CW 443: America’s Foreclosure & Shadow Inventory with Chris Cabanillas of the Cabanillas Law Firm

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Welcome to Creating wealth with Jason Hartman. During this program, Jason is going to tell you some really exciting things that you probably haven't thought of before. And a new slant on investing. Fresh new approaches to America's best investment that will enable you to create more wealth and happiness than you ever thought possible. Jason is a genuine, self made multi millionaire who not only talks the talk, but walks the walk. He's been a successful investor for 20 years and currently owns properties in 11 states and 17 cities. This program will help you follow in Jason's footsteps on the road to financial freedom. You really can do it. And now here's your host, Jason Hartman with the complete solution for real estate investors.

Welcome to the Creating wealth show. This is your host, Jason Hartman. This is episode number 443 and this is pretty informal recording. I hope it's not too loud, but we are in Birmingham and it is a rainy Sunday afternoon. Wouldn't you know it, Murphy's Law. For the day of the tour, we have rain.

And yesterday for the Creating wealth seminar, we had sunshine. But that's Murphy's. Murphy's Law, as it were.

And I'm here with one of our.

Attendees and that is Jonathan. Jonathan, welcome.

How are you doing?

Very well, Jason. Really appreciate being out here.

Hey, thank you for coming on the show.

Impromptu.

We were on the bus, we literally.

A couple minutes ago and I said, who will volunteer to do the intro with me? And it is you.

I can get my 15 minutes of fame with Jason at least, right?

Or maybe a little less than 15 minutes. Well, a little more than that, but. Hey, so where are you from, Jonathan?

Yeah, so I'm from Austin, Texas. I've been out there for about two years and from Utah originally, just a little south of Salt Lake. Coming out here onto the tour to learn more about real estate itself. I've been investing for only about three years, just have a duplex, just managing that. So kind of more property management of what I've kind of specialized in, but trying to get into it more. So here in Birmingham, of course, and.

You'Ve got a, you've got a great story because you're only what, 25, right?

Only 25. So I got the duplex about three years ago, as I said. But my goal is by the time I'm 40.

Right.

So in the next 15 years I want to have 100 units at that point. And I think Birmingham is a great Opportunity to kind of start and launch that at least.

That's an awesome goal by the way.

That's an awesome goal. And you work for Dell Computer, is.

That okay to say?

Yep, yep, work for Dell. I'm in their finance department right now, currently in treasury and deal with their debt capital market.

Huh. So are you in like treasury management? You manage the company's money that it has?

I'm on the team that helps and does that. So not so much their liquidity or investments. So those are two different teams. But I am also looking at the bond market and our term loans and ABS loans and just managing, seeing if Dell make sure we're compliant with the bank's covenants and making sure Dell is still supplement which we are.

Right, right.

Good, good.

That's good. Yeah.

That's an amazing company. I mean, you know, started out of.

A dorm room, you know, that's another.

Great American success story is Michael Dell and all. So tell us from yesterday. We had of course the Creating World seminar. We were nine hours of that with a few breaks in there, of course. You know, what, what has the experience been like for you and you know, any questions or thoughts on what you learned yesterday?

Well, the interesting thing that you say it's nine hours, didn't feel like nine hours went by pretty quick, which was fantastic. Very interesting, very dynamic. You're a great presenter. Of course we had a good partners coming in also with you know, self directed IRAs are of course mortgage consultants and other property managers. So that's been a fantastic opportunity, a good education. It's great to actually be here and meet the people that you're actually going to be working with.

Right.

That's one of the big huge values right there. And then understanding of course how real estate is a fantastic asset on its own. For my own question. Right. I've got an opportunity to do a partnership here and trying to understand, I kind of come with more of the real estate experience and knowledge and my partner comes with more of the liquidity and the credit opportunity and saying how do we structure that partnership into a beneficial way for both partners?

Right, right. And so what we talked about last night and yesterday at lunch a little bit was the way to slice the pie, if you will. And since you're in the tech world working for Dell Computer, although you're on the finance side, I recommended an interesting book called Slicing Pie Oddly. And you know, to answer that question, you know, every person in the partnership contributes a different thing and I know you've got an opportunity to raise what about $2 million. And start buying a bunch of properties with your partners. Is it one partner or multiple partners?

Right now it's one that's solid and then we're looking at others that have expressed interest, but we haven't locked it down.

