Coffeez with Joe Shalaby - How Much Mortgage Can I Afford ft. Tan Karim | Coffeez for Closers with Joe Shalaby Ep. 18

Starting point is 00:00:00 What's up everybody. Welcome to Coffees for Closers, a show about visionaries, entrepreneurs, and of course, closers. Here we talk about their wins, their failures, and ultimately the story of their success. What's up, everybody. Welcome to another episode of Coffees for Closers. Today, we have a true great. Meet the force behind Change Wholesale success. the vice president with over two decades in finance,

Starting point is 00:00:38 he's reshaped mortgage accessibility and enhanced broker partnerships nationwide, significantly boosting the company's market presence and client relationships. This key figure is none other than the VP of Change Wholesale, Mr. Tan Kareem. Welcome to the show, Tan. Thanks for having me. I've been watching this for a few months now. I always wondered when I'd get the opportunity to be here. So thank you.

Starting point is 00:01:07 Man, it's a blessing to have you. And, you know, we have to save the greats. You know, we got to save the greats. So I'm blessed to have you on the show. And it's an honor to have you here. It's also been an honor to work with you. And you continue to be really a pillar for a lot of these guys at eMortgage Capital to continue to grow with them in their success. And they're, you know, in beginning in the mortgage industry.

Starting point is 00:01:34 because you've really been a pillar of mentorship for many people here at EMC, and you always are willing to go above and beyond for these guys, not just at eMorgatechap, but for many folks in the mortgage industry across the board. So we appreciate you, your hard work, your perseverance, and your relentlessness in seeing a deal get done. So thank you. Thank you. So I like to start these podcasts off with a couple of icebreakers.

Starting point is 00:01:59 So the first one is, how do you like to start your morning? Well, I'm not as early of a riser as you, but I do like to wake up in the morning. The first thing I do is obviously check my emails. I have a lot of brokers that I work with on the East Coast. And sometimes I do have my Hawaii brokers that are emailing me late at night that mine might have fallen asleep and didn't get a chance to. So I do like to make sure I don't leave anyone unattended. So first thing first, I always make sure that I'm answering everything I missed overnight

Starting point is 00:02:33 or early, early in the morning. That's one of the things that I've always prided myself on is not to ever miss a phone call or an email. And if I do, I want to get back to them within minutes. That's my go-to rule every single time. I love that. Priorizing your people. Anyone hanging.

Starting point is 00:02:51 That's my rule. So that's what I do. I start off doing that. And then I begin my regimen of drinking coffee, getting something in my body, getting some fuel in there. And I don't go into the office. office right away. I stay at home for a while. I'll be outside, take a walk, I answer all my calls while I'm walking around, you know, just getting some blood moving. And then I began my day,

Starting point is 00:03:15 probably getting out of the house, probably by 9.30-ish and heading into the office. I don't always go into the office. I'd like to be on the road a lot, going from broker to broker, coming here, whether, you know, I'm always on the road, no matter what. That's my rule. Lunches, dinners, whatever I have to I don't like being stationary for too long. And as anyone that's listening to this podcast that has talked to me, they always know that I'm always in the car when they call me. They're like, always apologizing. I'm like, don't apologize.

Starting point is 00:03:45 Go ahead. Let's chat. You know, and I'll figure it out. Pull over, figure out a scenario for them, price it out, whatever I have to do. But I'm always on the go nonstop till dinner time. And dinner is usually fairly late for me because I'm always coming back from L.A. or somewhere stuck in traffic. Even dinners, I call you.

Starting point is 00:04:01 You're answering. Yeah. They always step away, you know, unless I'm with you. And everyone understands, you know, family, friends, they always understand what's going on. And I'm fairly good at keeping it quick, you know, but I will always step away and take your call if you call me. Guys, if you're listening, this is a man of relentless hustle. If you want a key to success, just listen to what he's doing.

Starting point is 00:04:26 It's very, very simple. You know, you don't get to live in Newport Beach and own a beautiful home and, you know, have the life that you have just by sitting back kicking your feet up. Yeah, blessed to be your neighbor as well. Yeah, it is a very good life, especially living here, and it does take a lot of work, hard work, and having good habits to be able to sustain a lifestyle here and keep growing. Especially coming to Newport Beach as immigrant families. You know, you're, you're... I'm first generation. First generation. Yeah, my parents came here from Bangladesh. Yeah, Bangladesh. Yeah, landed in New York City back in in the 60s, and started as a cab driver, put himself through school, became an engineer,

Starting point is 00:05:09 and moved out to California to work for his aircraft. And this is where I was born. You were born in Fullerton? He actually worked in Fullerton. I was born at St. Joseph's in Orange. Yeah. Nice. Nice. Yeah, you know, from one immigrant family to another, you know, I get it. You know, we understand the hustle. We understand the hustle, seeing our dads just grind like that. Yeah, he's still going. He owns a... small little property management company in his 80s still going still yeah my dad too every single day still going collecting rent in the island empire it's not easy for an older indian guy you know but he does it keeps it god bless me yeah exactly uh so what year

Starting point is 00:05:47 did you get started in the mortgage industry uh i would say this is uh 2 000 2 000 so you get you're going on 24 years in the space i uh we there was at uc riverside at the time there was an advertisement in the dorm rooms for $10 an hour telemarketing. Didn't say doing what. It just had $10 an hour. That was a lot of money back then. Money for a kid back then, especially, you know, college kids. You know, I was, what, 18 at the time.

