I don’t know.
Bill: When you first signed your loan application, you’re required to basically give them a borrower authorization to run your credit. Nobody ever did that. Nobody. Most brokers don’t even know what a borrower’s authorization was for.
Jason Hartman: They just run it without their permission.
Bill: You get them on the phone; you give them the social. That also used to [inaudible], too.
Jason Hartman: Oh, they’re not allowed to run it on the phone like that without – okay.
Bill: Without a signed borrower authorization, which most of the time, they didn’t get. Then they’re supposed to give you a loan application and you’re supposed to fill out the loan application and sign it within three days of running the credit. So that wasn’t done a lot of times. So once we get to the next level –
Jason Hartman: Good faith estimates.
Bill: Good faith estimate, truth-in-lending statements and stuff like that. We get to the next level; they’re supposed to set down disclosures three days prior to signing loan documents. The lender has to by federal law. It’s a cooling off period. You have to see what you’re going to be getting in a loan.
Jason Hartman: Now, is that for a refi or a purchase?
Bill: It doesn’t matter.
Jason Hartman: Oh, either one.
Bill: Either one.
Jason Hartman: All right. There is a cooling off period on a purchase, too?
Bill: Prior to signing the docs.
Jason Hartman: Oh, prior to signing docs.
Bill: Yeah because you have to evaluate the loan you’re getting. You have to have a truth-in-lending statement, a good faith estimate. You have to know what you’re signing. Okay, on loan doc day, you sign the loan docs. By federal law, you cannot be off. Your truth-in-lending statement, all that stuff that you had gotten three days prior, has to be within an eighth of a percent on the APR. It has to be within $100.00 of the loan amount.
Jason Hartman: Wow, that is – I had no idea.
Bill: If it’s not, you broke a federal law.
Jason Hartman: Wow!
Bill: From what I’ve seen, nothing is signed until the loan docs are dropped in front of you. Everything is signed on the same day.
Jason Hartman: And it’s always in a rush, they’re in a hurry, and that’s just –
Bill: What loan were you sold?
Jason Hartman: This industry is full of bait-and-switch deals. I just hate it. I’ve long said that in all my years in real estate, I feel like I get better service at Taco Bell than I did with a mortgage broker sometimes.
Bill: Well, let’s talk about mortgage brokers. Do you know that a mortgage broker, by law, is an agent for the borrower? He’s required by law to put you into the best loan available at that time.
Jason Hartman: Oh, not an agent for the lender in other words.
Bill: No. He is an agent for the borrower. He is supposed to go out there and get you the best deal available. That’s why you go to a broker. One of the things that I’ve seen is that brokers weren’t doing it for the borrower; they were doing it for their pocketbook. They were charging points and fees and YSP and everything else.
Jason Hartman: Oh, I know. Yield Spread Premium, you mean.
Bill: Well, that’s another issue. That technically is not legal either. So that’s another big one for the lenders.
Jason Hartman: It’s a mess of an industry and the one good thing that I think will come out of this mortgage meltdown is that we’ll be cleaned up a bit. I mean do you feel like that?
Bill: It’s already started. There are so many brokers out there that are out of business.
Jason Hartman: I think we gotta have separate licensing, real estate license, and I mean it depends on what state you’re talking about here, but in California, there are two ways you can do it under the Department of Corporations or under a real estate license. So you can have a real estate license and do loans, and I just think they should be separate. Realtors sell real estate. Lenders do loans.
Bill: It’s a highly regulated industry that’s being employed by people that don’t know how to do loans. I mean, honestly, until all this started, until I started this last year, I had no idea all this stuff was out there. Nobody ever taught me the proper way to do things. When we started reading through the legal stats and everything, that’s when I really learned the proper way to do things.
Jason Hartman: Sure. So Bill, we don’t have an exact success rate. We do know about 100 percent of the loan documents have some mistakes in them, which just is an amazing number. I can’t believe it, but that’s just incredible. What kind of results are you getting? You touched on that earlier. Anything more on that?
Bill: I’m going to have to be honest with you. It depends on the loan. It depends on the lender. It depends on your note holder. It depends on a lot.
Jason Hartman: And the thing that’s so hard to say with this stuff is it’s such a new industry, really, that you’re in that there’s not a lot of time to sort of have a real statistical answer to all these questions, I know.
Bill: No, there’s not, and the fact that we’ve only started doing volume lately, so we’ve got a lot of things right now with different lenders, different note holders, and different stages of negotiation. Certain lenders are much more happy to go along with what we’re trying to do. Certain ones are very, very resistant. We’ve got some attorneys right now that are involved and basically trying to twist the arms of some of the attorneys or some of the lenders, who aren’t coming along so nicely. So it takes time. That’s the one thing the borrowers – that’s the hardest thing the borrowers have a problem with is that –
Jason Hartman: How long does it take, 30 days, 90 days?
Bill: Well, it takes 30 days just constantly to get the first of the loan docs and again –
Jason Hartman: Oh, from the lender.
Bill: Yeah, because if the lender has the loan docs, then we get them pretty much within 30 days. It’s [inaudible] if they have them –
Jason Hartman: So here’s what I would say to listeners.
Bill: And they have to order them from the note holder. The note holder has, by a statute, 60 working days, which works out to about 85 days. So it takes time.
Jason Hartman: Wow. Okay, so to the listeners, hear this. Plan early. If you know you’ve got trouble coming, get with a loan auditing firm or loan modification firm early.
Jason Hartman: Because this takes time.
Bill: It does.
Jason Hartman: How long does it take after that? So it may be 85 days have already passed.
