Episode Transcript
[00:00:00] Speaker A: Hello and welcome to another episode of the Mic'd Up Show. I'm running back from a Mortgage Bankers association of Massachusetts, our annual meeting. And the reason I say that is Mic up show is for all you loan officers, processors, real estate agents, whoever is in housing and wonders what goes on at the national level, even the state level at the conferences, but are not sent because maybe budgetary reasons or your boss thinks you're such a superstar, doesn't want you to get recruited out there. Very common, whatever it may be, you'll learn that it is a big market. 6.5 million expected homes to be closed this year or financed. $6 trillion supposedly of the home ownership plus the journey immediately after buying goods. But it's a small pond and that's why we do this show every Thursday at 11:00am Eastern.
[00:00:58] Speaker B: I'm sorry, it's at 2:00pm Eastern and 11:00am Pacific Time here in sunny San Diego.
[00:01:10] Speaker A: And our guest today is a perfect fit for what we're trying to do here. We often have lenders and maybe we don't enough talk about part of the engine that runs this conference. And this is one of the most distinguished enterprise sales people in the mortgage industry for really larger vendors that come in and typically help these mortgage companies close, from mortgage insurance to I guess, lending in a box and all the ancillary services that come with helping. Shelley Duffy knows everybody and so it really goes really well with the theme we have here. And when we say knows everybody, she knows everybody. And when we talk about our viewership, it's, you know, what is the most important. I think it starts with who runs these mortgage companies. You need to know them when you go or that's what you're trying to get to. And then everything works off of it. So. And Shelly knows them all. And she is coming on Today along with my longtime co host Michael Zhou to talk about rtl, what it is and why lenders in this market are so excited about it coming forward. So thank you, Shelly, for coming on today. I think everybody's excited to hear from you and I think there's a lot of viewers in the LinkedIn world that are here just for you.
[00:02:33] Speaker C: Well, thank you. The Michael and Michael show with a little splash of Shelley today. If I don't, I am not sure that I would exactly say that I know everyone, but if I don't know you, I would like to get to know you in this space. So I do thank you for that and I, I'm happy to be here. There's a lot of exciting you know, information about rtl and I'm ready to talk about it.
[00:02:57] Speaker A: So yeah, let's start with. Before you both dive into it, because Michael's really the expert. But I did want to say by the time people maybe hear this coming out on the podcast where we're on all of the stations, Spotify, Apple, easy to listen to on the plane ride, a lot of people are touching down in Austin, Texas for what's called the IMB Independent Mortgage Banker Conference. For all of you people out there that deal locally, if you don't deal with a bank, you're either dealing with a broker or somebody that underwrites in house. You could listen to some of our episodes. We talk about it. A lot of these companies are larger. They have larger sales forces. I think loan officers need to expand beyond just Fanny and Freddie and lenders need to understand that they have incredible salespeople out there. And you're going to hear Mike and Shelley talk about it. But what's your feeling before we dive into rtl? But like, what is your feeling about this conference coming up and the rumblings behind it? It seems like there's some excitement there, but I think it also shows there's some winners coming out of 2024. And then there's some people just getting by right now that probably can't make it.
[00:04:06] Speaker C: Well, I think that's, I mean, you're right. There are some people that are wondering how are we going to make it? And so I think that, you know, I think about, you know, for me, at Incender Lender Services, there's a lot of services that really are more on the recapture side, if you will, and something different than an interest rate. Right. So I think that you have to, as you're talking to your investors or, you know, vendors and, and what it might be, you know, are there some things that, you know, I really don't want to say that will save you, but really have, you know, some, some lift to it to help you and help you be, you know, we like to use the word in our business more sticky with our consumers, members or borrowers. So I really do think that, you know, there's a lot of good things that are going to be discussed at the conference.
And I mean, that's, that's my opinion of it. I'm excited to go. Ralph and I will both, both be there. Ralph is the, the president of Lending in a Box at in Center. So, you know, our, our schedules getting packed. So a lot of good things that, you know, we're looking Forward to jelly.
[00:05:16] Speaker B: For, for our listeners that don't know you said the word recapture. Recapture means a lot. What does it mean when you say recapture? Recapture clients recapture quality control for mortgage loans. What, what does that mean when you said that or do you remember?
[00:05:29] Speaker C: I use. Yeah, yeah, good point. So I'm using the word recapture in the way of, you know, when you originate a loan, you borrower, you close the loan, it either stays with you go into a servicer, you know what happens when that borrower goes into refinance, you know, because their neighbor did or something, you know, like that. You really, you know, how do you get that customer or client member, whoever it might be, back into your shop? Right. So I'm using the word recapture. How do you, you know, from a servicer's perspective, how do you refinance back into it so I don't actually lose the consumer. That's the, that's the term that I was using for recapture.