Starting point is 00:06:15 And so we answered the call, and it was a 9-for-9 number. So we had to drive out to Irvine from Riverside. And we, you know, it was at Sky Park Circle, not too far from Borex. Yeah, that's one of our first offices there over there. I was in one of those little warehouses in the back. They built cubicles in there. and that's how it started. And I just got on the phone and there was, we used point.

Starting point is 00:06:37 And I learned how to use point by myself just by doing that $10 an hour. Nice, nice. Been in the space for a while. So last 20 years in the space, and what do you think, because you've seen multiple crashes, like what do you think the biggest change has been for you so far? Great question. So obviously I went through most of the, and downs. I started in Consumer Direct, worked for banks, including Pacific Mercantile and Bank of

Starting point is 00:07:07 California in their retail divisions where everything was self-generated, moved over to wholesale back in 2019. So obviously the biggest change has been that shift, going from retail, being on one side of the wall to the other and becoming a wholesale rep, was the biggest change. It was a change I welcomed. I did want to try it out and see what it was. like to be on this side. You know, especially being banking, you don't really get to see what's really out there. You're kind of cocooned, and you don't really know what other programs are out there. You're selling what bank gives you, and that's it. And there's so much out there, especially going into 2017 and 18, non-QM really started blossoming. A lot of new lenders

Starting point is 00:07:49 were popping up, and I didn't want to be constrained by just doing the Fannie-Fretti conforming GENI-FHA stuff. I wanted to really make a difference. not only for my borrowers, for my referral partners, but for myself, too, being able to have a huge array of products to offer and actually learn about. That was another thing. It's a big learning curve going from understanding reading a DU, reading full tax returns. Now throwing all of that away, I could read tax returns like no other, but then really truly understanding how, you know, how to qualify people on bank statements and asset qualifying and all, you know, all the other goodies that. Huge shift. Yeah. Huge shift. Man, so I got, that's a two-prong

Starting point is 00:08:30 question I got. First off is, because you're Indian, you're an immigrant, like, how did your family take it when you said, I'm just going to go into mortgage front? I'm not going to be a doctor. Yeah. I'm not going to be an engineer, dad. I'm going to be in the mortgage industry. They're like, what the hell is that? Yeah. If they're going to watch this, they're going to laugh, and so are my sisters, because it was a really big deal because I was the first son. And there was a lot of, so I'm a college dropout, number one. So that's a huge no-no in the culture. And anyone can attested it that knows. So that was a big deal. Both of my younger sisters graduated college. So my mom, to this day, in my 40s, she'll ask me if I'm going to be going back.

Starting point is 00:09:09 I promise you. This weekend on Mother's Day, she will ask me, you know, do you have any extra time? Maybe you can go to night school or something like that. So it's a really big deal. I mean, I can tell that they're proud of me, you know, with, I've lived a really, we've all lived a good life over the last 20 years. I've been able to take my parents on vacations and gift do all kinds of things for them because of... But you didn't get your degree. So thus... My mom would probably trade most of that out of way

Starting point is 00:09:35 to see me walk down the... In your 40s, 50s, 60, it doesn't matter. Even if I wheel myself down the stage in a wheelchair, yeah, she'll be happy. So that is something I have to kind of tell her that, you know, I don't think that's going to happen any longer. You know, I'm out of my 30s. But that was a very big part of our family.

Starting point is 00:09:56 But, you know, they're still proud of. I can see that. Yeah. That's good. Yeah, because, you know, I mean, I did finish college, but I dropped out of grad school. So it's always like, you sure you don't want to be a doctor? Like, you sure you're not going to just go, you know, finish your law degree? Like, no, no, I'm pretty sure.

Starting point is 00:10:13 Yep. I'm sold on that. But, yeah, for immigrant families, you know, they hold education at a level where, you know, most folks who aren't immigrants won't really understand, like, man, immigrant parents really, like, really want. want you to be an esteemed student. So, right now, can you tell us, like, the most, like, pivotal moment in your career that really reshaped your career? Oh, no, hands down, 2008. I was in my 20s.

Starting point is 00:10:47 I was relatively young compared to some of the other guys that really lost everything during the crash, but it was eye-opening because I was... 25, 26 years old. I was living up in L.A. You really didn't understand the gravity of the situation until it truly, like a few months into it, when the money wasn't coming in anymore? And you're like, wait a minute. When does it restart again?

Starting point is 00:11:13 You know, there was a few times in the mid-2000s, rates kind of were fluctuating, things slowed down. But I truly didn't grasp it for a few months into it when I realized that this is, you know, the music truly stopped. So, and this probably speaks to a lot of people. They really truly changed the way they looked at money, the way they looked at their expenses. Loan O'She's originators had a lot of bad habits. They still do to this day, some of them, but a lot of them, you know, there was a lot of bad habits back then.

