Mortgage Matters Transcript
Dan: Good morning! June 23rd, 2012. I hope your Saturday morning is starting out well. You are listening to Mortgage Matters. Thank you for joining us today. I’m joined as usual by Mark Antonowski. We have a great show for you today. I’m very, very excited. Here in a few moments we’re going to be joined by Mark Speno who is a private money lender and probably the most knowledgeable guy I’ve known in the business. I’ve been doing it for 20 years and haven’t met a better private money lender and we’ll get into hearing from Mark in a little bit. Right now I’m really excited. We’re joined by Mark Speno. I met Mark about 10 years ago when he was down here from, I believe, Washington.
Mark S.: Yes, I did.
Dan: I met him at a mortgage industry event and right away hit it off with Mark and I’m very, very grateful that Mark was able to join us today. Mark, tell us a little bit about you, where you work, what your history in the business and fill us in on what you’re doing.
Mark S.: Well, first of all, thanks for having me. Yeah. I’ve been in the private money lending business for little more than 20 years. I found my way down to Arizona about 10 years ago and it’s all I do and I’ve found my way into this business 20 years ago. I fell in love with it. Took a trip down to Arizona on a workout property we were dealing with.
Dan: It was raining up in Seattle that day and it was sunny down here and you golfed and you said I’m moving down to Arizona.
Mark S.: Absolutely! It was in December. I was driving with my arm out the window and I called my wife and I said we’re coming down to Arizona. Never looked back.
Dan: Never looked back and where are you currently now?
Mark S.: I’m an investor and I am a licensed loan originator with Kenwood Mortgage Investments in Scottsdale.
Dan: And you’ve been with Kenwood for a few years now?
Mark S.: Two years now. I officially retired about four years ago and as the joke goes
Dan: That didn’t last long!
Mark S.: I couldn’t be my wife’s best girlfriend during the day. So my wife said get out and get back to work and start making more real estate investments. And so, we’re out there actively pursuing real estate loans, private money loans, and we do first position loans. Kenwood Mortgage funds loans and loan amounts from $30,000 to 5 million dollars on residential and commercial property. And we’re active… We’re active in this market. We do quite a bit of advertising. Kenwood Mortgage is owned by Randy and Rose Persson. They’ve had that company for about 20 years now and it’s been a good fit. We’re good friends, we think the same way. We go out and we look at every property that we make a loan on and we just have a meeting of the minds. It’s been a good fit for all of us.
Dan: Now you say private money. Folks out there listening today may say okay, I’m interested in hard money or I may need a hard money loan. What’s… is there a difference between what many people call hard money and I’m not talking about quarters and nickels and dimes, but is there a difference between hard money and private money? Are those really one in the same?
Mark S.: That’s a good question. If you call me up and say I’ve got a private money loan or a hard money loan, we all know we’re talking about the same thing. The industry has adopted the term hard money. Generally it means the loan is secured against the hard asset or the real estate. I don’t use that term though when I’m out talking with borrowers just because borrowers may not be familiar with term and if they hear the term hard money for the first time, sometimes they conjure up different ideas in their mind. Maybe they think we’re talking about a product that’s got them between a rock and a hard place.
Dan: And a lot of people are feeling like they’re between a rock and a hard place right now! We’ll get into that in a moment.
Mark S.: Yeah, they are and so I use the term private money when I’m out and we’re advertising to the public. But, the fact is, if you call me and say it’s hard money, I’m not going to correct you. We all know that we are talking about the same thing. But, the terms are generally not hard. Our terms are actually quite a bit softer than some of the other hard money in town. So we’re… that’s what we do.
