KCAA: The Mortgage Voice with Jeff Barton (Sun, 9 Jun, 2024)

KCAA: The Mortgage Voice with Jeff Barton on Sun, 9 Jun, 2024

Episode Transcript

(00:00):
Now to provide you with insights andhelp you navigate the consistently changing world of
real estate lending. Here is yourhost for the Mortgage Voice, Jeff Barton.
Welcome back everybody on Jeff Barton,your voice in the mortgage industry.
Thanks very much for tuning into theshow for listening to us on a weekly
basis, as we bring to youthe interesting, fascinating and ever changing world

(00:20):
of mortgages, mortgage pricing, aswell as real estate news in the Inland
Empire. The ie we love thatout there and I know you're baking under
this sun. Wow, it gothot quick, didn't it. And some
of the things that we are tryingto deal with around that, whether it
be can you get proper home insurance? We've talked a lot about that on
the air, and we have anupcoming guest in a couple of weeks to

(00:43):
do with that, a guy fromthe insurance agencies. Guy's been dealing with
it for a long time. Veryinteresting, but we'll bring you that in
a couple of weeks. Also,I think in what we try to do
each and every week bringing to youthe information about not only these kinds of
sectors, but the rates, whythey go up and down. It's interesting
because again we have an interesting newstoday out that the unemployment rate has gone

(01:08):
up, yet we have a massiveamount of people who have been hired last
month in the month of May.So there are a lot of conflicting signals
in the economy. And when webring that to you, what does that
mean for you? Because you're tryingto buy a house, or you're trying
to refine ice a house, you'retrying to take the equity that you have
and turn it into some money makingscheme, whether it be buying a house
and running it out, whether itbe getting into a business. All of

(01:30):
these things are important and so we'regoing to get to it. However,
if you want to see and hearme on a daily weekly basis, and
you can't tune in to CASEAA Radioon Saturday and Sunday, go to YouTube.
Jeff Barton The Mortgage Voice is theYouTube channel that we are on on
YouTube. YouTube is a great placeto get almost anything you want. With

(01:51):
chat GBT, you can look upall kinds of fascinating items and they'll give
you a lot of information. However, on YouTube, they probably have a
video want it. That's how massiveand great that the people at YouTube are
getting. And we're certainly there too, Jeff Martin the Mortgage Voice, we're
also on as I said, CACAA. The people down there, they come

(02:13):
to you and me every week andwe bring you a great show, and
I'm really thankful about that. Let'sget right to it. Oh, before
we even start, there is atremendous amount of I don't know, anxiety
because of this election coming up,and there are people who will stand in
front of you and shout whatever they'regoing to shout about whoever they back or
wherever they hate. The economy itselfis always at the center of all of

(02:38):
these arguments, because if you're betteroff today than you were four years ago,
that's the same. Well, justso you understand that we are pretty
much treading water for the last tento fifteen years in terms of the type
of economic growth we'd have, regardlessof the claims of the people who are
in charge of the country or incharge of the economy. So okay,

(02:59):
so before cod, before COVID,there was Obama, then there was Trump,
then there was Biden. Right,So during the Obama administration, during
his eight years, he averaged twopoint three to three percent in gross domestic
product the GDP, and that wasfor eight years, So that that's Obama's

(03:21):
legacy. Wasn't great, wasn't wasn'tterrible, but it was steady, long
term growth. As you remember,during that time, he had just come
out of the seven and UH sevenand eight crash, the mortgage meltdown,
they called it. Okay. Sothat's where we are in terms of Obama
two point three three percent for eightyears. We came to the Trump administration

(03:46):
and this just before COVID. Wewon't include COVID, we'll mention it,
but before COVID, Trump's economy wasgrowing at two point six seven percent,
so roughly, you know, fortybases points better than Obama's. And as
a result of the long, steadygrowth, the policies that President Trump had
boosted the economy by forty basis points, not a lot, not insignificant,

(04:12):
but really in the same line andin the same vein. Now, if
you throw COVID in there, whichnobody can, because it really threw a
monkey wrench into anything we're talking aboutin terms of the economy today, actually
in today twenty twenty four, Sothe percentage of growth including COVID is one
point four to five percent. Sothat's what I mean. You can't really

(04:33):
include that, right, So ifwe have Obama at two point three three
percent pre COVID, Trump at twopoint six seven percent, now you throw
Biden in there. Now, Biden'snumbers are also skewered because you can't really
go pre COVID because he was postCOVID. He was the guy after COVID
hit and he came in. Andanyway, his particular growth over the last

(04:57):
three and a half years or threeyears plus three point four percent. So
as you can see, the amountthe economy has grown during the twelve to
fifteen years pre COVID through Obama,through Trump, through Biden is not all
that different. And so when wetalk about the economy and how the economy

(05:19):
is affecting you, most people wouldsay that it's bothering them because prices have
gone up inflation, and inflation hasbeen driven by many different factors. The
main factor is too much money inthe system, right, That's what everyone
says, too much money in thesystem. You can't print money, give
it to people and have prices staythe same. You're creating too much demand

(05:43):
with the money you're giving people,and therefore what happens is people are willing
to pay more for products that arescarcer, and even general commodities are scarcer.
So I went searching this week andlooking around through all kinds of things
in the marketplace in regards to this. Now, everybody knows that I drive
around in my car and I eatat gas stations. That's just I don't

(06:04):
know anybody who's in their car alot. That's what we do. We
drive around, we get a coke, we get a snack, and we
keep on driving. And I've beendoing that for I don't know thirty years
since I've been in southern California,especially since most of my work is traveling,
driving around seeing clients, or nowI'm in the medical world doing the

