Key Factors RealEstateAF

Zero Down Conventional - Down Payment Assistance Updates

• Mark A Jones - Founder of ReviewMyMortgage.com

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Ever felt like the hustle of your career is pulling you away from what truly matters? John Hudson did, and a trip to Disney World was the eye-opener he needed. Tune in as John, a mortgage industry veteran with 26 years under his belt, shares the heartfelt story behind his decision to start his own company. Discover how the relentless demands of his past roles and the noticeable lack of expertise among newer loan originators fueled his passion to make a difference. John dives deep into the world of mortgage structuring, income calculation, and compliance, revealing the intricacies that newer professionals often overlook.

In this episode, we also dissect the role of down payment assistance programs in today’s mortgage market. You'll hear all about an innovative 0% down program from the largest wholesaler in the country, along with its potential benefits and ethical dilemmas. John’s candid discussion about responsible marketing practices is a must-listen for anyone involved in real estate. Whether you're a seasoned investor or just curious about the mortgage sector, John's insights and experiences offer valuable lessons and practical advice for navigating this dynamic industry. Don’t miss out on this engaging, informative conversation that’s packed with actionable takeaways.

Key Factors Podcast is Powered by ReviewMyMortgage.com
Host: Mark Jones | Sr. Loan Officer | NMLS# 513437
If you would like to work with Mark on your next home purchase or as a partner visit iThink Mortgage.

Speaker 1:

Thank you. Welcome to Key Factors Podcast, where knowledge meets ambition in the fast-paced world of real estate and mortgage. I'm your host, mark Jones, bringing you the latest insight, trends and expert advice to navigate this dynamic property market. In each episode, we dive deep into the heart of the industry, dissecting market movement, exploring investment strategies and unlocking the secret to real estate success. Whether you're a seasoned professional, an aspiring investor or simply looking to stay ahead of the curve, this is the ultimate guide to making informed decisions in the world of property and real estate. So grab a seat and let's uncover the key factors that make all the difference. Welcome to Key Factors Podcast. Let the journey begin. Thanks for joining us for another great discussion on Key Factors Podcast. Real Estate, af and the AF stands for and finance. And good thing about that, because we're talking about financing today and I've got some cool things to talk about. There's some announcements, new programs that are coming out, and I figured what better way to share this discussion with anybody but Mr John Hudson? John, how are you doing Awesome.

Speaker 2:

I appreciate that, Mark. Thanks for having me back out here. Yes.

Speaker 1:

Like I said, now I really get to share my hot sports takes on things these days.

Speaker 2:

And why is that, john? Why do you get to share more? Why are you unshackled, so to speak? Unshackled, well, because just a couple of weeks ago, john Hudson left his previous employer and started yes, I've started my own company. So super excited and thrilled about that, I think this has been a long time coming.

Speaker 1:

Yeah, yeah, absolutely. I mean wealth of knowledge, somebody well-respected in our industry, locally and nationally. What provoked that? What was the I mean, it's probably brewing for a while what was the thought process going through that? You know what poked that.

Speaker 2:

A trip to Disney World. Okay, I know it sounds completely goofy and crazy. I want to know more, though. Yeah, the quick little, the 90-second version here was you know, I've been doing this for 26 years. I've worked for three places North American Mortgage Company, premier Nationwide Lending and, most recently, mortgage Financial Services. I was one of the founding members of Mortgage Financial Services, built it into a multi-billion dollar a year mortgage bank doing retail, wholesale, working with mortgage brokers and whatnot.

Speaker 2:

But I was killing myself and with the tumultuous times that we have in the industry, right, just, you have to start wearing more and more hats, true? Well, so last year took the, took my girls, my daughter and my wife to Disney world and and we had a blast, you know, we stayed in the, the safari lodge and seeing zebras, giraffes everywhere, super cool. But every morning I was in the lobby with my laptop working on broker packages, feeling out, you know, responding to a thousand emails and phone calls and texts, and at the end of that trip we're getting on the plane and we were flying home and I'm just like man, I just missed my trip to Disney World Pretty much. I wasn't present, yeah, and you know a lot of that's my own fault, right? People say no, no, just you know, be sure you're taking time off.

Speaker 2:

Well, I'm not. I'm built a little bit differently. I mean, if I know that there's things that need to get done, then then darn it, I'm gonna do it. But I wasn't present for my family, right, and so that really caused me to go into a lot of you know think, deeper sets of meditation, searching. That's why I go run half marathons every Sunday, right, I need that time for it.

Speaker 1:

You're nuts, by the way, for that.

Speaker 2:

I'm 46, so I'm not setting any land speed records, but it's challenging. But I use that for meditation and it's like man. Okay, I've been doing this for 26 years. I'm a student of the business. I know mortgages more than not ashamed to say it than most, and I was like man.

Speaker 2:

I just I saw a need out there in our marketplace and not to be disparaging to any of the you know, my former clients or mortgage brokers or mortgage loan originators that I know, but I could easily say that in the last few years, on a daily basis, seven out of ten originators that I was talking to have been in the business for less than five years and in that too, I would say that there's a great knowledge gap. There is, yeah.

Speaker 1:

Big learning curve and I would say a lot of it comes from the influx of 2020 loan officers recruits et cetera that Got in the refi boom.

Speaker 2:

Oh, you know, it's 2%, man, of course we can get you a mortgage loan. Well, those days are gone, and so I just I saw that there's a lot of originators that you know, don't know how to structure loans, don't know how to calculate income. Don't know how to structure loans, don't know how to calculate income, don't understand basic guidelines or procedures. And there's, of course, the compliance hat too. Right, there's stuff that's out of compliance all over the place. So it's just like man, okay, there has to be a better way.

Speaker 2:

So why don't I take my talents, do something myself? And now I can also be a little bit more present for my family, absolutely. And so, yes, I'm jumping back out now in the direct origination game. Love it. I'm going to be talking to my realtor friends and other referral source friends and be like, okay, john Hudson is here to serve you now. And the last one of my big accomplishments at Mortgage Financial Services was help setting up and bringing down payment assistance from the state agencies to the mortgage broker channel. Hadn't been done before, and to this day, mortgage Financial Services Wholesale is still the only wholesaler delivering Seth, tdhca and T-Shack to mortgage brokers.