Okay, super. And so you're, you're going to be doing the active part of going out and like deciding on which properties to get get and acquiring the properties, right? Correct. And they're going to be the capital partner. Just put the money in and they want you to.

More passive. Exactly.

Yeah.

Yeah, exactly. So, you know, I would say that, you know, if you put in the same amount of money, which you won't in your case, but say you were to put in each half, one person's the active one, like you might get, you know, 5 or 10% more in equity or put in 5 or 10% less money and get the same equity in order to equalize the partnership. One of the things the slicing pie book does, and that's really designed more for startups, especially tech startups, but I think you can use some of those rules. Yeah. And what you do is since none of you really know how much involvement exactly you'll have in the beginning necessarily, one of the things it does is it tells you to track your hours and then you can track different contributions as well. Like say for example, the other partners go out and raise more capital and they bring more capital in or maybe you bring more capital in. You know, you can offset the amount of pie if you will. That's why it's called slicing pie.

The amount of equity that you own.

In doing that, by the way. And Stephanie, Stephanie, by the way, our local market specialist is here standing by the door. It's kind of cold out here, but you don't have to trap the people in.

You can let them out if they.

Want to come out. You might hear some background noise from other people on the tour just coming in and out of this house we're looking at.

But you know, there's some good ideas there.

Right.

With slicing pie.

So check that out.

They've got an app, they've got a spreadsheet you can download for free, and of course a book. And it's on audio or in printed form too. So that's kind of interesting. But yeah, so I hope I answered that. Now the other thing I wanted to ask you about, you talked about. It's been great to meet the providers. Of course you met them. And the self directed Ira guy in my presentation. But the other real aspect I Wanted you to share that. I think and hope you've benefited from is you got to meet all of these different clients, right?

That's a huge, fantastic benefit right there. Just meeting individuals who are a, have not really done any kind of real estate or other alternative investments and those who have 50, 60 plus units. So you get a whole bandwidth of different kinds of individuals from different backgrounds. And that has been huge value right there. While the information you've presented is awesome, really the true, true value is the network that we're creating and building right here. That's, that's really been well above my expectations of what this property tour could provide.

I've noticed you at our different meals and the breaks and on the bus today, you know, talking with some of the different clients and stuff. So I hope that's been really.

Well, it's been fantastic. Yeah, it's been great. Thank you so much for this, Jason.

Yeah, my pleasure, My pleasure. And folks, I just want to encourage you, as Jonathan mentioned, you know, come to our live events. It gives you a chance to meet our providers, meet our affiliates, and most of all, meet our other clients. You know, some who have been clients for a while. You know, like Fernando's standing right here just a few feet from us. You know, he's purchased over 50 properties from us and you know, different people, different levels, some just starting and some, you know, doing lots of stuff. So it's a good wide variety.

I highly recommend it. Anyone who's any hesitations, don't hesitate. Again, right? Get into real estate, then wait, don't wait to get real estate.

Right?

That's a good famous quote. And we talked about that one yesterday.

Jonathan, thank you so much for joining me on this intro. And now let's get to our guests. It's going to be Chris Cabanes. We're talking about foreclosures and shadow inventory. He's an attorney, owns his own law firm. And I think you're going to get some really interesting stuff out of this. So if you don't have your tickets yet, by the way, for Meet the Masters in January, go to Jason Hartman.com and get your tickets for that early bird pricing available. By the way, we did make a change to that pricing and it is 4.97 at the time of this recording. It goes up as the event approaches, but it includes a guest, so you can bring a guest for the $4.97. Okay, so grab a friend or family.

Member and bring them as well. And we'll look forward to seeing you.

In January At Meet the Masters. Jonathan, thanks for joining me for the intro.

Definitely. Thanks so much, Jason.

Okay, here's our guest, Chris Cabanillas talking about foreclosures and shadow inventory.

It's my pleasure to welcome Chris Cabaneas to the show. He is an expert on foreclosure law and he is the owner of Cabanias law firm. Chris, welcome. How are you?

Good, thank you. Thank you for having me on the show.

Good. Well, hey, just in our pre show quick discussion that we had, you had some very interesting thoughts about foreclosures and shadow inventory and so forth. And the shadow inventory issue has long been debated. I mean, I think I've been talking about this for seven years, easily, maybe longer. And you know, the problem is nobody really knows, except maybe, I don't know, the Federal Reserve probably knows. I guess Janet Yellen probably has a number. Maybe, you know, Fannie Mae does Freddie Mac too. What are your thoughts on this?