Starting point is 00:11:47 You know, and you could see it when you were around Newport Beach or Orange County and how people were spending so freely. So I would say that taught me a lot about, you know, being a little more responsible with the way you go day to day and realizing that things could end and making the right choices on, you know, making sure you can, you know, keep going, even if things slow down. Did you lose your house for in 2008, do? Yeah. Me too, man. 2008 killed me. I was just like you, 25 years old, owned a house in Newport Beach. And I thought it would never end.

Starting point is 00:12:21 Yeah. Same here. It just made no sense to me. And I did a lot. And I, you know, there was, I probably, in 2007, I did take some money that I saved and I kind of traveled a loan. I backpacked around Europe. And I thought about, I read a lot. I read about what happened, how it happened, what a CDO was, what an MBS was.

Starting point is 00:12:39 I had no idea. For seven years, I worked in retail. I had no idea what happened to these loans and what a Fannie Mae Bond was. So I truly didn't understand how capital markets worked or anything like that. So I did a lot of reading and I learned a lot about the business. during that downturn and then got back into mortgages in 2010. And I'm still with that same crew today, the same core group of people that kind of banded back together and started again.

Starting point is 00:13:08 I love that year with change because change is such a dynamic company. It is so different than all the rest of the lenders that we work with. And for those listening today, guys, we are going to make an official announcement as to a major product enhancement and a new product that's come out back into the mortgage marketplace. I think for me, it's always been integral in my production, about 20, 25% of my production has been just this one product. And I think it's going to be a game changer with what we're going to announce today. And we're going to continue to kind of like remind people of this major enhancement.

Starting point is 00:13:44 But this is a game changer for anyone who does loans. But I want to ask you like, because for someone to join a company that's a non-QU. only company and go, I'm going all in on non-QM, I just want to ask you, the hell were you thinking back then? You know, it's like, it was such a new space. Yeah. Like, nobody knew about it. It could have totally went.

Starting point is 00:14:06 It was like, it was really like buying an alternative cryptocurrency or something. Like, that's really what the sentiment was about non-QM at the time. You had no idea it would be this big now. Yeah. So what were you thinking? I would have never done what I, made the most. in 2018 into 19 coming to change without key, there's a certain key people that started this and came over at that same time. So we all kind of came together almost at the same time.

Starting point is 00:14:37 If they didn't come, I probably wouldn't have had the belief that this was going to work. I truly believe that this was going to work and it was just a matter of how long it would take when I came over. We had no doubts in our mind because of who we surround. rounded ourselves with. We had the right people at the right places. It was very small at the time, tiny. I mean, we were in one small little office in Irvine, you know, about 50 of us. And, you know, we grew to well over 1,500 employees within, you know, 18-month period. So it was tremendous growth, which was scary at times. But like I said, without being with a certain group of people with the core group at change, I would have never came over nor would it have even worked out.

Starting point is 00:15:24 So there was 50 you when you started? Yeah, give it take. What employee number were you? I was the second wholesale guy to come in. There was one other. So there was about five of us that kind of came around the same month. But yeah, I was number two. Wow.

Starting point is 00:15:38 Yeah. Second person? Yeah. Man, what growth have you guys seen? But now in the last year you've seen some suppression, obviously, since you lost that major product. How much suppression? I mean, how much compression have you guys seen? Well, we grew to become the number one non-QM lender in the nation in 2022.

Starting point is 00:15:59 So we were doing about roughly $6 billion a year. And then the rates started, obviously, contracting in business along with it. So we did come back down to roughly about a billion last year because of everything we went through. And it's not just us. the whole entire non-QM industry. The space has been really trying to figure out the liquidity issues that investors are going through. Margins are so thin right now. It's really hard to make a buck right now.

Starting point is 00:16:31 Securitizing these loans are extremely expensive, extremely capital intensive. So there's so many moving parts in these non-QM companies that one thing knocks down and the whole thing can fall apart. So it's really hard to keep stay afloat and also be competitive and also give customers, service to companies like EMC. So you have to be able to keep the talent, pay the talent, originate these loans at a decent cost, pay all of your ops employees, then figure out a way to sell these loans or securitize them and make some money. So it is, I would never want to own one personally because it's just, it would totally completely just take over my life and I wouldn't know what to do. It's good to be a part of a group that knows what they're doing and can stay

Starting point is 00:17:16 afloat in times like this, and then also come out with the reintroduce some products and be creative, you know, once we get out of the, you know, out of the big waves. Yeah, which I think we're pretty much at the end of the big waves right now. I do too. I can see there is light at the end of the tunnel. We're reintroducing new programs and reintroducing old programs from, you know, two years ago with very, very, um, the guidelines are very competitive once again. So we're back to where we're, we're back to where we're, we're, we were, I believe, right before COVID, the way our company. Amazing. Let's not drop the news right now. We'll announce it here in a minute.

