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: Before we start today’s show, I want to make a couple of very important announcements.  Be sure to join us for our REO and Builder Closeout Event on February 17, at our office Costa Mesa.  And then we have a mini version of Creating Wealth in Today’s Economy on February 28.  We have Rich Dad’s Cash Flow Game.  If you haven’t played that, it’s a lot of fun.  Join us for that on Friday, March 6.

And then our twice yearly event, the Master’s Weekend, A Gathering of Experts, on Saturday, March 7, and Sunday, March 8, so join us for these events.

Here’s a little bit of info about the REO and Builder Closeout and Commercial Property Event on Tuesday the 17th.

I’m Jason Hartman with Platinum Properties Investor Network.  You’ve been hearing me on the radio for years now.  It’s time to protect yourself.  If you’re interested in investing in something you can actually control, check us out and what we have to offer here, excellent foreclosure and REO properties owned by banks, builder closeouts, some of the most phenomenal deals right now.  These aren’t the same old crappy fixer-uppers and money pits that you’ve been hearing about from other promoters.  They’re brand new or almost new.  They’re in nice areas in master plan communities in 39 markets around the country, selling for as little as $40.00 per square foot.  Yeah, you heard me right, $40.00 per square foot.

We have commercial properties, apartment buildings.  Join us for our Foreclosure REO and Builder Closeout Extravaganza, Tuesday, February 17.  This is not the same old junk you hear promoted by other people in blighted areas.  This is premier product at bargain basement prices.  Register for that or any other events at www.jasonhartman.com.  Get more info there.  And now, let’s go to today’s show.

Welcome to another edition of Creating Wealth.  This is Show No. 86 and this is your host, Jason Hartman.  Glad you could join us today.  Please pardon my voice.  I’ve been fighting a cold for a while now and I’m very stuffed up and it’s hard to talk, and you know what?  When you’re sick, it’s kind of even hard to think.  So if my mind isn’t as sharp as usual, please excuse that, too.

All right, so today, let’s talk about how you deserve a bailout, too, more on loan modification.  And I have to tell you that as we’re looking at the TV here, FOX Business, which I like quite well, we had the hearings this morning, we had all the bankers and stuff going in front of Congress, and Barney Frank.  He seems like a really brilliant fool.  I mean how can someone like that – you know I have to tell you.  Lorene is sitting here with me.  You’ve heard her on the show before and she’s kind of smirking as I say that.  Hi, Lorene.

Lorene: Hi, Jason and everyone.

Jason Hartman: Great to have you on the show again.

Lorene: Thank you.

Jason Hartman: Lorene’s always so reluctant and I like to have her on the show because she has such a great voice.  I tell you, hopefully no one will hire you away to do voiceover work.  Anyway, Lorene, isn’t it amazing?  You see someone like Barney Frank and he’s trying to tell these big CEOs how to run their business better.

Lorene: Absolutely.  It was entertaining this morning.

Jason Hartman: Yeah, people in government, it’s just really crazy what’s going on, folks.  The United States is becoming a socialist country right before our eyes and that is a sad thing.  But remember I visited many socialist countries in my travels.  I’ve been to 52 countries now.  I visited a few Communist countries and formerly Communist countries, too.  I remember visiting Cuba and I’ll tell you something.  You have to remember that big government is bad.  Government is just by its very nature an oppressive regime.  So government, we need government, but the less the better.  You know the old saying in I think architecture, less is more, and I certainly think that applies to government.

But anyway, as you see all this stuff going on, it’s just completely crazy what’s going on.  In socialist countries, remember, there are people who have money and there are people who are richer than others, and that will be true in the Socialist Republic of the U.S.A. that we are definitely moving quickly into as we see more and more semi-nationalized industries.

Okay, so enough of that.  But it’s crazy what’s going on and the title of this show is, “You Deserve a Bailout, Too!  More on Loan Modification.”  And so first, I want to tell you about my own loan modification story.

Now, this really amazed me because I have several properties and I don’t know how many loans I have because many of the properties have a first and a second loan on them.  And I’m going to guess I probably have about 35 loans, 35 mortgages, maybe.  I don’t know, maybe 40 of them.  I’m not really sure offhand.  But one of my lenders, who holds I believe seven of my loans, actually sent me a letter.  And they didn’t just single me out.  They sent this to all of their borrowers, I’m assuming by looking at the letter.

I’ve never been late on a payment.  I’m totally current.  I have fantastic credit.  But hey, business isn’t as good as it was last year, that’s for sure.  And so they said we know times are tough and people need help nowadays, blah, blah, blah.  If you need any assistance in making your mortgage payment, give us a call.  And I kid you not.  This would only happen, listeners, in this completely illogical, upside down, backwards, crazy, nonsensical world we live in today, where all the wrong things are being reported, i.e., back to my comment on the hearings this morning and look at our government.

Okay, enough of that.  I’ve had my afternoon coffee, folks, so I’m getting a little uppity here.  Anyway, so they sent this letter and in this letter, about two-thirds of the way down on the page, there were two italicized testimonials.  I kid you not, testimonials from other borrowers of this particular lender, saying so and so lender did such a great job in modifying my loan.  We’re so pleased with their great service.  And I’m like I couldn’t believe it.  I was like is my lender really sending me a note, saying would you like to pay less?

Now, how do you think I’m going to answer that question?  How do you think anybody receiving that letter is going to answer that question?

Well, so there was a toll-free number on there and sure enough, I opened this on Saturday and Monday morning, heck, I gave them a call.  I said times are crazy out there.  The economy is slower.  Business is a little slower for me.  Can you help me?  And they said sure.  And so I sent them a little letter – and by the way, we have sort of a copy of this type of a letter, a hardship letter if you will, on my website at www.jasonhartman.com.  It’s not the same letter, but it’s a similar type of letter.  Www.jasonhartman.com and click on the Members Only Section, no fee to join and it takes about 10 – 15 seconds.  You have to fill out your name and get a little password and stuff, and www.jasonhartman.com, click on Members Only, and you can see a copy of a sample letter on loan modification.

And by golly, wouldn’t you know it?  They modified several of my loans.  They reduced the interest rates for a period of time and did what they call a step-mod.  And I only learned this after it was done because I really didn’t know that much about it at the time.  They did a step-mod and lowered my interest rate for the first couple of years and then the rate bumps up a little bit and it goes through the next couple of years at a lower rate, still lower than my current rate on my 30-year fixed-rate mortgages, and then it goes up again.  By year No. 5, it’s almost back at the same rate I’m paying now, and so and so forth.

So I just want to tell you that you could look at this as totally nonsensical, completely illogical.  I kind of thought that when I received the letter, but then I thought about it and I thought in a way, this is a pre-emptive strike and this is a sign to me that these lenders believe – and I think this is rightfully so that they believe this – that more people will be defaulting on their loans and it is better, if you can, to keep the patient alive, keep the borrower paying something.