Speaker 1:

Oh, very cool yeah.

Speaker 2:

Yeah, super cool. Sorry, man, I've been teaching realtors on their CE course. I know these products like the back of my hand. So, man, why not put it to good use?

Speaker 1:

Yeah, and you know, I think a lot of us managers, owners, um, in this past year, I would say, have done a lot of soul searching, just like yeah and uh it same. I jumped back in originating. It is one of those things that you can recruit all day long, but each of those recruits is going to take time away from you and whatever it is that you're doing in your life and, most importantly, the family. Yeah, um, and honestly, it can go great with some, but for the most part just in my experience, there's a lot of turnover in this industry and it has nothing to do with you as the mentor, it's the new to the business loan officer that thinks the grass is greener on the other side, or they're not listening to those needle moving activities that you say that they should be doing, and at the time it's tough because they're not seeing you do those things. Um, which it's kind of cool, jumping back in to go guess what I'm doing Needle moving activities, guess what it's working, you know that.

Speaker 2:

That that is. That is the fun part, right? So I've got a great core group of folks that came with me and you know so we're doing. You know sales huddles every Tuesday. And there's accountability sheets, and guess who's on there too?

Speaker 2:

You are Yours truly. That's awesome and it is right it's. You know the mortgage industry. I and I know I told you this, you know this before, but you know I fell in love with it when I went to my first closing and saw a single mom cry at the closing because she got a house for her kids. And you know, now, today, and unfortunately, maybe it's just a sign of the times but I see too many people that think, man, I'm gonna go do a a funny tiktok video, yeah, or one Instagram post, and I'm going to sit back and wait for the phone to ring. Man, it doesn't work that way. And you know what, if you're doing funny TikTok videos, that's great, awesome, because they are entertaining, absolutely. But I see a lot of them that are missing the educational component of really showing consumers what their options are out there. I agree, and so I know that there's a better way.

Speaker 1:

There is and I call it boots on the ground, in addition to whatever you're doing on the social media world, because social media is what we want it to be and if you're not in the trenches, if you're not shaking the hands, kissing the babies, all that good stuff to provide. And in this day and age, the key and value is education. Yes, it is Teach, teach, teach. Show them how, the whole concept of teach a man to fish. We've got to teach these agents how and what options their borrowers have, so that they can strike the conversations that then push over to us, giving us the opportunities.

Speaker 2:

Well, and the key there too right, is also the concept of responsible home ownership.

Speaker 1:

Yes, sir.

Speaker 2:

And I know that there's. You know, and I don't blame people for it, right? Nobody wants to be the bearer of bad news or be the bad guy and be like oh well, yeah, we can do this loan, but we probably shouldn't. Right, and unfortunately, you know, there's a lot of times where you just have to be honest and be like, if we do this loan, we're putting this family into a bad situation and you know, we've seen it over.

Speaker 2:

I mean, I've seen it over and over and over again. You go, man. These borrowers are literally one flat tire away from an early payment default, and so that's what we. I don't think there's much worse than having a family getting foreclosed on.

Speaker 1:

No, I agree 100% with that. So give us the name of the company, yes, and and have you have you guys already? Uh, I know it's super new. Yeah, have you guys already have websites, stuff like that, or not just yet?

Speaker 2:

We do no, no, no, we do. So the name of the company is H&M Mortgage Group. H&m. And how would somebody find you? That would be at wwwhmmtgcom.

Speaker 1:

Oh, wow, that's impressive, joey. If you could throw that reference up there reference screen for just a moment, boom, this is where you can find Mr John Hudson, senior loan officer, one of the most trusted that I have utilized for many years to get the right information. That's pretty cool. So are you guys a broker shop?

Speaker 2:

We are a mortgage broker.

Speaker 1:

Okay, very good.

Speaker 2:

Yeah, super excited. And so the H stands for Hudson. Yeah, the M stands for Morton Boom Robin. Morton is my partner on this, okay, and she was one of my mortgage brokers back from over 20 years ago, and she's been with me for a long time too, and one of the more respected originators that I know, just based on her knowledge and skill set. Now, her specialty is high-end new construction custom home financing. My specialty is well, I know a lot about down payment assistance.

Speaker 1:

We've got a great yin and yang.

Speaker 2:

We've got a great yin and yang here and then scroll down a little bit and then you know. So we're thinking, okay, what are we going to call this? There you go.

Speaker 1:

Back reference.

Speaker 2:

Go ahead, oh no, and scroll down. Look at my little I did there. It's genius, yeah, pretty clever. So I am pretty good at you know cheesy marketing too. I love cheesy marketing.

Speaker 1:

Hey, cheesy has worked for me for 13 years.

Speaker 2:

No, it sticks out. Yeah, I mean shoot, I remember. I remember you were the first one with the wrap truck in San Antonio and be like hey, there goes Mark Jones.

Speaker 1:

People would ask does it work? And I'm like you just asked about it. It worked, it absolutely worked. But the funnier stories come. When I let like, for example, jackie, she'd drive my truck every once in a while, so she'd be driving, and she gets back to the office she's like, oh my God, you would not believe the amount of people that waved at me thinking I was you.

Speaker 2:

Yeah.

Speaker 1:

Like, just keep on rolling. It works, Absolutely it does. And a lot of folks would say, Mark, why do you have John on here so much? Why are you helping promote his mortgage company? Aren't you guys competitors? And for me I don't believe that anybody else is a competitor, even locally, simply because there's enough business out there, absolutely.

Speaker 2:

I mean, you know, yeah, I guess technically we're competition but we're also friends, absolutely. And at the same time, this is what I've always preached, you know, even going back to when I was helping to organize and run the San Antonio Mortgage Professionals Association. Back then it was like look out there on the streets, yeah, we might be competition, but here together we're all brethren, we're all facing the same challenges, we're all trying to serve the same consumers and, as long as we're doing people that are doing business the right way, I love them, I respect them and let's continue to work together. Because, yeah, at the end of the day is there's still a lot of homes that need financing? Absolutely.

