so here we are the mortgage foreclosure crisis so that's where public exposure is investigating and what we've done is we've gone out and we found an expert in to how to recover from the financial revival group powered bono welcome to the show thanks to howard  financial for closure crisis we were going to show up on the screen that you know a picture that so many people have probably have seen which is the sight of a house which is helpful closure what does the financial work revival group do what our job is to do is to educate people that are upside down in their homes latest statistics have shown about twenty five percent of the people that have a mortgage on their house currently are upside down in their house twenty five percent one in four one in four that's the public statistic if you go to detroit it's sixty percent  so i mean it varies from different parts of the country locally here about one out of four and so i think that statistic actually that's all you see because that's amazing because i live in seattle and one in four houses as i go down the street are probably underwater those are the ones with a mortgage on so there are about seventy million homes in the country and about a third of those interesting lee enough are owned outright yes so so it's one out of four locally here and what we're dealing with a situation that we use adults never thought we were going to get into and so now we've got this whole huge huge group of people rapidly growing group of people that really don't know what to do well let's talk about some of the individual issues then that they're going to have to deal with by the way where we're not selling anything here but if you were to go onto the my revival dot com my financial revival by financial revival done website you'd find some some interesting things there i downloaded that book myself and i learned an awful lot of things already let's go to the first thing is a mortgage a moral contract or is it a contractual you know for most people most people in our age bracket for example we were always taught that you've gotta pay your bills keep your word keep your agreement those kinds of things and so most people tend to think i made an agreement to pay my mortgage so that's it if you really look at the document that you signed there was two things in there the first thing said i the homeowner if i make my payments you the bank will leave me alone and what you find is that's accurate if you make your house payments the bank doesn't call you but what that agreement that document also says is if the homeowner don't make my house payments you the bank get the collateral that's an absolute choice that we have available to us based on the document we signed that was the document that was drawn up by the bank most of us didn't even read it and if we did read it we might not have understood it because there's a lot of legally senate so it does say in that document that if i don't make my payments the the way that the bank can deal with that is to take the house now the other have to stand some other remedies as well but i believe that people that was part of the agreement and so you can choose option number two as long as you're willing to deal with whatever those consequences are and so one of the things that this is out of the washington post this is an article was actually from a few years ago in two thousand and nine it said the nation's housing walking away from a mortgage and the quote it says that most owners are too worried about feelings of shame and embarrassment following a foreclosure and ignore the powerful financial reasons for going through with it basically which is for walking away i want to go to an example that you have on is part of the book it's from mark and sarah e their payments are twenty three hundred dollars a month and mark was i think an electrician and a union station and sarah took care of the kids at home and also did some part time work so together they made seventy five thousand  mark's doesn't have very much work anymore sarah has dropped some work and so they make less than fifty thousand dollars a year what should they do what they need to do is they really need to what we have to financially viable group to as we'll sit we sit down with people they're people of nine options in terms of the way that they can deal with their house nine different options now the first option is to stay and keep paying it's a legitimate option and many people most people at this point that's what they're doing because going back to that moral thing they think that that's the only choice they have they really have nine options what mark and sarah chose to do now mark and sarah is a real example i did change their names but it's a real example of one of the one of our members that we work with and so what they did is they sat down and decided here of the different options that we have and most couples don't really talk about money it's really fascinating to see that so what we want to do with the financial revival group is we want to educate people in terms of all nine options that they to talk about the pros and cons of each one of those options and get them to have a dialogue between the two of them to really get on the same page and figure out what they're going to do mark and sarah in this particular case they chose to say we're never going to recover from that hundred thousand dollars so our credit will heal faster than that hundred thousand dollars will come back in the value of our property what's to say that again our credit will heal faster right at the financial revival group we think that the housing market won't bottom out for three to four more years we think that housing from where it's at today will drop at least another twenty percent from from where it is today and in our informal discussions that we have with people universally people believe the same thing and so people are going to act on what they believe so mark and sara came to us already sam this is not going to come back we think it could be ten years before houses get back to the value that they're at today if you listen to susie orman she thinks it's fifteen years you know so mark and sarah took a look at that mark and sarah said you know something we're we're not going to do this work and sarah have chosen to not make the payments on their house to let the bank foreclose on that property and they're going to live in their house free for about a year and they're going to save some money to set themselves up for the next phase of their lives and they're going to go off to be renters and they're going to rent a house for a few years we're going to we're going to talk about all of this and the other  one we are in public exposure and we're continuing on with our investigation of the mortgage foreclosure crisis we're very fortunate to have howard bono of the financial revival group the web site by the way is my financial revival dot com there's also my band my own