Welcome to our new monthly series Learning With A Lender!
Each month Guaranteed Rate Vice President Joel Schaub discusses anything and everything related to lending. Joel is in the top 1/10th of 1% in loan production at his company, and his insights on what brokers and consumers need to know about mortgages is incredible. In this episode Joel discusses changes in Fannie Mae that allows for condo buildings with commercial space easier access to lending. Also, condos where the buyer is putting down more 25% are no longer subject to 50% rent caps. Last, Joel mentions that buildings under litigation are okay, as long as it not the association that is being sued.
D.J. Paris 0:13
Hello and welcome to another episode of Keeping it real the only podcast made by Chicago real estate brokers for Chicago real estate brokers. My name is DJ Parris. I am your host of the show, and today is our another episode of our monthly series learning with a lender. We have Joel shop from guaranteed rate on the call. Welcome, Joel.
Joel Schaub 0:33
Hi guys. Happy to be here
D.J. Paris 0:35
to tell you a little bit about Joel and we are also happy that Joel is here. Joel is vice president of lending at guaranteed rate. He has been doing loans at a high level since 2003. And has gotten to that level because of what he does directly for agents, I give his part of the commission back to the buyer on every transaction last year alone, Joe gave back over $244,000 in closing costs to buyers who we worked with, and that put Joe’s value in the top 1/10 of 1%. Nationwide, out of 370,000 loan officers in the country, he was ranked 181, again out of 370,000. So that’s year to date through April 30. Joel has done 69 transactions for just under 25 million and closings, and we’re grateful to have him with us today. So and also a Joel is one of the biggest cub fans you’ll ever meet. And
Joel Schaub 1:26
welcome, John. Hey, guys, I’m really happy to be here again, and thanks for that introduction. But it’s not all about me, I really want to make this something that we can give back to the agents about and go over some things. So I had about three things here today that I think are really great news for agents that are in the city, and suburbs that have listings for condos. So let’s do it. So Fannie Mae recently made some major major changes. So for all these years, you see things getting tighter, right? All the restrictions were coming in. And now we’re starting to see some loosening up. Right. So this is some really good news. So I’m going to go through a couple of these, and then we’re going to explain some ways that I think that this can mean more closings for the agents. So I’m going to list what the rule changes were. And then more importantly, how does that actually affect the agents that have properties for sale or buyers going into certain condo buildings. So the first one ticket right off with the amount of commercial space that was allowed in a building before was 20 or 25%. And that would allow a lot of that would restrict a lot of buyers in buildings that had a greater amount of commercial space. And currently, they just changed that from the 20 to 25%. All the way up to 35%.
D.J. Paris 2:49
Gotcha. So more spaces allowed now for commercial use. Yeah. So
Joel Schaub 2:53
when you think about these buildings where there may be a storefront and a couple of units above, these are real common in the city of Chicago. Yes, banks hated it, they would always give problems. And we were doing at guaranteed rate. But a lot of the big banks, you know, my colleagues that Chase and Wells Fargo and US Bank, the guidelines were really restricted, they just didn’t want to touch them, they were always afraid that the commercial space if there wasn’t a tenant in it, or there was any kind of issue with paying the HOA dues, that the buildings in the units above could have a special assessment to keep up with the current amount of money needed for reserves. Okay. So they didn’t want buildings with large amount of commercial space. And so now they’ve updated the guidelines as of June 6, to allow a much greater amount of commercial space. That means if you have listings, that are in buildings where there currently was a restriction, where you knew that you couldn’t get the property sold, or the buyer was going to have a problem. We can do it.
D.J. Paris 3:57
That’s great. That’s awesome. So that’s
Joel Schaub 3:59
one commercial space. That applies to a handful of buildings in the city of Chicago. But the next one is going to be really big guys. The next one is about the amount of rentals that were allowed in a building for a buyer that was buying the property as an investment property. Okay, so agents, you’ll know exactly what I’m talking about here. You have a building and it’s in the city and the amount of renters in the building was over 50% Right. The bank said no, no, that’s a non warrantable condo, right. So for the longest time as long as the buyer that was buying the unit lived in it as a primary residence, it was no problem but if you were buying it as an investment property, it was a non warrantable condo and you literally were a cash buyer that was it. Right guy? So guess what they did? This is all brand brand new. So now if a buyer is putting down 25% It does not matter how many rentals are in the building.
D.J. Paris 5:02
Got it. So the buyer can’t take out, like can’t do two mortgages to get a 25%, they actually have to put down 25%.
