Chased for Debt, No Doc Loans are Back, Just Get a Loan, and Reader Question

I see, Road, you’re get out of debt guy. If you’re listening to this podcast, you probably want to learn more about money, credit, and debt. Or, you’re one of the many good people out there with bad debt and you want it to go away. But stick with me, together we can make that happen. Either way, I’m here for you and I believe a better and more financially successful future is ahead. It can be within your grasp. I’d like to ask you for a favor. If you find this or any of my podcasts helpful, please take a moment and leave a review on the podcast platform you’re listening on. Your feedback and opinion matter to me. And if I’ve done a good job, your review helps others to find the podcast as well. And while you’re there leaving your review, don’t forget to subscribe to the show so that you can be notified when the next episode comes out. Last piece of housekeeping. If you have a question or comment you’d like to hear on an upcoming podcast, you can leave me a voice message at getoutofdebt.org slash message. Or leave me a question for me to answer on my website by going to getoutofdebt.org slash question. Thank you so much for being a great listener and I’m sending you a giant virtual hug in return. And now on with the podcast. All right there. Hello. Geez. Okay. How are you there? Am I loud? Well, I didn’t hear anything. I put the phone in my ear. Italy phone speaker phone. Oh my gosh. Just timing. I need to get a new chair. So where I put in for the in the budget for the new chair for the podcast. Oh, I can pay pal you 10 cents because it’s it keeps squeaking every time I shift. That’s okay. I got dogs barking. So don’t worry about it. All right. And I’ve got four things to cover. So let’s get going. Okay. I’ll try not to talk to them. If you need to be done in 20 minutes. Yeah. Keeping answers short and brief. Oh, yeah. How long you know me? Yeah. Well, I might even include this in the in the podcast to give people a little taste of what goes on in the background. Oh, I’m a talker. Oh, yeah. My role is, uh-huh. He’s not lying. It really is. Yeah. He’s not lying. It really is. It makes up. He goes back and watches a British show or whatever he was doing. Yeah. Yeah. Absolutely. Okay. Look, we’ve got four things I want to talk about in rapid fire order. And I’ll let you pick the one you want to start with. One is talking about the resurgence of no Doc loans. Another one is Chinese debt chasing people. Government workers just go get a loan and the reader question that I sent you. Your choice. Okay. So, reader. Okay. So I’ve got no Doc loans Chinese, GovWorkers, reader. That’s what I was able to write down. So let’s talk about no Doc loans. I love that topic. Okay. All right. So, yeah. The resurgence of no Doc loans. Apparently, you know, this is always cyclical and always cracks me up that people think that credit and debt problems are somehow new every time they occur. But down turn after down turn, we’ve always seen banks and have a resurgence of one need to give out as much credit as possible. And this time, low Doc and no Doc loans, which means people are getting loans without a whole bunch of supporting documentation to support their claims are really increasing. So, you know, here’s the problem. Here’s my problem with this is that you and I can tell people our experience and what has happened time and time again. Nobody’s going to listen. Oh, no. It’s the gold rush. You got to get in on it. That, you know, the nice thing is as a relatively young student of history, you know, I can attest to back before the old bubble crash, I was able to get a house, take out a loan. Of course, I worked for myself so I really didn’t have any documentation, luckily, if I didn’t require it. And I was able to get a house. I pulled a whole bunch of cash out. At one point, I owed $800,000 on this house. I took the cash. I decided, hey, I don’t know anything about real estate development. So I should do that, right? That’s what everybody’s doing. That’s right. So I did that. And then as soon as I closed the deal for the 17 acres to put some custom homes on, the market tank, like literally as soon as I signed the paperwork. And so the market tank, and then all of a sudden, my house that I owed $800,000 became worth of whopping $350. So what a great thing that no doc loan was for me to get. Now I owe it half a million dollars. I was half a million dollars upside down on the house. And I lost the properties because I don’t know Jack about real estate development. Well, true story. In the late 90s, I was refinancing my house. And the mortgage broker actually said, whatever you do, do not fill out the income part. And I said, why? And he goes, I