Unlock Wealth: Leveraging Home Equity for Financial Success

[Mike Mills]
Well, howdy howdy to all my real estate agents, my lenders, my real estate investors and heck right now even to all you Mavs and Stars fans in North Texas right now as they are both in the playoffs. The Mavs tied up the series last night one game a piece with the Clippers and the Stars unfortunately are down 2-0 against the Golden Knights which is an odd name but Vegas is odd so oh well that's what it is. But you aren't here to hear about basketball and hockey.

Hopefully you have tuned in to the Texas Real Estate and Finance Podcast and I'm your host Mike Mills, a North Texas mortgage banker with Geneva Financial and I do this podcast because I like talking a lot but I like doing mortgages more. So if you know someone that needs help getting through that tough loan or getting that tough loan across the finish line then give me a shout. My team and I are here to help and these days we have lots of time to get some loans done for you so give us a shout if we can help you out.

Now today's episode we are talking all about home equity and investing. Did you know that the average mortgage having homeowner right now holds $299,000 in equity on average and the vast majority of those folks also have a mortgage rate under 4%. So refinancing that first mortgage and getting a rate that's in the sevens is not exactly high on the list of things to do.

But as a real estate professional your job is to know everything there is to know about all things real estate and when you're looking for reasons to engage with your past clients or market to your database the best way to do that is to try to help them solve a problem. And the problem right now is that they have a ton of money they can't access and desire to pay off some big credit cards maybe or even invest in more real estate because right now there are more and more homes popping up as listings that could be had for better and better prices. So how can you help them solve this problem?

Well my guest today is here to tell us how to do just that and it isn't just your standard home equity loan that many of you are thinking about. There are some new innovative ways to tap the equity that you may have never even heard of until today that is. And oh by the way if today's episode helps you find a new way to help your customers and just or you just love hearing the sound of my voice surely there's someone out there that likes that right?

Probably not but I can dream. But either way please like, subscribe, comment, share, etc. And I'll do you a favor.

If you leave me a review on our website I will personally send you a Texas Real Estate and Finance podcast t-shirt so you can be the coolest kid on your block. You probably won't want to wear it around town but it is really comfortable lounging around the house t-shirt so drop me a review and I will drop you some merch. Now today my guest is a tech developer, a podcast host and he serves on the Massachusetts Mortgage Bankers Association Technology Committee.

He isn't a Texan and he talks kind of funny but he knows his stuff and he has some insight on some great new products and ideas that are out there when it comes to tapping home equity. And he's here to share it with all of us. We'll probably get into the market a little bit as well and let you know what's in store for the upcoming summer real estate world.

So fresh from the car and the parking lot please welcome Michael Keller to the podcast. Mike how are you doing buddy?

[Mike Kelleher]
I'm doing great. Thank you for having me. I just got off of podcast and that's because I do travel around the country over the last decade or so and I've been in Texas many times including the bankers association events.

So it's very important to be on the ground to hear different opportunities and this one I wanted to tell you about is one that is on my radar now. I usually have birdies and different indicators of what's coming to the market and this is one that is going to come. It's going to be a storm in my opinion and I want to be one of the people that rides the wave and hopefully your listeners do as well.

[Mike Mills]
Yeah I'm really interested to hear about it. I want to get to your back story a little bit on how you got into this world and into this mortgage world. Now you do a podcast yourself it's called More Talk and MO with the big MO on the front of it there which is geared more towards mortgage originators and lending and my show is a little bit more towards agents and real estate in general.

So I want to get into that but I do want to start with and I apologize for my Boston accent. I had to poke a little fun at you there but.

[Mike Kelleher]
No we were down in San Antonio presenting to a mortgage company and in the middle of the presentation I overheard two women say they sound just like Ben Affleck and Matt Damon. They didn't say look like them they said sound like them right.

[Mike Mills]
So you take it away right. So so tell me a little bit about what you're hearing out there because you are pretty dialed into the mortgage banker side of things and before new products kind of hit the market and get out there to the general public you know guys like you get a little bit of an inside track on some of this stuff. So so tell me what you hear and obviously you know Housing Wire just did a story recently about Freddie Mac kind of looking at dipping their toe into the home equity second lien product market a little bit more which we'll get into as well.

But I want to hear what you're hearing out there with some of the new technology when it comes to lending.

[Mike Kelleher]
Yeah the big piece is I work for myself so I'm not caught up in one product and so I'm talking to a lot of leaders sea level at large IMB's banks credit unions and that allows me to get information from people just by talking. And I've been hearing just like the second mortgage and HELOC market has been getting liquidity for a while now and you'll start to see it hit them and it's slow adoption down to loan officers because we could talk about it but it just doesn't pay enough to really get that push it should. Yeah.

And there's a new product out there HEI loans and H E I yeah they're like okay so home equity instruments and technically a real estate agent or a lender could get involved in it. But for lenders it the take is you should go first because maybe you can change your name you know you could be a real estate finance company instead of a mortgage company because right now this 13 trillion dollars of available debt out there to be had among 800,000 loan officers so it's that's mostly the purchase market and refinances and the amount of people that are going to refinance is extremely low I think 70% of people are below 4%.

[Mike Mills]
Yeah.

[Mike Kelleher]
Now there's 26 million dollars sorry 26 trillion dollars of capital equity out there and there's very little home finance companies should be mortgage but they don't go into the equity space and when you think about it before the crisis the home equity used to be used to solve problems and create opportunities now obviously it was abused and regulators came out there and rather than fixing it and massaging it they did a lot in their power to really close end it.

