2021 EP0717 - PLANNING MATTERS RADIO - THE DEBBIE BLOYD INTERVIEW

We want you to plan for success. Welcome to Planning Matters Radio. And welcome into the program. This is Planning Matters Radio. I am Peter Rochon, founder of Rich on Planning, and I am joined today by Debbie Bloyd, who is CEO of DLB Mortgage, a mortgage broker specialist in real estate and risk management. And Debbie, we appreciate you taking the time to join us on the program today.

Thanks so much for having me. In particular, Debbie, I wanted to have you on because you had some perspective on the recent announcement from Wells Fargo, basically telling its customers that it is shutting down personal lines of credit. Now, how that impacts you in the mortgage world, I want to get into that in a little bit as well.

But what is your take on this announcement from Wells Fargo? Well, I just think it's like any other business. If you or I have a business and we've got some lines of business that are not working, that are not making us money, we're going to want to cut that out.

There's no more time left. I think people wise or money wise to have people doing things that are not financially successful for your business. Home equity lines of credit and lines of credit are not utilized by lots and lots of people. And that preoccupies a lot of the money that the banks have. So if you get a line of credit for $100,000 and you're only using $10,000 of it on any given time, that means that there is $90,000 that has to stay on hold for you in case you want it. And so that pulls a lot of money from Wells Fargo or any entity that just has to keep it there in reserves.

I think they're kind of tired of that. Now, we know that banks don't have to keep dollar for dollar reserves. They can leverage it many times over, but this is still kind of restricting their lending power and their capital?

Sure, sure. And their manpower. So those lines of credit, it takes someone to draw down the line of credit, someone to keep up with all the paperwork. That's a lot of paperwork for a lot, not a lot of money. Do you think that this speaks to Wells Fargo's concern or confidence level in their customer's ability or the American public's ability to eventually pay back these loans?

No, I think it's probably- Or the unused portion? I think it's a combination. I think it's a combination of really bad press in the last few years. They're not very well run. As you can tell, they made up accounts for a long time. So how many are these home equity lines really real? I've never seen such a large company that's supposed to be, banks are supposed to be the strong, the honest guys. Yeah, they're not that.

So I don't know how much of it is just cutting out the fat. And then with the pandemic last year, we did business differently. You and I still had to get money in the bank, still had to cash check, still had to deposit things. And we were using ATMs and doing it on our phone.

It's kind of a dinosaur going into the bank. Not everybody does that anymore. I don't go in the bank.

I have things wired in and I move things through Venmo. So I think America is finding other ways to do it. The banker of 40 years ago is not the guy anymore. You can't have a handshake deal with your neighborhood banker named Bob. Bob's not going to give you a line of credit just because he goes to church with you.

So it's different. Banking is evolving. You have to qualify just like you do with me on a mortgage.

There's rules. Now, this isn't something that is new per se, because I remember back in the Great Recession 2008, 2009, a lot of banks actually cut customers' personal lines of credit pretty significantly. Actually, it could have an impact on credit scores as well, a separate issue. But this business move made by Wells Fargo is not a new phenomenon. There have been other banks across the board in other difficult economic times that have made similar decisions. Even in non-bad economic times, people change their line of business. A lot of companies go from having freestanding banks to doing everything online or changing the way they do banking.

I bank at Chase, and they've changed over the years. I think the other problem that we have to think about is all of these forbearance loans. Wells Fargo has a huge mortgage department, and maybe they see something coming down the pike with that in the upcoming months that we can't foresee.

So that is a great question. I have heard kind of two different distinctly sides of opinion on what the COVID extensions and reliefs meant for mortgage holders who were behind on payments. The term you used forbearance was one that was sort of debated. Does it mean deferment, or does it mean that a lump sum has to be come up with and is due at the end of this kind of forgiveness period? So I had some clients go into forbearance, and they took advantage unrightfully so of the situation because their lenders let them. So their servicers sent out a letter last year saying, well, if you can't make your payments for whatever reason, it's COVID related, we will let you skip your house payments for a while.

Then they came to me unbeknownst of what they've done to themselves. And they said, oh, I want to refinance rates are great. Well, we had to get them out of they had to have three payments, not catch up, not pay in full, but just three house payments, and then we can refinance them. So the forbearance was actually putting it on the rears, and it'd be paid out later sometime, they just had to make three separate payments. And then we were considered them caught up, even though that money went on the back end of the loan. So no, there was no lump sum of money because if people can't pay their bills one month, you let them not pay for three months and they come up with three times the amount of money, it's not going to work. But but just to clarify these lenders that that did allow the forbearance and I think that many were actually required to under the rules. But but they are taking those payments that were skipped and simply stacking them on the back end of the loan, right? Have this wave of crashing housing markets because a lot of people can't come up with the lump sum for all there is no quote, lump sum.

