Episode Transcript
[00:00:00] Speaker A: Hello and welcome to season four of the Mic'd up show, where every mortgage has a story.
The Mic'd up show is the ultimate hub where the hidden stories behind the mortgage industry come to life. I'm Michael Kelleher and good morning.
[00:00:16] Speaker B: I am Michael Zhao.
[00:00:17] Speaker A: And in every episode, the Mike's dive deep into the entrepreneurial spirit, the strategic insights and the breakthrough innovations that build the world's greatest mortgage companies.
Whether you're advancing your career, scouting for industry leaders or exploring opportunities in fintech and prop tech, you're in the right place. Get ready to unlock the story behind every mortgage. Let's dive in today with Daryl Caffey, who I have gotten to know not just from the lending community here in Massachusetts. He's a fellow board member and a very active one who has really grown. You'll hear through the legislative committee. But I, you know, it's not as much of a meritocracy at the state level. It's who is willing to put in the time and actually show up. And Daryl is a inspiration to, I think what every lender or loan officer processor, if you want to get involved, a great place to start is at the state level. And you have to understand most people outside of maybe one or two are full time in the mortgage industry and donating their time or volunteering their time. And so they're always looking for help, including Daryl. And he'll tell us how he got comfortable doing that today as well as how he grew up in the ranks of the local banks here in Massachusetts. He now leads lending at Webster five in a couple different capacities and we'll get into that today. So, and I did. Now you have a law background. You have worked in the, you know, the enterprise, the office side, I believe, over at Leader bank. You're now at Webster 5 where you, they seem to just give you more roles and more roles. So how does somebody juggle that in like the first five, ten years of their career? And sort of looking back, what's your advice to others that are going through that today?
[00:02:16] Speaker C: Yeah, and first and foremost, thanks for having me here. Pleasure to be on the show with you guys.
I watched a few. So having my first chance here, I'm excited to be honest with you. Early on it's impossible to kind of net or navigate or plan. Even better said, your path. Right. So I think one of the biggest challenges people have in any profession is day one, you get in and you start to think, I want to be in this spot five years from now.
Well, I'll tell You. I had no idea on day one.
And I remember vividly just walking to a. My first day, I walked in late because I did not realize how bad Boston traffic can be. Some days I had no idea what I was walking into, like many mortgage lenders.
And everything that happened from that point forward was really just a product of working hard and saying yes.
And I think it's really ironic because what you'll find later in your career, people will tell you you need to say no and protect your time better. But early in your career, you need to say yes and volunteer your time more. And the more you do that, the more doors start to open. And I'll tell you, for me, that was really how my story began.
Just got in, worked hard, and said yes.
[00:03:23] Speaker B: Often they say that if you're in a room of three successful people and you don't know what's going on, then you're in the right room. And I think that it's something that. That you've actually gravitated to by saying yes in order. In order to gravitate to success. Saying yes to the people that are taking you in the right direction are going to definitely get you there, as evidenced already in your current leadership and also in. In your directional pole into pulling the industry into a better direction. At what point in your career, at the very beginning when you were saying yes, did you start thinking, okay, I got. I know I'm at the beginning here, but I can't just do this for myself. But I want to be a contributor, I want to be a team member, and. And I want to shape my mindset. To those who have already been successful, what do you think that has taken you from point A to taking the direction into point B?
[00:04:15] Speaker C: Yeah, no. Good question. And I think, given some historical context, I got out of law School in 2012, which at the time was like a horrible market, right? Great Recession, not a lot of jobs out there. But at that time, we were really just exiting the housing crisis, and many lenders were in the midst of a pretty big refi Boo.
So, ironically, as I started to kind of spread out my search, I found myself at a mortgage lender at Leader Bank. And what was really interesting to me at that point was just realizing that there are thriving industries in times where the economy may otherwise be struggling.
And then you start to kind of look closer at what's going on around you, right? Because inside any organization, you're going to see operational leadership, sales leadership, and then everyone beneath them and how they're all working towards the Same, the same goal. And for me, I'd say early on it was really mostly about trying to get an idea of whether there was real opportunity in mortgage lending. And you know, I'll tell you a quick story, but in reality of it is I had no intent early on on staying in the mortgage business.
I thought I had almost the best game plan formulated where I would, I would almost pre write a bunch of emails with my resume with job offers, like the whole thing to apply for jobs.
And I would just go into the office, work what ultimately was like 10 hour, 11 hour shifts. And then in my little downtime I just fire off pre written emails. So you know, for me, the moment when I really thought that there was a pathway, a career in mortgage lending was when I started to see that there was opportunity in mortgage lending. Right? Because when you think about people getting out of school, the one thing that you really want is a chance to make it right. Because I think what people tend to find themselves in early on in their careers is, are, and I never will call any job a dead end job, but rather a job that is just that, a job and not a career. And when I got to my first job in mortgage lending, my mindset was really focused on, okay, how can I get to my career? And then as I was sitting there, I started to realize there was a career right in front of me.
And even if the answer was I wanted to be in law in some capacity, there's just a niche right in front of me. Whether it's closing attorney work, whether it's bank legal work, there were career opportunities in front of me. And I think that's when the flip really switched for me. When I got out of the mindset of this is a job, I'm getting out of school and turned to wait. This is a career path where I can gain a specialty that can turn into a long term career. And then from there it almost was doubling down on efforts.