Dan: Again, you’re listening to Mortgage Matters. This is Dan Huss with Antonowski. We’re joined by Mark Speno on 960 the Patriot and we’re talking this morning about private money with Mark Speno from Kenwood Mortgage Investments. A lot of people, if you’re out there sitting right now and thinking okay, why would I maybe need Kenwood Mortgage or Mark Speno? No, you know again every week and Mark you probably get these phone calls too. Mark Antonowski. Customers are calling me up and saying okay, I just six months ago… I had a foreclosure six months ago. I had a bankruptcy 6 months ago. I had a short sale and I’ve been going to ABC mortgage and every mortgage company. I can find to try and get a loan and everyone’s telling me I can’t. I’ve got to wait three years or I’ve got to wait five years or I’ve got to, you know, get my situation cleared up and I have no hope that I’m ever going to be able to buy, but I’ve got some money over here sitting here that I can invest in. There’s got to be someone who’s willing to lend me some money.
Mark A.: Well, yeah, I mean what Mark Speno brings to the marketplace is just very exciting because a lot of times people are in between they was a gap in employment, they’re starting a new job. It might be they’re self employed. The day of the stated income loan is gone. They’ve got some assets and so they want an asset loan and for them to be able to go out and buy today and we’ve seen over 25 percent appreciation just the last six months on the average in the area. So I mean to go and rent right now as opposed to buying, you know, is not in my opinion, it’s not the right thing to do to sit on the sideline. And what Mark Speno allows you to do is to put down 20 or 30% have a 12 percent loan. You’d say well, why would anyone anybody want to do that? Because it’s about the same price as rent. If you look at buying a $200,000 home and putting 20% down and have a $160,000 mortgage, you know, 12% is like 1% of that. That’s $1,600 and you know that house probably rents for about $1,600 a month. So, basically why rent when you can own. Am I right, Mark?
Mark S.: It’s absolutely right. In fact, if a borrower has sticker shock, Number one they’re probably not ready for us.
Mark A.: Right?
Mark S.: But when they are investing in a property and they understand the terms they put the pencil to the paper and they say you know what? The opportunity outweighs the cost of funds. And so in that sense, by the time they’re using our funds, the money is actually cheap by comparison to the amount of money. They’re making we’re in a very competitive environment. I think a year ago the properties available in the market where the inventory is about 50,000 properties now, we’re down to about 12,000. I mean the market is tightening.
Mark A.: 10,066 as of this morning.
Mark S.: To be exact and you’re good at that! So, it’s getting tighter every day. And so right now, we’re in an environment where you either have to have cash to buy a property or you need a lender that’s willing to act as though it’s as good as cash. And if you’re a buyer and you’re pre-qualified for a conventional loan and you need about 30 to 45 days of finish that process and you’re making an offer on the property, but meanwhile, there are four people climbing over you with all-cash offers who’s a seller going to.
Mark A.: Exactly.
Mark S.: And so in that case if you’ve got a close by Friday in a competitive environment, no matter how good of a mortgage broker you are if you’re working with Dan. Dan is as good as anybody in the business I’ve ever met, but still thanks have still certain restrictions and dots they have to connect in order to make things happen.
Mark A.: Yep.
Mark S.: And if you got to pull the fuse by by Friday, often you’ve got to have either cash or you need a private money lender like Kenwood mortgage back
Mark A.: Yep.
Mark A.: Well, you know, it’s real estate 101 if R if the real estate market conservatively right now. Is it going up one to two percent? So again that 200,000 our home is going up by two to four thousand dollars a month right now. So it’s leverage and you’ve put 20% down and you know, look at the return of getting on your money, but not only that but in two years when you can refinance out of that 12 percent loan that house might be worth 250 260. And now you’ve got a $1200 a month payment. So I think you do a tremendous service to the real estate community, Mark.
Mark S.: Well, thank you and that buyer’s could look back a year from now having made a lot of money.
Dan: Very good. We are joined again by Kenwood Mortgage Investor Mark Speno joining us at Mortgage Matters today this morning and we’ll be right back with some more specifics about how you may be able to benefit from the products that Mark Speno offers. Again, you are listening to Mortgage Matters Dan Huss Mark Antonowski. We’ll be right back.
