Yes! You Can Buy a Home with Keith Goeringer

Non-QM Solutions with Change Wholesale

• Keith Goeringer • Season 1 • Episode 5

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In this episode, mortgage industry veteran Keith Goeringer sits down with Mark Leusner from Change Wholesale to explore innovative non-QM lending solutions. 

Mark shares insights into Change Wholesale's unique programs that can help qualify borrowers who fall outside of traditional mortgage guidelines. Learn about alternative documentation methods using bank statements, one-year tax returns, and even no-income-required options.

Discover how products like DSCR (Debt Service Coverage Ratio) loans and the CDFI (Community Development Financial Institution) program can provide competitive advantages for your clients. Keith and Mark dive deep into the details of these specialized lending products and discuss how they can unlock homeownership for a wider range of borrowers.

If you're looking to expand your toolkit and better serve clients with non-traditional income or credit profiles, this episode is a must-listen. Gain the knowledge and confidence to explore alternative lending solutions that can make the dream of homeownership a reality.

Schedule your free consultation- http://schedulewithkeithgo.com
Send me a message - keith@keithgo.com

Keith Goeringer:

Keith, welcome to the yes, you can buy a home. Podcast, my name's Keith Goeringer, and for the past 23 years, I've helped 1000s and 1000s of people buy homes through mortgage and real estate. In this podcast, you're going to get expert tips, tricks, everything you need to buy a home and make it super easy. We want you to buy the home of your dreams. And yes, you can buy a home, Keith. Okay, I am so excited today. I've been looking forward to this all week long. I'm telling you, I have Mark Leusner here from change wholesale. And just to give you a little bit of background, I have been in the mortgage industry for 23 years, been through subprime up and down, the mortgage crash, everything. And when I find new products that are exciting, I get exciting the fact that you mark you actually have some new products that are I think they're really unique to what's going on in the market right now. And I wanted to bring you on and explain what they are, and have you explain what the benefits are to my listeners, of how it's going to help them. You know what? I mean,

Mark:

absolutely. And thanks for having me on, Keith, yeah.

Keith Goeringer:

So tell me a little bit about just give me a rough overview of the different products that you have, and we'll go deep as we'll go a little bit deeper into them also.

Mark:

Yeah, absolutely. So again, thanks for having me on and hey, you got me beat for 23 years. I have 22 years in the industry, but I am excited.

Keith Goeringer:

We're gluttons for punishment, aren't we? I want to keep the excitement going.

Mark:

I get it's a holiday week, and we can keep this compressed, but I have a lot of great nuggets and a lot of value adds for your partners, great, because we have a lot of distinction outside of the box being solely a cute, non QM product guy, and we have some really strong niches that we can touch on. Okay, so what we're looking for is anybody in the clientele space that falls outside of the scope of Fannie Mae, in essence, non QM, okay, so I have a lot of non traditional methods to qualify your clients. I have a lot of all doc alternative options to qualify clients. Specifically, I can get into income qualifications from an alt doc. You're not running an A US or a du, this is truly non Q web. We look at other items such as reserves and or assets, okay, and LTVs, again, we could touch on a lot of those programs specifically in the alt doc. Keith and please, we can keep this in any direction you want to go to qualify anybody self employed that should immediately trigger your bells and say, Hey, most likely that applicant self employed. And there's facts out there. How many people are self employed per state? And then most likely you got to qualify from an alternative doc, such as bank statements. Why? Most likely, they're probably creative on their tax returns, right? They're self employed for a reason. So from a alt doc perspective, I can qualify 12 month bank statements using 100% gross deposits on personal That's right. All

Keith Goeringer:

right. Let me stop you there, because a lot of the a lot of the listeners don't understand, like, how revolutionary that is. So, just so everybody knows, when you do a bank statement program in almost every lender, there is a percentage of those deposits that you can use, and it's usually based on what kind of line of work the person is. I had one and they sold. These are figurines or something, about a year ago. I remember we sent in all the bank statements, and I was going to be able to use 45% of all the deposits. Now, 45% of all the deposits sometimes will just not create a loan, right? So the fact that your company goes to 100% I think, is very unique for the marketplace. I wanted to make sure everybody had some context on that,

