Jason Hartman hosts guest Jen Du Plessis, A mortgage consultant and trainer. She is also a real estate investor and brings insight into each side of the mortgage industry. They talk about GSE, QM and non-QM loans.
Jason Hartman 0:00
Once we did encounter some challenges because we were part of your network and because I have an investment counselor, I always felt like I had somewhere to go for an answer. I always felt like I had somebody with more experienced than me that I could lean on and Sarah didn’t know the answer, she got the answer.
Announcer 0:16
Welcome to the creating wealth show with Jason Hartman. You’re about to learn a new slant on investing some exciting techniques and fresh new approaches to the world’s most historically proven asset class that will enable you to create more wealth and freedom than you ever thought possible. Jason is a genuine self made multi millionaire who’s actually been there and done it. He’s a successful investor, lender, developer and entrepreneur who’s owned properties in 11 states had hundreds of tenants and been involved in thousands of real estate transactions. This program will help you follow in Jason’s footsteps on the road to your financial independence day. You really can do it on now. here’s your host, Jason Hartman with the complete solution for real estate investors.
Jason Hartman 1:07
Welcome to Episode 1399 1399 glad you could join me today as we are going to get a little insight into the mortgage market. Our guest today was an interview I recorded when I was on that Caribbean cruise. Oh, maybe what was that about three weeks ago or so something like that. We recorded from the cruise ship. And I think you’ll like her insights. She’s been really an industry veteran in the mortgage market and its agenda pluses. So she’ll be here in a few minutes. But first I want to tell you well, I don’t want to tell you anything. I want to congratulate you. Yes, you investors need a congratulations. Because I am looking at a headline right now talking about how rents just continue to rise. They continue Rise, they continue to rise up up in a way go the rents and that means your income goes up. And what’s interesting is a survey by rent cafe found that markets, there was a 3% increase. And actually, that was a slower pace than we’ve seen. It was the slowest state increase in 18 months. So and that’s 3%. And that ain’t bad. That ain’t bad. Now, if you believe the official government inflation numbers that tells you inflation is 2%, or even a little less sometimes, and your rents are rising at 3%. Well, that ain’t bad. But remember, you’ve got hopefully that beautiful, beautiful, gorgeous mortgage, and that mortgage is making you money, because you’re already getting paid to borrow money as we are on the verge of the lowest interest rates. Ever. Yeah, you heard me say that. Right. I was reading another article just yesterday saying that they are predicting that we are it doesn’t have to go very much longer for us to have this. We’re on the verge of the lowest rates well, ever. Yeah. Is that good enough for you? Pretty good, pretty good. By the way, I want to remind you, I profiled a book, and I have not been able to book the author on the show yet. And I still want to get the author to come on the show. But I profiled a book last year on the podcast, and shared some of it with you on the show. It was entitled debt, the first 5000 years. That was a fascinating book, and I really want to take another look back at that book because I was really, really fascinated by when you look at the course of history and you look at the cost of money, and there there really has always been a cost to money. Right, because if the lender loans you the money, well what do they have? They can’t use that money for something else, right? They can’t loan it to somebody else. They can’t invest in something else. They can’t buy any new toys for themselves or go on any vacations for themselves. You know, remember, lenders aren’t always big banks. Sometimes there are people like your humble host, I’m a lender, I lend money, lots of money. Fact I just got a loan repayment to one of my companies the other day for, like 373,000 bucks and, you know, I had loaned that money out on a hard money loan, you know, paid me some nice interest on it and nowhere near as good as being a real estate owner. But it is my second choice. I you know, the hard money lending ain’t bad, but it’s not as good as the actual property, obviously, because with the lending you don’t give That beautiful multi dimensional return on investment. And you don’t get to be a borrower when you’re a lender. Well, sometimes you do. That’s actually the business banks are in, right, Jason Yes, yes, that is their business. Sort of, I mean, it’s all been watered down nowadays with the Federal Reserve System and such. But the idea, at least in concept of a bank is that they take deposits, those deposits are a liability for the bank, and they make loans and those loans are an asset for the bank. Remember, the balance sheet of a bank is the opposite of your personal balance sheet, because normally you would consider a loan a liability and money in the bank and asset bank looks at that the opposite way that we do right. What do