Yeah. An HEI loan allows you to get instantly cash out of your equity and the investor becomes almost like a JV and so they they get they give you 50% of the equity you want to have in present and future value and then you don't have any payments on it. It doesn't show up on your credit report.

It doesn't count against DTI and it really is a way to take some I think money off the table because if the value goes down you don't owe anything back to the investor but they are going to share in a split which I can explain more going up. Yeah. But I think it just provides a lot of opportunity not just to actually make money but have conversations that are not being had with homeowners.

Yes. They have all this equity and they're not talking about it because you don't have any vehicles talk about it and it's a boring topic otherwise. So what are they going to talk about their neighbor with it right it's private.

So I think it's a it's an unbelievable chance to open up opportunities and we can get more into that.

[Mike Mills]
So so what you're saying is that you can. So these are private investors I'm assuming right at least right now that will allow you to tap into your equity but not have a payment and it doesn't reflect on credit. Now I have heard obviously there are you know any time you do from from what I understand any time you do any type of asset loan because that's essentially what we're talking about is we're talking about an asset loan anytime you do a leveraged asset loan it doesn't really show up on credit.

This happens much more in a commercial environment than it does on in the private sector. But but when you're doing those asset loans there's no credit because it's based off the asset. This is how you know lending is done on like apartment complexes right.

If the apartment complex can generate X amount of revenue it's something that the loan is based off of that it's not necessarily based off of any kind of you know the value of it per se because the value is the cash flow of how it comes through. So so what you're saying is is that let's say somebody has a hundred thousand dollars in equity in their property they can tap 50 $50,000 of that and then they wouldn't have a payment. So what's what's the structure of repayment is it just interest like how does that work.

[Mike Kelleher]
So if you were to borrow $50,000 you owe back in say 10 years $100,000 but the blended rate comes out to almost current first market mortgage when you take into effect compounding interest and so you don't have any payments for the next 10 years. So there's a lot of opportunity you could take the money now and build an ADU unit if you're in California or Massachusetts and actually make income off of it.

[Mike Mills]
You could work on anybody real quick anybody that doesn't know what ADU is because that's a newer topic that's a it's additional dwelling unit inside which is becoming actually a big segment of the of the market. You're seeing a lot of those pop up everywhere.

[Mike Kelleher]
Yeah and I do a lot of advocating I am it's it's the fight against the not in my backyard because obviously you don't want your neighbor putting a you know all of a sudden a rental unit in the backyard where there was a swing set but the reality is with the way inventory is and affordable housing they are coming they are being pushed and this is about taking advantage of the times these loans need education. The loan officers need to be able to educate past that sticker sticker shock because they do make sense and so then the investor would get 80 percent of the up sorry 20 percent of the upside and you would get 80 percent.

So in a growing market or in an appreciation of a home you're both participating and that's how you have to look at it. You can't have that mindset of oh I could have got 100 but you know 100 of 0 0. So they are taking a risk there and again it's for opportunities and problem solving in my opinion.

Yeah. And I'm talking about a bigger picture. These are coming going to be rated by the rating agencies.

They're going to get liquidation. They exist today but they're run by people that know mortgage and they don't know real estate and it's more of a real estate. I think that's what we're trying to say.

Lenders have a chance to be home finance advisors and this is advice around home finance. They exist today. They're not run by mortgage providers and the mortgage providers underwrite everything that comes in and so they don't they're not doing it correctly.

It should be a lender or a loan officer should know which which one should be doing it which one shouldn't be doing it. So when it comes in it makes a lot of sense and they're able to use it for which we can talk about. But you guys can think of it too.

There's a lot of sales opportunities and I think creating a referral ethos around it that is not been used yet. You know you could use it with trusts the ability to share wealth among your family the ability to work with financial advisors and use that equity for better purposes. They can't they can't advise people to take equity out of their home but they can advise what to do once you get the cash so you can work with them on different options as you go and there are there will be some catches right that you recall them but with the proper education this makes sense in a growing environment.

And that's what I'm trying to help lenders get involved in early so that their loan officers can be part of that wave.

[Mike Mills]
Yeah so okay so this makes sense and so what you're saying is is that you are basically sharing future appreciation in your home with an investor. So the idea is that your house now this let's say this product had existed or was is mainstream let's say it that way if it was mainstream say back in 2019 and people are using this and since 2019 there's been a you know close to 40% appreciation in a lot of markets right now so you're sharing in the appreciation of the house with the investor so you don't get to keep all of it but you you sharing it with with somebody else but you get access to the cash without having to tap your first deck your first line because if you're sitting on a 3% mortgage right now you're not exactly looking to refinance that into seven and a half to try to get equity out and even on second liens with helix and whatnot those are nine and 10% you know in the market right now and a lot of banks are actually tightening down on even offering those. Now I do think that'll expand a little bit as as as the market you know once the market slows down which it really is right now especially with you know today GDP numbers came out they were below well below expectations actually but within that there were some higher than expected you know quarterly PCE numbers so inflation was still running a little bit hot so you saw pretty much every market right now except for gold is tanking you know the the the bond markets going down the stock markets going down even some even the crypto markets you know going down the only thing that's going up right now is gold so so as things get tighter you do start to see things loosening up because people are looking to take more risk to bring in more revenue so I think I do think on the second liens with the helix you're going to get a little bit more flexibility down the road maybe even you know on investment properties which was limited for a long time because people just didn't have to do it but what what this is essentially is it's like a joint venture like you said with an investor on your home which is you know again can't have its own downsides it's not perfect for every single situation but it's another product it's another type of innovative way to tap into equity that didn't that wasn't really previous there