will fill that out when I get back to my office. And then true story, he sneezed and blew thumbs all over me. And how did that all turn out for you? I couldn’t wait to sell the house and pay off the loan because it wasn’t affordable at all. Oh, yeah, yeah, exactly. So, but now the nice thing is people say, well, you can ever predict the cycles and all this stuff. Well, it’s actually not that hard because now what’s the bank start finding creative ways to get people into businesses that they clearly can’t afford? It’s coming. That’s when you know it’s way overheated and it’s just a matter of it’s starting to slow down. Then people all of a sudden discover, wait a minute. And then, and when it drops, it drops fast. Yeah. Well, so yeah, the cycle is people feel very confident about the future. They start taking on debt. Credit gets easier to access. People get loaded up and then a downturn occurs. I mean, I’ve, I’m now, jeez, almost 60 years old. Much older than you. Oh my god. I know. I know. And I’ve actually lived through these downturns. And I have the one thing that I’ve learned is they do happen. There are warning signs. They are real. And the second thing is I set it before I can say this guy is falling and nobody’s going to listen to me. And then that’s fine. Yeah. Well, let’s just go on record and say what’s today? It’s, well, January 2019. Don’t buy a house right now. Yeah. I mean, the recession, a recession is coming. I expect it in the next 12 months. I was talking to some investment advisors the other day. And they were already saying their managed portfolios. They’re already adjusting for them coming. There are two big warning signs for me. One is default rates are low right now. But if you look at the explosion in student loans, car loans, and easy access to credit, those are all the fundamentals that lead to a crash. Yeah. I think I’m going to be so busy fairly soon that we’re not going to be able to even do podcast because you know, the funny thing is that as these cycles occur, I could literally just go back and post all the old questions they’d be relevant again. Oh, yeah. Yeah, let’s go back about 12 years and just start recycling the same content and go to the beach. Yeah. Excellent. Yeah. All right. Next one. Next one. Chinese debt. Interesting. They have an explosion of consumer debt. They want to get it out there fuel the economy. Yet in China, they have an interesting way of chasing people who are behind on their debts. The thing about this story is it really makes you appreciate in America that debt collectors can only email you or call you or send you a letter because in China, China. There’s apparently an app that lets you identify on your smartphone. People who are behind on their bills who are near you and you can report them to the bank. Now, big deal. You can report them to the bank. But people who on this list are unable to fly, cannot get on their plane and cannot get on a high speed train. So apparently they can get on a boat and a slow train someplace. And they’re also putting up billboards of people who owe banks money and showing previews before movies of, you know, do you know this guy? Which I mean, who wants to live through that? Well, you know, it just makes you really appreciate living in a country where, you know, over 200 years ago before the technology was even thought about, you know, the framers had the wherewithal to realize that the, you know, the rights of the individual should be protected over the collective. And that’s what makes you there, you know, the United States very unique. But I don’t think that’s an issue. I mean, you know, because as far as shaming them into paying their bills, you know, we deal with people every single day. And I rarely get somebody that calls me up, says, I have this debt and I’m super proud. Like everybody is, you know, ashamed. They don’t want to talk about it. They didn’t do it on purpose. I mean, 99% of the people that have debt, they didn’t borrow the money with the intent not to pay it back. And they’ve already self-inflicted more shame than they really deserve. Good point. The last thing we need is some app where friends and neighbors can be like, oh, Jo’s $10,000. What a lose. I mean, talk about pushing people over the edge. It’s just ridiculous. Yeah. And you wonder why in countries like India and China that you have farmer suicide at high rates. Absolutely. But that’s not, you know, like I said, it’s not an issue. People already have so much shame that’s self-inflicted. If most people, if they could pay it, they would pay it. The like clients that come to me, they had circumstances or whatever. And it’s a whole big discussion that we can’t get into where the system is really designed to get you into this place