(06:24):
same exact thing. So the snackbusiness itself has really been hit because of
the rising in prices. Now,during the State of the Union, we
had Biden talking about shrink inflation,i e. You're paying the same money
for a product, but there aren'tas many cheetos or potato chips or whatever
is you're buying in the bag.That's one way that inflation effects. The

(06:47):
other way, of course, iswhat are the companies making these products and
how are they doing in terms oftheir business models? And because snack business
is supposed to be recession proof,supposed to be inflation proof, i e.
If you're hungry and you want atwinkiees, you're gonna pay anything you
want because you're in the convenience store. You got nothing else to eat,

(07:09):
and that's what you're gonna buy.So two companies come to mind quickly.
Obviously, the companies that we're talkingabout are Campbell's yep. And what's the
other one here? Hold on asecond, I have it right here in
my notes. Well, Campbell's isone. Anyway, their business has gone
down one percent and PEPSI COO thereit is which owns these two companies are

(07:30):
massive in the snacking business, buttheir business is down two percent. And
what it says is that the generalperson who's driving around out there, who,
as I can tell you by thenumbers in the economy, is really
not that affected by either their jobloss, which hasn't happened, or pay
being cut, which also hasn't happened. What has happened is the things that

(07:55):
you deal with on a daily basishave gone up dramatically. I was at
Starbucks. Now, granted I'm atStarbucks, right, I'm the person on
the coast who goes to Starbucks tobuy a cup of coffee four seventy five
for seventy five. And I said, Wow, that's a very good cup
of coffee you have there. Theylaughed at me and they said, I

(08:16):
know it's not us. Now,granted that was an in store Starbucks,
so you can't. Really that's notan independence store. But in the valley
three twenty five to three point fiftyfor that same cup of coffee, seems
like the gas prices right have justgone up and stayed up. Doesn't make
sense to me. California has itsown gas and its own refinery. Why

(08:39):
does that happen? But these thingsthat I'm talking about affect the general populace.
And that's why when you hear peoplesay the economy was better in the
past, I'm, you know,looking backwards, as if somehow in the
rose colored glasses that we look atthings when we're you know, fawning over
what it used to be. Andwe hear a lot of people do that

(09:01):
about many different things, but aboutthe economy in particular. These nuisance items
are why. In general, foodhas gone up, shelter has gone up,
and obviously gasoline prices and all theother things that we live with have
gone up. But so too haveyour house price I eat gone up about
thirty to fifty percent over the lastthree years. If you're invested in the

(09:24):
stock market, and many people are, that's gone up tremendously. We had
again today record breaking stock market numbers. Whether it's the NASDAC or whether it's
the DOO, or whether it's theRussell or whether it's the bond market,
all doing exceptionally well. And ofcourse, if you're employed, your wages

(09:45):
have gone up about four percent overthe last twelve months. So inflation,
yes, but it has also seenthings that are inflated that are good for
a majority of the people who ownhomes doing very well. So it's a
kind of a mixed bad on that. I hope that confused the heck out
of you. I didn't mean to, but again, I'm Jeff Bartn,

(10:05):
your voice in the mortgage industry.We'll be right back. You're listening to
the Mortgage Voice with Jeff Barton.We'll be right back with more and just
a moment for questions or comments,send emails to info at Melibukumdings dot net.
Now back to the Mortgage Voice withyour host, Jeff Barton. Welcome
back everybody. I'm Jeff Barton,your voice in the mortgage industry. Thanks

(10:28):
very much for tuning into the show, for listening to us as we bring
to you the best news possible aboutthe mortgage and real estate business. We
talked a little bit about in theearlier section about what's happening with the economy
over the last ten or fifteen years, so people get a little bit more
relaxed when it comes to crazy season, which of course is the election.
Anyway, I am Jeff Barton.This is the Mortgage Voice. If you

(10:48):
want to see us in here usgo to Jeff Barton The Mortgage Voice on
YouTube. We also have a greatwebsite if you want to go there see
past guests as well as a wayto get in touch with them. It's
the Mortgage Voice dot com. Andwe are on a number of different podcasts.
Daryl, you got that, Isure do. Jeff. It's Apple
Podcast, Google Podcast, Spotify,Speaker, Stitcher, iHeartMedia, Odyssey,

(11:09):
YouTube, podclips dot Io. Atthe Mortgage Voice dot com excellent. Podclips
dot io great place to centralize yourpodcasting needs. If you want a great
there's a variety of different things there. I want you to go there podclips
dot io and seek out and lookand listen to a bunch of different great
people who will bring you some interestingand fascinating looks at their particular industry.

(11:31):
Whether it's in healthcare, whether it'sme and financial, whether it's an alternative
dispute resolution, whether it's sports orlifestyle. There's a great place for you
if you go to podclips dot ioAgain, I'm Jeff Parton. This is
the mortgage voice. Let's get rightto it. Thirty year fixed rate loan
is its seven point one five percent, fifteen years at six point six oh,

(11:52):
the jumbo is at seven point threeseventy, FAHA is at six point
sixty four, and the VA isat six point sixty five, two years
at four point eight sixty six,and the ten years at four point four
to two, and that spread isabout forty basis points thereabouts. Why have
we not talked about the inversion inso long? Anybody who's listening to the
show for the past few years knowsthat this inversion I e the two year

(12:16):
is paying more than the ten year. That's called the inversion curve. And
why that hasn't been talked about muchin the news over the past two or
three months. The reason is isit used to poortend a recession. Well,
now they've given up on that.Why because after a year of crying
wolf, you know, most peoplewould be like, you know what,