Mark:

yeah, bank statements, it's an alternative documentation to qualify the client. You're not looking for a two year normal Fannie Mae agency tax return. You're looking at cash flow and bank statements. So if this individual has extra cash flows and or a side hustle on this side, we're using 100% gross deposits that's on personal statements only 12 months to qualify for income that's on your loan at you're not running a US, it's just an income calculation. You also have business funds or business statements. You can use 12 months there. But then there's an expense factor ratio, as you mentioned, 45 where we can go up to 75 potentially on some buckets or programs, meaning using 75% of gross deposits on business. Can also commingle different bank statements. If there's additional earnings coming in, you can also add on additional income streams, such as client has bank statements say he works at Starbucks, a w2 job, say he goes home and he has a nightly side hustle, maybe he's selling stuff on eBay or Uber driving or something else from a cash flow position. First of all, you're using 100% gross deposits on that individual. And then you can also add on an asset assist. What's that mean? If they have a high net worth, you can use it as a depletion so like a 401 K or stocks or bonds or mutual funds. So you can commingle income to qualify for your client.

Unknown:

And commingle is

Keith Goeringer:

just a fancy word for mixed Okay, so the word from mixed together, right? Okay, cool, correct. So

Mark:

the point is, I'm trying to get your mind turning and your fan base client, anybody with a challenging position to support income from a normal agency, tax return qualification. I also have a one year tax return qualification, if they did file last year's returns. We can use a one year of income to qualify, or a 1099 such as a one year 1099 and or listen to this one, Keith had one year. W2 somebody now that we're merging into next year, but hypothetically, say if they had a hot, strong 2023, earnings. W2 Yeah, maybe a lot of overtime, maybe a lot of extra commission or bonus earnings. We do not require a pay stub to support that year to date earnings. That's right. So think about that one year w2 last year to qualify no pay stub, we're only doing a verbal verification, so we're just doing a w2 divide by 12 for a monthly income. So that's a great approach. It's an additional nugget. I want to give you a competitive advantage that other clients don't have. It's not a two year blended income on a w2 approach, like agency on non QF.

Keith Goeringer:

Except that's amazing. I had a gentleman, literally today, that he He's 1099, through five different healthcare agencies, and then he also runs a podcast, like we're on here now on the side. And that podcast, he makes money from bringing people on. He makes money from basically running ads on his podcast. So you put all that together, it's 3040, grand a month. But it doesn't look that way on paper, right when we look at from a Fannie Mae or a Freddie Mac standpoint, and he's a great example of somebody that would benefit from your your unique programs as well. Okay, that's really cool. Now, I really want to go also into dfcr a little bit, because I think that there's a big misconception about DSCR, and people just don't understand what it is. Can you tell us, like, what is DSCR? What does that actually mean? When you hear that word DSCR? What does that mean?

Mark:

DSCR stands for debt service credit ratio, and you're using the market rentals from the subject property to, in essence, carry the cash flow or debt service to cover the mortgage payment.

Unknown:

So

Mark:

any investment prop purchase you're looking for market rentals that's done by an appraiser. It's an appraisal schedule. It's called a 1007 for a single family and or a 1025, for a multi family, I can do a purchase investor DSCR 80 loan to value one to four units using the market rents. You're not using income to qualify for this approach. This is a non QM FIX IT strategy. And again, there's no DTI, there's no a US, there's no findings. A file is simple to originate, and it's a great nugget for your clientele base to utilize 80 loan to value four units, and then the DSCR, how that's formulated is you're utilizing, again, the market rents, and dividing that into the proposed payment. We call it a p, i, t, i plus a meaning, if it's a condo with an association, basically full nut of the pay, if it deposited cash flow. It's called one to one and or greater than 100%

Unknown:

That's great from a standpoint,

Mark:

from a program matrix we allowed down 2.75 meaning that property is going to have a negative cash flow, potentially.

