Join three of the top mortgage loan originators of 2022 for a discussion with National Mortgage News editor in chief Heidi Patalano on strategies for keeping home lending business moving amid rising interest rates and a tight inventory for home buyers. Michael Borodinsky, a producing branch manager at Caliber Home Loans’ Edison, New Jersey office, Melissa Cohn, regional vice president at William Raveis Mortgage in Shelton, Connecticut and Thuan Nguyen, president of Loan Factory in San Jose, California and the No. 1 originator in this year’s survey, will discuss how they’re adding to, or adjusting, their product menus as the market shifts away from the boom of the last two years.
Transcription:
Heidi Patalano:
Good afternoon. I'm Heidi Patalano, editor in chief of National Mortgage News. Thank you for joining us today for this discussion on strategies for home lenders in 2023. I'm very happy to be speaking with three honorees from our 2022 top producers ranking. Please join me in welcoming, in alphabetical order, we have Michael Borodinsky, a producing branch manager at Caliber Home Loans' Edison, New Jersey office. We have Melissa Cohn, a vice president at William Raveis Mortgage in the Shelton, Connecticut office. And we have Thuan Nguyen, the president of Loan Factory in San Jose, California. Thank you all for joining me today. I'm really looking forward to a free flowing conversation, so feel free to jump in wherever you have a thought. I wanted to start setting the table for this conversation by talking about what you're seeing in the market right now. This is obviously a very interesting time - rates are going up, we're reporting on layoffs left and right here at national mortgage news. So maybe Thuan, could you start us off with what you're seeing in the market?
Thuan Nguyen:
Think it slowed down a lot. Most of the refinances disappeared and for purchase, I don't see any investors buying anymore. So right now, I only see purchases for primary residents, even a second home. Also, I don't see that many more, even primary resident people, of course putting off right now,. It's exactly like when we started the pandemic, the first one or two months people canceling the contract. People wanna see what's going on. So right now, it is a very sensitive time. The home buyer, they wanna see which direction the housing market will go. So right now it's the most difficult time. That's what I see.
Heidi Patalano:
Yeah. And Michael, when I spoke to you prior to this conversation today, you talked about it being a bit of a perfect storm. I wonder if you could kind of explain your thinking on that?
Michael Borodinsky:
Well, the first thing I'm gonna say before I even get into that is that this is 2022. We're talking about 2023. We are not talking about 2006, 2007 and going into 2008. This is a completely different marketplace. The reason we're getting to where we are and any slowdown in the marketplace and any potential issues with lender viability andall that has nothing to do with loan quality and has nothing to do with buyer appetite and has nothing to do with the irresponsibility that the lending industry had back 15 to 20 years ago. So that's the good news. The perfect storm, however, is what we're basically seeing and what Thuan basically alluded to where, when we had a Goldilocks market, maybe even more, maybe even a red hot market in our industry, for the last two years, which was below market and historically low rates that we've never seen in our lifetime. Not only did we hit low points, it was sustained. Meaning we were there for a very long period of time where people became accustomed to being able to finance at extremely low rates. And that made a huge difference, but it also made the average home buyer and borrower become complacent. They assumed and expected that rates would never go up and they have. So what we've seen is a perfect storm of rates going up, inventory remaining tight, inflation starting to rear its ugly head over the past 12 months, despite assurances from the Federal Reserve that it wasn't going to be sustainable. They used the term transitory. Well, the Federal Reserve got it really, really wrong. So now they're playing catch up. They're implementing very historically high, extremely rate hikes, which by the way, our market has already priced in.
Michael Borodinsky: (04:55)
That's why rates have gone up so far so fast, historically, never this quickly before. What we're seeing is that there's such negativity out there between the combination of rates going up, the negativity of the impact of inflation and basically buyer sentiment starting to erode a little bit. So those are some of the challenges we're facing. Both of my colleagues that are on this a panel can speak to the fact that it in no way resembles what went on 15 or 20 years ago, number one, and number two, there's still a problem with regards to the lack of inventory out there. And there still is a buyer desire. We can talk to the erosion of somewhat of their appetite, due to affordability issues, but there's an enormous amount of people who would prefer to buy than to rent. They're out there looking. They're just not finding what they can get. That's really what our problem is.