[Mike Kelleher]
before previously there before yeah and I'll talk to you about second mortgages I think second mortgages should be used more and more the problem is first and this is the same I'm almost a futurist by talking to enough people and putting together the information in a way that makes sense to me and in the second lien position I had a lot of talks with certain servicers subservicers I saw this market coming but the reason well didn't get second mortgages wasn't because it didn't make sense with that equity it was because there was not correspondent availability so what that means for the average listener is it had to be brokered out by the mortgage companies and their their manufacturing plants in some ways that's how they're able to get you better pricing and they don't want to do deals that they don't build in-house and so that was about two years ago and the domino started falling companies like spring EQ went out there and we were able to get a put together a bunch of second mortgages and sell it on Wall Street and then it followed with case and fifth thirds got involved and then there was a company called Georgia banking only do correspondent with the people that use them for other services to make it easy warehouse and banking but once that became liquid on Wall Street they said you know what everybody can have correspondent so now your mortgage loan officers have more access to seconds than they had before does it still pay enough no no it's better to use their time to go find first mortgages if you take the law of numbers than to go to seconds so what does that mean they're not calling anybody under four percent right now when they could be calling them about the second finding out what their kids are up to finding out what the neighbors doing is anyone new in the neighborhood all of that activity and that's the 26 trillion dollars they're not talking to well these pay these vehicles pay and that's why I think they're gonna be a great lead they're also gonna be a great waterfall this piece is not about more lenient second mortgages becoming available to me I think it's about being able to pay more to the lender trickle down so the loan officer actually makes enough money it's worth their time and so I think you're gonna see a lot more people here about how second mortgages can help and why is Freddie Mac doing this which is assigned to everybody in the industry they any and for 70% of the loans they have and they own almost a lot of them will say in this country right yes they're under 4% and so if people aren't gonna touch it these are assets that means they're not fixing the gutter they're not they can't afford the $14,000 roof a great point is a lot of people that bought back when you were talking Mike they couldn't afford to buy their home today at the price it is today they could only afford their home at what they bought it for so they can't afford some of these renovate they can't afford renovations on a million-dollar home even though they're living in a million-dollar home because they bought it as a $400,000 home so I think by theory Freddie Mac Fannie Mae recognize this the refinance market in a whole is not what it's going to be they need to make it easier so people can take out money so that they can fix up these assets for the next 10-15 years because they essentially are on the hook I think that's why you're gonna see a lot more seconds and I think this is gonna be a great lead but also a great waterfall I don't mean to keep hogging the microphone but you have 76 million gig employees now like those didn't exist eight years ago Etsy uber right door dash all those people can't get second mortgages no if they own a home right these HEI loans there's no DTI it's just like you said it's equity they can get them they can then use them as vehicles to pass down generational wealth to improve it to pay off problems that they're having with inflation there's just more opportunity and they don't have payments along the way to figure out what they're going to do and I think loan officers at least right now even though it's more of a real estate vehicle right real estate licensing that's what we'd have to bring but I think loan offices are in a better position to explain this properly and that's what excites me and that's why I'm trying to get it to the lenders owners to say you have a real chance here you have the right people in place they have the right database you know all the LTVs of millions of people across all the ice and compass databases of the world you know what their DTI was when they took out their loan and you can assume with credit card debt it's a lot higher yep I think HEI loans for the ones that get involved early are going to make a lot of sense and I'm excited to just do what I do which is push things into the market like I did with the mobile app yeah well and I

[Mike Mills]
saw a thing to your point I saw Redfin actually just did a survey I believe I think it was Redfin where they said they asked you know I don't know how many people it was 20,000 30,000 homeowners could you afford your house do you think you could afford your house today if you had to buy it in the current market and it was something like 35 of them said no that they wouldn't be able to afford their home you know based on today's current rates and current prices and so you know that's where this whole lock-in effect comes into play which people talk about but I don't think they think it's just about interest rates which it is but it's not just about interest rates it's taking a house that I bought literally two or three years ago for $300,000 with a 3% mortgage and now having to sell that house and then trying to buy something even just the same you know equivalency that's now at $400,000 and now I'm having to pay seven and a half percent on that mortgage right and and people just they can't do that they don't want to do that there's there's you know the only ones that are moving at this point are people that absolutely have to job changes you know if you just look at the market as a whole the only you know the cash transactions are way up they're the highest they've been in quite some time at least as a share of the market I should say you see the jumbo market actually surprisingly is is very high on homes over a million dollars because again these are cash purchases these are people with lots of money that did really really well more so than the average American so these are the things that are moving right now but the the 200, 300, 400,000 homes especially pre-existing homes are just you know they're in the toilet they're just not moving because people can't afford to do it and when you can't afford to do that then what you're going to be looking to do is you're going to be looking to make upgrades to the property that you currently live in because you can't move you got to make those changes and anybody listening that just so you know I try to keep things on my on a fifth grade level because that's kind of where my brain is to some extent as well but whenever you're looking at a mortgage bank whether it be a company like Quicken or like Geneva Financial which is what I we're an independent mortgage bank we we specialize in primary mortgages and the reason for that is because these are mortgages that go to the GSEs the Fannie Mae Freddie Mac they go to they're insured by HUD they're they're sold on the secondary market so there is more revenue inside those because they're larger loans there's a bigger market for them there's more investors that are willing to purchase them so you can make more money on those loans as a company than you can on these second liens that are 30, 40, 50, 60,000 dollars there's not as much revenue in there so as a general rule of thumb most companies if you know you're obviously you're trying to make a profit because you need to pay your employees and you know this is this is how all this stuff works so you're going to gear everything towards those primary mortgages much more so than the secondary ones because there's just less of a less profitability but they are a very good tool and and at times like with times like right now when everybody's looking for a reason to contact your database to reach out to people to say hey look you know especially for realtors look I'm your real estate expert I know everything there is to know about roofing you want to talk about insurance premiums and where those are I'm going to tell you about that I'm going to send you emails I'm going to you know update you on on how premiums are going through the roof no pun intended I'm going to tell you about how you know how much equity you have in your home what it's worth what you could do with that equity the the different vehicles in which you could you could use it and as a realtor you may not get a sale or a buy out of that but the idea is that you have to contact as many people as you can and get in front of them as often as you can because you want to get in touch with their network you want to talk to their family members and their friends and maybe that person that bought a whole home from you three years ago isn't in a place to move but their cousin that has been renting for their entire life and is sick of it and pissed off at their landlord because they just raised the rent on them again maybe they are looking to buy and they need strategies to be able to do that so that's the idea is that whether or not somebody could actually use this tool and it's practical for someone because I think that's where a lot of people go to a place well yeah I mean I could sell that to my uncle sally but she's she's not going to want to do that it doesn't make any sense it doesn't matter that she wants to do it or not it's just a it's a key to the front door it's a way for you to communicate with someone without trying to reach out to him go hey you want to buy hey you want to buy hey you want to sell hey you want to sell it's just another way to stay in front I think that's the power of these tools is that right now in the market there's going to be different products and there's going to be different things that pop up that are going to help homeowners solve problems like like I said in the very beginning we're trying to solve problems for homeowners that are dealing with a lot of debt that are dealing with you know I think whether people realize it or not because the job numbers are in my opinion kind of BS you know there's a lot of people losing their jobs right now there's people that lost jobs that are having a hard time finding jobs and so there's a lot of things that you can do to kind of help solve issues and I think products like these are going to play a huge role in helping all real estate professionals contact their people and market to them a little better yeah and you can buy a new home with it