they do they make a margin between the money on deposit that they pay a lower interest rate on and the money lent out that they charge a higher interest rate for right. I know this is called Advanced Education here. Folks, yes, I’m sure you understood this when you were in elementary school, so forgive me Forgive me. But of course, it’s all become much more watered down in the days of fractional reserve banking or fractional reserve lending. It’s referred to both ways, and the era of the Federal Reserve and the repo market, and auction rate securities, and the overnight lending rates and all this. It’s all just super complicated, and very few people can really truly understand it. I don’t really truly understand it myself. I will be the first to admit, in fact, I think it was one of the creators of the Federal Reserve, or maybe it was one of the Rothschild family members is quoted as saying that not one person in 1000 can understand our monetary system or something like that. It is truly complicated. And when I had my favorite financial writer on this very show a couple of years ago, Bill Bonner, head of Gora financial who’s extremely wealthy guy, and a very smart one. He’s, I think, the best financial writer. He said, just maybe he was just being humble. At the end of the interview, he said, You know, I don’t even understand this stuff. And I’m like, well, you certainly understand a lot better than I do. But, but yeah, you know, you get paid to borrow. And we demonstrated that when Rabbi Evan montek, our client was on the show a week ago or so, you know, he just got that loan on a property he bought through our network at 3.5%. So inflation taxes, you can just sit on that property never rented out even once, and you’re still getting paid to borrow the money. That is a pretty darn phenomenal deal. But let’s look at the rents in some of these markets. Okay, so the most expensive markets for apartments if you want to rent an apartment or you own an apartment there, where do you think You’re going to charge the highest rent. By the way, it’s an easy gas. You can probably guess this. You probably already you’re thinking in your head because you’re probably thinking of a big apple. Yes. bite into that Big Apple. That’s New York City. Very overrated place. Yes. Me. I mean, I love to visit New York, but living there now. No thanks. So 4200 bucks a month, it’ll cost you in New York to rent an apartment. Or it’ll cost you. I’m gonna venture to be a landlord in New York. Let’s look at it that way. Let’s not look at it from the renter side. Let’s look at it from the landlord side. I ventured to be a landlord in New York, it’ll cost you 50 $800 a month. Well, being a tenant only cost you 40 $200 a month. Why do I say this? And how do I know that? That math is correct? Well, I’m guessing, okay. It’s a guesstimate. But here’s how I arrived at It I think it costs you 50 $800 a month to be a landlord of that apartment that you rent for 40 $200 a month in New York. Some of you know what I’m going to say don’t Yeah, I think you’re on the me because I think that apartment in New York if it weren’t for sale, I’m just guessing here would probably be valued it right around 1 million bucks. And for a million dollars you should be getting about how much rent 1% do you say right? somewhere around there. That would be $10,000 a month. So literally, by being a landlord in New York and renting this very apartment or an apartment like it, it is costing you 50 $800 a month. Because just like that example I gave you have the lender loaning the money, right? They have an opportunity cost. So it has the landlord in New York City, okay, because that landlord has tied that money up They can’t buy another property. They can’t buy 10 $100,000 single family homes in three diverse markets at Jason Hartman calm and by the way, be sure you’re subscribing to our property cast. So these property performance are delivered right to your smartphone or right to your computer. Right as they become available, they’re just delivered all the time to you. They can’t go there and buy one of those properties or 10 of them for the same million dollars and earn 50 $800 more a month. So being a landlord in New York City regardless of rent control, intrusive government, high taxes, massive amount of regulations, blah, blah, blah, unionized apartment buildings, or you gotta you know, deal with unions. Gosh, that’s tough. Okay, so it’s gonna cost you about 5800 bucks a month to be a landlord in New York City. Okay, and plus prices have been declining, so That makes it even worse, but I’m just talking cash. Well, where were the lowest rents? The lowest rents or in Wichita, Kansas? Yes, Dorothy said we’re not in Kansas anymore, right. And they were only $662. Now, how much is that property that rents for $662? Well, it’s a cheap apartment. We know that. And I’ll venture to guess that a cheap apartment in Wichita, Kansas, is probably about 50 grand a unit. And you’re getting 662 a month. That’s more than 1%. Yeah. So there you go. You get paid to be a landlord in Kansas, and you pay to be a landlord in New York. I know it’s counterintuitive. And if you’re new to the show, and you’re just listening to this for the first time, and you probably don’t know