Bill: Well, once we get the loan docs, we’re pretty quick. It goes through the audit process. It takes about four hours for one of the auditors to get through a file. It’s a big process. There’s almost 300 things we’re looking for. We really do a lot of work on the audits. And then they do a verbal with the borrower and the borrower’s going to tell them stuff that happened during the loan process that we can’t tell from the file. And then it goes into our legal area and they write the settlement letters, based on what we found in the loan docs. That goes back to the note holder and the lender and that’s where the process starts. They will take about 30 days to even route it to the right person. Then they do their due diligence to verify everything that is in our letter, that they basically broke this law or did this wrong or something. And then that’s when the negotiation starts. By the time you get through all of this, you can be looking at anywhere from 4 – 6 months.
Jason Hartman: Wow, this is something to plan early. Get going on it early.
Bill: A loan mod company, you go to a loan modification company, you give them a copy of your bills; you give them a copy of your paycheck stubs, sometimes a copy of your W2 from last year. They write a letter to the lender with the support documentation and they try to go in as a hardship. That takes about 60 – 90 days just to get an answer back on that. So a loan mod is an easy thing to do. This is much more cumbersome and complicated.
Jason Hartman: A loan audit is more complicated.
Bill: Yeah, what we do is much more complicated, but our results are a lot better.
Jason Hartman: Right, because you’re not sticking it onto the back of the loan.
Jason Hartman: How much does this program cost?
Bill: What we do is we charge the borrowers for two reasons. One is we have to prove the borrower has the ability to make the payments, so what we do is we end up with a payment history. So we only charge four payments max. The starting payment is $1,450.00 per month.
Jason Hartman: To start the process.
Bill: To start the process.
Jason Hartman: Oh, so you charge them monthly for this. Oh, wow.
Bill: Yes, but when the settlement is done, one of three things will happen. Either the money goes to us as part of the settlement, it goes to the lender as part of the payments, or it goes back to the borrower as part of the settlement. So at the end of the process, ultimately, the borrower is way ahead. The borrower doesn’t actually pay anything by the end.
Jason Hartman: If it works, but it might not work.
Bill: If it doesn’t work, no, we have a 100 percent money-back guarantee. If there’s no benefit to the borrower, we can’t help them, we give them their money back.
Jason Hartman: Oh, wow. Okay, so you really are very confident that you’ll make it work.
Bill: Yeah. We have to perform to make money.
Jason Hartman: So does the borrower really pay any money at all for this then?
Bill: Ultimately, no, but they have to prove to me that they can make the payments and I want them –
Jason Hartman: Make what payments? Your payments?
Bill: The other payments, the new payment.
Jason Hartman: The new payments, okay.
Bill: And the other thing is that as soon as Countrywide – I love these guys – as soon as we sent Countrywide our first letter to get the loan docs, the first thing Countrywide does is send it to their loan audit department and start calling my borrowers. And borrowers – I’ve lost borrowers because they’re going to do the loan mod with Countrywide and Save the American Dream isn’t going to help them. And I tell borrowers straight out if you do that, I’m going to keep your money because we’ve already worked on the file.
Jason Hartman: Oh, so they’re kind of circumventing you and they’re being sleazy and going around you.
Jason Hartman: Gotcha.
Bill: So I have to keep the borrowers onboard. The borrower has to –
Jason Hartman: We have clients do that once in a while. It’s a dog-eat-dog world.
Bill: Yeah, but I don’t blame Countrywide. They’re going to give up a lot less if they do a loan mod than if they go through us. But it does say in our first letter, please don’t contact the borrower, and the first thing they do is call.
Jason Hartman: And then the borrower starts getting off on the wrong track. Okay, so the fees are really recouped in the settlement is what you’re saying, right?
Bill: The fees are recouped in the settlement.
Jason Hartman: Does the client continue to pay their mortgage payment while they’re in your program, or do they stop making payments?
Bill: They should continue to make their mortgage payments if they have the ability.
Jason Hartman: Okay, so if they have the ability to make the payments and they’re making them along the way – I mean if they don’t, they’re not going to make them anyway.
Bill: Well, if they don’t, they don’t. Their credit is going to be affected, but part of the settlement is that we go back and have the credit report fixed. So at the end of the settlement when we write the settlement letter, one of the stipulations is they fix the credit. Any negatives on the credit from Day 1, since they started our process, the lender goes back and fixes.
Jason Hartman: Oh, wow.
Bill: So any negatives –
Jason Hartman: So literally, they can come out of this thing with a renegotiated loan, a bunch of principle balance knocked off their loan, possibly a better rate, one or the other or both –
Bill: No, both.
Jason Hartman: Yeah, okay, maybe both in the best case. And clean credit?
Bill: I’m only responsible for the timeframe when I start this. I can’t go back to before then.
Jason Hartman: Oh, so if they had bad credit before they came to you – I mean bad loan history. Got it.
Bill: We’re not a credit repair company. I only deal with – the day they sign an agreement with us till the end of the process, I can usually get that fixed. Anything prior to that, I don’t know what happened before that. And also, the borrowers should ask the question how are things going to improve if they don’t do this. Property values aren’t going up any time soon.
Jason Hartman: Yeah, not in the markets you’re dealing with, that’s for sure.
Bill: And mortgage payments aren’t going down, and the job market is really being hurt right now, so if people think they’re going to get a better job next week, that’s not going to happen either. So we’re pretty much it as far as helping people and getting them out of the situation.
Jason Hartman: So you can reach Bill’s company, Saving the American Dream, at 877-57WECARE. Thanks, Bill, for being on the show. Appreciate it.
Jason Hartman: Learned a lot today.
Dave Toombs: Hey, so we’ve been Platinum members for a couple of years now and we’re just real pleased with the way things are working out.
Kathy Toombs: We couldn’t be happier and it’s really changed our lives for the better.
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Duration: 42 minutes