[Mike Kelleher]
because it doesn't count against your DTI yes in the future because it's not on your credit report there's no it's not like you're hiding it there is no monthly payment yeah so you can use the money to go buy a new home while you're figuring out your family and I go advocate all the time in DC on behalf of mortgage bankers I am the biggest believer of generational wealth is built through owning real estate and you could take money out of house A use it to go buy a better fit house B and the real estate agent would get the transaction and eventually you probably have to make a move on your your home on house A over the next 10 years is usually some maturity here 15 and so that could be another transaction for the real estate agent who could be in that referral ethos and I'll point out one other sort of piece that we don't talk about in this industry is a lot of the interest on 30-year fix are in the first earlier the more earlier you are in your mortgage the more interest you're paying and as you that's just a normal amortization schedule so if you can do one of these loans so you're staying in your loan longer you're actually have more months of paying more principal before you go back to the 30-year fixed again and start all over so I think this is selling math and it the math either makes sense for some people or it doesn't for others I'm at the front of this because I know it's gonna get liquidity and when it gets liquidity that means there's going to be a lot of incentive to go out and sell it and I think the right people to sell it are loan officers because it one that's what people used to do they used to use their equity to solve problems and create opportunities you talked about losing a job that's a problem yeah we got scared of it because during the crisis people would use it to pay off their jet ski and then they would go get buy another jet ski right and we as loan officers said oh that wasn't what we when we drew the T they came in on the left side and we showed you how we were gonna fix it and then you went out now we feel like we advised you into the wrong area but you made the right math decision they they were the ones that chose to go out and get another jet ski I don't know why a loan officer or a lender and I was one of those loan officers back then I don't know why we keep punishing ourselves and not allowing us to work with that 26 trillion dollars of equity because we're afraid that my grown-up uncle can't make a decision not to go out and get another jet ski it was different times I think people make more sound decisions and you should have there's more opportunity with technology to build a better referral ethos system to make sure they're using the money correctly but self-employed people like myself gig economy workers we are trapped with our equity and it's vehicles like this that help the 76 million alone let alone somebody with a w-2 and wants to actually has a creative idea or has

[Mike Mills]
a leaky roof that could use this as well yeah well into you know we say this in the industry a lot because I mean it's just it's true but it gets cliched and it gets overused where you know I joke or not really joke it's serious I anytime someone asked me is is it you know when's the best time for me to buy a house I always say yesterday yesterday was the best time for you to buy a house and the reason I say that is because if you look at just any historical chart of home values over the last since the existence of time okay real estate does nothing but go up okay there are periods of time where it will take small dips but even back we had the worst financial crisis all related to housing that occurred back in 2008 the market fell about 20% maybe across the board I mean in Texas we really didn't even feel it that much might have maybe 30% in certain areas but it wasn't very long before it was right back up and you know the 180 or $200,000 house back then is now $450,000 today so the it continues to go up in and in the you know we've talked about this a little bit before you know I wear a little tinfoil hats all the time and my personal belief is that there is a somewhat concerted effort by those in that those that have extreme amounts of wealth to try to make home ownership as difficult and expensive as possible because you know there's the the national GDP housing makes up 30 like 30% of our national GDP all things related to housing so there's just a ton of money and it's one of the largest expenses that anybody has in their daily you know in their monthly household budget so if a company like BlackRock can get in and have you pay them your $2,000 a month or $2,500 a month on an asset that they own that continues to appreciate and generates cash flow on a regular basis then they're gonna do that and they're gonna do everything they can I mean I don't know if you've seen but the the build to rent market the the the large companies that are coming in and and paying for you know 500 homes to be built in San Antonio that will never ever hit the market for purchase that are only gonna be for rent that market is up like 30% just or 30 or 40% just in the past couple of years so this is headed that direction so my point of that is is that when you have this much equity in a property that you can't get out of or can't that you can't use and you want to put it in a place that isn't the stock market that may crash if you pick the wrong thing or that isn't Bitcoin that may or may not go down depending on you know what what what the where the winds are blowing real estate is the place to put money that that generates cash flow and appreciates continuously over time which is why 95% of the millionaires in the United States have come from some level of real estate and where they've grown so that's the biggest benefit to those that have a good chunk of it is even at higher prices you know it's it's not getting cheaper at least not anytime soon than I can see what are your thoughts on that