bailout dot com i strongly encourage you to go to very interesting things also what you should do is to go to the web site because there is does the thought of your home in foreclosure keep you up at night well there's a lot of people that it does you were saying one hundred four one in four that this is in the western washington area in other areas around the country western washington is a little bit higher than than other areas actually the last two to stick that came out western washington was one in three but nationwide it's about one in four while they're upside down ok we're talking about foreclosure and this time it's damage to your credit if you decide to walk away let's go back to our gamble again mark and sarah they're two thousand and eleven house credit we're going to put a graphic up but just what does it do to you it certainly does damage your credit there's no way around it there's no a magic pill to to make that not happen your credit is going to be damaged there's a couple of things that we think are happening now the banks have taken about four million homes in foreclosure so far we think that by the time that this whole foreclosure crisis is over that they're going to take somewhere between fifteen and twenty million homes in foreclosure as much five times the amount i think that we think that we're not close to even being to the middle of this at this point so we think that they're going to take let's say they take fifteen million homes now this is my own personal idea here but the banks aren't really very good at dealing with money because they had to get huge bailouts from the government just to survive we did notice that you know now the banks are going to take on fifteen million homes and so the best are the banks going to go back and  basically because you had a house foreclosed we're not going to sell you one of these houses that we desperately need to sell you or are the banks going to change the rules as they're known to do when it benefits their their bottom line and say you know something why don't we just forget that whole foreclosure because it kind of everybody and if you want to buy one of these houses that now cost half of what they used to cost we'd love to sell you one we have to sell you one we think absolutely that the credit scoring system going forward is either going to have to be completely scrapped or it's going to have to be changed dramatically so yes in the situation you're in if you've had a foreclosure fannie mae and freddie mac says we're not going to let you buy another house for between four and seven years so the thought process we have there is number one do we really think fannie mae and freddie mac are going to be here if they're here and secondly will the banks change the rules going forward so that they can get rid of this massive amount of houses that they're going to have they're already lying about the number of houses that they have that they are absolutely like this is an interesting thing that that you're talking about that because right on on the web site my financial revival dot com you make this statement about credit scores anytime the banks and the credit companies want to achieve a different result they change the algorithm or the formula that spits out your number is that true yes let me give you some examples it used to be if you had credit card debt if you had if you owed less than fifty percent of your limit on your credit card if you hold less than fifty percent of that it didn't negatively affect your credit score a couple years ago they changed algorithm to where if you owed less then thirty percent it didn't change your score so if you had a ten thousand dollar limit on your credit card and you owed four thousand dollars on that credit card a few years ago it didn't negatively impact your credit score today it does really yes they changed the ruling as they were tightening credit and this just happened a couple of years ago can you find anything definitive to verify that no because they're very secretive about that entire algorithm and the way that they're that they manipulated they were how do you know because i have just some i have a lot of friends in the business so i have some insider information and i was in the mortgage business for twenty years so really i think seen thousands of credit reports and so we can start to determine what's being changed in these now we're seeing that for people who have had a foreclosure we're seeing the damage to your credit actually not nearly as severe as it was a few years ago and i can give you an example of that i have a friend who gave a house back in a foreclosure and now this is somebody that is has a lot of money in the bank this was spear lee business decision on a second home that they owned in san diego gave their house back the bank took it in january of two thousand and ten in january of two thousand and eleven this year she called me and said i just ran my credit scores and my middle credit scores back up to seven nineteen and i said wow how did she do that and she said i'm calling you to see if you know how and i said they've changed that algorithm so it doesn't impact your credit scores quite nearly so much so we're seeing some of those things already happening what i would tell people what we tell our members for example and the people that we coach is that if you're going to give your house back if you're going to make that independent decision to do that and get your house back you're going to rent for a couple of years the bottom of the housing market we think is twenty fourteen or twenty fifteen so you're not going to want to buy a house until then anyway and by then we absolutely believe that your credit score is either not going to matter or will have adjusted nuff and healed enough so that you're going to be able to buy whatever you want to buy so if i ask the question again i can mark and sarah ever buy a house again the answer is absolutely absolutely if they choose to what we really want people to understand is just because we've gone through this situation with real estate owning a house i still believe is a great thing from an economic standpoint is it a great thing now you know will it be again in the future i absolutely believe that so i want people to not be so damaged from this situation that they never want to own a house again because i don't think that's ok good point right here in public exposure we are investigating the foreclosure crisis and we'll be back with more so here we are on public exposure investigating the foreclosure crisis and we say investigate because the thing that we're trying to do is to provide information for you to determine what your own steps are going to be whether it's your own mortgage whether it's whether or not to buy a house now whether it's two to rant or whether it's to do something else howard bono of the financial revival group which is also by financial revival dot com is here with us howard we're talking