120 What Is Going To Happen When The Mortgage Refinance Boom Is Over?

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120 What Is Going To Happen When The Mortgage Refinance Boom Is Over?

Bill, Wendy, and Jonathan are live in the Active Income Passive Wealth Show to answer today’s “Ugly Question”.

What is going to happen when the mortgage refinance boom is over?

Understand more about this topic by watching this video.

Carolina Capital is a hard money lender serving the needs of the “Real Estate Investor” and the “Small Builder” borrower who is striving to build wealth and generate income for themselves and their families. We offer “hard money rehab loans” and “Ground-up Construction Loans” for investors only in NC, SC, GA, VA, and TN (some areas of FL, as well).

As part of our business practices, we also serve as consultants for investors guiding them to network with other investors and educating them in locating and structuring transactions. Rarely, if ever, will you find a hard money lender willing to invest in your success like Carolina Capital Management.

Bill Fairman (00:02):

So, have you been wondering what’s going to happen when the refinance boom stops?

Jonathan Davis (00:10):

Almost every day.

Wendy Sweet (00:11):

Yeah, cause that’s gonna happen.

Bill Fairman (00:13):

That and more,

Wendy Sweet (00:14):

Get ready!

Bill Fairman (00:14):

Next. Here’s what we do since we’re sibling.

Wendy Sweet (00:29):

I’m teasing him cause he just doesn’t ever sell it excited. Billy’s always so calm.

Bill Fairman (00:34):

Yes. I should have been in the golf announcement business.

Wendy Sweet (00:38):

Unless you’re driving, you’re not calm then. He’s one of those rage guys that you don’t want him to be in the car with

Bill Fairman (00:45):

So, thank you for joining Active Income, Passive Wealth show. I am Bill Fairman. Wendy Sweet. Jonathan Davis. We are Carolina Capital Management. Maybe I can say that with a little more excitement. Carolina Capital Management. We are a lender in the Southeast. So if you are a borrower looking to borrow some money in the Southeast CarolinaHardMoney.com click on the apply now tab. If you’re an investor looking for passive returns, click on the accredited investor tab. Don’t forget to subscribe, share like hit the bell, all that good stuff.

Wendy Sweet (01:23):

Tell all your friends.

Bill Fairman (01:23):

Also, I’m going to have through put in our comment section. We are going to be guests on the cashflow expo coming up at the end of this month, you can register for that.

Wendy Sweet (01:40):

Well, let me mention this too. I am doing a, I’m participating as a speaker in what’s called the short term virtual summit. Short-term rental virtual summit. You do not want to miss that. You can go to, IRARocketFuel.com and sign up for that. You’ll be put into a Facebook page, but sign up for that. It’s it’s actually this Saturday, February 6th. So two days from now that you can get online and it’s cost you a whole lot. It’s absolutely free. So yeah, there’ll be six really good speakers there

Bill Fairman (02:19):

Yeah. It sounds like it will cost you not to attend.

Wendy Sweet (02:23):

That’s right. That’s right. And it’s over there in the chat box. If you want to take a look, thank you for putting that out there, Cherub.

Bill Fairman (02:29):

Excellent. Nothing like giving you guys a heads up with plenty of advance warning.

Wendy Sweet (02:36):

I think it’s before the day

Bill Fairman (02:40):

And we give Wendy a bunch of grief because she’s like the just in time freight. When we get ready to turn this train on Thursday, she is just sat down

Wendy Sweet (02:55):

I got stuff to do. I’m busy. Somebody has to work around.

Bill Fairman (02:59):

So today’s, let’s, you know what, before we get to the question, let’s talk about breaking news,

Jonathan Davis (03:06):

Breaking news.

Bill Fairman (03:07):

Breaking news. Five, four, three, two, one.

Jonathan Davis (03:21):

This just in, go live breaking news.

Bill Fairman (03:24):

So, the jobs numbers came in this morning. ADP’s numbers for, private hiring, I think came out on Wednesday and they were, expectations were for like 49,000 new jobs created. And it was like 175,000.