[Mike Kelleher]
I love the quote the best time to plant a tree is 20 years ago which if you bought a house 20 years ago right and the second best time is today right so if you haven't that they'll quote like if you haven't done it 20 years ago get on it today I think it's the same I believe in generational wealth but I also see you know as we're getting older there is trusts which protect families because a lot more people are gonna have to go to assisted livings right because they're living and if you don't play that properly that money goes to everybody but your family it goes to the assisted living facility till you run out then you go to Medicaid it is reports of different probates if you don't write the proper will ending up with ability to get it over to the county very easily when it obviously shouldn't I think making sure you have all this equity and you're not protecting it I think is where my headset is at and if you can't afford attorney at $5,000 but you have $400,000 in equity that might be a great area for this you know home equity financial advisor type role a loan officer morphing into and getting the right advice on helping them protect the equity of the great mortgage they got him into but bottom line is what you're saying Mike the home is where you build wealth the home is where you keep wealth the 30-year fix is the greatest instrument in the world and every other country is jealous we have it and it's not just the loan officer can handle the math and the real estate agent like you just need to be protected on the buyer's side that's why I think this NARA thing is so important you need right buyers representation when you're looking around and I think this gives more opportunity to reach out to real estate agents and again I'm just predicting that it's going to be a market and whether it's tap an app push a button get it into your account or where I think it should be is the loan officers get ahead of it and make it their product yeah and that's all I'm saying and that's what I'm going to do is bring it to the market and then I will just be the voice of it but the real brains will be the ones working with the owners of the lenders to get it through and make sure there's money on Wall Street to buy it well and that's been the I don't

[Mike Mills]
think I like the average person doesn't realize that this this particular type of vehicle is not new it's a it's been around forever it's just new on the general consumer level to be able to get into their home because you know the the the big trick or whatever they talk about all the time is you know if you're Jeff Bezos right you go buy a you know four million dollar yacht right and you can you by the way you you take leverage on your stock in Amazon which is you know four million dollars he's got billions of dollars and then you leverage that stock to purchase with cash a four million dollar yacht and then you take out another loan on that four million dollar yacht to to live your life essentially and you have all of this debt per se right but none of it is being counted in your cash flow and you don't pay taxes on any of it so you never have to actually you know cash out anything or sell your stock in a lot of cases in order to get money to exist you're just moving debt around now I'm not saying that that's a good way to do it for the for the average person that doesn't have 30 billion dollars but I am saying that these tools have been in play for a long time when crypto popped up one of the things that happens you know I pay a lot of attention to Bitcoin and something that's my little side hobby that I like to to look at and you know that is a big player there if you if you have an account with Coinbase right and you buy whatever a hundred thousand dollars worth of Bitcoin if you want to go on there and borrow fifty thousand dollars against that hundred grand you can get it almost instantly like it happens within a few hours if you I don't do that myself but I know many people that do and you can leverage that asset to borrow money it doesn't show up on your credit there isn't a payment that's due on it it just if your asset falls to a certain level you have to sell off part of it in order to get it so there is you know downsides with the risk and the fluctuation in the market that's why Bitcoin is one of those where because they have such big swings you'll see big crashes because people over leverage themselves but but these tools have been in place that's my point is they've existed for a long time it's just now it's being brought to the general consumer whose biggest asset that they own is their home and with the amount of appreciation that's occurred and the amount of value that these homes now carry there is a tappable market to be able to get in and use that money because at the end of the day you know when I do mortgages for folks one of the things I always tell them is now it's a little different today because with rates as high as they are you know you got to work the math out a little bit and see if it makes sense but you know back when we were just at four percent even five percent I would say look put down the minimum or put down twenty percent because anything in between doesn't really move the needle you're saving like 65 bucks for every 10 grand but that four percent debt that you're paying on okay if you wanted to put two hundred thousand dollars down in your house because you wanted to save your two hundred dollar a month you know on your mortgage payment or 250 bucks a month but if you took that same two hundred thousand and stuck it into an index fund that makes on average you know four to six percent or five to seven percent or whatever the numbers are these days that's going to be a way and it compounds right over over 20 years that's going to be a way better use of those funds than sticking it into a house that's going to appreciate that you're just saving on your monthly debt so so it's just a matter of looking at it differently and this is how uber wealthy use their money and their assets and again it's not for everybody but it is certainly a tool that could be helpful

