2023 Mortgage Update: Broker vs. Banker Insider Tips

00:00:14 - Mike Mills

Hello. Hello everybody out there on my real estate and finance forks. Welcome to Mike Mills Mortgage and Finance. I'm Mike Mills with Mike Mills Mortgage and Finance. And today we are going to be talking a lot of loan stuff. I brought the enemy with me today, but we're going to talk about loans. We're going to get into interest rates and the market and just kind of where we're at with everything from two loan officer points of view and hopefully we won't get into a fistfight is what I'm looking for right here. But welcoming today is Mr. Gary Pierce. Gary, how are you doing man?

00:00:54 - Gary Pierce

Awesome.

00:00:54 - Mike Mills

I got to give you the clap. Sorry. Part of the normal thing.

00:00:57 - Gary Pierce

That's the first applause I've ever gotten, especially in this market.

00:00:59 - Mike Mills

Yes. Everybody's just depressed when they call us, right? Oh, you I got to call the guy and talk about 7% interest rates. Lucky me.

00:01:07 - Gary Pierce

Yeah.

00:01:07 - Mike Mills

Well, man, thank you for driving all the way out here. You live in weatherford, right?

00:01:12 - Gary Pierce

I do. Okay. Yeah.

00:01:13 - Mike Mills

So it's a little bit of a haul. About 40 minutes.

00:01:15 - Gary Pierce

About 45.

00:01:16 - Mike Mills

45 minutes.

00:01:16 - Gary Pierce

Okay.

00:01:17 - Mike Mills

It's not too terrible, but it's farming, ranch stuff and that's what you do. So Gary, he is a broker, a mortgage broker here in Texas. His office is based in Weatherford. He specializes in farm and ranch. I'm an independent mortgage bank and Gary's a broker. So we're a little different. We kind of explained some of those differences a little bit, so everybody understands that. But we're both loan officers, essentially both knee deep in loans every single day. So I'm sure we're going to have a lot to talk about and kind of get into some special programs and get into where rates are, where we think they're going, all that kind of stuff. But let's start a little bit with the journey down the mortgage bank. Did you how did you get to the place where you wanted to run your own shop there?

00:02:00 - Gary Pierce

Yeah, interesting.

00:02:03 - Gary Pierce

Concept.

00:02:04 - Gary Pierce

I was going to retire and be the old guy in the square writing some loans.

00:02:07 - Mike Mills

Okay.

00:02:09 - Gary Pierce

And so that was my plan. And during COVID I decided to go get my license. I'd always been in consumer finance, worked at LendingTree SunTrust Bank, more marketing and business development for consumer finance products. And so I got my license and lo and behold, another banker similar to Verity reached out and said, hey, we want to start up a Texas branch. And I was like, well, sounds interesting.

00:02:30 - Gary Pierce

Okay.

00:02:31 - Gary Pierce

It was a refi boom. I mean, I could fog a mirror. So I was writing a lot of loans. So was our so anyways, long story short, we did that and then as the market shifted and our area obviously Parker County is heavily influenced by the Western industry and performance horse industry. And so we were missing out on those kind of opportunities in the farm and ranch world and so we wanted to be able to service that area from a loan perspective and so we knew going out on our own was really the way to do it. And then from a cost perspective, a broker made a ton of sense because then we could broker loans to basically a wholesale lender.

00:03:13 - Gary Pierce

Right.

00:03:14 - Gary Pierce

And so with that we get great rates, we get good support and it allows me to kind of grow the business kind of organically without having a ton of it still costs money, don't get me wrong, right. But not the kind of money it takes to prop up a mortgage bank. It's a whole different set of employees and things like that.