[00:06:50] Speaker A: You get a lot of that mindset from the sports world and I think that's a mortgage trait, right? To make those analogies. I noticed you mentioned Kobe Bryant a lot.
Having that Mamba mentality means repetition means not taking any days off. And I think more than anything it's when you're in that role, you're just taking at that individual effort at a different level than everybody else's. It's almost like your life doesn't get mundane for you because each minute's a challenge, each hour is a challenge. How do you not only bring that to, to the Workforce. But how do you work with others that can't get to that level?
[00:07:36] Speaker C: Yeah, I mean, honestly, it's tricky, you know, when I think about. So I grew up in Philadelphia, a little suburban Philadelphia. So Kobe was going to the high school in the same.
When he was in high school, it was in the same school district that I was at. So he was very, very popular in the area.
I think the mob mentality, so to speak, is almost like a caricature of the effort that goes into forming that mentality. But for me personally, it was more about the sacrifice that I got from him. And if you ever heard any of the stories he told, he made a lot of sacrifice to get to where he was ultimately. And I think a lot of successful people, a lot of leaders, have to at some point in time, and then you start to realize that maybe some of them were worth it, some weren't worth it. I don't know.
But for me, it was really about understanding that early in my career, if I wanted to be successful, I was going to have to make some sacrifices.
Whether that meant coming into the office early, staying late, maybe I was missing something. My friends are going out. I can't go out that night. Whatever that sacrifice ended up being, it was about having the mentality that I was fine with that. Right. I'm okay to make a sacrifice in the moment on year one, two, three of my career, because I like to hope that by the time I get to year 20, I might have some freedoms that I otherwise wouldn't have had, had I not made those sacrifices.
So to me, that was really what it was. And when I looked at my peers, I'll be honest with you, I'm a millennial. Right? So the biggest criticism of me and my peers was that we were lazy. Right? So when I got out of school A, I think there may have been some truth to that, even if it's just a product of approach and circumstance. But I looked at it as a real big opportunity for me where I could sit there and say, hey, if I've got peers around me who are only willing to do X amount of work, if I'm willing to do 2x, I already have a great advantage. And for anyone else who otherwise is looking at my generation saying that we had whatever challenges that we may or may not have had, it was an easy opportunity to impress by showing them that that wasn't the case with me.
So I looked at it very much so, like, early on, it was about making the right sacrifices while simultaneously changing perceptions that otherwise people may have had about me based on my generation or whatever else it may have been.
[00:09:40] Speaker B: What are some of the sacrifices vocationally that you think that it takes as a, as a executive, as a leader that you committed to at the beginning of your career?
Whether it was things that you had to plan at the beginning of your day or when you had to stay late, or when you volunteered to stay a little bit later in order for you to say, you know what, this could have been moved out to the next day. But these are some of the things I need to commit to because I see two months down the road, three months down the road, and these are the building blocks and the seeds that are going to help build not just my career, but everybody that's going to be around me to, to build them up to be a better team.
[00:10:20] Speaker C: Yeah, honestly, it's all outcomes and I think that kind of plays into almost any role you have in mortgage lending.
I knew I was prepared to do whatever it took to get any assignment done. It just needed to be presented to me. So I think an easy example, you know, if I were to get an assignment on a Friday night, and I say Friday night, but let's call it, you know, three o' clock on a Friday afternoon, I think the general expectation is, oh, this is a weekend assignment. Right. My mentality was like, no, this is a Friday night assignment for two reasons. One, I wanted to have my weekend still.
Two, I'm thinking about the outcome if someone gives me an assignment, and this is early in my career at 3 o' clock on a Friday. My mentality is if I do it by 10pm Friday night, that's what it takes. Not only am I done and freeing my weekend, whoever gave me that assignment is likely going to be impressed because they assumed I would have taken it as a weekend assignment. Maybe some people would have waited until Monday to do it. But for me, taking it as an assignment that was given to me that day, that night, getting it off my plate immediately, delivering it, a high quality too. I think a big part of the outcome is you have to deliver good work fast, bad work fast, who cares, right? But if you can deliver good work fast, especially in this business, results start to kind of come in. And for me, that builds reputation too. People now know, hey, I can trust you with an assignment. And maybe even more importantly, if it's time sensitive, you're going to deliver. And in mortgage lending, I still believe answering messages, promptly, handling assignments, timely calling customers, timely calling realtor partners, attorney partners, timely response time is so critical in this business.
And I didn't realize that at the time, in my mind at that time was just get assignment, do it quick. But as you start to kind of stay and live in this industry, speed is one of the most important variables.
[00:12:02] Speaker B: Were those things that you need to get done, were they in the legal department of the mortgage industry? Coming out of 2012, we had short sales, we have foreclosures, we've got modifications, hamp tamp, different types of products that we don't have now non QM was virtually non existent. So everything related to agency that time in the legal field is going to be challenging. And although we don't have that right now, it could happen in, in the future when we don't know, however, but you know, th, those are things that were happening that you need to either have stayed late for. What, what, what are the things that you learned back then that you need that you said, okay, this is what we need to do.
Whether it was in collections or whether it was in foreclosures or short sales modifications, I mean that those are all real issues that are coming up in commercial lending, coming up in potentially non qm. So what did you, what were those things that you do did need to commit to?