Joel Schaub 5:09
Yep, on an investment property will allow on an investment property, I should say it will allow for a buyer to go in, even if the building has over 50% rentals. So agents that are listening to this right now, you know, buildings, you either have had a listing, or you know that you’ve had a problem in the past, this is a big, big change, this will now allow for you to take a unit that was listed for sale where you knew that the buyer had to be a primary residence and open up the doors to investors as well.
Big news. Yeah, that is huge. So let’s just
think about what this means in like common terms, right? You had a property listed. And we knew it was non war, we knew we had a rental issue, there was so many renters in the building. Why would that happen? DJ, because it’s probably a great rental building, right. And so who wants to buy in a rental building, when the rents are really good, and there’s a high render concentration, probably another investor, somebody that wants to rent out the building. And so that’s exactly what Fannie Mae and Freddie Mac did not want for years. So when you were over 50%, non owner, it made it a major problem. So now, as long as the buyer is putting down 25%, which is really common for an investor, they are allowed to buy in the buildings that as of last month, they could not buy in.
D.J. Paris 6:36
You know, that’s really huge, because we have, there’s so many brokers that work with investors. I mean, this is this is a big, big deal.
Joel Schaub 6:42
So now what it means is, I really want the agents that are on the listening to think about the buildings that you knew that were a non warrantable condo that ended high investor concentration, you can now literally go into those buildings with investor clients of yours. And buy, you can also get listings in there and open it up to not just owner occupied but to Investor Buyers. Big. So this literally should be should allow you to have several more transactions in the next couple of days, weeks and months. And that’s really what this is about is just kind of educating from the mortgage standpoint so that the agents know you don’t need to know everything, but some of these tips and tricks will be really good. Okay.
D.J. Paris 7:26
Yeah, that’s really good stuff. And I suspect like me, I did not know either of those things had happened. So
awesome for everyone. Listen.
Joel Schaub 7:35
So another great one. How often do you have a building in you hear about the property has litigation, right? Sure. Yeah. So you get these condo buildings and nine times out of 10. It was a deal breaker. Right. So Fannie Mae recently had some adjustments to this. And the big takeaway here, and I could go on about this for hours. Because I’ve done all the research, I’m kind of a mortgage nerd. Read this at night, this is what I like to do DJ, this is I read through all this stuff. So the basis here is if you have a building that’s in litigation, and it’s the association that’s actually suing not being sued, you can actually get the deals done. So I want you to think of some of the associations that you have, where instantly, you think that you can’t get the transactions complete, because of the word litigation pops up. They’ve really clarified this. The problem is when the association is being sued, it’s not when somebody from the association is the suing party. So some big things there and I can go into details you’ll give my information at the end. Yes. And, and anybody who has questions on this, I’m an open book, whether you use guaranteed rate or not, I want to be helpful to you guys. Okay, awesome. Here’s one more smaller buildings when you have a two to four unit building, and you’re listing a condo agents always have a hard time with these because they’re usually self managed. Right? Right. So it’s just somebody that lives in the building. That’s the condo board president. And it takes days to get the condo questionnaire complete because he’s just like a guy like you or me. It’s not his job. He doesn’t necessarily want to be completing all the paperwork. So now, Fannie Mae and Freddie Mac has no project reviews on buildings that are up to four units. Oh, wow. Absolutely amazing. You know what we need now? We need a copy of the appraisal and just the master insurance, so no more questionnaires. No more getting Jim upstairs to complete a questionnaire right or Susie down the hall to comprise the questionnaire. So this is a big thing. So for properties that are 123 or four condo units in a building. That is what’s acceptable. No, very big news.
D.J. Paris 10:01
This shaves the least of possibly a few days if not longer off the process.
Joel Schaub 10:06
It does. And if you guys remember the last call where we’re having a big majority of properties now have appraisal waivers. Right? So think about this, I had one with the appraisal waiver and this new rule that in seven days from start to finish, was cleared to close on a three unit condo building, the contract came in, they were blown away that I told them that the new rules were in effect. And literally last week, I already had a clear to close on a file that was in process for just over a week seven business days. Right. Pretty great. That’s awesome. So those are some of the things that are extremely helpful that I just wanted to bring up as far as condos go.
D.J. Paris 10:54
Yeah, that that no, that’s all really, really helpful. And again, arms, the broker with more information that they can take to not only separate themselves from other brokers out there, but also just to provide good, good quality information to the clients. Quick question for you. With respect to the Fed, because there has been talk of the Fed continually going to continue to raise rates slightly over the next, you know, year or so do you have any, any thoughts about that, how that may affect lending?