00:03:35 - Mike Mills

So explain that just a little bit to anybody not familiar with it, because you've been on both sides a little bit. So explain what the difference is between a mortgage broker. Because broker is a general term I think people use whenever they talk to someone that says if someone says, oh, I do homeless, like, oh, you're a mortgage broker. And I'm like, well, no, not really, I'm not really a broker. I do a little different. Right. But I think it's just been around. It's just a term that's been around for a long time. But there are actually difference between a mortgage broker, which is what you are, independent mortgage bank, which is what we are, and then like a servicing style bank, the big boys, which is like a chase or somebody like that. In your own words, kind of explain what the differences of those are.

00:04:16 - Gary Pierce

I think the biggest, easiest way to.

00:04:17 - Mike Mills

Understand without talking smack about me, by the way.

00:04:20 - Gary Pierce

Okay, yeah, definitely. Well, we work very similar, right, from an investor standpoint in a wholesale lender standpoint. But the easiest way for a client to understand it is that when we write the loan, we write the loan on the wholesale partner's paper, it's going.

00:04:38 - Mike Mills

To say wholesale partner being the bank.

00:04:40 - Gary Pierce

That the bank that investing in taking the loan on. So it might be Rocket Mortgage, united Wholesale, whoever. That's where the documents are going to come from in the case in your situation, it's going to have your company's name on that because you guys are the bank and then you have investors on the back end. So we kind of work similar.

00:04:59 - Mike Mills

Not that dissimilar.

00:05:00 - Gary Pierce

Yeah.

00:05:00 - Mike Mills

Because we're going to sell our loan eventually to most of the time to Wells Fargo or a city or somebody like that. That's going to go they're going to service the bank ultimately, but we're not going to hold it. Typically we do hold some, but not very many compared to the servicers, whereas you guys are basically doing the same thing. The only difference is when we close our names on there, when you close it says United Wholesale or whoever, right?

00:05:25 - Gary Pierce

Yeah.

00:05:26 - Gary Pierce

It's funny because the first audit we had at my previous company, we asked the question to the regulator and said, as a broker versus a correspondent lender or a bank, what's the difference in this process? And they said, well, there was a list of 20 items that needed to be addressed. Right. And he said, you see these 20, you're responsible for two of them. The lender is responsible for 18. He goes, when you're the lender, you get 18 of them or all of them in that sense. So it's like, yeah, I don't know if I want to bite that much of the apple yet.

00:06:06 - Mike Mills

So something we can certainly agree on is how terrible the big banks and servicing banks are doing mortgages. So why don't you talk about why it's so much more of an advantage to use somebody like us versus somebody that is going through like a chase or wells or somebody like that?

00:06:19 - Gary Pierce

Yeah, I think the biggest is the cost. Usually we're going to be usually when I'm competing against the big guys, I'm happy because we're going to win. Right. So our cost structures are much different. We don't have the overhead. That's the biggest thing that I see on the front end. Once you get the loan in a process, it's massively. Much more efficient. I've seen it over the years where you get the calls, the nightmare calls from somebody and their hair is on fire. Can you save the day? And a lot of times, not to toot our horn, but to tutor our horn, because the way we're structured, we're more efficient. We get loans done, that's what we do.

00:07:05 - Mike Mills

There's less red tape. You don't have 600 different levels of that's. The way I explain it a lot of times too, people, is just like when I have my processor, my underwriter, my system or whoever, they're right there. Or like, in your case, the relationship that you have with the bank that you're working with is a good relationship. They want to keep it so you have direct access to whoever you need to talk to. But if you're on the other side, the processor might be in Oklahoma and the underwriters in California, and they're on different timelines, and then there's three levels of management in between them and you got to call the 1800 number and roll through the phone tree and all that stuff. And then they're like, I don't understand why they don't close loans on time. It's like, well, it's pretty self explanatory.

00:07:46 - Gary Pierce

For the most part. Yeah, it's good for us, right?

00:07:51 - Gary Pierce

Yeah.

00:07:53 - Mike Mills

So what's been the biggest, I guess not impact, but what's been the biggest, maybe surprise of you going out on your own and actually having your own company, running your own business. Obviously you've been in lending for a while, but participating in lending and doing a loan and all that kind of stuff is very different than actually being the one who has all the responsibility. What's that been like for you?