Speaker 1:

And I also just to add to that is the concept of where does the growth come from? If you're only focused or only able to kick ideas off the people that are in your inner circle or in your close sphere, it doesn't really happen. Cross-pollinating is how genius things happen in any industry, in my opinion.

Speaker 2:

No, it's how you grow. That's the whole mindset of getting out of your comfort zone. Yeah, that's the only way that you're going to grow.

Speaker 1:

So, in the spirit of getting out of the comfort zone, this sounds like a great transition to what our topic is today and we're going to be talking about down payment assistance. Transition to what our topic is today and we're going to be talking about down payment assistance. We're going to be talking about some of the nuances, some of the new programs that are re-announced, et cetera. So if you want to start with something like that, let's get into it.

Speaker 2:

Well, yeah, no, we can just jump right out there. And actually it's kind of. What prompted me to reach out to you was last week. You know, one of the actually the largest wholesaler in the country rolled out a new program 0% down. All right, sounds awesome and fantastic, but immediately you know my feeds and every, I'm sure, everyone else feeds it was all over the place zero down. But no one was really educating with their announcements. And I get it that we all want things to go out there and sell right, it's the new shiny object. But we have to make sure that we're doing it responsibly. And you know, in some of the various social media groups I mean I actually wrote down a couple of the quotes that just stuck out to me and drove me nuts, but one of them was and this was from a loan originator says the clicks and conversations the program creates for us, using it as marketing play, are all worth it. I don't really plan on doing much of them, but the traffic it creates is where the money is at.

Speaker 1:

Wow, I appreciate him for being honest.

Speaker 2:

I appreciate the honesty, but it also just shows the disingenuousness of some of the marketing of these products that are out there. I mean, if you're going to promote it, man, I really hope you have the full intention of using it.

Speaker 1:

Correct and it almost validates the concept that I preach often, which is the whole bait and switch. Yes, that's what they're doing, right, in that statement he says I don't plan on doing a lot of it.

Speaker 2:

I'm going to advertise it, but I'm not planning on using it.

Speaker 1:

Right. Well then, what are you doing? I just want to get the phone ring so I can start the conversations. Well, to me that's a little deceptive, it's very disingenuous conversations.

Speaker 2:

Well, to me that's a little deceptive, it's very disingenuous. And it goes back to you know. That's why, you know, I've always been a huge proponent of the TBD approval. Yeah, let's get these borrowers approved before they go shopping. Absolutely, because the home buying journey is supposed to be just that, you know fun, exciting and new. It's a journey. Well, if I'm jumping my toe, I'm putting my toes in the water for this journey. Well, if I'm putting my toes in the water for this journey and then that's going to be completely not even offered to me, or I'm not going to qualify, or expectations are not set properly, or the builder says the payment is X, but it's really Y, that's right. So now, all of a sudden, the journey has a dark cloud on it.

Speaker 1:

In addition to that dark cloud that you're talking about, and I know exactly what you mean. How do I say it? Good news travels fast. Bad news travels faster? Yes, it does, and that in itself, the journey that we're trying to create, that streamlined process, the experience that a borrower should have, is intended to lead to them being thrilled at the end, promoting it, giving you praise to their friends so that they know that not only is it possible, but it was a cool journey. We had their ducks in a row, it wasn't the 11th hour and we're still asking for documents, having to switch programs last minute. There's so many different nuances that, hey, when the shit hits the fan, we got you. John, I'm sure you've had to think quick on your feet as well.

Speaker 2:

I mean, there's always been fire drills. Yes, sir, but now correlate that too with one other thing. The last time I was here, we talked about the NAR settlement and how the impact is going to be on buyer's agents. Well, you know, still, buyer's agents, now more than ever, have to be able to show their value to a home buyer. And so again, if you're aligning yourself, in my opinion, with somebody that is just doing something solely for disingenuous marketing efforts, at the end of the day, yeah, you might get a quick buck here and there, but that is not a long-term value building strategy, I agree.

Speaker 2:

I do agree, and so that's where we just got to come back and align ourselves with local licensed mortgage originators that are doing things for the right reason, absolutely. And when you do it for the right reason, the money follows. It actually does. Yeah, it's weird how that works out. It's weird. Yeah, it's, it's, I think it's. I think the quote is from Jeffrey Gitmer and the quote is I don't want referrals, I want recommendations. Oh, I like that and I was like you know what that is that?

Speaker 1:

Oh, I like that and I was like you know what that is, that that is strong, yeah, and such a couple of different letters in that word that change the meaning and the power that it brings, with a recommendation versus. I'll refer you to this no, no, no, no, I recommend them.

Speaker 2:

Here's somebody to call versus. You have to use my guy, yes.

Speaker 1:

That's a huge difference, and I think that's something that we, as loan originators, should be striving for. Yes, is the recommendation, not the referral man. That's strong.

Speaker 2:

Put that on a t-shirt, yes, plan on it right. I don't even have t-shirts or business cards yet, so we're still building.

Speaker 1:

That's okay. That's okay and I know that it's a tough build been there before but I know that you've got the right people around you. You've got plenty of resources. I don't have any doubt that you're going to have more people flocking to you.

Speaker 2:

Yeah, it's been. You know what I mean launching this new venture. What's been really great to me was the number of people that have reached out and said man, this is awesome, good for you. So what took you so long?

Speaker 1:

That's what I was thinking too is what took you so long, but I get it.

Speaker 2:

Yeah, it's you know. I mean I was an executive at a company, right, I mean I walked away from a comfort zone. Nice package, and you know. But at the same time already you know what? My wife has already told me that she feels like I've been more present and this Friday I get to volunteer at my kiddo's field day at school. How cool, you know. And yeah, she made. My daughter starts sixth grade next year.