[00:06:14] Speaker B: That's interesting. Before we get into rtl. Rtl, just for our listeners out there, RTL stands for residential transition loan. But before we get to that, it's interesting you talk about the recapture. Michael Kelleher, of course, my co host here put out an a LinkedIn article today about Zillow home loans and the amount of volume that they're doing. And when we're looking at how technology is changing the type of originations that the mortgage originator, loan officer, broker, whatever it is supposed to be, client retention or either in the servicing for the retail platform or if you are a broker in marketing, if you're looking to recapture your client, it's going to be critical, especially with the addition of additional technology either in AI or in marketing efforts via email telemarketing by AI. Even so, I think that the more that originators are looking into this, the more it's advancing even beyond even our own comprehension because technology is going faster than the speed of thought. So I don't know if Mike, if you can touch on that briefly before we get to the rtl, because it is something that's actually somewhat live.
[00:07:30] Speaker A: One of the points I made in the post is the point of sale. Everybody's driving everybody to the point of sale. And easy Mortgage apps was one of the people to push it. But we always push the short app, the long app, the 265 clicks once you get a customer. Okay with that. My point is Zillow can put that on their website. Now your servicers can put that on their website. Once people are comfortable, then trust that they went through that and they closed it. Now all of that refinance is being captured. You've. You've taught them how to fish and why RTL is old school. It is something that you're going to have to go to a loan officer that understands it. And I believe it's more relevant than ever for the current inventory. So I am very bullish on the more I dive into this, loan officers that get into this will win. And the. And what's going to drive me nuts. And you guys can kind of highlight why is this is great for a loan officer to learn and go out there and get new business. But the more I hear about it, the more I learn, it's like, hello, the loan officer is already doing the fix and flips. Or our friends with the real estate agents already doing the fix and flips, they need to raise their hand and say, you know, give me this direct liquidity. Let me go out there and. And pour gasoline on it. They're sitting there and I'm just afraid it's not going to translate from the conference scene down to them in the communities. And that's why I'm, I'm excited about this show. I'm excited about Incenter, you know, helping these lenders realize it's available.
So with that said, I think RTL is, to me, okay, it's popular in New York, Wall Street, I call it, but wherever.
[00:09:21] Speaker B: Silicone Valley, the mortgage low, the mortgage, mortgage loan.
[00:09:24] Speaker A: Right. But trickling it down to me as an originator. Let's just like, get right into, like, what RTL is and how do we get from there to fix and flip? Because I'm in the Northeast and there's a lot of people that haven't touched their house in 30 years, aging in place. And when they sell it, the millennials can't vision it, you know, with that, with those cabinets, with those purple cabinets. Who's going to buy those? So, Shelley, do you want to just explain what the acronym RTL stands for when you're talking to IMB's?
[00:09:53] Speaker C: Yeah, it stands for Residential Transition Loans. And look, and you've both said it. You know, these have been around for quite a while. They have other names such as Hard Money, Bridge Loans, and Fix and Flip. So it's not, it's not that we haven't heard these before. It just has a new name, just like fashion, if you will. You know, instead of bell bottoms, they're flared at the bottom. Right. So we're just changing our verbiage a little bit in Our, in our industry.
But you know, I was, you know, just kind of getting into it. If, you know, as we step forward and we talk about, you know, IMBs and loan officers and the education around it, you know, if you really think about it, it's. Independent mortgage bankers already are really set up outside of like your seconds, your HELOCs, your closed end seconds. I mean the mold of it is, is that you have, you know, some of them have retail, you have your loan of your los, you've got your pos, you've got your pricing and you've got your, your doc prep, right? So your tech stack is, is there, right? You're, you, you have first lanes, which these fix and flips or RTLs are first lanes. Right now, I mean we're looking at about a $300,000 loan amount. You know, you look at the pricing, up to maybe five for origination or the points, you know, with the average of about three and a half with some ancillary income in there. You know, the other thing, you know, when you talk about it, you know, as you say fix and flip, if you do a fix and flip and it doesn't flip, you know, what happens then? I mean it's the opportunity to recapture, I guess if I want to use that word again, you know, and that rolls into what we would say is DSCR loans, right. So you know, the people, you know, for those that like to say twofer or whatever it might be, you know, there is that opportunity, you know, that you have. So you know, getting back Michael Kelleher, to your point about loan officers and the opportunity, you know, think of it as, you know, as you want to educate yourself on the fix and flip. But then if it doesn't flip, if that makes sense.
[00:12:12] Speaker A: Yeah. And Mike, maybe you can take it a step further on what I, I think the, for me, the takeaway is there is a vehicle now within center with your, your family office, Mike, where it is going to be much easier for the IMBs to let their loan officers not just go out and do fix and flip, but go out and do fix and flip with the confidence that what they say they're going to be able to deliver on, not give it to the local accountant person that said they were going to do it, then didn't do it and now you're dealing with, you're like, why did I even get in this in the first place? This is finally coming to the IMBs where it's a real product they can count on. Can you dive a little bit further into that, Mike?