Dan: Welcome back. You are listening to Mortgage Matters Dan Huss here with Mark Antonowski on this bright, beautiful Saturday morning. Thank you for joining us. We are coming to you on 960 and excited about how we can help you today. We’re joined again by Mark Speno with Kenwood Mortgage. Thanks again for joining us. You know, I think when it comes to private money hard money a lot of people think well, that’s an Investor loan. Somebody who’s looking to flip a property or you know, being in a property for a short time, but the markets changing and there’s buyers out there that are looking maybe for their primary home and they’ve got some money saved up and they just can’t qualify the more conventional way of going. Do you work with, you know, both Investors and those Buyers out there who are looking for a primary residence as well.
Mark S.: Absolutely. We do a fair mix of both. The investor properties the lot of properties going to foreclosure especially in the last year that’s been very active and that’s now that it started to settle down a little bit. There’s less inventory. The investors aren’t having as much success as they were a year ago with buying properties at the auction. So now the focus has turned to Consumers people who want to buy a home they want to get they had a foreclosure or short sale in the last three years. They can’t qualify for conventional money, but they’ve been saving their money and they’ve got quite a bit to put down and so if they’re putting down quite a bit of money. Again, we’re making the loan primarily based upon the amount of collateral we have, the loan-to-value. We’re looking for a more conservative loan-to-value, but we also get a credit report and a loan application because we want to know who are doing business with and a lot of times the only thing wrong with your credit might have been the Foreclosure they had in the last few years. Meanwhile, they take responsibility for their lives. They pay their bills and they’re otherwise a good risk and we want to do business with those people.
Dan: So, you say life happens.
Mark S.: Life happens and someone calls and tells me they’re sad story about how they lost the home and my comment to them is, well welcome to the human race. Let’s get you back in the house. Right?
Dan: And so what is that process of someone’s looking I know, you know, I refer a lot of business to you as someone may come to me that. You know would think that they would qualify and we just recently had a example of this. I had a customer who came to me. I’ve done many loans for them in the past 800 credit scores. We got all his documentation, submitted it for underwriting and low and behold, he had a commercial short sale that showed up on his tax return that I missed and got caught in underwriting and he needed to close really quickly and he wanted this house and I said well, you can talk to Mark see what he can do for you and then I can refinance you six months down the road and once he was able to file this year’s tax return that didn’t show that loss from the short sale. We were able to get them approved and we’re actually in the process of finishing up that loan and I think we’ll be paying you guys off next week. So you get a lot of business for me. But what is the process for someone who is looking for a private money loan in turn process terms, etc.?
Mark S.: Well, ideally that person’s already gone out and find a home. They want to buy right they already know they’ve got the cash down. They’ve been talking with a mortgage professional mortgage broker or mortgage banker and they have the idea that they’re gonna have to come up with 20 or 30% down.
Dan: And is that where it kind of starts your first conversation? Let’s see what you have for the do you have the down payment?
Mark S.: Yes. Usually when a phone call comes in. My first question is have you identified a property? Do you have an executed purchase contract? Executed by both sides.
Dan: That’s where Antonowski comes in
Mark S.: Hopefully that’s the case because now it tells me as I start to dive into this transaction. I’m not wasting my time. We’ve got a willing buyer and a willing seller you’ve got a property and they’ve agreed upon a price. All they need is money to glue the deal together, right? And so my next question is have you filled out a loan application? Often times I’ve already been to a bank and gone through the approval process and they can even already provide me with a loan application. They’ve already had filled out saves me a lot of time if they haven’t done that. We’ve got a website. They can go on our website. They can go into our loan. Nation they can fill it out online click submit it automatically loads into our system and and we begin the process
Dan: And that website by the way is kenwoodmortgage.com and you can go on there and apply as well. You can also give me a call or Mark Antonowski ask you a call and we can put you in touch with Mark. Is there red tape involved in the process?
Mark S.: Well, that was my next step. One of the nice things about working with a private lender like Kenwood Mortgage is you’re dealing with the Investor. We are the source of the capital. So. if we’re going to approve a loan, we don’t approve a loan subject to getting out our database or rolodex and going out and trying to find an Investor for it. It’s all done in-house. So, we’re not gathering a lot of unnecessary information for somebody we haven’t even met yet. So, we keep our files very thin. There’s some information by law we have to get and so we do have to put together a file. We get a preliminary title report. I want a loan application we get a credit report and we’ll get up some kind of documentation of income but we keep the process very streamlined very fast and usually our loans close inside of a week. Usually less than two weeks start to finish.