Speaker 1:

And what I also have learned in the last year mostly the last what are we in Five months Last five months, once I picked up the laptop again to start doing loans is consumers are very understanding that you are also a human being. Yes, You've got things to do, as long as you're setting the right expectations. Um, as a matter of fact, I had a, a realtor, close friend, a great guy, make a comment that he was like hey, backstory. I sent a text in the group and I always like when, if you're going to refer me something, put us all in a group so we all know what's going on. There's no misconception, no communication issues, anything like that. So within that text I said hey, is it okay that we meet at after seven, because I've got this event that I've got to go to, et cetera, et cetera. It happens to be mud volleyball. We do it once a year et cetera.

Speaker 2:

I was like it's crazy.

Speaker 1:

And side note, he was like hey, let's kind of keep the uh personal stuff to a minimum. And I'm like I don't know if I agree with that at all, simply because I want them to know I'm human. Yeah, who knows if. And if matter of fact, if there's somebody that can't respect that, I don't think I want to work with them anyway.

Speaker 2:

Right, you know, not a good fit, and that's okay. Right you know, go find somebody that is a good fit, right? That's okay, absolutely. Anywho, let's talk to TA.

Speaker 1:

So we can talk forever.

Speaker 2:

Come back in the program. We really can, so anyway. So all of a sudden, you know social media feeds blasted with the zero down program and you know people getting excited and whatnot. But then you got to always you got to go back and you got to look at the fine print. Yeah, and you know, the one thing that really stuck out to me right away with the fine print is okay with the zero down product, it's a 97% conventional loan Awesome. But conventional loans can be tougher to qualify for, absolutely Right. So you know you have this huge gap. You have this huge field of prospects. So now it's a 97% conventional loan. That's been put out there. The field gets a little bit smaller. There were a couple of options with it. If you are not a first-time homebuyer, then you are limited to 80% AMI pool shrinks. That's right. If you are a first-time homebuyer, not an income limit as long as you have over a 700 FICO score.

Speaker 1:

Brinks again.

Speaker 2:

So the pool continues to get lower and lower and lower. And then the last part of it was that it's actually it's a second lien at 0% that is repayable.

Speaker 1:

Okay, so it is all repayable. There's no forgivable side to it.

Speaker 2:

Right, gotcha, it's forgivable. So when they refinance or sell the house, they're going to have to pay it back. The other cap too, was that it's up to 3%, up to $15,000, which is also kind of limiting Absolutely. And yeah, while there may be and I had posted a video on this Friday too, it's like may fit certain borrowers, awesome, more power to it. But as originators we can't be too fast to just all of a sudden forget about the classics, correct, and I'll put this out there. I mean the challenge with T-Shack, texas State Affordable Housing Corp. The challenge with Seth, southeast Texas Housing. The challenge with Texas Department of Housing and Community Affairs. And you know this, they're not moneymakers, no, no, not at all, that's right and you know this.

Speaker 1:

They're not moneymakers. No, no, not at all. It's one of those things that, ever since I got into the industry, I've done plenty of bond loans throughout my career and at previous shops it was frowned upon to do them. So I'll be honest when I became a branch manager, I took that same mentality for a short period of time until I snapped out of it, going wait a minute. These still people are going to be able to get into a home. So what if we make less as a company? For them, there's still opportunities. Number one for them to tell more borrowers, potential borrowers, for them to refinance down the road. And for you to feel good at night when you go to bed knowing that you borrowers, for them to refinance down the road. And for you to feel good at night when you go to bed knowing that you know what.

Speaker 2:

I found the program that will work for these people and that's how you get from referral to recommendation. Yes, I like that. I like that a lot, you're right. So you do it for the right reason. So you know, I look at it just from the educational standpoint. So, as a mortgage broker, total compensation on a T-Shack, tdha or Seth loan is 1.5. So still got to pay bills out of that. There's still a lot of work to do. But again, you know what, if I have to go out there and originate a thousand of these suckers, you bet your rear end. I will, because I believe in what the good the program does as far as bridging a lot of gaps and I've got data to-.

Speaker 1:

No, and you are correct. I mean that goes hand in hand with the home affordability issue that we're seeing. Is it truly the payment that people are balking at, or is it the payment plus? They've got to come up with the funds, plus the down, the closing costs, plus, plus, plus. And if you're removing some of these layers, it's bringing their anxiety down. Their guard is coming down, they're starting to trust you and then now they're willing to listen to what it looks like to have a higher payment and how you can plan for it, in addition to what things they can potentially get rid of, pay off to mitigate or offset that higher payment. That could be temporary. I'm not going to say it's for certain that it's temporary, because we don't know what rates are going to do, but chances are in the future rates will eventually come down, giving them the opportunity to get it lower, Fix today, move on down the road.

Speaker 2:

If there's something that if you're comfortable with, the payment, Correct, that's right, they get in there, that's right. You know, don't, don't delay, and and so so I kind of, so I kind of fall back on on the T-Shack stuff here and so just now I also happen to you know, note, note for everybody I am on their lender advisory board for T-Shack.

Speaker 1:

All right. So y'all out there. We know somebody that knows somebody, huh.

Speaker 2:

Yes, I can pick up the phone or even send a text, which is great, right, but so consider these numbers. For T-Shack, for example. So last year, 2023, they originated 11 240. Okay, so that's over 11 000 families that were served just with t-shirt, and that's just in texas. So, yes, that's just, yeah, that's just texas. Now, now t-shirt, they are the largest hfa in the country. Okay, believe it or not, now, texas also big state. Yeah, true, um, think about that. There's over almost a thousand families a month that are utilizing T-Shack. Yeah, average FICO score was a 698. So you know, below that 700, that this other program that you have to be at versus 698. And you know you don't have to be a first-time home buyer, it's true, and you don't have to be a first-time homebuyer, it's true.