where you can’t pay it back or whatever on that. That’s a different radio show for another client. Right. Yeah. That’s BS. That’s not going to happen here. Yeah. Like medical debt. You know, you fall down, break your leg, have an ambulance right into the hospital. And I guess in China, the next thing you know, there can be a billboard that you have the hospital 20 grand. Yeah. The whole thing is just ridiculous. So yeah, I’m not going to go out. If I start, I’ll get on my soapbox and I only want me to do that. All right. So let’s, we are 10 minutes in. So let’s rush along here to, hey, we’re 10 minutes in and we’re 50% done. What the heck are we doing? We’re on time. That’s new math. I’m not familiar with this math. All right. So the government, as we are recording this is currently in a shutdown unless that’s changed in the last 10 minutes. And some of the government advice out there is a little bit detached from reality. For example, Commerce Secretary Wilbur Ross came out and said the government workers on a couple of paychecks and not getting paid should just go get a loan. Just guys, it’s, you know, just go get a loan. It’s no problem. You can borrow the money, which seems like counterintuitive advice and careless. Let’s see American way, Steve. Bar your way out. Absolutely. You want that white ticket fence? Bar the money. Get the white ticket fence. Yeah. You know, it seems like it’s no concept from some people about what it’s like to live paycheck to paycheck. It’s not fun. Okay. And all of my advice and knowledge come from the School of Hard Knock. So, you know, when I’m talking about it, yeah, it was borrowers money. I’m not immune to that. I buy all kinds of money for crap. I don’t need to. Well, you know, look, people are if somebody is short, I can understand them. It’s in a couple of paychecks. They need to make ends meet. And so are they going to put on their best suit and go to a local bank and try to find a bank that’s going to give them a loan? Or are they going to respond to the TV commercials and the, you know, easy money now type things and get a payday loan? I would expect there are a lot of payday loans going on. I mean, on the one hand, you got to look at it as, you know, if, you know, whatever happened happened, right? So now you’re in the situation today. You haven’t had a paycheck in a month. And if you didn’t have any kind of emergency fund, which as you know, most Americans don’t, and you’re out of credit cards or whatever, I mean, you’re going to do whatever you can do to keep food on the table for the family. So on one hand, I see the argument of, well, you know, if you can find a loan and there seems to be institutions that are coming out now, probably more for PR reasons to say, oh, if you’re, you know, missing your paycheck as a federal worker, you know, we’ll give you a very low interest rate or no interest or whatever. So I could see, I could see that. I think the biggest thing is just the irony of, you know, it coming from people in government telling, you know, people, you know, people that they’re not paying to go borrow the money and a big deal. But honestly, I’ve seen things going around Facebook and I’m, I’m all for it. If they’re going to have a government shutdown, I think the first people that shouldn’t be getting paid is all the politicians. Yeah. I think that stuff would get worked out like by dinner time. Yeah. None of the people on Capitol Hill were getting a paycheck either. I mean, you know, well, the politicians, politicians work that out because apparently you can’t change pay structure between elections. Yeah, of course not. But I think we could solve a lot of the problems in this country if the politicians just had to follow the same rules. They had to have our health care that we can. Oh, yeah. And if there’s a government shutdown, they’re in it too. All the sudden, crap, you would just magically get worked out. The problem. Yeah. You know, the other thing that cracks me up too is when you hear a government pundits say, I don’t understand what the problem is because lots of creditors have said that they’ll work with people. Okay. That’s fine. So, five creditors that you have mortgage company credit cards, etc. And two will work with you. You’re still screwed. Yeah. And not only that, but nobody’s calculating, you know, working with creditors is not exactly easy with all the hoops and things that you have to jump through. These people are essentially having to take on a second job trying to manage their finances and keep their credit from getting destroyed. And then if it does happen and the creditors says they’ll work with you or they don’t or it gets added to your credit report, it’s not just, oh, right, a simple letter and have that taken