[00:12:58] Speaker B: Absolutely. I think that for those of you who, who actually watched HGTV or either on YouTube or on Netflix or on the actual satellite or cable television, if you have cable television, it the making making house flipping easier for the consumer to understand or even for the business owner that that is in real estate, whether they're a real general contractor, it's somewhat unknown. Because the reason, and the reason I say that is because even now if you talk to a general consumer and even certain loan officers that I've spoken to across the United States, there's still the assumption that the only products available are the FHA 203k in order to do it, in order to buy property, have some money to fix it up. And then, and technically, actually if you're an originator and you come across a client that says, yeah, I want to fix and flip this property and they use a 2 or 3K that's technically not really legitimate because that's supposed to be owner occupied. And so you know it, the, the mortgage loan originator really doesn't have a product outside of the DSCR. And if you do DSCR, you need to put anywhere between 20 to 40% down just to get the DSCR mortgage loan. And that, and that doesn't necessarily always help the flipper as well, because what if you're buying a property, say in somewhere, somewhere in the Midwest or the east coast for let's say $400,000 and the after repair value, also known as ARV, is worth $600,000 or $700,000, right. And you say, wow, it sounds like a great deal. And then you start doing the math behind it and you go well, we need 100 for fix up or whatever. And, and that's when you sit there and go, well, wait a second. Yeah, even after everything is done and done, if we can get, we can get a $400,000 on that mortgage loan or even $450,000 after points and fees or whatever, and we just have to come up with fix up cost or they're buying it for $300,000 and they can get $100,000 for fix up cost then. And they maybe they only have to put up, come up with 10% of that purchase price down, that becomes an opportunity or the flipper or the contractor or somewhere where they can actually create inventory in a suburban space where number one new construction isn't happening. Why? Because if you're living in San Diego, Los Angeles or Seattle, Miami, even Boston or even Manhattan, where no one's creating more land in those spaces to build. So the only thing you really can really do is get financing or get some sort of financing in the, in the form of this RTL Residential Transition Loan Fix and flip loan as I'm going to, as I call it, in order to get, to get the deal done. And if you only need to put 10% down for that because you have experience and there are a lot of flippers out there who have experience.
If you can put 10% down, that's a big win, right? Only putting 10% down pay, it's a $300,000 purchase and it's worth 700,000, $30,000 down. And then getting a hundred thousand dollars to go fix up the property. Big wins. And, and, and you can do that inside of an llc. Maybe you're doing it with a family member now get a gift fund or you get some kind of loan or you can get super creative when putting the deal together. And I've been, I mean I've, I have personally flipped properties myself. So for me to get creative is, is not as challenging for me. But I could definitely see if you're an originator out there or independent mortgage banker and you want a creative way in order to create not only revenue for your, for yourself as an originator and an independent mortgage banker, this type of product is not only is it something that you can create for your originators and if you're a loan officer, this is a product I think that you want. You're creating a way or to bring inventory into the market where the average homeowner or the average home buyer, whether they're first time or move up, they really actually don't want to fix up the property. They actually want move, move in, move ready, you know, because if they've got like an 8 year old and a 6 year old or if they got the 3 year old who wants to do construction. I mean, unless.
[00:17:19] Speaker A: Now that's a, that's a great point. You mentioned areas including Boston.
It sounds to me like the real opportunity is like where the salt of the earth people are or where a handshake makes sense. Shelley, what are you finding geographically as somebody that knows everybody? Like how are you going to play this in with, with your contacts at the being after?
[00:17:42] Speaker C: Yeah, I mean I don't want to, you know, exclude anyone. I think that there's opportunity everywhere. But I think that where we have been having conversation is kind of that Middle America, if you will, you know, the Midwest, you know, having some conversations down in this, you know, in the Southeast and really where a lot of the HPA hasn't really peaked yet, if you will.
[00:18:06] Speaker A: I think you're going not to get political, but I saw one of the new Trump administration plans seems to be to open up houses or to build on federal land. A lot of that land actually isn't in the most desirable places as far as jobs go or you know, it's just way out my but it certainly would play into a better inventory. Play it. You at least want to be aware of this so that if in your backyard you here's an idea. I always try to think two steps ahead. If you have any federal land in your mortgage footprint, you should be reaching out to Shelley and saying let's get ready for this. Because how. How recent were we saying survive to 25. And it's like, oh, 25 is already here. Right. So like it'll be 27. Not before we know it, but it'll be 27. And to have another train running parallel to the let's check the rates and the Fed is going to cut or not every quarter. Next thing you know it will be 2027.
The new word for me. Shelly, I'm here and maybe to go off of RTL for a minute, I hear tool, tool in the toolbox. I need another tool. I don't know if that's secret word for I don't want to pay for every seat in my enterprise. How micro of a contract can I get? But are you hearing that a lot out there for lenders to try and find new tools?
[00:19:29] Speaker C: Yes. And I also yes, I actually hear it from different parts of our industry. You know, I've heard it from MI companies trying to put another tool in their toolbox. You know, you hear it from servicers trying to educate, you know, more of their borrowers, you know, more information, the more you know, if you will, you know, out on websites, click here. You know, if you need to know about your taxes or escrow accounts or whatever it might be. But yes, that that is starting to become a common word that we're hearing every single day. Another tool in our toolbox.