Speaker 2:

The income limit was the big one that stuck out at me, though. So, if you do have to go under the 80% AMI program with this other loan deal that was out there, so Bexar County today is $71,440. That's 80% AMI, okay, versus T-Shack. On the other hand, their income limit, which hasn't been adjusted yet it'll be adjusted in a couple of weeks, but, as of today, your income limit is $119,000. So almost 120, which really falls more in line, in my opinion, with a dual income. Correct Situation, correct. So if you're back at that and this is just where I say that there's challenges out there so if you're back at, say, you say you're at that, 71,000 for the AMI, so that's income limit of $5,953 per month. So what's the highest ratio you've seen on a conventional 97? Conventional 50. I mean, yeah, 49.99. So 49 DTI on that, that would be the max debt to income ratio. Your payment would be 2,917. If you have no debt, no other debt, no car payment, no credit card, no installment, no student loans, nada.

Speaker 1:

I haven't met a single person like that in the last six months.

Speaker 2:

It's been a while, right, it's hard out here. So you look at that and you go, okay, okay, well, and now today I say that the 1% rule really applies, right? I mean, whatever your loan amount is, it's 1%. That's what's very close, right, mas amenos, between, especially with homeowners, insurance, correct and taxes. So now you're looking at assuming they have no other debt. Now you're looking at a $290,000 loan, mm-hmm. So consequently too right. So now let's call it a $300,000 loan sales price. Remember that program was 3% assistance up to 15. So they're really only getting $9,000 in that case. So was it worth it? It's a little bit of a challenge where you know the T-Shack program, and what I really appreciate is that they will go up to 5% assistance, right, so that way you're covering down payment plus some of the closing costs that are in there too, right, right?

Speaker 1:

And what you're actually doing and I don't know if it's the intent or not you are shedding some major light on the marketing tactics that are being used, the programs that are being created to only serve as marketing.

Speaker 2:

Yeah, I mean it kind of is Does that make sense? Yes, oh, absolutely it does. And you know the other thing I'd say about this other investor and I think it's brilliant, it's a brilliant strategy to also protect their portfolio of loans they service from any runoff. That makes sense Because, hey, we could refinance you but you got to pay this off. That's right. And you know, I honestly I don't see home values getting much higher in appreciating, you know they continue to appreciate, but it's going to be at a much slower pace, correct, so it's going to be a while versus where you know. Again, the T-Shack program. The main thing behind it is it is forgivable after three years. That's right. So we'll take that same $300,000 sales price. Let's say they do 5% assistance that's $15,000 that they're going to get. That will be completely forgiven Right After three assistance that's $15,000 that they're going to get. That will be completely forgiven after three years as long as they live in the house.

Speaker 1:

I love it. As a matter of fact, let's throw up an example. If you can go to reference, Joey, I'm going to put up this rate sheet. I just went to this one. We can jump over to the other here after this. But I want to compare what you are seeing in these social media posts, and I've heard it from realtors. I mean almost immediately because, like you said, it just starts flowing through the feed Zero down, zero down, zero down when you have programs right now that we could create some right now, that we could create some misdirection marketing concepts to do the same exact thing.

Speaker 2:

I absolutely could. Yeah, we also have to be careful with the term zero down.

Speaker 1:

Oh, 100%. Yeah, you are correct, that's funny. Zero down 100%.

Speaker 2:

Hey, there you go. It's funny you think back. I mean we talked about that RESPA or that misleading false advertisement with that home builder. Right, they got popped for saying zero down. Why Was it not zero down? Because the borrower still has money they're putting into the transaction. That's right. Now you could say no down payment.

Speaker 1:

Right no down payment required. Yes, In many situations, because there's still situations that it could possibly. What if the home comes in short value and the seller says take it or leave it?

Speaker 2:

Or you have a buyer that's still putting money up front. There you go. So if you say zero out of pocket, you're going to be in trouble, unless you're paying for the appraisal. That's right, which means you're paying for it in the rate somewhere. So it's true.

Speaker 1:

So John was talking about the zero down program that was rolled out that you guys are seeing tons of marketing on on social media, and I'm just going to go directly to this. Um, my choice, Texas. That clearly States forgivable. Um, now, those of you tuning in, listening, watching, you can find these rate sheets daily. They are publicly available 100% and you can see and check whoever it is that is offering other programs, so that you can see apples to apples on what the rate offering is, as opposed to what you're being told or shown in a unethical post maybe.

Speaker 2:

Yeah, and I think that's good. We need to put the links out for these. Oh yeah, so that way our real estate partners can go and check them themselves. Because that's the other thing too is if somebody says, oh well, I could get a better TDHTA rate than that guy I've heard before Me too. No, the state sets the rates.

Speaker 1:

I'm like, are you going to hope and wait till next week when they change?

Speaker 2:

I don't get it Right, that's it.

Speaker 1:

Yeah. So on here you can see and I want to make sure that I articulate how to understand and read these rate sheets, because all the different bond programs, they have their different nuances to the qualifications, income limits, things of that nature. But as far as the rate sheets, they are all very similar in how you come up with the rate as compared to the amount of funds that you're receiving. So, for example, in this case scenario, we've got the my Choice Texas Home forgivable. This is after three years of having that loan. You can use a government FHA program or conventional, and we're looking at this HFA here and you can see that if you request 2% in assistance for any of these programs, you're looking at 7 and an eighth, 7.875 and going further, so all the way up to and it used to be 5%. Hopefully they'll bring that back eventually. I don't know. Um matter of fact, no, but, john, is that something that they tell you guys behind the scenes that they they don't.

Speaker 2:

So tdha really doesn't. So just for you to know, uh, for everyone to know, so tdha, most of their financing like 99 of it does come from bond issuance. Okay, so it's. And the problem with that is, you know, if you're going to put does come from bond issuance Okay so it's. And the problem with that is, you know, if you're going to put money out for bond issuance, that means you have to have investors that want to buy it. That's true, yeah, and with the volatility that we've had in the marketplace, then no one's really buying at least TDHCA bonds for 5% right now.