(12:37):
the wolf's not coming. So that'sessentially what they're doing. And I think
the jobs report that came out isa great indication of that, with adding
two hundred and what was it,two to seventy five, Yeah, two
hundred and seventy two thousand jobs inMay. It tells you that the economy
is still rolling along pretty strong.There are indications that a number of different

(13:00):
different places in the economy have comeback to earth Ie pre pandemic levels,
and that's a good thing because whatwe would like to see is inflation join
those groups of economic indicators at twopercent, and that would be good for
you because we would have the Fedlower their interest rate and then we would
tangentially have the mortgage interest rates comedown. I wanted to get into a

(13:22):
little bit of that. Now,this is an explanation that you may or
may not be able to follow,but anyway, I will try to get
it to AA as clearly as possible. Okay, So we always talk about
the FED rate and then we talkabout the mortgage rate. But so many
people think they're the same thing.They're not the same thing. So when
people say, hey, the Fed'sgot to lower the rate in order for

(13:45):
mortgages to go down, that's partiallytrue, but it's not one hundred percent
true. The reason mortgage rates arehigh, one of the reasons is,
yes, the FED rate is atfive point twenty five to five point seventy
five percent. That FED rate iswhat the larger banks borrow from the FED
in order to meet their liquidity requirementson a daily basis. So if they're

(14:09):
short one hundred billion dollars of theliquidity requirement they need today, they have
to go to the FED and borrowit, and they're borrowing it at that
particular rate, either five point twentyfive to five point seventy five depending on
the demand, depending on the agreementwith those member banks. That's how that
particular aspect of the FED monetary policyworks. Now, as the FED raises

(14:35):
that rate, what happens the banksthat come to the FED on a daily
basis to borrow money. To makeup that liquidity, they have to pay
more money. I mean it's obviously, during COVID you had zero point twenty
five percent. Now you have fivepoint seventy five percent. Obviously you're paying
an additional five to five and ahalf percent in interest on a daily basis.

(14:58):
And when you're talking in billions ofthat's a lot of money. And
most of that money is money thatused to be lent to you, the
consumer, either through credit cards ormortgages, or car loans or any number
of other business related activity. Nowthe bank doesn't have it to pay to
you because they're actually having to paythe FED. So what that does is

(15:22):
it takes money out of the system. Now, we've been in this accelerated
market of rising interest rates to theFED for we're going on close to two
years, right, let's say it'stwo years, a year and a half,
two years. What that means iswe've been sucking money out of the
system for that long. So becauseof the fact that we printed so much

(15:46):
money during COVID, rather than givingit to the larger banks as we did
in the great recession in two thousandand eight. This time around, we
flooded the market with not the market, but we gave people money. I
don't know how many twelve hundred dollarschecks, So how many was that three?
I think everyone got three twelve hundreddollars checks. Then there was the

(16:07):
PPP program, so there was alot of money, trillions of dollars of
money in the system, I think. I think at the end it was
close to three to four trillion dollars. Now, to to get an idea
of what a trillion dollars is,think of a million dollars and a stack
of money, and how it goestop of the Empire State building, right,
A billion dollars would stretch to themoon. A trillion dollars probably go

(16:29):
to the sun and back. Sothat's how much in terms of a visual
that we're talking about when we're talkingabout these particular items. So when I
got to thinking today, I said, you know what, let me try
to explain this a little bit abouthow it really works and why these numbers
mean what they mean. If you'relending money to anybody, you want to

(16:51):
make money on the interest, It'sjust the way it is it's business.
It's the way it is. Soif I'm gonna lend money to you,
I'm gonna charge you X amount ofdollars. When you finish the debt,
you're gonna pay me either that interestin one lump sum or you're gonna pay
overtime like an amortized loan. That'sreally the way it works. The rate
itself that we charge you is basedon how cheap the money it is to
me that I buy that I get, But it's also based on the person

(17:14):
that I'm going to take that product, i e. The loan that I
gave to you and sell it tosomebody else. Because this is not George
Bailey's savings and Loan back. Atanybody that doesn't know what I'm talking about,
you're gonna look it up. Becausemost banks all banks. Now maybe
there might be some credit unions tokeep the money, but they don't keep

(17:37):
the loan that they make to youand service it and wait thirty years till
it's paid off. They don't dothat. They take this product and either
sell it to the government agencies Freddiemac Fannie may Ginmy May, or they
sell it to a private investor,sovereign fund What does that mean? Countries

(17:59):
buy us mortgage backed securities. That'sjust the way it is. So countries
buy it, Hedge funds buy it, Wall Street buys it. There are
so many different people out there witha lot of money who want a steady
rate of return on the money thatthey have, so they go out and
they buy mortgage backed securities. Andthat's how that particular part of the business

(18:22):
works. So the mortgage market,through the banks, through the lenders,
gets replenished by selling the product tosomebody else. When you sell, you're
going to sell to the highest bidder, right, makes sense. Everybody knows
that in order to make money inany market, you have to let as
many people know that you're selling aparticular item, and you let that item

(18:48):
fluctuate I e. So you'll seeon a daily basis mortgage backed securities will
go up, we'll go down byhundreds of basis points. Now, if
you're talking about one loan, it'snot that big a deal. When you're
talking about billions of dollars the loans, that is a big deal. So
now we're talking about the FED,who is taking money out of the system.
Now we're talking about the mortgage backedsecurities who are looking for the highest

(19:11):
bidder. These numbers matter. Therate that you pay on your particular loan
is how it is determined whether thatparticular loan can compete with what mortgage backed
securities are going to sell for andthe treasury bonds are going to sell for.
They're competing with each other for yourdollar, for the investor dollar,

(19:34):
who forever is buying those two instruments. And because the Fed has got the
rate at a certain amount, theamount of money that's available to purchase either
the mortgage backed securities or the treasurybond is less than it was previously,
which is why what happens is youhave less money to buy two different assets.