Now, that’s logical.  Look.  If you’re in business and you have a customer, and your customer can’t pay you, which is very true on what’s going on in the economy – by the way, I’ve invented a new phrase for this, folks.  I call this “trickle up economics” and I’m going to put a little TM after that, so don’t steal my term.  I invented that one.  During the ’80s, we heard Reagan and his terrific economic policies, “trickle down economics,” largest peacetime expansion of the country’s economy or any country’s economy in human history under Reagan.  You can probably tell I’m a little bit biased.  I’m a little bit of a fan.  He didn’t do everything right, I agree.  There are some things Reagan definitely, looking back in history, messed up on.

But overall, I think that “trickle down economics” does work, as long as the people at the top don’t get to keep all the money, which is what we’ve seen lately.  So Lorene, I’m getting off on a tangent here as usual.  What was I just talking about?

Lorene: You’re going towards Wall Street, aren’t you?

Jason Hartman: Yeah, I’m always out for those Wall Street guys.  I am a capitalist, but I do not like the fat cats and the winner-take-all society, skimming all the profits off the top.  And the way to stop that is vote with your money.  Don’t invest with these crooks.  Okay, anyway, not that I have an opinion about that.

But I call this “trickle up economics,” so if you are in business and you have a customer who’s having trouble paying you, do you want to just get really angry about it and sue the customer into bankruptcy?  No, you don’t.  You want to work with your customer and that is proactive.  It’s pre-emptive.  It’s smart.  It’s good business.

And so you could certainly say this is what lenders are doing now.  But suffice it to say, I was rather amazed, happily amazed, to receive that letter, and I was also rather amazed when I just did this myself and modified several of my loans and got a better deal.  I’m thankful to my lender for doing that.  You know what?  I’m going to see if my other lenders are open to that possibility as well.  Why the heck not?

I’ve talked about this on prior shows and I tell you my position of being in debt, and how debt is my favorite four-letter word, and debt is the position of power is contrary to popular belief.  I’ve been proven right again.  Everything I’ve been telling you listeners, you’ve been listening to maybe the last 85 shows and also the Speed of Money shows.  We have ten of those or so.  I know we stopped producing them, but those are kind of good, too, just little two-minute shows.  Go to www.thespeedofmoney.com, I believe, is the website.  Maybe it’s www.speedofmoney.com.  I’m not sure.  Don’t quote me on that.  You can get them all at www.jasonhartman.com and click on Education and then Podcast and Radio, and all the shows are there.

Everything I’ve basically told you to do has pretty much come true.  The only prediction I’ve been wrong on so far is that I really thought interest rates would be a lot higher by now.  Our government, our Federal Reserve, has defied gravity and they are just continuing to try to defy gravity, but you know what?  You can’t do that forever.  What goes up must come down or what is too low and what is down must go up.  Interest rates are going to be a lot higher in the future.

So you are going to love having long-term, fixed-rate debt into the future.  This is going to be a supremely good financial planning tool in my opinion.  Just love your mortgages.  Stock up high quality, long-term, fixed-rate debt attached to a set of packaged commodities in the form of little rental houses that are highly in demand as we see the population increasing.  Yes, I think we’re in for bad economic times.  They’re going to get worse.  We have a lot of investments that make sense the day you buy them and I don’t think there’s any better choice than good, solid rental property and income property investments.

Okay, so enough of my commentary.  We have a guest coming up.  I want to get to a couple questions and comments, and Lorene, that is your department.  Thank you for joining us today.  Everybody, give Lorene a hand.  I want you to clap right now.  Wherever you are, if you’re driving in the car, give her a hand.

Lorene: Oh, thank you, Jason.

Jason Hartman: Okay, go.

Lorene: All right, our first is a comment from Eden, just a very quick comment.  He’s from Logan, Utah, and he says, “Dear Jason, I can’t wait to learn more.”  So we’ll keep that short and sweet and move ahead because that’s what we want to do here.

Jason Hartman: Oh, well, thanks, Eden.  Hey, everybody – and by the way, many of you have done this and I thank you very much for doing it – please, we love hearing that you like the show.  Go to, if you’re an iTunes user, go to the iTunes store and put a testimonial for us on there and review the show.  Tell us what you like about it, what you don’t like about it, and we just would love to get your support out there.  Thank you.

Lorene: And our next is a question.  Owen from Newcastle, Australia.  “Hi Jason.  Firstly, I want to thank you and your team for producing those fantastic podcasts.  The depths of knowledge and advice covered in the podcast is fantastic.  As a listener, who lives in Australia, one thing that amazes me is how much cheaper the houses are in the U.S.  Consequently, finding homes with an adequate RV ratio in Australia seems impossible.

“I came across an article, which explains why houses are overinflated in Australia and this article gives me a basis for why linear markets and bubble markets exist, but I would love to get your opinion on that.”

So that’s his first question to you, Jason.

Jason Hartman: Thank you for that question and by the way, I have to tell you, I have visited Australia and I love it down under.  That is a beautiful, beautiful place.  I remember I flew into Sydney on Christmas Day.  I don’t know what year it was.  Maybe it was 1999, I think.  Flew in on Christmas Day, left LAX, it was about 40 degrees, and it was about 80.  And I was on the beach – I believe it was on Bondi Beach, which is a famous beach in Australia – white as a ghost.  It was the middle of winter that I just came from.

Everybody was wearing Santa hats on the beach that day and I actually got on Australian TV.  There were TV cameras out there at the beach and that was kind of fun.  I said I just flew in from California and loved it.  Australian people are so friendly and that is just such a great place.

The only real problem down there, I guess, is what you mentioned.  The real estate is a little expensive and there are a lot of sharks in the water.  Be careful of those sharks.  It’s really interesting.  You go to the beach there and the shark problem is so significant that they have these metal cables, nets, that are spread around the beach area to keep the sharks out of the beach area.  If there’s a little cove, really, really incredible.

But Australia’s a great place.  I really particularly liked Noosa.  That was a beautiful, little town in Australia.  A lot of neat places there, so I can’t wait to visit again, and I have a friend in Australia, too, my friend, Norel that I actually met in Helsinki, Finland who is on my Facebook page.  I don’t know if she’s a listener, but I’ll tell her I mentioned her on the show.

So what you’re talking about there is the difference between linear markets and cyclical markets.  Now, cyclical markets in the U.S., examples of those, are the sort of bubble markets, the markets which have high land values.  We don’t like these markets in terms of investments very much.  They include in the U.S. California, a lot of the Northeastern areas, New York, Boston, Washington D.C., a lot of areas in Florida, Hawaii, the greater Chicago land area, Arizona, Nevada, a little bit of Oregon.  These markets are really pretty much overpriced.