Well, what I'm seeing, and this is just through the experience, and we have offices in three states and, and they're all judicial foreclosure states. And what I'm seeing is that the number and the length of time it takes to get through judicial foreclosure is taking a very, very long time. It can take several years on average here. But I think even the larger sort of problem, or if you will, the larger reason that the shadow inventory is so big is that so many people haven't even been sued. So I'm seeing just a ton of people that maybe haven't paid their mortgage in three to five years. Maybe they've given up hope on getting a loan mod modification. And yet the. The entity that owns the loan. And I say entity downs alone because even though we always call it banks, it's typically not a bank. It's usually a securitized entity that was created to buy up all the loans that entities not proceeding with a foreclosure action against them. And so when you look at this, you have a situation where, you know, the foreclosure activity might not seem like it's very high, but somebody could be in default for thousands of days.

Yeah. Oh, no, it's insane. I mean, it's just really insane. You know, do you have a list? Maybe you can just, you know, name off a few of the, you know, the major states that are judicial foreclosure states.

Sure. The big ones are Florida, New York, New Jersey and Connecticut.

So why, I mean, judicial foreclosure to me seems like an absolute disaster, right or wrong. And Then do you have an opinion as to why that law hasn't changed in those states?

Well, I, Yeah, I think. Well, first off, it's just, it's just the setup of sort of how they have it. I think frankly that what's happened is you've had two things in judicial foreclosure, right? So somebody, they have to take them to court and they have to go and obtain a judgment of foreclosure and sale. Well, as we have all heard about, there was a huge problem with robo signing and a lot of the documentation not being in order when these cases were brought. And these cases were primarily brought by sort of these large mill factory kind of law firms that were just sort of just printing out these foreclosure actions and not really doing the proper due diligence. So in traditional foreclosure, when they started getting these cases, started getting defended, there was a lot of holes that got exposed in the system of how they did it. And you know, one of the big problems along the way was that these mortgages, since they were packaged up and sold into these securitized entities, there are certain transfers that needed to take place and those transfers taking place during the mania to get these mortgages packaged into these securities. So what's happened is now they're trying to go enforce the security these, these mortgages. And a lot of that, a lot of the deficiencies were exposed in the judicial foreclosure process. So they were having difficulty moving those cases forward. And so that's, you know, so I'd say on the one hand that's really one of the big reasons that why got delayed up. Now they had a lot of the states responded, these judicial foreclosure states responded with requirements such as in New York, for example, that the plaintiff's attorneys have to sign affidavits and certify that an attorney has really looked at the documentation and you know, sign on a name that, yes, you know, everything is in order for us to be able to proceed with this foreclosure action. So that's just going to take time for them to get the documentation together and for somebody to look at and actually sign their name to it. You know, that that's, that's held up the process a bit. But then I think secondly, what's happened is that these states, in response to sort of seeing these problems with the documentation and the robo signing, etcetera, They've all created these procedures in their court systems to say, hey, look, if it's a foreclosure case before we're going to allow this thing to really get litigated on the.

Particulars or on the substantive nature of the case. We're going to make both sides go to mandatory foreclosure mediation. And so it's been great for homeowners who really are trying to, you know, they. Maybe they've had a lot of frustration dealing, dealing directly with the banks or lost paperwork, et cetera. This puts the bank and their bank's lawyers on the hook to actually have to give these people a fair shot to try to get it modified so that, you know, that's a process that probably can take anywhere from three months to a year. In many times, I've seen some of those mediations go on for a year and a half. So I think both of those two things together have really dragged out the process of foreclosure, if the foreclosure started. But again, I think that the bigger reason is simply that I think there's some sort of conscious effort on behalf of these entities, and maybe the government is encouraging this to really put on the brakes of bringing so many actions at once.

Yeah, yeah. It just. It just seems so unfair. I mean, listen, banks, their list of sins is so long as to be, you know, we don't have enough time to talk about them. But by the same token, I mean, it seems really unfair to lenders. It's, it's not necessarily even the banks. It's the investors, of course, because these are all securitized, as we've discussed. It just seems really unfair that people should be able to live in their house for free for three years. I mean, doesn't it? Yeah.