(19:56):
So in order to attract the bestbuyer out there, you have to
offer the most yield. And that'swhy you see treasuries going up. Treasuries
on the tenure. What are theten year tenure today is four point four
to two. Now you're talking abouttrillions of dollars in mortgage backed securities and

(20:17):
trillions of dollars in the rate thatthey're going to charge. In order to
have the FED look at both themortgage backed security market and look at the
UH the bond market, and bothof these things are competing against each other
for the amount of money that theyget out of the system. So you

(20:37):
have the FED removing money from thesystem, two different investment vehicles. Debt
really are being sold onto the Americanmarketplace in all these areas. Now,
what does this have to do withthe rate? Okay, so the rate
has to remain high because they haveto compete with US treasuries in order to

(20:59):
make the buyer well aware and obviouslydesirous of the most return on their money.
So all of these things affect therate, and you won't see the
rate come down until you see themortgage backed securities in general and the Treasury
Department yield come more in line withwhatever the FED has for their particular rate.

(21:23):
So the Fed lower is it byfour percent? You all of a
sudden have an incentive to lower yourrate. Doesn't mean that it's going to
happen, but the incentive is todo that so that you attract more people
to buy your product because it's cheaper. Anyway, I'm Jeff bartin your voice
in the mortgage industry. Thanks verymuch, be right back. You're listening
to the mortgage voice with Jeff Barton. We'll be right back with more and

(21:45):
just a moment. For questions orcomments, send emails to info at melagu
funding dot net. Now back tothe Mortgage Voice with your host, Jeff
Barton. Welcome back everybody on JeffBarton, your voice in the mortgage industry.
Thanks very much for tuning in tothe show to listen to us each
and every week as we bring toyou the news that you can use,
most of the useful news that webring to you or about programs from different

(22:10):
lenders. The way we try tohelp is bring a global view, which
is what I try to do onthe first couple of segments. Then we
bring in experts in the industry tobe able to sort through that and really
give you choices that you can takeadvantage of. One of these people is
Rob Rank, who joins us fromEquity Equity Wave Lending. We've had Equity
Wave on once before but not Rob, so I appreciate him coming to the

(22:32):
show. Rob. How are yougood. How's it going, Jeff?
That's pretty good, Thanks very muchand thanks for coming on. Yeah.
Okay, so, as we weretalking off air, the market has got
some advantages in terms of products thatyou can be able to provide to consumers.
What we'd like to see is anability by which we can take the

(22:56):
equity that's in your home and tobe able to convert that into cash or
some other vehicles, so that youknow the money that you've been making.
Although it's hard to tap into anaccess because of the lock in issue.
How are you guys helping in thatarea? The best way we help We
help like people who are self employedor who have investment properties. We can

(23:18):
provide a second because a lot ofpeople they don't want to touch that first.
Of course, those those rates areso low. Who knows that it's
ever going to get again No,yeah, mine either, but we can
help that. We primarily do businesspurpose loans, So like someone who has
a business and they have a lotof equity in their private residence, we

(23:38):
can actually tap into that equity forthem by providing a second that can get
them the money that they need toexpand their business or you know, acquire
another business, whatever they want touse the money for, or like an
investment property, they want to pullcash out to as down payments for other

(23:59):
properties, other opportunities that they see, or maybe to rehab some of their
properties to increase the value. Thatkind of stuff. That's that's interesting.
Okay, so you talked about asecond loan. Are there trid requirements in
the second loan? It's a businesspurpose loan, so there probably isn't.
But can you explain that part ofit too. With business purpose loans,

(24:19):
it's not some loan. It's juststrictly used for business, so there aren't
trid requirements for that. It's treatedmore like a commercial loan. So there's
no right or decision and that kindof stuff, even on an owner occupied
property, but the funds have tobe used for you know, for their
business or for an investment opportunity thatthey see. I see. So you

(24:41):
can take money out of your home, but you have to use it for
your business, right, Yeah.For the kind of loans we present because
we do basically it's like a statedincome, stated asset. We don't need
to see tax returns because I mean, we know how a lot of self
employed people are our own businesses,and you take all the tax deductions that
you can get. Of course,so a lot of times you don't show,

(25:03):
you know, a lot of positivecash flow even though you are cash
flowing right. So okay, soand okay, let's get down to the
nitty gritty. What kind of creditscore do you need? What kind of
equity do you need to remain inyour property? These type of types of
questions. Yeah, primarily what wedo with the seconds, We'll do a
combined loan to value of sixty percent. We're kind of conservative on that because

(25:26):
it's you know, it's private money. Sure, we don't have a FYCO
requirement. We'd like to see atleast a six hundred score. Huh.
But you know, people have hadsome issues where the scores can go below
six hundred, which is fine.We just need a good explanation and we
see that whatever cause of the problemisn't there anymore. And you're in the
second position on most of these loans. So how do you, I guess,

(25:49):
guard against the issues of you know, people with the lower FYCLE scores
obviously have a lower FYCLE score fora reason. So how do you guys,
do you deal with that higher ratesor do you do with that just
by having that much equity in theproperty. Well, we like to have
the equity position and the rates area little higher. You could get a
better rate if you know, youhad you know, full tax returns and

