 Welcome to Condo Insider, where we discuss all things related to condo living and condo ownership. I'm your host, Christa Stadler, here with Patty Kanuha, the producing branch manager of VIP Mortgage in Kailua, Kona. Patty will share her insight and wisdom regarding refinancing and the loan process. Welcome Patty. Aloha. Thank you. All the way from Kona. All the way. Thank you. Yes. And for full disclosure, Patty and I have known each other through the industry for several years at least. Many years. Yes. Yes. So, Patty, tell us a little bit about yourself, how long you've been in the business, have you been in Kona your whole life, a little background? Sure. So, I moved to Kona in 1979, I was raised in Washington state and then came here. We didn't know that, did we? I know. We came here for a month vacation at 19 years old and so it's been almost, it's been 41 years this month. Wow. Life has happened to a 19 year old, so long story short, 41 years later husband, three boys and seven grandchildren, I'm still here. Excellent. That sounds like me, but mine's only been 21 years. So, how did you, what led you to the mortgage business? Have you been doing it for a long time? Yes. So, I started in 1987 in traditional banking. So, I started as a teller at Pioneer Federal Savings Bank, which was statewide, first chartered bank in the state of Hawaii, started the territory way back then and I was a teller of CSR, senior CSR, operations manager and then to branch manager and our location was right on Pilati Road and then right before my 10th year anniversary, we merged with First Twine Bank. So, but at Pioneer, we didn't do personal loans, credit cards, we did mortgages, we did equity lines, deposit CDs. So, when I merged with First Twine Bank, they made me a branch manager in Waikaloa. So, the Waikaloa office at First Twine Bank, that's where my first home was with First Twine Bank and that was in 1987, no, 97. And so, I did that for a couple of years, we did really well there. And then I became, same thing, mortgages, equity lines were my biggest thing. I did a lot of training on that with tax returns, et cetera. And then they made me a sales manager for five branches from Konaka to Kona, Waikato School, actually. And didn't like that as much because it took me away from that mortgage part. And that's when I realized that was really something that I really liked to do. So I was, I think it was in 2001, I left First Twine Bank and worked for a mortgage broker for a year. And I loved it. What I didn't love was, as a broker, you could go to the closing table and things would always still be coming up, back in that day at least. In 2002, I believe, I joined Wells Fargo as the first private mortgage banker for the state of Hawaii. And I think about three years later, I became a branch manager and kind of split off. And then I did managing the state. So total 12 years there. And at that time, we could underwrite our own loans. And we could approve our own loans up to a million. So I was the only one in Kona and then I built a team on Maui, Kaua'i and O'Loughlin. And so that's where I kind of found my element. You must have been traveling a lot with, and you had small kids at that time, right? And didn't you? Well, actually, one was at Kamehameha School. One was, my oldest son would be 40 already. So I was already in the military. And the other one was in high school. So it was a good time, actually. My youngest son played football and never missed a game, except one when our fight was delayed for four hours. But it was, so that's when I realized this is my element. But I love it. Never, well, I'll do it till the end. That is, that's so wonderful. I think I met you during that time. I think you met, I met you before the world went crazy in 2008. And everything went to heck in a hand basket. I remember when that happened. Yeah, all the schools are changing. Wow, yeah, you've seen, you've seen all of that. So for the folks out there that, you know, don't know, you know, there's so many different facets of real estate. What does, what are the programs? What are the things that a mortgage broker handles? Well, I guess everybody would be a little bit different, but to start with it's pre-approvals. For someone that's looking to buy a house. And that would be the first step is to get them pre-approved. And as we discussed earlier, getting pre-approved before they look for a home is the best situation. For them and as well as for all the other parties involved. Sometimes they may think they don't qualify for something and they may or they might think they qualify for more and they don't, but this gives them an idea of what that would look like to them. What would their mortgage payment be? What would their rate be? Is their credit satisfactory? You know, and so it gives them all that information above so when they do go in to make an offer, they can do it with confidence because they know they're qualified. We prefer, and I know not everybody does, but we prefer to gather their documentation. If they don't want to, that's their choice. But like I tell them, it takes a little time on your behalf, it takes time on our behalf and it may never close. You may never find it properly or may decide not to do it, but it's worth it because at the end of the day, when you make an offer, you know you qualify. And it's a good representation for your agent who's making an offer on your behalf. And it also, to me, I know a lot of listing agents want that pre-approval, but it still surprises me how many don't. And I recently had a call from a borrower that had a pre-approval and when they went to escrow, they weren't pre-approved, they never even ran their credit. Oh my gosh. I just had a phone call and they typed up a letter so you know, yeah, sounds, basically, yeah, sounds good like what you told me and you didn't qualify. And so they came to me, but it was the same story we couldn't do it. But we're still, we're working with them now and we're gonna get them to a place where he will qualify. He will, he just has to do a few things. So those are things