They’re cyclical markets.  They have big highs and ugly lows.  These are high-risk markets and I’m a pretty conservative investor, so I like the slow, steady markets, where you can put your money in, have a nice stabilized investment with a good RV or rent-to-value ratio.  See what I’m talking about in prior shows where we discuss that in depth.  And you have stable properties that just chug along and they earn a nice, decent rate of appreciation.  You’re in and you’re out.

Now, granted that will vary from year to year.  Some years may be even negative, but with history as our guide, these are the good, solid, stable markets and these are the core of your investment holdings.

We have a lot of foreign investors that like U.S. property.  And I have to tell you, having looked at properties all over the world, and I have other shows where I’ve talked about this – go back and look at some of the prior shows – the U.S. is really a very good deal.  Properties in areas that we cover in 39 markets around the U.S. and many cities in Texas, some cities in Georgia, North Carolina, South Carolina.  Indianapolis is a really good market in Indiana.  We have one market in Ohio, in Columbus, that we’ve done quite well in, surprisingly because that’s in the rust belt that we generally wouldn’t recommend.  But there are a few exceptions here and there.

So there are many good linear markets that are conservative, safe bets to just buy and hold.  And again, that’s the investment strategy at this time.  Much cheaper than Eastern Europe, Australia, even Panama, which I looked at, which isn’t too bad.  Panama is actually pretty good.  So far, we really prefer Argentina.  The U.S. is just offering better investments, better financing, and you know what else?  A lot less corruption, a good transparent legal system.  You’re hopefully not dealing with corruption when it comes to your property investments.

So right now, we think the best property buys in the world really are in the United States.  That’s always subject to change.  It’s a dynamic thing.  But right now, look at the markets we’re recommending at www.jasonhartman.com, click on Properties, and you can see a bunch of information there.

What’s the second part of that question, Lorene?

Lorene: Owen would like to hear a podcast about financing and how it would work for overseas-based investors, just to elaborate further on what you were just saying, and he wonders if it’s best to get loans based in the U.S. or in that particular homeland overseas.

Jason Hartman: Good question.  I don’t know if it’s better to get a loan in your home country or not because I don’t know what’s available there.  The likelihood is you’re going to be dealing with a U.S. lender and your loan is going to be U.S. based.

Now, for non-U.S. citizens, you have to put a little bit more down and it is a little bit harder than it is for U.S. people.  But we have had a lot of clients do this.  In fact, we had an interview on the show, there’s a prior show, with Richard Lillycrop, one of our clients, who is in England, who financed several properties through us and talked a little bit about that.

But you know what?  That’s a good idea for a show.  Maybe I’ll actually get a couple of different mortgage people on the show that talk about that.  I actually discuss that in lunch today with one mortgage broker.  We may get someone on the show to discuss that more specifically as well, but that’s just the real basics.  Thanks for the questions.

Lorene: This is a comment from Tony, Williamsburg, Virginia, who just states in his comment, “Love your show.”

Jason Hartman: Thanks, Tony.  Appreciate it.

Lorene: The next is from your educational blog, Jason.  This author is Jordan from Austin, Texas, and his comment is posed an author, but he says, “I’m surprised that sample properties that you put on this site have negative cash flow.  Do you really suggest people to buy properties with negative cash flow?  I don’t think those ROIs are guaranteed.  If you have negative cash flow, how can you get 34 percent ROI when you cannot sell it?”

Jason Hartman: I am so glad you asked.  You need to go back and listen to Podcast No. 16, which is entitled ROI, Some People Just Don’t Get It.  In other words, ROI, return on investment.  I do believe that there are many properties that make terrific sense – I know this is counterintuitive and it challenges a lot of closely held beliefs of people – that make terrific sense with negative cash flow.  In fact, I like negative cash flow so much sometimes, that I gave it a new name.  I call it “Deferred Down Payment” because with the leverage benefit and the mortgage asset, you actually reduce your risk and increase your return on investment.

Unfortunately, though, with the credit market tightening, you usually can’t even do this anymore anyway, so it’s a mute point.  But please go back and listen to Show No. 16 that was published on June 20, 2007, and that will explain more about this and I’ve also explained it Show No. 18, when it talks about the “Great Inflation Payoff” published June 26, 2007.  And throughout the various different shows as well, so very important that you listen to that.  ROI is not guaranteed, ROI meaning return on investment, and for many of you regular listeners, I have another definition for that.  I call it “return on inflation” as well, a second definition for ROI.

But the less you put down and the more you leverage, as long as the leverage is responsible and prudent, long-term, fixed rate, attached to a solid asset, that makes sense the day you buy it, the higher the return on your investment will be, and the lower your risk.  And again, I know this is counterintuitive.  A lot of people have a lot of trouble accepting what I’m saying, so go back and listen to those shows in detail.

And by the way, if you’re a reader and you prefer to read, remember that the transcripts for all the shows are in printed form on our website at www.jasonhartman.com as well.

Next question, Lorene.

Lorene: This is from the educational blog as well and that subject is “Monetary Inflation with Asset Deflation, Protect and/or Create Wealth.”  And this comment is from John and he says, “I also think high inflation is coming to the U.S. dollar.  Another good investment with all the inflation to come is to buy assets that can’t be inflated so easily, such as gold, silver, oil, as well as other precious metals and commodities.”

Jason Hartman: Okay, good question.  I’ve addressed this before and please, folks, go back and listen to the old shows.  Now, when you say other assets that can’t be inflated, really, inflation as a word is a little bit of a misnomer.  It should really be called deflation in a way and what I mean when I say that is that the value of the asset cannot be deflated.  I know we call it inflation, but it kind of has a double meaning.

What you’re saying there is that gold and other precious metals tend to do better in an inflationary environment where the fiat currency or the fake money we call the dollar becomes devalued.  So for example, a loaf of bread will get more expensive, a house will get more expensive, all the ingredients to a house will get more expensive, while the dollar goes down in value, or whatever currency in whatever country goes down in value.

And usually gold or silver and these precious metals, or even copper for that matter – and there’s an awful lot of copper in a house; remember that – go up in value at the same time.  That is generally true.  You are right.

But here’s the problem with the precious metals.  As I’ve mentioned before and talked about in more detail on other shows, there are five major problems.  No. 1 problem is you can’t get any good financing on them.  No. 2 problem is there’s no tax benefit.  No. 3 problem, you can’t rent them out.  And No. 4 problem, they’re subject to confiscation by our government.  You think I’m crazy saying that?  You think that’s some conspiracy theory?  It’s not.  It’s already happened, folks.  It happened in 1933 where the government told the people they had to turn in their gold.  It was illegal to keep it.  You don’t think that can happen in a crisis situation?  We’re on the verge of a crisis situation right here.  It can happen again.

And the other problem is – and this is probably the biggest problem of all – is subject to manipulation.  Remember Central Banks around the world, they create fake money, like the Federal Reserve, which is not the least bit federal.  It is a private banking cartel that’s run by very, very wealthy people that essentially run the world, or at least the financial world.