Keith Goeringer:

Note too, before you go on, we should note that most lenders will be a one to one ratio. That's what I. Paint so the back mature going down a little bit below the one to one. We have one right now that we're working on like that, and we were looking at it, and we hit that. We knew we were going to come in a little bit below one to one. It wasn't much. It was like 6070, bucks. But I was like, Oh my gosh, we're in trouble. And that's when I reached out to you, and you were like, No, man, we've got something to take care of, which is amazing, because, like I said, most lenders are looking for that one to one ratio, and you're a little more aggressive, which I think is awesome,

Mark:

correct? So we have that additional we call it a bucket, or opportunity for the client to fill that loan transaction. If you're that tight, we can explore other avenues, such as qualifying the client on an IO payment now call it an itty instead of a pity, meaning now that payments going to be lower, and see if we can increase that debt service to a potentially above 110, and or a one and a quarter would be a sweet spot for us, because then that pricing bucket is going to adjust,

Keith Goeringer:

and pity is pro interest, taxes, yeah, and insurance. And what was the other one? You said

Mark:

Itty. I call it ID an IO, okay, you're qualifying that mortgage payment into the debt service as an itty, an IO, meaning an interest only, taxes in insurance payments,

Keith Goeringer:

I see, okay, I didn't even know that was possible. I just learned something today too. That's great. Okay, you qualify it, boss based off of off the interest only payment. Okay, that is correct. Sorry. I just a lot of people out there don't have the 22 years of waking up in the morning and doing this every day. They don't know what some of that vernacular is, absolutely,

Mark:

I fully understand some another say prefix that I use. It's called an air DNA. What is that? This is great. It's for anyone listen to this. It's only permitted on a purchase. Think of it as like a Zillow gives you a value of what the property is going to be, right? You plug in the address, bedroom, bathroom, count, air DNA is a hot, aggressive option. Or to qualify to client on purchases, you plug in address, bedroom, bathroom, count, and it's going to spit out a projected income over the next 12 months for that subject property. We could potentially use that heat to qualify your debt service, even if it comes in higher than the 1007 on the market rental so again, this is based on short term rentals for this subject here DNA. This is a great exit strategy, great value add for any Realtors listening out there, it's called rentalizer, and you and I can plug and play in this and to see if it can qualify, or to see if we can pivot for your client. So the point of this is, there's multiple options to qualify clients. We have a lot of great little buckets of opportunity. It's just not your normal approach. So that's what gives me change a competitive advantage. And

Keith Goeringer:

most of these products are between what 70 and 80% loan to value, aren't they? That

Mark:

is correct. My Max loan to value is 80 on investor. But from a pivot, we can also qualify, if you're on investing, investor as a subject property, we can pivot to an alt doc option. Alt Doc is piggyback on an income stream approach, such as personal bank statements that we talked about, 100% gross deposit that client does not need to be self employed. Now I can get you an 85 loan to value with no MI, no mortgage insurance for an investment purchase and or a larger loan amount. So that would be a great exit strategy, and that would be a pivot again, going, maybe the w2 approach, maybe going that bank statement approach, 1099, asset qualifier, asset depletion. We didn't talk about that one. That's a great option. That's for somebody, say, with a high, big, large nest egg of funds, anything from an asset instrument of stocks, bonds, mutual funds, 401, KS, whatever it is. We can use a depletion method. You can use a divider by 60. It's rather aggressive, because industry and my competitors are going to divide by 84 or 20, yeah,

Keith Goeringer:

that's absolutely right. That's the Fannie Mae formula, absolutely yeah. So

Mark:

think of me again. I'm giving you guys perimeter product outside of that Fannie Mae box you have, so that there's the pickup and there's the benefit from our guides and matrixes that we can offer to your clients. I

Keith Goeringer:

think we've also got to address the fact that, because these loans are 70 or 80% they're still pretty safe for you guys. They're still a very good investment. I remember when all that stuff happened, in a way, and I was thinking, the reason that this happened was we were doing these. Alternative programs at 100% some of them was 110% they're crazy. Now I feel like they're much safer because they're lower loan to values. Can you and can you speak to that at all? Because I'm sure everybody is listening to this going, oh my gosh, we're creating a we're creating the next level of and we're not. And I gotta tell you guys like I went through that whole thing, right, and I still remember the bank statement loans themselves performing extremely well, I'm talking like, probably better than some of the full doc loans back then, when I was at Fremont and I prefer as well. They performed extremely well on the market. In my opinion, the reason most of that happened was just pure stated loans and high LTVs of the stated loans.