Starting point is 00:17:53 I want to do it. We're going to continue to build up to that moment just to keep everybody listening and involved because we want to drop this on them and make sure that they take action immediately. Now, for first time home buyers listening to this, how can they leverage non-QM programs, changes programs and, you know, take advantage of some of the things that you guys are offering. Yeah. So first-time homebuyers are a little different in my, the way I view them are a little different than I used to back in the days. You know, it's usually when I think of a first-time home buyer, it's going to be somebody that's going to go probably FHA. They have a very minimal down payment, maybe 5%.

Starting point is 00:18:31 For some... Let's say they don't meet the normal FHA guidelines. That's why they're coming to change. First-time homebuyers are a lot different these days. A lot of them are, you know, they don't have regular wage earning jobs. They're younger. They're doing, you know. They're doing YouTube. They're doing Bitcoin. There's so many things that they're doing these days. And the first time home buyer age has been dropping consistently over the last 10 years. That's a number of first time home buyer who's 18. I mean, he was a YouTube, everybody. And they're doing great. And, and, you know, typically you would never think somebody that young would want to own a home.

Starting point is 00:19:01 But now they're like, you know, they want a place where they can relax and have fun and they want to make it their own. They design it themselves. It's kind of a thing now. Financial literacy is a thing too. Content is like just financial literacy contents all over TikTok and Instagram. These kids are a lot smarter today. Yeah. So that's what we're here. We are here for borrowers like that.

Starting point is 00:19:21 You know, it's not going to be your typical borrower. We want to do loans for guys that are doing, that are out there hustling, that have side hustles, that have two or three different streams of income that really have good CPAs too, that don't, you know, that help them, you know, shield themselves from tax liability. So that's what we do. We will do bank statement loans utilizing personal bank statements, and that's it. You don't need anything else. We won't have an expense factor.

Starting point is 00:19:44 We know you have money coming in. We know what you're doing with it. That's enough for us. Twelve months of personal bank statements and nothing else. No one else does that, and it makes life a lot easier for originators and for your borrower and us. Everybody's happy. So things like that are what we're trying to make it easy, simple, and use a little more common sense than everyone else. That's, and I can promise you, our chief credit officer and all of management, that's all we do is we bang our heads, trying to figure out how can we make it easier to do a loan, not so somebody can commit fraud, but so we can, you know, we can do a loan that's safe, sound, secure, and that we can sell to the secondary market at a profit. That's all we think about all day long.

Starting point is 00:20:26 I love that. And you're also, you know, making these kids' dreams come true or making these people who thought they would never get a mortgage come true. You know, and it's such a blessing to be a part of something like that because most these people that come to change are like hopeless, right? You're basically instilling or reinstilling some hope in the American dream for them. Yeah. A lot of our loans do come to us after being out somewhere else for several weeks. So we are seeing a lot of loans that have been to two different lenders have been turned down and we look at it like, okay, you know, we can definitely do this. So I don't like to be the lender of second or third choice, but you know what, that's fine. You know, if I can make somebody happy and we have a successful closing at a, you know, in a great time frame, then everyone wins.

Starting point is 00:21:15 That's fine. How about DSCR, you know, the investor portfolio products? How aggressive are those products in comparison to all the other non-QM investors out there? We are very good at DSCRs. Our pricing is what makes it really good because the most important thing of an investment property is obviously your cap rate and the, the cash flow coming into a property. The lower the rate, the lower the cost of the loan, the happier the borrower is going to be. I would say probably about 50% of our volume today is coming from investment properties. But not just DSCR, we do allow investment properties

Starting point is 00:21:49 utilizing bank statement loans and our new P&L loan that we just launched about two months ago. Nice. That PNL loan, you want to just summarize that real quick? So the cool thing about our P&L loan is we don't need bank statements to coincide with the So a lot of lenders will say, yeah, we'll take your profit and law statement. It needs to be signed by a CPA. But we also need you to give us two to three months of bank statements so we can make sure that the deposits kind of match what the P&L shows. Well, not everybody has all their money going into these specific accounts. They have them going all over the place. So we will take a P&L that doesn't have a bank statement coinciding with it, which makes everyone's life easy. Yeah, it makes much easier

Starting point is 00:22:28 underwrite as well. Yep. So, you know, you've been, you're so busy all the time with running this all of change of wholesale's wholesale department. How do you manage to balance this super high-powered career and just having a personal life with your daughter, with your wife? It's been a challenge here and there. I did, you know, during the, during the last 18 months as rates dropped, I did have a little more free time. I was able to kind of step out and, you know, have weekends and maybe take a trip, you know, here and there. So I do travel, I try to make sure I travel at least once a quarter because I do need to reset here and there because I literally dream I'm literally having dreams all night of numbers and waking up and thinking about and you know

Starting point is 00:23:12 volume and so it is nice to be able to reset so I do almost force myself to make sure I have a good time at least once a quarter and get out you know go to Mexico or maybe you know I'll go to Europe you know for a few days so I do make sure I do give some time to everybody I just got back from Tahoe last week from my with my daughter just with your little father daughter Tahoe trip so that was cool that's awesome me I'm planning a father-daughter trip with my daughter coming up here soon now that actually puts me into my next question like when you're not crunching numbers you know and dreaming about how to put difficult loans together like how do you like to unwind uh good question oh well we live in Newport beach so we're blessed to be able to

