Save Loan Denials With Trio

SPONSORED Wouldn’t it be great to be able to close a loan for your customer even if they are denied? Sounds too good to be true! But now you can through Trio’s OwnOption Mortgage. Three years ago, Trio launched its OwnOption Mortgage product with a select group of lenders with the sole purpose of responsibly expanding access to credit. Today, lenders across the country are lining up to take advantage of this innovative program. Through Trio, lenders now have access to a Federal Housing Administration (FHA) lease-purchase mortgage product they can originate when a customer is denied. Trio’s affiliates qualify as borrowers under a special program with FHA. Lenders originate a simplified FHA mortgage to Trio’s affiliates and distribute through its partnered FHA issuer and servicer, Land Home Financial Services. Customers then sign a lease-purchase agreement with Trio and take occupancy just like a traditional mortgage. One hundred percent financing is available down to a 580 credit score. The program has no maximum income limits. After customers take occupancy, they have up to three years to finish qualifying. Trio’s HUD-approved counseling agency (Money Management International) provides 24 months of counseling to assist. Once customers are ready, Trio provides down payment assistance covering the required down payment and closings costs. Customers can assume the original FHA OwnOption Mortgage or, if rates have gone down, use a new mortgage to purchase their home from Trio. “From late-stage denials to expanding our third-party origination channel, Land Home Financial has partnered with Trio and its OwnOption Mortgage Program,” says Mark Sheridan, senior vice president of Third-Party Origination. “Lenders, brokers, builders, agents and sellers benefit from a successful closing that would have otherwise resulted in a loss. But, to see customers that were denied for a mortgage returning to our closing offices to become homeowners is very satisfying and proof that Trio’s system works.” And now, Trio has created an online ‘Rules Engine’ that simplifies and automates the process for lenders. According to Land Home Financial Services, Trio’s Rules Engine qualified over 40% of its denied mortgages into an OwnOption Mortgage. Imagine sitting with a customer and realizing they will likely be denied and then being able to offer a ‘back up plan’ that assures them of a path to homeownership.   Sheridan, says, “This is a game changer for originators when working with potential homeowners. It expands originations as well as saves deals.” Trio is a finance company based in Bellevue, Washington, that has been offering affordable lease-purchase programs for nearly 20 years. Most industry professionals shy away from lease-purchase programs because most overpromise and underdeliver. What makes Trio different is that each home comes with a single-family mortgage and a fixed purchase price, making ownership affordable. Darryl Lewis, managing director and founder of Trio, is very proud when he tells us, “Trio has over a 70% success rate of transitioning its customers into homeowners.” Needless to say, Trio’s OwnOption Mortgage is a safe alternative for customers having a difficult time getting into a traditional home loan. “Trio’s OwnOption Mortgage was created to bridge the gap between renting and owning, for those who aren’t able to initially qualify for a traditional mortgage,” says Lewis. “Our mission is to create homeowners through responsible innovation. Everything we do goes back to that idea.” Trio’s OwnOption Mortgage helps potential homeowners ranging from first-time buyers to recent college graduates to those with student loans or jobs in the gig economy. An OwnOption Mortgage is also a wonderful option for those lacking a down payment, small business owners, those recovering from a financial or medical setback as well as renters wishing to become homeowners. Lenders have used OwnOption Mortgages to save late stage denials, bridge qualification gaps due to changes in employment, relocation, down payment seasoning and have rescued new construction sales with homebuilders.  Sheridan further comments, “Lenders big and small are now using this unique product to expand qualifications and cure deals helping to expand relationships with agents and builders.” Trio and its industry partners have engineered the ‘holy grail of home finance’ that unlocks a new door to homeownership, providing the industry with a new way to originate a mortgage for customers that are nearly qualified, but not yet ready for a direct mortgage. Trio truly provides a win-win-win for all parties involved. iBuyers, homebuilders and single-family rental investors are also working with Trio. Trio pays market pricing for existing rental homes with tenants that may want to convert to homeownership through its OwnOption Mortgage product. Trio purchases in bulk or singles from these investors and offers its lease-purchase program to existing tenants. “Our mission with our investor purchase program is to return affordable homes that were swept up after the housing crisis back to homeownership” says Lewis. Trio is currently offered in California, Nevada, Arizona, Texas, Colorado and Georgia. “We will be expanding very quickly in 2020 to more states” according to the business development director Aaron Tuttle. “There is a lot of demand for this program, and we are excited to partner with our government housing agencies to bring Trio to potential homeowners in those states.” The Trio Rules Engine will be broadly available at the end of the first quarter of 2020. Lenders who are interested in learning more about Trio’s OwnOption Mortgage or signing up to participate can inquire at the Trio industry website, www.trioresidential.com/lender. “With our Rules Engine launching this year,” said Lewis, “originators everywhere will have a streamlined way to save loan denials and help more people break out of rentership to become homeowners. Everybody wins.”