[Mike Kelleher]
for a lot of people that need relief you could buy the phoenix suns or the Cleveland Cavaliers under a stock leverage plan if you wanted yes i agree and i think when these start to hit the market there will be it'll be run by mortgage companies and therefore they'll be able to create their own programs so one i'm hearing is for the low and moderate income areas there'll be restrictions on this they'll they'll only lend it to pay off certain debts to help provide relief in this inflation market so i'm not saying this is just a new vehicle coming i believe this is something people are going to write product off of and write protections around and be a way that you know real estate agents can give advice to this is to protect some people from losing all that equity and they never touched it because they didn't know they could or they weren't able to and at the end they just assumed that i don't know it went to the right spot and it doesn't and so i i think it's just an incredible opportunity to make sure that the math can work and it might not just be mortgage math you might want to bring in referral partners that better explain what to do with that go put go put solar on your house and now you could get money from the the solar company right like i don't know if that makes sense or not but it will someday and if you're able to get information on how you should use your equity better i and you have all this equity that's another thing some of these programs the the average person didn't have that much equity to to go out there and do great opportunities now they do they just don't know how to access it or if it's worth the risk and that's where a lot of the education will be and that's where when a parent company signs up for a program like this the trickle down has to get to the loan officers if they're up for it how to explain it how to manage it how to educate people on it but i think all all ships rise with the tide if you're talking to your database again that has equity you'll be having more conversations those behaviors if you have the right technique will lead to more opportunity and then more opportunity will help you brand your reputation in the area as a problem solver or as an opportunity

[Mike Mills]
giver yeah yeah well and it's a great again going back to you know just using it as a tool to to get people into your database and talk i mean you know you want to talk about a great lead funnel i mean if you if you're creating information out there on social media making videos making guides on how to you know tap this equity get into it because there are millions of americans that are you know leveraged to the hilt on credit cards right now they're delinquent on their credit cards i mean delinquency rates are the highest they've been since 2008 on credit cards today and they're looking for help and so if you're if you're educating people on social media about products like these and putting it out there and saying hey drop me your email and i'll send you more information about this you're just adding to your database of buyers and sellers so this is this is how you build careers this isn't how you solve your your problem today but the more people you can contact and the more people that you can get your message out to on a regular basis the more opportunities that you're going to have to help people buy and sell homes whether you're a realtor whether you're a lender whether you're an investor there's so many different ways to use these tools to kind of help develop your your marketing strategy and develop your database so you have more clients that you can reach on a regular basis and that ultimately you know is the goal because these days with transactions being fewer and far between it's a numbers game you got to get in front as many people as you can reach out to as many people as possible with as many different ways and try to get them you know to to reach out and ask questions and start a conversation and that's that's what these are these are these are conversation starters with folks to help you discuss because then you might be able to help them solve a problem that they didn't even know they had but a lot of times they have to talk to an expert before they even know that

[Mike Kelleher]
right yeah to build on what you said to zoom out just from a social aspect of it i i believe for a long time the loan officer was the best financial advisor for a homeowner around their home pnl their home balance sheet i'm talking everything credit cards anything that shows up on a credit report a loan officer typically gave advice and probably every two years that helped sharpen the skills of a consumer on what to do yep these golden handcuffs these low rates have shut off the light to that financial advisor for that homeowner that person that needs that advice you don't have the the visa officer calling and saying hey let me give you some credit card advice the loan officer always did that you don't have people uh saying here's advice on your car loan that's about to expire what i think you do the loan officer always did that and right now this market has caused the loan officer not to call that person anymore maybe drip very well through some ai bot or email campaign but not call like they used to and so that advice is is going away and the result to me is a little scary because i think what happens is nobody gave better advice on credit scores and credit report i mean no offense to credit karma but you can't touch a loan officer that talked to more than a you know has closed more than 100 deals they know credit better than anybody and it's for those best on uh linkedin if you ever need the best advice but um that's all being shut off now and so that person's credit score is going to go down to 500 before they know it one of these trillion dollar right now there's a trillion dollars of credit card debt out there it's going to go down to now they can't i guess they could use this program to touch it but i'm not trying to say they should use it because of that and i think you want to prevent that person from getting to the point where they have equity can't touch it and became a byproduct of society um because the current system took out what i think is the frontline leader or as uh as dave savage calls it the first the loan officer is the first responder for the financial crisis of americans right now and this is one of a couple opportunities i'm a big believer in second mortgages you get loan officers back on the phone and giving that advice where where deserves or the government should pay them but somebody

[Mike Mills]
should help yes yes we definitely um spend more time coaching people through you know and the services are free we don't charge for it because we're we would we just want an excuse to talk to somebody so if we can help them advise them on how to fix the credit how to um you know uh structure their taxes in some cases we're not cpas we're not credit experts per se i mean we kind of are but you know we don't have the licensing for it we're not technically you know supposed to tell them what to do and i'm certainly not an accountant but we see tax returns every day we we know how income is structured we know how credit reports look we know where people spend their money you know we know what credit card debt is and and how high it is for for you know people all the time i mean i i talk to people all the time they call me and they're like oh my credit's terrible or you know i'm sorry i have so much so many credit cards so much debt i'm like look i've seen worse like it's really it's not you know it's not as bad as you think and a lot of times i i truly were able to make people feel better because it's like look we see so many people and we talk to so many people and see their you know we see them financially naked essentially um the average person that we know what it is and we have empathy for it because like look i understand i mean i i got into this business 15 years ago and my credit was atrocious i owned a business a restaurant with a business partner and it completely wrecked my credit and it was awful and getting into the business and learning about it i knew how to fix it and so it took me a little bit of time but i got it to where it was and but that was only because i came into this business and figured it out and so you're right i mean the the loan officer is a huge resource for a lot of folks to be able to look at their financial situation and say hey look fix this do that you know work on this piece because our incentive is a we want you to come back to us when you are ready to buy even if you're not ready yet and b we want to take really good care of you and help you out because we want you to tell your friend your brother your sister your mom your dad so then that way when um when they're ready to make that decision they come to us as well so we have every incentive in the world to help you out from the point of truly you know caring about it but you know we're we're trying to grow a referral network and build our business especially the local guy who isn't working at quicken or working at uh you know the the the chop shop mortgage place because you know they're not going to call you back because they have 5,000 other people calling them with all the marketing that they do so you know the local person that's going to help you out is going to be a huge resource for you and you know i agree people you know people should take more advantage of it just because especially right now because they all have time on their hands so if you got questions about your finances call call the mortgage guy