00:08:17 - Gary Pierce

So the actual X's and O's of getting a loan disclosed to a client and selling a rate and closing a loan has been the same. The biggest change for us is for me personally is I've never done any local marketing ever. So I've always worked for larger corporations.

00:08:41 - Mike Mills

Banks that we leads are just coming.

00:08:43 - Gary Pierce

In well, or we were doing more online type stuff. Right. So the idea of working a market and penetrating a market and the time that it takes to get the buy in is a lot of heartburn.

00:09:03 - Mike Mills

Little tough sledding.

00:09:04 - Gary Pierce

Yeah. My partner Mills, who he's not with us today but he's amazing at writing loans and building relationships and doing all this stuff. And I'm thinking from a marketing standpoint we're going to do A, B and C and it's just going to take off like wildfire. But yet you got to sell yourself not only to clients, but now you got realtors involved and you got to make sure that they're on board with you. And I get the hesitation to try the new guys on the block.

00:09:33 - Gary Pierce

Right? Yeah.

00:09:33 - Gary Pierce

And so we fought through that because the other thing is I was telling our loan officer this morning, I said I didn't know if it was going to work, we could sit here and thankfully it's knock on wood, we're doing okay, but you just don't know. Am I spending the time at the right places, meeting the right people?

00:09:54 - Gary Pierce

Yeah.

00:09:55 - Mike Mills

You can spin your wheels a lot in our business and it's hard sometimes. I mean there's more technology tools out there now to be able to determine who's doing what business and so you can kind of get a gauge on if people are actually, if agents specifically are selling and if it's worth it. But then you also don't know there's a lot of new people that get into the business. And I love working with new agents because you'll find people that are new to it but have a hunger, they have a passion for it and they have a drive that you know they're going to be really big as time goes on. And you just invest a little time and make sure that you're providing value to them and all that kind of stuff and that kind of stuff. Those kind of relationships tend to pay off in the long run. But you can also spend a lot of time chasing somebody that you think, I can just get one deal with them and then six months up the road or twelve months I haven't done anything with this person because it's difficult. I don't know that it's different from a lender's point of view. I think we can maybe relate to title some a little bit and just on how we sell simply because as a realtor, if you're an agent you get to talk to friends and family and your world of doing real estate is just everybody you can meet. Right. And not that we can't do loans for everybody that we meet. Of course we can, right? But our primary source of business in most cases comes from realtors, for sure. And so when you're spending time focusing on a particular group of agents or this agent or that agent, someone gets out of the business or someone comes back into the business, I mean, it has a big impact on what we do. If someone just decides one day, I'm not going to do this anymore, it's like, man, that was one of my better ones. Send me a deal a month or whatever. So it becomes a bit of a struggle sometimes because we always start over from zero every single month. I give my insurance friends a hard time. Yeah, right. Give my insurance guys a hard time. It's like, oh, you got that nice residual income. That sounds nice. We start it poor every single month, right?

00:11:53 - Gary Pierce

Yeah, it is. What have you done for me lately? Yes, for sure.

00:11:57 - Gary Pierce

Yes.

00:11:57 - Mike Mills

Well, that's what sales is. Speaking of that, though, how did you kind of get rolling? How did you get into the mortgage industry or get into selling to begin with?

00:12:06 - Gary Pierce

Well, so I started out in five with Lending Tree.

00:12:10 - Gary Pierce

Okay.

00:12:10 - Gary Pierce

So I was there you're grinding it. Yeah. So I wasn't on the mortgage side, on the loan side, which they did have back in the day, a lending side of their business, but I was on the lead side. So I was selling to the Quicken Loans at the time and those kind of companies, and they were buying our leads, and that's kind of how I got into it. And then from there, I just kind of through different business development roles, I always kind of wanted to be on origination at some point and didn't know what that looked like. And then kind of like for a lot of people during COVID you're kind of hitting the reset button and trying to figure out what's going on. And so I had reached out to a budy of mine that's still at Lending Tree, still one of the top account managers there, and I said, hey, man, you remember we should joke around, know, getting our license. I said, Well, I just got mine.

