Working Capital The Real Estate Podcast

Mortgage Matters with Christine Beckwith|EP21

Sep 30, 2020

In This Episode

Christine Beckwith is a leading and award winning mortgage industry executive sales leader. Her career which spans 30 years has her winning on multiple origination & management platforms, levels, and companies while consistently proving time and market does not change her ability to compete & bring sales teams to the very top. She is a sought after public speaker on the real estate & finance circuit. She is the Vice President of Realtor & Sales Management for AnnieMac Home Mortgage & the President of 20/20 Vision for Success Coaching.  She’s also was the first female news anchor for the mortgage news network and is a best-selling author

In this episode, Christine shared her incredible journey from top loan officer to mortgage executive, how pandemic affects the mortgage industry, her online coaching company, 20/20 Vision for Success and she also answered some questions that every investors wanted to ask about mortgage.

Quotes:

  • “Everybody in the world is refinancing”
  • “A Financial mindset & good wealth is built off of liquidity”

Resources and Links:

https://visionyoursuccess.net/

Christine’s LinkedIn

Christine’s Facebook

https://wwvmag.com/

https://www.thevision-mag.com/ 

 

Transcript

Jesse (1s):

Welcome to the Working Capital The Real Estate Podcast. My name is Jesse Fragale. And on this show, we discuss all things real estate with investors and experts in a variety of industries that impact real estate. Whether you’re looking at your first investment or raising your first fund joined me and let’s build that portfolio one square foot at a time. All right. Work in Capital listeners. I have a special guest today. Her name is Christine Beckwith. Christine is, Oh my God is going through these awards. Write here is just a rock star in the mortgage industry.

Jesse (32s):

She has won awards that arranged from award winning Mortgage industry executive and sales leader. Best women owned business in banking, most powerful woman in banking, 2019, most connected Mortgage pro and on and on and on A she’s also what was the first female news anchor for the mortgage news network and his a best selling author. I’m going to run out of breath here. Christine how’s it going?

Christine (56s):

Good. If you get old enough, you get like a whole long list like that.

Jesse (59s):

Yeah. Well, listen, thank you so much for coming on. This is going to be, like I said, prior to this show, this is going to be the first show that we’ve had kind of a bit of a debt set centric or a Mortgage centric guessed on the show to really demystify that world for us, you know, coming to real estate as real estate investors. Not surprisingly, we need lending, we need money and you fill up, fill that void. So again, thanks for coming on. Maybe what we do here is a little bit of a background of yourself. I mentioned a couple of a couple of these awards.

Jesse (1m 31s):

How did you get into the Mortgage world and, and what did that start like for you?

Christine (1m 38s):

Yeah, it started in college. Nobody ever comes in and straight up, but we don’t write that. We want to be in here when we’re children, when we grow up, we it’s a running joke. I was assisting a female originator in a credit union in Massachusetts while going to school for sports, medicine and nutrition. And a by the time I graduated college, I had such a bug for what it was she was doing. I just ended up jumping in myself, straight out of college as a, as a loan originator.

Christine (2m 8s):

And, and that was, you know, 28 years ago. So if you include the time that I worked with her spend about 30 to two years and that’s it, that’s all I’ve done ever since.

Jesse (2m 19s):

Wow. So for those that don’t know, you hear the term, a mortgage broker or loan originator, what would for you to define a loan originator for those that don’t know what would be A will be a short definition of that?

Christine (2m 31s):

Sure. So, I mean, there’s three major silos of all mortgage lending. And so once you’re inside mortgage lending, you can kind of see it more clearly, and that is banking lending or brokering. And so the difference between a mortgage broker and a loan originator, so loan officers become like a taboo name when NMLS a national mortgage licensing system decided to make mandatory license sure.

Christine (3m 1s):

For a loan officers after the obviously meltdown of 2006 and 2007, they changed the name. If you, you need to have a license, the only place you don’t need a license today to lend mortgages is if you are in a bank, if you’re employed by a bank because you fall underneath their bank charter. And so basically you’re insured by the bigger bank charter. Otherwise you need a broker licensed to be a broker or, and you need a license to be loan originator.

Christine (3m 31s):

You can be alone originator for a lender. So you’re licensed to handle the paperwork and appropriately qualified customers and do things like that. And as a broker, you are an independent contractor. That’s probably working with many, many lenders. And so there’s some advantages to that because obviously you have a lot more flexibility in offering. If one place does it qualify a borrower, you go to the next lender and find a program or, or something that does the disadvantages are that as a broker, you either have to work in your own shop, which means that you have to create your own utility, which, you know, all of the things that plug in and create automation and support systems foundation’s of those systems and functionality of the business.