Wendy Sweet (03:43):

New jobs created?

Bill Fairman (03:46):

New payroll.

Wendy Sweet (03:47):

That’s really goodness.

Bill Fairman (03:48):

So a lot of that has to do with States or some of the States are starting to reopen again. So people are able to get jobs in those areas. The unemployment, first time unemployment claims the estimate was 849,000 and it came in at 749. So it was a lot better than they expected. And continuing jobless claims are now below 5 million is like four, three. So that was under expectations as well.

Jonathan Davis (04:24):

It’s really good news.

Wendy Sweet (04:25):

That’s very good news.

Bill Fairman (04:25):

It’s better news. I mean, it doesn’t mean that there aren’t more than 5 million unemployed. They’re just no longer on unemployment insurance. So, you know what happened after 2008 is that we had a lot of people that left the job market, you know, altogether and you know, when we started booming and we had this really low and unemployment pictures, people were like, well, you know what? Maybe I should get a part-time job or something. Now, people are like, eh, I’m retiring. So especially with all this extra money that we’re getting.

Wendy Sweet (05:09):

Yeah. You were gonna say free money, aren’t you? There’s not any out there.

Bill Fairman (05:09):

Yeah. It’s funny. There’s a guy that took his stimulus check and he used it to, he didn’t need it cause he was employed, but he got in anyway. So he took that money and he did the Robin Hood thing. And he initially invested in, you know, AT&T and a couple of other, you know, blue chip stocks. And then he had one stock that he said, you know what, I’m going to gamble with this one. Then he made a pretty good return on it. While he was doing this, he was learning how to do leverage in the market.

Wendy Sweet (05:47):

Stock market, right?

Bill Fairman (05:47):

And then he hopped into a game stop, AMC. And then when the price is going up really high, he went ahead and sold all of it, except for about five shares of GameStop. And he made with his, $1,200 that he got. Cause it was a family thing. He made $36,000.

Jonathan Davis (06:11):


Wendy Sweet (06:12):

That’s pretty awesome.

Bill Fairman (06:14):

Now, the problem is he’s probably not the majority of people that do this.

Wendy Sweet (06:23):

A lot of TVs went on sale too. I gotta say that

Bill Fairman (06:27):

That’s okay. Hey, he got a little bit of a government government bailout to improve his position and that’s what he did with it so good for him

Jonathan Davis (06:36):

Banks Dupree, just ask the question here and you all can read it while it’s up there, but the answer to your question is yes, you should go ahead and divide those lots and get as close to one and a half, two acre, lots as you possibly can, how many you can fit on your 6.7 acre and subdivide those and get them planted in a record, you know, survey all the things before you go to get the loan. That way it’s a much easier simpler process at closing.

Wendy Sweet (07:09):

Right. Right. Absolutely. No good and good for you. Really good for you. I’d be interested in knowing where it is. I’ve talked to banks before, but I don’t remember having to do that.

Jonathan Davis (07:20):

And we’d be happy to do that loan for you after you divide those lots.

Bill Fairman (07:23):

The first thing I would do though, is research the highest and best use for the property that you have because you don’t want to get caught in that trap of I build houses. So houses go here.

Jonathan Davis (07:35):

Well, it’s true. It’s right across the street from a development that’s looks like it’s two acre, lots and 1800 square foot houses selling for 340.

Wendy Sweet (07:41):

Yeah. So he’s done this before.

Bill Fairman (07:43):

No, I know. But again, if you’re, as long as you’re comfortable with that, it may be a situation where you can do some patio homes or townhomes that something across from that, that you’re giving people another option, but still a hiring.

Wendy Sweet (07:58):

And especially if those properties are located in South Carolina because South Carolina is number two with retirement people coming in, you put Patty homes in there and that’s a slam dunk. So it’s our H zone.

Jonathan Davis (08:14):

Our one zone.

Wendy Sweet (08:16):

But here’s the problem. Our one could mean different things in different counties. Counties don’t carry the same zoning. I’m assuming it’s one house per acre.