[00:13:00] Speaker C: Yeah, you know, my path was somewhat unorthodox where you know, I got out of law school, I didn't get into a legal role when I first got into mortgage lending. You know, I actually started in post closing and ironically when I started there were probably four attorneys working in post closing at the bank at the time, which was very unusual. But if you look at it in like a time capsule, I think the thought process really was the market's oversaturated. There's not a lot of jobs out there. You can bring in a bunch of legal attorneys who are looking for work in that period between taking the bar, getting their results.
It was a temp job at first, so it was meant to be a six month assignment with the potential to be extended.
And then from there it kind of became what it was.
For me early on, it really wasn't legal assignments that was always part of the hope, the goal. The early assignments was the simplest thing in the world. You know, I remember a getting into the office my first week, seeing two big file cabinets in the space that we were in that I assumed were just always full. Right. So again this is like the, the ignorance of not being in the industry law.
I assume that in the mortgage business you just always had a bunch of cabinets full with loan files that someone had to review, post close and deliver to an investor. I wish that was still the case all the time, but the reality is, in that moment, the goal is just to get as many files turned over as fast as possible. And I remember management at some point did an analysis and determined that amongst the five of us, if we did 20 files a day, we're doing, you know, 100 files as a group. If we do that five days a week, we're getting out 500 files and the next step becomes, okay, great. If we don't hit 500, you gotta work on the weekends, right? So my first mentality was just, well, we're doing 500 during the week, right? And that kind of takes its own shape. You know, I remember some of the early conversations that really were, you know, I remember hitting 20 files for the first time and looking at the people in the room with me and just saying, hey, what's the plan, guys? Like, I just hit 20. Are we all doing 20? Do you want me to do as many as I can do? Like, how are we going to game out this, this number? And when they told me they didn't care and just do whatever you want, I was like, I'm off to the races at that point.
So early on, it was literally just do as much as you can as fast as possible. And on the great days, you know, I could be pushing 40 files on a normal day, maybe it was a little less than that, but it was much more about the assignments in the early stages. And then as I matured into my role, it became much more project focused. Right. I'm giving you a project that someone might expect to have take a week.
Whether it was implementing a technology or reviewing a product, or building out some kind of custom screen or form in an los, tackling those projects really, really quickly and going to market was really where I started to kind of gain the respect of a broader audience. Instead of just the post closing group
[00:15:41] Speaker A: in the back kind of going with that. Now I, I find the ability to lead is handling different departments and you are in collections, which for the common maybe listener, it is less of the collections you're used to. It's, it's how do you collect a mortgage payment? How do you work with a consumer? How do you work out plans according to the government, as well as trying to evaluate the best way maybe a consumer can get back on track. It's called loss mitigation.
It seems to me that's a lost pathway into leadership where you can, and I know a couple that have done it but very few. But you really understand the compassionate reasons of why even a QM or, you know, an affordable DTI is important, because you could see on the back end the hardships that occur when people start to fall behind. And I think it brings more of a human aspect to who we are at leaders. It reminds us we're not tech companies that happen to do mortgages. We're mortgage companies that give out mortgages so people can, you know, have the American dream generational wealth, as long as they keep paying, making their payments on time, or they don't make their payments on time, communicating so that they can get back to making their payments on time. What.
What would be the message that you've. Like, what. What are some of the parts of the loss mitigation, the collection department that you've been able to bring to the front of the House, whether it's just in leadership or how you have timely talking or just your vision as you are talking, you know, as part of the legislative committee or, or down in D.C. next week, of course.
[00:17:27] Speaker C: Yeah. You know, honestly, I think sometimes collections gets a bad rap because of the nature of the work. Right. I think to your point, Michael, you really touched on it. It's a.
It's a customer service experience for a customer who's in a difficult position. And I think when you look at the overall lending landscape, that's a lot of the customers people deal with.
[00:17:46] Speaker B: Right.
[00:17:46] Speaker C: Like when we refinance people, it's not because, and maybe it is for fun halfway, but the reality is a lot of those people are looking to save money. Right. I find the customer you deal with in collections, for whatever reasons, found themselves in some sort of hardship, much of which you could not have predicted. Right. They're challenging situations, whether it's losing a job or someone passing away unexpectedly. These are the things that usually trigger those events. So the most important part up front is just to be human, right? Humanize the experience, understand what's going on with the individual, and then leverage your circumstance.
[00:18:20] Speaker A: Right.
[00:18:21] Speaker C: So I'm saying that on a broader scale because I'm a community lender.
So for us, part of our DNA is really talking to the customer, understanding what they're going through and finding solutions that can work for them. Now, the other end of the spectrum, you know, we also service for transactions that we might have sold to a GSE or, or an fhlb, and now we're beholden to their servicing requirements. Now, granted, they're also going to be quite understanding of a customer's experience.
We're just going to be dictated towards what we can and can't do. So there's a lot of these conversations that take place and it starts with understanding, hey, what's your situation? What's happening?
Are you okay? Because you've got to have that real human interaction there.
And then you start to dig into, okay, now what am I able to do to help you?
Who is actually in charge of whatever the servicing protocols are going to be or the collection protocols are, and then from there trying to implement them in a way that is both fair to the customer, fair to whomever else is on the back end, while simultaneously trying to get to the same point that we all want, which is to get back on track, paying monthly and on time.