Christine (4m 21s):

And with a lender, if you choose to put your license up underneath a national lender or even regional or local lender, they’re usually the ones that have all that utility built for you. And you’re literally sitting at a desk originating loans, but have the ability to use their library of resources.

Jesse (4m 39s):

So when we as investors, when we’re going to look for debt on a property, let’s, let’s talk on the residential or a multifamily side, just for context. You know, you hear a lot about regional banks, national banks, CMBS lenders, you know, what, where do you steer people? If you were asked that question, you know, where to get the best deal for your debt in terms of the type of banking institution that you would go to, where would kind of that person that’s buying, maybe their second or third, a call it a 10 unit apartment building, you know, which one of those would they, which Avenue would they go down to have a how the conversation when it comes to adding debt to the property?

Christine (5m 18s):

Yeah, it’s funny because there’s a difference between where they would, where the well is good for sourcing that type of opportunity. And then where the well is good for financing that opportunity. So I’ll take it in both directions. And hopefully that helps the audience. You know, clearly banks, you know, have some of the biggest portfolios and a cost, a lot more money to run a bank. You know, obviously they are taking and savings and loan in their, using the, the credit investment money that’s brought in through that to actually lend against.

Christine (5m 53s):

And there’s the whole thing happening there that they tend to have bigger lists of foreclosure and collectively, they have them all in one place. If you can imagine a mortgage lender is typically selling their loans off to many different banks, they may be holding their own servicing portfolio, the really big ones do, but they don’t usually make their lists public. And so unless you understand where those mortgage lenders are lending, and you’re going to look in the registries for those type of information, you don’t have full access to that.

Christine (6m 26s):

So sourcing the business is a little bit different, but then on the finance side, you’re going to find the flexibility in the mortgage lending and the mortgage brokering world. And so when you’re really trying to use as much of your assets, as you can, as little of your assets, as you can to securitize and create, you know, the, the, the investment for yourself, really those two avenues create the better, a more flexible opportunities

Jesse (6m 53s):

To make a distinction in that conversation between whether you’re looking to buy specifically commercial properties, let’s call it a, you know, an office building or retail is a strip mall, as opposed to going down the single family or multifamily route.

Christine (7m 6s):

Yeah. You know, it’s funny because right now there is, you know, people’s people have equity. So, you know, it certainly leans an investor into the single family, smaller multifamily arena, because obviously that’s where you’re steering from when there’s a loss of equity. And when you get into the commercial, you have the security of the rental income coming in to cover the debt. And so there’s some flexibility in that, even though there a bigger down payment to acquire those programs or properties, rather, I would tell you it’s extremely attractive to buy and flip.

Christine (7m 42s):

And while the flipping guidelines are nothing, you know, I’ve been around 30 years. So, I mean, we were, you know, we come from the heyday of flipping when there was no guidelines at all, and people could buy 20 properties a year and sell, sell, sell, and now, you know, there’s shipping and flipping guidelines and all that, but it’s very much, there is a lot. Think about the perfect storm. You have all the people. So 42% of Americans that own property in 2006 will go delinquent by 2008.

Christine (8m 12s):

Now, prior to that for 20 years, the average delinquency annually and across America was about 4%. So you can just look at that and understand how is it? 42 out of a hundred Americans are going to fall. Half of those people had never had a Mortgage delinquency. They were just letting go of second properties. And all of this, there was no demand, rising default, perfect scenario for the crash, nothing like the market we’re in right now where there’s high demand and a robust, low interest rate.

Christine (8m 42s):

So if you think about the single families and small multifamily is the two to three units and stay out of the commercial for just a moment, you are talking about properties that are in such high demand. Now that we are getting back to close to it, annualized equity between five and 10% annualized equity in 2005, 2006 was about 15, 20%. So even though there was a demand issue back, there was nobody was buying and people were defaulting.

Christine (9m 13s):

It was, it was truly the chiropractor of the mortgage industry today. That’s not true like today, the racetrack is full and people want property. The millennials are buying for the first time. In 2019, they were the biggest buying group. You know, finally they showed up and this year that number is growing predicted to, to grow. Even with pandemic, the mortgage industry is thriving. So, you know, if you’re looking to buy, if your, this is what I think is going to happen, I think in the next six to 12 months, you’re going to see a lot of new real estate investors entering the market.