[00:20:09] Speaker A: Another question to go on to that. Are you finding the education side of it is that with I am bullish on agentic AI, which is the reason we have not reduced any cost is you can't reduce cost unless you take out people. So if you automate tasks, great, you're more efficient, the loan might move faster, but your costs are not going to go down till you replace people. That's sort of rhetorical. You don't have to touch that third rail if you don't want to. Shelly. My thing is that's agentic AI. That's the AI I'm excited about. I went to the housing wire AI conference. Not sure if you went, but everybody was excited about their own chat GPT that they're making, which is generative AI, which is the ability to like talk and think and they're loading in like all regs or they're loading in these, these documents. You have a long history in this industry from your MI days of going in and educating loan officers. Educating. I know now you help people with operations.
You're a huge resource. Do you think people are getting away from that too much now and like relying on AI that's not the agentic one but the, the ask a question. Do you think that's diluting a little bit of the expertise in our industry?
[00:21:22] Speaker C: I, I do, but I still believe that people want to talk to someone. I think that that's still out there and I think that physically learning the education is there. However, I would say, you know, you look at some of the new first time home buyers when, you know, you look at our generation today and you know, you look at everyone, they're looking up things on app and you know, on an, on their phone and they're googling or they're, you know, looking for it. So yeah, I do think that education out there, if you don't know something, you know, you're automatically going to go out to, you know, and search it. So the more education that you can put and somebody drives to your website, you know, I think it's, I think it's, you're going to need it and people are going to go there. I mean, why should you look at, you know, your property taxes, what's the importance of that? Do you really need mortgage insurance? I mean fix and flip, I mean all of the education is out there and I do think that, you know, people thrive on that and that AI will fulfill that, if you will.
[00:22:26] Speaker B: Shelly, what does. Over at Incenter, we were going through a fix and flip trade of mortgages from one, from one organization to another. Can you explain what Incenter does on behalf of a buyer? You know, you're going to have some independent mortgage bankers, they're watching the show and they're going to want to know more about this space. Can you go and talk about what, what Incenter does on behalf of the buyer and in return also provides feedback back to the originator or the independent mortgage banker that wants to Enter into this space.
[00:22:57] Speaker C: Yeah. I mean, so for us, you know, we're. We're kind of in the middle of that.
You know, we want to educate our IMB partners, you know, anybody, you know, that we're working with on, on the. How it works and, you know, providing them with education, you know, how we can help them get to the buyers that you alluded to earlier. And, you know, the, the advantage of it putting 10% down and then getting them, you know, to the right. Working with you guys, you know, getting those loans to you and, you know, and helping. And helping that IMB or loan officer out to get them there. Because really, you know, we really want to help educate but then also drive them so they'll be successful. So we can, you know, do more of this and get this out. Because like we said before, you know, new construction is not big right now. You know, we have to help create this.
[00:23:55] Speaker B: Sure. I want to add a kudo actually to Insider recently in this, in this recent trade of mortgages that, that we, that we just completed in this last week. Is that what Incenter did with their team? And Shelley doesn't do the actual underwrite. She. She's representing the center. But what they did is they actually looked at the guidelines and said, oh, these, this is what the IMB is doing. Right. And this is what they're not doing. Right. And they're protecting the investor. But actually also, I honestly believe they're also protecting the imb. Protecting the IMB and maybe figuring out, hey, you know what, this is where your underwriting guideline says, and maybe you're not doing this according to the guidelines. And we not only want to protect the investor, but we want to protect you as the IMB in reducing delinquencies or default or fraud or any of those types of things. In other words, the value that the company Incenter is bringing not just to the buyer, but also to the independent mortgage banker is in the form of feedback. And if feedback is the breakfast of champions when taken constructively, then I think that there's a huge value add that Incenter can bring to the independent mortgage banker and also to any buyers, whether it's a family, another family office, a hedge fund, or just an investment fund. And I think that you can look at pre quality control underwriting or post quality control underwriting, and this is more on the post quality control side, but yet it still protects both sides, and there's a lot of value in that. So when Shelley is out there, especially when you're at the imb, Conference. It's not just about. Because everyone wants to know what's in it for you.
Right. It's not just about the IMB creating the business. Because, yes, there's anywhere between 300 plus basis points potential to the IMB and also there, you know, there's money back to the originator, there's back money back to the imb. And all of this also means, and just for contextual purposes, when an incenter does get involved, it also means that there, there's no, there is a higher potential of not having a buyback.
[00:25:58] Speaker C: Yeah, I know. I appreciate that.
Yeah. I mean, we do this day in and day out, you know, in our diligence and, you know, it's something that we offered today and, you know, we take a lot of pride in that. We have folks that are the best of the best that have been in the industry doing this, you know, a long time. You know, we have seen, don't want to skip and overlook something just because we want to make sure that we're getting the deal done. And, you know, we want to make sure that we are doing it, you know, to your point, Michael Zhao, that we're protecting everyone and ourselves, you know, we have a reputation as well. And it's important, you know, not only for us and for you, it's for our industry to keep things. If there's fraud or if they see something, you know, it's okay to say we can't do it. If we lose the deal, then that's okay. But, you know, it's, it's, you know, we are, and you're right, we do want to protect everybody in the transaction. And, you know, we want to keep, you know, we have a good reputation. I'm excited about what we do. You know, again, we do it day in and day out. We've got great technology, we've got great, great people. They've been in the industry a long time.
