Thinking In the Millions

Thinking in the the Millions
Mental fortitude is more important than market timing or even business strategy in determining whether we are successful in our business endeavors. The current economic environment is a test of our constitution and our tenacity. The slightest chink in our mental armor is enough to ensure defeat. For this reason, I am proud to introduce the Granderson Holdings webinar series based on the mindset I used to graduate with honors from Harvard Law School despite not having the full use of my eyesight for the entire first year. The series is called Thinking in the Millions based on a book that I am writing of the same name, and I will include concepts from this series in this newsletter. I hope you find it empowering.

The Fear Based Mindset

The emotion of fear is natural and instinctive. In fact, it ranks among some of the more important emotions in ensuring our self-preservation. Fear results from the anticipation of harm of some sort: physical harm, emotional harm or financial harm. A near collision with another car at an intersection will induce a state of fear and justifiably so. In this state, we become tense, clench our fists and stiffen our skeletal structure to absorb the anticipated impact. Our attention zeros in on the source of the potential harm, in this case the oncoming car. If our phone were to ring as the threat nears we would undoubtedly fail to notice the ringing, so intent would our focus be. This combination of emotional, psychological and physiological responses in anticipation of a real or perceived threat is natural and healthy.

The problem occurs when the very natural, transient emotion of fear calcifies into the permanent psychological structure I call the fear-based mindset. The fear-based mindset is absolutely not natural or instinctive. It actually requires a fair amount of effort over an extended period of time to develop. But, once developed it influences every decision imaginable. It is literally impossible to achieve significant success when in the grips of the fear-based mindset. For example, when I ask the question

Which statement resonates more with you:
a) I do not want to be poor or
b) I want to be wealthy

Many people respond that it is more important to me not to be poor than it is to be wealthy. The immediate justification then follows that this is simply because they are not materialistic. But when I pursue the line questioning I often find that for that person, it is more important not to feel pain than to feel good. It is more important not to be fired than to be promoted, etc. This is the fear-based mindset in a state of full development.

The fear-based mindset is a problem of directional focus. When crossing a high rope bridge the guide will instruct you not to look down. Why? Essentially the guide is telling you that you have the motor skills to cross the bridge already in your possession. But if you look down you will become so paralyzed with fear, you will be unable to call upon those motor skills. The fear will so consume your focus you will be unable to execute a task you are perfectly capable of executing (for the same reason you do not hear the phone ring when the car is about to collide with you).

The fear-based mindset causes us to focus on preventing things from going wrong as opposed to accomplishing goals we have the capacity to realize. The net result is a heavy preoccupation with sustaining the status quo as opposed to a burning desire for progress.

By Kwame J. Granderson

HAFA: Moving on With Dignity

The Home Affordable Modification Program (HAMP) is part of the Making Home Affordable Program announced on March 4 2009. It was designed to help homeowners who are in default, at risk of imminent default or in the foreclosure process save their homes by making available a loan modification to reduce their mortgage payment to 31% of their income.

Of the 3-4 Million eligible delinquent loans, 295,348 have received permanent modifications with another 1,214,805 in various stages of a trial plan according to Treasury Department's progress report in April. But as Laurie Goodman, senior managing director at Amherst Securities pointed out in her testimony before congress at the end of last year, the problem is "the program does not emphasize the re-qualification of the borrower." In other words, if even after the modification, the borrower is massively upside down, the borrower may still consciously decide to default again, which is exactly what is happening in many cases.
So common is this behavior that Corelogic, an industry giant in the field of real estate analytics, has created new software called WillCap in order to predict strategic default behavior. The software analyzes consumer credit, property information, loan product information and local real estate market profiles to determine whether it likely a borrower will continue to pay on a loan, based on the outcomes of the approximately 5M loans that were used as case studies.
In response to the fact that many borrowers that are at risk or in default either can not or will not continue to make their mortgage payments, Home Affordable Foreclosure Alternatives (HAFA) program was introduced in April of this year. HAFA is designed to encourage lenders to offer the alternatives of a short sale or a deed-in-lieu of foreclosure to borrowers otherwise eligible for HAMP.

The structure basically works as follows:
1. Borrower can use the same package that was submitted for the HAMP program to qualify for HAFA.
2. Borrower can be pre-approved for short sale before even listing the property. This is significant because the uncertainty of the short sale approval process makes short sale properties extremely difficult to market.
3. Borrower's are fully released from future liability for the first mortgage debt (no cash contribution, promissory note or deficiency judgment is allowed). Does not apply to a second mortgage and therefore it is helpful to retain a law firm to negotiate a full release from the any other mortgages.
4. Provides up to $3000 in relocation money and $1500 to pay for services related to the application process.

When the only alternative is to move on, the HAFA program is intended to allow the borrower to do so with a clean slate.

By: Kwame J. Granderson

A New Day = A Fresh Start