what I’m talking about, so be sure to check out my other podcast that is a quick start podcast that will teach you The fundamentals of real estate investing, listen to that one concurrently as you listen to this one. And you’ll get the fundamentals on Jason Hartman quickstart whatever podcast platform, you’re on iTunes, Stitcher, radio, whatever, type in Jason Hartman quickstart and get the basic fundamentals there, and then get some of the news and the more advanced techniques here on this show. So that’s just kind of interesting, isn’t it? So according to yardie matrix, about 1.5 million units, housing units are delivered over the last five years. And they say they expect to see 300,000 more delivered this year. All right. We still have a giant housing shortage. Now, you may drive around some American cities or really most any city around the world and think the national bird of America is The construction crane, certainly it’s been that way in China for a long time, because there’s a lot of development going on. But it’s not enough. It is not enough. Because guess what else is going on? There’s a lot of population growth that’s been going on for for a while. Now. When you talk about population growth, of course, you have to lag it right, you have to lag it. And what I mean by that is you have to go back, you know, 25 years give or take, because that might be the average age someone moves into the housing market, they can be 25 years old. So the question is not what happened five years ago, because the five year olds, well, they’re usually hopefully living at home with their folks. But the 25 year olds, well, Hey, you know what, they’re probably living at home with their folks to in a basement eating pizza, surfing the internet all day and playing video games. Okay, so we know that but hopefully, by the time they’re 30, they will get out of the house and leave the nest. So hopefully that’ll happen. So you have to always lag population growth. Now, a reminder, what is the highest earning and spending time of someone’s life when they’re moving through that economy like a bowl, Jenna smake. If you’ve ever seen a Snake Eater, eat a rat or something I have witnessed that in school actually all places new kind of gross, but hey, it’s the it’s the way the wilderness works. And so, you know, you see this big bubble moving through and that’s the population bubble, the demographic of the baby boomers, or my little tiny, humble generation Gen Xers with only half the amount of the baby boomers or the millennials that are about double my little generation size. When those when you lag those people to win most of them are about 46 years old, okay, somewhere around there. They are spending the most money and they are also earning the most money, okay, so they’re earning and spend The most, you know, it’s those are slightly off, but just put a mid 40s close enough for government work. And then you see the biggest impact on the economy, whether it be housing or many other parts of the economy at the same time, so just something to know. Okay, I’m going to wrap up on this with but to tell you that the largest rent increase was seen in a market that we’ve been in and out of a couple of times over the years, but it’s way too expensive now, so we stopped recommending it years ago, but many of you dear listeners and clients of ours have properties there that you have made a ton of money on. So congratulations. And next time you see me at one of our live conferences, feel free to pat me on the back. That is Phoenix, Arizona. 8.3% rent increase in one year. Yep. 8.3% rent increase. Wow. That is nothing short of phenomenal, but That doesn’t mean you should run to buy in Phoenix now because it’s too expensive. Okay, so without further ado, let’s get to our guests. Let’s talk to Jen Du Plessis, for properties for additional information to reach out to our investment counselor Jason Hartman calm one 800 Hartman, call us on the phone or reach out to Jason hartman.com. And here is our guest as we talk about the mortgage market.
Jason Hartman 16:26
It’s my pleasure to welcome Jen Du Plessis to the show. She is a leading mortgage industry trainer and of course, was a broker in the past and has some good insights on the economy and where the markets going. And we are sitting on a cruise ship right now, which is kind of neat. I have done some shows from cruise ships before. And it’s just a good way to knock out a few podcasts. Yeah, so welcome, Jen. How are you?
Jen Du Plessis 16:52
Thank you. I’m so happy to be here and I’m doing great. I’m doing great good stuff.
Jason Hartman 16:57
So what is your take on what’s going on in the Economy there’s so much happening. Namely, there’s a lot of talk about the privatization of the government sponsored entities or GSE. And or enterprises, Fannie Mae, Freddie Mac, namely, even Sallie Mae, there’s been some talk about that one too. And, you know, that could really change the mortgage market. It’s interesting, since the Great Depression, the mortgage market in the US has always been sort of subsidized by the government. And that really has made for some great opportunities for real estate investors. Do you think this will happen? What’s your take on this? It’s a pretty big deal.
