good morning

good afternoon

good evening

wherever you are and whenever you're listening

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hi my name is Hunter Boyd

I'm the director of sales for the Sherry Riano Team

and this is Mortgage Mindset

today we are joined by Chris Brazil

what's going on Chris Hunter

how you doing sir

doing well man

directive operation for the Sherry Riano Team

very excited for what we're gonna be discussing today

we're actually gonna be starting our first series

and this series is gonna be on non q m products

so things like DSR

bank statement loans

1099 asset qualifier

just all those things

um Chris why don't we just kind of jump into

what does non QM even mean

yeah it's a good place to start because

we use all this terminology in the mortgage world

because we deal with it every day

but a non qm loan

basically what that means

QM is short for a qualified mortgage

and what that means in layman's terms is that

it's following conventional

conforming guidelines to become a qualified mortgage

to qualify under Fannie Mae

Freddie Mac

FHA the normal loan programs

so a non qm loan is a portfolio loan

and what that means

is specific investors have expanded the guidelines

and they're gonna lend the money

and a loan program that they've developed

and they're gonna portfolio it themselves

and what that means is that

they don't plan on selling this loan on the open market

like a normal mortgage commodity

so if it goes upside down

they're gonna collect on it

they're gonna be your collections department

they're gonna

you know God forbid

they're gonna foreclose

they're gonna really take this thing from

origination to paying off the mortgage

one way or another

that's correct yeah

the way to think about it is

this is a hard money loan

but it's from an investor and not hard money

somebody you're getting off the street that

you know is

is it's a way of getting things done

but this is a little bit more

I guess you would say

in a tighter box than a hard money loan

but it's it

it does not have the normal guidelines of a Fannie Mae

Freddie Mac loan so it

it does kind of remind me of a pre 2,008 type loan um

where the packages

maybe not as complete you know

maybe there's lacking income in

the package or something like that um

is that you know

is it pre 2,008

why we have that today

because of what's

what happened back then

that's correct yeah

so back then

you know I started in the business back in the early 2

we called it the Wild

Wild West back then

it was a lot of fun

it's very little regulation

but we had no dock loans

stated income

stated asset

basically the

the saying was

if you could breathe

you could borrow

meaning we pull the credit report

and if you had good credit

you're gonna tell us how much you made

you're gonna tell us how much money you had in the bank

and you're gonna pay for a

with a little bit higher of an interest rate

but you're gonna get a loan

and so that went away

when when we had the housing crash in 2008

uh the government came in swooped in

Frank Dodd Act you know

and they said

we gotta tighten up the mortgage industry of course

we took all the blame as mortgage

originators sure

not all the blame was on us

I saw The Big Short yeah

I still have PTSD man

I mean it's that

was a tough movie to watch

but it was pretty spot on

you know it was

it was a lot of fun back then

but in I'll tell you

we did need some regulation in the industry

and kind of weed out the bad seeds

but it did go too far you know

I could go down

a rabbit hole and tell you

about things like that however

so it all went away

and it got so hard to lend to people

and the people it affected the most

are the people that do have non

conforming income you know

your regular salary

W2 employee

they're like

fine you know

I'll give you my

your w twos that you need

and things like that fit

the mold that

you know Fanny

Freddy wanna see

exactly where it

less risk adverse

right and so

and so what happened is

these investors came in and said

you know they tightened up the mortgage market so much

it left out a big part of the population

that should be able to get a mortgage

they pay their bills on time

they make good money

but guess what

they may use

you know the

tax laws that are

out there to offset their

tax liabilities

no there is rules in place for them to not

have to pay hand over fish

just because their self

employ borrowers

and it's not to punish them

from the IRS standpoint

however the IRS

was not in cahoots with the mortgage industry

because the mortgage industry wanted

everybody to be a tight little box

meaning we need to show what income

you're claiming

and paying taxes on to the IRS

in order to

get you qualified

well that's

not the true picture

we all know

that's not the true picture

I mean most of the

people listening to this podcast right now

if you're a realtor

you don't claim 100% of

your income

cause why would you

right cause then

your income is gonna be

offset by the amount of taxes that you pay

so you're being

eliminated from qualifying

sometimes from these

uh you know

the QM loans

the Fannie Mae