Jonathan Davis (08:26):

Yeah. Well it would be, you know, one single fact or I guess the density would be one per acre.

Wendy Sweet (08:32):


Jonathan Davis (08:34):

Well, that’s located in Virginia, Virginia.

Wendy Sweet (08:37):


Jonathan Davis (08:37):

Yeah. So that County, we don’t know offhand. So you want to research that with the County and just make sure what that zoning is because sometimes in some counties are one is one for a quarter acre or half an acre or an acre or, you know, there’s just all of different counties that use different metrics. Right.

Bill Fairman (08:58):

And there are Commonwealth, so they know what the heck they want.

Wendy Sweet (09:02):

What is Don saying? 13 days to what?

Jonathan Davis (09:06):

I think that’s Wednesday with Wendy.

Wendy Sweet (09:08):

Oh yeah. Okay. I’m glad you’re excited about that. I am too. Thank you.

Jonathan Davis (09:14):

Looks like you talked to, Banks, talked to the County and they allowed 1.5 acres minimum. So there you go. So, all right. It’d be one for 1.5 acres. Yep.

Bill Fairman (09:24):

Well then you have done your research. My apologies.

Wendy Sweet (09:26):

Good boy.

Bill Fairman (09:26):

I’m just touching all the bases.

Wendy Sweet (09:29):

He’s a Debby Downer.

Bill Fairman (09:29):

I’m not. I just had a limited information to go back and limited brain capacity to work with,

Jonathan Davis (09:39):

But that’s a great price point, Banks. And like I said, you know, we’d love to help you out with that and once you get it done.

Wendy Sweet (09:46):

Yeah. And I know in Virginia from the people that I know in Virginia, Jim Ingersoll and his folks businesses, booming.

Jonathan Davis (09:53):

Oh I like Virginia. We’re doing a lot more loans in Virginia and love it.

Wendy Sweet (09:59):

Yeah. Awesome. Good deal. So what’s the? So we’re still on the breaking news. anything you might add to it?

Bill Fairman (10:02):

So we’re pretty much done with breaking news other than the fact that, you know, we keep hitting back on. I keep hearing news on the place to be is in single family right now. I did get a chance to hear supervy

Wendy Sweet (10:22):

Supervy. You gotta say it with the southern accent

Bill Fairman (10:23):

A representative talking about the millennials, what they’re looking for in single family and space, they’re looking for space. They also are very tech oriented. So they want not just offices, but they want zoom rooms.

Wendy Sweet (10:43):

Yeah. And we got ’em. We got ’em. That’s awesome. So Banks, no, you do not have to come to the table with the construction loan that we could lend you that money. And if not us, somebody else would take, but we’d prefer you come to us.

Jonathan Davis (10:57):

If you bring the land as the collateral, we can fund a hundred percent of the construction loan.

Wendy Sweet (11:03):

Yeah. That’s a pretty thing. Awesome. Good stuff. Good stuff. So what’s next Bill?

Bill Fairman (11:09):

I don’t know. What you want to do?

Jonathan Davis (11:11):

I don’t know. What you want to do?

Bill Fairman (11:11):

Okay. We’re going to do the ugly question.

Wendy Sweet (11:15):

ugly question.

Bill Fairman (11:28):

I am so impressed.

Wendy Sweet (11:29):

I know we’ve got great graphics going on. We get to see different ones everytime we’re on live

Bill Fairman (11:33):

They never rest on their laurels. That’s always coming up with new ones.

Wendy Sweet (11:37):

Really cool stuff.

Jonathan Davis (11:38):

Yeah. We had a lady here. Her name was Laurel.

Wendy Sweet (11:42):

That’s right.

Jonathan Davis (11:43):

We rested on her a lot. She’s gone now.

Wendy Sweet (11:46):

We missed her. She was a good girl.

Bill Fairman (11:48):

Yes she was. Her auntie is, I’m assuming.

Wendy Sweet (11:51):

I hope she’s doing well still.

Bill Fairman (11:53):

So what is going to happen when all the refinance stop? What do you think?