Mark:

Yeah, this is a great pivot. So you're aging myself too and but I was at some called an old sub primer. So I work with Lehman Brothers, and I have many years doing some of these programs. But these now non QM look for additional assets. Okay, additional reserves to qualify to mitigate our risk. So these loans do perform, it's a higher FICO bucket, and again, reserves to mitigate the risk. You're saying state, it state. It's gone right? It was dating, quote, unquote, how much John Smith works makes at the gas station. That was a state. It has an ATR. And this is a great pivot to a strong one of our value adds here, Keith, it's called Community. Why am I saying community? Because community program, it's called community does not have an ATR. ATR, guys, means ability to repay. So this is a great pickup for change, because in the industry and out there, in the non QM land in America doing wholesale, there's minimal channels for exit strategies with a no ATR, that's no ability to repay,

Unknown:

not state it for a primary. So

Mark:

this should ring a bell in your video, because how do we do that? And here's a value add. It's called four letters. My story is I didn't know about this until four years ago, and that's why I took the position. So I'm dating myself, but my last run was a 13 year run doing wholesale. I left that book of business because I didn't know about a CDF community development financial institution. This is going to give you a value add for the underserved, underbanked community. This is big team. CDFI stands again for community development financial institution. It's so big that it's issued by the US Department of Treasury, okay. Why is it so big? Because it gives us exemption. A CDFI is exempt, as you mentioned before, ATR. ATR is ability to repay. Okay, this is part of the Dodd Frank Act where we have exemption to ATR realtors and fan base listening. That means on your loan application that Keith cannot can set up for you guys, no doc, no income, no income to qualify or calculate it, and nothing is stated. There's that word, it's almost like a curse word, but there's nothing stated. Keith, yeah, and there is no DTI to calculate. So what we just talked about is a no documentation, product that is no employment stated, no income required on a primary be

Keith Goeringer:

very similar. If I walked into a bank and got a signature loan, right? I walk into a bank I get a signature loan, there's collateral, but they're not really diving into what my income is, possibly assets, but not what my income is, I think, and tell me if I'm wrong, but it seems to me like, like you said, stated is the a bad word. We're not stating income. It is just flat. No income required. There's no it's not even looked at, right? That

Mark:

is correct. So again, how are we mitigating or the risk on the file? First of all, compared to the 2008 days, there's nothing from a high loan to value bucket max on this program is 75 Yes, it's for primary Secondly, we look at a FICO minimum credit score for your applicant is a 680 and we do want trade lines, meaning credit depth on the applicant to qualify, we look for two trade lines open and active for 12 months, or one reviewed for 24 and or if they are a first time home buyer, there's no restrictions. Dollars. But then I can also use 12 months cancel rent checks in combination with one Trade Month, the biggest piece and the difference from, let's just call it the 2008 2009 days is we want more reserves, reserves, meaning to mitigate our risk. We want the pity the amount of the mortgage payment times nine. If you're doing a 75 loan to value in the applicants account, applicants accounts, they can utilize any asset instrument they have, stocks, bonds, mutual funds, even business funds. That's nine months 75 loan to value, they can purchase a one to four unit. Yes, you can get a gift for the other 25% down to structure your loans, 75 loan to value. 25% potentially a gift, as long as they have their reserves sourced in season for 30 days six or nine, and that's tiered depending on your loan to value. Now you're getting the American dream, Keith, you're setting up your clients and then getting their primary residence loan amounts currently up to $2 million and again, this is a no ATR loan, no dumb no doc on a primary situation.

Keith Goeringer:

You figured this out four years ago. I literally didn't know about this until I talked to you about what two weeks ago or so. I think I had no idea it even existed, and that's my fault for not getting out there and understanding the programs I've been doing so many type right VA conventional for so long. I'm just glad we talk, because there's so much need for this. Now I'm seeing this as I start to talk to people and realtors and things like that. There is so much need for this product, and it's really an aggressive but still safe product. If, if you could put those words together, I think you can, these days, right? We have an aggressive product, but is also a safe product. And I think that's refreshing and pretty amazing, correct?