Melissa Cohn: (06:02)
I agree with you. I also think that part of the equation that we haven't brought to the table yet is we have all of this millennial generation that are ready to start buying and they are oftentimes two-income households. So they have more buying power. Yes, they've never seen interest rates as we have today, but I think that they are adapting to the fact that we are in a new, higher rate market. The buyers that I've seen in the past couple of weeks have said, that they understand this is the rate market. What can I do to bridge it? One of my favorite new expressions is, you tell people that you're gonna marry the house, but you're gonna date the rate. We've seen a surge in people taking adjustable rate mortgages using that as a bridge because the Fed will eventually bring the rate of inflation down.
Melissa Cohn: (06:51)
They will do that most likely by slowing the economy. And when that happens, the Fed will have to change directions, start to lower rates and mortgage rates will come back down. They'll never go back to where they were at 3%. But I think that if we can get rates back down into the sub 4%. Call it the high threes, where rates were just prior to the pandemic, that will be in a much better place. We are still dealing with the total lack of inventory. I see that, especially in my primary marketplaces, which are New York and Florida, where there are unfortunately still enough buyers to meet the inventory demands. Now, people are hoping that perhaps by the end of the summer — since I live into sort of seasonal regions — that will see more inventory coming on the marketplace. But you know, life will go on. Business will go on. Mortgages will continue to happen. People that are just surfing rates for refinancing have probably seen their bottom, but people refinance for other needs. They wanna do a cash-out refinance. Home equity loan rates are getting very high. If you can lock into a long-term adjustable in the low fours versus facing the fact that the prime rate next week could be at five and a half percent or higher
Thuan Nguyen: (08:10)
Yeah, I agree with both Michael and Melissa. The borrow only attempt to adjust. They get spoiled. They get used two under 3% already. They need time to get adjusted.
Melissa Cohn: (08:24)
That's going back to a new normal. I've been in the business for 40 years and when I first started, I was selling adjustable rates at 15%. We've all seen higher rate environments, and we all know that people bought and sold and refinanced in those higher rate environments.
Michael Borodinsky: (08:44)
Melissa, you alluded to something very interesting. Nationally, we've seen a surge in demand for home equity product. And when the prime rate goes up,again to the levels that we expect it to, you're gonna see that completely change in terms of what the borrower is looking to do. That might default back to like some type of intermediate ARM product that might be more valuablethan borrowing it. One over prime or something like that.
Melissa Cohn: (09:21)
Right. The Fed wants to raise rates by another 175 basis points. By the end of the year, that would put the prime rate at six and a half percent or higher. If you're A-1 plus prime, plus one, that would be a seven and three quarter seven and a half percent rate, if you have 400,000 to 3%, and you've got a 150,000 at seven and half 8%. All of a sudden the math doesn't work that the home equity loan is a better option.
Michael Borodinsky: (09:49)
Exactly.
Heidi Patalano: (09:51)
Well, that brings me to something. I wanted to ask you all about the products that you're focusing on. I love that "marry the house and date the rate." I did wanna just open it up to discuss the other, the products that you're really, putting your energy towards in the future going into 2023.
Melissa Cohn: (10:27)
Well, I think adjustable rates are most important these days. I think that they're a good bridge. I think that when consumers understand that if they're taking a seven-year adjustable that for the first seven years, it walks, talks and acts just like a 30-year fixed rate. There's no difference in the amortization. There's there is no difference other than the fact in the eighth year, that the rate will adjust and that the odds are that interest rates will be lower at some point in the next seven years, giving someone the ability to refinance. I also think that with real estate prices so high, many people are buying for more short-term or intermediate needs and not buying a property that they think that they're going to be in for the next 30 years. Definitely in the jumbo marketplace, more and more buyers are looking at the adjustable rates in the conforming spectrum.
Melissa Cohn: (11:17)
We're still still seeing people looking at fixed-rates because there are not as many competitive adjustable rates in the conforming space as there are in the jumbo space, but we're seeing more conforming adjustable rates coming out into the marketplace. So I think that we're gonna be in a very big ARM market, which is great for us in business because you figure, basically it's like you get, it's a two-fer. They're gonna come to us. They're going to take the adjustable rate, 30-year fixed rate goes back in hopefully to a three-and-three-quarters percent and they'll come back and refinance as long as we did a good job with them the first time.