Speaker 1:

That's basically what it means. Um, so you can see here 4%, you're going to get 7.625. Now, at times these will go away. Like I mentioned before, 5%, one day it was there, the next day it was gone. Similar to matter of fact, they don't have it on this one. Maybe they have it on the other. We'll switch to a different one. Let's see here, We'll go here and I'll jump over to this one. So you guys can see this and this is going to be T-Shack and T-Shack.

Speaker 2:

And just to note on there, t-shack does have a 5%, but they get their money from the secondary market, so they're actually putting this out there every single day, really, so that's why they don't. I didn't know that? Yeah, so that's why. That's why T-Shack doesn't run out of funds. Makes perfect sense. So you'll see, like, when they do have a bond up there, that shows nothing, right, because that was limited availability versus their other products. They're getting from the secondary market, so they do have funding for it every single day, gotcha.

Speaker 1:

And those of you that are looking at this and going wait a minute, wasn't the other rates over there higher than what I'm seeing here? That may be the case, but there are situations to which the guidelines behind the scenes don't apply to your borrower, so you have to use the other alternative option of going with the higher rate, because maybe they're not first-time homebuyers and they still need down payment assistance. Maybe go ahead.

Speaker 2:

Well, I was just going to say I mean then, that's as mortgage professionals. That's why, if we're going to sell these products, we have to be vested in making sure that we know the program parameters. That's right. So when the loan comes, loan application comes through, we can kind of run it through our matrix and then present the borrowers kind of the good, better, best of each. Yes, Door number one, door number two, door number three choose your own adventure, Right.

Speaker 1:

And I think, for me, the biggest thing and speaking to borrowers, is make sure that these loan officers are explaining why their recommendation is this that's exactly right, just ramming something down your throat, because that gets you to the finish line. It's not enough, in my opinion, that you need to know the how and the why behind it.

Speaker 2:

Yeah and so, and another thing just to point out here and you know TDHE had the same thing too you notice that there's a different interest rate, right, based on the different levels of assistance that you get. And again, in my opinion, this goes back to why the to be determined pre-approval is so important Yep, Because it gives the consumer much more negotiating power.

Speaker 2:

And you know what, if we can. Let's say, for example okay, I have this borrower pre-approved today on 5% assistance, but when we go to make that offer, if we can get maybe two more percent in seller concessions, then look, my rate goes from 7.625 down to 7.125.

Speaker 1:

That's a huge difference, huge difference. And we've got situations that come about. Just had one recently where there was some repairs that needed to be done and the seller was asking the borrower to ask us, the lender, if we could contribute to the deal in any way. And this was a bond program and I had to educate the realtor. Hey, there's no funds here. They got them. We structured this deal accordingly. So I hate to say it, but you guys are the only ones that can contribute. You're left.

Speaker 2:

Or Mr Seller, if you really want to build this house, fix it.

Speaker 1:

Come to terms. That's right. So, yeah, I mean there's plenty of different options when it comes to this. We've talked plenty of time on benefits, things of that nature, to these programs I want to talk about.

Speaker 2:

Go ahead, Hang on. Well, I was just going to add one in there. The other thing that's not talked about is with that other program that's being advertised. There is no mortgage credit certificate available for that.

Speaker 1:

Okay.

Speaker 2:

Okay, so with T-Shack and TDHCA they still have mortgage credit availability. So what is a mortgage credit MCC?

Speaker 1:

Yeah, let's go over that. Do you still have the reference up there, Joey? Oh good deal.

Speaker 2:

So let's go back to this here, because that should have they normally say, with MCC, yeah, I think they're probably waiting for their next issue, possibly right here. Yeah, so they've got a 20% MCC, but they have, let's see here. Yeah, that's this one here. Okay, so target area combo.

Speaker 1:

Gotcha, but go ahead, keep playing that. You can throw the reference away.

Speaker 2:

So I love the mortgage credit certificate and it's one of the most underutilized programs because, quite frankly, a lot of loan officers just don't even know about it Absolutely. So what is a mortgage credit certificate? It is a dollar for dollar tax credit equal to a certain percentage of the mortgage interest the consumer pays. So TDHCA, their MCC is 20%. Tshax is only 15%. So I jotted some numbers down just off of what TSHAX did, so put this into perspective, right? So for everybody out there follow me here, okay, of consumer today getting 5% down payment assistance from T-Shack, their note rate would be 7.625. If we are including the mortgage credit certificate for that borrower, their actual effective interest rate is going to be 6.48%. Wow, and the reason for that? Go ahead.

Speaker 2:

The reason for that is because the borrowers are going to get 15% of the interest they pay given back to them in the form of a tax credit, either at the end of the year or they could adjust their withholding and use it throughout the year. But so in year one, based off a $300,000 loan, that would be $3,417. The borrowers would get back based on that number. But it's the gift that keeps on giving. So, and this is based off of after you know, assuming the borrowers never refinance, they will. But after five years the borrowers would have gotten back a total of $16,741. Wow. And after 10 years it's $32,000. Wow. So, and when the borrowers? Just FYI, so when the borrowers do refinance sometime in the future, they can actually keep their MCC. Really yes.

Speaker 1:

That I didn't know as well.

Speaker 2:

There you go, keep giving, let's see. And so it's just. There's all these little nuances that people don't know about. Right, that really can be, or really should be, talked about to a consumer, absolutely, because you know that people aren't going to be in their house for 30 years.

Speaker 1:

So you're saying this MCC shouldn't just be used when you need some DTI room.

Speaker 2:

Yes, well, and that's the other thing too, right, I mean so that $3,400.

Speaker 1:

I think that's the only time that that comes up in the conversations I hear when people on the social media Right, that's a benefit of being able to squeeze alone and through. I was going to say that that's a ploy or a band-aid.

Speaker 2:

It's a band-aid underwriting trick. There you go, but in reality I mean, I wish that I knew about the MCC when I bought my first house, but everybody should be able to use that. And so just to give you an example, right? So if at 3%, if the note rate was 7.125, the borrower's effective interest rate would be 6%. Wow, yeah, wow. And their tax credit per in the first year would be $3,192.