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RCN Capital Resumes Funding

RCN Capital has resumed funding for both short-term fix-and-flip loans as well as long-term rental loans for non-owner-occupied residential properties. RCN is one of the first private lenders to re-enter the space with a full suite of financing options geared towards real estate investors. “As the real estate market and overall economy continue to search for stability following the enormous amount of volatility resulting from the COVID-19 pandemic, we are incredibly proud to relaunch all of our loan programs back into the marketplace,” said Justin Parker, head of treasury and capital markets. “As we navigate a new world post-COVID, we take a great amount of pride in being able to stand true to our customers and be there for them when it matters most.” The terms RCN is currently offering are slightly more restrictive. Specifically, with these new product offerings, customers will find slightly lower leverages and higher rates than what the company was offering pre-coronavirus. Given the fluidity of the market and indications things are starting to stabilize, RCN believes these guidelines will loosen. The company fully anticipates being able to provide clients with higher leverages and lower rates in the not-so-distant future. Vist the RCN Capital website for the company’s current loan programs and guidelines.

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Which U.S. Housing Markets Are Most Vulnerable to Coronavirus Impact?

Nearly half of the 50 most vulnerable counties are in New Jersey and Florida. ATTOM Data Solutions released a special report on April 7 spotlighting U.S. housing markets at the county level to show which areas are more vulnerable to the impact of the coronavirus pandemic. According to the report, the Northeast region of the U.S. has the largest concentration of the most at-risk counties, with clusters in New Jersey and Florida. On the other hand, the report indicates the West and Midwest regions are least at risk of housing market challenges. Markets are considered more or less at risk based on the percentage of housing units receiving a foreclosure notice in fourth quarter 2019, the percent of homes underwater (LTV 100 or greater) in fourth quarter 2019 and the percentage of local wages required to pay for major home ownership expenses. Rankings were based on a combination of those three categories in 483 counties in the U.S. with sufficient data to analyze. Counties were ranked in each category, from lowest to highest, with the overall conclusions based on a combination of the three rankings. The full methodology can be found on the ATTOM Data Solutions’ website. “It’s too early to tell how much effect the coronavirus fallout will have on different housing markets around the country. But the impact is likely to be significant from region to region and county to county,” said Todd Teta, chief product officer with ATTOM Data Solutions. “What we’ve done is spotlight areas that appear to be more or less at risk based on several important factors. From that analysis, it looks like the Northeast is more at risk than other areas. As we head into the spring home buying season, the next few months will reveal how severe the impact will be.” Northeast Vulnerabilitiy Housing markets in 14 of New Jersey’s 21 counties are among the 50 most vulnerable in the country, according to the report. The Top 50 also include four in New York and three in Connecticut. The 14 counties in New Jersey include five in the New York City suburbs: Bergen, Essex, Passaic, Middlesex and Union counties. New York counties among the Top 50 most at risk include Rockland County, in the New York City metropolitan area; Orange County, in the Poughkeepsie metro area; Rensselaer County, in the Albany metro area; and Ulster County, west of Poughkeepsie. Additional High-Level Findings The 10 counties in Florida are concentrated in the northern and central sections of the state, including Flagler, Lake, Clay, Hernando and Osceola counties. Other southern counties that are in the Top 50 are spread across Delaware, Maryland, North Carolina, South Carolina, Louisiana and Virginia. Among the counties analyzed, only two in the West and five in the Midwest (all in Illinois) rank among the Top 50 most at risk. The two western counties are Shasta County, California, in the Redding metropolitan statistical area and Navajo County, Arizona, northeast of Phoenix. The Midwestern counties are McHenry County, Illinois; Kane County, Illinois; Will County, Illinois and Lake County, Illinois, all in the Chicago metro area; and Tazewell County, Illinoic, in the Peoria metro area. Counties in the Top 50 with a population of at least 500,000 people include Bergen, Camden, Essex, Middlesex, Ocean, Passaic and Union counties in New Jersey; Lake, Will and Kane counties in Illinois; Delaware County, Pennsylvania; Prince George’s County, Maryland; and Broward County, Florida. Texas has 10 of the 50 least vulnerable counties from among the 483 included in the report, followed by Wisconsin with seven and Colorado with five. The 10 counties in Texas include three in the Dallas-Fort Worth metro area (Dallas, Collin and Tarrant counties) and two in the Midland-Odessa area (Ector and Midland counties). Eighteen of the 50 least at-risk counties have a population of at least 500,000, led by Harris County (Houston), Texas; Dallas County, Texas; King County (Seattle), Washington; Tarrant County (Fort Worth), Texas; and Santa Clara County, California, in the San Jose metro area. Counties where median prices ranging from $160,000 to $300,000 comprise 36 of the Top 50 counties most vulnerable to the impact of the coronavirus. Counties with median home prices below $160,000 or above $300,000 make up 14 of the Top 50 most vulnerable to the impact of the coronavirus. Those with median prices below $160,000 are among the most affordable in the nation to local wage earners, while those where median prices exceed $300,000 have some homes with the highest equity and smallest foreclosure rates.  

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From Boots to Suits and Back Again