Wendy Sweet (12:01):

Well, that’s a great question. And I think we’re already seeing a huge drop in refinance applications as we speak, it’s taking price,

Bill Fairman (12:12):

That said it’s not, because rates are going up too much.

Jonathan Davis (12:17):

No it’s because everyone who could refinance has already done so.

Wendy Sweet (12:20):

That’s right.

Bill Fairman (12:21):

Because today’s average 30 year fixed is 2.73 and a two year. I’m sorry. The 15 year is 2.2.

Jonathan Davis (12:33):

Oh, that’s it. That’s.

Wendy Sweet (12:33):

Can’t get much better than that. That’s just free money.

Jonathan Davis (12:36):

That’s pretty much free money on a 30 year mortgage, that’s free money.

Bill Fairman (12:40):

So a lot of people are in a position to where they can do a cash out, refinance pay the same or less than what they’re paying now. And, you know, tap into that equity. Most of them aren’t using it just to spend. They’re saving with it or they’re investing with it.

Wendy Sweet (13:00):

Right, which is smart.

Bill Fairman (13:01):

Cause our nationally, our savings rates are going through the roof,

Wendy Sweet (13:05):

Which is good. People learn

Bill Fairman (13:06):

Again, all of this is opportunity for investors because there’s plenty of capital out there that are looking for a home.

Wendy Sweet (13:14):

That’s exactly right.

Bill Fairman (13:15):

And as long as rates stay low, there’s still gonna be people buying homes. Because there’s still a high demand for housing and we don’t have a large supply. We did a subgroup meeting last night and you know, the focus on that is how do you build efficient or how do you build affordable housing and having enough margin as the builder to make all of it?

Wendy Sweet (13:51):

With the price of wood, and shea rock.

Bill Fairman (13:51):

All of it is going up.

Wendy Sweet (13:51):

Yeah. just like taxes.

Bill Fairman (13:51):

I know, Think Realty group was before Congress and they were talking about that same thing, how to get affordable housing and one of them were, they were doing a 3d printing of houses.

Wendy Sweet (14:07):


Bill Fairman (14:07):


Wendy Sweet (14:08):

That’s amazing.

Jonathan Davis (14:09):

That’s interesting.

Wendy Sweet (14:10):

That’s amazing. That’s a big printer.

Bill Fairman (14:11):

Well you know, it’s basically a 3d printer, but it’s some kind of a concrete composite kind of stuff.

Jonathan Davis (14:23):

This was years ago. I was talking with an engineer and a builder down in Alabama and they had retrofitted train cars to create and pour concrete in them to create walls or a house. And then they would, you know, section them off. They’d have them all prefabbed with whatever it was in the train car and then pour the concrete, let us set and then they’d pull them out and set them on the house and then, so it was like a

Bill Fairman (14:53):

So the train car was like the mold?

Jonathan Davis (14:54):

The train car. Yeah. It was the mold. And you could change out the molds inside of it. To get the different wall stretch if that’s you want.

Wendy Sweet (15:00):

Well, you know, the storage truck containers, storage containers that they use to ship with. Those are extremely affordable and they’re built to be stacked on top of each other. So they’re strong, there’s great options to be able to put together, to build a home. A lot of people are doing that now. I’ve seen communities actually, made out of those things. And I think that we’re going to see a lot more people hopping into being able to reuse things to build houses with because it used to be kind of more expensive to do it that way. But I mean, even building with tires and bottles and.

Jonathan Davis (15:43):

I was read a report from East Tennessee where contractors, I mean they’re in bid wars and if they can’t get, uh, materials to their sites. Yeah. . It’s insane right now.

Bill Fairman (15:56):

And the poor whiskey distillers in Tennessee, you can’t get they’re whiskey barrels, it costs too much money and these breweries are taking the used ones and having them infused with a whiskey.