The Central Banks want the value of precious metals to be suppressed.  They manipulate this.  The stock market, the Wall Street lobby does not want to see the value of precious metals increase.  Why, you might ask?  Well, the reason is because when precious metals go up in value, the dollar goes down and the stocks go down because stocks are nothing more than a form of currency.  They’re fiat money.  They’re paper.  They’re a scam.  I’ll just say it.  It’s just a fake asset that nobody knows what it’s worth except what the market says it’s worth.  It has no real intrinsic value.

Now, precious metals, historically, do have a store of intrinsic value, but what I say is they have those five major problems.  Let’s review.  You can’t finance them.  No tax benefits.  Nobody will rent them from you.  They’re subject to manipulation.  They’re subject to confiscation.  Five major problems and those are major problems, by the way.  This is why I’m not a gold bug.  You hear on my interview, prior show, with Peter Schiff.  He’s a gold bug.  A lot of people are gold bugs.  I do not think gold or silver is the answer to the problem.  We are facing severe inflation in my opinion.  You give it another two years and I think we’re going to see significant inflation.  I don’t know how they’ve been able to put it off as long as they have, but they’re still defying gravity and that can’t last forever.  The chickens always have to come home to roost.

And the thing that will be the ultimate shield against inflation is what I call Packaged Commodities Investing™ and what that means is you use borrowed money, as much borrowed money as possible, long term, 30 or three decade-long, fixed-rate, borrowed money and you attach it to a set of packaged commodities, a rental house.

What are the ingredients of a rental house?  They’re just a bunch of commodities, right?  What’s in a house?  I mean, Lorene, think about it.  You bought a house in Charlotte, and by the way, congratulations on getting it rented.

Lorene: Yes, I’m very excited.

Jason Hartman: It took a little longer than I wanted it to, but it did get rented.  So what is your house made of?  Well, what are the ingredients?  Look around, right?

Lorene: Metal, plaster, sticks, bricks.

Jason Hartman: Sticks and bricks, concrete, petroleum products.  How much petroleum products do you think are in a house?  All the plastics, the switch plates on the plugs, the insulation in the ceiling and in the walls, petroleum products.  How much energy does it take to refine all those products, bring them to a worksite, and assemble them?  Oil is a commodity, the insulation, the copper wire, the glass, the steel, the labor; all of this stuff, these are commodities.  And they’re commodities that are not attached to just the U.S. economy.  They’re traded on a global scale.  They have global demand.

So think about it.  When you buy this property, you lock in your cost of borrowing for three decades.  Now, Lorene, you’re 29.

Lorene: Exactly, that’s right.

Jason Hartman: And I’m only 28.  So you lock in your cost of borrowing for three decades.  For 30 years, you’ve locked in your cost of borrowing.  The cost of borrowing, I believe, will go up, and again, this is just one person’s opinion, but I think I’m probably right.  And the cost of those commodities will go up as inflation rears its head, so you get what I call the double inflation arbitrage.  Inflation reduces the value of your debt because you pay it back in ever-cheaper dollars.  Very few people really understand this.  I’ve done a lot of shows on this.  Podcast #57, entitled “Getting Paid to Borrow,” and there’s a whole bunch of this woven into all the shows, but there’s one for an example.  That was published June 18, 2008.

And the fact that all the commodities should increase in value due to inflation and your rent increases due to inflation, but your cost of borrowing is fixed.  And everybody that comes after you has to pay more to borrow.  This is the ultimate investing equation.  It really is.  So that’s what I think.

Any other questions?

Lorene: Yes, we have a question from a podcast listener, Steve, from San Diego.  “Hi, Jason, thanks so much for your terrific podcast show as they are packed with information.  I’m making my way through all of your shows and I’ve learned so much.  I have one rental property in Southern California with positive cash flow, but like so many others, have been waiting for several years for the market to correct itself before investing in another property.

“In your show, you state you do not like Wall Street because you don’t have control over your investments and I agree.  I have always felt the same way with buying real estate in another part of the country.  I feel like I don’t have control over the property if I can’t drive over and monitor it.  Flying to a remote city to inspect the property every once in a while seems like it would really eat into your cash flow.  I’m struggling with this lack of control issue by owning non-local real estate.  Please educate me on how I can feel comfortable and in control with the far away real estate investments.”

Jason Hartman: That is a great question and I’m so glad you asked.  Now, first of all, probably almost everybody listening either owns or has at one time owned stock in a company or a mutual fund or bonds.  How many of you when you bought this stock or bought that bond or bought that mutual fund, how many of you actually went to the company and visited, and met with all the senior management and the board of directors to hear them pitch you on why you should invest in their company?  None of you probably, right?

The other thing is how much more control do you think you have investing with some CEO and board of directors and CFO and COO and all these people that are skimming all the profits off the top of the investment.  So you’re darn right.  I don’t like Wall Street a bit.  I think Wall Street is the new version of organized crime.  It would make Al Capone look like a Mother Theresa in my opinion, compared to what we see going on nowadays.  It’s just ridiculous beyond belief.

Now, I will tell you I own properties in 11 states and 17 cities.  Most of my properties I’ve never seen.  I’ve owned them for years.  I have no intention of visiting many of them.  I’ve never seen them.  I get my checks every month.  I have a professional manager, who is licensed and insured and is doing the job for me.  So I don’t really see why you need to inspect your properties.  If that makes you feel more comfortable, absolutely do it.  I’m never going to discourage you from inspecting the properties, but remember this is just a financial thing.  It is not an emotional thing.

So why is it that everybody has this idea when it comes to a house you should go look at it and you should be there and you should be nearby, versus when it comes to a stock or a bond, you never go there.  And that would be weird.  You wouldn’t go to the corporate headquarters of Wal-Mart and check everything out before you invest probably, right?  You might say, well, yeah, with that, I have an annual report where a bunch of accountants manipulate the numbers and help them legally cook the books.  Not illegally.  Now, they might do that, too, but I’m saying just legally they skew things and manage perceptions.

So for me, I like investments that I can control and it’s a simple transaction.  I was talking with one of our investors that I ran into at a cocktail party the other night.  He said I haven’t talked to my property manager in Charlotte in 18 months.  I’m getting my check every single month.  The property is fine.  If there are any maintenance issues, they deal with it.  It shows up on the bill and it’s all just really quite simple.  This is not as hard as you think and if you don’t believe me, just try one and then go on from there.  That’s my answer.

Anyway, that’s a great question.  You know what, Lorene?  I see you have a few more questions.  Let’s answer them on the next show because we have to get to the interview.  Here’s the interview.  This is with another loan modification company.  I interviewed one before.  I want to tell you that any guest I have on the show we do not endorse them.  We have not necessarily even used them.