So to me, honestly, it's the same way in any human business, right? You're talking to people, you're understanding their problems, understand their concerns. You're then looking at whether it's guidelines or terms and figuring out what makes the most sense for their situation and then making recommendations.
Ideally, I can get them to a place that they want to be.
[00:19:36] Speaker B: It's interesting that, that you say that, because what I've often been caught myself saying to a lot of people is, especially originators, is you need to learn how to think like an investor. And in the IMB space or even in the banking world, the investor is the, is the banking lender, whether it's a federal home loan bank or whether it's as an agency, and a lot of times the originator.
They've invested so much time in marketing and producing business that they actually lose sight of what the investor actually wants.
And what the investor wants is not only the yield, but they want the yield to be paid on time.
And so there's a difference in understanding that. And as a leader that understands the collection portion of what the investor wants, what do you think is the difference between someone who is a producer and then wants to move into leadership? Because it takes, it takes actually some traditional mind shift and you've already done it, but I haven't seen that many salespeople do it.
And what caused you to go from this is in sales, making production to this is what it's going to take to, to bring to, I don't know, better yield to the investor, more payments on time. I don't know what it is just yet. I can just put it into what the product is into better performance for the, for the mortgages.
[00:20:59] Speaker C: Yeah, well, you know, first and foremost, you got to want to do it right. So for the right reasons And I say that because, you know, a lot of times when people look at management logically, it's just a career progression or it's a way to make more money or more income or drive, you know, basis points, whatever it may be.
First and foremost, you got to have a hunger for information. Because one of the coolest things about mortgage lending is it's not just an intuitive business, right? Like I remember growing up, one of the first things I've ever done in any job I've ever had is try to figure out how it works, right? You work at a grocery store, you start to realize, okay, you get products, you put products on the shelf, you mark them up a little bit, you make a yield. Oh, I could understand this, right? You can kind of follow the trade. I worked at a coffee shop, same laws, and you create a product, you sell the product, you whatever the spread is on the materials to, to whatever you sold it for income.
The mortgage business is complicated, right? So I remember the first, you know, call it, I hate to say first day because I'm not that sharp, but the first time I really was trying to sit there and understand, okay, how does this business work? I could not grasp any of it, right? It just wasn't making sense. Like basis points and pricing and investors and why this investor over that investor. And then execution is the best efforts is mandatory. You're playing this game where you're trying to understand all these different aspects of the business.
But what's so much fun about mortgage lending is that it's so complicated and so nuanced that if you have a hunger for knowledge, this is an industry that will constantly feed you. And for me, that hunger for information led me to want to have a better understanding of what investors want, of what the customer wants, about what sales people want, what ops people want, how this partnership works together to actually fund, create loans. It's really an experience that requires you to, uh, have a desire to learn. And then as you learn and learn more now you get to start applying it. So for me, to answer your question, I think the most important thing for any salesperson that's looking to get into management is understanding what this business really means. And that goes beyond just originating the deal. To your point, it does mean delivering that deal, having that deal perform, and then having everyone kind of win in the transaction. And as you gain that knowledge, passing it on is half the fun too.
[00:23:08] Speaker A: One, one good way to learn in tribal knowledge that you may need is actually leaning on some of the technology vendors in this industry that are doing certain parts of the industry you may not be as familiar with and you can watch YouTube videos or you could probably just call your account rep and be inquisitive about what you want to know and get that free education. And they're always willing to do it because all partnerships are a long game. So with that said, we have two great ones we'd like to introduce you to and at the and we have some couple sponsors at the door right now to look at maybe sponsoring the next episode or two. So if you're a sponsor out there and you're listening and you touch mortgage or even real estate in any way, please reach out.
And on the other side, we are going to shift from leadership to asking you a couple questions about advocacy. We have the Ag Advocacy Conference next week in Washington, D.C. and also what's going on in Massachusetts. You're involved a lot in the legislation committee and there's some it'll give people an understanding of you can't close loans unless you have your local state reps protecting you from those porks in the bill.
And finally, I, I do have a couple questions about CRA and and I know you are Tom, heavily involved in CRA and I think that is not on the radar as much as it should be of originators and our listeners. So we're hoping to put that on the radar. So looking forward to seeing you on the other side of this quick, quick commercial break.
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[00:25:55] Speaker A: All right, so quick hitting right off the bat Daryl cra. How has the you could talk about your role at the bank, but how has the prices rising across let's say state of Massachusetts impacted the total available inventory to be able to qualify for CRA and has that limited the ability to lend in some of these areas that are very affluent on one side of town and then limited CRA ability on the other.
[00:26:29] Speaker C: Man, CRA is always a loaded question, right? I, I think any good CRA strategy is really like all encompassing. You really have to be looking at all the different moving parts, the investments, the lending, really the, the community activity for us in particular. I think one of the most important parts when you're looking at the clients that are looking to get into homes is that you're thinking that the client that you may have helped that was a CRA eligible client likely is having a lot of difficulty finding a property today, which means your time investment might increase.
Your approach to products and programs needs to be slightly different.
And I think that's really where the kind of the, the crossroads hits.
If you were to ask me the same question five years ago, I would have told you the most important part was being in the correct market and finding the right borrowers. Not that that's not very important today, but just as important now is products and programs and what you have to offer. Because there are so many down payment assistance programs, there are so many grant programs out there, there's so many programs that will allow someone to close with a thousand dollar borrower contribution, there's investor paid buy down programs.