Jonathan Davis (16:12):

Let’s talk about, so the refinances are starting to dwindle down. All right. So do we see an increase in purchases if there’s enough inventory and then kind of like the, I don’t know, I would say almost like a elephant in the room, but maybe most people aren’t aware of it elephant behind the curtain is what’s going on with all of these COVID forbearances COVID modifications, loans that are already behind. Well does that affect anything moving forward?

Wendy Sweet (16:47):

I really believe that we’re going to see a huge foreclosure burst come through at the same time. And it’s, I think it’s going to come from a couple of different things. I think, number one, we’re not only going to have homeowners be foreclosed on, but there’s a lot of current landlords that have loans on their houses that they have backup rent. They’re still having to pay those mortgages there. They’re not going to be able to get caught up and they’re going to lose their houses. So, and that’s hurting the little guy because these are the people that have, you know, a few houses here and a few houses there. You know, they can’t afford to be making payments on the mortgage without getting any rent end so I’m really anxious to see what’s going to happen there. That’s kind of scary, but it’s also an opportunity for those who are hoarding their cash, like they should, being able to scoop up those properties when they come available or people who are in a position to be able to still qualify for hard money loans and things like that, to be able to grab these properties and be able to rehab them and sell them. Cause there’s still a whole group of people who still have jobs and can still be home buyers for owner occupied. If you’re a mortgage broker and you’re living your life off of refinances, I hope you haven’t lost your relationships with your real estate agents for purchases because that, you know, that’s dropping down and the purchases are going to take over. So, you know, so it looks like it’s going to kind of keep continuing, but we’re certainly going to see rollercoasters and there are segments of the population that will absolutely suffer and segments that will absolutely prosper from what’s going on.

Bill Fairman (18:48):

Did you have anything to add to that?

Jonathan Davis (18:49):

Yeah, I felt like you did. You were gonna something.

Bill Fairman (18:53):

Well I always do. I was just gonna give you a chance because I tend to talk over people.

Jonathan Davis (18:57):

Don’t worry. I’ll interrupt you if I have somebody to say.

Bill Fairman (19:01):

So I have a little bit different take on it because all of our crystal balls are a little bit different. Different manufacturer

Wendy Sweet (19:08):

This is a Debbie downer fall. Remember that.

Bill Fairman (19:12):

I think on the government loans, I think you’re going to see a lot more workouts with the government loans because they’re the ones that are, they have the ability to do that. So your FHA, your VA or USDA loans where you know, they decided that you can’t foreclose on those, I think those are going to be worked out modified and it make it a longer term.

Jonathan Davis (19:40):

Yeah. We talked with the broker the other day and that he was part one that got modified into a 40 year am.

Bill Fairman (19:47):

Right. Yeah. So they’ll take those payments that they miss and add it to the back. Assuming that person’s still has a job and can make the payments. Now, if they can’t make the payments, there’s not much you can do with these if you’re not employed. So they’ll probably give them a little bit of time, but they won’t give them a whole bunch of time because they still have investors they have to deal with. The investors or the taxpayers. That said on the conventional side, you’re going to have investors that are willing to do loan modifications. It’s a little bit harder in the process to pull them out of the pool, they’re essentially having to buy them back,

Jonathan Davis (20:30):

Not centrally. You do have to buy them,

Bill Fairman (20:32):

Then you, modify them. Then you have to sell them back into the pool. And then you’re going to sell them back into the pool as damaged goods, as [Inaudible]. So I think you’re going to see a lot and there’s a lot of looking to be placed. And so you have people that are, and we’ll have, our next guest coming up, Fred Rory is in the note buying business. You’re going to see a lot of funds that are buying notes. And I think instead of going into the foreclosure spot, they’re going to go to the note people first, and it’s going to take a little bit longer to work out if they can’t work them out. Their job is to get them to re-perform anyway. They just have more bandwidth to do so. Yeah. So I don’t think we’re going to see big floods of foreclosures immediately. If you’re going to have them, they’re going to be kind of like a drip email marketing campaign.

Wendy Sweet (21:27):

We just, when I say we, my partner, Darren and I, you know, we were buying these houses to put into the short-term world and we just bought a foreclosure from a bank and we’re talking directly to the person who takes care of all of their dispositions.