Joel Schaub 11:23
Absolutely. Let’s just talk about the current interest rate environment so that we can be armed with knowing where the market is at the 30 year fixed rates are hovering around four and a half percent. And if we look, just a few months ago, we were doing 30 year fixed rates below 4%. So they have moved up quite a bit, the feds have increased rates twice. And they look to be doing so here in the future, what it means is, rates will go up a little bit, we don’t expect this to go A to a point where a 30 year fixed rate is going to be at five and a half or 6%. And we’re never doing this fear where a lot of mortgage guys out there, colleagues in the industry will say Well, you better hurry up and buy because rates are going to skyrocket, right? It’s better to just understand what’s actually happening. And if rates go up a quarter point or a half a percent, what that means to the payment, and just speak with a mortgage professional about what that would be on a $200,000 deal, a $400,000, deal, etc, to know what that could be if you don’t buy now, and you wait a couple of months.
D.J. Paris 12:31
Right. And I also think sometimes we lose sight of the fact that the feds raising rates, because everything is doing really well. It’s it’s supposed to compensate for people’s income and to to keep things you know, more level. And it’s not necessarily about punishment, or is it going to stop anyone from I mean, this is a mild increase.
Joel Schaub 12:53
Here’s what I’ve seen, you’re exactly right. What I’ve seen is it really has had buyers, get off the fence. And the last couple of months, I’ll take June, for example, we just closed out June. And I had over $6 million of purchase business in June, which was any other June in my history, we’ve never had that many. And it’s one of those situations where I think a lot of people are afraid that that rate is going to go up a lot more than it really wouldn’t. So if you’re an agent, that’s good news for you whether the buyer is correct or not. It does mean that buyers are under the impression that rates today are better than they’re going to be next year.
D.J. Paris 13:32
Very, very good point. And I know if I was looking to purchase knowing that the news stories are saying the Fed may continue to raise rates to some degree over the next year or even further, I would definitely consider that as well and want to make a purchase as quickly as I can. So you’re right. That’s awesome. Well, in speaking of rates, you know, Joel is a lender who has a guaranteed rate if there are brokers out there who have not found a lender that that that they just love working with, how should they get in touch with you? And also, if any buyers and sellers are out there, how can they get in touch?
Joel Schaub 14:07
Oh, we’re happy to help. It’s no problem at all. I’ve gotten to this level over 15 years, where now I’m closing to 20 to 30 transactions a month. And it’s about giving back. So any buyers that you have that come over, we’ll waive the fees, we give a $1,500 closing cost credit, that’ll waive the lender fees as well as the appraisal. So get in touch with me my phone number is 773-654-2049 and then I’m big on Facebook. All right. So Joel Schaub at guaranteed rate. We have just north of 18,000 followers to my page because I give out information, tips and tricks and just trying to really give back and educate and we’re always there for the people that need somebody to actually help them during a transaction. We’re here for
D.J. Paris 14:55
you. I myself have refinanced with guaranteed rate years ago and and it was definitely out of all of the refinances I’ve ever done. It was the smoothest one I’ve ever done so. So you know, they obviously know what they’re doing. And Joel obviously knows what he’s doing at guaranteed rate. So definitely give him a chance. And he also throws really great parties, which I was telling him off air I had to miss his last one, but I’m not missing another one. So anyway, I definitely you know, get to know Joel, he a lot of people already do. He’s obviously doing a great job over over gr but he is always looking for for new brokers and new clients as well. So give him a shot. And with Joe, we will see you in another month. And we’ll have more to talk about on the lending side.
Joel Schaub 15:38
That’s perfect. And thanks for the plug about the parties. It does. It does go a long way when you’re out there doing things and the next one that we have is coming up at the end of July. It is a yacht club party. It’s called boats and bingo so you’ll guys will see the announcement for that we’re giving away a 65 inch TV, a trip to Las Vegas and I watch etc is just so fun prizes. It’s going to be at the end of July. And it’s one of those things where if you’re out there actually having fun it’s good networking as well. So look for
D.J. Paris 16:12
a lot of the people that have been featured on this show have been worked with Joel so if that if that tells we only talked to top one percenters so that should tell you something. So anyway, Joel, thank you so much for your time. This is a he’s so he’s too busy to do this yet. He does it every month and he’s so great. We’re so grateful he does and we’ll see you in a month.
Joel Schaub 16:29
Thanks a lot. Have a good day.