When I started writing my blog, Mandelman Matters, over two and a half years ago now, I knew what I wanted to accomplish… I wanted to provide homeowners and others with straight talk in simple and hopefully somewhat entertaining terms that would help people better understand how and why our nation’s financial and foreclosure crises began and how it would impact our country’s economy and society in the years ahead.

As the first year writing and posting articles on Mandelman Matters flew by, and our government continued to utterly fail to mitigate the damage caused by the economic crisis, I expanded my mission to include providing insight, tools and whenever possible trusted resources that homeowners could depend on to help them get through the clearly worsening storm.

I guess it’s not inappropriate for me to admit today that having written and posted 448 articles covering the economic, political, social and legal aspects of the financial and foreclosure crisis, and many of which would have to be considered at least fairly in-depth, I’m quite proud of the body of work I’ve created.  I don’t say that because I’m in a love affair with my own writing… rather the source of my pride comes from the fact that as I write these words, I don’t think anyone combing through my site’s archives could point to a single salient fact or forecast that I’ve gotten wrong.

That is not to say that I saw coming everything that has transpired to-date, because I did not.  For example, and among other things:

1. I did not know Barack Obama would turn out to be closer to and a bigger supporter of Wall Street than George W. Bush, or any of the Republicans in Congress, as far as I can tell.
2. I didn’t know it was possible that mortgage servicers could be involved in the modification of mortgages for three years without showing any substantive improvement.
3. I certainly had no idea that the number of unscrupulous operators, con artists and frauds would proliferate to the point that a consumer seeking answers and throwing a dart at the front page of a Google search, would be as likely to get ripped off or lied to as not.
4. I would never have predicted that our government would find a rationale for spending over $13 trillion to prop up our nation’s commercial banks and financial institutions, while devoting something like 1/1000^th of that amount to stopping the free fall in housing values, which, in addition to the ongoing credit crisis that has ostensibly left our federal government as the country’s only lender, continues to fuel the nationwide foreclosure crisis.
5. And I had no idea that our mainstream media would deteriorate to where it is today… where you often can’t tell whether the source of a story is a press release and when it’s actual news based on investigative journalism and/or objective, unbiased information.

And yes… I’m sure there’s quite a bit more than I could not have told you two and a half years ago, but as I’ve watched what has unfolded in complete amazement and no small amount of sheer sadness, I’ve tried to cover it not from the perspective of left vs. right, but rather from the perspective of right vs. wrong.

Understanding where we are today and how we got here…

Homeowners borrowing beyond their means to buy homes they would never be able to afford did not cause our global economic meltdown, or even our country’s foreclosure crisis…. It was Wall Street’s incomprehensibly greedy and almost entirely unregulated financial institutions that caused our economic downfall… period… end… stop.

It was not the American homeowner that borrowed beyond his or her means, it was our nation’s financial institutions that dramatically over-leveraged themselves, so that when the credit markets seized up in July of 2007, essentially all became insolvent almost overnight.  Many hundreds of banks have been shut down by the FDIC since the crisis began, and even the trillions in bailouts for those deemed too-big-to-fail, and apparently prosecute… have left us with financial institutions that remain dependent on the government’s… read: taxpayer’s… continued financial support.

Oh I know… we did have a housing bubble, and by the summer of 2006, with the Fed having raised rates 17 times in a row, that bubble was destined to pop, but falling real estate prices that are the result of market forces decline on a more gradual slope that what we’ve seen to-date, and as they decline on that slope homeowners have opportunities to avoid foreclosures through either refinancing, or worst case… the sale of their homes.

This crisis was not primarily fueled by the market forces associated with a housing bubble’s demise… this crisis was the by-product of credit markets that literally froze solid overnight, leaving no chance for homeowners to react to the changing market conditions, and relegating them to foreclosure.  The same is true about our bankers who, when the music of the credit markets so abruptly stopped, had leveraged untold billions in CDOs and other derivatives appearing on and off their balance sheets, and whose value went straight off a cliff in a matter of days or at most weeks… a’la the final scene of the movie Thelma and Louise.

These institutions, like homeowners, had no time to react as they might have were the market to have fallen more gradually, and no way to borrow.  Many of the largest categorically failed.

Our response to the crisis has been to pump money into our financial institutions and, I suppose, hope that Wall Street’s recovery ultimately leads to Main Street’s… and rather than debate whether this was the correct response or not… let’s just say that it sure as heck hasn’t happened yet.