I mean, on the one hand, you would. You would think that, you know, it sounds like, well, they're being allowed to, but again, it's not even so much that they're allowed to. Again, remember, I, again, I stand firmly behind the belief that the majority of these people, if the banks really, if the banks or the entities that own really wanted to move the foreclosure actions forward, they could. You know, the statistics that I've seen in New York, for example, show that, you know, only 5% of homeowners who are getting sued for foreclosure actually go to court and fight the case, which means that 95% of these cases could be won on just simply a default judgment. But again, they're not moving it forward, and I don't know why. I think it's got to be a conscious effort that maybe they don't want to overwhelm the market with all this, you know, new inventory. But again, I think it makes it for a difficult, for difficult understanding of really what the landscape is. Are we really through the foreclosure process and all the bad times that everybody has been, was really talking about back in 2009 and 2010, or is it still there? It's just not really, you know, really being, you know, being exposed. We're really just kicking the can down the road, which is what I think is going on.

Well, America is very good at kicking the can down the road in so many ways. That's right, yeah. We never want to take our medicine in this country, do we? We just want to. We'll do it tomorrow, you know, but that's another issue. So what are your thoughts on shadow inventory then?

Well, I think that there is just still a huge market that's out there. I think that, look, I think it. Since we didn't want to take our medicine right away, I think what's happened is it's become more politically acceptable for people to allow this situation to go on because it allowed for the market to stabilize a little bit. I think the hope is, look, if the economy starts to improve, people will be, you know, the anger against, you know, the investment bank, et cetera, after the financial crisis, that's sort of gone away. And you know, if you can go back to sort of business as usual as it used to be, you know, so I think it's really allowing for that to happen. But you know, frankly, I think that it's, you know, I think that it's. At the end of the day, it's really going to hold up a true recovery for quite some time because those properties are still going to start slowly out and hitting the market. But I think, you know, I think, I think if we look back in 20 years, we'll probably end up saying that it was the right call because it didn't allow for the market to be overwhelmed with all the foreclosure properties. So I guess time is. Time's gonna have to. Time's gonna have to tell.

Okay. And I want to get some context for this discussion. Chris, in what states do you practice law?

Our office represents homeowners in New York, New Jersey and Connecticut.

Okay, so New York, New Jersey and Connecticut, all fairly high flying states. Certainly New York is. And when I say high flying, I mean cyclical non linear markets like California, like, you know, South Florida, Miami, Fort Lauderdale, you know, fairly expensive markets for sure. Right?

Yeah, absolutely.

Yeah. So when you talk about shadow inventory I just want to try and make a distinction here. In these states with judicial foreclosures, that's where the shadow inventory problem would seem larger, wouldn't it?

Yeah, I would think so. Because in the other markets they can more quickly take over the property. But again, we don't know if they are again, like, you know, like, I don't know if they have the ability to take over the trustees in the non judicial foreclosure states. I know that they have the ability to do it more quickly. I don't know if they're executing on it from, from what I've seen and heard, it was a faster transition there, that they did take it over more quickly. But I got to think probably still shadow inventory there as well, that you know, where these situations where they can sort of execute and take the property over more quickly, but they don't.

Right, and I agree with you that there may well be that situation. But it's so much easier for the lenders to foreclose in those non judicial states, right?

Oh, absolutely, 100%.

Yeah.

I mean, in California, if you wanted to, you could foreclose in 111 days, right? You know, that's right.

Yeah, that's right. I mean, New York, it's, you know, it's, it could never be that.

I mean, I remember quoting stats on prior episodes a long time ago saying that the average foreclosure in Florida took like 960 days. I mean, that is insanity.

That's right. That's right.

Yeah.

It can take, it can take that long to process again. But again, I think that, you know, you know, look, I've seen foreclosures in New York that have been handled by sort of these larger, more mill firms and they sort of have more of a process. And I think that those take longer than, you know, the guy down the street who might be, you know, holding on to one mortgage. And he maybe, maybe he, you know, it's more personal. It's not exactly more quickly because there are steps you can take to move it faster. I just think that they, they have so many files that they're dealing with that they're just sort of slowly getting through it.

With that in mind, what you really see here is once again the government with its, its old laws, I'm going to call these old fashioned laws, judicial foreclosure. They're really inhibiting what's known as price discovery. Because if they would let this inventory clear the market and resell and be reused by someone who will actually pay for it, Then you'd have price discovery and you would have this healing much, much faster. It is. Gosh, it's very frustrating.