00:12:59 - Gary Pierce

Yeah.

00:12:59 - Gary Pierce

He's like, oh, shoot, you got to call these guys. They need somebody in Texas, like, right now. And I said, okay. And so I had a conversation with these guys called Mike Mills Mortgage and Finance, and they're great guys, and they're still cranking away, but yeah, so that's how I ended up here. And then Pure Funding is kind of spun off from that.

00:13:16 - Gary Pierce

Yeah.

00:13:16 - Mike Mills

So when did you guys start officially open your doors, per se?

00:13:23 - Gary Pierce

We started our application sometime around May or June of last year.

00:13:27 - Mike Mills

2022. Right away.

00:13:32 - Gary Pierce

And then I was just talking to one of our account executives. We closed our first loan on August 20.

00:13:37 - Gary Pierce

Eigth.

00:13:38 - Gary Pierce

So almost one year ago today.

00:13:39 - Gary Pierce

Oh, wow. Okay.

00:13:40 - Gary Pierce

Well, next week it's been almost a full year, a full year right at it. So we're still cranking away and I feel like we're doing the right things. And I love it because I've never had a job where I was in the community and doing stuff. So we get involved with the chamber, we're around all the business leaders, and, I mean, I just love that in our community. As you know, Parker County is fairly tight knit. It's a smaller but a lot of growth going on. But, yeah, we've embraced it and love it.

00:14:15 - Mike Mills

And why did people they didn't see you walk in, but you always got the hat on. I had it in the picture there and you walked. I was man, I'm hoping we're going to wear the hat for this. That's why I wore my cowboys shirt. But what was it about farming ranch specifically? Like, why did you decide that that was a good area to kind of focus on? Did you have a background in that and come through it, or did you just end up there how to help?

00:14:35 - Gary Pierce

No, I think it was just being opportunistic. Right. So if you look at a lot of which would be our competition, they can't do those types of loans the way their investors back them from an underwriting standpoint. So if you start talking about houses with acreage more than ten or 15 acres, and it's not really your standard.

00:14:57 - Mike Mills

Conventional loan ain't going to work.

00:14:59 - Gary Pierce

Yeah.

00:14:59 - Gary Pierce

And so there's barn dominiums, right? Like, that's the hot button. Everybody wants to have a barnuminium right now.

00:15:05 - Mike Mills

I'm like, if I had a nickel for every 27 year old that called me and asked me about how they're going to build their barn dominium on the land they want to find, I'm like, well, you got a couple of hundred grand laying around.

00:15:16 - Gary Pierce

Yeah. Here's the thing. My builder buddies, I talk to them all the time, I'm like, hey, am.

00:15:22 - Mike Mills

I thinking about this?

00:15:23 - Gary Pierce

Right?

00:15:23 - Gary Pierce

But it's the same cost per square foot now that it is to build a stick house, right? And they're like, oh, yeah, because steel is through the roof.

00:15:31 - Mike Mills

Oh, sure, everything is super expensive.

00:15:33 - Gary Pierce

Five years ago, maybe different ballgame like you were building. It's kind of like having a two and a half percent rate.

00:15:40 - Mike Mills

Not anymore. Yeah, it's gone. So what is it about okay, on the loan side of things, because I don't do a ton of farmer ranch myself. So what is it about? What are some big differentiations if someone's looking to buy a farm or ranch, what are some stuff they need to pay attention to when you're looking at that, whether it be from issues with the loan or just regarding what kind of loan types they can work with. How does all that work.

00:16:05 - Gary Pierce

In the farm and ranch world? There's a lot of different products, right. And so we do have a few that I feel are really good, especially for our area, because the big loan, the residential loans, are written just like we would. There's still the same kind of trade requirements that you would have. They just are backed by Farmer Mac and not Fannie or Freddie.