Christine (9m 46s):

You’re going to see them buying a single family home and putting their toe into the pond of this and, you know, coming in and renovating, when I said it was the perfect storm. Here’s the second part of this. All of those people that went to LinkedIn in that 42%, they had to wait to give back in the market. Some of them were defaulting, you know, close to 2010. So you take that seven year, a foreclosure run that they couldn’t get back in the market. That’s going to bring you all the way up to, you know, a few years ago.

Christine (10m 17s):

And some of them are just re-establishing that credit line to the point where they can buy now and have the money to do so. And so the neat thing about that is there’s two, there’s a dichotomy there. You didn’t have a lot of demand until the last two or three years. So that’s pushing this, this economy in a really a good way. And at the same time, nobody had equity to do home improvements is the perfect area for an investor come by the rundown Cape or the rundown single-family and drop 25 30 K on some aesthetics and turn that thing for 75 to a hundred, you know, and I think they’re going to find at this interest rate that they can finance it and all time historical low, you’re going to see a lot of people doing this right now.

Christine (11m 5s):

I have actually said out loud, like, why am I not doing this right now? For sure, because I understand the econ economic makeup enough.

Jesse (11m 15s):

Yeah. And just anecdotally, we’ve seen that over the last couple of years, just this push towards whether it’s, you know, flipping YouTube channels, the burst strategy, just people buying assets and flipping them. But I think it’s interesting what you said, and I’m curious to get your take on this right now. You know, this is like a lot of things and right now, I mean, you know, COVID-19 just kind of the environment we’re in here, you know, back then in Oh seven, Oh wait, there was a liquidity issue. And it seems like now that’s not the issue. There’s there’s money out there for people to purchase. Or I’m curious about is, Oh, seven Oh eight.

Jesse (11m 45s):

We talked about, you know, on the Podcast low doc loans, that Ninja loans, how just in the industry, it seemed as an outsider of the mortgage industry that basically anybody could get along. How have you seen those standards change from, you know, Oh seven Oh eight to maybe even before this current crisis, just, just the standards in the industry, have those have those involved and, and what have you seen?

Christine (12m 8s):

Yeah, so, you know, obviously in Oh five Oh six, if you had a heartbeat and a good intention to repay your loan, you were able to find someone that was going to lend you. And we learned our lessons, licked our wounds, and we securitize now on the basis of risk, layered risk assessment. And so, you know, there has to be enough equity there for the, the, the note holder or to take that property back and actually, you know, be able to turn it back around through a foreclosure process.

Christine (12m 39s):

That’s really, you know, where a lender’s are mitigating, their risk that you’re going to seed loan to value is to be lower, needing more money down because it widens that gap. I mean, if you look at what happened to the mortgage insurance world and OSX, it was like the rest 60 national Mortgage insurance companies and before was done, there was none. And they all had to pay out policy cause it was the perfect storm. So you’re gonna see more money needed to be down all though in recent years, alternative documentation has come back and I never thought we would see this.

Christine (13m 15s):

Re-emergence where, you know, you didn’t necessarily have to have bank state, excuse me, tax returns, where you could show liquidity through bank statements or self employment and that sort of thing. So there’s, there’s a lot of aggressive note writing going on in the right channels. I’m in some of the businesses they’re really looking more profoundly. Here’s the mistake we made in Oh five Oh six. If you had a good credit score and we didn’t care to look at your tax returns, we only looked at a certain history of your credit.

Christine (13m 48s):

We really didn’t care where the cash came from at the table. And so you showed up with the good credit score and you got the debt. The problem with that is with no employment history and where we were at that time and really low LTV with 20 years behind us, where people got, you know, were houses accumulated 15 to 20% equity. You were lending. We were totally gambling. In those years. We were gambling against the future equity earnings because for 20 years we could hedge.

Christine (14m 21s):

We could say this house is going to get 15, 20% equity. And so we’re going to lend on this, even though there’s, you know, 3% down, no money down. And we don’t care what this guy is, job is, or a girl’s job is because they’re keeping a heavy credit score. The problem with that is that it led in a lot of illegal money. It led it in a lot of people that didn’t have longterm credit histories that could support that. And when the demand fell and the houses weren’t selling and the equity dropped the head, you bet on disappeared.

Christine (14m 56s):

And so that default would end up meaning that we were walking a tight rope, windows security. So today you’re going to need to put some money down and we’re going to get in a position where if we take that property back, we can handle the time on the books. We can handle the turnaround and we’ve got that cushion. So that’s number one. Number two, we are going to look at your work history and we are going to look at your credit score and the history of your credit. And so if you are gainfully, self employed, and maybe you’re writing a lot of your business expenses off, but you’re showing good accounts receivable, you’re probably still going to get in the game a little bit.