There are so many products and programs available that can help you do business with borrowers who may otherwise not have qualified that that to me is the difference maker. Have a strong mix of products and they can chip away at the affordability issue that your average CRA customer may run into and then from there obviously be in the right markets, make sure you're networking with the right realtors. Be intentional. I think one of the funny things is when you think about normal lo logic and I'm going to speak for the masses here, so I'm sure I'm going to overstate.
What you want to find is who's the biggest producer in the area. I'm going to partner with those realtors. Right. Makes a ton of sense. I'm not saying that's a bad thing. When you're thinking about cra, your mindset has to shift in your approach to say let me find the towns and communities that are underserved, let's find the real estate agents that are spending their time developing their business there and let's start to make those partnerships. Let's try to make end roads there a You're going to find that the competition for that realtor base is probably a little different than the competition on the higher end of the spectrum.
You're going to find that the customers you help ultimately really, really needed the assistance and the education on products programs and how to execute a closing.
But perhaps even more importantly, the stories resonate way more. You know, I can't tell you the amount of phone calls I will get because I either had one of my lenders or myself help a customer get into a program that offered them down payment assistance or federal grant money. That was the difference in them qualifying because now they're really, really going to tell that story. Family, friends, the attorney, even the realtors will come back saying, how did you do this again? Like, why was there this money and where did it come from?
That doesn't usually happen at the higher end of the spectrum. Not to say that they don't care about the rates and the products on that end too, because they do matter.
But when you're really looking at an LMI borrower, low to moderate income, when you help those families, it really makes a difference. And all the people involved really want to tell that story and then the leads start pouring it because now there's more people that want to learn what you just helped this other person learn. And it really is a, a fun and exciting cycle that in some ways could be more rewarding than even handing some of those bigger transactions to your team.
[00:29:56] Speaker B: We had Jeremy, Jeremy Ray Davis talking about CRA a little bit earlier, a few episodes ago, talking and, and I want to make it clear that CRA is not fha, meaning that it's not designed for maybe you have a little bit of a credit challenge. However, there is a huge demographic of 22 to 35 year olds who have decent income that still qualify for CRA and decent credit and even have a little bit of savings. And actually I hear it from my kids. My kids are 23 and 25. And I can't do this, I can't do this, I can't do this. But yet their income qualifies for cra.
And I'm like, well, you can go over here, there's an area of San Diego called Rancho Santa Fe and their CRA districts inside of that census tract that they qualify for.
And I'm like, well, you just need to go look. And I think that the, the difference is that we don't have originators out there or realtors that are concentrating on cra. And even if you go to an FDIC insured bank who's required for CIA larger. I'm going to talk about like the, the, the, the Bells, Nargo or something like that. And in, they don't, they just don't concentrate on that. And so in order for you to be passionate about CRA lending there needs to be two, three aspects actually. Number one, a developer that's willing to do that. Number two, a realtor or selling partner of that product that's willing to do that. And number three, the, the lending partner that has the willingness and capacity to understand that they can't serve everybody has a willing to say yes to the right people, no to the right people or wrong people and then proceed, proceed willingly. Because it's not going to be the top producer who's not the highest and best used to do that. It's going to be the medium or beginning producer that says I'm going to concentrate on that, I'm going to serve that capacity. I'm going to find the right realtor, seller partner to do that.
And what is it that, that it takes in order to move in that position? The riches are going to be in niches in that case. And I think that the lack of education on all three parts of are leading us to a lack of production in that.
So what does it take to scale in leadership to say okay, we're going to choose these originators to work with these realtor partners and as a result we're going to educate those two so that the production of product is going to be out there not only for affordable housing, but also in cra.
[00:32:26] Speaker C: You know Michael, it really goes back to one of the things I mentioned earlier where it's all about outcomes to me. Right, right. If you ask me what's the desired outcome? You want to have more CRA eligible transactions and ultimately help those clients build generational wealth and maybe they were otherwise having a harder time achieving.
I think you have to start asking yourself what the best pathway to home ownership looks like today as opposed to 10 years ago, 20 years ago, whenever it may have been. And for me, high level, it really starts with how do I envision your average home journey? Right. So back in the, I say back in the day very well could be yesterday. You'd imagine you've got a couple who spend time together just getting to know each other. They're renting, they didn't decide, you know, we want to start buying a house and they start to look for a home. Then they buy their house and, and then perhaps they start their family.
In today's Market. When you're talking about CRA and what that means at 80% AMI, granted, very much going to be location specific.
But in my area, if you're making around 80 to $90,000, you may very well qualify for a CRA product or program.
That's a lot of money, right? So first and foremost, get the part out of your head where you think CRA stigma, low income, I'm talking 80, 90 grand. That's good income, especially if you're, you know, a single individual. So when I sort of think about the execution, how you want to start thinking about this from a customer journey standpoint, instead of sitting there saying, you know, I'm single, waiting to find someone or I'm renting, in the meantime, it starts to shift to, okay, I want to target individual home buyers who may be a few years into their careers, educate them and say, hey, I know you're renting and plans on buying long term. Let's talk about what products and programs are available to you today because of your financial position. If ideally, that's your first CRA transaction, the individual who's a couple years out of school or a few years into their career, you do that transaction CRA eligible, whether it's based on the individual or the census track they're in, then you look to find whoever their significant other may be or whomever they hope to meet down the road.