Starting point is 00:23:55 live here and so I do spend an inordinate amount of time being on the beach um I will actually walk near the peninsula, take a long walk, and I will literally just make phone calls and work from my phone for during a two to three hour or two to three mile walk. So I spend a lot of time at the beach, you know, whether it be at Corona Del Mar or somewhere on the peninsula, I spend a lot of time out there. Nice. That relaxes me. It really does. And then I'll come home and, you know, have dinner and stuff. So now I'm always happy at that point. Yeah, yeah. I like to do the same thing, actually. I'll do a couple mile walk with the dog and just hit a bunch of phone calls. Yeah. It's the best. Yeah.

Starting point is 00:24:31 It's just like to unwind, go walk around the beach. It's like, weather's beautiful and, you know, what more can you ask for? Yeah, that's good to know. So let me ask you this. How do you, like, what's the secret sauce to continuing to really grow the wholesale channel for change? Like, continue to grow the partnerships, to continue to really enhance these relationships. So we, I feel we do things a little differently than a lot of wholesale lenders. A lot of wholesale lenders,

Starting point is 00:25:01 have like some sort of call center, will they have like inside reps. And it's almost, the personal service is not always there, especially if you're a newer broker or, you know, maybe you're a three to five man shop, your volume is fairly low. It's really hard to get a certain level of service sometimes. One of the things I like doing is, see, EMC's always been pretty big, although I've seen you guys grow tremendously over the last five years. I do have quite a few of the smaller one-man shops. You know, that, and I try to help them grow. Those one-man shops are just to come EMC. Like, that's like, you'd be doing, you're not doing them any service, not telling them to come here.

Starting point is 00:25:40 You should tell them. I do start that. I'll become one of your best recruiters. But I do like what helping people grow, you know, so what I'll do is I'll explain to them and teach them and maybe talk to them about how I see other successful originators from other, you know, brands. What do they do? What are they doing? Because there's plenty of business, especially non-QM business for all of us to succeed. Become a consultant for these smaller shops.

Starting point is 00:26:01 There's a few that I've spoken to where I'm like, you know, they're never going to, you know, they're just going to do what they do. That's fine. But there's guys out there that are very eager to learn. And I like helping them grow. And, you know, a lot of people are really stuck in that model of just sending loans that are going to go only to UWUAM or rocket or whatever it might be. And that's it. They're comfortable. They're happy.

Starting point is 00:26:23 They're making good money. And then there's guys out there that are like, hey, listen, I'm tired of this up and down. You know, maybe I can get another source of income from, you know, self-employed people. people that are going through divorces, people that need hard money, takeout loans. Where do I go find people like that? And I'll help them understand where to market, how to market, who to reach it out to, and what to look out for. And once they're able to identify and create a new stream of leads, then I'll help them understand the loan and go from there. Because, you know, getting somebody in the door is one thing, closing the loan is another.

Starting point is 00:26:57 And you have to be able to do everything very efficiently. That's awesome. Let me ask you, how do you think change has streamlined the process of non-QM in comparison to other investors? Well, our main product, the community mortgage, is as streamlined as you can get with the least amount of paperwork as you can get. So that's what we lead by. And I've always taught processors, loan officers, brokers, you name it, the waterfall test. If your borrower doesn't qualify here, you have to be able to quickly understand if they qualify here, here or finally come to the community mortgage. You know, we're right there.

Starting point is 00:27:35 But there are other loans along the way that maybe you could see if they qualify for. And you have to do it very quickly. I like the waterfall test. Yeah. I've never put it in that context. I teach everybody that. That's my number one thing. Every time I do, you know, a Zoom presentation, I teach them.

Starting point is 00:27:51 Don't go straight to the community mortgage. Yeah. Start off here. Take a few minutes to figure out if they go here. No, bank statement loan, a P&L loan. What do they? You know, and then get to the end. And then you can do the community.

Starting point is 00:28:01 mortgage. We should be a one-step shop for every single one of those rocks on the waterfall. That's a great way to kind of, I mean, to paint that imagery. And I'm going to tell my design team, just to put that into like more of an image where I can each set to folks a little bit easier or even explain it as a flyer to your consumer, because it just makes a lot of sense. Are you going the conventional route? You go in the bank statement route? You go in the P&L route. You're going the no documentation route? You're going in the hard money round? Yeah. And it should only take a few minutes to really understand and identify where your borrower falls on that fall test. Yeah. And I, that's all, I've lived that for five years teaching

Starting point is 00:28:42 everybody that, and even myself too, you know, trying to perfect my pitch to brokers on why they should use change. And we don't want to be a one-trick pony that only does loans with no income. I want to be able to be the guy that you think of when you have a doctor. or a dentist that has his own practice that is very rate sensitive and doesn't want that rate, but he wants to be able to get something closer to what you can get at, you know, Wells Fargo private. So we have jumbo, bank statement loans and P&L loans that are like that. We don't actually know you for those loans.