Christine (15m 34s):

So we’re hedging against a little bit of the tax, a law, and, you know, taking it upon banking law to make good sense that this money, because the mindset they’re by the way is not to go against, you know, a tax law. But the mindset is if this money is flowing through your bank accounts and you can’t afford to make this mortgage payment debt to income ratio wise, a lot of these people, you know, we’ll just wrap that expense up underneath their profit and loss and still operate just fine.

Christine (16m 6s):

And so that’s kind of that moment.

Jesse (16m 8s):

And are you seeing that both, you know, back to that dichotomy between that residential and commercial side for the loan to value a, you know what we’ve seen sometimes I’ve had commercial loans where they’ve been easier for me to, you know, to finalize and the personal loans like buy my own place were more difficult. And is that, is that going to be a function of, you know, you’re looking at a debt service coverage ratio for the commercial and a few different metrics for the personal,

Christine (16m 35s):

I think with commercial, all bets are off right now. I wouldn’t even want to give a crystal ball on that because if you look at what just happened, pandemic wise with businesses, commercially, we have yet to understand what 30 million loss jobs really looks like. You can take national chains, and I don’t want to name anyone because I don’t want my, I don’t want to be quoted somewhere that I named the name of this coffee shop or that, you know, chain store.

Christine (17m 5s):

But I will say that if your, one of the big chains and your used to operating nationally in, let’s say 5,000 locations, I’m just giving this as an example. And you’re in a strip mall or you’re in a mall or your, on a busy street or a main street. And now you’re shut down for 90 days because the pandemic and that company is used for bringing in $1 billion a day in revenue, and that revenue is gone. All workers are laid off. There’s no, you’re not buying products.

Christine (17m 36s):

You don’t know when you’re opening again. You know, we don’t know yet those companies are waiting to announce. There’s probably so many defunct companies that have not publicly announced yet right now that we don’t understand the, to the commercial real estate side of things yet, there’s going to be a lot of vacant buildings. And the vacant building next to you might do as much damage to your business that survived and the building next door. And so what I would tell you right now is I really think there’s going to be a hard, and there has been pumping of the brakes by lender’s on commercial, because its almost like we’ve got in a car accident, but the assessor hasn’t shown up to analyze the vehicle.

Christine (18m 21s):

We don’t really know the full damage yet from the car accident. And I don’t think we’re gone to know maybe not even this year. What I do know residentially speaking is that Doug Duncan from Fannie Mae who is their national economist, other, you know, obviously Bloomberg, obviously all of the economists that you see coming out that are talking about we’re, you know, real estate and to lose its value. You know, there’s several things looking at the third and fourth quarter, we were headed into a place economically speaking, where we were lending 500% times the volume free pandemic.

Christine (19m 0s):

And there was, I don’t know how close you guys follow the economy, but before March 7th. So before the pandemic was nationally announced that we’re going into this pandemic and lockdown, there was a margin call environment occurring on wall street where all the national lenders were getting margin calls and the margin call was occurring. And I always break it down for the listener that needs a layman. I’m a great metaphor teacher. So I’m going to do it like this. If your child came to, to get $20 lunch money every Monday and then suddenly they came and asked for a hundred dollars, would you ask what they’re doing?

Christine (19m 34s):

You would, you would say like, what’s going on? Why do you need five times as much money? Well, that’s really what was happening in the mortgage industry. And if you have ever been at a bar and you’ve been the nice guy that picked the tab up and had to give your license at the bar to get the tab paid at the end of the night. And you’re obviously going to go back to your license and pay the tab if you’re a good guy or a girl. And so the whole analogy I’m using is in a margin call environment when you’re lending that much and the risk that looks really scary out of the blue 500% lending’s going on, we are going to take your license.

Christine (20m 8s):

The margin call is giving your license. The only difference in banking is we would say in that scenario to our son, okay, Tommy, you can have the a hundred bucks for lunch, but I need you to go to your piggy bank and you’ve got to give me $10 out of your piggy bank and I’m gonna hold on to this town and to give you this hundred and you know, I’m going to hold on to this. The difference is we’re going to keep the $10. So in a margin call environment, if you get called and some of these banks were called $150 million margin calls and they were trying to stay open by meeting these margin calls.

Christine (20m 41s):

And by the way, when they write these checks, they have to write them from their personal profit of the bank and then they don’t get the margin call back. So I want everyone to understand that’s where we were before the pandemic hit. We were already in an environment where ambassadors on wall street were like trying to pump the breaks about how much money that we were lending. So in some weird way, the pandemic has caused us to neutralize that environment. And we’ve kept the rates low after a few, remember the Sunday that the feds dropped the rates down to zero and everybody started calling and said, Oh great.