Jen Du Plessis 17:35
Yeah, I know, it’s a big deal, but I don’t think it’s going to happen. I mean, I’ve been around the block several years. And, you know, I just don’t think that that the markets going to be able to hold it and sustain it. I think there’s too much concern about risk still, I mean, a lot of people have forgotten about our Great Depression. I mean, you know, I mean, relationships are great recession and but I think that lenders are still very risk adverse the compliance component is horrendous right now. And Fannie and Freddie is what keeps everything in line. And I just feel that, that that could be detrimental to the whole concept of, you know, what’s happening with with the compliance, etc. So
Jason Hartman 18:16
what I mean in the last 10 years coming out of the Great Recession? I mean, I think and I think a lot of people you might agree that the banks have really overcorrected. They’ve been conservative. I mean, this is not like the next recession that occurs is not going to be a subprime mortgage. No
Jen Du Plessis 18:35
question. Right.
Jason Hartman 18:36
So why would they be afraid of it? I mean, the underwriting seems pretty solid, doesn’t it?
Jen Du Plessis 18:42
Yeah. Well, they’ve you know, it’s like anything with a pendulum right there is an overcorrection, but they’ve already swung back. And so I don’t know that a lot of people know that we’ve swung back. And so the markets really opened up and non qm. So for those that don’t really understand that, you know, quantitative quantitative easing and stop
Jen Du Plessis 18:59
non qm causing problems.
Jason Hartman 19:02
So what’s qm though?
Jen Du Plessis 19:03
Yeah, non qm. It’s a qualifying mortgage. So what happened was during the credit debacle, Danny and Freddie and when actually the government came out with Dodd Frank and said, this is how mortgages they have to meet this criteria in order to be safe harbor, you know, in order for the mortgage companies to be able to be supported. It’s only
Jason Hartman 19:20
200 page bill or whatever it is that will buddy understands.
Jen Du Plessis 19:23
Yeah, we’re gonna pass it and we’ll read it later. Okay. Nancy Pelosi.
Jason Hartman 19:27
Health care. Yeah,
Jen Du Plessis 19:29
there we go. And so so that happened. And so qm came in, and then immediately after that, we had some non qm which means it’s a non qualified mortgage, so it doesn’t fit the criteria and especially for investors that are listening. You know, there’s a lot of criteria that investors have to abide by and if you don’t abide by that, you’re kind of kicked to the street and go good, you know, good luck, go get a mortgage. So what was happening is investors were kicked to banks and getting true commercial loans on single family residential homes because they didn’t fit the criteria. So incomes non qm. Now, what’s happened with non qm over the last four or five years is that it’s grown tremendously. It is securitized because it came out as being well, if it’s not qm in it, is it you know, it’s not a qm loan, and it’s a non qm loan, then isn’t that subprime? No, it’s not surprised because they’re all being securitized.
Jason Hartman 20:22
So before we go on too deeply into this Gen, the QM the qualified mortgages, would those be considered the agency loans, the strict Fannie Freddie loans, then there’s the non qm and who’s making non qm loans?
Jen Du Plessis 20:37
Yeah, so non qm loans are by individual private mortgage companies and some banking institutions that are taking on you know, now that it has been securitized, the banks are now starting to hop on board and say, Okay, well, we can take on the risk of non qm whereas before we didn’t feel like we could do that. So, so imagine, if I bring it down to the to the nth degree, you know, you have a million dollars that you want to lend out of money. Right? And you close, let’s say it’s, you know, for loans, right? You close for or but let’s make it five loans at 200,000. You close five loans at $200,000. You’ve now sucked up your million dollars when you as an bank, it’s an institution then take that to Fannie and Freddie. And they
Jason Hartman 21:19
they’re only going to buy the QM loans though, right? Are they going to buy non qm to Oh,
Jen Du Plessis 21:23
no, they’re not buying non qm. So so that’s the point here is that so if they, so you send the loan to them, and you say, hey, look, we underwrote this loan to all of the QM requirements, you know, with perfect credit score, perfect assets, perfect a debt to income ratio, Fannie and Freddie will buy those loans, and you will get your million dollars back so that you can then do more loans,
Jason Hartman 21:46
keep the machine going, you can sell them off the line and do that. Right. So that’s the QM but there’s been you know, what’s really great is that used to be you either had an agency loan to Fannie Mae, Freddie Mac, loan or hardware money, right. And there was really nothing. Yeah, I mean, there were commercial loans. Right. But people weren’t doing those, at least not that I can recall, you know, before the Great Recession on single family homes.