Dan: When you say credit report. It’s probably someone out there listening today at saying man that applies to me but my credit. You know man, it’s always been perfect. But last year was tough and my credit scores, you know now 580, but if you look at my credit, you’ll see that I’ve paid my bills in the past and credits really really important to me and I’m hurting that my credit isn’t my credit score is an 800 like it’s always been. I don’t want the word credit report to scare somebody away from potentially calling you or calling Mark or calling myself in regards to hey, I want to look into potentially getting a private money loan. Expand more again on the credit piece.
Mark S.: Well, we’re all used to talk about FICO score, especially banks. They want to know what the FICO score is. Dan you and I’ve been in this business long enough. You can look at a credit report and I can tell you without looking at the FICO score if they take responsibility for their life. I can look past a foreclosure. I can look past a medical bankruptcy. We can look past some things that otherwise Banks would hold a crucifix up to. I can look at a credit report and I can say is this loan could be a success? So now on a FICO score, generally if you get below 500, I’m probably going to come to the same conclusion of the FICO score, can’t do. But there are some things that just fall just outside of the bank guidelines that you and I can and make a subjective analysis of and put our experience to the to the table and and still do those loans.
Mark A.: Hey Mark, how many… Mark Antonowski here. How many times you get a phone call from a broker referring a client or just a client who knows about you that is currently in foreclosure or currently selling their house short doing a short sale and you’re going to prepare them for their next loan. So they don’t have to rent does that happen frequently?
Mark S.: Not too often. Usually they’ve already completed a short sale or the foreclosure process.
Mark A: But it’s not impossible that somebody listening to this our voices today, has the wherewithall, perhaps gift from a family member and they’d rather go out and buy their rent and yet they’re involved with a short sale or foreclosure. Is that a scenario that you can do?
Mark S.: Absolutely and you know, I want to encourage people if you’re thinking about borrowing private money or you’ve been disqualified from borrowing conventional money pick the phone and call us. I don’t want people to put together a great big thick hairy loan file before they call me as it’s always a conversation and and usually within within. One minute of just a little bit of dialogue with a bar. I can tell you on the phone. If it’s something we can move forward on or if it’s something we shouldn’t waste our time on.
Dan: Absolutely. Mark Speno with Kenwood Mortgage. Mark has graciously volunteered to stay again with us through the next segment. We’ll get into his contact information. So get your pen ready pen and paper ready and we’ll give you marks contact information a little bit. We’ll come back with some more specifics in terms of rates, etc and continue with that process in regards to getting private money alone. Again, this is Mortgage Matters on 960 the Patriot. We will be right back.
Dan: Welcome back to mortgage matters. Hope your morning is going great Dan Huss here joined by Mark Antonowski and we’re back with Mark Speno with Kenwood Mortgage. During the break Mark, you had some interesting things that you were asking Mr. Speno.
Mark A.: Well, yeah, you know I was talking to him about luxury properties because a lot of times the best the best deals in this market right now are probably your luxury million-dollar properties and I was asking Mark off the air if he leant on the higher end knowing that that’s where you find a lot of self-employed people people that just have you know, you know income from investments that so Mark tell me a little bit about the upper end. Are you doing loans for luxury home buyers?
Mark S.: Oh, we love to do the the jumbo loans. We just did a loan to the few weeks ago in a gentleman that had a strategic default in his past. He couldn’t qualify for conventional money, but he had have to put down on a million dollar purchase and we did that loan and to make it even better. He said by the way, I want to be out from underneath this thing in five years. I want a full five year amortization. So he’s making some big payments but it’s a it turned out to be a great transaction for all of us.