Yeah, no, I can see it. And I think also too is that, you know, you also have issues related to the title of these properties, I think, which is causing a lot of problems as well, because I've even seen cases where, you know, the foreclosure, the properties have been foreclosed on yet. The, the asset managers haven't moved forward to take the property over to try to resell it. I mean, it's just, it doesn't, it doesn't make sense to me, but I see it happening.

Yeah, yeah. No question about it. Okay, so talk to us about some of the things people can do if they're facing foreclosure, whether it be on a home in which they live or an investment property.

Well, the first thing you have to figure out is, you know, who's the mortgage servicer? Is this a mortgage servicer? And also, you know, who's the investor are these mortgage servicers and investors that are modification friendly? I'd say the far majority of them are receptive and open to modifications, especially if those loans have been taken out pre January 1, 2009, because then for the most part, you'll have the Making Home Affordable program apply to these types of mortgages. And that's where they're trying to push to get the payments for principal, interest, taxes and insurance down to around the 31% of gross income number. And so, you know, if it is, you can modify. Now, it used to be the case that only principal residences could be modified under this program. Well, that's been switched as of, I'd say about 18 months ago to a program now where actually, even if it's an investment property, can also be considered for the Making Home Affordable HAMP program. So, you know, I'd say, you know, the first question is, you know, do you want to try to modify. And if you modify, there is a lot of those banks that have these programs out there. Aside from that, one way to sort of try to get out from the situation as undamaged as you can, would be to consider a short sale or sale of the property. I say short sale because the majority of these properties are what you call upside down, meaning that the amount owed on the mortgages is greater than the property value. Well, unless you're going to come up with the difference in money when you go to sell that property for its current market rate and you owe more than it, you're going to have to ask the bank to forgive that amount to allow you to sell for that lesser amount. And that's called a short sale. So a lot of people.

Take that route as well. They want to try to get out of that situation and do it that way. Now, there are certain tax consequences involved with doing that. I think anybody who's going to consider these different approaches or avenues really needs to consider that, speak to their tax advisors regarding that on how to handle that, because it could be an unwelcome surprise if you have a cancellation of debt and don't treat it correctly for tax purposes. Other than that, what's very interesting I found, and this was sort of the biggest surprise that I saw along the way, is that you've heard a lot of people talk about what's called a deed in lieu or basically where they want to just sort of hand the property back over to the bank.

Yeah, deed in lieu of foreclosure. Sure. And so what's going on there, there?

I've seen that it is very difficult. That's probably the most difficult out of the three options.

Yeah, I agree.

Because the bank, the banks simply don't want to take the properties over that quickly. And they'll often, you know, make sure that you have the property completely vacant before they'll do that, or they'll want to see you attempt to try to have the property sold via short sale before they're willing to entertain it. So, you know, I have, I've had a lot of situations where I have people, they've moved out of the property, they want to move on with their lives and, you know, they can't because the deed still remains in their name.

I wonder why deed in lieu is the hardest. I mean, isn't that weird? And one thing I want to also ask you is when you talk about loan modification, speak to the concept of modifying the rate or the terms versus the actual principal balance of the loan. But first, the deed in lieu question.

Yeah, yeah. So, you know, with the deed in lieu as why they will want to get over. It's an excellent point. I mean, I've read some statistics that said that, look, when a property is sold via short sale, it's likely going to be sold for an amount greater than if the bank takes it over and tries to sell it as an reo. So I've seen that statistic a number of times. In fact, I've seen statistics say that a property sold at REO is likely to be sold for 25% lower than that same property if it were to be sold via short sale. So on the one hand, that could be one reason. I think realistically, though, on the other hand, they simply don't want to take on the liability of having to deal with this property. You have to maintain the property. A lot of the municipalities are getting upset when they see that banks have taken over properties in the past. The property then goes in disrepair, or perhaps there's squatters sitting in there and living in there.

So I think that there's one other just sort of high touch, human aspect that I think happens a lot of times in the practice of a short sale. And that's the fact that the people are usually living in the property. And as they're doing their short sale, the sellers who are in default, they're seeing these people come through and, and many times they get to meet them and, you know, they don't want to rip the pipes out of the wall and steal the microwave because they met these people.

That's a good point.

It's, it's. They'll usually leave the property in reasonably decent condition because it's kind of this, you know, they've looked, they may have looked them in the eye. Okay, if you will, and shaken their hand and, and you know, they know it's like a real person taking over the property versus some big institute, you know, faceless institution. Okay. So. So I think that's another reason. Short sales sell for more.