Jen Du Plessis 22:11
Yeah. You mean commercial loans on?
Jason Hartman 22:13
Yeah. You know, that they might get due to do an apartment complex or a shopping centers. They
Jen Du Plessis 22:17
were they were actually doing them on single family homes, because it’s considered a commercial loan if you don’t meet the criteria of Fannie Freddie FHA, what if you’re an investor anyway, so once you once you had more than 10 finance properties, you had to get a commercial loan on a residential?
Jason Hartman 22:32
Right that I know but I’m talking pre Great Recession. Yeah. When you could go get 200 Fannie Freddie loans. I mean, couldn’t
Jen Du Plessis 22:38
know you couldn’t don’t do that. You actually couldn’t do that. There was always a cap from Fannie and Freddie on the number of loans that you could have a non on the number of properties you could own but the number of loans that you could have,
Jason Hartman 22:50
well, I remember coming out of the Great Recession it was they kept it really tight it for loans. There were four finance properties for a while. That’s been one up to 10 per spouse, so can qualify, then you can get 20 total in your family. But before the Great Recession, people were doing way more than that. I mean, they were getting a lot more.
Jen Du Plessis 23:09
Yeah, they actually they weren’t. I mean, I’ve been in the business for 35 years. And when you went to a traditional lender, that’s all you could ever do is especially Fannie Mae was for finance properties, period and a story now, there was alternative lending. So if you went to like Wells Fargo, for example, they’d send a lion’s share of their business to Fannie and Freddie and FHA. But then they would shelf the loan, they would do portfolio loan, right portfolio
Jason Hartman 23:31
loans.
Jen Du Plessis 23:33
Yeah, now maybe what you’re thinking because they actually didn’t securitize those until after they had a seasoning so that they could sell and then say that’s what they were so,
Jason Hartman 23:41
so so so they’d allow them to season so they could say they were performing loans for a certain amount of time. And then the secondary market, some secondary market buyer was
Jen Du Plessis 23:50
already with Fannie and Freddie were willing to buy it after a year of seasoning okay.
Jason Hartman 23:54
So it was a one year of seasoning requirement, okay. And there was a lot of that, but now this one whole segment of this, what I’ll call middle market has just blossomed. Yeah. And the rates really are not bad. I mean, they’re not incredible, like Fannie Freddie, but they’re pretty good.
Jen Du Plessis 24:11
Yeah, they’re, they’re actually really good. You know, it used to be, and really a pre recession. For the Great Recession. We, you know, we had a paper we had all day alternative a where you had a situation a lending, and then we had subprime, you know, so it kind of went in that order, and then obviously on private money if you couldn’t even get so went into that, when everything collapsed, all we had was qm all we had was a paper, everything else was gone all day was gone, you wouldn’t find a bank that would do a portfolio loans to save the lives. And so what I was saying before, you know about selling on the secondary market and being able to recoup your cash, so many banks and said, Well, if I, if I sell, if I can’t sell the loans, that I have to have a lot of capital to be able to continue to do business and it just wasn’t there. So what’s happened over the last few years with the non qm is that it’s becomes securitized on the secondary market and Wall Street. And that’s allowed everyone to say, well, heck, if it’s securitized, and I don’t have to hold it on my books. I’ll take more risk. And that’s been absolutely beautiful.
Jason Hartman 25:13
And you know, here’s why it’s so there’s a lot more money out there to finance properties, more than 10 properties per person. Yeah. Oh, wait way more. The rates aren’t quite as good, but they’re not bad. Yeah, the length of loan some of them even go up to 30 years fixed. I believe. There’s a lot to do 10 and 20 year fixed type area, and certainly, you know, seven and then they go adjustable answer that, but the products are pretty good.