Now you've got two individuals who when they first come together, already are homeowners, right? Single homeowners who then have to think about, okay, as we think about moving together, what are we going to do? Well, we're going to buy our next house, which may very well be a non CRA transaction. But are they now holding two investment properties as well? Because they got them with fantastic assistance. So when I started to think about how you really get this thing going, you got to ask yourself, what's the real outcome? The outcome is generating generational wealth for homebuyers who may otherwise be held out of that. And the best path to me is help them buy a home early in their careers.
Then ideally, as they meet whomever their significant other may be, have multiple assets, buy their next asset. Now they're retaining assets. And granted, that path is not for everybody, but having that mentality starts to shift the approach. It's not just I'm looking for, you know, what people perceive to be low income earners or properties, and that's going to be what the CRA loans are like. No, no, no, no, no. You got to shake that from your head. It really is about the individuals and what they're looking to do, how they're looking to build their, their family units.
And then beyond that, I think when you dig deep into the communities, there are most certainly family units that are intact that could leverage these programs to really get out of or better improve their circumstance. And I by no means want to kind of scapegoat them either. But I think there are two different conversations. Both lead to the same outcome and the mindset has to be much broader than it used to be.
There are long term journeys for every single borrower. You can never look at it like one transaction. You got to look at it as multiple transactions and helping them kind of hit that outcome that they're looking for.
[00:36:17] Speaker A: I think we are seeing more help the generational wealth part from family members willing to help with a down payment which doesn't knock you out of the the income equation to, to bring you access. And when I think of the first way into a housing market in Massachusetts, in many areas it's condos. And with Fannie Mae releasing new guidelines last week which eliminates the limited review where lenders were able to review these condo docs in a more limited way now it'll be a little bit more thorough in certain areas it'll be more thorough in other like reserves and I think unit health in other areas it'll be less thorough. I, I believe the roof no longer East Coast. So Daryl know when I say roof, if we said roof, you know in the Midwest for our listeners that's not looked at as much on reserves. And the reason I say all this is condos.
As a loan officer, either you or the real estate agent, someone needs to step up as the life advisor and talk about some of the complexities of homeownership that are going to occur after the close and after the picture with the key on Instagram and on those you do have to deal with neighbors and contributing money and pooling it into fixes.
And if it's your first time buying and it's in your first generation buying, I hope loan officers will take this opportunity to look a little bit more into it. So I wanted you to kind of comment on that Daryl, but also talk about one of the pieces of legislation here in Massachusetts you've been keeping an eye on around foundations and just it being an example of it doesn't hurt whether it's a single family or a condo as a consumer to do a little extra due diligence before you buy it and don't fall in Love with the process and, and do the due diligence after you bought the home. But, um, you just talk a little bit about, you know, loan office, what you've learned, educate us a little bit on this foundation piece and then how that can relate to loan officers reminding themselves to be house coaches, not just mortgage coaches.
[00:38:40] Speaker B: Yeah.
[00:38:40] Speaker C: Yeah, good question. So, you know, for those who aren't familiar, Massachusetts, parts of Connecticut have had issues with crumbling concrete foundations, in part due to a material known as purotite that's inside the cement. When it gets moisture in, starts to break down. I'm not going to try to bore everyone with the details, but what I will tell you, to your point, Michael, you really have to do your due diligence. And when we think about real estate transactions on a larger scale, I always, I always stress how important it is to step away from the transaction. And I hate to keep using the outcome word, but remember what you want the customer to actually have at the end of the day, right? Which is an asset that's going to perform well, that they can afford, that they can raise their family in.
A big part of that includes making sure that the property is sound, top down, and not to say that there was anything someone could have detected, because I think that's the biggest challenge when it comes to the actual crumbling foundation. Issue is that was almost impossible to detect at least a couple of decades ago when most of these homes are being built.
But in general, I think part of good home buying processes includes having a good inspection by inspectors that you can trust and know well, being a part of it. Right. I can personally speak to the first time I bought a house, and if it wasn't for the inspector pointing out where all the shutoff valves were, how was I going to know? You know what I mean? Like, I'm sitting there thinking to myself, like, you know, I remember that my agent asked me, do you want to come? Like, of course I'm going to go. But the reality is he sat there and started showing me, here's where your water cutoff comes on, here's another shutoff valve, and here's where the gas goes to the fireplace. If it wasn't for him doing that, and then also telling me it was a pretty good idea to make some tabs and start to stick them on these things so I could actually remember it a few years later, I'll be the first to admit I'm not the handiest person in the world, but I do consider myself handier than the average person, wherever that falls in the spectrum. But the reality is I needed that little instructional just to have a better idea of how to maintain my own home.
So I think crumbling foundation and of itself is a real challenge for home buyers in Massachusetts and Connecticut.
Whether it ends up being a larger issue in New England, I don't know yet. I think there's still a lot of discovery to be done there. But the best thing that you can do, regardless of any possible issue, is to just make sure you're thorough up front. You're educating consumers about what it really means to be a homeowner, the work that it takes, both from an upkeep perspective, maintenance, a roof repair, you name it. Like you need to have an idea of when all these things go bad.
For any homeowner out there, you can probably name the example of times that you spent money that you did not plan on spending. Right. Like I think my hot water heater broke last February. I thought I was going to pay a guy 250 bucks or to repair it ends up being a full replacement. Like you just don't know. That's part of home buying.