I would agree with that. Correct. Yeah. So again, yeah, so I think that, yeah, they don't want to take these properties over. The municipalities oftentimes are holding them liable if the property's not nicely maintained. And I think, I mean, I'm just supposing that that's got to be one of the reasons that they're not really in the business of trying to take title to these properties. But again, by them doing that, by that, if you have somebody that's willing to hand you in the keys and they're not paying you the mortgage and you have the ability to take the keys back, I mean, it's common sense that we would think that, yeah, we'd want to go ahead and do that, and for whatever reason, they're not. So again, I think that a large part of this shadow inventory, it's not just set up. It's not just a function of, oh, it's the judicial system that's preventing this from happening. No, in fact, I think it's by design. The owners of these mortgages, these owners of these, these properties simply don't want to take it over for whatever business reason that is.

Talk to us for just a moment, if you would, about.

How someone should engage with a foreclosure defense attorney. Should they be expected to pay an upfront fee? Is it the typical, you know, sign a retainer agreement for an hourly fee attorney relationship? Is it a flat fee? How it. Does it work?

That's a good. That's a great question. I think, look, I think each situation's differently. I mean, I know that and also it's very important, you know, which jurisdiction you're in and how they do it. In the New York, New Jersey, Connecticut area where we practice, you know, we're governed by strict rules as to, you know, the retainer agreement and the attorney client relationship and how we do that. So. But yet we have flexibility in how we can design sort of how we're going to get paid, I think, to do it hourly. Most people probably aren't open to doing it hourly because they want to be able to sort of limit their expectation of what their investment's going to be in trying to produce a particular result. You know, some people do it differently. The way that we do it sometimes is we might do it by action or activity. So if we have to go to court, there's going to be a certain fee. If we have to do a certain type of pleading in court, there's going to be a certain type of fee. And then, you know, then maybe you have some sort of blend for hourly on how you're going to do it. If you're trying to, on the transactional part of trying to work out a deal, you know, there's, there's different ways to do it. I think what's important is, is to make sure though, that, that you are certainly going with somebody that's licensed in, in the area of law of what you're doing, certainly somebody that has an office that you're going to be seeing face to face. I mean, I've heard so many horror stories about people that they were enlisting people from out of state from across the country to help them with a modification or something like that. And, you know, that's, that was bound to be a problem later on because if you can't, at the end of the day, if you can't sit down and look your attorney in the eye and look over the file together, you're really not knowing what they're going to do because they're simply on the other line of a telephone. That's not, that's not good enough. So I would say Certainly, you know, do your due diligence in meeting with them and sitting down. But then also, you know, really, I.

Just want to speak to that for a moment, though. And I hate to sound like such a skeptic, but that isn't foolproof by any means. I've met many attorneys who have not done very good work for me over the years that I've met in person. And, and certainly Mr. Bernie Madoff met a lot of people in his physical networking.

Yeah, well, certainly.

Well, I mean, also, I mean, he was hanging out at country clubs and charity events and met all those people and, you know, scammed them just the same.

Yeah, well, I mean, look, I think that, I think that, look, the reality is that if it's, if it's an in person attorney that you're meeting with, I mean, the likelihood of really being scammed is one thing. I mean, I think you got to be realistic as to the result that you're looking to get, and you got to be upfront with the people that you're meeting with. Certainly anybody that we're sitting down with, you know, we work tirelessly to explain, you know, this is the expectations is what you could see to have. And, you know, we don't take every case that walks in the door. I mean, that's, that's our experience. Are there other people out there that, that, that are fraudsters?

Sure.

I think that you got to be careful in anything that you do.

Yep, of course. Yeah. Okay. Anyway, go ahead with what you were saying.

Yeah, so I think that's the best way. Another way is that, you know, there's local bar associations within most people's jurisdictions. So, you know, in New York, you know, pretty much every county has their own bar association. Certainly there they have referral networks that perhaps if you're looking for help, you can look for some there. So that's another way to find help.

Interesting stuff. Interesting stuff. What would you say? The average. I guess you probably sort of thinking in a loan amount, and I doubt that as a lawyer, you're thinking too much on the numbers. But, you know, just anecdotally, do you have an idea as to the average loan amount that you're negotiating? Average mortgage size?

Yeah, the average mortgage size. You know, it really depends whether it's New York, New Jersey or Connecticut. I would say in New York, in the areas that we work, it's probably about half a million. I would say in Connecticut, depending on which part, you're probably somewhere closer to around 300.

