Isaac Bensussen

In February 6, 2009 I received a Loan Modification Proposal from IndyMac that I read, signed and approved and sent it back. With it, I sent back a copy of my business Profit and Loss Statement for the year 2008.

In this Profit and Loss Statement I showed a Pre-Tax Net Income of $ 78,713.87 for the year or $6,559.00 per month, after deducting my business expenses. A few days after IndyMac received my Profit and Loss Statement a negotiator from your Institution called me and told me they had to change the terms of the Loan Modification that I signed and submitted, based on the fact that IndyMac considered that I had a $1,500.00 excess disposable income per month, so I had to come up with cash payments of almost $9,000 that I don't happen to have.

Nevertheless and with all due respect, I have to disagree with IndyMac's findings. What I submitted was my business yearly profit. Fortunately, my business operated with a profit but this is far from reality after I deduct my personal expenses.

From my business monthly profit, I have to substract the following expenses.

Present Mortgage Payment to IndyMac $ 2,200.00

Home Owners Association Fees 320.00

Property Taxes 366.00

Property Insurance/Fire & Liability 50.00

TOTAL HOUSING EXPENSE $ 2,936.00

OTHER PERSONAL EXPENSES

Car Payment 500.00

Food and Medicine 400.00

San Diego Gas and Electric 100.00

Health Insurance Payment 300.00

Credit Card Payment 100.00

Other Expenses 200.00

TOTAL PERSONAL EXPENS $ 1,600.00

TOTAL HOUSING EXPENSE $ 2,936.00

TOTAL PERSONAL EXPENSE $ 1,600.00

TOTAL HOUSING/DEBT EXPENSE $ 4,536.00

PERCENTAGE OF HOUSING/EXPENSE RATIO

OF MY NET BUSINESS INCOME 69%

I believe this is a very high percentage due to the fact that Federal and State taxes have not been calculated and that is the reason why I have fallen behind my payments.

With the initial loan modification that you sent me, my mortgage payment was going to be reduced to $1,200 for 5 years, meaning $ 1,000 savings per month. Also, I have started proceedings to lower my property taxes, because the property that I bought for $ 378,000 with $ 70,000 down payment is now only worth $ 190,000.

By bringing down my HOUSING/DEBT RATIO $ 1,000.00 per month, the percentage for my housing/debt ratio compared with my income brings it down to 54%. With the property tax reduction of $ 150.00 less per month, that will bring down this percentage to 52%. I expect that by reducing my personal expenses a little bit more, I can bring down this percentage to 50%.

Considering that I am more than willing to stay in my home that unfortunately has lost almost 50% of its value and also be able to make the new modified payment without having to apply for public assistance, it would be to our mutual benefit if IndyMac reconsiders their decision and allow the above loan modification that has been signed and approved, to stay in place without asking for cash that I don't have.

I appreciate the attention that you can give to this letter since "Time is of the Essence".

Thank you

Every single day I read the front pages and business sections of The New York Times, Los Angeles Times, San Diego Union and many other publications reporting about the massive amounts of bail out money for AIG, City Bank, Bank of America and many other huge financial institutions that are "too big to fail"

To make us feel better, the Treasury Department lets us know that we are taking ownership of AIG and all the other Banks that have accepted billions from the Treasury. Nevertheless, nobody seems to know the real financial condition of all these institutions.

Economists and savvy political analysts keep on guessing who will be the next one to be saved and how much tax payers money it will take to save them and when the economy will rebound.

My thinking is; haven't they heard of Audits. If we are majority owners of many of these institutions, don't we have the right to conduct audits performed by reliable and certified accounting corporations with dozens of auditors working for them on every financial institutions we give billions to and partly own?

I believe that will take the mystery out of the guessing game and will show in plain paper their real financial condition. We would not have to be guessing any more. With more than 80% ownership of AIG and big stakes of ownership in dozens of Banks and Wall Street firms I would like to know right away if we are dumping good money after bad money.

Certainly, dozens of simultaneous Audits ordered by the Treasury for all these financial giants will give the transparency that the Obama Administration has promised to all of us.

I posted a previous blog about loan modifications. I was proud that some borrowers in trouble that I helped with their loan modification efforts, actually got their loans modified.

Now, I discovered with horror that, in one case, the loan modification got invalidated and readjusted to a new scenario. Now, my friend in trouble has to pay $ 4,440.00 immediately, followed by $ 2,991.00 before April 10 and some time later another $ 1,593.00. If the Lender does not receive these payments as requested, they will continue with their foreclosure proceedings that they started while working on the loan modification.

The Lenders' argument is that they received the package of financial information that they requested from my friend, and they determined, after reviewing it, that he still has $ 1,500 of monthly disposable income. When my friend explained to the negotiator and others that food had not been allocated, neither gas to go to work or health insurance; the Lender did not recant. Their answer; try to get the money from somewhere to send it to us or you will loose your home.

