[David] Alice, I’m really excited to get your segment because of the Senate housing bill. They talked about that in the MBA segment Adam DeSanctis did, and I’m really interested in having you talk about your thoughts and all of us joining in a discussion about this.
[Alice] Yeah, so it’s been pretty it’s been very vocal in the news lately about, yeah, the aspect of the Senate housing bill, that during this week there were provisions added that would add further restrictions to what we call an institutional investor, what they call. And so in the law, this is currently, at least as of last thing I read was, if the, an entity owned 350 or more homes investment properties, that was the dividing line. There are many other aspects of the bill, but I thought for this conversation, I think our listeners would like to hear what’s good and bad so that they can reach out to their congressmen and women and let them know whether or not they think this is a good idea. It’s funny because before the show, we were comparing some aspects of it to a 50 year mortgage that we went. Did they really think about the ripple effect? Yeah. So I think just to start with would be the fact that one of the provisions that was added was that in certain rent to buy developments where an in investor, an institution investor owned X percent or owned the entire development, that they would be required to sell the property to a purchaser offered up for purchase within seven years. Yeah. And the first thing that goes to my mind being the regulatory compliance person that I was for so many years, is who’s enforcing all this for starters? Yes. Yeah, great question. What regulator is going to be monitoring who owns what percentage, who does this law apply to? Does that mean it gets spread out to various regulators, which, who is that for the builders association? There isn’t. Yeah. There, there isn’t a regulator necessarily for them at a federal level. And how would you monitor this seven year piece? And then of course my brain goes, I’m sure as all of you did, where what lender wants to do a mortgage in the first place knowing there’s a takeout that has to happen in seven years. If I get the house back in foreclosure in five, now what happens? There’s just so much that hasn’t been thought through. There’s lot of take with this statement like that. So I’d love this group to chime in and tell our listeners what you think. ’cause there’s a lot of. Fluff out there. Obviously there are articles supporting the investors yeah. And supporting the need to get them under control in certain markets. So yeah. You I think it goes, experience I thought would be helpful to share.
[David] Yeah, go ahead, bill.
[Bill] So first I thought it was hysterical that one of the first groups that came out in favor of the seven year mandatory sell was the National Association of Realtors. Yes. Gee, saw commission checks coming. Oh gee, I wonder why. Yes. I wonder why All the money. so my second thought was, putting my risk hat on. So if you’ve got 500 house subdivision that was all billed to rent and now you’re getting to the point where you have to start selling, what lender is gonna wanna finance those early transactions? ‘Cause. At that point, it starts to look and feel like a condo association. That’s a hundred percent yes. It’s great analogy. Investor owned. So Alice, to your point, so let’s say sales start to happen, but they’re not at the pace that they’re supposed to. Then the Blackstone of the world that owns it, are they forced to lower prices until they generate sales? That would be a bummer for the first group of people. Yeah. And what do you do with the tenants that are living there and have been a great, that’s happy tenants and
[David] Who cannot afford to own. So that forces them all to go into multi dwellings in apartments.
[Bill] And so that was my other thing is okay, so I get it right, the single family house vision, but. What’s the difference between a 350 house subdivision that’s billed to rent and a 350 unit attached housing complex? Whether it’s a high rise, whether it’s townhouse style, whatever. You’re building it to rent. Why are you forcing one group to sell them after seven years, but yet another viable, productive segment of the housing market? You’re saying those don’t apply. It, they’re getting so fixated on the fact that it’s a single family house, number one. So number two, if you start stacking them together, then does that eliminate. It’s so poorly thought out it from so many different levels. It’s,
[David] Yeah. That’s, and I reached out to Logan Motashami when you guys sent over this article to talk about Logan at the housing wire. By the way, thank you for housing wire support them all that they’re doing. Be sure to sign up for the gathering, get a part of that put that all in there because that way I could quote Logan freely make sure I’m not getting crosswise with a housing wire. But he doubts, he personally doubts he doesn’t know. Anything’s possible. He doubts it’ll pass in its current form. I think it’s, so that’s was his thought. He said there’s a lot of aspects about this that needs to be thought through more thoroughly. And that’s, I thing it’s gonna happen. I think that’s evidenced by who’s sponsoring it. We have bipartisan Elizabeth Warren and Tim Scott. I got a feeling this was a, probably a little more Elizabeth Warren leaning on the. Scale on this then Tim Scott, I have a privilege of knowing Tim, talking with Tim Elizabeth has a lot more conviction about housing. In a way it should be in here. I think one thing, Alice, you brought up when we were talking about this before we went live was the fact that this is very much a market driven. There’s some markets where there isn’t an ordinary percentage of investors owning it. I’d love to get your, share your thoughts on that. And then also the timeframe when these homes were bought. Bill, you raised that. So Alice, start with your comment about the regional aspects of this.