That applies to this guest.  I heard their commercial on the radio several times.  I know they’re running a big ad campaign and I called them up and I said, hey, our listeners want to know about this.  Let’s get some of these people on the show and see what they have to say.  They’re obviously promoting their services.  I want to say proceed with caution.  Get things in writing.  They say they offer a guarantee.  Get that in writing.  Be careful.  Shop around.  Get a good deal.  When it comes to loan modification, you may need the help of a professional, like the ones we’re just about to hear from.  I did them myself on several of my loans.  You may not need that.

We are also talking about getting into this business ourselves because we’ve had a few clients request it from us.  So stay tuned.  More information coming up, but here’s the interview and I think you’ll like what they have to say.  You get kind of an insider’s view of the loan modification process and you deserve a bailout, too.  Not just for the rich fat cats on Wall Street and in government.  Get your own bailout, modify your loans, get yourself a better deal, if that’s applicable to your situation.  Let’s listen in.

Interview with Greg and Steve Feldman

Jason Hartman: It’s my pleasure to welcome Greg and Steve Feldman of the Feldman Law Center.  We are going to talk about loan modifications today.  We have talked about this on a prior show and one of the key distinctions in the loan modification business is whether or not you’re working with an actual attorney doing the service because it is different with an attorney and they’re going to tell you why during the interview.  This is a law firm, basically.  They specialize in doing loan modifications and as their commercials on the radio say, they are not nice people when it comes to going to bat for you and negotiating with your lender.

Welcome Greg and Steve.  It’s great to have you.

Greg: Thank you.

Steve: Pleasure to be here.

Jason Hartman: Tell us a little bit about the loan mod business and the nice thing about it now is that this industry has developed very quickly and there are really some real, more established guidelines I think now, although I’m sure they’re subject to change.  Tell us what’s going on out there in the load modification world and how everybody can get their bailout.

Greg: Well, things have started to develop and unfold a lot more than they did last year, I think, with the market starting to settle, the lenders starting to get a better indication of what they want to do, and the government programs being a little more clear cut.  We’re starting to see a lot more movement from the lenders.

Jason Hartman: Okay, so the lenders are being more flexible.  In other words, they’ve kind of ended their capitulation.  Is that what you’re saying, that at first they would capitulate and they wouldn’t.  They didn’t know what to do.  Now everybody knows they have to give away the store.  Is that sort of what’s going on?

Greg: Well, there’s still hold back from a lot of the smaller lenders, but the larger lender and servicer seem to be more active, in addition to trying to better staff their offices to support the loan mods.

Jason Hartman: Okay, good.  One of the questions I asked you before, but maybe you can share it on the show, is I’m always curious – which lenders are really being easy and cooperative and modifying loans without much of a fight, and which lenders are really difficult?  Can you give us any insight on that?

Greg: Wow, that’s the $3,500.00 question.

Jason Hartman: I thought it was the $64,000.00 question.  Well, it’s $3,500.00 to you guys, but to the borrower, it may be $64,000.00.

Greg: Well, we’d like to think honestly that the borrowers can go this alone, save themselves money.  Truth of the matter is it seems to be apparent that in most instances, when you’re in a little trouble, you’re better with a lawyer in your corner.  Probably the better lenders I would say is it all depends on the day of the week, the month of the year.  You speak of Countrywide and now Countrywide is not moving as quickly as they used to with us.

Jason Hartman: Do you consider that that they’re getting overrun by loan modification requests and they don’t have the staff and the infrastructure to keep up with it?  Or do you think they’re just being more hardnosed or – you probably don’t know.  It may be an opinion.

Greg: A lot of the folks that we hire that run our backend negotiating team do come from the other side of the fence, so they come over with not so much trade secrets, but an inside as to what’s really going on in that side.  The truth of the matter is Countrywide’s problem was that there’s a lot of loan mod companies popping up, marketing clients, submitting erroneous types of loan mod packages, and really clogging up the pipeline, if you will.  We have our own negotiator assigned from some of the major lenders, but still those people are having to handle a heavy caseload.  And just like maybe loans, there’s a lot of declines.

Jason Hartman: So let’s hear a little bit about maybe the legal side of the business.  And one of the things I hope to do today is let’s differentiate for the listeners the difference between an attorney-backed firm, a law firm, versus a lot of these other companies out there.  I know there are a couple different ways they can do this.  They can do it under a department of real estate license in California or they can just say they’re a loan auditing company, where they just look at the loan docs, but don’t go to bat for the borrower it sounds like.  And then there’s a law firm, which I would say would probably be the highest and best version of this.  Tell us about the distinctions there, if you would.

Steven: I think the main distinction with the law firm is that you’re hiring a lawyer and what you’re doing is you’re hiring a level of expertise.  You’re hiring a level of dedication.  You’re also obtaining and achieving a reaction from the bank because the bank knows they’re dealing with people on the other end that aren’t going to just accept a decline lying down, that are going to look at the loan documents in a much more strict manner, and are going to take whatever steps we need to take to make certain that the bank understands that, like you said, we’re not nice guys.

Getting back to your earlier question, it’s not a cookie cutter industry at all and the industry changes on a daily basis, on a monthly basis.  Deals that we got in November pale as compared to the deals we got in December, which hopefully will pale to the deals we get in January, February, and March.  Rate reductions, term extensions, we have a number of lenders who continually call us up since we’ve done so much business and indicate clearly to us why don’t you wait a moment because we have a new program coming out.  We have a 40-year term.  We have a 50-year term.

What the banks are finding is it does them no good to take back these properties and at some point, they are working overtime in trying to establish programs that allow their investors to at least get back the money that they have in the property.

So the difference between an attorney-backed firm, as most of the firms that we run into, the attorney’s there once a week, once a month, once every two months.

Jason Hartman: Right, the attorney’s there in name only really.

Greg: Well, they’re having a large turnover in attorneys because once the attorney figures that his name is out there for an undisclosed small fee per file –

Jason Hartman: They get concerned about the liability?

Greg: Well, yeah, they come in.  Typically, what you have is you have a mortgage broker, a mortgage company, or a telemarketing company that can get an attorney to join forces, and it’s a tough business.  It’s a rough crowd.  Like Steven says, it’s not a cookie cutter industry.  Sometime quite candidly – and I welcome you to come by the office – you’ll find like four people standing over a speakerphone, screaming at a negotiator, “Are you crazy?” and these are people that we’re dealing with.  In some instances, we’ll actually negotiate in small pools with a Countrywide, with an IndyMac, with a WaMu, or a City or a Chase.

Jason Hartman: So in other words, when you say small pools, you mean you’ll have several clients that come to you and they all – like just give us an idea of how this works.  It’s changing so quickly.  I think the listener would like to understand.  Let’s not get off the subject of the differences between the different types of loan modification companies, but maybe talk about how has your company grown, what have you seen.  Who are the different contact points in the company that the borrower is dealing with as they’re going through this process and how the process works, too?