I think for. And I'm going to go back to LMI borrowers for a second.
That's one of the areas where we probably do them. The biggest disservice when you're not really educating them on the cost of homeownership and even worse when you're using them or putting them in a scenario where they're using every dime of money they have in their savings to get to the House Day 1 without paying attention to the fact that they need to have some reserves in case something goes wrong. Something always goes wrong. I think that's one of the real points I'd always stress.
But yeah, big picture, you got to know your house, you got to the property and you've got to understand that there's a maintenance cycle that's going to cost some money.
[00:42:03] Speaker B: You know, it's interesting because you know, you're, you're cons, you're fairly consistent in talking about talking, you know, Dana, talking about the things that you're going to be going ahead on. And at the beginning of your career we worked a lot on post closing issues. And the reality of home ownership is not just about once get you get the house and you make the mortgage payment. It's also about through that home inspection, you're talking about maybe one day replacing the roof, maybe going from PVC plumbing into copper, maybe talking about some of the, the structural things that are going on.
What are, what are Some of the things that you think that that may be missed by lenders that someone would need in order, you know, to, whether it's a lender or a realtor, by the way, you need a CRA lending or, or traditional lending. But home ownership, what are some of the things that need to be talked about right now? Because just because you have a 30 year fix does not mean that your house is going to stay the same forever. Physically, I mean. Right. So can we address the necessity for changing the financing for the homeowner so that they can not only repair their house in the future, whether their house was built in 1910 or 2010, the those houses need repairs and maybe homeowners don't prepare for that, but it is a part of their, their fiscal literacy that they need to prepare for.
What, what part? I mean, I think that you can see it, but may, But I would say the majority, 99% of the other people maybe don't.
[00:43:38] Speaker C: Yeah, well, you know what? Interesting. I think most of the time people have to ask themselves a question about the relationship with their customer, whether it's a realtor or loan.
Are we business partners or are we friends?
Right? And one of the things that I tell myself and the people I work with all the time, once in a while I just take a break. The same way you got to take your leader hat off or your manager hat off once in a while and just have a realistic conversation. I just tell someone, hey, I'm going to treat you like my friend right now, okay? I'm going to tell you exactly what I actually think. The advice that I think you should listen to and this is going to be away from the other things. I can tell you what your max qualifying payment is and what the most amount of house you can buy is. We're going to have those conversations do. But we need to have some of these friendship conversations where I tell you that I wouldn't put my friend in a situation where I knew on day one they couldn't afford their first repair.
I wouldn't put my friend in a situation where I thought they were going to max out their debt ratio when I know they've got other expenses as well.
To me, I think the fine line between a business partner or even the customer lender relationship shifts is when they stop looking at the person as if they are just a client or just a customer or just whatever term you want to use. You really ask themselves, okay, if you were my friend, how would I explain this to you? How would I prepare you? And if I'm thinking long term again, what are we actually trying to accomplish here, right? What is your goal? Where do you want to be in 10 years? If the answer is this is your starter home, you plan on being here for five to seven years, maybe we should be having a conversation about what costs are going to come up in that five to seven year window because that's a part of your home buying journey. And if this house has, you know, three year problems, then maybe it's not the right fit for your actual circumstance, right? So to me, when I'm thinking about affordability and how someone can navigate whatever maintenance is required and I, I'm starting there, but the reality is these things take many shapes, right? You know, I, I'll give you another personal example. I got into my house and in my mind I was going to be going in at one pace. My wife had other ideas in mind. She wanted new appliances, right? So I mean, this is real life. Like it takes a matter of moments for someone to say, you know what, we should finish the basement or we should add some trimming here. These are all the costs that pop up as a homeowner. And you know, you hit the nail on the head. Your, your house, day one likely is not your house year five.
Think about the things that are going to be required during that period and then think about the things you're just going to want to do, right? You're just going to want to add some new section, some little nook but bookshelves, who knows what it may be.
I think especially for the non handy people out there, bookshelves take many different shapes, right? If you're talking about a custom build out, you can have some real expense right there. If you're talking about putting some shelves in, I mean, there's a wide spectrum. So to me, knowing your customer base, knowing what they're trying to achieve, but most importantly, being able to break down that line between client and friend and then start to think through like, okay, if you were my friend, who knows I'm in the business, who asked me for advice on what they're trying to do long term, what does that look like? And then be mindful of the fact that for many first generation homeowners, many minority homebuyers, they don't have resources like that. And I think that's the one thing that I try to stress on people. It is easy for a young individual whose parents were homeowners, whose family were homeowners, whose uncle was a real estate investor, to make a really smart real estate decision when they're buying their first house. It is very difficult for someone who is a first generation home buyer who has no education on what it looks like to buy and own and operate an investment property, but for whatever reason has their mindset on being owner of a triple decker. Now that's an east coast reference for you.
Owner of a triple decker with, you know, two tenants, like it's a wildly different thing.
So to me, making sure that we're approaching those conversations as a friend and not just as a business partner I think is incredibly important and we sort of break down those lines. At the very least you make sure that that consumer knows what they're getting into because that's the most important part. Know what you're getting into. If you're comfortable with it, great. But I'm not going to sugarcoat it. I'm going to make sure you understand what the real picture looks like.