(26:11):
you could go to your bank andget it sure, but we're a lot
easier. You don't have to providetax returns and that kind of stuff.
It's just more of a short termloan or people taking these out for long
term. What are the terms inthe loan? It's just short term because
we'll do like two year maybe athree year. Okay, on an investment
property, we can do it asan interest only, but on owner occupies

(26:33):
we do what's called a forty yeargrammorization. That's doing two I see,
So it's a bloom payment after twoon this business purpose loan with us or
someone else, or you know,you just pay it off. Depends on
what you use the cash for,I see? And what Who typically is
your client? Who is the typeof person that will come to you for

(26:53):
this type of loan. It's someonewho needs cash pretty fast, their tax
returns don't look stellar for the youknow, the local bank to help them
out, right, Uh, it'sthat kind of stuff. Or they have
lower scores, you know, becausethey had some late pays on mortgage,
or you know, something happened,right, you know, life happened so
that because we overlooked that kind ofstuff. We just want to know that

(27:17):
whatever problem is, it's gone right. But we're not providing like a bailout
or you know, this money isn'tto be used to pay off your credit
cards, because we do look atthat, like if someone has you one
hundred and fifty thousand credit cards,they're maxed out and that's why their scores
are low. It's like, well, what are you actually using this cash
for? I see, so really, if they have low FCO scores,
it's probably due to a medical expensethat you would then say, oh okay,

(27:38):
I understand that one, but notlike that. You know, yeah,
a lot of times that's what itis. You know something the Brett
Earner wasn't bringing in the cash fora while. I see, okay,
very good, and how successful hasit been. I mean a lot of
people need to take money out.So I imagine if doing we do a
lot of a lot of loans,they do a lot of investor properties.

(28:00):
You know, people are taking advantageof that their equity and then you know
the small businesses that need the cashand they can pull it out of there,
you know, because they gained somuch equity in their primary residence right
when they use it, and theyhave a plan usually to pay it back,
because that's always the best thing todo. Do you look at the
ratio prior to COVID happening and theamount of equity in a property or do

(28:22):
you just look at it today?We look at it today. Ok.
There are some areas I don't knowexactly because I don't keep up with them
all the time, but there's someareas where values have dropped, right,
you know, so we're a littleyou know, we kind of look at
them closer, right, and well, you know, we look at the
appraisal in that kind of stuff andsee what's going on in the marketplace.

(28:45):
Right. A lot of the areas, especially southern California, are still,
you know, really strong. Californiais strong. I think the areas you're
talking about are like Texas and Arizonaand there's one other state I read about
it today. Yeah, we don'tdo seconds there, We just do first
I see, And how is howis that mark? The first market?
It's a lot of competition obviously forfewer and fewer borrowers out there. It
looks like, you know, theamount of money, well, we do

(29:07):
it in for our first We cando it for an owner occupied if the
property is free and clear and it'sa business purpose, but mostly our first
are for you know, non owneroccupied properties. And you you're in southern
California and you're doing what other kindof loans here in southern California. Uh,
well, we do the first mortgages, you know, up to a
sixty five percent LTV for purchases okay, foreign nationals. We do some commercial

(29:33):
usually just like up to a fiftyor fifty five percent LTV. And is
that like a unit building or isthat the industrial? What is it?
It can be almost anything. Itjust depends on the property. Yeah.
I don't make those decisions unfortunately,right exactly. That's it's one of our
owners to side on the commercial Alittle more difficult, I understand. Have

(29:56):
you found any issues with your appraisalsat all? I e. Youre having
different culty either getting an appraiser outto the property or getting the proper numbers
that you need in order to dothe loan. I haven't, personally,
Okay, so I haven't talked toany of the other los about that,
But you know, I haven't hadan issue Okay, So it's really it's
full guns ahead. The only problemis is that race are still terribly high.

(30:19):
But that shouldn't affect your second mortgagebusiness at all. No. Yeah,
and in the seconds, the race, it just depends on what their
credit score is and what the LTVis the CLTV, right exactly. Okay,
So and you're in fifty states.Uh, the seconds, we're only
doing in California, and I thinkthere's forty two states we do with the

(30:41):
first. Wow, that's a lot. Yeah, yeah, either forty two
or thirty seven. I can't remember. We're supposed to add some states.
Now, you said you're of thesame age as me almost, so you've
been in the business a long time. You've seen things like this happen before.
Right, rates go way up andbusiness gets off. Yeah, you
know, it's cyclical. It's youknow, the like the Federal reserves trying

(31:03):
to control the economy a little bit, you know, to stifle inflation.
Hopefully they're successful and that start goingback. Yeah, I hear you there.
No, we were just talking inearlier section as to why the Fed
is always the one who's deemed theuh, the person that sets the mortgage
interest rate. Now I was tryingto explain. Well, it's it's more

(31:23):
a confluence of a different events.But certainly the FED has a lot to
say about it, that's for sure. Yeah. Yeah. They always control
the like the money supply, andthey think they can control them, but
they always go too far one wayand too far the other. They can
never get it right. Yeah.I wouldn't want that job like the rest
of us exactly. Hey, listen, I really appreciated Rob coming on the

(31:48):
show. Anyway, you can shoutout a phone numbers so people can get
in touch with you. Sure,you can call me a Rob Rank or
e n K. And my directline is three zero three five two one
seven six two. That's seven sixtwo two three oh three five two one
seven six two two. Is thatright? That's it? Okay, excellent,