Jonathan Davis (21:44):

split assets and acquisitions?

Wendy Sweet (21:44):

And, you know, we’re always, trying to get a relationship with them. So they think of us first when they have a house. And, what she told us is, yeah, I only have one or two that are in that that are ready, that are through foreclosure and ready to be. So she said, that I have a hundred of them waiting to release. So, you know, I don’t know how smart banks are at this point. You know, how, they don’t think that way, that it’s easier to sell the notes. So I love what you’re saying. And I think it’s great. And I think some will do that.

Bill Fairman (22:22):

The smaller banks aren’t knowledgeable, and they just have a different mindset. I’m talking about the securitized loans

Wendy Sweet (22:33):

This is a big one, we bought a farm.

Bill Fairman (22:36):

In pools, they’re going to be selling a lot of the notes, but you’re still going to have a certain amount that are going to be going into forklift closure. I just don’t think you’re going to see it like you did. And in ’08, there’s not going to be one way of doing things

Wendy Sweet (22:50):

Well, that’s true. And I also believe that banks will understand that who is their biggest market segment of who they can sell distress notes to versus foreclosed homes to. And your market is always going to be bigger on the foreclosed homes, because a lot of people don’t really even understand about how to buy notes and that, you know,

Jonathan Davis (23:14):

And the whole note game is that, you buy 20 nots or a 200 notes or 2000 notes, and you’re playing a numbers game, right. When, you know, when you’re buying one foreclosure, I mean, it’s, you gotta buy it right.

Wendy Sweet (23:28):

It’s a different type buyer and I think it’s a more, finance savvy buyer of someone who’s buying notes and I’ve said this a hundred times and I’ll say it a hundred times more. If you understand the note buying space, if you learn about it, learn from Eddie Speed, Donna Bauer’s another one that teaches it. There’s great people. Eddie Speeds with note school. There’s great people out there that can teach you Don Rick and Bob is another person. The note queen. If you learn how to do that.

Bill Fairman (24:03):

See the clock in the corner?

Wendy Sweet (24:05):

If you learn how to do that, they are going to,

Bill Fairman (24:09):

Pick up the pace.

Wendy Sweet (24:09):

You can do anything in this business. Anything you can put any deal together. So buying notes, knowing how to buy notes is numero uno, learn it folks. S.

Jonathan Davis (24:18):

So you think is going to be more notes sales. You think there’s gonna be more foreclosures and just to put up, you know, like a number to it, there are over 2 million current government insured loans that are past 90 days that aren’t in forbearance and then there’s another, almost 3 million that are in forbearance right now. So that’s the 5 million loans that could be like distressed and could be severely delinquent. You know, what percentage of the 3 million get modified and, you know, turn back re-performing? I mean, even at half of them, that’s still a 1.5 million additional loans that go into the non-performer section.

Bill Fairman (25:08):

Well, the reason I think you’re going to see more note sales is because the head funds are going to be knocking at the doors of the people that own the mortgages, because they’ve lost so much money in game stock. They got to get there [Inaudible]

Jonathan Davis (25:23):

They were taken care of.

Bill Fairman (25:25):

Anyway, thank you guys for joining us. It’s the bottom of the hour are we got to get to that next show. So we are Carolina Capital Management. We are lenders in the Southeast. If you’re looking to borrow money in the Southeast, then CarolinaHardMoney.com click on the apply now button. If you’re a passive investor convert passive returns,

Wendy Sweet (25:48):

Same website. Different tab.

Bill Fairman (25:49):

Just click on the accredited investor tab. Don’t forget to share, like, subscribe, hit the bell, all that good stuff. And don’t forget to register, excuse me for the cashflow expo. And what was your short term thingy?

Jonathan Davis (26:08):


Wendy Sweet (26:08):


Bill Fairman (26:13):


Wendy Sweet (26:13):


Bill Fairman (26:14):

We’ll see you again.

Wendy Sweet (26:15):

Thank you.

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