off once things go back to normal. I mean, you hear those stories all the time that people have their identity stolen and it takes them years to recover their finances and get back to where they were. It’s a major issue. Yeah. I just wrote about a person who just sued the three credit reporting agencies for just effectively ignoring their valid disputes. You know, they’ve been going on for years trying to fix this credit credit is it just, it’s a scam. And again, that’s a whole another topic. It’s all a scam. You can manipulate it. You know, you can throw $10,000 on your credit cards and watch your score jump 100 points and then use that $10,000 the next day. And then yet, you know, today I’m only worth a 605 go tomorrow. I’m worth a 720. I mean, it’s so stupid. Well, I think the thing that really gets me about credit scores is people somehow think that a good credit score means that you are good with personal finances. No, it means you’re good at manipulating the system. That’s what it means. Right. Yeah. You’re just making yourself more attractive to creditors who want to lend you more money, not that you’re responsible in any way. Yeah. And then stupid things like trying to shop around for a good loan, but then you get too many things because this this lender reported to EchoFacts and this lender reported to TransUnion. All of a sudden your score drops 20 points because you have several hard inquiries. The whole thing is just a scam designed to confuse consumers and get them to pay more interest when they don’t have it all figured out. Yeah. So back to the origins of the credit score. Before that, you actually met with somebody who looked at your situation and made a decision. Do I have you, your character, your capacity, your collateral, etc. But the credit score was designed and came out in the late 80s to allow creditors to make rapid automated decisions about who they wanted to lend to. It was a mass market sales product. Do I have like a minute and a half to tell my story on that, Rook? Absolutely. All right. So this isn’t my younger days. I’m much older and wiser now, but I just we just got our first house and I can’t remember what I needed a loan for. I don’t know what it was, but I got all dressed up, told my wife, hey, I’m going to go to the bank. I’m going to try to get a loan. So I got all dressed up, took a shower, you know, I drove our nice car to the bank in case they looked in the parking lot. And I went in there and I walked up and I said, oh, who could I talk to about getting a loan? And the toddler looks at me and she points to a telephone on the wall. Right. So I’ll deject. I got a tie on, you know, this was like 15 years ago. So it’s probably, you know, 2004, something like that. I don’t know. So I walk over to the telephone and this little booth and I call and I get this lady who may have been in the US may not have been. I couldn’t tell. This asked me the question to do to do. Oh, I’m sorry. You’ve been denied. Okay. Thank you. Yeah. Now you’re in your best clothes in a booth and a bank. Yeah. I mean, I’m sorry. I’ll just leave. But I mean, at least nobody knew I got denied. Yeah. And the flip side of that is, you know, I can remember a time way back when you had a relationship with your banker and your banker would actually come to see you. And if you picked up the phone and you said, you know, hey, Bob, I need the bar of $10,000. Bob will go, yeah, no problem. You know Steve, though, that still does exist. It’s that, you know, these people call them flyover states, but in a lot of places in the Midwest, you know, there’s local banks there and you, you know, you do know the manager or the, you know, the bank, right? And you go in there and a lot of it is credit based on, you know, your history with that bank. My brother had a relationship like that set up at his local bank for years where he could just go in and because of his word, you know, that, how much money do you need, Dave? Okay. Here you go. And no matter what, he would make sure it was paid back, right? And so that does still exist. It’s just not on the outer edges of the country. Well, as, as fate would have it, as we’re sitting here recording this, I just get a news alert that congressional leaders and President Trump have reached a tentative deal to reopen the government without wall funds. So maybe people will get paychecks soon and they’ll have to pay all those late fees and take the credit ding for not getting paid missing bills. Anyway, let’s move on. The last one is a really in two minutes, a complicated question. If you want to read the question, it’s at getoutofdebt.org slash 118540 118540. The big thing I want to talk about this reader question I sent it to you, it’s a book, is that sometimes there’s