about an awful lot of things are right now want to talk about is something new you say is the is a it's it's pride and some times pride gets in the way of good business decisions absolutely absolutely about how that relates to mortgages well when i was in the mortgage business i ran my complete business strictly on a referral basis and a nice mortgage business and when we started the financial revival group we really thought that we were going to be able to use that same model to develop our business based on referrals what we completely miscalculated was the fact that if people decide that they're going to give their house back or file a bankruptcy or they're looking to do a loan modification or they're trying to get refinanced without success they don't go to work and shout that around at the water cooler so this is one of those issues where private people feel alone so people that are watching this for example are probably going to be going you know something i'm the only person that's stupid enough to get myself into this situation and i'm not going to tell anybody not family not neighbors not friends not anybody and that's really i think the worst thing you can do you really have to do some research you can't let that pride factor get in the way of dealing with this because you're absolutely not alone at all in th situation ok let's go to our example mark and sarah two thousand and six they bought a house for two hundred ninety five thousand dollars it was probably worth every penny and then that was when they paid twelve thousand down seventy five thousand dollars income between the two times change two thousand and eleven  the house is worth two hundred eighty five they owe two seventy seven their income is less than fifty thousand dollars is try going going to get in the way of mark and sarah being able to move forward it certainly can't if mark and sarah are saying you know we were just young and  we made this mistake and we're just going to have to eat it this could impact that one purchase could impact the rest of their financial lives and probably will deeply impact their relationship so should they walk away you know that's a question that is not you can't provide a universal answer to that question it's very individually based there are nine options that people have in terms of the way to deal with this situation and walking away is just simply one of them and for some people walking away is the perfect solution for other people walking away would destroy something inside of them it's not a good solution so there's no universal answer to this well yeah but what i'm hearing you saying that you know you know financial situation like this the the walking away aspect is more damaging to an individual from an emotional standpoint it is from a business standpoint is that right no not really once they once people really get it to understand that the deck in this whole housing crisis the deck is purely stacked against them the example of that is five hundred billion dollars of money that could have gone to refinance every house in america went to the banks with the hope that the banks would spread that money around they didn't do it the deck is stacked against individual homeowners so once people get that they get really angry and what we try to do is to temper that anger to say you can't make decisions based on emotion you can't make your financial decisions based on anger you've got to separate those emotions you have to look at this from a dollars and cents business perspective and make your decision based on the logical side of this so take on the smug approach you know the logical side and and that's what we did with mark and sarah to get them to look at the logical side of this to make their decision actually we're going to go to confucius you know we don't have to go to spock we're going to go to confucius because he said that this is a very important business princip is this a wise man makes his own decisions in an ignorant man follows public opinion in this instance the public opinion could be the moral pressure or the pride perhaps you know the moral pressure there was a big last summer a year huge lots of articles out you know the media was really pushing the moral issue saying you could destroy your neighborhood you could destroy the whole economic system you have to keep paying your your mortgage it didn't work it didn't work people are saying look if you're asking me to make my personal financial decisions for myself and my family and include my neighborhood my community my city my county my state and that and the whole of the united states that's too big for me and people are saying i have to take a look at this based on my own particular situation and the pride factor once they overcome that they start to do the research once they do the research they realize that the pride factor is simply going to cost them money because there are solutions many solutions that will will save them money in this particular situation in another segment use said there one in four here in the united states are underwater in their mortgage that means that a lot of people are probably thinking about walking away so i mean is there going to be that the public scorn if somebody walks away from them or you know what we're seeing is just the opposite of that what we're seeing is financial planners are and i can give you an example for the members of our group we have a meeting once a month for our members and it is facilitated by family counselor or family counselor came in at one of our early meetings and said i just can't do this these people are giving their houses back and they're happy about it and i support what's going on is there's a big burden it's been released they have money in the bank now which they didn't have before and so i asked her if she coaches you know or counsels people that have drug problems and she said yes and i said we don't agree with that so get over it not to talk to her financial planner and everybody's financial planner of course is the best in the universe you know and so she came to our meeting and said i was talking to my financial planner who's the best in the universe and you know i asked him about this group that i'm counseling and said that they were happy about this and he says well they're smart and she says no you don't understand these are people that are not paying their house payments they're giving their houses back and they're happy about it and he says yeah they're smart because they're making this decision now which is going to they're going to move backwards a little bit you know in terms of credit scores and those kinds of things but they're going to be able to regroup in order to really move forward as as our economy works its way through whatever it still has left to work its way through thank you very much howard so the moral of the story is don't let pride get in the way see you next right here on public exposure we are very fortunate