[Alice] Yeah, there are definitely regions across the country and depending on where you search, but you’ll find different names. But there are some consistencies between Atlanta, Jacksonville, Charlotte. Those cities seem to be coming up regularly in various searches. And we def definitely understand in some markets typical home purchaser cannot compete with an institutional investor that doesn’t care if they overbid by 5% or more because they’ve got a different long-term gain that they’re interested in on the home. And so does, but does it need to be something that’s federalized in order to solve a regional problem coming from an administration that was talking a lot about do things at the state level. So that I think is something that we have to talk more about. There’s definitely markets where it’s a challenge, but what are some of the other driving factors in those markets that should be looked at as opposed to something at a federal level that’s noten enforceable?
[David] Yeah. Very good. Very good. Bill, you made some comments we were getting ready. Yeah, go ahead.
[Bill] What’s that great Ronald Reagan quote? The worst from the government, the worst, however many words in the English language. I’m from the government and I’m here to help you. I’m here to help. Yeah. I’m not sure that their solution, to your point, Alice, to this problem is the right way to go. And it also feels like they’re picking off of the buffet line of different issues and putting it together. A lot of the areas. So Charlotte’s a good example where there is a large investor concentration, but that’s been a lot of buying up individual houses over time and they make a conscious decision. They’ll put an office. And they’ll only buy properties that are within 15 miles. Because they feel like they can manage and maintain them, but they were the ones going out and hammering with all cash offers, right? That’s very different than the build to rent where the Blackstones and investment funds are going to a builder and saying, okay, look, I know you have an approval to put 300 houses up here. You can build and take the risk of how fast it’s gonna take you to build and sell out everything, or we’ll actually pay you less money per house, but we’re gonna pay you right now to build those 300 houses and here’s the money. You gotta look at the builder side and as they’ve looked at market nervousness going, okay, I can get one check and I’m still banging nails, but financially I’m done. I got my money. That can be attractive and yeah so so much of what they’re doing is mixing and matching and I thought it was fascinating that they started off at a thousand. Yes. And we talked about it, I think it was last week, then it was down to a hundred. Now it’s at three 50. But you have to sell okay what’s gonna be tomorrow morning’s announcement?
[Alice] It sounds like people in a room who don’t do this for a living who don’t understand Exactly the dynamics of the finance side of it, for starters. And it’s just, like any I’m not saying it it’s like ineffective negotiations where you’re just trying to split the middle. Somebody said, okay, if not a thousand, how about three 50? And none of it makes any sense in the real life.
[David] Yeah. I think this is gonna get struck down. Mark your thoughts on this.
[Marc] Yeah. I want to, I wanna give you my 2 cents worth on this. First of all, I think it’s appalling that we even have to have this conversation, okay? Not that it is not needed, it is needed, but it’s appalling. We do I’m looking at a subdivision built for rent in rural Alabama right now. I pass it just about every day when I’m in Alabama. Pretty nice houses, not great houses, but pretty nice houses, and I’ll bet you that. Everybody that’s in there is there for a reason. They don’t have the money for a down payment to get a house, et cetera, et cetera. So those houses serve a purpose and it’s all about housing starts and provide housing for people and people rather being housed than a condo or high rise or whatever the case might be. And I just think it, if somebody’s willing to step up and make sure that happens for people and there’s a place out there they can afford to live in, and now we’re trying to do everything to tear that apart, that doesn’t make any sense to me at all. It doesn’t, yeah.