When I graduated college, I realized I had a choice: suit and tie or construction boots. I chose the latter. Subconsciously, this may have been my first step toward becoming an entrepreneur and eventually the founder of Walnut Street Finance. I wouldn’t say that my career path was always a calculated journey. Sometimes I just plowed ahead toward what I thought would bring success. But one thing I did consistently was throw myself completely into every job, no matter how big or small. I turned each opportunity into a learning experience. I know it may sound cliché, but there is no better way to understand your customers than to have walked in their boots. Perseverance and Thirst for Knowledge My first boots-in-the-mud job was on a real estate development site called Ashburn Village. It wasn’t far from where I lived in Virginia. I remember riding my bike through the dirt of construction sites around where I grew up. There was rapid development sweeping Washington, D.C., suburbs, so real estate felt natural to me. I graduated with a degree in economics from George Mason University in the 80s with the know-how to use computers, which were just making their foray into businesses. Looking for a job after graduation, I knocked on the trailer door of the development site of Ashburn Village. I didn’t have an appointment. I offered to digitize the firm’s finances using Lotus 1-2-3 and told them they could fire me whenever they weren’t happy. They hired me on the spot. Over the next four years, I worked on the finances while soaking up as much real estate knowledge as possible. Through a combination of perseverance and luck, the next 10 years laid substantial groundwork for who I am today. For this next stage of my journey, I had to put on a tie. Before the Great Recession, there was the savings and loan crisis in the late 80s and early 90s. I joined the Resolution Trust Corporation (RTC) just as it started to collect and sell assets. I was ready to tackle this Wild West home mortgage disaster. Of the hundreds of billions of assets the RTC liquidated, I was active in the sale of $14 billion in real estate. I quickly realized there was a whole other side of landholding that I had no idea about. This was a crazy time. I walked away from this experience with an overflow of information on how mortgages worked, the risks of savings and loans, asset valuation and trustworthiness—all of which would play a major part in my decision to start my own business. After spending five good years with Sunrise Senior Development, building across the mid-Atlantic and southeast and helping take that firm public, I was ready to put my boots back on—on my terms. Thinking Outside the Bank At this point, I realized real estate investors had to think outside the bank and lenders had to take underwriting into serious consideration. The snowball repercussions of being too risky with money could be devastating to so many. In 1997, I took the entrepreneurial plunge and formed Walnut Street Development. We built single-family detached houses and townhomes as well as some commercial properties. Our goal was $1 million in revenue for the first year. We hit it with our first two projects. During the next 10 years, we were building nonstop. I developed a deep appreciation for what our future Walnut Street Finance borrowers would experience. We did it all—from acquiring to zoning, materials sourcing to permitting, and everything in between. There were a lot of growing pains, and I was often flying by the seat of my pants. Looking back, I am grateful for my mentors and my family for keeping me grounded. You Can’t Do It Alone The next thing I knew, we were peaking at more than $250 million in revenue. But I wasn’t doing any of this alone. Not only did I have my own trusted construction team, I had formed partnerships with The Carlyle Group, Lehman Brothers and Trammell Crow. This trifecta of private equity, investment banking and international real estate powerhouses helped me deliver more than 1,200 residential units and 200,000 square feet of commercial property in the D.C. area. By this point in my journey, I’d learned a few incredibly valuable lessons. The first was that I needed to be sure my construction boots are always at the ready. The second was that we don’t ever succeed alone. One man building a company is a fool if he thinks he doesn’t need smart, experienced, independent thinkers and doers around him. I also strive to keep a personal touch on the business. It was important that I was boots on the ground during our builds, putting faces to names and roles, resolving pain points and understanding every stage of a project. The Big Twist By 2008, the market turned. We decided it was best to go from sell to buy. We scooped up 100-year-old row houses in D.C., which we fix and flipped. We did it again and again, with great success and excess capital. By pivoting from building to lending, we came out of the recession relatively unscathed. We made our first few loans—using a pen and yellow pad—to our previous flipping competitors. We had just two employees. Four years later, we originated more than 350 loans. Last year we generated over $70 million in loans and had more than 15 people on staff. We proactively nurture a culture of quality and service. We’ve built this company by doing what we say we are going to do—with our customers, fund investors and one another. Most important, we can serve our customers best because we know what it is like to walk in our customers boots. We never forget where we came from.

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The CARES Act and Your Retirement Investing