[00:27:05] Speaker A: That's the beauty of this. You have relationship like it's back to relationships, which when we're Talking with these IMBs, they are excited for this. You have Shelley as the face of a company that is going to mitigate the risks of a buyback. Right. Almost mitigate the risk to buyback. We'll leave it at that. Then you have Michael Zau, and I've seen him talk to the lenders and help really mitigate the risk of an early payoff. Like the most you'll be. Worst case is some interest, you know, interest of the first month. But it's almost over a handshake type relationship that you rarely see. So you bookend both of that. And then from a sales perspective, I don't ever. I keep saying this. Everybody has all. I'm not going to mention them, but we would love to have one sponsor our show. I know five that you're able to see all of the real estate transactions of which loan officer worked, which realtor, and everybody goes in and tells the same story. Now, to the real estate agents used to be donuts. Now it's, oh, I know who you're closing now that I know that there's real estate. Top real estate agents also fix and flip because they're able to get the listings and say, oh, before I list this, I'll just buy it and flip it with my friend and my contractor above market. Right. Like, I'm just saying totally legally do it.
[00:28:22] Speaker C: They.
[00:28:22] Speaker A: They recognize it. That same real estate agent also shows up in those data pieces as doing 12 deals a month that everybody's going for. It's just such an easier way in. And so you have the relationship and I guess. And then like one more point and I'll just tee you up, Shelly, because you already mentioned it, but it's really just getting the right paperwork. They already have the tech stack, and the companies that Michael Zhou and I've seen us work with are doing it on Encompass. They're doing it on the normal data stack or tech stacks, and they're making a million more a year when everybody else was suffering. So you want to just talk about how it's. I think it's. Would you say it's easier than even a second lien to put in place?
[00:29:10] Speaker C: I think it's just like, I mean, like I said, it's, you know, when you look at the mold of it today, I mean, your tech outside of second liens, you know, sometimes that's got to be brokered out something. Sometimes it's not something that you do internally, so it's got to go somewhere else, you know. So when I look at it today, I mean, if you will, it's getting you to the right, you know, investor. It's the experience you already have. We've said it. The tech stack, you've already got everything in place. It's a first mortgage. It's really, you know, I mean, everything looks and feels the same. It's. You've got pricing, you've got your doc prep. I mean, everything is there. It's just, it's, you know, I guess it's almost like, how do you take this type of loan and get it, you know, here it's, you know, let us be the. How it already goes through your system, you know, we can help you guidelines, underwriting, you know, due diligence, whatever it might be. And you have a good experience so you want to continue to do that. So I mean I, I don't want to say it's easy because that's silly. Not, not everything is easy. Let's just say that. But I do feel like it's, it's so similar to what you're doing. You know, the originations that we're seeing today.
[00:30:27] Speaker A: We've helped a couple lenders start this with, with all of your help. It's. If I'm with my capital markets background, if we're helping them do it, it has to be easy. It's just getting the warehouse loading the documents in and xying where to sign. If I was a loan officer, I'll. And I'll tee this up for both of you.
I shouldn't say tee it up because it's actually a difficult question. Not rehearsed. I think the parts that are similar are in the problem. And I'll even go on my soapbox for one sentence. Loan officer unfortunately, you know, has gone from helping somebody get the right like product into a loan to as we all know, taking a consumer and trying to get them to get approved in DU or lp. Right. It's a different process these days. It's like what can I do to get approved versus here's the loan. But both of those are so fix and flip. I think there's like three items you could talk about, but it's, it's pretty easy. Conventional. It goes into 30 year fixed and you trust that these services are going to take care of it whether it's yours or you just kind of just assume just so people are scared or like there's draws, right?
Possibly draws. It's going to be fast. There might be more questions. Is this something that the originators are going to have to go on a training and know the answers to or do you think it's going to be more like a retail. Where they should. Because they're going to be asking that or should they just set it and forget it or. Because we don't want to. You don't want to tell them set and forget it. And all of a sudden they're, they're fielding phone calls from the contractor and they're like, I didn't know what I had to do. I already got my paycheck. Who's Paying me to give this advice. How do you think that's different than conventional?
[00:32:12] Speaker B: Okay, first of all, is that a fair question?
[00:32:15] Speaker A: Like, that's what I would.
[00:32:16] Speaker B: It is definitely a fair question. I don't think back in the 80s there was a, there was a movie called Money Pit. It was with Tom Hanks and, and Shelley Long and talking about how this couple buys a property and, and basically they're trying to fix up this property for them to live in. And. But they discovered that, hey, you know what? They don't know how to talk to contractors. They don't know how. They don't know what contractors actually are doing, how to monitor them and doing certain types of things. And I think that movie, and it's a comedy movie by the way, and I think that movie actually is a more telling story of two things. Number one, how important is it for that, for that loan officer? And I'm going to go preface what we talked about in Zillow before and what Shelley talked about as far as Recapture is concerned, is how important it is for the loan officer not only to be educated about this one, but during this process, the more communication that you're talking to your borrowers about not only fixing up a property, whether it's an investment property or if they do a 203k and they're going up to fix a property on an owner occupied property, I think that the importance of communication, of knowing about what, how to do things, communicating with the realtors, communicating with the contractors, communicating with the bar and then them communicating back, all of those become factors not only in how to fix up a property and the potentially to sell it or to keep it as a rental. And also it's creating the goodwill that AI can't do for the purpose of future referrals and client retention.