Starting point is 00:29:14 We know you for the waterfall, the bottom of the waterfall, right where it hits. And we want to, we want to reintroduce you guys as, you know, to be on the entire kind of like landscape, not at the very top of the waterfall, but just as we can. Level two and then work. Yeah, because what you're known as, I think, throughout the community is the bottom of the waterfall. And that's what really hindered changes growth, obviously, in 2023. But this is what we're going to be talking about. Now, actually, let's go ahead.

Starting point is 00:29:44 We've been talking about the changes. And the reason why, guys, I have Tan on the show today is to reintroduce a product that has been really a big part of my. personal success as a mortgage broker, this product, we lost it. And they reintroduced them beginning of the year. And it wasn't very sexy, but it started to reignite some business. But as of today, live today, right now on this show today, no documentation is back. And it's back better than ever. Let's talk about the guidelines. Thank you. Yeah. So the community mortgage was reintroduced several months ago, and it required, it's a great loan. Don't get me wrong. And we still did bring in loans with the original guidelines from the beginning of the year. But it required 18 to 24 months reserves. Guys, 18 to 24 months reserves, that's a lot of money in the bank. Okay. Continue on.

Starting point is 00:30:45 A $2 million loan, it just really wasn't working out. So as of today, or as of Monday, we only require six to nine months reserves. That's the same amount that it was during the peak of our origination. of this loan. And more importantly than the six to nine months is this. You can use the cash from the loan that you're borrowing as reserves. That is basically you just need this to do a loan now. You hear that? That's a heartbeat. You just need a heartbeat now to do a loan and a good credit score. You got to have a good credit score to own a house nowadays anyways. But you got to have a heartbeat and a good credit score and you can pretty much get a loan done. And that is huge. That's going to save so many homeowners' butts, you know, because a lot of people can't qualify for loans for whether it's, they don't have the assets, you know, they might not have a high FICO score.

Starting point is 00:31:40 You know, the 680 is not a high FICO score. That's a very mediocre score. Are there exceptions on the FICO, like go down a 660 by case by case? No, we're going to keep it at 680 for a while, I'm sure. You know, we're just rolling this out. I think that's a good. It's always been that 680, I believe. We did. We were at 640 many years ago, but we did raise it to 680. We tried that out. You know, we still have to sell these loans to investors. And, you know, one of the things is we understand that, you know, there's no income.

Starting point is 00:32:04 There's no employment documentation. So we'd have to make sure there is other parts of the loan that are a little stronger than others because, you know, you're missing a few important factors. So the collateral and the reserve position and the credit score is very important to us. Yeah. Guys, this is a huge, huge alternative to, I mean, number one, the LTV is pretty, pretty aggressive, right? What's the 70% on a cash out, which is great. Yeah, 70% and on a purchase. On a purchase, we're at 75. We were at 80 when it went away, but we're at 75 right now.

Starting point is 00:32:35 Let's see how, you know, originate, you know, how much we're originating and how we're able to sell this in the market over the next few months. And, you know, we could make some tweaks to make it even easier. I'm sure. You guys are always adjusting in. When we launched this in 2019 and launched at only 65 LTV and then, you know, we, and we continuously improved it over the, the fact that we're at 70 cash out right now, Using cash out as reserves is an absolute game changer. It's an absolute game changer. And we should see a huge uptick. I know the people here in the office are like,

Starting point is 00:33:05 make sure Tan comes and talks to us a little bit about it. And everyone's really excited. I'm sure all the listeners right now are like, what did I just hear? Did I just hear a no documentation loan where I can use the cash from the loan as assets? I really don't need assets. Like I could just use the cash as assets. I mean, this is a game changer.

Starting point is 00:33:22 I know personally, like I'm always getting clients myself. that like don't fit normal conventional buckets. You've originated quite a few over the last years. Yeah. I know. I love that product. Yeah. I've originated a ton of them.

Starting point is 00:33:33 Yeah. A ton of them. It was, I only, like, I would only use two investors, you know, and you were one of them.

Starting point is 00:33:40 So, you know, like, well, no, no, actually, I'll take that back.

Starting point is 00:33:44 I, for the really low FICO stuff, I had to use another investor, you know, like an EPM or SunWest or something. But, but yeah, this is a big,

Starting point is 00:33:51 big move for the industry. I think, for us at e-mortgage capital. It's going to be a huge game changer for the folks that are always trying to originate business. So I'm going to slowly like make the rounds with some of our leadership here to make sure that they're trained up on this product, that they could train their team on this product, obviously listen to this podcast. But we'll kind of go through the rest of these last questions here and, you know, make sure that people get to know you a little bit better.

Starting point is 00:34:25 Mortgage is being like tricky because non-QM is tricky. And I learned a little bit about the waterfall test myself on this podcast. But how do you make mortgages easy for people? So that's a great question as well. That is one of my biggest things that I have for my entire team. My account managers, my assistants, our underwriters, I want to make sure that the process of submitting, admitting and getting a loan approved with us and going all the way to docs is easy.