Christine (21m 16s):

I can get a 0% interest rate. And we’re like, no, nobody can’t because its how it’s tied to the 10 year treasury bill obviously,

Jesse (21m 24s):

Or when Trump came out, they were talking about negative rates and he’s like those San pretty good to me. And I was like, eh, you know, it’s like those sound great. The thing is it’s interesting. Cause as a myself commercial, a commercial broker w obviously the, the, the story is more complicated on the asset class. So in that you mentioned, you know, national retailers for instance, versus the office environment versus in industrial. And what I find that’s, that’s interesting in this particular time right now is we are still able to actually get these loans for some of the properties.

Jesse (22m 1s):

So the AAA covenants, The the ones that the certain companies that haven’t been as effected. But I think it’s just what it’s necessitating is people to take a closer look at when they’re lending is exactly, you know, where are these all triple net leases in this building with type of companies, have they applied for any government assistance? So I think as an even, and as investors, we’re getting a bit more granular. What I’d like to ask you is in terms of, you know, if you’re going out and is as an investor and you’re going to add debt, whether your in this market or, you know, this is last year, what would you say the process for them is, is that going to find a mortgage broker or is that going, walking down to their regional bank?

Jesse (22m 40s):

What do you see as kind of the first steps that you’d recommend?

Christine (22m 44s):

Yeah. You know, there is a thing, find a broker.com technology now where all the brokers have uploaded their, their licensure. So you can put in a zip code and you can find one anywhere. And so I don’t mind saying that because I think that helps all of us to have Resources like that. I think you could do find a loan officer dot come to, I think it’s the same company in, in a different channel for the lenders. But anyways, you know, you can pretty much find someone.

Christine (23m 15s):

I would start with a three prong approach. I mean, I said, there’s three silos. Why not? Do you know, it’s not going to take you long to get a three prong approach. Here’s why local credit unions who are lending in their own money, savings and loan banks. A lot of times they beat the pants off every body else, interest drop rate wise, but they’re also the most conservative. So you might not like the loan you’re getting, you might like the rate you’re getting, but you don’t have as much leverage. You need to put more down. There’s not as much flexibility or in your DTI.

Christine (23m 45s):

The is probably going to be somewhere in the middle of that pack. And the broker’s probably gonna beat on price and have the most flexibility. So uhm, do the three prime approach and see, see what you’ve got there when, when it settles back and you know, it’s still like unbelievable right now there’s so much demand. And so many people buying there’s so many people it’s, it’s, it’s actually understated right now. And I’m going to tell you this, there’s actually a big distraction occurring in the mortgage industry right now Everybody in the world is refinancing Everybody.

Christine (24m 20s):

And so we’re now at a ridiculous volume and people are working night and day and they’re doing it from their homes and it’s crazy. But every executive that I speak to because I coach and consult banks and firms and managers within our space, you know, they’re very concerned about the distraction of all of these, these lenders, all of these loan originators to the refi business. Cause its kind of like picking the apples up off the ground, you know, for the last decade we’ve been climbing the Realtor trees, right?

Christine (24m 51s):

So when you neglect those Realtor trees, you know, it leaves room for the greenbacks. There’s tons of new alone originators coming into our space because the volume, they have no database to call upon for refi. So they’re not going on all the realtors doors that are being, you know, neglected by the primary loan officers that are distracted for refi. So if you’re my guy coaching with me, I’m telling you to make sure you’re a realtor, doesn’t cheat on you. Do everything you can do to go get the apples on the ground, but maybe hire an Apple picker for the ground while you keep climbing the trees for an investor.

Christine (25m 24s):

I would tell you get in there now, you know, sooner or later this refi business has been a slow down. I think going into maybe the spring of next year, I think we’re gonna have a good run until then. And when that happens, you’re going to see a shift. There’ll be more focused on purchase. I think the wind will go in into this spring market next year and there’ll be less property to choose from. I also think the money that you seem lending outright now on a refi level is pouring in to Home improvements into homes and those are gonna bring the prices of properties up.

Christine (26m 1s):

And so the longer we create that liquidity for homeowners, that more and the demand remains there. You as an investor, Stan, to find a property this year at a better price than you will next year, even with the risk, people are saying what’s gonna happen, a property value and this pandemic, this to fall, I really still believe as long as the demand stays and, and people are able to that demand stays there. Even if the default rises, we’re still going to see property value is stay up there saying Doug Duncan said 15% reduction due to pandemic.