Freddie Mac

conforming loans

so it would

if fits a need

it's not to be thought of

is like a you know

something that's a bad loan

or something that

should be looked down upon

it's a loan that

was put in place to fit in need

that went away

when the industry tightened up so much

you mention realtor

specifically

uh huh who else do

you think these

these types of loans help are

I would think

you know if

you're mentioning realtors in 10 9 9

you're thinking you know

self employed

bar wars um

things like that

right yeah so it

it's gonna be

any of your

major entrepreneurs

you know people

who open up a business

maybe they own a small shop

restaurant owners

um you know

we've done quite a

few of these for like

nail technicians

yeah you know

that right your

people that are 1099

contract workers

things like that

that you know

they don't have the

the normal W2 job

where they're paid

you know $90,000 a year in salary you know

they make money

maybe you know

like a therapist

or something like that

or somebody

who does like

physical therapy

and things like that

they pick up their

own clients so they're

they may work

at a particular

hospital or

outpatient facility

but their income is based from their

own clientele

that they pick up

and so they're paid

you know on an hourly rate

or you know

a billable hour rate

where it's not normal

and so they

get a 1099 from their employer

and so they file

you know Schedule C

like they have to

and they write

off their expenses

cause they're allowed to

that's right

yep and so you know

your net income is

not a reflection of

your actual income

in these type of loans

your net income

is what you wanna

report to the IRS

to limit your tax burden

which is why those rules

are in place yeah

I would also think that like

Project DSR

that's gonna help somebody who

maybe doesn't have a ton

of qualifying income

correct but has

a heavier cash flow right

like maybe they're sitting

maybe they inherited some money

or something like that

hit the lottery

hell and um

so they have money for

you know a 15

20 25% down payment

yep and they

don't mind you know

eating the higher

interest rate on that mortgage

cause they're not

the ones that

are gonna be paying

anyways you know

the person who's running

the property will be

the one paying

the interest rate

that's right

and investors

that's exactly right

people that

are investing

and building their own

personal portfolio

you know maybe they

own ten to 15

properties yeah

and they're you know

not only are they

making money

off the rent

but they're

making money off the

equity that they're building in the house

and this is the

their retirement plan

which is a great

way to do business

especially in this market

and so those

people they would

not qualify

for a standard Fannie Mae

Freddie Mac

conforming loan

and that's why these loans

are in place

it allows them to

expand their portfolio

by purchasing more

properties and

at the same time

they get the loans that they want

because they're gonna

they know they're gonna make

the cash flow

off the rent

and they're gonna make

the equity off the

of the appreciation

in the house

that's alright

so let's say uh

Agent Joe has gotten a hit client Susie under contract

what can they expect as far as like a turn time

like are we talking you know

we love to tell

our 15 day clothes on a conventional nevation

we talking 15 days here

we talking 60 days here

we somewhere in the middle

what do you see in for most of these

non Korean products

yeah somewhere in the middle

we're gonna be about 30 to 45 days

and what that take

yeah it's not bad still

so it's not like you know

I'm not saying anything bad like Credit Union 60 about

normal prequel from

the local credit units right

but but what we do is

because these are portfolio loans with

investors specific

they write their own guidelines

so we can't just go

to Fannie Mae handbook and look up hey

does this client qualify

ideally we get the application

and we get some of the supporting documentation

and with that we wanna look at

and the first step in this process is

we wanna send it to that specific investor

the investors gonna take a look at up front

they're gonna give it the green light

the green lights

not a full approval

but it's basically that's

our version of a pre qualification on these non qml

yes and so they give it the green light

then we send it out say okay

look at your pre qualified

once you go out and find the house

and go do what you wanna do at this point

and then once you're under contract on the house

that's when we start the normal underwriting process

but everything does have to go to the investor

because these are investors lending their own money

that they're gonna service on the back end

you know IE

the portfolio aspect of it um

they have no plans of selling this on the open market

because they can't

they're gonna be the ones to underwrite it as well

so it's a little less control than your normal

conforming loans

because we do everything in house on those let's say

it sounds very much like a lack of control there

yeah that's correct