And when the, and if you get it, because not everybody does, if you just there just to collect a paycheck to set it and forget it, that may be a reason why you're not getting referrals back or you're not getting referrals even during that process of just communicating in general. And I think that this is the type of mortgage loan not just for the flipper, by the way it might have been. And there's a lot of these out there that your parents have been living in the same house that you grew up in, and you could be 30 or 40 years old right now. And then all of a sudden, hey, you know what? I got to figure out how to fix up this house. And you know, I Live out in XYZ suburb and then, but, you know, maybe I'll move in, I don't know. But in the meantime, I have, you know, this child or the parent, the son, whatever, cousin in law, whatever. Now there's, now there's an opportunity to talk to an originator and ask for, maybe ask for an exception on figuring out the type of. That's why I call it residential transition loan, not just fix and flip. I use that because it's mostly for flippers, but it's a, it's a residential transition loan to take a property that is not in great shape, that Fannie and Freddie don't want. FHA may not even want it either.
And to turn it into transition it from okay livable to amazing livable. And when that opportunity comes about, it's not just about turning, turning a property into better condition, better shape. It's also potentially about client retention and communication through so many types of people for the creation of more business in the future. It's that recapture rate for the originator which creates the untapped origination opportunity that we talked about for that as far as the show is concerned.
And I don't mean to steal your thunder, Shelley, but no, no, you know.
[00:35:34] Speaker C: What, Actually what I was going to say is, you know, I agree with that 100%. But going back to your question, you know, in conversations that we've been having, it's been very interesting to, you know, talk to some of our capital market partners saying, yes, we do fix and flip. However, we only have, you know, we might have 75 Los, if you will, but we really only have two or three that might be the experts. And so that's where everybody tends to go to because they've educated themselves. They know they don't want to get into, you know, a situation where they don't know because I think sometimes, you know, in the lo world, if you're uncomfortable doing something, you probably won't. Right. But then, you know, talking to other IMB's or, you know, mortgage bankers or whoever it might be, they talk about they want to get into the space, but they haven't yet. So I think that there's still a lot of education out there for us to, you know, get out there, teach or educate, you know, those that really want to get into it. So I feel like, you know, some people might be reluctant to talk about it because they just don't know. And, you know, others, you know, that have really educated themselves and become the expert of it, the financial advisors for their, you Know clients as they're talking to them, as they get to know their, you know, portfolio. You know, we've got these two houses, you know, blah, blah, blah, and so forth.
[00:37:01] Speaker A: So that's another great point. And really, in your world, Shelley, so I've been talking to the IMB owners that I know, big names that'll be on our show or have been on our show, or if they come on our show, we tell them about this great program. They usually refer me over to capital markets, who then refer me to, oh, this regional manager did a great job rolling out our non qm. That's who I want you to talk to. I tell them, you really want to be speaking with Michael Zhao about the, the lessons he teaches at the colleges on this program. And he also says exactly what you said. If you have a hundred loan officers, don't look at this as a program. You want to roll out to the hundred, go to those three you just talk to and start there and stay there. My question is, you know, this space well. So, like, my approach could be different than other people's approaches, but who do you think a IMB owner should, after they have the discovery call with you? Where, in an ideal world, where would you want them to refer you or would you want them to just start working with you at that high of a level? Secondary or where do you think this thing should be? Marketing, Secondary or ownership?
[00:38:11] Speaker C: You know, I think it really starts with I. I feel, and this is just my own humble opinion, that it's really kind of starting with capital markets, you know, secondary. They've been talking about it, they've been hearing about it. And, you know, once it's a domino effect, once you hear someone doing it, you know, you're intrigued too. What are they doing that we're not. Are their. Are doing it? So ours should too, because everybody wants the same product that everybody has, right? So I do feel like it starts with the capital markets, then leads into product development or, you know, marketing. And that's really. But to. To the point again, which I'm, you know, learning that, you know, it's not. You don't. You don't roll this out to a hundred people, you know, you just find someone and usually, you know, they may have a, you know, something in their, you know, ticker file that says, hey, Shelly came to us with this, you know, a while back. We said, no, obviously, you know, that individual might be doing their. Finding out about it, educating themselves. So just start small, you know, because once you start seeing that success as, as an ello. You know, you're starting to see, you know, someone make some money, you know, get some more deals in outside of, you know, just a traditional. Maybe purchase or refinance, you know, what are they doing that I should be doing as well? Working with realtors, you know, on this.
[00:39:32] Speaker A: Yeah, I see it. And my loan officer, mine's like, working. I think naturally people go to the, like, broker outpost world, like, oh, I'll be able to get somebody else's dangling, like, if that's what you're doing.