Christine (26m 37s):

Estimated again, to me you can quote, that’s how I was April Fannie may report. But when you look inflation, it counters and there’s no loss in value.

Jesse (26m 46s):

Yeah. It’s interesting you say inflation because that was just, I think it was Jeffrey Siegel. It was on Bloomberg and he was talking about the bond market generally. And he mentioned that he thinks 2021 is where we will for the first time in awhile, see a show about inflationary, upward pressure. And he said, he also said that he sees rates. You know, it’s not, is not an uncommon thing to say, but he thinks that we’re going to look back at the 20, 20 a time period as not only the low of a decade for rates, but generational lows.

Jesse (27m 16s):

What are your thoughts on that?

Christine (27m 19s):

Yeah, I think that’s right. You know, I couldn’t imagine when I was 18 and I was helping people refinance to 14% for the first time a world that we’d ever dipped below 10. Then when it was eight, I thought for sure, I’d have no job in the future years. So here we are. You know, so it’s like never say never. And you know, speaking of Trump talking about going into a negative market, I follow again, all the economists and when they started predicting about three, four weeks ago that we were going to go negative, it was just like, this is insane.

Christine (27m 53s):

And so I do, I think, you know, it’s got to come back up. We, we know a couple things. We know the interest rate is typically indicative of the economy. Now, if you go prepare endemic and you follow the job markets, which is tied too, a lot of our interest rates fluctuation, you saw about 220,000 unemployment on February 28th. Okay. Right around there. And that we know where it is now. And so the fact that the feds of forcing the, you know, the rate to stay low right now and the default is the unknown.

Christine (28m 30s):

I truly believe between the default question Mark becoming an answer we visibly see in the next six months and inflation and you know, the, the, the liquidity that’s been brought in by the refinance market. I think you’re going to see the interest rates slowly come on up. It was predicted that it was going to comp in 16, 17, 18, 19. I have articles on LinkedIn that are dated springtime of the last couple of years where I’m like, this is it Everybody get where you can and rates are coming up and they didn’t.

Christine (29m 4s):

So it’s going to come up because it has to move kind of a R at the bottom, right? So there’s gotta be a balance in that direction, but this is what I’ll tell you when they come up, we will still be in such an incredible position in the housing market with a property value, high demand, still high because of the millennial push that is at the very beginning of that push and those guys coming, I truly, truly believe it’s still going to be an incredible learning environment. And you’re going to be talking about splitting here is because the difference between one and 4%, two, a house that has equity and you know, hopefully jobs that go back is nothing.

Christine (29m 46s):

It’s nothing. Yeah.

Jesse (29m 48s):

Yeah. You know what? We’ve been seeing the same thing. And you know, if I pulled the five-year-old a LinkedIn articles wear a cap rates, they can’t pay. There’s only one way they can go. And then next thing you know, you’re in a 2.8% cap rate for downtown office product AAA products. So yeah. You know, one, one area I think of you probably have experienced this multiple times in, in your career, but I think the general public, they’re a little, there’s a bit of confusion as to the fees associated. When you go to a loan origination or a mortgage broker, what, you know, generally speaking, I know there’s probably all kinds of nuances, but generally speaking, when you’re going to get a loan for, for an individual, let’s, let’s say it’s again like our, you know, five or 10 unit apartment building, what should they be expecting?

Jesse (30m 32s):

And when are those fees paid at closing or when the deals finish and when can those fees, if they can be rolled into the deal itself.

Christine (30m 42s):

So when you’re buying a home, it’s always, you always have to pay those in cash. And so when you’re refinancing, if equity limits permit, you’re a loan to value permit and this room over the principal balance, you can finance them. The difference between how much is asked for upfront really is the loan to value position typically, or a rate position. So those two things dictate the, the, you know, the cost of the loan per se.

Christine (31m 14s):

And so here’s what I, let me define what an origination point his first and then add, and also reassure Everybody about the 2008 laws around origination points, because the two things really put investors and everybody at ease. First of all, it was a while ago. That was up until 2008. And so if you were a loan officer and you wanted to grease your own commission pockets, you could charge origination points and you usually had to split with a bank. So the bank benefited or whoever you work for, I say, bank, your employer benefited.

Christine (31m 46s):

If you were lending and you benefit it. And that got a stripped away how loan officer’s on originators get paid, her brokers get paid. It has a completely different now what’s permitted. It is not tied to the interest rate. There is no benefit to give you a higher interest rates for that at all. So if I want to quote you to right now, or a three and three is higher and has more margin, I have to meet a certain criteria financially. So in other words, if you come and your credit score is 800 and another person comes and they have a credit score, 800, both putting 20% down, you both earn 40% DTI and similar credit risks.