So we’ll get into that, but before we do, let’s just finish if we could on the differences in the types of loan modification or loan auditing companies when they’re not a modification company.

Steve: Well, once again, you said it just a moment ago.  There’s a certain level of comfort that a customer has when he has to rely on someone to save his home.  It’s not a shirt.  It’s not a pair of shoes.  This is their home.  So it’s more likely than not that if you had to put your hat into the ring, you want to have the best person on your side.  You want to have the most expertise on your side.

Clearly, the mod companies that are attorney backed recognize from a marketing standpoint that that’s the key, that’s the hook that the customer out there will rely, to his detriment, thinking that he has a lawyer on his side, when really all he has is a lawyer in the background so they can charge their fees upfront.

Jason Hartman: And so there are law firms.  There are law firms in name only.  There are loan-auditing companies, who have no type of licensing?

Steve: Absolutely, there are loans-are-us, for all intents and purposes.

Greg: What you’re seeing a lot, unfortunately, is a lot of these loan mod companies, telemarketing, doing “Press 1” campaigns, leaving –

Jason Hartman: What’s a “Press 1” campaign?

Greg: It’s where you’ll get a pre-recorded message that almost sounds like it’s coming from the government or from state authorities.  You’ll opt in.  It’s kind of like some of the ads you hear that I feel are a bit misleading.  I mean we’re certainly not trying to mislead anybody, letting them think that we’re part of the Hope for Homeowners Association and I really don’t mean to bash anybody, but I think the biggest problem in this industry is that it’s not an industry yet.  And so I feel that most of the mortgage professionals just trying to jump on to make a buck are really using whatever ploy they can, either by telemarketing and/or direct mail campaigns, to lead clients to believe that they are supported by the federal government and their loan modification efforts.

Jason Hartman: So that’s the distinction between the different types of loan modification companies.  Tell the listeners, if you would, about the process.  They’re having trouble out there.  Maybe it’s a true predatory lending situation.  Maybe they lost their job.  The economy’s rough.  They hear a commercial.  They say hey, all these rich fat cats on Wall Street are getting bailed out.  I want my bailout, too.  I can’t blame them for thinking that.  I would, too.  What do they do?  They call you up and then what happens?

Greg: Well, typically, for the most part, the legal assistants are there to help Steven and the rest of the team in prequalifying potential clients to see if we can actually offer them help.  Once we determine that through a simple retainer application, prequalified process that typically takes 24 hours, we would go back and our retainer amounts vary depending on the lender, the amount of loans on the property, the severity of the hardship, just basically what kind of case that we feel we can build and what we would need to do for that client to allow them to keep their home.

Once we establish that, if the client retains us, we have a team of about 25 people in our back office that handle everything, from all the document preparation, financials, preparing a file for the negotiating team, which Steve is involved with, and I think we have – what? – six or seven negotiators at this point?

Steve: That’s correct.  We have negotiators.  We have team leaders.  We have client counselors.  As any law firm, when you’re dealing with people, especially in this situation where the anxiety level is extremely high, you want to make certain that your client contact is ever present, and you want to continually update the client on the situation and let them know what the response from the bank is, let them know what our next move is, and like Greg said, it’s a constant battle with the bank.  It’s a constant negotiating.

It’s absolutely, positively imperative that we at the Feldman Law Center educate our clients.  An educated client is a reasonable client.  A reasonable client has reasonable expectations.  And those expectations may differ based on whether you’re 30 days down or 60 days down or there’s a notice of default, or there’s a trustee sale.  We run into lenders who refuse to budge when you’re 30 days down or 60 days down, and only when it becomes a realization to them that they’re about to take back a piece of property that’s $200,000.00 undervalue does that loan mod that we wish we could have gotten in Week 1 come to fruition in Month 4.

Jason Hartman: Okay, so I get the process.  How many different people are they talking to at your firm?

Steve: Generally, they’ll end up talking to a team leader, a negotiator, and a client counselor.  So for each client, their will probably be three to four individuals, who are constantly aware of their file.  Now, at times, we can’t have them talk one-on-one with the negotiator because the negotiator’s on the phone and the other lawyers are on the phone talking to the banks.  We’re busy saving homes.  So that’s why we have a team leader and if the team leader can’t answer the question, then one of the lawyers will be calling them back.

Jason Hartman: And how many lawyers do you have?

Steve: We have four lawyers on staff.

Jason Hartman: Okay, great.  Tell us a little bit about the cost.  Does it matter if you have a second trust deed as well?  Does it matter if it’s your principle residence or if it’s an investment property?  Does it matter if it’s in California or any other state?  And which states do you cover?

Greg: We pretty much cover all 50 states.  Steven is a consumer, or has become a consumer advocate, and we’ve learned to embrace some of these people’s situations and their hardships, and frankly, when you’re talking to somebody in Oregon that is stuck in a Neg Am loan that is recast and has two children that have liver disease and a wife that’s unemployed, they’re in a different situation than an Orange County resident that made a bad investment.  I would say that our fees, our retainers, are flat fees and they would range anywhere between $2,500.00 on up to $7,500.00 on up to $10,000.00.  We do take on some properties with multiple loans on it, several million dollars, that we know are going to require a lot of work, and they’re in a financially different position than others.

Steve: We also have to take into consideration the point in the process that our client is at.  It’s much less difficult to deal with a bank when a client’s only 30 days down or 60 days down.  We have people who have waited all the way through their notice of default.  They’ve been served with a trustee sale date.  They come to us with four days left before their home is about to go to sale.

Jason Hartman: Yeah, so one of the other distinctions we should probably make for the listeners is that if you have a notice of default already filed on your property, my understanding is only a lawyer can work with you in that case.  Is that true?

Greg: That’s correct.  However, it seems that we’ve made some enemies around town because we have chased a couple of these guys down that are collecting upfront fees without any type of advanced fee agreement, without any type of licensing, without being a law firm.  Just basically kind of a wild, wild West, if you will.

Jason Hartman: Yeah, right.  That sort of seems to happen with every new industry before the regulations really settle in and the climate sort of builds.  So that can be pretty expensive then, $10,000.00, $7,000.00.  That’s a lot of money.

Steve: It certainly can, but the downside is if you don’t do something, there’s one thing we’ll guarantee you and that’s that you’ll be on a curb.  People come to us and say can you guarantee your results.  And that’s the disappointing part for us.  We would love to be able to guarantee our work.  The only thing we can do is guarantee our effort, which is why when you’re looking for a loan mod company or you’re looking to modify your loan, that’s why most people choose to go with an attorney.  It’s not just a promise.  It’s not just a naked promise.  They have the State Bar looking over our shoulders.  We have to perform.  We also are obligated, if we get down the road and we haven’t used the full retainer, that we are obligated to refund their money.