Jen Du Plessis 25:39
Yeah, they’re actually really, really good. And I’m actually finding it beyond that space. Because I also you know, when I was originating I was a master at investor loans investor financing. So yes, the beginning want to be I want to be an investor would go Fannie and Freddie if it could, and then, you know, all the way to non securitized really crowdfunding of thought, you know, residential, as long as it was non owner occupied, it wasn’t subject to any criteria. Those now are 30 year loans, you know, so now they aren’t, what the traditional was they were going to be flips right there when we fix and flips rentals. Now they’re buying holds on that long period of time as well. So I think that, you know, that’s opened up. And I think the biggest thing is when we have when this pendulum swung, and it’s swung all one way, we have to remember that what drives our economy is entrepreneurship, self employed businesses that could, you know, could move their money and they needed this money. They were the ones who were in the mid to high tier homes. I mean, you could still get a fan of an FHA loan with horrible credit right after the crisis. But these are the thing this particular group was the one that was going to move us forward and it was stunted it would nothing was happening. So the non qm came out so that we could do bank statement loans again,
Jason Hartman 26:58
the difference this time they use All those liar’s loans are sort of but
Jen Du Plessis 27:02
what’s the distinction? You knows? and Lena has no income verifications. Yeah, all those crazy things.
Jason Hartman 27:07
No income? No. no income,
Jen Du Plessis 27:09
no assets. Yeah.
Jason Hartman 27:11
It’s just no questions asked.
Jen Du Plessis 27:13
Right. Right. And so now their bank statement loans with good quality credit, and good downpayment. So there’s their skin in the game, right? And so if you think about that old game used to play about layering your hands, you know, that’s all kind of gone away. But this opened up the market for small businesses to get residential home loans.
Jason Hartman 27:32
Okay. So when you say that I, I’m not sure what you’re referring to, are you referring to the fact that a small business owner has a home or some investment properties in the refinancing them to pull cash out to use in their business? Is that what you’re talking about? Are you talking about business financing?
Jen Du Plessis 27:50
Now I’m talking about them to refinance their homes for whatever reason, because now they have growth equity, you know, they have equity growth, and it’s all trapped in their house and they can’t get a loan because it’s qm qm qm. And so they needed to release milk they can now they can, now they can. And that opened up the marketplace because now maybe they grew out of their home over that period of time, right? They grew out of their home and they want to buy a new bigger house, but there wasn’t any financing for them to do that. Because traditionally with with self employed individuals, their tax returns aren’t going to support a traditional Fannie and
Jason Hartman 28:24
Freddie loan. What that’s another reason you’re referring to self employed. Okay, got it. Got it. Okay. So let’s, we’ll try and visualize this for listeners. Okay. You mentioned the pendulum. A lot of people use that metaphor I certainly do. In 2003 2004 2005. The pendulum was way at 1am. Yeah, the loans I used to show screenshots in my PowerPoint presentations at my live conferences of from lenders, namely countrywide, mostly, that would say, one day out of bankruptcy, one day out of foreclosure 545 go score. Right, which is low, by the way, very low. Yeah. And you could get a 95% blow. It was just stupid money, stupid money. So the pendulum was too far to one direction, man. And obviously we had a mortgage crisis. Okay, where is the pendulum now?
Jen Du Plessis 29:19
I would say so let’s just use left and right let’s just say that the pendulum swung all the way to the left everybody’s cease and desist. You know, it was always clear over there any kind of loan and went all the way to the right hand side. I would say we’re now left of center. Okay, so Wait, where’s the is the right the liberal stupid lending and the left is the left would be this stupid lending swung all the way to the right. So let’s get this right. Okay. Okay, let’s get the right. And so I go all the way to the right. And now I would say we’re left of center. Okay, we’ve come back not to center but even to the way that says how do we loosen up the market, right. And so there’s so many opportunities and we have so much liquidity that we We have so many private lenders out there, right? And everyone’s crowdfunding and doing all these wonderful things. So I actually think we’re left to center as a whole. In the lending space itself. I think we’re getting to center if we can knock down some compliance walls that are preventing people from even wanting to engage. Right now, the average mortgage company makes $457 per loan they originate.