00:16:27 - Gary Pierce

Okay.

00:16:28 - Gary Pierce

Right.

00:16:28 - Mike Mills

There's a farmer.

00:16:28 - Gary Pierce

Mac.

00:16:29 - Mike Mills

That's what it's called.

00:16:29 - Gary Pierce

Yeah.

00:16:30 - Mike Mills

I didn't know that. That's hilarious, by the way.

00:16:32 - Gary Pierce

Yeah. They're the end investor.

00:16:37 - Gary Pierce

Right.

00:16:37 - Gary Pierce

Or insurer. Those loans work the same way. We have the same kind of regulations as we would in a normal loan. You got lender overlays where, hands down, we have to have two years of tax returns.

00:16:58 - Gary Pierce

Right.

00:16:58 - Gary Pierce

No matter what.

00:16:59 - Gary Pierce

Yeah.

00:16:59 - Mike Mills

Which no matter what on conventionally, you don't have to have that.

00:17:02 - Gary Pierce

Conventional, we don't have to have it.

00:17:03 - Mike Mills

Sometimes, but it's not mandatory.

00:17:05 - Gary Pierce

Yeah.

00:17:08 - Mike Mills

Are you able to take income from the farm itself and use that as well? So if it's a producing farm of some kind yes.

00:17:15 - Gary Pierce

That gets a little trickier and into the weeds.

00:17:17 - Gary Pierce

Sure. Yes.

00:17:18 - Gary Pierce

And so those are kind of your residential properties. So a lot of them where we find the niche is ten to 15 acres or more, let's say. It's got a really nice house, 5000 square foot home, and it's on 25 acres. The loan amount is going to be over the conforming loan limit, so above 726. Right. And so jumbo loans, they don't like those. Over ten to 15 acres, usually. There's usually an overlay on that. And then the AG folks, the AG banks don't like it because there's not enough AG to support their underwriting.

00:17:55 - Gary Pierce

Got you.

00:17:56 - Gary Pierce

So we've kind of found a little niche there with that product, and so we've kind of pitched that, and that's been helpful for us. And then once you get out of the residential, then you start getting into kind of raw land. Right. And so that's where it gets to be more of a commercial product got you. Versus a residential world. And so that takes on a whole different set of underwriting, which we've had to learn over the last year, which is it can be a little confusing because we're thinking residential underwriting processes. It's like getting a business loan. Right. So heavy documentation.

00:18:40 - Mike Mills

I think what I run into a lot, at least with people asking questions about different types of documentation required and what banks are requiring and all that kind of stuff, know when we do a standard FHA loan fannie, Freddie, whatever, or know we still can't get over that. The it's basically insurance, right. If I do the loan correctly, per their guidelines, and you don't pay your mortgage, fannie, Freddie, HUD, VA, Farmer Mac, they're going to buy the loan.

00:19:12 - Gary Pierce

Right.

00:19:12 - Mike Mills

Because we did it according to their rules. There's limitations on that, of course, but we did our job. Now, when you're talking about doing a loan for commercial or you're doing non QM or you're doing whatever, well, the restrictions get greater and the rates get higher and the costs get greater because there's nobody on the backside insuring that loan for the bank. So the bank's out there, it's their neck, so they're going to do whatever they want. And I think where borrowers get frustrated sometimes, and I understand is when you're doing one of those type of loans, right, if you do a standard conventional loan, you know exactly what you need. You can even argue with underwriting sometimes to be like, we don't need that. This is why show them your rules, whatever. But when you're doing a non QM or you're doing a portfolio loan or anything where it isn't falling under that category, they can just say no just because they want to. They've got their rules. Here are the ten things we want. You're like I met all the ten things. Usually you're fine, but there's still sense. We're like, yeah, we still want to do that.

00:20:12 - Gary Pierce

And it's like, okay, yeah, it gets crazy too, because once it gets into underwriting, you've got this laundry list of checkboxes. We've got it when we submit and it's like they'll always come back for more.