I don’t think there should be any question here… for the average American… the worst is yet to come in many ways.  Housing prices have nowhere to go but down, and that will lead to increasing numbers of foreclosures, which will in turn further depress our economy as trillions more in consumer wealth will evaporate.  Significant job growth is nowhere on the horizon either, and although it shouldn’t be nearly as hard as it apparently is… our ability to get loans modified in order to prevent what are preventable foreclosures from the investor perspective, is downright partisan pitiful and painful to watch.

So, before we go on, let’s just recap the key points made thus far:

1. The credit markets, most notably the secondary mortgage market and private demand for mortgage- and asset-backed securities are broken and the federal government is essentially the country’s only lender.  This situation has NEVER existed before in our nation’s history, and because real estate prices have always been largely driven by access to credit… it’s always a function of terms, rather than price when it comes to real estate values, remember… until those markets thaw, you may be assured that we’re going down, not up.

1. All efforts to prevent an increasing torrent of foreclosures have failed, as we continue to engage in the intellectually dishonest dialog about whether homeowners are “irresponsible” and therefore don’t deserved to have loans modified.  The answer to this inane debate is simple: A foreclosure should be prevented through modification of the borrower’s loan, when the borrower can demonstrate that he or she can make the modified payment, and the Net Present Value (“NPV”) of the loan’s modification would result in the investor coming out ahead financially as compared with foreclosing… PERIOD.

In other words, if the investor would make more money by modifying the loan that’s otherwise at risk of foreclosure, and the borrower can document his or her income at a level sufficient to make the modified payment… then modify the damn loan, because no one is wining as a result… we simply don’t need another vacant house at this point in time.

So… why are these points about way-too-tight or nonexistent credit markets, and the need for a clear rationale for determining what is and isn’t a preventable foreclosure even debatable?  Is there anyone that doesn’t agree that fixing these two things would go a long way towards stabilizing housing prices and stopping foreclosures?

I sure hope not, because if so… you’re just not thinking about these issues carefully enough.  I’m not talking about a 100% solution overnight, but the fact that’s there’s no magic bullet available is no reason to ignore steps certain to making the situation incrementally better.

The information and tools you need to get through the storm…

Setting aside how to fix, or rather un-thaw the credit markets that would thereby make mortgages more readily available to more people, lets talk about getting your loan modified… homeowners need to start down this path by running what is called a “REST Report”.

I’ve written about the reasons for homeowners to use the REST Report when applying to their servicer for a loan modification, but I want to be much clearer and stronger in my statements in support of homeowners and lawyers using the REST Report… because outside of a servicer, the REST platform is the only one that can credibly establish whether the investor that owns your mortgage will come out ahead by modifying you loan as compared with foreclosing on the property.   It will also show you how your servicer may view your proposal to short sale the home, should you fail to qualify for a loan modification.

The REST Report is a 12-page document generated by a highly sophisticated software platform used in various form by major banks and mortgage servicers.  It’s not a toy that some clever programmer created in order to sell something to homeowners… it’s the real thing… and there is no “other one” or close substitute.

Now, I hope you’ll forgive me for what I’m about to say, but I want to be both clearer and stronger about why homeowners should REST Reports when applying for a loan modification, and why anyone who says otherwise is at best misinformed… but at worst they are full of beans and lying to you about their own report… which is worthless in comparison to what is produced by the REST platform.

I really do understand why it’s so hard for homeowners to tell the difference between what they should believe and what they should not… and I hate that it’s the case… but it is.  So, with that in mind let me try to say this as unequivocally as possible.

If someone says that their report is somehow better… or that what I’ve said about the REST Report is in anyway less than true… I want to know… contact me… lets shine a giant light on this topic… BECAUSE THEY ARE WRONG OR LYING… period.  So,  if someone doesn’t know of the REST Report, or doesn’t know enough about it… let’s all get on the phone together and get things nailed down.

The REST Report can withstand any amount scrutiny… it can be entered into evidence during a court room proceeding, the financial analysis it provides related to a servicer’s decision to modify a given loan… is CORRECT… and no other system can duplicate what REST does.

How to use the REST Report with your servicer?

Once someone has run your REST Report, you send it to your servicer’s loss mitigation department, along with your application and required supporting documentation.