Mark:

Yeah, these loans do perform well. And again, they have a Reserve Base, as you said, vanilla. Think of it as the Fannie Mae box on the outside of the perimeter product. So yeah, great little value add for your team, for your realtor, base, for your clientele. It's not for everyone, but this is a great solution to a situation otherwise the client can't receive lending. So now you're in that solution and basically fixing their problem and getting them into the home. Okay, so great solution, great exit strategy, great value, add team. And

Keith Goeringer:

that's what I always loved, even back in the bad days, right? I always liked the fact that we could still help people that other people would not help, right? We could still figure out a way, if you want to become a homeowner, I'm going to get out there and dig and call and find a way for that to happen. And that's really that's why we learned all these things. There's this myth that we were all, everybody was on the take and we were all trying to do the wrong thing. That's not what was really going on for a lot of us. We were just looking other ways to help people get that American dream of home ownership and and just talking to other companies and finding out what's out there, and that's exactly what I'm doing right now. This is awesome. Have we missed anything here? Anything else we need to go over? You think that's a product that's worthy of talking about?

Mark:

Yeah. Again, there's a lot of good little niches in it. I don't know how granular you want to get, but I'm trying to

Keith Goeringer:

get. I don't know if my listeners get to stay in that they're probably asleep by now,

Mark:

you and I, but think of me as that large toolbox and digest all because we have a lot of great little nuggets and a lot of items that are just going to outside of the normal vanilla, as you said, that's the Briars ice cream, right? I'm the chocolate chips. I have a lot of nice little pivot points that we can do options for, such as maybe client with no trade lines, maybe somebody with mortgage lates, maybe an applicant qualifying with adu income. Maybe they need a higher expense factor on bank statements. I have a written doe program. I have properties listed. If they were listed today on the market and they pulled it off tomorrow, they can do a cash out. You can't do that with Fannie. It's a great term only. So now that's the chocolate chip piece. I have a lot of great little non traditional methods. Hopefully that's what comes across on this conversation for your team to pivot to explore options for lending part of the underbanked, underserved community that you're given an exit strategy to. So team, give Keith a call, and we can collaborate together and come up with an approach to see if they can qualify. Okay, if they can't go from a alternative doc, we can also go community doc, which is the no doc. So there's a lot of great value adds. Hopefully this was positive. Keith and Oh,

Keith Goeringer:

I love it. It's been awesome. I have to tell you a story. I was talking to a realtor. We were thinking about working together yesterday, and we were just talking about how she had some deals that fell out and used to when you're busy. Deals fall out because of, usually the lack of communication or contact or something like that. Right now, when you're not extremely busy, it's interesting. I'm finding out that deals are found because the loan officer doesn't push or try to figure out other ways to get the client to be able to qualify, right? So the client comes to a loan officer, and like you said, they're not used to doing some of the programs you have, and maybe the loan officer doesn't even do what I call a deep application, right? So I think there's been this interesting just laziness in our industry, where we send people to a website, and that person fills out information on a website, and that application comes back, and then we run the credit, and from that we determine if the loan can be done as well as I do. Back in the day, we didn't have websites, right? It was all we're talking to that person on the phone and handwriting the application and learning absolutely everything. I think it's important for us to go back to that time, and if there are loan officers listening, call that client and go deep with them as much as possible, because that's when you build a real loan application, not off of a online application. Because I can't find out these things and put them in the bucket of what you do if I don't talk to the client about absolutely everything going on their finances and their assets, etc. So I think it's important for us to really think about, like, who people are working with when we dive into this stuff. But no, this is dude. This is thank you so much for doing this and spending your time. I don't think you guys get near enough air time to tell us what's really going on in the marketplace. I was thinking the other day. I was like, when was the last time I heard anything like this on the internet at all? It's told you this, but it's like, you guys don't really have a voice, and I wanted to give you a voice as to how unique some of your programs are.

Mark:

Yeah, I appreciate the voice in a phone call away, I like to talk. I'm cold fashion as an AE, so I'm heavily getting involved. And as you say, scrub the client, really dissect what they have going on. And let's see if we can pivot to an alternative documentation to qualify your applicant. So it really takes somebody seasoned like you, Keith, with a long mortgage career, to really drill down, put on the gloves and go to work and review what they have for options to qualify, rather than just somebody plugging and playing on an app and online, as you say so, any yellows out there. If you're looking to learn

Unknown:

in this space, it's

Mark:

you got to think outside the box. It's creative lending, and we have a lot of options. I know our rates are aggressive. I know what I can do for service. So hopefully you guys think of me. Hopefully you had some takeaways from this call. Hopefully we can close more loans.

Keith Goeringer:

Absolutely. Thank you for your time Mark.