that is absolutely right

there mercy

we are at their mercy

because they're the ones giving us their money

cause they they're

they're the ones taking the risk on this

to take it on as their uh

a commodity in their own portfolio that they're gonna

service long term well

and selfless plug here for you

but like that's why you want someone in your role

where your job is to stay on that investor

hey look we're waiting for an update here

you know we're waiting for the surprises come out

we're waiting for this underwriter review

this stuff you know

having someone as a director of operations

whose if it's taken

you said 24 hours

it's our 25

we need an update

that is something we're gonna need to see very quickly

I mean I think

the individual loan officer out there

while they can benefit from this

they have to be

very diligent in monitoring these investors

because there is a lack of control

and had not asked

not you know

Squeaky Wheel gets the

gets the grease

all that stuff is very applicable in the situation

yeah that's correct

that's why we have built

the relationships with these account reps

that are with these investors

the relationship is key with this

cause that's the go to person for me

when I haven't had an answer in the time frame I expect

cause we set high expectations for us

to present to the Realtors

to present to the clients that we service

and we do set the expectations on these

accordingly

that it's not like our normal conforming loans

but we still have expectations to meet

and people need answers

and what that means is

I go to the account

wrap and demand you know

answers and accountability

which it's good

because it's a symbiotic relationship

they want to

they want to ease that

right because

they want the continue business

there's not just one non qm investor out there

that's right

I can go to many

I can develop a new relationship if I need to

but you know

if your rates are in line

your guidelines are in your line

and your conditions are not insane

I wanna keep the relationship I had

because we already have kind of

started this path together

that's right

and the good thing is

once we learn the process with the particular investor

and account manager

our account representative

you know then we know the next one

we should expect the same

and it becomes you know

a normal flow of doing multiple loans with them

and if their parameters change at all

you know we need to know up front

and relay that information

cause these do kind of ebb and flow a little bit

because the products are so unique

sometimes our guidelines change

and so our account reps tell us up front

they send out email blasts and kind of keep us

you know a prize as to what's going on with these loans

if anything changes

um and that's

that way we know what's going on with these products

from beginning to end

yeah alright

so before we end the show today

let's kind of

real quick just hit some of

the top ones are gonna be going over

the next three weeks

we're gonna be

referencing these

going into more detail

uh with next week

we're gonna be starting with DSCR products

this is one of my favorite products just

because I deal with a lot of

um investors

you know buying first

Second Third

investment properties

um having this type of loan

essentially

it's a pre 2,008

no DOC loan

where you use the rent

schedule from the appraise was

qualifying income

we're gonna be going into more detail on that next week

the following week

we're gonna be talking about bank statement loans

asset qualifiers

you got anything you wanna put on those

yeah so those are great loans

for those self employed borrowers

yeah to see

it's almost like a PNL through bank statement

but we will go into those a lot

more detailed of course

in the second week

but they're great loans

for those self employed borrowers

that will show

a true picture of what they're bringing in without

having to hit them for the um

the write offs

or depletion or

anything like that

the expenses that they write

off on their

tax returns

and then last week

we're gonna be going over 1099 and P

N L profit and

law statement loans

um what do you got to show

you on those

yeah so those are great

products for again

those contract workers

and people that

you know they work

they are for

all types of purposes

self employed

but maybe it is that nail technician

that works at a salon

but they bring in their

own business

that physical therapist

and things like that

so again it's somebody that's paid 1099

um or they just have a PNL on their expenses

because you know

they bring in a lot of money

but they do

right off of money

but the PNL

they're looking at

the cash flow

but again we'll go into that a lot more

but it's again

a good product

for those self

employed borrowers

that's right man

look if you've

enjoyed today show

if you're looking forward to

the next few weeks

and where we talk about these different

products that

are out there

for your clients

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tune in next week for DSR

and all things that come with that

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