00:20:26 - Mike Mills

Oh, now I want this and now I want this and now I want this.

00:20:28 - Gary Pierce

And then appraisals can be very expensive because now you're talking about large tracts of land potentially.

00:20:35 - Mike Mills

Well, I bet the time to close on those is pretty big too, because I mean, finding an appraiser that does that specifically, that's got to be a difficult thing, right?

00:20:42 - Gary Pierce

Yeah.

00:20:42 - Gary Pierce

So we haven't had the privilege to buy, to do a facility. We've done most of ours have been land, so 100 acres and they're going to put a horse facility on it eventually or something like that, or recreational land. But I know the company that we work with, the lender has done they were giving me examples early on and it just kind of caught me off guard. I was like, man, this is a whole nother line of business to think about. But they were refinancing the company, the farm in California that produces all the milk for Costco. And so this farm is out know they've got their business and so they're doing a cash out refinance to kind of help their deal. So anyways, they were cashing out so they could expand and get more cows. Apparently Costco is selling a lot of milk.

00:21:32 - Mike Mills

Yeah.

00:21:33 - Gary Pierce

Wow.

00:21:33 - Mike Mills

Yeah.

00:21:35 - Gary Pierce

And those kind of deals are not 30 day closes like you said. I would guess that was six to eight months.

00:21:43 - Gary Pierce

Yeah.

00:21:43 - Mike Mills

Well, I mean that's a commercial deal basically is what you're doing, right?

00:21:46 - Gary Pierce

100% commercial, yeah.

00:21:47 - Mike Mills

All those commercial loans, they take a while. It's not something that goes quickly. And do you experience, I don't know because I know you guys are primarily residential, but you are starting to dabble a little bit in the commercial side because you have relationships that can handle it. Is that right?

00:22:01 - Gary Pierce

Yeah, for sure.

00:22:02 - Mike Mills

So are you running into? Because I've always heard from my commercial real estate guys or lending guys especially that because it's such a business oriented transaction that whenever they'll be working with somebody for four or five, six months, getting everything put together everything's looking sharp. They got it going on, and then they're going to close in 60 days. Everything's lined up, and then out of nowhere, somebody flies in with some smoking deal. And all that work you just did just goes down the toilet if you can't obviously meet it or beat it.

00:22:31 - Gary Pierce

Yeah, luckily we haven't had that happen yet. But it definitely is something that can happen in that industry. And then we get deals because deals get killed at the last minute, too.

00:22:43 - Mike Mills

Yeah, you pick up the trash, they're.

00:22:46 - Gary Pierce

Like, hey, we got all the way through the finish line. And then now they're saying this. It doesn't happen as much in the residential world in that commercial.

00:22:56 - Mike Mills

I mean, it happens. I joke sometimes where they're garbage cleaners because you get people calling that it's almost like a benefit that everybody in the business isn't quite as good as what you do. Because then you get both. You get the phone call that says, hey, so and so was denied over here. What's going on. You pick up the file and like in 5 seconds you're like, yeah, you were never going to be approved. And here's why. And they're like, Why didn't they say that? It's like, well, because people are not good at their job. And then you get the other ones that you look at it and you go, man, this is easy. I think we can do this. I think we can pull this off. And here's why, and here's why. That kind of stuff can really help your business a lot. Because what we do every day is problem solve, right? We're looking at a puzzle and we're trying to figure out how to make the pieces work. I don't need this, I need that. All that goes into play. And when you do it enough and you have enough experience with it and you see those problems on a daily basis, it becomes easier and easier. But that's our job. I tell people all the time I sell, but not really. Here's how it works, here's how we can solve it. And then give me the information. We'll see, we can figure it out. Is that what you guys experience, too?