Obviously, their logic is completely flawed and does not make any sense. The property subject to the loan modification is a condominium in the Carlsbad area of San Diego that my friend purchased in 2005 for $378,000. He invested $ 70,000 down payment and signed a loan for $ 308,000. Prices fell as we all know and there have been three foreclosures in his complex. The first one sold for $ 240,000, the next one for $ 225,000 and there is another that just came out as Active priced at $ 220,000. The same floor plan. The way things are, this condo for sale will probably sell for $ 200,000. It needs work.So, the new appraised value will go to a new low value of $200,000.

My friend requested a loan modification because he was willing to stay in the condominium. He is willing and able to pay the new low payments initially offered by the Lender, and overtime, pay the mortgage in full amounting to $ 308,000 plus the $ 10,000 that he hasin arrears. That was the loan modification that the Lender originally submitted. With this scenario the Bank would recover, over time $ 318,000. Lets assume that the Lender will foreclose on his condo in April 10. Because of the market, the unit will be sold between $ 200,000 and $ 210,000. Commissions and closing costs, another $ 12,000. Foreclosure expenses and more payments missed $ 10,000. The Lender will recover, if lucky $188,000. Nevertheless, the Lender is willing to foreclose to recover $188,000 instead of $ 318,000. Where is the logic?

With the new and not so new "help is on its way for borrowers", I have received a few calls and visits from people that I know, that want to modify their loan. Many of these people are under terrible financial distress, but they want to stay in their home. They do not want to do a short sale or be foreclosed upon.

Some of the people that I interviewed lost some of their income. The wife of one of them lost her job but the husband is still working. With one salary, they have enough to pay for their basic needs and have some money left over to pay a reduced mortgage payment. This is why loan modifications could work for millions. The problem is that most of these borrowers do not know where to begin to obtain a loan modification. Many did not even speak the language fluently.

With such a short sample of borrowers that came to me for help, it comes to my mind that the program is not going to succeed without the help of Realtors. I know that attorneys are doing loan modifications and many companies have sprawled all of a sudden on the Internet and TV promising loan modifications, but that is not going to be enough and maybe, some of these companies are shady enterprises not to be trusted.

I decided to help a few of these borrowers and I was successful in obtaining loan modification commitments from some lenders. It took a lot of time and effort. Now, collecting money from these people that came to me for help was out of the question. The economic stress they were feeling was right on the surface. How could I charge for my services?

In some of the loan modifications that were accepted, the missed payments were added to the principal. No lender agreed to reduce the principal to reflect the present value of the homes. In calculating the payments that the lenders were going to receive on the proposed loan modifications, I noticed that they were going to be receiving the full amount owed. Over longer time, with reduced payments, but the full amount.

Banks are going to be swamped with loan modifications and they are not going to be able to service them diligently, so many of them will end in foreclosures. So, why can't Lenders pay Realtors a fee to be the liaisons between borrowers and them, just like short sale deals. Loan Modifications are a much smarter alternative for lenders than short sales or foreclosures, where they lose their shirt doing them. Wouldn't it be better if lenders partner with Realtors to do the bulk of loan modifications with the agreement to pay one or two points over the loan amount if the loan gets modified? That certainly will take away the pain that borrowers feel when they have to pay attorneys or Loan modification companies in advance.

I understand that people are very scared about the financial future of our country and many more are also fearful of their own job security. Just by watching some TV in the evening, reading any newspaper or going on line to read the news can make you very nervous.

Nevertheless, not everybody is having a hard time. Many lucky people have secured jobs and have many opportunities where they work, for advancing to better positions and higher salary.

Many potential First time Buyers on this lucky path are waiting to buy. What is their explanation? I have asked a few clients in this position, and their reply is almost the same; either expecting prices to go down further or finding a steal. Some of these Buyers have a family or are starting one, and their long term plans are to purchase a home where they can raise their families. They don't want to rent any more.

I am sure they have heard this explanation from their Realtors or from friends or relatives. If you are planning to stay in your new home for a few years, you should let go of your fears or trying to find a steal. Finding the super buy can take time. You can do that later. Life is long and full of surprises.

Lets assume that you really like a home you found that is priced at $ 500,000. You have been pre-qualified for a 96.5% FHA loan. You can afford to make the monthly payments and still have enough money to take care of all your other regular and some not so regular expenses. You have a fairly secure job, have good credit and make enough money to be approved for the loan. Your explanation for waiting is that you believe that homes are going to be going down further. Maybe in your mind you are sure that this home that you like might be reduced $ 50,000 and you will be able to buy it for $ 450,000 instead of $ 500,000. Let me tell you, $ 50,000 is a huge price reduction in this price range; especially since Sellers are pricing their homes at their lowest levels because they are competing with foreclosures and short sales.

The variables in betting on the future are many and if you need a home you should rely on the present. Interest rates might be going up, the home that you really like might get sold, prices might level off and start going up, and many other scenarios. Is it really worth playing Russian Roulette with your future for the minimal savings per month? After all, you are planning to keep your new home for a few years.

The market has never been better. Surplus inventories. Low, low prices. Incredible low interest rates. What are you waiting for?