Dan: And what’s so interesting about that is you know, that’s one of the or the hard loans for us in the institutional lending to do. Because I have so many clients who are past clients and investors, whatever who are self-employed. They may have a couple million dollars in the bank, but they’re pretty Savvy with their tax returns and their tax returns show a loss and they’ve got two million dollars in the bank and I can’t get them alone. We know they would make the payments but I can’t get them alone because of that.
Mark S.: Well the absence of traditional financing for Jumbo properties explains why that market is really depressed. You can get some great deals on luxury properties right now.
Mark A.: So what about land if I bring a client that’s got you know spots of fat because I think you know with the market being that it is a lot of people are focusing on land to build custom homes. Are you doing any lending on short-term and land?
Mark S.: We’ll do some land, but keep in mind that land doesn’t cash flow. So as our to run it out. Sorry to run it out in as a lender. We ask ourselves what what if what if something bad happened to this good person and we ended up taking this property back the idea that is is not going to cash flow. So we’re going to be ultimately conservative on. Probably 30 to 40 percent loan to value as opposed to 70 to 80% on a single family residence. And we want to see the borrower really cash flow.
Dan: Let’s get back into terms a little bit back to the luxury market and the jumbo loans you and you just mentioned, you know this last long you did you’d done a five-year term. Someone’s borrowing money. What are we looking at in terms of interest rates, terms, interest only, are we paying amortization, you know payments. What are some of the terms that were looking at?
Mark S.: All those come in come into play in a single lone? Let’s see if I can if I can cover that here that the short answer is the pricing of the of the loan interest rate the interest rate that the investor or the lender gets on the loan in private money World those those amounts seem to be between 10% as high as 18% on some of the super hard money in town. The number seems to fall around 12% will do between 10 and 13, but the average seems to follow around 12 and then you going to charge them origination fees. We’re going to charge anywhere from two to four points in an origination fee on that transaction. If it’s an investor property, Investors typically want to buy so they can flip, they want a short-term loan. They want to keep the payments as low as possible. So the typically they’re asking for an interest only loan. Yep, and we’re willing to do that. All of our loans have no prepayment. So an escalator yesterday, it was could be an owner occupied property now now comes in the Dodd-Frank Act. Yes, which is it. No one’s friend including the consumer or the banking industry, but the Dodd-Frank has been very restrictive on all lending and it also includes private lenders and they’re certain disclosures and certain loan terms. We have to give so the loan has to be at least a five-year term if its owner occupied. And there has to be some form of amortization schedule. In other words, the federal government says if the bars are making payments, you have to give them the opportunity to make principal reductions in an amortization schedule does that so, you know,
Mark A.: It’s back to my first example of a $200,000 home, but now somebody wants to buy the million-dollar home. It just did a strategic default on a two million dollar loan. That’s why the house it’s only going to be worth maybe a million and a half in 10 years, a strategic default. They come to you with $500,000 that million dollar home would rent again for about. At 12 percent one percent a month that’s about a $5,000five thousand dollar a month payment. They’re paying the same as rent, but now they control an asset. It’s it makes and what are they going to get on there with their five hundred thousand dollars in the bank? You know one percent. So it makes total sense for somebody looking to buy luxury to come to you and do a deal.
Mark S.: Well, they control it asset this also could begin appreciating the day they buy it.
Mark A.: Leveraged. Sure.
Dan: Absolutely. Well Mark Speno with Kenwood mortgage thanks for joining us today. Mark, I think we go on for hours and hours in regards to this topic just because there’s so many people out there again that are just don’t think that they are able to buy, they have some money and there’s an answer for them. I know we didn’t even touch the surface of the questions or the information or the knowledge that you can bring. So thanks for joining us today. I want to give everyone Mark Speno’s contact information again. Mark Speno Kenwood Mortgage Investments. Telephone number 480-788-8800. You can also go to kenwoodmortgage.com and reach Mark. So, any questions please give Mark a call. If you didn’t get that contact us any time during the week off air and we can put you in touch with Mark Speno.
Mark S.: Thank you very much. Been a lot of fun.
Dan: You’re listening to Mortgage Matters.