[00:47:52] Speaker A: Yeah, a triple decker isn't just a turkey club or around here.
There's two final points I'd like to bring this home with. So this will be my final question if Mike wants to follow up with it. But I'd love to just have you address how or some of the other topics that you take on in the legislative committee for Massachusetts. Just so nationally people understand maybe how they come up. Like people understand they, they sort of come from bills or, or from current events. It's not like we just have a wish list of, of items. And then again advocacy is next week. We, we don't just want you to give a rah rah for it. But how someone like you and I, I, I try to say you don't really understand that the barrier to entry, to get there is low. The welcoming of the groups at your state because you actually get to sit at a state table. It's like the easiest conference once you finish it. You're like, it's just so different than every other conference because there's a support system in place so you're not awkwardly in the corner. And then you get to go home with this renewed feeling that I am doing more than just putting people in 30 year mortgages. I am. And then fill in the blank because I think each person, I think that's the key. Each person kind of gets a different warm fuzzy feeling for their reason being there.
So starting with state and local and ending with national. If you could just sort of take through, you know, the frustration I have of there's so many more people here locally that should start, get on the train and end up, you know, in
[00:49:31] Speaker C: D.C. yeah, yeah, for sure. You know, I like to kind of always frame the legislative conversation with two different lenses, Right. The first one is I don't want to be reacting to change.
Right. Because that's what we always find ourselves in. We're in this situation, and for every lender out there, you've been there too. Issue pops up. You deal with issue. That's never where you want to be, Right. You always want to be proactive. Legislation is that practically on steroids. Right. The last thing you want is for there to be some new piece of legislation that comes out that makes it difficult or more challenging and more.
More costly to close transactions without having been a part of the conversations up front.
So first and foremost, it's about being proactive. Like getting involved in legislation is making sure your voice is heard before things are passed. That way you can educate people who may not otherwise be educated about the topic.
Mike, you've been to NAC a number of times. You've been to state advocacy a number of times. You can speak to how often the individual that you're speaking to is unfamiliar with the home buying process, talking about affordability in general. You know, most of these conversations take place with aids. Most of the aides do not own homes. Right. So there's a million things that you don't even.
I shouldn't say no, but that they haven't experienced. And when you don't experience something, it's hard to even relate when someone tells you a story. But what we do so well, and what I think lenders and ellos in particular, and maybe even, you know, agents would probably be just as good, is tell the actual story of the customer, how they are impacted by these different transactions, how they're impacted by the legislation. And in turn, it starts to kind of spark this. Oh, wait, that's how that problem works. Right? So the first thing is just understanding. You gotta be proactive. And that means getting involved in legislation early. And then on the other end of the spectrum, it's bipartisan, right? Because I think there's a million times where people start to think that this is gonna be a he said, she said between the two parties. And the reality of it is housing is a universal issue.
And I think both sides understand that. And the most important part is finding a solution that works and solves the problem, whether it's housing supply or affordability.
Granted, everyone probably has wildly different ways to solve the issue.
That doesn't change the fact that they were all united in trying to solve the issue. So at a state level, you got to get engaged because you got to be proactive. Legislation is not something that you should be reactive to. It's just too late by then. And secondarily, don't let the idea of Democrat, Republican or anything else slow you down from getting engaged. It's far beyond that.
And then at the national level, I mean, again, talking about not letting change happen without you being involved in the process, at the end of the day, federal change in many instances is going to preempt state change, right? So you've already got to be thinking like, I need to know what's happening at a national level.
We all have representatives. What are your representatives saying at a national level? What are they engaged in? And then how can your understanding of topics impact change down the road?
I think every state can look at their legislators, get an idea of the legislation that matters to them, and then ask themselves, is housing on that list? Do they talk about housing when they go meet people in public if it's not on the list? Now that's your job, right? That's your point of activation. I need to make sure that my legislators are thinking about housing, housing supply, housing demand, the market. When they make decisions, when we're talking about doing things, what does that do to market housing rates? Are rates going to go up? What's that due to affordability? In my, in my area, like these are the questions that we have to put on people's minds. And when you don't ask questions about it, when you're not putting it to the forefront, it doesn't come up. If we're being honest with ourselves, banking mortgages is not the feel good story that people have on their plate when they're looking at their overall legislative agenda. I think housing and homeownership is a really important part of it. But there's a lot of things that either can be flashy or draw people's attention.
Housing, when brought to the table, becomes a really, really good talking point.
But it's easy to get missed in the idea of there are these other problems. Hunger, there's, I mean, there's bigger problems, right? We're being honest with ourselves, but at the same time we've got to make sure that we're putting this on people's radar and driving the conversation. And it starts at the state level and the local level, it goes to the national level. And to be honest with you, wherever you can get engaged, even if it's at your local town board, right? There are local town housing boards that if I were to guess, probably have open seats right now, like start to look at those things, get involved in those conversations and then naturally it becomes a bigger, bigger talking point and you will start to build both reputation, right? Because now people know that you're passionate, you care about the business, you build expertise because an understanding of legislation gives off the impression that you care about this industry, not just the transaction. And in turn that leads to more business, right? People are going to gravitate to those who are knowledgeable. It's just normal.
[00:54:40] Speaker A: Thank you for that incredible message. Thank you for joining us today. Darrell, thank you for joining us on this journey into the heart of mortgage innovation.
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