But once again, you have no idea when you’re approached by a client, who has a week left before his home is sold, and you have to put together a file and you have to bang it out with the lender.  It can take us one full day, two full days, 16 straight hours to save a home.  It’s quite rewarding when we save it, but yes, at some point, it does get very expensive, but when a cost analysis comes about and it’s either you pay us $5,000.00 or you pay us $6,000.00 or you pay us $3,900.00, or you lose your home, most of the time, people find a way to make it happen.

Jason Hartman: How many – I know that you can’t guarantee that someone will get a loan modification.  Is there a percentage that you’ve noticed?  What percent of loan modifications occur and when they occur, what types of modifications are they getting?

Steve: At the Feldman Law Center, we’re very, very particular about the cases we accept, so when I tell you that nine out of ten loans that come into our office are modified, that sounds like a lot.  But we have a number of people that approach us, but we have to turn down their case because when we do our analysis, when we do the financials, when we take a look at their ability to sustain a permanent payment – and we know what the bank’s looking for – if it doesn’t fit our profile, we have to turn the case away.

It’s sad at times, but once again, we get into the situation where we do not want to take someone’s money unless we honestly feel we can drive a positive result.  We don’t want to use our man-hours.  We don’t want to tie up our desks.  We don’t want to tie up our negotiators on deals that we can’t drive a positive result.

So in desking the deals, that’s the critical element.  Can we help you?  Are the elements in line to help you, and if they are, that’s the cases we take and those are the cases, nine out of ten times, that we’ll produce a positive result on.

Jason Hartman: Any kind of percentage?  So are you saying 90 percent of the time?

Steve: That’s exactly what I’m saying.

Jason Hartman: So 90 percent of your clients get some sort of a modification.

Steve: Absolutely.

Jason Hartman: Okay, good.  So what type of modification do they get?  What is it like?  For example, if they spend $5,000.00 with your company and they’re going to get one-tenth of 1 percent reduction in interest rate, it’s probably going to take 30 years for that to pay for itself.  So what type of modification do they get?

Greg: Well, Jason, we understand that.  The good part of our office is out of the mortgage industry.  I think at this point we have about 65 employees or so.  I would have to say a good 90 percent of them are coming out of the mortgage industry and a lot coming from the other side of the fence.  So we certainly understand the value necessary for a loan modification to pay for itself and be a benefit to the client.  We see pretty much around 4.5 to 5.5 percent on a long-term fixed in most cases.

Jason Hartman: So that’s the actual interest rate.  If they come in and they have a 6.5 percent fixed-rate loan now, you can get them down to 4.5 – 5 percent.  You get that interest rate rewritten, right?

Greg: That’s correct.  And what we see a lot of is for example, option ARMs.  So these people are not able to make a 5 percent interest only payment even.  Typically, what we’re able to negotiate in those situations is a very low start rate, fully amortized.  It could be as low as 1 percent, typically 2 – 3.

Jason Hartman: Wow, so is it like 1 percent for a year, then 2 percent the next year, and 3 percent the next year?

Greg: A common mod would look like this.  We completed one for a lady with Parkinson’s disease at $850,000.00 with Washington Mutual.  She got 3.129 percent, fully amortized, fixed for five years.  She got 4.129 percent fixed for another year, and then 5.129 fixed, amortized over the remaining 34 years.  So it was a 40-year amortization.  It basically allowed her to edge her way back into a fully amortized payment.

Jason Hartman: Okay.  What about principle reduction?  That’s the interest rate.  There are a couple things they can do.  They can reduce the interest rate, they can lengthen the term, they can do a forbearance on payments, which that’s not really a loan modification in my book, but it’s maybe better than nothing if you need it.  They can reduce the principle balance and reduce the rate.  When we talked before, you told me about one of those cases.  That sounds pretty cool.

Greg: We see those not often.  We see them in cases of extreme hardship or collection and/or lender violations.  Probably our largest principle reduction, principle forbearance of $410,000.00 on a $625,000.00 loan amount.

Jason Hartman: So the loan amount went down to $225,000.00.

Greg: That’s correct and the interest rate went from 10 to 3 percent and I can prove that to you.

Jason Hartman: That’s incredible.  But you said forbearance.

Greg: Well, in principle forbearance, they forbeared $400,000.00.

Jason Hartman: Which means they wrote it off.  They’ll never get that principle back?

Greg: Well, no, they did not charge – there was no way, even at 1 percent, for this loan to pencil out for these people at $600,000.00.  We caught the lender in collection violations.

Jason Hartman: That was a 10 percent interest rate, so that was probably some sort of private, or hard money type deal, right, I assume?

Greg: Actually, the loan was serviced by EMC.  It was a subprime loan.  So it was probably something that went from 5 – 10 or 7 – 10 type of thing and had adjusted.  They came to us, I believe, Steven, when they were ten months back?

Jason Hartman: Okay, so what you’re saying is that on that deal, they didn’t charge interest on $400,000.00 of the loan.

Greg: For ten years.

Jason Hartman: For ten years, but if they sell the property in ten years, they still have to pay that $400,000.00 back.  So it wasn’t a principle reduction.  It was just sort of putting that principle in the background for up to ten years.

Greg: That’s correct.

Jason Hartman: Pretty good.

Greg: But we do see reductions.  We do see – I don’t want to give you hard, fast numbers, but let’s say we’ve done a 1,000 mods.  There have been seven of them, seven, eight, nine that will see actual principle reductions.

Steve: You have to remember that the banks unwillingness to provide the borrower with principle reductions are the same reasons that all these federal programs aren’t working.  Outside of IndyMac and Countrywide Home Retention program, IndyMac with the FDIC, and Countrywide as a result of the lawsuit, principle reductions are rare.  Now, out of the blue, you fight and fight and fight, and just the other day where Linton reduced the principle balance by $165,000.00 on a loan.  We danced around the office.  We celebrated around the office.  It was great.  The homeowner loved us.  Every homeowner that we take –

Jason Hartman: I mean that’s like winning the lottery.

Steve: It is like winning the lottery.  And that’s what you fight for for your clients, but once again, the banks have to share a relationship with their investors and they have a certain responsibility to get the best rate of return for those investors they can.

Jason Hartman: And I tell you they haven’t respected that fiduciary relationship very much.

Steve: I guess the bottom line is the banks will fight you tooth and nail.  They will reduce the interest rates.  They will extend the term.  They will forbear.  But they’ll almost jump out of a window before they’ll reduce the principle.

Jason Hartman: So they don’t like to reduce principle, but they will reduce rates and change payment schedules and that kind of stuff.

Greg: And we are starting to see quite a bit of the principle forbearances, which is a further reduction in the interest rate.  For example, like this couple went from paying a $675,000.00 mortgage down to a $200,000.00 and some odd dollar mortgage, dropped their interest rate 7 percent, fully amortized for ten years.  That really allows somebody an opportunity, a real opportunity, to pay that mortgage note, get that note to perform, and be in a situation after ten years where they can get out from under the burden.