Michael Borodinsky: (11:49)
Melissa is one hundred percent correct. I completely agree. Whether they're taking a fixed-rate or an ARM, and again, it's our job to give them both options and let them choose what they think is best. But the reality is is that the faster things go up, meaning rates, the faster eventually they're gonna come back down because the Fed is going to slow the economy down. Remember mortgage rates are forward-looking, forward-thinking. They've gone up already in anticipation of what the Fed's about to do. All of the fed hikes are just about baked into the market already. So the rates that we see today on the marketplace for fixed and ARMs, essentially reflect what the Fed's still about to do.
Michael Borodinsky: (12:46)
So what does that mean while the economy slows? And typically, when you look at what the Fed has done historically, and how mortgage rates reacted to it, each time there was a recession or a slowdown in the economy that was stimulated essentially, or triggered by Fed action, long-term interest rates, which then affect mortgage rates, actually dropped. So we could be looking at a very different mortgage rate that Melissa alluded to in the next nine to 12 months, certainly different than where it is today. Let's put it that way.
Melissa Cohn: (13:34)
I agree with you, Michael. I believe wholeheartedly that rates are going to come down. I would say, starting at the end of the year, first quarter of next year. Basically as soon as we see that inflation is peaked, we will know that mortgage rates have peaked.
Thuan Nguyen: (13:49)
Yeah, I think rate would drop, when inflation drops. I currently focus a lot on non-QM. It's getting so popular nowadays, non-QM loans. You can help get a higher profit margin and a lot of buyers we help them buy a home with non-QM loans. Eventually, they will refinance with a conventional loan, so you get a potential clients in the future.
Michael Borodinsky: (14:18)
Yeah. The non QM space has been a real game changer to help especially the self-employed borrower who the agencies really never reflected in terms of, uh, how they changed underwriting guidelines post-2008, 2009, and never really took into account that the self-employed borrower who puts a lot of money down has been in business for a number of years and has a good track record of, of generating income, but just not showing it well. There should be a product for them because they're not historically a default risk. That's where the non-QM space comes in. It still remains a viable option to help that segment of the marketplace.
Melissa Cohn: (15:07)
It's not only for the self-employed. It's also for people buying as investment properties, as the non-QM lenders understand that the income that the property can generate helps to pay the cash flow and the debt service for that loan. And that actually, if you have a borrower with good credit, good liquidity and a property that has good rental potential, then that's actually probably a more secure loan than someone who's salaried and could risk being laid off due to the economy slipping.
Heidi Patalano: (15:38)
Agreed. One thing I wanted to also pivot to in speaking about the properties that you were talking about that people may not stay in very long, or if, things are too unaffordable. They may scale down what they're trying to buy, in terms of a condo. With Florida being one of your markets, following the Surfside disaster, things have gotten a bit tougher with condos. Maybe Melissa, you could kick us off because you were the one who surfaced this as an important issue for originators today.
Melissa Cohn: (16:22)
Yes, I live and breathe condos, all day long. After the Surfside collapse, Fannie and Freddie have come out with their new guidelines, which are good guidelines making sure the buildings have sufficient reserves for repairs and that they have a budget line item to replenish the reserves and understand if there are assessments for deferred maintenance and is the building in good condition. There are many buildings that no longer meet, Fannie Mae guidelines, and that's another huge aspect of the non-QM lending, because we have lenders that will come in, especially the non-QM lenders, who are willing to finance in these non-warrantable buildings. It's not that the buildings are in bad shape financially. They are just not prepared to meet the new Fannie and Freddie guidelines.
Melissa Cohn: (17:12)
I think that we will see over the course of the next year or two, that more and more buildings will be forced to comply. But it's a very expensive proposition for many buildings; for a building to have to all of a sudden have 10% of the budget and reserves can be hundreds of thousands of dollars for a building. Buildings operate basically on a break, even, homeowners don't historically want to put money in reserve for a property that they may not be living in in the next three to five years. I've seen in Florida and in New York where many buildings and many board members are opposing going to the new guidelines, but realizing that their units are not gonna sell because buyers wanna be able to get market rates in order to purchase that apartment. And that's gonna make the condominium marketplace much more competitive.