The coronavirus stimulus could mean good things for your retirement accounts. When President Trump signed the $2 trillion coronavirus relief package into law March 27, 2020, most people’s attention was squarely on the small-business relief loans, the COVID-19 stimulus checks and how they might have their rent waived or their mortgage payment suspended. The Coronavirus Aid, Relief and Economic Security (CARES) Act also offered a number of other benefits to Americans, especially Americans in a position to stimulate their local economies in the weeks and months to come. For example, the legislation included some very big benefits for the owners of individual retirement account (IRA) plans, including the ability to make some contributions and withdrawals that normally are prohibited or heavily penalized. While many have accused policymakers of including these benefits as a way to sneak in loopholes for “rich investors,” the reality is that every single person who has a retirement plan needs to take a close look at how these changes might affect their retirement investing returns for the better. In some cases, these provisions might allow them to help their families through a very tough economic time as well. “The CARES Act is an unprecedented bill that will help many Americans impacted by COVID-19navigate economic uncertainties,” said Reneika Lightbourne, a business development specialist with Advanta IRA, a self-directed IRA custodian with more than $1 billion in assets under management. Reneika noted the legislation contains provisions that could help individuals and families experiencing financial hardship as a result of a coronavirus diagnosis. But she emphasized the importance of consulting trusted legal and tax advisors before making any withdrawals. “There are a ton of opportunities in this new code provision, and it is going to take everyone some time to unpack all of this,” warned Tim Berry, a self-directed IRA and 401(k) attorney with more than 20 years’ experience working with self-directed investors and their accounts. “We are all going to benefit from and hear about this legislation for years to come.” Changes in Distributions and Loans One of the provisions of the CARES Act that will have an immediate financial impact for IRA holders is penalty-free early distributions of up to $100,000 from retirement plans. Taxes on that distribution are due in three years, however, and are spread out over the three-year period. Berry noted that this three-year window creates an unusual and possibly beneficial scenario for investors. “If you qualify for that early, penalty-free withdrawal and take a distribution now that normally would have cost you a 10% penalty, you could save a lot of money,” he said. Berry cited an example of an investor who was already facing the decision of whether to withdraw money from his IRA account before the benchmark age of 59½ because doing so would allow him to purchase an investment property in his own name rather than in the self-directed retirement account, creating a significant advantage. Because the investor qualified for the penalty-free distribution, he was able to save almost $10,000 on the transaction, benefiting both his current and his future financial situation. “Another big benefit of this law is that taxes on distributions will be automatically spread out over the next three years instead of the client having to pay taxes on a $90,000 distribution in tax year 2020,” Berry said. “That means you might effectively lower the tax bracket your distribution is taxed on, and you effectively receive a three-year loan to pay the lower taxes.” Do You Qualify? Remember, no one automatically receives these benefits under the CARES Act. The benefits of the CARES Act are reserved for individuals who meet certain eligibility standards. According to the CARES Act itself, distributions must be coronavirus-related in nature. This is relatively broadly defined as: You are a taxpayer who has been diagnosed with coronavirus. You are also eligible if your spouse or dependent was diagnosed with the virus and, as a result, “suffered adversity.” Eligibility extends to individuals not formally diagnosed who suffered adversity in the form of quarantine, furlough, job termination, reduced work hours, or inability to work due to inadequate child care. Berry said, “I’m guessing that nearly everyone could say they have had their work hours reduced due to the coronavirus. It’s a pretty broad definition in the new law.” If you are unsure whether you are eligible or if you have a conventional retirement account that is sponsored by your employer, you may need to check with the plan sponsor. However, most sponsors say they are relying on employees to “self-certify” their eligibility. If you plan to take a loan from your 401(k) under the CARES Act, you will need to check with your sponsor (if applicable) and take that loan before Sept. 23, 2020. Investors should note that the ability to borrow against your 401(k) is not new, but the maximum amount permitted is higher than previously allowed. Before the CARES Act, you could take out $50,000 or 50% of your account balance. The new legislation permits you to take out $100,000 or 100% of your account balance. If you are unsure whether you qualify for CARES Act-related benefits, ask your trusted legal or tax professional. Although your company plan sponsor may be able to tell you whether they are permitting account holders to implement these strategies, neither your sponsor nor your custodian can necessarily provide you with full guidance regarding your eligibility. Only a tax or legal professional familiar with IRA and 401(k) policies, laws and tax code can do that.

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Regional Spotlight: Columbus, Ohio