Jason Hartman: Okay, I have two more questions I want to cover before we wrap up.  One is the issue of the property versus the borrower.  So I know of a case where someone I know makes an excellent income.  They have a professional job, make good money, secure job.  But they have this one property that ain’t doing so great.  So this property isn’t doing so great and they went to their lender.  They tried to do it themselves and the lender said go pound sand.  Forget it.  Can you sort of work on the angle of the property having the problem and not the borrower?  And this is a rental property in this case, so the borrower’s paying on their own home and they have a couple other rental properties, but they have this one that wasn’t working out so well.  Anything there?  Do you ever see that type of thing?

Steve: Well, banks are much more flexible when you’re dealing with a homeowner in his home.  Much less flexible on an investment property, much less.

Jason Hartman: Why do you say that?

Steve: Well, because at some point there’s the argument that you’re going to put somebody out of their home, their kids, their grandmother.

Jason Hartman: Or you can put the tenant out of their home.

Steve: That’s okay.  At some point, they look at the investor and it’s an investment piece of property and as far as they’re concerned, they borrowed the money and if in normal circumstances, they have a tenant paying the mortgage, under normal circumstances, they took the risk of that investment property inflating or deflating.  And like Greg will often tell you, the loan mod industry is not one that’s set up for an investor who made a bad investment.  The banks are not going to come in and rescue every piece of investment property by discounting the principle balance on the note and walking away to their investor and saying, by the way, in order to make this work, you have to give up $200,000.00 or $300,000.00 on the note.  It is not happening.

Jason Hartman: How much do you see that there are actual violations of the law in the loan documents?

Steve: We see violations, but not significant violations.  Not violations that give significant remedies to the borrower.

Jason Hartman: So sometimes there can be something done improperly in that client or in that borrower’s loan documents, but it doesn’t give the borrower a remedy?

Steve: Absolutely, or the remedy may be limited to $1,000.00 with a maximum of $2,000.00 in damages.

Jason Hartman: Oh, so like if they do something wrong in the loan documents, they have to pay the borrower $1,000.00.

Steve: Correct and a lot of times, unfortunately for the borrowers, they’ll come to our office and they’ll talk about broker fraud.

Jason Hartman: Like the mortgage broker.

Steve: Correct and unfortunately nine out of ten times, the lender’s not going to be responsible for that broker fraud unless that fraud is on the face of the documents, and then at some point, you almost have to look at your borrower and say, excuse me, but is that your signature there?  And when that loan broker told you don’t worry about it, I know you’re a gardener, but we’re going to put $10,000.00 there as your income.

Jason Hartman: Yeah, a gardener making $10,000.00 a month, sure.

Steve: And that’s where the problem comes into play.

Greg: I think mine does.

Jason Hartman: You have an expensive gardener.  So any thoughts on the percentage of times that you see these violations on the loan docs?  Like, are 50 percent of the loan docs you guys review, do they have violations?  I’m not saying they all have a big remedy to them.

Greg: I would say probably close to that, that’s correct.  I mean most of the clients that call us have dealt with a mortgage broker.  Most of the violations that they speak of they’re pointing toward the mortgage broker.  The unfortunate thing is in most cases, if you want to go and sue the mortgage broker, you have a difficult time finding him and/or there’s just no apparent damages that it may just not be worth it.

Jason Hartman: Right, that’s the broker, but you’re working with the lender here, the actual lender.

Greg: We’ll point out in most instances, it’s along the lines of hey, we don’t want to have to go here, but we will.  We’re just looking for a favorable resolution.

Jason Hartman: Okay, good deal.

Greg: So we’ll use that as leverage in other words.

Jason Hartman: Be proactive.  Oh, you know what’s the other question I wanted to ask you guys just before we wrap up here is do the borrowers need to be behind on their payments and how many come in where they’re current on their payments and can still get a loan modification or how does the sort of balance of power work if you will on that one?  And then we’ll wrap up.

Greg: Well, we do have a lot of clients calling us.  As a matter of fact, from KFI, where you advertise as well, and they say I’m not down, but I could be.  Or I’m not down, but I will be.  Obviously, the lenders act quicker when they’re getting hit in the head by a rock.

Jason Hartman: In other words, when the air is cut off, they act quicker.

Greg: Right.  But there is what we call imminent hardships.  We’ve been very successful in a lot of cases where there’s an imminent hardship.  I mean it’s evident that they’re robbing Peter to pay Paul and it’s just a matter of time and/or there’s a rate adjustment coming.  It’s unfortunate, but you usually don’t get to save your credit and your home at the same time.  The majority of the clients that we have coming in are behind, but we’ll look at every case individually and then really, Steven’s fierce about it in believing where we can truly see where there’s a hardship.  We’re not looking to create one.  Either they’re going to default or they’re not and if they’re going to default, usually we can sell that deal to the bank and get a mod without them being late.

Jason Hartman: Can you get a loan mod if you’re not behind on your payments?

Greg: Yes.

Jason Hartman: How much of the time?

Steve: Unlikely.  You can get a loan mod very seldom if you’re not behind, unless you can show them a perfect storm is brewing.  Put yourself in the positions of the bank.  They’re not going to just take somebody who’s not delinquent and discount their note.

Greg: It’s not a refinance.

Steve: They basically make us prove to them that they are willing to prove to them that the hardship is real and that’s why Greg said you don’t oftentimes save your home and save your credit.  It’s like trying to play a football game and trying to win it in the mud, but you don’t want your pants to get dirty.  Unfortunately, the banks address a three-alarm fire faster than they address a two-alarm fire, faster than they address a single alarm fire.

Jason Hartman: Okay, good.  Good stuff.  Anything we should say just sort of wrapping this whole thing up?  What should the borrowers know?  What should the listeners know?

Steve: The borrowers should know that we understand it’s a great deal of money that modification companies, as well as the Feldman Law Center, may charge for their services and we would encourage you to try and do it on your own, if, in fact, it was doable.  The situation is such that it’s not set up to be doable.  You need an expert.  We would recommend that you hire a lawyer.  We would recommend you hire the Feldman Law Center, but if it’s not us, make certain that you do get a good lawyer on your side.  That’s what you need.  Avoid the fly-by-nights.  Avoid the Mods-Are-Us.  You get what you pay for.  Pretty simple.

Jason Hartman: Well, that’s the Feldman Law Center.  What’s your website?

Greg: Www.feldmanlawcenter.com.

Jason Hartman: Good, good.  Good stuff.  Okay, Feldman Law Center, guys.  Thank you so much for coming in.  I appreciate it and this was some great insight.  Thank you for being here.

Greg: Thank you.

Steve: Thank you.

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Duration:  58 minutes