Melissa Cohn: (18:06)
Another interesting point is that in the new development space, most new developments do not meet Fannie Mae guidelines. Sponsors don't want to put 10% of the budget in reserves. They're not willing to take that money out of their pocket. Now Freddie Mac is more lenient and will deal with the working capital contributions as a development of the reserve fund and will also allow that the budget be less than 10% of reserves. They will also, Freddie still allows for reserve studies to be used. So it's easier to get a new building approved with Freddie than it is with Fannie, but we're going through sweeping changes in the condominium marketplace and it's going to take time for it to happen. Don't you guys agree with me?
Michael Borodinsky: (18:52)
Yeah. I think diversification of product is essential because we can't necessarily rely on agency. Whether it's a portfolio, whether community banks or whether it's a non QM space there are lenders out there that don't adhere to agency guidelines that still provide outlets. And in some cases, very competitive outlets for people buying in condos that just don't meet the new guidelines that have been introduced.
Melissa Cohn: (19:28)
No, I agree. And I've seen, you know, I've seen some of these smaller lenders sort of asking the right questions. Yes. I see that the 10% reserves are not there, but looking at the financials, asking about the condition of the building, are there any repairs that are necessary looking at the assessments and still agreeing to make loans, because they're not selling them to Fannie or Freddie, mostly these are the portfolio lenders that are doing it.
Michael Borodinsky: (19:53)
Exactly.
Heidi Patalano: (19:57)
Yeah. That's interesting. It's a, it's a challenging time. There's a lot of shifting happening right now. Where do you see, the greatest opportunity for loan officers in at this particular moment? Where do you see, areas to move into at this moment, what are the smart strategies that loan officers should be deploying at this moment to keep business coming in and keep a pipeline going
Thuan Nguyen: (20:33)
Right now? There are two area that I'm focusing on. One is building a better relationship with the realtors. When things slow down, when you have time more time with the realtors, you have to know them, try to help them. The other area is social media. I mean, realtors are just like us. They want to promote themselves. They want to be active within that community. So if we can be a partner helping them, they're helping us, we refer clients to them. They refer clients to us. That is the best way. So in the past few years, I was so busy with refinance. I didn't even have to know any realtors. I didn't need that business because I had so many refinance thousands and thousands of refinances, but now things have changed.
Thuan Nguyen: (21:31)
And this is a good time for me to spend time with realtors, get to know them, try to help them ,understand their problems. I really go deep and try to understand their problems. And I think they have the same problems as us. They don't have a lot of assistance, they don't have the technology, they don't have a way to follow up with leads. They don't have a way to promote themselves on social media, on advertising. So if we can take that problem and combine it with our problem and try to solve it together, then, the realtor would stay with us for a long time. They will love us.
Melissa Cohn: (22:11)
I think the most important thing that we can do in terms of what we're focusing on today is making sure that we're always providing something of value to our partners, that we are providing education. We're helping them to understand the new rate markets. We're trying to put everything into perspective for them, helping them to understand the savings with an interest only loan versus an amortizing loan. Anything that we can offer to our realtor partners, to our attorney partners, our CPAs, financial planners that would help their clients be able to purchase what they wanna purchase, provide tools for them so they can do more business
Michael Borodinsky: (22:52)
Diversification of product, combined with industry knowledge is essential. And that's why the three of us are here because we've been fortunate enough to be here long enough and doing it reasonably successfully over the years, which lends itself to the most important aspect of this process. And that's customer satisfaction. We have to be able to succeed in meeting the expectations of the customer. That's going to translate into more business, not just via our referral partners, but by a repeat business from the customer itself, because nothing is more important than the validation from the customer and how they felt the experience went during the process. And they're gonna be the ones that are gonna boast loudly about their experience with, with each and every one of us. And they boast is through referrals.
Melissa Cohn: (23:58)
I always say that we're only as good as our last mortgage.