Speaker 1:

Right, and it's real money and I think it's important for people to understand that that money and the way that it is applied is directly off the payment when calculating DTI. Yes, I mean, it's like dollar for dollar, right?

Speaker 2:

So well, taoiseach. For example, they changed their guidelines, so it's just effective income. Okay, but the math still works out. If the borrowers only had $5,000 a month in income now, they'd have $5,000. $5,126. $250 or whatever it is. Oh, okay, that's right. Yeah, there is no maximum. So that's $3,400 a year. Wow, that's real money.

Speaker 1:

And so that you know, so that, okay, pause, yeah, yeah, because I want to be educated here that whole $2,000 number that we used to use. Divide it by 12, comes out to $166. That's old Gone.

Speaker 2:

Gone. Wow, yeah, yeah, right, mind blown, we need the little graphic to go off. I'll throw it in, and so it's. It's super important that that, again, this just boils down to why borrowers and realtors, for that matter, and home builders and financial planners all need to be educated on this, uh, on what is truly out there and available to consumers, and not just marketing gimmicks.

Speaker 1:

Right, no, that's a huge, powerful uh statement and it is something that I think well, I hope that more adopt. It's very rare, but I do believe that it's something that should be respected. If you come in contact with a loan officer that knows their shit like this, right, you know 100% and it's not, unfortunately, yeah go ahead.

Speaker 2:

No, I was just going to say the other definition, and this is what's cool too, right? So the definition for these programs of a first-time homebuyer is obviously somebody. That's well, a first-time buyer. But what does that mean? Somebody that has not owned a primary residence in the last three years. So if you had somebody that moved here from California, they owned a house out there, they moved here, they've been renting, they still have this other rental property, they're still a first-time homebuyer by now, as long as three years have passed. You're right, as long as three years have passed. The other part of that, too, is if the house happens to be in a quote-unquote targeted area. A lot of folks miss that. There's a lot of areas in San Antonio that are considered targeted. You know, a giant chunk of inside loop 14. And then the third one well, any qualified veteran is technically a first time home buyer.

Speaker 1:

No way.

Speaker 2:

Yes, that, another new one, wow so. So what does that mean? So what is a qualified veteran? It is somebody that is not active duty, okay, but and was honorably discharged, which so, like 99% of our vets, 99.99% of our vets out there Wow. So. Which means that they could own a house today, convert that to a rental property, buy another house tomorrow and still meet the definition of a first-time homebuyer Wow.

Speaker 1:

I think that in itself is going to make people's mind head spin, because I didn't know that it's not talked about enough.

Speaker 2:

No, it's not.

Speaker 2:

So now that I'm originating again, you bet your rear end, that all these fun facts are going to be getting out there to the masses, Because it is an educational thing. Yes, it is. There's a huge gap that we still have to bridge when it comes to our country. That gap really boils down. It is the haves versus the have-nots. Most definitely. You know me and my show prep right. I like it so, and I've talked about this before. So 2019 survey of household and consumer finance. Household net wealth in this country was $188,000 for white families, it was $36,000 for Hispanic families and it was only $24,000 for black families.

Speaker 1:

You have Asians on there. Asians are not. They're kicking everybody's tail.

Speaker 2:

They're not in this data but I know that they're up there and this is interesting, right, and I don't know. I just find the correlation to be interesting. So, out of the 11,000 plus units of Taoiseach families that were served last year, 44% of those went to Hispanic families Okay, because we're in Texas, I mean demographics 31% went to white families, but only 12% went to black families, and so it just and this isn't out of mortgages, right, that were originated, this was just out of, you know, people that utilize the Taoiseach product, and so to me, I kind of see that as well. Perhaps there's not enough education in the black community about T-Shack and TDAHCA and Seth and down payment assistance.

Speaker 1:

Being a person of color, I can shed light on it. You are right Education number one. They don't know it's available, they don't seek the information, and those aren't the things that our community holds higher in regard. Now, I'm not saying that they're dumb or anything like that, but the second thing is credit. They don't qualify at the moment, but they also, leaning back on education, don't have any sphere around them that can say, hey, it's not too late, you can fix your credit. Yeah, get a plan together, get with somebody that knows how to do this. Educate yourself or get educated. That will allow you to get to the next phase, that you can now partake in this.

Speaker 2:

Yeah, and the right kind of credit. Yes, sir.

Speaker 2:

I mean, I hate it when I see a credit report and I've got, like you know, it's typical for the Hispanic community there's a lot of you know installment loan from payday lenders. Yes, I mean, it's just, it's true, the data doesn't lie. But what kills me is that type of credit is weighted less than other types of credit. So somebody can have eight pages of borrowed $1,000, paid it off, borrowed $1,000, paid it off, borrowed, paid it off, and their credit score is actually going to be lower than somebody that has maxed out credit cards. You're right.

Speaker 1:

You're right.

Speaker 2:

Kills me.

Speaker 1:

It makes sense, though I mean knowing credit as much as I do. These are installment loans. They are short-term debts, whereas a revolving is more of a long-term commitment. You're able to see more of their daily habits, monthly habits, et cetera. You almost wish, and it's not going to happen. They're not going away. Payday loans aren't going away. It's one of the most profitable industries out there. People bash them, but then they run and go and get one.

Speaker 2:

But it's education. People just don't know what their other options are, and so that's what just kills me. So Bexar County, fourth largest county in the state, for T-Shack loans originated 732. 732 San Antonio families used T-Shack last year.

Speaker 1:

And this is the same one where there were 11,000 of them. So you're saying, out of that ratio, wise, we didn't even scratch the surface, we didn't even take 10% of that. No, wow, yeah.

Speaker 2:

Education. 20% of consumers in America still believe that we need 20% to put down when we buy a house.

Speaker 1:

Yeah.

Speaker 2:

You know. And so, despite all the tick tock video, I mean, yeah, right, I mean they're not following the right people, I guess. Um, but, but, but this is where you know I'm, i's 100% an affordability right there.

Speaker 1:

I got in there, they gave me the opportunity and once we got the one-time close, two-time close, it was like holy cow. I've been in this game 13 years and I just figured this out. They're not that hard?