(32:09):
Rob, thank you very much forcoming on the show. I really
appreciate it. Yeah, I appreciateit. Jeff, okay, very well,
Well we'll get back to you soon. Thank you. That's Rob Ring
from Equity Wave Lending on Jeff Bartinyour Voice in the Mortgage Industry. We'll
be right back. You're listening tothe Mortgage Voice with Jeff Barton. We'll
be right back with more and justa moment. For questions or comments,

(32:30):
send emails to info at melbu fundingdot net. Now back to the Mortgage
Boys with your host Jeff Barton.Welcome back, everybody. I'm Jeff Bartn,
your voice in the mortgage industry.Thanks very much for tuning into the
show listening to us on a weeklybasis where we bring to you not only
the best news, but the bestpeople. A lot of people that we

(32:51):
do bring on the show give realspecific and they detail out what the programs
are. They generally give you asense that there is hope that you can
get a loan. Guess what,I know that stuff out there, especially
with rates the way they are,but there's a lot of different ways that
you can get alone, get aproperty and be able to feel comfortable in
doing so. In this market,rates always change and you can always either

(33:15):
reduce or increase your monthly payment onthat loan, just depends on who you
go to. And the best peoplethat we know come on our show and
tell you about their programs. Oneof these people who hasn't been on the
show before, and I really appreciateElton doing that. Elton Wong wangs.
I'm sorry about that from New Waveand he joins us. Now, Elton,

(33:36):
how are you. I'm doing great, Jeff, thank you again for
having me on the show. Ihave an opportunity to check out the Mortgage
Voice, and I'm glad to beable to have this opportunity to connect to
your audience. Excellent. Oh that'svery good. Okay, So tell us
a little bit about what New Waveis doing, what type of loans you're
doing, kind of clients you're lookingfor? Sure, So here a new

(33:57):
Wave. We are a wholesale rightvendors specializing in non QM products and programs.
We are located locally in southern California, specifically the city of Industry.
We started out serving the local CaliforniaGolden State and three other states, now
growing to about twenty plus states incounting. So generally speaking, we,

(34:24):
like I mentioned earlier, specialized inthe non QM realm. And what non
QM is it's a product and programcatered to clients who aren't necessarily credit worthy
for the standard qualified mortgage programs,or situations where clients may have been transitioning

(34:46):
through a life chapter change in paystructure that just happens to fall in the
timing that they're purchasing a home orlooking to finance a home, refinance their
homes, and we generally like tocater to those types of clients. Okay,
it's of expertise, Hey do youdo mostly purchase or I can know
that refi is really not a bigseller right now, but some of the

(35:09):
lenders have branched out into seconds orother kinds of business purpose loans. Are
you strictly doing purchase right now?We actually are doing a majority purchase business
currently. However, we do getrefinance business as well, but it's as
you mentioned, with the current marketenvironment, refinances aren't as popular right as

(35:34):
we would hope. But as youalso mentioned, rates are ever changing.
We're definitely hoping for that next refiveboom. Oh yeah, yeah, we
all do well, but you knowwhat, we've been trying to push the
economy. At least a lot ofpeople who talk about the economy are trying
to say, hey, what wereally need is a recession, and then,
of course, you know, everyonewill do better in our business,
as it always happens because rates lowerand then everybody wants to refin and take

(35:57):
money out, So they can sustainthe lifestyle or at least pay their bills.
That doesn't seem like it's gonna happen, even though we've had this inversion
in the two and the ten forso so long. How are you guys
thinking about it long term? Areyou looking at rate staying the way they
are for at least six to eightmonths or what do you think? That's
a great question, Jeff. Inthe interim our outlook in terms of market

(36:20):
environment, we feel even though FEDSin the government will tell us, you
know, they're talking about lowering andcutting rates again, we don't foresee that
being something that will happen, atleast not in the near quarter. Okay.
Going into Q three now, Ithink we're going to be looking at

(36:40):
similar average in terms of rates andwhat's available currently. Okay, So really
what we're doing is treading water toand through the election, probably which I
don't know whether that favors one personor another, but I do know anybody
out there trying to purchase a homeas not happy because you know, obviously

(37:01):
every percentage point more or less isgoing to cost them more or less money.
So how are you dealing with that? In particular? You're just looking
for a particular buyer that doesn't reallyrate sensitive, They just need a way
by which they can purchase. That'sa great question, Jeffs. And how
we go about it in terms ofwith our clientele since we work with folk

(37:22):
brages directly. It really depends ontheir book of business and what their clientele
is looking for. At the moment. We are seeing a trend in a
particular program. I'm not sure ifyou're aware of it. It's called the
DSCR also known as the debt servicecoverage ratio program. It actually originated over

(37:42):
from the commercial side of electing productsand programs and trickle down into a way
that got worked into the residential mortgageside of programs. Sure you explained DSCR.
I know what it is, butmaybe some of the audience don't.
Yeah, of course. D SCRDebt service coverage ratio is a loan that

(38:04):
takes the existing debt of a subjectproperty and the rentability market rentability of the
property and it offsets to its ratioto determine whether it's a positive ratio or
a negative ratio or not negative racialbut a racial of one percent or less.
And what that means and how youcalculate that is, you'll take your

(38:27):
subject properties, monthly principle and interestpayment, proper tax insurance, homeowner association,
et cetera. You add it allup together, and then you take
a look at the rentability in thatmarket and demographic and if that number,
let's just say, for example's sake, it's fifteen hundred, then your market
rentability will if it's fifteen hundred ormore, will your DSCR ratio will be