[Alice] And what about manufactured housing in all of this, people talk about that. It’s too expensive. Articles where they say it’s 400,000 to build a house because 24% of it is based on, all the regulation that a builder has to get over and so forth. Manufactured housing should be a part of this discussion. There is terrific manufactured housing done today. New. There’s some really good quality stuff out there too. Yes, it is. That has to be part of this solution, and it did get a little one-liner as part of the bill, but needs more attention to Mark’s point of building more homes that are affordable.
[Marc] Yeah. Yeah. A company I’m working with right now focuses on manufactured housing, double wide, single wide the focus on financing for the parks they got a deal. People don’t realize this happens, but people go in and place a manufactured housing in a park and then they die or they move or whatever, and it’s there and they’re forced to sell it to somebody because they can’t move it out the way it’s been built and put in there. And a lot of times the people that buy it are the park and so the parks end up owning it, but at least they maintaining that housing for people because they need an affordability function there and they’re doing that. So I’m glad the parks were able to do that. Matter of fact, Patriot Housing has been an education process for me the past couple years ’cause I never dreamed it was a diversity as you can go to California and see a manufactured housing roll out of a plant for $300,000. And then you can go over to Alabama and see a manufactured housing roll out of a plant for $75,000. It is just as diverse in manufactured housing as it is in the home building market. Not quite as large a numbers, but still diverse. Yeah. Yeah.
[Alice] That’s a, you brought up an interesting segment Mark. The ones that get moved into a park because the investors won’t allow it to be moved, you can’t get a secondary market, a hotter VA mortgage on that. On one that’s moved. Yeah, that’s right.
[David] Yeah. Very good. Then it’s a complicated, a dynamic issue. What’s driving this is a lot of people who have complained that says, I was bidding on a house. I got beat out. I finally found a house I gotta afford, and Dogon, an investor came in, an institutional investor came in. Snatch the house up and now I’m renting again. I think this needs more attention. I’m not a fan of the bill. I’m a fan of something being done, but let’s think it through. Measure twice. Cut once. Good discussion guys. Good panel discussion. I love this all the way around. Unfortunately, we don’t have our AI tech expert Alan Pollock on the podcast today. We’re missing him. There’s a lot going on in AI out there. There’s some new companies that are rising up that I am. Looking forward to having on the podcast that are doing some very innovative things. Listeners, if you’re hearing things out there about companies, please let me know about them. I’m gonna have them on the podcast as the opportunity arises and as I’m doing due diligence, we just don’t let anybody on the podcast. We wanna vet them a bit. But if you hear anything listeners about yet, you’re hearing someone doing something unique out there, we wanna hear about it and we’ll help put some jet fuel behind them by giving them some airtime. So love to hear from you listeners on that.
Alice Alvey, Master CMB
She handles development of their World Class Training program designed to support UHM partners and organizational effectiveness.
Prior to UHM, Alice served as Senior Vice President at Indecomm leading the Indecomm-Mortgage U division, Internal QA and Compliance and SaaS technologies. Indecomm acquired Mortgage U in 2013, where Alice was President/Co-founder, providing training and consulting since 1996. Prior to MU she served as SVP of Operations at a national bank overseeing operations for wholesale, retail and correspondent from underwriting through servicing, and compliance.
She has been in the trenches of mortgage lending operations from application through servicing for over 30 years. Her authoring work in training content, policies and procedures and the FHA/VA Practical guides illustrates her ability to bridge regulatory requirements with day-to-day operations.
Alice has been a weekly contributor to the Lykken on Lending show since its beginning in April 2009 and has made her weekly contributions to 450+ episodes!