Michael Borodinsky: (24:03)
Exactly. Melissa. So what is a refi? I've always prioritized the purchase side of the business because I always felt that refis come and go, they come in waves. They're great while they last, but they're not sustainable. Eventually they go away and that's where I go back to that perfect storm. When it just ended like a faucet just shut off. So now we're faced with having to rely on our traditional means of referrals, which are purchase types of transactions and what do our referral partners expect from us? Well, obviously they expect execution, but they also expect us to be able to handle different scenarios because not every purchase transaction is a cookie cutter, easy deal where someone's putting enough money down, has perfect credit and has the perfect scenario.
Michael Borodinsky: (25:03)
And it goes through just like that. Well, some of those people don't even need us. And some of those people we've never seen because they may go to an online scenario and we'll never know who they are because it's that easy to get a loan, but it's the more difficult or the more challenging or the more unique scenarios. So if we have the ability through experience, through understanding of what the market's doing through guidance of what the interest rate environment is, and being able to put a loan together with the right product, whether it's conforming, jumbo, fixed rate ARM interest-only fully QM or non QM. If you have a diversified product line and you know how to properly leverage that product line to meet the needs of the customer, you're going to succeed in this marketplace, that's now and then into 2023.
Melissa Cohn: (25:58)
We have to really work hard to show people that we do know what we're talking about, and that we are helping them by educating them to provide, or to choose the product that is best suited for their needs and not just the easiest loan for us to help them get. People need to understand that we do know what we're talking about, that we don't consider this to be an adverse market, but this is the market that we are in today. And how do we best navigate in this marketplace?
Heidi Patalano: (26:31)
Absolutely. All three of you are in very competitive real estate markets in terms of the desirability of all three of your markets. To stand out among the mortgage lenders that the realtors can work with is quite tough for all three of you.
Melissa Cohn: (26:55)
Sometimes we feel that there is as many mortgage brokers, as there are real estate brokers out there at the moment.
Michael Borodinsky: (27:01)
I totally agree with that statement right now,
Melissa Cohn: (27:06)
Right.
Melissa Cohn: (27:08)
Everyone is trying to poach everyone else's deals and, I'm going to get that deal. I'm going sell this. And I find that a lot of people are sort of aggressively selling a product that probably doesn't fit that borrower, maybe the property, won't qualify for that rate. And people hoping that if you just sell this rate, they're going to listen to the rate. And if there's a problem later on maybe I can just move it to another bank and they're going to be stuck. And I think that's a huge mistake that a lot of people in our business make that we need to always sell the right product for that transaction, as opposed to just selling rate it's how do we get person closed?
Michael Borodinsky: (27:46)
Setting the right expectations and delivering.
Melissa Cohn: (27:49)
Right. It's a new, it's a new construction condominium, the building's 32% sold, and someone's trying to sell a Fannie Mae product. That's not going to work. So you have to go back and say, I'm sorry.
Michael Borodinsky: (28:02)
And that' happens way too often as you and I both know
Melissa Cohn: (28:05)
All the time. I always tell people that are rate choppers that, I understand I try to do when I talk to a borrower, especially if they're purchasing a co-op or condo and say, let's look at the property because it's probably easier to get you approved as the buyer than maybe it is to get that building approved. And I try to do my homework on that building up front so that I can provide them with the sort of an educated answers to what the rate and the product is that will be best for that building as well. And then they say, so-and-so offered me a rate that's a quarter percent better. I say if you can get that, that's great. I can't match that. But if you have any issues or problems, I'm here happy to help you. And I can't tell you how often we get that phone call saying, well, you were right, they can't do it. So always making sure that we validate the rate and the product that we're selling so that we aren't the ones that say, oh, I, I thought I could get you that rate. We need to be confident in our information,
Michael Borodinsky: (29:06)
Melissa, you're a hundred percent correct. What lenders fail to do, especially on condominium financing and/or co-op financing is they do not tell the borrower that there are actually two separate approval processes, not one, two. And if both don't aren't achieved, if you can't do one without the other, and if the lender's not disclosing that scenario to you up front, they're not being fully transparent as to the risk of what you're about to get into. If I'm a lender and I have the building approved already, which in a lot of cases, that's exactly what we do up front. I've told them that we just eliminated one part of your approval process. It's already done. That puts me at at an advantage. And I'll encourage the buyer or borrower and say to them, "have you talked to the lender, have they told you about this?" And then then they'll find out that they didn't, and it becomes eyeopening in a lot of cases.