In Uncertain Times, the Columbus Market Holds Steady Just a few short months ago, at the end of 2019, real estate investors talking about Columbus, Ohio, would likely have mentioned the city’s Top 20 ranking as a business-friendly environment, its highly educated workforce, a local government dedicated to public-private partnerships and development, and the many parks, bike paths, restaurants, museums and community gathering places found in “The Biggest Small Town in America.” Today, thanks to the worldwide spread of COVID-19, Columbus is more likely to make headlines as the first city in Ohio to have a confirmed coronavirus-related death: that of a 76-year-old attorney who had recently traveled to California. Despite the uncertainty and ongoing economic and financial volatility catalyzed by the coronavirus, Columbus remains one of the strongest housing markets in the country. That’s thanks to a sound geographic position, diverse economy and jobs market, and a real estate environment that encouraged investors to place their capital in projects that would not just cash flow, but also offer some degree of equity. “The inventory in Columbus has been and continues to be very low. That has created a built-to-rent investing strategy in the area that has led to new construction coming into more areas of the market,” said Brandon Guzman, president and CEO of MFS Supply, a provider of preservation and renovation supplies with a major branch located in the area. “We are seeing more and higher-end rentals enter the market these days, which increases competition throughout the market.” Guzman recommended being “cost-conscious with upgrades” when renovating existing properties for rent or resale because of the additional new-construction dimension in the single-family sector. However, the multifamily sector in Columbus is also booming both inside the city proper and in the suburbs. “From a cost standpoint, there were a lot of banks willing to finance multifamily developments,and that led to a lot of multifamily growth in areas that had previously been primary single-family,” Guzman said. Fortunately for those developers, there have been plenty of new Columbus residents moving into the area over the past decade. Those new residents have happily purchased and rented homes across the spectrum. Bryan Blankenship, CEO and founder of Columbus-based Venture Real Estate Group, has worked in the area for more than a decade. His company specializes in a wide assortment of properties ranging from single-family turnkey rentals to multiunit properties to historic homes. The COVID-19 crisis did not slow Venture Real Estate’s acquisitions pace. Midway through the “15 Days to Slow the Spread” initiative, Blankenship continued to conduct transactions in the Columbus area, albeit virtually instead of in person. “We acquired a nice, large historic home with a $400,000 ARV that I’ll be passing on to a DIY buyer to do the rehab themselves and a small condo with a $140,000 ARV,” Blankenship said. The company failed to make the closing deadline on a duplex it already owns, but Blankenship was not worried. “The condo will be a 12-day rehab and then go back on the market. The historic home is super-hot and should list and