00:24:09 - Gary Pierce

That's really what it is. And that's where you talk to folks that are newer to the industry. And I've got a loan officer assistant and she just started and she's like, week two, she's like, how do I get better quicker? And I'm like time. It's time. In our last company we did, I don't know, in 18 months, 2200, whatever the number was refis. And all I did all day long is I'd write eight to ten a month and I had 25 guys on my team and it's just as fast as you could go through them. So all I did all day long was look at problems. And we're like, okay, this is how you fix that. Onto the next one. Onto the next one. And when you're an individual loan officer and you're trying to generate your own business early on, you just don't have that luxury. You just don't.

00:24:58 - Mike Mills

Well, it's crazy how the refi business really did. I mean, that's where a lot of really good loan officers cut their teeth, whether whatever period of time that that occurred, for sure. Because you're just churning and burning so many loans and maybe a bad thing. But you can make mistakes when you're new. Not us. No, never made any mistakes. But in the beginning, not can. But mistakes happen because you're learning and you tell somebody you can do something, you find out later, oh, no, you can't. Here it is, here's why. But at least in those cases, the person just can't get the lower rate. They're not out of their home or whatever. So that's a really good place to kind of get your feet wet and really learn because you're pumping through so many loans. And I had somebody tell me right when I got in the business that you basically have to do at least 100 to 200 loans before you really start to kind of understand what you're doing. And you just got to do that many thousand percent.

00:25:58 - Gary Pierce

Because here's the other thing that people don't realize is that they didn't write the regulations insert five years ago and haven't evolved or changed rules or changed laws or in the state of Texas, we have our own laws that drive our so, you know, that stuff changes. And as much as we try to stay on top of know one little thing or the thing that I find is the tricky part is when a lender has an overlay that you're not aware of.

00:26:27 - Mike Mills

So explain that too for anybody that doesn't understand what an overlay is, because we all play in the same sandbox, basically, but not.

00:26:38 - Gary Pierce

Are the guidelines are online. Fannie Freddie. Right.

00:26:42 - Gary Pierce

Yep.

00:26:42 - Gary Pierce

Anybody can go look at them. And that's how we have to write loans. Whatever that requirement is, we have to meet that on every, whether it's loan to value based on property type, property purpose, loan purpose, et cetera. But the trick to that is lenders have overlays and they say, okay, a perfect one is acreage, right? We're ten acres hard stop, not doing anything over ten acres. We don't like the risk. It's not our thing. And they don't understand it. So they said, we're not going to do it now. Fannie, Freddie. They don't care. There is no acreage overlay, right? And so I've got lenders that don't care, and I've got lenders that say ten acres full stop, 15 acres full stop. It just depends and what trickles down to.

00:27:24 - Mike Mills

The customer is. The customer says, Well, I heard conventional loans don't do ten acres. And I understand loan officers approach to it because I think some don't know and some do. So it just depends. But if you're a loan officer and someone calls and says, hey, I want to do a loan with you, here's the circumstance. And if it's a newer one, you might say, let me check on that. You give somebody in your company a phone call and you say, hey, can we do here's the scenario? Is this something we can do? And they will go, no, you can't because it's over ten acres. So then that loan officer comes back and goes, sorry, it's a conventional loan, it's over ten acres, we can't do it. And then the buyer or the borrower goes, man, I guess conventional loans can't do over ten acres. And then they tell their agent that and the next thing you know, then you get a phone call a month later and somebody's like, well, we know Fanny can't do ten acres. Where is this coming from? What do you mean? But that's how a lot of stuff in our business works. And sure, as a new loan officer, you don't realize that until you get into it a little bit. Because when you're a newbie and you have no idea what's going on necessarily, and people are you can do this and you can't do that, you can do this. Because, look, I would love to tell people that we sit there and read the 1004 FHA guidebook every day and you go look for it when you need it and then it gets all kinds of gray areas on how you interpret this and interpret that, whatever. But at the end of the day, your company can do what they can do. But the idea that everybody is the same, it's just not the case. And even when you have people that can go direct to Jenny, which is FHA or Fanny or Freddie or Farmer, then you have a little bit more flexibility. But even then it's like the FHA credit score thing, right? People say, well, the minimum that FHA will do is 580 or the minimum 600 or whatever. There's no minimum for FHA. There's nowhere written in there that it says there's a minimum. The banks make that decision.