After that, assuming the report does show that you pass the NPV Test, you push like crazy no matter what your servicer says.  If they tell you that you failed the NPV, but your report shows that you do… tell them you’re report is correct and you want to see the inputs they used to make sure that the reason for the discrepancy in NPV Test result is nothing more than a typo… which is the case at least 90% of the time.

Then, you work with your servicer to correct their typo and rerun your information to determine whether you passed the NPV… and if they input your numbers correctly… it’ll come out matching what’s found in your REST Report.

Without the REST Report, what will you say to your servicer when they deny you for a loan modification?

Ummm… but I think I pass?  That’s not going to do much.  Servicers are only available in three flavors: Terribly annoying… Unbearably annoying… and Make-you-want-to-burn-your-home-to-the ground-annoying.  And the REST Report… although rock solid correct in terms of it financial analysis, isn’t a pill that will make servicers behave properly, so get ready to push back using the REST Report and be confident that what the report says is correct…. It’s your servicer that’s wrong.

We’ve run over 4,000 REST Reports and their effectiveness is unquestionable… I wish I could tell everyone at risk of foreclosure to order one right now because if we could at least prevent the preventable foreclosures, we’d be a heck of a lot better off.

REST Reports have been run for major servicers… some of the largest… and for large investors who want tom know how they should optimally dispose of their delinquent loans.  Like I said, REST is not a toy or a piece of software some clever techie programmed so a company could have something to sell.

So, again… if someone says they offer a report that will do the same thing REST does… NO THEY DON’T… and let’s give them a call together, shall we?

How much does it cost a homeowner to run a REST Report?

It depends on the law firm or organization, but it’s somewhere in the $700 range, give or take.  Here’s why…

Running a REST Report is not something that just anyone can do.  It’s a case of garbage in and garbage out, so you need an expert to run your report and show you how to use it.  In addition, firms that offer REST Reports say that it takes them roughly three hours to run a homeowner’s report and go over it with them so they understand what it says, how to use it, and how to read it.

As a result, some firms charge a bit more and others bundle the report with other services and as a result charge a bit less, but a hundred bucks one way or the other is really not the issue here… the REST Report is the only thing I’ve ever seen work in terms of increasing a homeowner’s chances of getting their loan permanently modified… and I’m pretty confident that I’ve seen everything by now.

If someone tells you don’t need a REST Report to apply for a loan modification, as them what you should say when your servicer turns you down for failing the NPV Test.  And if they tell you that they can “eyeball it” and tell you whether you will pass or fail… tell them I said they are wrong… or full of you-know-what.

The foreclosure crisis has been allowed to continue for too long and it’s obvious that our government is incapable of stopping it, and that are servicers simply don’t want it stopped.  Servicers make more money when they foreclose, so that’s what they try to do almost every time… but the REST Report… more often than not… ultimately changes that outcome.

And for attorneys, real estate agents involved in short sales, and other mortgage professionals involved in helping homeowners avoid foreclosure… you can become licensed to offer REST Reports to your clients… and there is no cost to become a licensed provider of the REST Report.  (Scams, you might consider, are never free.)

In my considered opinion… and I’m not kidding about this… if you don’t offer to run a REST Report for your clients who are about to apply for a loan modification, are stuck in loan mod hell already awaiting a decision, or are attempting to negotiate a short sale… it borders on, or is mal practice.

I’m sorry to come off this way… I don’t like having to “sell” anything… and I know how hard it is to separate the wheat from the chaff with fraudsters seemingly on every corner and all over the Internet claiming to have one sort of solution or another to stopping foreclosure.

But you need to know about the REST Report… and you need to know that it is not a scam or a toy… it is the only way… outside a servicer… to determine whether your loan should be modified because the investor will come out ahead as compared with foreclosure… it’s the only tool I’ve ever seen make a significant difference for homeowners, and having run 4,000 reports to-date, I think the results are clear and they are overwhelmingly positive.

Contact me… I’m here and devoting whatever time I need to this month and next to answer any questions homeowners, attorneys, real estate and mortgage professionals and others have about REST, so we can start fighting harder so more homeowners will use the report when applying for a loan modification or short sale… and we can turn the tide on the foreclosure crisis ourselves.

And once our housing markets start to stabilize as a result of preventing the preventable foreclosures, watch how fast we see private sector lending starting to gear up for an actual recovery, or at least the end of our current and continuing slide.

You can reach me at mandelman@mac.com.

Mandelman out.