Hey Everyone,
This week I talked to A LOT OF PEOPLE who are asking me about loan modifications.
Obviously, the term “Loan Modification” and “Foreclosure” are all over the news in today market.
You really need to closely look at your unique situation to see if a loan modification is for right for you.
Well, here is really how went down in just a few sentences to where we are even talking about loan modifications.
In the last few years GREED hit the financial institutions and well street…bet you never heard that before! Wall Street wanted a higher return on the mortgage backed securities they were buying from banks. The more risky loans, the higher returns wall street would get for their investors.
It was really a “Perfect Storm”. Wall Street wanted more money, banks were willing to offer riskier loan, loan officers and mortgage brokers were qualifying people faster and faster to produce these “higher risk notes” they would sell to Wall Street.
So what started to happen in the market was unprecedented! People were qualifying for loans they could not afford, people with poor credit were getting into loans that started with low monthly payment and started to increase their monthly payments year after year with option ARM loans.
Nobody really seemed to care because everyone thought that since they could easily qualify for a loan, they would just refinance in a few years for a better loan because housing values were increasing so fast year after year. People were buying additional homes and many were pulling out the equity of their homes to pay of debit.
Ok, I am going to say it now and I may offend some people. IF YOU PULL OUT EQUITY FROM YOUR HOME TO PAY OFF BAD DEBIT YOU ARE NOT THINKING ABOUT YOUR FUTURE!
I am not going to go on a long tirade here its just plain stupid what many people did in the last few years. If you have high credit card debit, that means that you are living outside of your means! If you buy a car that is worth more then you make in a year…that is STUPID!!! If you rent your home, have an expensive car, have high credit card debit, have all the nicest clothes and latest gadgets and are BROKE you can NOT manage your own money!
People who cant event manage their own money or finance were suddenly given more money to “pay off debit”. If you pay off your debit you are back at ZERO. Try to figure out how you got there in the first place and start to cut back. What the heck are you going to do for retirement if you cant make ends meet now?!!!
I’m going to blog about this issue of financial literacy later because its such a huge issue in our country.
Now back to the loan modification and the “Perfect Storm”
Well, banks gave people more money then they knew how to manage at interest rates that no one would be able to afford in the next few years.
When people could not afford the higher payments, they stopped paying their mortgage.
No longer would any one on Wall Street would pay for “non-performing” mortgage backed securities. Who would buy stuff that was worth $100 that would later be worth $0.02??? Dumb right?
So banks were creating loans that no one would buy on Wall Street. People were unable to pay their mortgages, thus the banks were no longer getting their money. The greedy Wall Street people who put these previously high performing mortgage backed securities into retirement accounts and mutual funds started to see values drop dramatically.
People started loosing money faster then ever in their stocks that contained these bad mortgage backed securities. Banks started failing because they loaned out money that people were not repaying. Banks would foreclose on homes that lost the value that was loaned on them and could not resell them to even break even!
People would refinance a $300,000 house to pull out equity and when the market turned, the homeowner would get foreclosed on for not being able to make the higher payment amounts, and foreclosure set in. When the bank went to sell these foreclosed the home values could drop dramatically because NO ONE was buying! A financed home for $300,000 in Phoenix, today could be only worth $115,000!!! This is a true story because if happened across the street from me!!!!
Banks were losing money, Wall Street was holing onto worthless securities, mutual funds and retirement plans dramatically started losing values and most of all….us billing paying citizens started to feel the pain of GREED from others!
Now with less money out there, people are cutting back and not spending as much. So we have consumers with little spending money. Businesses start to fail, layoffs start to happen, the media runs with the bad new and it’s a downward spiral for there. GREED on Wall Street took advantage of people who were uneducated about money and now we have the economy we have today!
So I guess we should get back to loan modifications…..as you can see this subject really starts to push my buttons.
Now you have banks who are so afraid to loan money, hardly anyone is qualifying for a loan. I know someone here in Austin worth over $30 million and its hard for HIM to get a loan!?!?!
Banks are working diligently now to get people into loans that they can repay to start rebuilding the values of these non performing securities on Wall Street.
Banks want to work with you. BUT sometimes you have to be behind on your payments for the bank to work with you. They have to see that there is a need to refinance you in a better rate.
To some people, it may be worth to go 30 or 60 days late to get a better rate on your loan. People will argue with me but I could care less. If you CANT PUT FOOD ON YOUR TABLE WHO CARE ABOUT CREDIT!!! Take care of your family and let go of your credit score a little. Get into a position to lower your payments to get food on the table and pay the basic bills. You can fix your credit later.
I know people will be writing me complaining about the above statement however, many people are going broke right now just trying to save their credit. Listen, credit can be repaired over time. You need to do what it takes to keep your family afloat.
Call your bank and see what you can do and what your options are. Like I said you may have to go 30 days late for them to even listen to you.
You don’t have to pay someone to do the loan modification for you. Its not that hard, it just takes time.
If you don’t have the time, fine then pay someone. Just remember that no one currently needed a license to do a loan modification. This means no training, no oversight, no consumer protection from people who will take your money and RUN!
I know this is my longest blog to date. This issue is complicated and as you can see really gets me fired up.
It all comes down to people becoming financially educated and understanding how money, investing, banking and Wall Street all work. If you are not educated, you are taken advantage of just like in this market.
You can not get taken advantage of if you are educated. Don’t trust someone else with your life or your money. Learn what you need to survive financially and get started.
I teach people all of this. This is why I get so fired up.
So enlighten yourself, get educated, get your finances straight and get lets get out of this slump together.
In my next blog I will talk about the HUGE opportunities in this market and how to make a killing while everyone else is running around scared to take any action.
If you do need to sell your house quickly, please visit:
http://www.WeBuyYourHomeFast.info
Until next time!
Sincerely,
Curt Maly
Serial Entrepreneur
www.EndurableInvestments.com
www.MillionaireRealEstateBlueprint.com
www.WeBuyYourHomeFast.info
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