Speaker 2:

No, but it's the same thing. People just don't know. And you know it's like with the manufactured stuff.

Speaker 2:

People hear manufacturing, oh you know they roll their eyes yep, even our real estate partners, because they don't want to be correct. And it's like dude, this isn't cousin eddie's tenement on wheels, pulling up now griswold's house. They're super nice, this is granite countertops and whatnot, so but but again, it's just, it's it's. We just have to continue to go out there and educate and, and that's why I really I love your platform and being able to come out here and share my hot sports.

Speaker 1:

Hey man, I will continue to have you back as long as you keep giving us these great nuggets. It's a wealth of information. Every time that you get on here, I learn plenty. Go ahead.

Speaker 2:

Oh no, I was just going to say you know what we should do, and this would be a really interesting one, because I was just jotting some notes down On another show. We should actually do an educational piece on what is debt-to-income ratios and responsible election as a matter of fact, john, what are your thoughts on doing a series?

Speaker 1:

I'd love it An educational series with and this would be a separate playlist, so to speak, still podcast related but customers, realtors, even other lenders. If you want to know about this topic, vti, whether it be down payment assistance specifically, or even we go program by program, I would love to do that. I think it would also allow people to see how cross-pollination works without the conflict and see what it breeds.

Speaker 2:

I mean we're just collaborating Because, at the end of the day, if our borrowers are better educated, if our real estate partners are better educated, then we're delivering a better experience for everybody. That's right. And the DTI one just popped out because I was just jotting some notes down when I was running some math and I was like man, okay, a lot of people don't realize that a 55 back ratio today is really like an 85 back ratio.

Speaker 1:

Yeah, because we're using a top line income, not after tax.

Speaker 2:

Okay. So somebody making 60 grand a year, okay, five grand a month, so that means their semi-monthly paycheck is 2,500. There's a really cool, so you can just Google.

Speaker 1:

Paycheck city.

Speaker 2:

No, well, this one was an ADP calculator that popped up, so it did. So. If you have a $2,500 paycheck in Texas, you know, sudafudafika, it was $2,091. So that's without any 401k contributions or anything else like that, right? So take-home pay is $4,182. So if somebody has a $250,000 mortgage assuming $2,500, there's their monthly payment. That leaves them $1,682 left over at the end of the to live to live. That's assuming they have no car. Payment credit cards they still got to. I mean, I know what my HEB bill is. Payment credit cards they still got to. I mean, I know what my HEB bill is.

Speaker 1:

There's, you still got to put food on the table. They just show up at the door. These days I'm like dang it again.

Speaker 2:

I like going to HEB.

Speaker 1:

It's another meditation for me too, like washing the car.

Speaker 2:

Yeah, exactly. So, uh, no, I would love to do an education series, cause man, I mean, I've got pages of of of notes like these Good and I love that you come prepared.

Speaker 1:

There are fair. Most do come prepared, but when we have our discussions it's very factual, based driven data. It's data that we're able to apply to scenarios, which then paints the picture for those that are just listening to this on Spotify and Apple podcast. Huh, see what you did there for those that are just listening to this on Spotify and Apple podcast, that are able to kind of envision what we're talking about, and then they go oh wow, that's how that just applied to that. Yeah, we did that, john did that.

Speaker 2:

It's telling the story Correct and it's funny. I'm doing a longer term exercise with my team. Right, we had everybody come up with the individual core values and now we're working on action statements, then it's vision, then it's goals, and the whole thing is you're developing your story, because if we can tell the story, like you and I do, then people listen to it. They can relate to a story better. They just absorb it better.

Speaker 1:

Well, that's an incredible practice that you're doing with them. I learned that through coaching years ago. And what people don't understand in going through the motions of developing each one of those pieces is, once you take all of those things, practice them, believe in them. Yes, it's not very difficult to strike up a conversation to pull any of those things out in any given situation. You don't have to give somebody your book. Pull out what they're asking.

Speaker 2:

Because then it's coming from the heart. That's right.

Speaker 1:

That's right. It's not a script. You didn't make it up. Yeah, this is not a ploy or a gimmick. This is from my heart. That's correct. Yeah, that's one of the best traits that you have is you speak from the heart and there's a passion for what you do. I think we both have that. Yeah, I'm looking forward to the future.

Speaker 2:

No, me too, brother.

Speaker 1:

Yeah Well, guys, we're probably going to cut this short. We've got a ton of information that was jam-packed in this, joey, how long was that? Maybe 40 minutes. Oh, okay, 55 minutes. All right, not bad, not bad at all.

Speaker 2:

We can just get going, man, we really can. Good thing, there's not beer here. I mean, we can be here all day 16 steps away, everybody again.

Speaker 1:

I want to make sure, john, if you could one more time company where they can find you all that good.

Speaker 2:

Yeah, no, no, I appreciate that. So John Hudson, co-founder, h&m Mortgage Group stands for Hudson Morton and they can find us at wwwhmmtgcom. And just remember you can't spell home without H&M.

Speaker 1:

Boom. Ladies and gentlemen, thank you so much for tuning in. I hope you got plenty out of this. Share this episode, talk about this episode. Use this episode when you're talking to your borrower so that it'll help you articulate your points, potential options that they maybe didn't know about before. And you're hearing it here today. Don't always believe what you see. Dig a little deeper so we will catch you on the next one.

Speaker 1:

Welcome to Key Factors Podcast, where knowledge meets ambition in the fast-paced world of real estate and mortgage. I'm your host, mark Jones, bringing you the latest insight, trends and expert advice to navigate this dynamic property market. In each episode, we dive deep into the heart of the industry, dissecting market movement, exploring investment strategies and unlocking the secret to real estate success. Whether you're a seasoned professional, an aspiring investor or simply looking to stay ahead of the curve, this is the ultimate guide to making informed decisions in the world of property and real estate. So grab a seat and let's uncover the key factors that make all the difference. Welcome to Key Factors Podcast. Let the journey begin, thank you.

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