you don't wanna see happen to them because for one, he went into it with good faith. He didn't realize that that pre-approval meant nothing. You know, he thought, yeah, this piece of paper says I'm pre-approved, it must mean something. So I would prefer to put the time in and give them a real pre-approval. It goes through, credit has to be run. It gets ran through a decision system. So tell me the difference between, I mean, you don't have to go through every single thing, but the pre-approval you need bump, bump, bump. And then when you get to the real deal, then you're gonna need this whole litany of things, correct? Well, you can do it one way or the other. And there's third times we'll issue a pre-approval without all documentation. It might be a repeat client you've worked with a few times or cutting dry, they've given you a W-2 and a pay stub, and that's really the main meat of it. But if there's spottingness to it in any way, or if it's someone I don't know, we prefer to get the W-2 to current pay, whatever the decision agent calls for, two months of bank statements, two paystubs, a W-2. Different documents required for self-employed borrowers. Then you need tax return, right? So it really depends on what's being requested or what's needed for that situation. But if they refuse to do it, we'll do our pre-claw to say based on the application, no supporting documentation has been received. We don't wanna mislead anybody. And not like you can't issue one without it, but I don't feel that typing up a pre-approval and you haven't ran credit is not a responsible way to represent your borrowers. It's like me renting out a property without running their credit would never, not gonna happen. Yeah, not gonna happen. It doesn't benefit anybody because now you got the support agents and asked to go on someone else took it off the market to sell it and now it's not going anywhere. So when you're pre-approving them, I know you have a whole variety of different loan options people can utilize. Are you pre-approving them for a specific type of loan or are you pre-approving them just generally? And then when you get further down, you'll determine which loan option that best fits them. Typically it's a specific type of loan. Okay. But, so there's gonna be three categories. There's a government loan, FHA, USDA, VA. There is your conventional conforming, anything below the conforming loan limit. And then there's jumble, right? So if you're going to jumble, then we're gonna get two, then there's no ifs or buts. It's two years tax returns, whether you're a self-employed or not, two years W2s. But if you're conventional conforming, anything within that price range, you're gonna be qualified for based on the information that we're going through. We'll ask them what is the maximum purchase price you'll go for? That's not what we'll issue the pre-approval for, but if you're looking at a property for 700 and that's the highest you'll go, that's what you wanna pre-approve before. That way if you're gonna offer 660, easy to do, it takes two seconds or two minutes. And then you wanna do another one for 680. It's easy to do that rather than having to rerun things every time you wanna go up. Sure, interesting. So you don't pre-approve just for, this is the max that you, based on your income, that you actually have them pick that number. You want them to pick that number. Yeah, because it's not always what they'll qualify as, what are they, comfortable paying? Oh, and I agree, I qualify for a lot more than I actually spend, because I don't wanna be. So if they just tell me 700 and I go, here you go, and then they see what that number is. So most of it's done remotely, right? You're doing on the phone, on email, you apply online. You can, especially with all this stuff we're going to do right now. But before I issue it, in most cases, in the early process, I'll talk to them about that. Just say, what is the maximum payment you want? Especially first time home buyers. So I should clarify that. Yeah. I mean, people that have been around the, done the rodeo, they're comfortable with what they're buying. But they're still gonna see what those numbers look like. When we send out our pre-approval to them, not to an agent, I'm putting in there what the rate options are, what that P&I looks like, what the preliminary closing costs are. So there's no surprise. So they know what they're looking at. They know that this is the number I chose, but this is what it's gonna look like. Right, and I think that's great. Definitely, absolutely. So what if somebody comes to you and maybe they've got a positive, maybe they've got great credit, but they don't have down payment money, or maybe they've got quite a bit of down payment money, but they don't have such great credit. Are there options for them? Right, so all those situations are different, but so let's start with credit, because there's three or actually four, there's low value. For one, it's your product and program. So let's say someone has a down payment, they have the debt to income ratios are in line, but their credit is not to where it should be. When I say not to where it should be, there's derogatory events, right? That's bankruptcy, foreclosure, deed and loo. Those are different based on whether it's conventional conforming, whether it's a guvy loan, or whether it's a jumbo. Jumbos, cut and dried, conforming is cut and dried. The guvies are usually like half of the waiting time, but there's no is to buts about it. So if it says two years, it's two years. If it's not one of those derogatory events, but more it's a credit score, it depends on why. Is it because there's just a recent medical collection? Is it because you only have two trade lines and they're both maxed out? Credits became a very big piece of a decision and that's what happened to one of these clients that had got pre-approved without having their credit ran. And then when they did run it, it physically met the guidelines. I mean, in black and white, it says, this is the lowest that you have to have this score. He met the DTI, he met