Starting point is 00:35:00 And it's all about just making the experience pleasant. It's not always pleasant and especially a non-QM. So as a former retail loan officer, both in Consumer Direct and in a regular bank branch, getting an approval was sometimes a little scary because you look at it, first of all, it could be two pages, maybe three pages. and seeing these conditions that you have a feeling that you're not going to be able to meet is the worst feeling in the world. And so I never want one of your loan officers here at EMC to feel like that.

Starting point is 00:35:36 You know, instead of being excited, you're nervous about getting an approval from change. And that is something that pisses me off if that ever happens. If you have a loan officer, if a loan officer at EMC is scared of dealing with change, that means I'm failing and my team is failing. So I've done a fairly good job over the last few years of making sure that an approval doesn't go out without me taking a look at it. And sometimes an underwriter will make a mistake or maybe they might overcondition on something or they think they see something that's really not there. Whatever it might be, I make sure that that never enters your realm or your loan officer's realm without me trying to fix it or at least communicating what it is. That's the issue.

Starting point is 00:36:17 So making it easy isn't always quick, but it's making it easy. making it stress-free, making it less scary, you know, especially with deals are very far and few in between today. So every deal counts. And when they count that much, they were, but with this new rollout, I know, yeah. But I just- The rule is going to get, you know, it's not going to make deals very far, few and far between. It's going to make it, like, they're all between now. You just want to make it, make it stress-free. That's all we want. Because the thing about non-QM and the biggest apprehension that people have, it's like, oh, does it's a non-QM, I got to go. I got to through hell to get this deal done.

Starting point is 00:36:54 And we just want it to be easy. Loan officers just want to turn and burn through these deals as quick as possible because, you know, time is money, right? So they want to make sure that this is an easy process. It's executed quickly. It's efficient. There's not a lot of back and forth. It's not over-conditioned.

Starting point is 00:37:11 And I love that you have that hands-on approach to review the conditional approval to make it like... I don't care if I have 100 or 200 loans in my pipeline. Everything has to go through. me or somebody that's just like me on my team. I'll hold you to that. I will, yeah. I'll hold you to that because you're about to have a couple hundred loans in your pipeline again.

Starting point is 00:37:28 And it's like things are going to change this year with that product because we've all been anxiously waiting for the reintroduction of that program. And I know when we lost it back in last year, mid, yeah, it was like devastating for us. It was devastating for us. So, you know, just even giving people the hope that this product is real and it's back is like, it's a game changer. It's a game changer. Now, what do you think the future holds for the non-QM space?

Starting point is 00:37:59 I see tremendous growth. This time, and I think I almost said something about this earlier in the conversation, that this reminds me of 2019 again. I know that it's not a long time ago, but it is. It's five years ago. The non-QM space, that's like a lifetime ago. So I see a lot of movement happening. I see a lot of investors trying to figure out what's going to happen with this election

Starting point is 00:38:22 coming up once I think that's set in place I think a lot of people are going to kind of relax themselves a little bit and they're able to understand what's going to happen over the next four years somewhat and the once we're able to get a clear indication of what these loans are worth that's the most important thing for us then we can price these properly and maybe start beginning to lower rates on some of these products and a lot of it is you know in the fed's hands as well but I see nothing but growth you know we did lose a lot of us the last two years. I don't know if we're going to get back to where we were in 2021 and the beginning of 22, but I think it's going to be pretty darn close. When do you think we'll know what these

Starting point is 00:39:01 loans are worth? I would say probably by the end of the third quarter, fourth quarter of this year. We're not to wait until end of fourth quarter or beginning of fourth quarter. Beginning and fourth quarter probably, yeah. What do you think some of the biggest challenges were for change building its portfolio initially? I would say the tremendous growth affected us. So we had a very hard time. We had a very hard time hiring. I mean, it was truly, it came down to bodies on the floor, really, at one point for us. We could not hire fast enough. I don't think that's going to be what we're going to go after this time. I think we want to do a little more organic growth currently, which I think is fine. You know, we've already done that rapid expansion once, and it was fun, but at the same time,

Starting point is 00:39:46 it was very taxing on everybody in all of our internal, you know, systems. So this time I think it's going to be organic growth. And that was the hardest part was being able to hire enough underwriters. You know, we were hiring contract underwriters in Florida that really weren't here in-house that had the same, kind of followed the same rules that we did. They kind of lone wolves out there. So it was a little harder. Some brokers have to deal with an underwriter that was, you know, 1,800 miles away.

Starting point is 00:40:13 So that wasn't cool. This time, I think we're going to be a little more organic with the way we roll out everything and the way we grow. What do you guys think you're anticipating for the growth with this new rollout? Like, how much do you think it's going to change the business? I think what's going to be, we want to be double what we're doing today within the next 90 days. I mean, that is our projection. We have to.

Starting point is 00:40:36 By this summer, we, you know, we want to be back to a $3 to $4 billion originating non-QM lender. Yeah, we need to be a couple hundred million of that ourselves here at EMC. And I think we're good for it. I mean, you are too. Because the fact is that this is a product that every single person that, that's on the phone on the other line can pretty much almost get. Yeah. You know, so the turn downs for us are going to be turning into money now.