Melissa Cohn: (30:12)
We do our job well because we provide complete education to our buyers as to what to expect throughout the process. It's especially dangerous with some banks who only add the collateral, the condo or co-op approval at the very end of the process. You don't want to find out five days before you're closing that "oh, I'm sorry, your building's not approved. We have to start all over again." It's easier in New York, for example, where we have contracts that are on or about, and buyers can get grace period. In Florida for example, if a contract is a 30 day contract, it's time of the essence closing for the 30 days, and we don't have the time or the ability to fumble at any point throughout the process.
Michael Borodinsky: (30:53)
Exactly.
Heidi Patalano: (30:56)
I've got some questions here that have come in from the audience, and I'm just going to throw this out for whoever wants to grab it. One viewer asks which non QM lenders are best to work with on condos.
Melissa Cohn: (31:11)
None of them, no, I'm just kidding.
Melissa Cohn: (31:15)
It really depends where you are geographically. Some non QM lenders that are regionally based oftentimes are better for financing in that specific marketplace. It depends on what why do you need to go non QM? Is it a presale issue? Is there a litigation? It doesn't meet the Fannie guidelines because there are no reserves? Non QM lenders, on the surface, sort of all offer the same product offering, the same as we all do. But some of them are better and excel in specific areas. So it's really important that we get to know all of our non QM lenders that we have in the marketplace and what they specialize in. Just don't go to sprout because they're not in business anymore.
Michael Borodinsky: (32:10)
I was just gonna say that
Heidi Patalano: (32:12)
I've got another one here. As a mortgage broker, do you find it harder to find options on condo buildings with the newest changes? I keep losing deals because my lenders condo departments aren't approving it, but they are still being built and sold by others.
Melissa Cohn: (32:35)
It's the question of knowing your lenders, we should all as mortgage brokers, have relationships with lenders who are willing to finance in any condominium. There are lenders out there that are not that worried about presale. They're more concerned about the quality of the borrower as opposed to the building, as long as there's no litigation and the building doesn't operate at a significant loss each year. I think it's a question of not trying to sell rate, but trying to sell which bank will approve the building and get you closed in a timely fashion.
Michael Borodinsky: (33:09)
Melissa is correct that you have to have almost the same way you have a menu of different products lined up, there actually has to be a separate menu for condos. And what the scenario of that condo is, there's the new construction condo. There's the existing condo, there's the new construction condo that has an issue with presale and/or construction completion. And you have to be able to know where you can place that loan, where the presale and/or construction completion can be worked around. Number two, you've got issues with an existing condo, is the condo fractured where the builder or sponsor is holding too many units for rent. And in terms of exceeding Fannie or Freddie guidelines for allowable percentage single entity ownership, or is it a litigation issue?
Michael Borodinsky: (34:00)
What we're seeing a lot of in my marketplace is what's called transition litigation, where the developer hands over the reins to the homeowners association. Now the HOA is now in control, but they're not satisfied with the completion of the community or the building. And they file suit to get certain repairs made and that's become sort of a toxic issue for most lenders, not all, but most lenders have a problem with transition litigation, even though the HOA is not the defendant, they actually are, the plaintiff, they're suing the developer, but the issue becomes a health and safety one, and most lenders shy away from it. So, you need to find lenders that don't have necessarily have a problem with it because a lot of these lawsuits go above and beyond what's reality because they're trying to exact a settlement and meet somewhere in the middle. So, it becomes very discretionary and sometimes it requires maybe a portfolio community bank that might be willing to not care about it or a non QM lender that's less sensitive to that type of scenario.
Heidi Patalano: (35:23)
Right. Okay. We've got another question here. Are you free to say what lenders currently have the most aggressive conforming ARM products?
Melissa Cohn: (35:46)
I actually have an easy answer for that. And I find that the most aggressive portfolio and conforming adjustable rates come from your local regional community banks, so that you should look looked at the banks in your area, the savings and loans, the credit unions, that's probably where you're gonna find the best rates. You're not going to find them with the big box banks.