the reserves. He met the credit score when to prove it. Oh! Because it goes by your overall profile and credit things are changing. They're looking at, now when you see a credit report, it'll show you what the two last two years have looked like. Has the use of credit increased? Has their limits or their usage compared to limits increased? The pain is going up. What does the trend look like? So there's a lot of trending in that type of thing. For the most part, if you meet those things, it's gotta go through, but there's that one off that it just didn't like it. But we have a system that will actually give us, okay, there's three scores. And it'll say there's an opportunity to improve this score by 22 points, this score by 18, this score by 30. So we use that and that's how I'm helping this client. As we actually say, you pay this down to this. You pay this 18, whatever it may be, there can be many situations. You have to get that score up. That's great because if they pay off that medical collection, if they have their actual amount, 50% less than what they have credit on, all those little tricks, yeah. But we're gonna take a little, I'm so sorry. No, no, I was just gonna say, but my thing to them is never tell them to pay off anything without doing that homework first. Because it can actually change your outcome. It could actually be a negative. Interesting. If you have a delinquent account and then you do anything on it, you could make it, it could actually have a negative effect. Well, we're gonna take a little, thank you so much. We're gonna take a little break and we hope you all join us. Patty is going to talk to us a little bit more about other facets like refinancing, how COVID-19, the pandemic has affected for business, if at all, and what she sees for the future. So stay tuned, thanks. Aloha, I'm Kisha King, host of Crossroads and Learning on Think Tech Hawaii. On Crossroads and Learning, our guests and I discuss all aspects of education here in Hawaii and throughout the country. You can join us for stimulating conversations to enrich and liven and educate. We are streamed live on Think Tech bi-weekly at 4 p.m. on Mondays. Thanks so much for watching our show. We look forward to seeing you then. Aloha. And welcome back to Condo Insider. I am here with Patty Kanuha, producing branch manager of VIP Mortgage. And she is going to talk in the second half about refinancing. If this is a time you may wanna consider refinancing, what that entails and discuss a little bit about COVID-19 and how it's affected the mortgage business. So thank you, welcome back, Patty. So let's dive into refinancing. Is this the time we should consider refinancing with interest rates being lower? Yes, there has to be a benefit to doing a refinance. Even for a loan officer, we cannot do a refinance unless there is not what we call a benefit to borrow. And there are certain categories that meet that benefit. One of those is rate. The rate has to be lower. How much lower? How much lower? The detail or the actual apartment is a quarter percent. Oh. Yeah, but typically, honestly, that wouldn't be a benefit enough to most people, right? But another option is cash out. They need cash out, they're gonna pay off something. They're gonna use it to put their child to college or they're gonna lower their debt or something like that. And then purchasing there's never a benefit. I mean, that's always a benefit. So that doesn't make a difference. And if it's an investment property refinancing, there's really no rules on it. But as far as rates, they're extremely low. I can't tell you a certain situation. I didn't price anything today, but I know like two weeks ago, we locked like three different loans at 2.99. They might've had a half a point or something to that degree. And all three of those properties were actually owned less than two years. So that's how big of a difference it had made. One and a half percentage points to their interest rate. But for a borrower, it's not always rate. It's sometimes their situation. Maybe by refinancing, even though it might be adding more time on, it lowers their P&I payment and makes it more comfortable. Or just by paying off certain pieces of debt, maybe they've taken on truck payment, especially during these times, while the send your incomes cut in half. And so it has to make sense to the borrower and has to, the rate is always a focus point and rightfully so. But also, what is their bottom line is? So when we do our scenarios that we send to them, we put in three or four different rate scenarios, but then we'll also put what is their monthly savings? So they can, and then here's this rate with no points, here's this rate with some points. How many months does it take to recoup that? So it doesn't make sense because sometimes just that 2.99 sounds great. Depending on credit and everything else, maybe that has a steeper cost that really doesn't make sense. Maybe three and a quarter cost you 50 bucks more a month, but it won't take you 60 months to recoup, right? So it's all about what is best for them. I have questions, I have questions. Okay, so my first question is, do you have to own your home a certain period of time? I have two questions, that one is the first. Do you have to own your home a certain period of time before you can refinance it? You should own it or have, or even if you've owned it for three years, but if you recently did another loan, should be six months. And the reason why is that whoever did the original loan gets charged an early payoff if it gets refinanced and paid off within six months. So we're cognizant of that, even if it's not our loan, even if we're not refinancing our own, because it's a steep, it could be, I think it's like 3% of the loan amount of the original loan amount. So it's a hefty fee, and because delivering an owner-occupant loan, they don't wanna have a delivered owner-occupant loan more than, it has to be like every six, it can't be more than once in six months, it's to wait six more months. So we just try to, it's very unusual to have one that young that really