(38:52):
at one or greater. And that'swhat you want in order to do the
loan. You don't necessarily need tobe at one or greater. Coper.
It does have an impact on pricing. Oh, I see what you're saying.
So if the rents cover the thedebt, then the ratio, that's
absolutely right. The ratio that youget will obviously be a lower rate than

(39:13):
somebody who doesn't. So you dolend on something that doesn't cover the actual
rents, I mean it doesn't coverthe actual mortgage, right, Yes,
that's correct. Okay, if therentability of the property is less than the
expense factor of the home, it'sstill a considerable property and scenario that we
can entertain. I see, anddo you do you look at in a

(39:35):
scenario like that to have at leastsome equity in the property or dealing.
Is there? Yeah, we dohave an LTV restriction, our lung value
restrictions on that will vary depending onthe clients scenario and of course the subject
property and where they're looking at.But yes, there is a restriction we
can't do generally speaking, it's eightypercent, I see, Okay, And

(40:00):
is there I mean, I knowin a lot of these DSc ares there's
no credit requirement? Is there onthese ones that you're lending less than what
the rents cover? Great question.So there's a few DSCR products available.
There is one that does have nocredit requirement, but that's catered to foreign

(40:20):
nationals clients who reside out of stateor country. They don't have a US
FICO scorer, right of course,correct? Yeah, right, Okay,
so there are that isn't a programor option available to Okay, and do
you deal with a lot of foreigninvestors? We actually do be a good
book of our business. I'd saywe were starting out about five percent of

(40:44):
our book came from foreign national business, and it's growing. It's nearing a
thirty percent actually of our book ofbusiness. How is your company growing in
this type of environment? It alwaysfascinates me. I was in the mortgage
business for about thirty years. Igot out of it about almost a year
ago, but it always fascinates mehow companies in tough times seem to be

(41:07):
able to put it together and growtheir company waiting for the next you know,
boom year. And that's great question, Jeff. I mean from my
perspective within this company's outlook, Ithink their business plan and what's in place
in terms of products and programs andflexibility. I think that's what their priorities

(41:29):
are here that sustains such a goodbusiness model. We aren't very risk adverse,
but that could be a double edgedsort. Well yeah, I mean
if the market tanks all of asudden, were property values seem to go
down quickly, it's you know,we don't want to go down with this,
no exactly, And so that's whyI was I was asking you.
I mean, obviously you're banking onthe economy not only staying good, but

(41:52):
also rates to go down. That'sright. Yeah. Generally speaking, we
are looking to grow beyond our currentcoverage and we are doing a lot of
outreach out of state, specifically towardsthe East coast and the Midwest, Oh
Okay, as we are license theretoo. You'd be surprised the number of

(42:13):
brokers and clients that just aren't readilyversed in the non QM realm and these
types of products that are available.So bringing those tools to their tool belt
is what we need to do.That's excellent. Thank you for the information.
Elton. It's we've come to theend of the interview and I appreciate
you coming on the show. Iwant to have you back, so thank

(42:34):
you very much. Could you letpeople know how to get in touch with
you, that'd be great. Yeah, definitely, Jeff, and again thank
you for having me. I reallyappreciate the opportunity. You guys can get
in touch with me directly at mynumber which is six two six three seven
four A two six seven excellent.Thank you very much, and thanks again
for coming on the show. Thankyou. You have a good day you

(42:54):
too. That's Elton Wang from NewWave on Jeff bart and your Voice in
the mortgage industry, and we'll beright back. You're listening to the Mortgage
Voice with Jeff Barton. We'll beright back with more and just a moment.
For questions or comments, send emailsto info at Melo gruppunding dot net.
Now back to the Mortgage Voice withyour host, Jeff Barton. Welcome

(43:17):
back everybody on Jeff Barton, yourvoice in the mortgage industry. Thanks very
much for tuning into the show,for listening to us on a weekly basis.
If you want to see the show, you can go to YouTube Jeff
Barton the Mortgage Voice, and that'son YouTube, been there for a long
long time, hundreds of shows there. You can only always just view what
it is this week, or youknow, see what we've been talking about
for the past two or three weeks. A lot of the topics we bring

(43:38):
up on the show we bring upagain and again and again. The reason
is is because either the problem hasn'tbeen solved, or the product that we're
trying to introduce or talk to youabout is something that really is helping a
lot of different borrowers. We havemany different lenders and people that come on
the show, account executives or differentlenders, as I said, and they
bring to you the products available outthere in the marketplace. Maybe you can

(44:01):
consider them, Maybe you can't.But if you go to the Jeff barton
the Mortgage Voice on YouTube or goto the Mortgage Voice dot com either one
of these places KSEAA dot com aswell. They all have archive shows that
you can listen to and look atget a bit of a trend in terms
of what's been happening over the lastmonth, two months, six weeks,
whatever it is, can help youin order to gain a perspective on the

(44:22):
market. Okay, So in whatwe've been talking about all day on the
on the Mortgage Voice is how ratesare, what they are, where they
come from, Why are they sodifficult to predict, where the FED is
going to be able to help andhurt? And also, let's boil it
down really simply. Okay, let'slook at a couple of house prices and

(44:45):
what different rates would be able toafford them. The lower the rate,
the less impact a rate of sixto five percent is going to be.
Let me give you an example.If you buy a house at two hundred
and fifty thousand dollars seven percent interest, which is currently what we've got going
on seven percentages two hundred and fiftythousand dollars house, the payment will roughly