I would say that's not like who we're talking to here. This is almost like country club world, beach club world, like the real estate agent and the, the dev. The contractor that you see the signs of all over there doing the wealthy homes, those are the ones that you're going to get involved in. And by just being around them, not just during the. Put a bow on this whole conversation, not just during the closing, but they go down to have us, you know, a nice lunch with them, steak lunch. Because you have to talk about the first draw. After the second draw, you talk to them. Have you identified your next house? Do you want to talk about the. The biggest north star here that people may not know about that I've learned is you have to have flipped five homes. So.
Right. Like, so there's only a certain clientele there that you're going to be talking to anyways. And if you become their money person, I think the world becomes your oyster.
[00:40:43] Speaker B: Brandon, just think of it this way. When with after 2008 debacle, there was about four years of, of just like falling prices and, and just situations where, you know, nobody wants to really buy a house and we had excess inventory and, and short sales and foreclosure and, you know, dogs and cats were living together. It was complete pandemonium. And if you look at that in the situation now, we've had 15 years now of, of business owners, and those business owners are general contractors and professional home flippers, and they actually don't have enough inventory to flip. If you're an originator and you see a onesie twosie and this person doesn't necessarily qualify because they don't have five flips under their belt or it's their first one. Maybe they do have money, maybe they don't. But the situation is they got the inventory. There are general contractors and professional flippers out there. They want to partner with that person. And if that person says, oh, I got money or I have the equity. Yeah, or I own the property, you know they can now partner with somebody and you don't need seasoning. And unlike agency, where, oh, you need two months of seasoning on the money, we need this, we need that.
This is, it's a, it's not loosey goosey, but it's a much more forgiving world. And, and I think that if you're an original and you can't conceptualize. Well, wait a second, what do you mean?
Hey, just money. As long as you can follow the Patriot act and follow the money trail, this is a much more forgiving space. And then when you go to, to the, to either DSCR loan, if you're going to keep it, or the DST property, that's when, that's when, or you're going to refer it out to the realtor or whoever, that's when it becomes the opportunity. And I think that for the last 15 years mostly mortgage brokers who specialize in that space have been doing it. And there's an opportunity for independent mortgage makers now to enter in that space only because there are now family offices and hedge funds that are buying through capital markets and we have the opportunity through incenter in order to provide that as an avenue.
[00:42:50] Speaker A: There is a chance there might be some foreclosure forbearance inventory for the first time in years too. Right. So it's, it's hedging like if you, if you have a servicing portfolio. What's your experience, Shelley, of how the world contracted in mortgage financial crisis? Afraid to do creative loans. These type of loans, when were they popular, like 2002 or 1998. And do you think we're back there just with much better guidelines? Because I've heard, you know, this is still high fico low LTV or LTV compared to when it's finished. Right.
[00:43:27] Speaker C: Well, I think we've almost been through a cycle. Right. I mean we've, you know, from the early. So I, I can't speak before 2000. I mean, I hate to say it, dating myself a little bit when I got into the industry, so I can't go back before then. But I would say I think we have seen this cycle before, but I don't think that we had. I think it was there, but I think making these loans today is a little bit different. I think that we have some opportunity. So I mean, I, Michael Zao, might be better to, to answer that than, than me.
[00:44:02] Speaker B: I mean I, I've been doing this since 96, so that is dating me for sure.
[00:44:06] Speaker C: I didn't mean to do that.
[00:44:08] Speaker A: But, but I mean look. But even like. And maybe it was a different world. No podcast. But when you go to a conference in 2024, you talk about the 2018 days of, you know, meeting people at lenders one and all this. Right. So I think anybody that was in 2004 was probably talking about and it seems like there was much more family.
[00:44:30] Speaker C: Tree or 9 and 11. 9, 10 and 11.
[00:44:33] Speaker A: Yeah.
[00:44:33] Speaker C: Were disaster years. I mean we can go back then.
[00:44:37] Speaker A: Yeah. Logan said something interesting. If you took out 2009, 10 and 11, there's only one year housing prices have ever gone down. It was kind of just a crazy stat. I heard the other day a lot more family trees too in mortgage. Then you find that like people would be like, oh, they came from Countrywide. And also all these names like I've never heard of. And you don't hear that quite as as much. Maybe there's more IMBs and people don't move. But whenever somebody Talks like pre 2010, they name like the same 4 to 16 companies that so and so came from and this and that.
[00:45:16] Speaker C: It's very chemical bank to Countrywide to. I mean there's just so many names that can be named. Yes. It's. It's everybody. Yeah. The tree has dropped a few names and now I think we're all kind of just sitting in this, you know, big Apple bucket together.
[00:45:33] Speaker A: Yeah, I'm nostalgic. I miss, I miss. I wish we did more of that. Like, oh, everybody came from so and so. But instead it's. It's a battle everywhere.
[00:45:42] Speaker B: What I'm finding in this space and this is for this dates me too. Is that if you're a football fan. Right. It used to be the Bill Walsh coaching tree. If you follow Bill Walsh was a football coach in back in the 80s. Well 70s anyway. But trickled down. For example, like was it Mike Seifert Holmgren just like all these other coaches that, that won Super Bowls that came from the Bill Walsh coaching trade. And I think if you look at the same way who came from for example either the. The household finance coaching tree. But. Or even I would call it even the old days of like the even around household. It was either the Long beach mortgage or household finance coaching treatment. And I, and I and I talked to certain leaders that are out in the independent mortgage space right now. And if you came from those trees. Right. The ability to look at either non QM or the. Or this or the RTL space, all of a sudden it's just like the floodgates open once you Begin to, to truly understand, oh yeah, we could do this, we could do higher fees.