needs a refinance. But we can always get it started, we just can't record it until after the six months is up. Interesting, so then my second question is, let's say it has, let's say it's been a year or two, when you're going through the refinancing process with VIP Mortgage in your situation, do you have to go completely re-qualify again? Let's say my original loan was with you, am I going to have to re-qualify everything again? Just like a regular loan, okay. Yes, yes you do, because it's a new day, right? So we don't know what your income is, so all that stuff still has to document, because it's still on the burden of the loan officer or the lender to confirm that they have done their due diligence to make sure that they've done a loan that you can afford to pay back. Nobody wants to see somebody lose their home, and nobody wants to be part of that. So it's our job to make sure that, as well as the fact that every file gets audited, and that will be confirmed, but so the only thing that we do see happening is there are appraisal waivers happening fairly frequently, maybe 50% on refinances, so that's sometimes helpful and saves some time if you don't have to go through the appraisal process again. It's not a guarantee, it's really behind the scenes, Fannie, Freddie, wherever that loan's gonna end up going, they have a system built in that can pull comps, et cetera. So when you run your decision, it'll tell you up front whether you need an appraisal or not. Very good, so let's talk a little bit about COVID-19 and what changes you've experienced, if any, since we all went into the lockdown and how is it affecting your operations? So operation-wise, there's not a whole bunch of change as far as we're not, I'm not meeting with people very frequently. I do meet people to pick up documents if needed and just do it very, of course, that's all changing as we speak, right? But you have more freedom to do that now, but the signing process definitely had a lot of changes. If you work with Title Guarantee, I actually like their process. We got to where we send the docs out to the borrower the day before, so if they had that time to review them, I'd be available to answer any phone calls. And then when they showed up for the signing, they had a metal table outside their window and the docs we passed to them, they'd have gloves and a mask, they'd be given their pen that they could keep and they would just sign the signature pages there and it took like 20 minutes. Have you seen a decline in purchases since? I did originally. So this all started in March, but I didn't really see any fall off to our business so probably about mid-April until about mid-May. And then a few weeks back, it just kind of started booming again with purchases that only refinanced. So there's been a difference though with COVID, there's so much opportunity for refinancing. However, if you're laid off, you can't take advantage of that yet. Now, so there's a lot of forbearance opportunities and that's wonderful as it should be. But if you're in forbearance, you can't refinance because you don't need payment, right? And they're the ones that actually could use the refinancing. So, wow, that's really tough. Yeah, hopefully forbearances could be three months, it could be six months, depending on your situation, but hopefully, I don't see rates changing too much in the future. So I know that's probably something we'll discuss after, but I think that they'll still have that opportunity. Excellent, well, that's great, okay. So as far as out there with real estate, and I don't know how involved, if you don't know the answer or you don't wanna get into this, are you seeing, but you seem pretty familiar with, especially the Kona area, are you seeing prices staying comparable to what they were prior to March or increasing or? I don't can't speak exactly just from March, but I did check my own property, my sons and a nephew, all of who I have access, all of them went up. I was, and I checked that about a couple of weeks ago before we even talked about having this call. So I've talked to a couple of agents that I've worked with, they said they have not seen a downward trend. Now, everybody has different markets, it doesn't mean it's not happening somewhere, but refinances, ones that need appraisals came in at or above, and these are all properties that have, these last three I'm just speaking of have been all purchased within the last two years or less. So far, usually I would think that we'd see some of this, but it's, and so really I can say honestly, I'm not qualified to speak about it directly because I only see what I see when I get an application, but I have not seen it directly. Interesting, well that's positive. You know, I've always had thoughts, I wonder if folks are gonna start thinking now maybe we should move to Hawaii or get a place in Hawaii just because we have had, you know, we've taken so many precautions and we have such a low count. And, you know, at least in Kona, I'm not so sure about Honolulu where I am now, but when I lived in Kona for the last 20 years, I had time, I shouldn't say this, but I didn't even lock my door ever. I don't even know where the key was. I don't know where the key either. Oh yeah, I don't have a key in my house, I don't know where it went long time ago. Yeah, right? Wonderful. It's just, it's so wonderful, it's so wonderful. Now I live in a secure building with video cameras and whatnot. Oh wow, different thing. Well, I really appreciate you taking the time. I had you in mind, I just thought, you know, I've respected you and appreciate so much what you do for the industry and all of your wisdom and experience. So thanks for sharing that with us. My pleasure. Greatly appreciate it. And I wish you all the best. And you take care and I'll hopefully see you around town sometime when I'm coming to Kona. Well, I hope you're having me and if, you know, you need to follow up, just give me a call, you know where I'm at. All right, thank you, Aloha everyone. Thank you for tuning in and we will see you next week. Take care. I'll be home.