Jason Hartman 30:27
That’s not much.
Jen Du Plessis 30:29
Because it’s all compliance written, they’ve had to hire so many people and there’s so many fines for making, you know, for computer mistakes, not human mistakes, computer mistakes. They’re not going to survive.
Jason Hartman 30:40
So, you know, Trump when he was a candidate, but he alluded to the idea that he was going to get rid of Dodd Frank. Okay. And Dodd Frank is really stupid bill. Okay, but, you know, whatever. That’s not worth arguing about. But is Dodd Frank going to go away? I mean, I think he’s already weakened it a bit. I’ve definitely read some stuff about that have not fought closely, he sort of destroyed Obamacare effectively as it kind of with an end run around it wouldn’t you know no fine for not having your insurance. But But where’s what’s the status of Dodd Frank?
Jen Du Plessis 31:11
Yeah, I think Dodd Frank is here to stay. I think I think that we need it. It should have been there anyway. But there have been there’s been some loosening that happens under the covers and behind the scenes that the normal consumers not going to see. And that’s what I’m talking about is the compliance written that tells somebody you can’t close your house because you forgot to sign a piece of paper digitally by midnight, those types of things are going to be going away. Because they have a domino effect on people, you know, not being able to close tomorrow, because I didn’t find that another transaction can close
Jason Hartman 31:43
or Yeah, a whole bunch of unintended consequences. Yeah,
Jen Du Plessis 31:46
yeah. And I think that’s where it’s at. And I you know, for the consumer, you know, my hope is that they understand this isn’t an negligence on the part of a loan officer, a realtor, a title company. It’s just what we have to do because the fear of Getting a $2,000 fine on something that you’re only earning $400 on. And so now these companies are going to close down.
Jason Hartman 32:06
Yeah, so that’ll just make for less supply. That’s what regulation always does. You know, it reduces the supply and increases the prices to consumers, the people they say they’re trying to help, a whole debate there for sure. But interest rates, were we going on rates 2020. You know, the Fed has already said that they might cut rates three times this year. I mean, really, rates are very low, we’re going to see them go down even more
Jen Du Plessis 32:29
we are we’re going to see them go down even more, we still have a supply issue with with homes, we still are, you know, we don’t have enough housing for anybody. We have a big issue with that. So what you’re going to see most likely during it because we’re about ready to hit and we talked about GDP right. And knowing when you’re in a recession, we’re going we’re heading towards a recession right now.
Jason Hartman 32:51
And of course, the academic definition, of course, two consecutive quarters of declining GDP, GDP.
Jen Du Plessis 32:56
Right, right. And so I’m sitting here and while we’re on camera shall hold up two fingers for you.
Jason Hartman 33:01
We’re not on camera. Yes, that’s a visual. Yeah, right. Yeah,
Jen Du Plessis 33:04
the visual. I’m sitting here holding up two fingers. But But yeah, so we’re, you know, we’re heading to that. And of course, you never know if you’re in it until but you know you’re out of it. But this is probably going to be one of the longest recessions that we encounter. Now, recessions can be good, and they can be bad, right? Quite frankly, all of us. If you lose your job, you’re in a recession. If you you know, you lose your house, you’re in a recession. If a business loses a client, they’re in a recession. But what’s going to happen this this next go around is that once we get into this recession, I believe we’re going to have a three quarters rate drop from where we’re at right now. This is going to be the lowest rates we’ve ever seen in our lifetime. And listen, I’ve been in the business for 40 years, and I’ve said that several times over the last 810 years, because rates went down to three and you know, three and three eighths etc. We are going to be three quarters lower than where we are right now on the day that we’re doing this which is January 23, or 24th.
Jason Hartman 33:58
And then we have a massive housing Inventory shortage, especially in the lower end of the market. And there’s literally in the last 10 years, almost nobody has built any workforce housing. I mean, almost, there’s almost none built at all. And if rates go down more, I don’t know. I know. I don’t know what I don’t know what we’re going to do. The builders have got to build some houses, well, inexpensive houses. So we got some music starting here.