[Mike Kelleher]
he can usually help you out and i'm i if anybody wants to reach out and talk about second mortgages and where their lender or parent company should be looking to being offering them it starts up the loan officer has to deliver it but you were in the restaurant business there's a great tapper uh gary v clip that i saw years ago but he just reposted it where tapper says if somebody comes into your restaurant and has a great experience they have like a 30 chance of coming back and if they come in twice it's like 38 or 40 but if you can get them to come in a third time and have a great experience there is a 70 chance that is back as as a regular and so that's another reason where the money might not be in that second but if you're getting to go through a second experience with you and have a great second experience that counts as one of the three and then they'll come back rather than waiting for three first mortgages which could take a lifetime so yeah and in mortgage they might recommend it to others so that 70 doesn't just mean they'll be a regular they like you just said will recommend it to others so i want to say there are reasons that right now you got to focus on that 26 trillion dollars and purchase business yeah yeah absolutely um so i'm

[Mike Mills]
curious so how did you how did you get into this world i know you said you were a loan officer before and uh you know you've kind of been on the mortgage side of things but then you built an app and you have your podcast now so so tell me a little bit about that so i created the mobile app

[Mike Kelleher]
in mortgage which i came up with the idea of the ability to track a loan throughout the loan process me and a partner helped bring it to life and at one point we had 32,000 loan officers we had 500 billion dollars of mortgages we were mobilizing to close and we termed items like the lending ecosystem we realized through our clients that the real estate agent should be involved the buyer's agent seller's agent loan officer we bridged the gap between really legacy software at that time and what was becoming a mobile centric ecosystem and we had the tracker based on milestones we fully integrated with the lending it's called an los but it's the operating system of a lender and we created the tracking system years before dominos came out with similar looking one now i hear people at conference say a domino's pizza tracker i always want to say we were the domino's pizza tracker before domino's had a pizza tracker but it taught me a lot when you're first to market there are so many items now that are comfortable well accepted that back then caused extra investment extra adoption and you would have lenders that didn't want to the ability to choose a loan officer because they didn't want people recruiting them now there's four softwares out there that will help lenders know exactly who's closing what loans with what real estate agents just so you guys know that they're real estate agents every lender has it now they know exactly where you're giving your your deals to but we had to go spend a lot of money doing the mousetrap this way that way and there was a lot one thing that i was able to do is it was 2011 so in 2007 the iphone came out in 2009 the app store came out so we were only oh no 2011 the app store came out sorry i created in 2013 right before the rocket mortgage came out with their app but we got ours to market a couple weeks before theirs i obviously didn't know they were working on it and we became the solution for every lender to have their own rocket um and then some and i got to talk to a lot of presidents ceos of mortgage companies because back then i would say who's in charge of apple on the phone and nobody really knew right so they would just be like i think so and so is so that's i was able to build a rolodex i went to a lot of conferences because we were the leaders for a long time and then we got ultimately another company with larger investment past us but i know a lot about adoption down at the in the streets level based on technology decisions made in a boardroom

[Mike Mills]
without real life examples right right and then you uh you took that with your connections that you've had and and you know now especially because you say you're in washington a lot dealing with this stuff too and you started uh you started a podcast um where you talked to it's it's very mortgage mortgage banking centric um so so what uh what led you to do that i've just always

[Mike Kelleher]
been present and i believe even when i had the mobile app we bootstrapped everything it's a lonely world you know borrowing money mom and dad are using some of their marriott points to get but i always tried to show up show up was my mantra i believed if i out showed up other people and i know now social media it's build a brand i didn't really have in the instagram didn't exist so there wasn't that motivational let's go so i would go to the secondary conference in new york and just sit there and work from right in the marriott marquee lobby so everybody saw me and it doesn't work once you have to be consistent and so seven years in a row later at every new york's you know they would see me and say boy he's growing up there he is and i did it for the advocacy conference in dc and sometimes it was my own money sometimes you know it'd be the company's money but i made sure i continued to show up and the the podcast is really the same way i i had a vision that podcasts would be famous in 2013 the gentleman licking on lending that has and i was on his podcast in 2013 but it was a radio show you called in i said you should get you should try podcasting like it's it's gonna be i knew i should have done i just never did it and so back in june michael zell and i who i was huge on clubhouse i was the first one on clubhouse i brought i feel like the industry to clubhouse we didn't go out during covid we had masks on and you know in a bubble going to stop and shop but the one enjoyment would be go out to my car because i had a newborn and just there was like tuesday night shows and there was everybody in the mortgage industry and then when the lights came back on everybody was allowed to go out clubhouse became deserted so but i was able to take somebody i met there we said we were going to make the show just to prove we could be consistent and now we haven't missed a thursday since june and we've done it from like 26 different states i don't even want to say some of the places like we've had to run over and do it from but the podcast to me was just a test to myself can i do this consistently because you've been telling yourself for years you were quote gonna do it and my dad always used to call me michael mikey gonna do growing up and i didn't like that so yeah this would have been another quiver another arrow in his quiver i didn't want to allow this well i you know i think we're all