00:29:16 - Gary Pierce

That's right, because that's a perfect example. I just got this morning, all of our lenders send out marketing material and 500 credit score on FHA, thinking to myself, holy smokes, this is going to be tough.

00:29:31 - Mike Mills

Well, so that's a good transition too. So do you think something like that? Because you see more maybe than I do on the product side that come to you because you can accept what you want to accept. I know what we have as a company and I know some things that are out there, but I don't see the stuff that you get just in mail and say, hey, do this. So are you seeing a big shift with the market kind of contracting as it has and you're seeing like lenders get either more desperate or they're offering more products or what are you seeing from like a corporate management side?

00:29:58 - Gary Pierce

Yeah, I think they're trying to get creative.

00:30:02 - Gary Pierce

Right.

00:30:03 - Gary Pierce

I think they're trying to make products that are smart for everyone. Right. Smart for the client, smart for them, their investors.

00:30:11 - Mike Mills

Right.

00:30:11 - Gary Pierce

Because ultimately somebody's got to hold that loan. Right. And if it's bad money, then we start looking back to historical things and I don't think we're anywhere near that kind of product. But like for instance, there's a 1% down product that we have available, right? Yeah, that's a great product. Yes, it's conventional, no PMI, you guys probably have something similar. So like those kind of things. I'm seeing more of that happening. The 500 FHA, that's such a sliver of the population. But if you can service them and you have that product then it's a feather in your cap and you can get a deal done, right?

00:30:53 - Mike Mills

Well, that's a good point on the when you said sliver of the population because this is another thing that I talk about a lot is my favorite and least favorite term in the world is special programs or incentives. I love that one too. What's a new home buyer incentive? There's no incentives. Okay, can you do new homebuyers? Yeah, this isn't a car, there's not any incentives. But what happens with these special programs that come out, okay, you have the bonds and the grants, all the down payment assistance programs and then you have the stuff that you're talking about. Like we have a 1% to 0% fannie and Freddie deal rates are actually pretty good on it. Costs are reasonable, they actually have give cash, all that kind of it's all. We have one with FHA, same deal. But there's a box that you have to fit in to qualify for that loan and especially with some of them, there's income limits. Right? And then when you walk the line of, okay, we have an income limit on this product and we have a really high home values and high rates, well then that income limit really starts to kind of butt up against, okay, can I even do this? Yeah, I have this product available but like you said, for some of them it only fits for a sliver of the population. And good or bad, I don't know. I understand it but I also get frustrated with it sometimes because I call it chum in the water. So as lenders we're in the business of marketing and so we're putting out all, oh, I've got this special program and first time home buyer loan and teacher loan and calling it whatever you can. And the reality is when people call and you start explaining to them and you're like, well there's this little box you got to fit and people fit. And when they do, it's perfect. It's awesome, but it doesn't fit everybody and more often than not so how do you handle those type of deals?

00:32:43 - Gary Pierce

It is what it is, right? The numbers are the numbers, right? Those kind of like you said, special programs are black box. You better fit in the box or it doesn't work. So what we found and I looked the last 20 loans, and I looked at what we're doing, out of 24 conventional loans, okay, 50% are conventional or FHA, and the other 50% are farm and ranch stuff or non QM, which is like bank statements and that sort of thing, and investor products. So like fix and flips and that sort of thing. So what I found is that I think which has been great because FHA recently on their PMI pricing, right?

00:33:27 - Gary Pierce

Yes.

00:33:28 - Mike Mills

They get better.

00:33:29 - Gary Pierce

So that's one of the things I thought was great, that the government that's a benefit.

00:33:32 - Mike Mills

Yeah, that's an actual benefit. Everybody for everybody.

00:33:35 - Gary Pierce

Yeah.