Jen Du Plessis 34:27
And it’ll be it’ll go away there. Yeah, so values are definitely going to go up. So that’s a really good thing for us. You know, as investors, that’s a great thing. So this is going to be prime time. It’s sort of like get your ducks in a row so that you can take advantage and unfortunately, people are going to lose jobs, right? Because that’s what GDP is. So people are going to lose jobs to we’re going to have foreclosures, we’re going to have some of those that’s going to be to our benefit will
Jason Hartman 34:48
Okay, so let’s just let’s just talk about that a little bit. So when you say well, the economy’s due for a downturn, the question is always, what will cause that right Is it just the business cycle Which were, you know, well overdue for a business cycle? Obviously, you know, it’s certainly not a real estate debt crisis, maybe it’s a student loan debt crisis, maybe it’s an auto loan debt crisis. I don’t know, it’s just very hard to tell
Jen Du Plessis 35:15
it. And that’s one of the challenges that I’m seeing with my colleagues is being able to actually predict when this is going to happen. So some are saying it will happen this year. Some are saying it’ll happen in the next year, you know, like, early 2021. The question is, are you you know, are you ready for it? Are you are you putting the things in place for the potential of another recession, whether you’re going to be part of it or not, you know, gain from it or lose from it? You know, your point about we just had Amazon decided that they were coming to Washington, DC, you know, the big debacle of Where’s Amazon going to go and they’re coming to DC But to your point, absolutely no housing, no one can afford to come there and work to build the building that Amazon wants to build, right? So there’s, there’s no housing and that’s going to drive prices up, that’s going to drive rentals up as well. But the issue is that we’re not going to have, people aren’t going to be able to have those jobs to be able to spend money at the store to be able to spend money at restaurants. And then those businesses have the effect on it. And I think that that’s where we’re going to start seeing that happen. Well, it happened in in the Bible, I should say, Bible club at the middle America, probably not
Jason Hartman 36:24
just like those properties are so inexpensive already, you know, they’re there. That’s what we like, we like those boring linear markets. You know, we don’t invest in the cyclical markets and maybe some of the hybrids we do well, but not that not the boring linear markets. Those are just right. Nicely insulated from from a downturn. Thank God.
Jen Du Plessis 36:43
Yeah, they got and I’ve got a bunch of those too. But I also think that we’re going to see pressure you know, from from the states that are now charging more for taxes, they’re charging more businesses, we’re seeing
Jason Hartman 36:54
people are voting with their feet,
Jen Du Plessis 36:56
right. They’re exiting, you know, major states and going to more initiative. Going to states, but I think that’s going to have a shift there, too, you know. So the biggest thing, the bottom line for people that are in bed that are thinking about is investing is get your ducks in a row so that you can rock this recession so that you can benefit from this recession, having all your have your emergency fund to have your capital, if that’s you want to get your finances in place, there
Jason Hartman 37:18
can always be a good opportunity to refi you know, the refi to die plan that I teach, of course,
Jen Du Plessis 37:23
yeah. And you know, one of the strategies that my clients are using right now my husband’s still in the mortgage business is we’re refinancing and pulling equity out to position themselves to lower their expenses so that if the recession touches them, they’re going to be in a better cash flow situation every month, but we’re doing that with no cost refinances. So it’s not costing any money, but we’re yanking out that the equity now before we have any issues, right,
Jason Hartman 37:48
absolutely. Equity stripping. I’m a big fan of that. So yeah,
Jen Du Plessis 37:51
and when that happened when we had the recession, you know, it was I’ve got $100,000 equity, but now I don’t have a job. I can’t help you. So let’s get it while you’re good. So get your ducks. in a row, get your emergency fund, figure out where you can reduce costs, and then ride this tide of this recession. And if you have extra capital, bye, bye bye. Absolutely good stuff. Any questions? I haven’t asked you just anything you want to share? How about anything, just be patient, be patient when you’re dealing with lenders, but they they’re working out for your best interests. They are they truly are. So we’re real estate agents are looking out for your best interest. We’re just working within the confines of the system, the new system and you know, just be patient with them. Have it you know, real strong relationship with people and don’t go transactional because it’s going to hurt you,
Jason Hartman 38:37
Jen, give out your website. Yeah, it’s Jen du plessis.com. Jim, thanks for joining us.
Jen Du Plessis 38:42
Thank you so much for having me. It was great.
Jason Hartman 38:49
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