(45:07):
be sixteen hundred and sixty three dollars. If you buy that same house at
two hundred and fifty three thousand,at five percent, it'll be thirteen hundred
and forty two dollars. Now,anybody who's looking at that can say,
oh, it's about three hundred dollarsdifference in payments from five percent to seven
percent on a two hundred and fiftythousand dollar house. Now it's significant,

(45:31):
but doable for most people. Now, let's just go to the top end.
Let's go to a million dollar house, which a lot of houses in
southern California, certainly San Bernardino andRiverside have their share, and a lot
of people want to buy those typesof houses. But the difference between a
seven percent and five percent is quitea bit different. If you're looking at

(45:52):
a seven percent mortgage at a milliondollars, it's going to cost you sixty
six fifty three month. That's sixthousand, six hundred and fifty three dollars
a month. If you're looking ata five percent interest, it's going to
cost you five thousand, three hundredand sixty eight dollars. That's a twelve
hundred dollars difference. That's quite abit different than the two hundred and fifty

(46:13):
thousand dollars example, where it wasthree hundred dollars difference. This is about
twelve hundred dollars difference. And interms of rate seven to five percent,
that's where we're talking about where weneed to see the rates. We probably
won't for quite some time, butjust to give you an example of how
rates affect your ability to purchase,this is in a if you go to

(46:36):
I think it was on MSN dotcom, you can look it up and
see this particular article which talks abouthow rates are affecting and how the difference
in the price that you pay forthe house really is affected by the rate.
The lower the house price not somuch. A couple hundred, three
hundred dollars is quite a bit differentthan twelve hundred dollars and twelve hundred dollars

(46:57):
added on to you know, thefifty three hundred dollars get you to that
same house at seven percent. AndI think you know, if you're out
there right now and you're trying tofigure out a way but to squeeze you
into a home this, you know, in this market it's hard One of
the things that I wanted to say, though, is we see a lot
more houses on the market. Letme just get to that. Yes,

(47:20):
six hundred and four and twenty twohouses available for purchase right now, and
that is up and seventy four housesfrom last week. Each week I try
to bring you that number so youcan see how the expansion in houses available
is really affecting the marketplace. Andone of the reasons that we don't see

(47:42):
more people jumping into the markets becauseof the rate. Obviously, the rate
and the price. I mean,we may see more houses on the market,
but we don't see enough houses onthe market in order to lower the
rate. The supply and demand justisn't there yet, i e. We
need more houses obviously, lower rates, higher competition for homes for safe well,
that usually would be true, exceptin this particular market, what we

(48:05):
see is a lot of people quit. I'm done, I don't want to
do it anymore. I'll just rent. And we have seen red prices come
down in a lot of different areas, so that is a solution for many
people, or just stay where theyare. I know that in certain states
we've seen an exodus of people.California being one of them, but not
enough to say, hey, look, we have so many people leaving,
we got to lower the house ofprices in order to try to keep them

(48:28):
here. No, that's not happeningyet. Okay, So a couple of
things in the news to use section. I'll just run through it here for
you. The net worth of householdsand nonprofits rose to one hundred and sixty
point eight trillion dollars. Let merepeat that, the net worth of households
that's you, you're listening to theshow you live in a household and nonprofits

(48:52):
rose to one hundred and sixty pointeight trillion dollars. These are numbers that
did not exist. It's just mindboggling. Equity in these homes rows to
three point eight trillion dollars and inreal estate zero point nine trillion dollars.
Okay, So you can see thatas a result of house prices rising,

(49:16):
stock market prices rising, that theamount of overall money that is now worth
in your home, meaning if youare in the stock market and if you
own a home, you're sitting prettygood, even though inflation is at three
and a half percent. And Iconstantly say owning a home is the best

(49:37):
hedge against inflation. Why because normallywhat you will see is supply and demand
like we have today, push theprice of your house higher. How can
you tap into it? We gota couple of guests on the show talk
about it today. Whether it's asecond or whether it's a refinance, or
whether it's pulling money out for abusiness purpose loan i e. Buying another
property. There's all kinds of waysthat you can take advantage of good inflation,

(50:00):
house, stock market, yeah,wage, what with your ability to
be able to do that, toset yourself up for long term, set
your family up for generational wealth.It's a great way to do that.
But uh, okay, a coupleother things here, Okay, real estate
blah blah blah. Mortgage debt right, uh now, mortgage debt in the

(50:22):
US. We have about fifty onemillion mortgages in the US. It says
it's two point three eight trillion dollars. It's up two point one percent from
last year. That's a lot reasonit's up. Obviously, the prices are
up, right, and that's howthat's how we get a rise in the
amount of money that's owed. Buttwo point three eight trillion dollars is the
amount of money that's owed in mortgages, and the household debt is up two

(50:44):
point nine percent. These are allinteresting facts about what's happening in the economy.
As we started off the show talkingabout the long term last fifteen years,
what GDP was. We're talking abouthow equity in your home, equity
in your stock portfolio if you haveone, and certainly wages going up four
percent four point four percent year overyear. All of these things are good

(51:05):
inflation and as you can see theGDP, the annoying thing is yes,
high by snacks and they keep goingup. Gas keeps going up, and
I think that getting a handle onthat particular aspect is the last mile here,
bringing us from three and a halfpercent down to two percent inflation.
I'm Jeff Martin, your voice inthe mortgage industry. We'll see you next
time you're listening to the Mortgage Boyswith Jeff Barton For more on today's topic,

(51:30):
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(59:04):
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Delaware Senator Chris Coons told CBS's Facethe Nation Biden actually wants to solve
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