Christine (32m 27s):

So let’s just say it’s the same two different people. I can’t quote you two. And then three, I have no ability to do that. The rate sheet is dictated by the credit risk and all those factors. So all everybody that way now, so you line up your thumbprint of finance, financial credit risk is shown. All those things are validated any, and it renders a rate that rate is quoted by the loan originator. A loan originator is paid a percentage of the amount of the lens.

Christine (32m 56s):

So if you can assume they can’t really fish for larger loans or not. We obviously could make the argument. If you’re a loan officer and in Boston, you’re smarter than a guy in Cincinnati, but you know, if you understand you don’t control your lending environment, volume-wise then everybody gets paid kind of 1% or whatever it is, a hundred basis points, you know, and that varies too, depending on who you’re working for. So let’s take that off the table and let’s go back now and look at the fact that an origination point is prepaying the investor, a bulk, a set of interest.

Christine (33m 35s):

So if you look at the longevity of alone residentially for many years, we are as the average low, and this is just lengthened in the last 24 months. But for two decades, the average length of the loan was between three and four years. So most people either refinanced or sold that note in that time. And when I say sell note, they sold their home and close their note, or they refinanced it. So it got closed by that lender. That was about the shelf life of a loan, a residential loan. So most lenders are going to want to earn a certain amount of interest.

Christine (34m 7s):

If they know they’re only going to have the loan for 36 months and you want to have a better interest rate, you could pay a prepaid bulk of interest. So I’ll buy one point for some bulk of interest upfront and say, OK, in that case, we’ll give you. And so, you know, 1% or one origination point might equate two on going a rough year, about 25 basis points on the rate. So three down to two and three quarters, it’s not one for one interest rate to origination point.

Christine (34m 40s):

And so the whole point there is this. Yeah. If you wanted to say that there’s, that, you know, quotient of what they want to meet interest rate wise, you can buy it. So today when investors are buying it, we are looking for how long is it likely that this person who’s buying under the investment title is to hold this loan and whatever those points are that a dictated is that investors position on how much interest they need to earn during the note.

Christine (35m 11s):

But it is the same for all people based on credit risk and based on your position. And you probably have the flexibility to buy into that to a better interest rate or not, but you are truly buying yourself a better interest rate by giving them interest upfront. And it really, that is, you know, now texted on the consumer level. It’s truly only meant to give you a better position and not meant to go into the pockets of, you know, loan officer’s. Yep. And so with that changing, you know, you can talk about Mortgage origination now in a way where you’re really trying to solve to what you have for money to put down.

Christine (35m 48s):

Cause let me tell you, you could put five additional percent down and it might move the needle on the interest rate because the LTV change, but you might take that 5% and buy points down and get a better interest rate with a higher LTV.

Jesse (35m 59s):

Yeah. Yeah. So it looks like it’s standardized or there’s created a quality between the people and their in their profile. That’s actually, I like how you use that from the thumbprint of their, of their risk profile. And for us to like the last one I did a, we increased the emiratisation by five, I believe it was five years and it was agency debt. We actually had to a, there was some additional fee for doing that. So I think, I think we did have a little bit of flexibility with that in, in terms of, so you’re paying, you’re paying for cash.

Jesse (36m 32s):

Like you, you mentioned on any of those types of mortgages, if an investor, is there any way that investor can structure, did the deal that a portion or all of the fee can be amortized into the deal? Or is that something that is just not available to them?

Christine (36m 48s):

It really is going to depend on the investor’s position, LTV position. It can only happen if you’re refinancing it. And typically if you’re buying investment, they’re going to tell you that you’ve got to wait six months. Some investors are 12. Okay. So if you’re buying, you’re buying, you need the cash to cover your interest position. I would tell you this, take the rate you’re going to take. If you know, you’re going to refinance the investment property in 12 months, once you get past what they call that, you know, timeframe, a pass penalty phase for the investor, I would take the money you didn’t spend, because think about this.

Christine (37m 27s):

You want to hedge against your longevity on the lone to if you spend it all, when you buy the loan. But you know, you’re going to refile in 12 months old on to it. So you do the refi, then put it down for the long term rate that you are going to hold. So a lot of times it’s like back in the day, there was a real purpose. I’ll tell you as a, as a professional in this space, I hardly ever got a 30 year fixed my dad and mom, absolutely with no other loan, but a 30 year fixed. What I understood is a professional with a 36 month life shelf shelf life that I should take a five year or three year arc.