You know, you don't have to worry like, like in the agency space you're worried about, ah, it's going to pay off within six months or a year. I got to pay back all the originations and I got to pay back the commissions and I, and I don't get any recapture on the federal, federal income tax or Social Security, any, any that stuff versus, oh, something happened. Oh, well, don't worry about it. The, the family office, the hedge fund or the capital markets team that bought the loan, they'll, they'll, they'll absorb it because of, because of the research or xyz. Because the only thing we're really looking for in our space is like 30 to 60 days of ownership at least in for our family office. And if it pays off in 30 days, actually, we don't care. We collected our interest for other investors, they might want 60 days. So I think this type of opportunity is much more open. And if you, and if you've been a leader, if you were a leader in the 90s or in the early 2000s and you got out of the habit of looking at what the opportunity was back then, this, it's a good time to be looking into this. Not only will it increase the opportunity of rtl, it, in addition to that increases the awareness and the profitability back to the imb because now it creates more DSCR or non QM opportunities. And I think this is an opportunity for the IMB to really look at it because if you can bring non Q and back into the forefront into the originator, it's, it's, it is a profitable mortgage loan not only for the borrower because they are producing profit if they, if it's underwritten correctly, it's also profitable for the originator and, and ultimately for the independent mortgage bank.
[00:48:20] Speaker A: Yeah, I was gonna say. And knowing that like IMB leaders, they know where to find Shelley, I would most do. Obviously this is on LinkedIn, but you can go to LinkedIn, it'll be in the show notes. If you're a loan officer and you just heard all this or you are some ancillary piece of it and you know a loan officer, you owe yourself to send this to a loan officer. They reach out to Shelley. And I think that's the biggest difference I've seen so far. This RTL space is securitizing in the new world. As I said, we've watched a couple deals go through there that were not the Family office, money and it just, it didn't feel right, didn't feel relationship, didn't feel comfortable in the same way that dealing with Michael and Shelley and myself here, you know, will feel. So I think that's a major reason and we are doing our best here at the Mic'd up show to bring you people that are at the conferences. So we do have Greg Schermann verbally committed to be on the show. Coming up here, Taylor Stork for Community Lenders of America. Coming up on the show where there's going to be a stronger I heard it on David Licken stronger urge to lenders to join that group of IMB focused that don't have dual mandates between bankers and IMBs. So we're going to help him spread the word. We have on February 20th Stan Middleman from Freedom Mortgage coming on the show who we are going to read his book and try and give the best darn interview we can give. And then we have Patty Revelio from New American Funding who has just been giving some amazing clippets of how my takeaway is believe in yourself. And just so many people stop on the one yard line and I think that's my theme coming into 2025. 2024 it was was 2023. It's just been a couple hard years.
There's so many people that talk about they didn't realize they were on the one yard line and thank God they didn't quit. And I hope people get that message from this show and the and by that that'll be the culmination of it where we try to get through to everybody that just stay passionate, advocate for the IMBs like we do, advocate for just mortgage and homeowners and bankers and don't give up on whatever your voice is because there's a good chance you're on that one yard line. And if our show while you're driving please subscribe or while you're watching can be that little extra push then we did our our job. Any final thoughts? Shelley, thank you for coming on the show today. Final thoughts and thank you for having me.
[00:50:54] Speaker C: I'm excited.
I was. No, I thank you guys. This has been great. Again, I'll be at the IMB with my colleague Ralph, president of Lending in a Box.
And you know, please reach out to me if you guys have any questions. I thank you too for the opportunity today.
[00:51:12] Speaker A: And Marquez, I used to have 2020 vision so this is surprising to me.
[00:51:18] Speaker B: Yeah. And also for William S. For asking these questions just for our listeners that are out there. We always are welcoming communication dialogue in this space for us to be able to communicate not only to our listeners and people who watch the show online. We welcome any question yeah I'm going to do a quick hopefully I can answer this this one comment he says the question for our listeners that are not watching the show is someone told me today the investor product guidelines are continually expanding and seems unsustainable like the changes in 2006. You also mentioned hedge funds are the primary buyers. Could you talk more about risk management if you think the flow of purchasers is sustainable. Risk management is done by companies like Incenter and, and there's. And they're not the only ones that do it but we're. But they can do it and, and risk management is done also in the underwriting stage talking you know and if you're a non human right you can look at it assets and title reports and and budgets for rehab and comps for after repair value, things like that. It's actually a much easier underwrite than you might think. And is the flow of purchasers by these funds sustainable? Absolutely. There have been six trades that I know of, $750 million or more and if you take into consideration how much billions of dollars of actual mortgage backed securities are being traded, $750 million sounds like a lot but really it's not that much. So it's very sustainable right now. There is demand for it and to be frank with you, just like in housing, not enough inventory to be sold.
[00:52:48] Speaker A: Thank you Mike. Great show.