Starting point is 00:40:59 Yeah. And we're going to do our very best to educate because I think the biggest problem we had with with change as a whole is that just the lack of education and the lack of awareness about this product. Because if you told 900 loan officers that all their clients who don't have any income can get a loan, they're going to be like, well, hold on, explain that to me. Like, wait, re-explain that to me. Because a lot of people weren't around for the SIVA days, you know, they didn't understand any of that.

Starting point is 00:41:28 All people know, for the most part, in the mortgage industry, is just tax returns, W-2s, you know, your conventional FHA, VA buyer. They don't know a no-income buyer. And I'm going to, that's what, and that does fall on me and us, you know, you're in leadership that, you know, while before the next refy boom starts knocking its door on we should be able to educate everybody on what is out there. You know, so they're ready for the boom as well, you know, because if they're... Boom could be coming.

Starting point is 00:41:57 Yeah. As soon as they say rate cut. Yep. And you don't even need that much of a rate cut to create a refund. They just need to say rate cut. They just need to say a rate cut is coming. Oh, just kidding. It's not coming.

Starting point is 00:42:09 Yeah. Yeah, because they just, now they're just saying there is no rate cut coming. Yeah. But once they start to reintroduce the thought of a rate cut again, like rates are going to go down. Like, they're now saying they're. backing off and they're not okay with no rate increases again this year yeah maybe something in october there's this carrot that they're dangling yeah they keep dangling it and they had another

Starting point is 00:42:28 fed speaker today saying yeah we might have a rate cut still this year maybe you sit tight we'll see we don't know no one knows but but as soon as we do get a rate cut it's game on it's game on um so i like to end these podcasts with a couple last questions and their their personal questions um the the first one is this it's a three-prong question what is a three-prong question what is a personal goal that you have for yourself? What's a goal that you have for the family? What's a goal that you have for change? People that know me already know this, that I have, health-wise, I haven't taken care of myself over the last two years, three years, give or take. So that's one personal goal that I have is to completely get back to where I was probably five years ago.

Starting point is 00:43:11 I don't know if that'll happen exactly, but, you know, if I can get close, I'd be very, very happy. family goal God there's so much that you want to do but no more kids for me so that's not something that I need I just spending more time with my daughter I guess you know as much as I can that's very important to me

Starting point is 00:43:31 and yeah that I would say was your daughter she's 12 she's going to be 13 at the end of this year yeah yeah for change you know I think I have a lot of great partners just like yourself and I just, you know, I just want to be able to be, I just want to help you guys grow.

Starting point is 00:43:51 That's it. And what you said, like, you know, there's not everyone here at EMC knows, you know, what we can do. I want to do a better job of educating everybody. Instead of going out and looking for new brokers to work with me, I already have everyone I want to work with, I think. I think I want to grow the relationships that I already have. And I think that should be my number one goal currently. And you don't really need to go out and get more brokers because that's, that's what we're doing, right?

Starting point is 00:44:17 Yeah. It's like every day we're doing that. I should send them to you. Yeah, like every day we're just bringing on new people. So it's cultivating the relationships that you have here and helping them grow, which, you know, even just reminding them of the resources we have here at headquarters. Yeah. And there's nothing that makes me happier than to see, you know, specific LOs going from, you know,

Starting point is 00:44:37 averaging a million to two million a month to the five to $8 million a month. It's so fun to watch that happen to LOs. originators. The best part of being in a leadership position is just to see other people succeed. That's the reason why I exist. That's the whole purpose of why I'm here is just to help others thrive, dominate, grow, continue to achieve heights of success that they never would have thought possible. Now, the last question I have is this.

Starting point is 00:45:07 When you're in front of the pearly gates, what do you think God's going to tell you? No one's ever asked me that. no one gets asked that question often no i just think it'll that i have the garage opener in my pocket it'll open i think right that's that's that's you know that you've ran the race right you did you're here you're helping yeah so as long as everybody else i've come across in the in in my life says the same you know says the same thing then that's what that's what matters the most yeah yeah you are you are and uh and it shows and we appreciate you We love you.

Starting point is 00:45:46 And we hope that change dominates, guys. The new change program is a game changer. This is going to escalate everybody's revenue, probably 20, 25 percent. You should see a 20, 25 percent in your revenue this year. As a result of this one program, I think some people who are going to specialize in this, obviously to market it online or just drive SEO traffic around it or, you know, ads around it are going to obviously just catapult. So we'll start to introduce some more marketing strategies.

Starting point is 00:46:16 strategies for our folks around this one product. And thank you so much for being on the show today, Tan. We appreciate you. We appreciate the relationship. God bless you, your family, and I hope you hit every single one of those goals. Thank you so much. Thanks for having me. All right. Thanks, everybody.

Coffeez with Joe Shalaby - How Much Mortgage Can I Afford ft. Tan Karim | Coffeez for Closers with Joe Shalaby Ep. 18

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