to be working on the foreclosure crisis and this working on is trying to understand it and trying to see what you're going to do individually we're very fortunate to have with us howard bono who is from the financial bible group the web site is my financial or bible dot com strong we encourage you to go to the web site because you're going to learn an awful lot and you even have to tell anybody do you know you can go anonymously so in this segment we're going to talk about the inside story on loan modifications and we're also going to bring the iris in here old boy well let's talk about what is the inside story on loan modifications seems to me to be an obviously appropriate thing for banks to do well the long modification falls and sure that you'll hear the acronym hamp housing affordable modification program and the basic idea behind the hamp program is if people are in a situation where they can't really afford their house what if we modify what if we the banks modify their loan so that the payments  you know would they be people may be more inclined to continue to pay that's the biggest concern the banks have is getting people to continue to pay the problem that they have with the ham program is you might think that the banks when they're dealing with this are very organized they are absolutely it's insane how disorganized they really are the last to stick that i read was that less than four percent four percent of the people that actually apply for a loan modification actually get one here's the worst less than four less than four percent here's the worst part when you call and say hey look if i get my house payment lowered a few hundred dollars a month i'm good and the first thing the banks will tell you a certain last year or two or three months behind on your house payments we can't help you so what they're telling you is we're choosing not to help you that's not a requirement you know but that's something that they've put in and it's universal you have to be two or three months behind on your payments before you can even talk to the bank about doing a loan modification the next thing that you have to do after you get behind on your house payments is you have to send them all of your financial information so how crazy is that you know your basketball coach right so it's like walking across two minutes left in the game walking across the court and asking the opposing coach what play should i run next and he said until you're twenty points down right and also i want your playbook you know you get twenty points down and i want your playbook and then i'll tell you that's exactly what the banks are doing in this situation they're putting people in a default situation three months behind on your house payments the foreclosure process can start so they're putting you behind the eight ball there and then they want your play book because in addition to that so and they're only approving four percent less than four percent of the of the loan modifications that people ask for i don't understand it's on the financial revival of my financial revival website there's statement here and a quote from j p morgan chase it says we are not in the loan modification business well i thought they made money off of interest they make money off of interest but the truth is if people get behind in their payments that was a statement by the way from the c e o jamie diamond you know he basically said loan modifications are a difficult process for the bank it's very complicated it's very drawn out they do get money from the federal government the federal government set aside i want to save seventy five billion dollars to give to the banks for doing these loan modifications so the banks then are going to take less money and interest every month from these individual people but in in order to do that they have to go through all of this it's almost like doing a new loan for people all over again but they're always isn't that their business well it is their know their business is to have you sign a document and make a regular monthly payments to them and they get to their borrowing that money at a lower interest rate they're lending it to you at a higher interest rate and they make money on the arbitrage the difference between those two that's their business if they're not getting the monthly payments arbitrage goes away and so what they're concerned about is people that are just saying i'm not going to play anymore and so that's where the loan modification came in this was the federal government's way of saying we can fix the housing market without really damaging the banks and without really doing anything for the homeowners and they put this program together that was supposed to help three to four million people and so far it's helped less than half and yeah and it's not work it's been a dreadful failure so for  those people who say that they're not going to play anymore those are the people who are just taking their their ball and going home they're taking their money and leaving us what's a short sale a short sale is a situation where let's say going back to the markets or example that we used to mark and sarah's house is worth one hundred eighty thousand and they go to seventy or in that range could they sell their house in today's market for one eighty maybe maybe not people are looking for deals that's the only only thing they're buying if they could sell that house for one eighty they can't sell it  and complete with the bank so what they do is they sell that house for one eighty and the bank agrees that they will allow mark and sarah to be short on the payoff so that's where the short sale comes in so you can sell your house even though you're upside down in it but you have to have the permission of the bank in order to make that happen so we only have about a minute left so i got to ask this question the iris is coming in and taxing people and short sale yes situations sales and foreclosure i can't even ask the question i mean it's just so backward it is and here's why the way the so let's say that mark and sarah sell their house for one seventy the bank loses one hundred thousand dollars on that transaction  s says that if the bank loses money on that transaction that hundred thousand dollars for example the i r s looks at that as a gift so j p morgan chase gave you a gift of one hundred thousand dollars because they accepted one hundred thousand dollars last as a short sale so typically the bank will they were i mean the i r s wants taxes on the hundred thousand dollars however there is a law that says it's good through the end of two thousand and twelve started in the bush administration extended in the administration that says if it's the first loan on your house the primary loan and it's the house that you live in and the house is foreclosed prior to the end of two thousand and twelve that you don't have to pay that well that we're going to make that be the last word if you want to learn more