300.

And I would say in New Jersey, right. Worth 300,000. Yeah, in New Jersey, I would say it's probably somewhere around the 250.

Okay. And then, and then, and we should note that's the loan amount which may or may not be close to the property value. So.

Yeah, oh, oh yeah. It's almost, it's almost never close to the property value because that's the loan amount. But then you have maybe all the back payments. So when you freely add up all that stuff, it could be maybe 50 to 100% higher. That so. But then you got to look at the property values. Oftentimes these properties were purchased overwhelmingly. They were purchased during the boom times of 2004 to 2006 or 2007. And so a lot of these properties have dropped from those highs maybe in value, maybe I'd say at least 25% to 50% in some cases. So you have a situation where there's a lot of people that owe a lot more money on their property, on their home than it's worth. And what happens is that I think that, you know, a lot of the sort of the government has done, has pushed Fannie and Freddie Mac, who are the majority owners of most of these loans to some extent to try to give relief in terms of modifications. But that's primarily only been to give modifications in terms of reducing the interest rates that are being applied, which is helpful and you know, extending the terms out that can allow somebody to have a lower payment. But I think if you're really going to look at it sooner or later a lot of these people who are getting those types of modifications, if they remain underwater, significantly underwater, they sooner or later are going to make the business decision that you know what, it's not worth putting the money in anymore. They're going to want to walk. So I think. And the problem's been that Fannie and Freddie have not been granting principal reductions. And I think what needs to happen is if we really want to see encouragement in trying to get through this problem, the modifications, the Fannie and Freddie should be allowed to give principal reduction.

I think it's going to go a good points. Well, thank you so much. And I just want to stress the distinction of that the markets you're dealing in are these high priced markets. This is not the Midwest, it's not the South. So of course that market varies pretty dramatically around the country. Of course. I love it when these people, Chris, and I'm sure you'll appreciate this too, they go on CNBC and they talk about the housing market in Corporations quotes as if there's some single national housing market in a country as large and diverse as the United states with about 400 metropolitan statistical areas. So you know, good, good points. And I boy, judicial foreclosure, I tell you, if I had my own state and I ran it wouldn't, I wouldn't have judicial foreclosure because that's just too crazy. But we'll see how this works itself out. And gosh, I wonder if these multimillion dollar New York little tiny condos are going to see a drop in value. They may.

Well no, I think that, no, I think you hit it on the head when you said that each market is a different market. I mean in the markets that we're talking about, I mean Manhattan is probably completely excluded from the conversation. I mean that's a market all its own. And I don't think that hasn't suffered a bit.

Yeah, yeah, but I still think it's way too expensive. And you know, it's just, I don't know, I, I just think the world is changing a lot. You know, I used to say, you know, look at the three cardinal rules of real estate were location, location, location. Right. Everybody's heard that and I think that's becoming, it's still certainly important. I mean everyone, buddy. Wants to be in a well located area. But you know, that's becoming less important as we see these digital nomads, ads and people, you know, running pretty good businesses from all over the planet. I mean they can live in these lifestyle destinations now. You don't need to be in Silicon Valley and have to have a tech company. Although it's cool if you are, I get it, there are benefits. But it, it's just that geography is a little less meaningful than it's been for sure. Okay. And, and that's my point.

Yeah, yeah, I would agree with that. I think what's interesting to note about Manhattan though and what's happening there is that you know, so many, so much of the property prices and everything that's shooting up or so many foreign investment, there's people who are just, they're just, they're just, they're parking money.

They may, they may never, they may never live, they may never sleep at night in the apartments that they're buying.

Let me tell you what's really interesting about that too. I mean we have lots of investors from all over the world that contact us to invest in American real estate. And America has always been known as the Brinks truck. You know, where wealthy or upper middle class, if there are any. There's not that many, but it's mostly real wealthy foreigners, whether they be Chinese, Russian, Ukrainian, you know, South American, whatever. Right. They always, always want to park some money in America. And I think that really, even now, even as mismanaged as the US Is, you know, I mean, it's, it's still, we've still, we still got that. You know, I think that bodes really well for the US I really do. Good stuff. Well, hey, it's been really fascinating talking to you. Give out your website, tell people where they can find out more.

Absolutely. Thank you. You can reach me at www.cabaneaslaw.com, which is C, A, B as in boy, A, N, I, L, L.

Chris Cabaneas, thank you so much for joining us today.

My pleasure. Thank you.

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