[Mike Mills]
anybody my opinion is is that anybody that does anything of any significance probably has a list of a hundred things that they were gonna do right because you've got to go through a list of all those things that you were gonna do before you get to the thing that you actually do and um i think that's a that's you know if you if you're never gonna do anything then you never do anything and so it it takes a little bit of ideas and you know i i joke with my wife all the time because i'm very much hey we should do this hey we should try this hey we should do that and she's always looking at me like you you know that you're not going to do that i know i was like i'm just putting it in the idea bucket i say i have an idea bucket i'm not just dropping it in there you know if it comes up later you know whatever you know i i said we should have done it we maybe we did we didn't but um but i think that's part of you know finding your way through this i mean it's i'm kind of the same you know this this when it comes to you know social media and doing anything out there it was something that i knew was important right i knew i needed to be on social media because these days i don't even think you should call it you know the idea that it's called social media makes it it has this negative connotation but it's no different than cable tv look if you you know when they did the whole uh um like the wayne's world you know where you had the closed circuit cable channels you know that's what this is essentially that's what it is and so it doesn't cost anything it doesn't take anything but effort and time um and especially now with ai being what it is there's a ton of things that you can do on your own to save yourself time to actually produce it and put it out there that's relatively easy um but i knew for myself that i wasn't going to stand in front of a camera and you know do a dance or make some silly video because you know just wasn't my personality necessarily but i like to have conversations i like to talk to people i like to find out what they do how they do it i'm very interested i'm a very curious person and so this was a perfect avenue for me to sit down and chat with somebody and go okay tell me about what you do why you're doing it um and and let me find out a little bit more because the more i can understand is going to help me in my business because i preach this all the time and i very much believe it is that the more i understand about all facets of real estate whether it be how what a realtor has to do what a title company has to do what roofers do what insurance companies do what mortgage lenders do and and what's involved with all that the better i'm going to be at my job as a whole because like you said in the beginning our job as lenders we talk to people every single day and so if i can i don't sell interest rates i don't sell mortgages really you know what i sell every day i sell my brain i sell what i understand what i've learned from other people i'm not saying that i'm smart or that i know anything better i just talk to a lot of people and i'm very curious about information and so holding that information aggregating it out and using it to help my clients so doing this has helped me in two things it's got me in front of as you know more and more people it's got me to meet wonderfully interesting people like yourself i've interviewed a lot of really great people on the show and had created new relationships with them and it's grown my knowledge base so when i talk to my clients on a day-to-day basis and when i work with my team and their clients then i'm able to to help them you know impart knowledge and impart information so their their clients value them even more and that's that's really what you gain and you don't have to do podcasting you can do a million other things find your lane for what it is but but i

[Mike Kelleher]
think that's how you grow yeah and build your brand now and yeah do what you're gonna do right i think you said it best but i would especially if you're in real estate and mortgage and maybe the deals are coming harder because we can't control it a lot of its inventory it's nothing but inventory so if inventory's slow get a microphone and you can do it all on youtube right like that's where you can learn everything that's where i learned to get this microphone actually this microphone i watched an episode of alex hansen um but that's proof like i was watching his show and bought this microphone so you could provide value to people you have no idea he probably had no idea i would do that when he made it but he put it out there so i think an outsource like you said is ai but use fiverr use upwork you have to get involved there and if you find somebody great on those

[Mike Mills]
do what you can to keep them yeah yeah absolutely well um mike to mike i really appreciate you coming on and and chatting about this stuff i think this is a very interesting um uh a way to you know to be able to get into equity that otherwise you wouldn't have been able to do and i do think you know it's going to be a much much bigger player as rates stay if rates stay higher which at least in the near future it looks like that's going to be the case then there's going to have to be other creative ways for people to be able to get get in touch with that you know trillions of dollars of equity and do something with it to help grow like you said generational wealth and and i think this is a great tool for it so i really appreciate you coming on and talking about it um it's an innovative thing you know it's not mainstream yet but it's it certainly looks like it's moving that way so coming to a lender near you but before we go um let everybody know about your podcast where to find you all that kind of stuff and then uh and we'll hop out

[Mike Kelleher]
sure and i see you and your podcast and your guests on my news feed all the time so it pays off right it amplifies what you're doing if you want to listen to our podcast a lot things we do is we talk raw about the mortgage industry uh in real estate when we can if it's in the news and we can find somebody to talk raw about it say something they might not always say you just follow hashtag more talk m-o-r-e-t-a-l-k on linkedin and you'll find it or you can youtube uh and search more talk or look for it on spotify more talk m-o-r-e-t-a-l-k uh and if you need me for any questions about this program or really you want to talk tinfoil hat or what's coming in mortgage you can text me a 781-367-0068 it's fast it's easy and i'll always respond mike's giving

[Mike Mills]
out a cell phone i love it all right man well i appreciate it as always we're moving into the weekend hopefully um we have uh um tomorrow the actual pce numbers will be coming out so we'll see if inflation is going to be nice to us and that it doesn't seem like it will be but we shall see i do think you'll see some changes in the job market coming soon um i think we're already starting to see those numbers weaken a little bit so i don't know you know stock market's down today everything's down today gdp's down maybe we're maybe we're on the cusp of this recession you know that we've been waiting we're not waiting for but expecting to kick in maybe it's about to happen i don't know we'll see but either way we'll keep you in the loop about it um we'll have them i'll have my market update bout uh out on tuesday next week otherwise everybody have a great weekend and we'll see you next time