sell immediately. When the duplex does close, it is pre-sold to a cash buyer still committed to keeping it as a rental,” he said. Community Attracts and Retains Talent Since 2010, Columbus has periodically made headlines for attracting large-scale, foreign investments to the area. Those investments have occasionally also spurred conspiracy theories and instigated bouts of hyperactive investing by investors hoping to “follow the money” to the next big boom. At the height of the EB-5 visa program, Chinese investors poured capital into the Midwest, focusing on Columbus and Toledo, particularly. Those funds have ebbed since the program’s peak in 2014, but they left a lasting legacy of infrastructure, development and momentum that has continued to build, thanks to incoming capital from American investors, large corporations and even public funds. “This is a community with amenities and attractions that both draw in and retain talented citizens,” said Harding Easley, an account executive with Yardi Matrix and managing director of The Harding Group, a consulting firm for real estate investors and small businesses. “This community has everything: open parks, walkways, bike paths, restaurants, museums, an 18-hour mixed-use district that boasts 1,700 residential units and hundreds of thousands of office, retail and restaurant space, an incredibly pro-business and pro-investor environment offering state and city tax-credit incentive packages to help expand your operations, and an educated workforce stemming, in large part, from the five universities located in the Columbus area,” Easley said. At the start of 2020, Columbus boasted a population of more than 892,000, and that population has been rising steadily since the 1830s. In fact, Columbus has not experienced negative growth rate, overall, since the U.S. Census started tracking its data in 1830.Its lowest per-decade growth rate on record is between 1850 and 1860, when the population rose only 0.37%. These days, the area’s population growth is hovering between 1.5 and 1.8% annually, mainly due to the presence of powerhouse employers in the aviation, banking and finance, national defense, medical research, technology and energy, and fashion sectors (see sidebar). Columbus is also home to five insurance companies, including Fortune 500 Nationwide insurance, as well as Safe Auto and State Auto. Global Shocks and Aftershocks Even before the coronavirus hit the U.S. in force, Columbus was dealing with issues related to U.S.-China tensions. Tariff and trade tensions had a clear impact on the area. “We saw materials shortages cause a direct increase on plumbing, lighting and cabinets across the board,” Guzman said. Chinese cabinets had been the leading factor in fix-and-flippers’ ability to make a house look beautiful on a budget. Guzman noted that “prudent” investors had started finding ways to fix their costs, such as making spec lists of materials for their investments and, in particular, addressing changes in how cabinet materials are priced. He said that in addition to the coronavirus, dumping lawsuits and tariffs will affect the availability of materials for five or six months after those

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