Christine (38m 2s):

Yep. And the reason I did that is I was banking against my own. Even with no idea of leaving the home I was buying. I thought, I guess I’m supposed to, you know, I’ll probably refi in this timeframe will, if I’ll probably refi, guess if I have to refi to get out of this arm and get it fixed, then you know, you’re just buying liquidity and wealth is liquidity. Financial advisors are going to tell you to keep your rate as low as you can, keep your terms as long as you can, because here’s the thing that people forget old school mentality is let’s pay the loan down.

Christine (38m 33s):

Let’s get rid of the term. Let’s pay loan offer. Yeah. Financial mindset, good wealth is built off of liquidity. So the lower you can make your monthly output. So that’s long term on a debt by the way, and never get rid of your tax. Write off, you know, you could open a life insurance policy that pays the debt because everybody says, well, I don’t want to leave my kids with, with that. Okay. We’ll cover the debt with an insurance policy, but I’d rather spend a thousand dollars a year on an insurance policy for the longterm note on my properties have low liquidity be building that into wealth over here.

Christine (39m 10s):

And that’s how the rich Jewish, you know, multimillionaires do not pay for it.

Jesse (39m 16s):

Yeah, for sure. It’s funny you say that my parents, exactly. I’m sure everybody’s parents. Exactly. Same thing. And I kept, I kept doing it to myself. I kept going shorter and shorter with fixed rates. And I was like, why do I keep doing this? Because I’d sell a place to go to an and yeah. A hundred percent agree with that. Christine I know, I want to be mindful of the time right now. So just to wrap up here, where can people find you on online? And, and just in addition to that, we didn’t really have that much time to talk about a little bit about what you do kind of on the, on the Coaching and, and on social media, because all you really have to do is Google your name and, and your everywhere.

Jesse (39m 50s):

So maybe you could tell us sinners a little bit about how to reach you and what you do.

Christine (39m 55s):

Yeah. So a couple years ago, I finally hung my executive hat up from banking, as fun as it was. And as long of a ride as I had very successful career, I decided that my calling after a few, my mom and dad has been sick. My sister had been sick and I just felt like this last 10, 15 years of my work life, I wanted to dedicate to others. I also believe companies grow and thrive in an environment of necessity. And one of the necessities and the Mortgage field after really looking at it from a bird’s eye view is that originators coming into our space and veterans need to know how to operate their business like a CEO and real estate brokers and real estate realtors needed to know how to operate their businesses like a CEO.

Christine (40m 43s):

So I built an educational platform. My company’s called 2020 Vision for Success Coaching. I specialize specifically in the mortgage lending real estate world. And I built an entire virtual school. That is truly about how to take the guy that you could, you could actually, you know, be a seven 11 a chain owner and take my education and you’d be the best damn seven 11 a oner that you could be. So I’m entrepreneurial mindset. We start from a principle base, we build your business plan, all things around that.

Christine (41m 17s):

We get into economics because of the real estate industry. We get into all the facets of the business, and we just ride along with them. We have Financial forensics coaches here that build profit and loss is and illustrate them. We have everything from health and wellness coaches to life coaches, origination, scaling growth, all of those things. And so we’re kinda of like this entire restaurant have Coaching specifically for our, our industry. And you get a membership that our subscriptions here, so many different layers of those very affordable, I will say, and you have access to everything that’s in our, in our menu.

Christine (41m 55s):

And you can eat as little or as much as you want. We’re a big organization and you can find me under my name on Facebook. Christine Beckwith. We have a page there 24 slash 20 Vision for Success Coaching. I have a women’s Coaching division to the largest in the nation and our industry called women with Vision. And you can find that on Facebook as well. LinkedIn under my own name. Our website is Vision your success.net.

Christine (42m 25s):

And we have two magazines that you can subscribe to you for free. One is WWV mag.com for women with Vision and the Vision mag.com.

2 (42m 36s):

My guest today has been Christine Beckwith Christine thanks for coming out, working Capital.

Christine (42m 41s):

Yay. Thanks for having me

2 (42m 47s):

Favor listening to the Working Capital Podcast My goal is to help individuals break into real estate investing as well as educate experience investors. If you enjoyed the show, please share with a friend subscribe and give us a rating on iTunes. It really helps us. If you have any questions, want to learn more or likely to cover a specific topic on the show, please reach out to me via instagram@jforgalsorheadtowwwdotjessefragale.com. My name is Jesse Fragale and I’ll see you back here for the next episode or the working capital real estate podcast.