Michael Borodinsky: (36:06)
And I'll also say this. It's it's musical chairs with this scenario, because what happens is that we all know that agency conforming rates stink, comparatively. So what lenders have been trying to do and I'll speak on behalf of all three of us is we're trying to find a local outlet that can deliver the type of price execution that we're looking for that differentiates sufficient spread between the fixed rate and what their intermediate arm price would be. Well, you can get to them, but the problem is how long that rate will stay competitive because once these smaller portfolios fill up, they're just gong to raise their rates and try to shut the volume off. So then you have to find somebody else and then that happens and then they shut their volume off. Then it becomes almost like whack-a-mole where you're just trying to find the right outlet to solve your problem. I can name a flavor of the day, but I can tell you in a month, it may not be.
Melissa Cohn: (37:15)
It's so true.
Heidi Patalano: (37:22)
Could you provide some practical ways to simplify the complicated understanding of the market? I hear the advice is to provide value and educate, but even in that conversation, discussing ARMs and products often are more confusing for customers.
Melissa Cohn: (37:46)
I think one way that I try to address the complexity of the marketplace today is when I speak to a buyer or someone who's looking to even refinance, I talk about monthly payments. I don't really talk about the product and the rate. So to speak the headline today should be "what is the monthly payment? And can you afford to make this payment and therefore, can you afford to buy the property that you would like to buy?" And then you say, you're buying a property and based upon your income, you can qualify to spend $5,000 a month on a mortgage. And what is that? What does that $5,000 buy you in terms of a loan amount and what is the property that you're looking to buy cost? And then I try to explain the amount that you can borrow $5,000 at 6% gets you a whole lot less than $5,000, does at 4%, and try to help them fit into the property that they want to buy. Most times when clients come to us, many of them already have in their head the type of property, the price of the property that they want to buy. And it's our job, especially in today's much higher rate environment to show them how they can qualify to get into that property.
Thuan Nguyen: (39:03)
For me, when I talk to the customers, I kind of interview them. I get to know who are they? Their level of understanding about mortgages. Then I provide them the best possible mortgage type and rate, and, the numbers show them, here is what you need to know. That is how I deal with clients.
Michael Borodinsky: (39:32)
Yeah. That the only thing I will tell you is, is I'll echo both, my panelist comments. I want customers to understand what's going on in the marketplace and/or acknowledge whatever their concerns are. Because a borrower is going express, they're giving us all their financial information. It's almost like them getting down naked with us because they know they're going to be giving us everything there is to know about them. We're going to know their credit, we're going to know their finances. We're going to know how much money they have in the bank. So they already feel vulnerable and they really depend on us to give straightforward advice. In an inflationary environment what, what happens?
Michael Borodinsky: (40:27)
Well, the value of your money erodes. You're looking at your 401k go down in terms of value and that's sort of a negative wealth effect. And sometimes that seeps into the mind of a consumer who starts to worry, well, "should I be buying or not?" On the other hand, buying a home is really an inflation hedge. It's a place to put your money where you're locking in home ownership at a price that over time will still go up. Maybe appreciation is going to slow down, but historically it always goes up. So it's a pretty safe place to put your money on top of having a roof over your head. So what could be better than that?
Michael Borodinsky: (41:13)
On top of that, when Melissa says "marry the house, but date the mortgage." Well, that means that there will be a time in the future that if you feel this rate is too high there's going to be an opportunity to refinance in the future and rebudget or reallocate your budget in a better way because your payment's going to go down. And to Melissa's point at the end of the conversation, obviously payment matters, payment matters more than anything, because it has be reflective of what someone's budget is.
Melissa Cohn: (41:50)
That's correct.
Heidi Patalano: (41:52)
Absolutely.
Melissa Cohn: (41:54)
You can't live in a stock certificate. So when you buy a house, you actually get to consume it. It's an investment that you get to live in. As Michael said, you put a roof over your head, you buy stocks or bonds or anything else, you know, it's just an investment and there's no enjoyment or personal benefit at the same time.
Heidi Patalano: (42:13)
Yeah, absolutely. Well, I'm afraid we're out of time, but this was such a great conversation. It was wonderful to hear all of you share your expertise here. Thank you so much for joining us today and thank you all in the audience for being a part of this as well. That's it have a great day.
Michael Borodinsky: (42:36)
Thank you. Take care, everybody.
Thuan Nguyen: (42:38)
Thanks. Thank you everyone. Thank you.