always an option to deal with debt. But sometimes it’s going to involve some sort of sacrifice. There’s no magic wand, is there? Sometimes? Yeah. All the time. Yeah, it’s always going to be a sacrifice. Well, and so you may have to give up something in order to achieve your goal. You may have to downsize or file bankruptcy, get rid of your consumer debt to afford your student loan debt that can’t be discharged or something else. I mean, Damon, how many times do you have to bring people to reality? Every time somebody calls me for help. And no, and it’s not like I have to bring everybody to reality because most people know it. They just what they need is somebody that an outside perspective that can just run through the different options because my job as a consultant and a coach is not to tell them like you get on these national radio programs that, oh, you have to sell your house or you have to do this or you have to do that. No, it’s not like that. There’s usually several different strategies and options. So my job is to say, look, here’s the different ways that we can mathematically deal with this. Here’s the pros. Here’s the cons of each of these strategies. Some are going to require more sacrifice than others, but it’s your life and it’s your money and it’s your credit, it’s your job to decide. My job is to really lay it out for you really clearly so you can look at each one of them and mull it over and decide what’s right for you because typically everything’s going to have different degrees of sacrifice like the Dave Ramsey eating beans and rice and what living like nobody else today. So you could live like nobody else tomorrow. Oh, don’t even get me on day. That’s fine. And it works for some people, but it doesn’t work for everybody. Some people aren’t ready to do that extreme and they don’t want to downsize their life. So there’s other options that you have to look at and then you have to let the client decide what’s right for them and their family. I’m with you. It doesn’t have to be about extremes. It has to be about making an informed decision that you can stick with for a long period of time to deal with your situation. That’s it. I mean, you can have a quick solution to problem debt like bankruptcy as long as it’s part of a plan on how you’re going to do better moving forward. That’s all. Yeah. And I get a lot of people come and say, oh, I don’t want to file bankruptcy. And again, I’m not here pushing bankruptcy, but the way I look at it is I like to go through and look at process of elimination. Okay, if you’re going to say no to something, let’s make sure we know why you’re saying no, not just because you read something on the internet or you heard that it’s going to ruin your life for 10 years or whatever. Let’s go through and then if we find some non-starters, great, we can at least check that off the list. But now you can make a more informed decision because we looked at every single thing. And I can’t tell you how many times people have come to me. I don’t want to file bankruptcy, but then we explored a little bit. And then they realized that bankruptcy is not going to do to them what they thought it was going to do. And then they’re like, well, can you find a bankruptcy attorney for me? I want to get this done tomorrow. And again, it’s not my job. I’m not here trying to push people into bankruptcy. I’m not a bankruptcy attorney. My job is to just give them a good understanding without giving them a rosy version of debt settlement or a rosy version of bankruptcy or what they’ll typically get when they call any kind of debt relief program. They’re going to get a sales pitch on whatever they’re selling. I give them the no-holds bar. This is what it’s going to do to your life. And are you prepared to handle it? And if not, we need to look at something else. Yeah. I mean, typically when people contact a debt relief company, they’re going to get a one-size-fits-all magic solution when people need a customized solution. Do you say typically when they call or all the time? Because I’ve yet to see an example where somebody calls a debt settlement company. And the sales guy who’s probably never negotiated a debt in his life. Didn’t pitch him. Yeah, it goes, oh, we’re the best at everything. Higher us, don’t look at anything else. You know? All right. We’re out of time. Thank you, my friend. And people need to find you. They go to gameandade.com. That’s right. That’s still… Gameandade.com. All right. Thanks a lot. Goodbye. Bye. This is Steve Rhode, your Get Out of Debt Guy. If you want more advice or you want some free help, be sure to visit me at thegetoutofdett.org website. And while you’re at the site, don’t forget to subscribe to this podcast for even more practical tips and advice.