No, okay, no, it's all in the back. So if you know, so some people decided to sell their house and get out of their money in arrears just by selling the house and doing something else. And then with COVID, you know, we have all these people moving around the country. So a lot of people are using this time to the markets hot. So a lot of people's equity has risen. So even if they don't want to sell, they're doing a cash out, refinance, paying off some bills, and they're just kind of hitting reset is all it's doing just hitting reset. But there are problems like you can't refinance a house in forbearance, right? You've got to have at least three payments and get caught up, which a lot of us would love to take advantage of this low interest rate environment.

Yeah. And it would make the financial situation better. But if we are already in forbearance, can't do that. Now, many people kept up with their payments and are in a great position. Yeah, with a little bit of extra cash, we'll say because of the COVID stimulus to make those kind of proactive moves that could improve for further improve their financial situation.

So you know, depending on which side you're on would determine you can't blame them, you know, if the government's going to give you free money, I've got business owner friends that got the got the stimulus checks for their businesses. And they didn't necessarily Yeah, they didn't necessarily need it. But they took it, it was free. So you know, I don't know many business owners who are going to turn down the opportunity for free money.

Of course not. And so, but is that fair? If you don't need it, is it fair to take it? Well, we've created a society that that's okay. So I think, you know, you and I are going to pay for that in taxes, over the next few coming years, you know, we've got inflation's on the rise. And and certainly, money is not free.

We've been printing a bunch of it. And that just means that we're going to pay triple and double for our bread and our gas and our cars. But we already see that in the economy. I like that you know that money's not free. I'm on the financial retirement planning side. And for years, I've heard the term free money when it came to the 401k match.

And wow, maybe that's the closest thing that we can get. Money is not free. And I always remind people that no, you're working for that money. It's just you don't get it unless you put some skin in the game money. Money is never free, right?

Never free. Talking with Debbie Boyd, CEO of DLB mortgage. Now you're in the Dallas, Dallas Fort Worth area. How's the housing market over there? Because we're in North Carolina. It's super busy.

It's super busy all over Texas. So we've got people from the East Coast moving here. We got people from the West Coast moving here. And, you know, we are a tax free state. So we have no state income tax.

So coming from California, you're gonna love it coming from New York, Chicago, some of those states, you're gonna love it. So we're very busy. We have a shortage right now, nationwide of lumber products, windows, bricks, did you even know that bricks were in short supply. So now, because of the housing boom, we can't build fast enough.

And this is all over the state of Texas. So a lot of the neighborhoods are having to only start two or three houses a month, which is unheard of to cap it when you could sell 10 or 20. But you've only got so many workers so much raw materials to use. So we're really having to make the market slow down. Just because of what happened last year, we're still trying to play catch up, driving prices up.

Yes, of course, of course it is. And so a lot of those neighborhoods did not even keep the contracts they had in place. So a lot of the home, the big production builders, the big national production builders said, you know, we can't complete your home in the time we given you, we're going to give you your earnest money back, your house is now going to be worth $60,000, you're going to pay us $60,000 more, because lumber is up, windows are up, and and you can resign if you want the house. Well, that's really detrimental for some people because, you know, they don't have an extra 50 $50,000 that they can qualify for to keep that house. So they've had to let that house go and figure out another means of buying a different house different price range. Again, talking with Debbie Boyd, CEO of DLB mortgage, circling back here to this decision announcement by Wells Fargo that they are cutting off personal lines of credit.

I think they said for most borrowers between 3000 and $100,000. Other lending institutions, other banks have stepped forward and offered customers kind of a place for a soft landing if they chose to move accounts over. Sure, well, I just like any other competition, you know, one car dealer quits making one car manufacturer quits making one style of car or small car and SUV and somebody else picks it up. It's like grocery stores.

It's like anything else competition is going to win. You're you're not getting told that all across the nation, we're not going to have any lines of credit. You're just getting told this one place is not going to give you any line of credit right now. So that'll change people's banking.

But you know, maybe that's what they wanted. Auto lending also potentially impacted here. Sure, Wells Fargo has a lot of auto loans, but so does ally and so does a lot of car companies. Every seems like every line of car has their own financial institution behind them.

So Mercedes has Mercedes Benz financial, there's a lot of ways and then you know, you got all these small credit unions and associations that lend money still. So we're not seeing any of that go away. We're just seeing it get moved around a little bit. Do you feel this is an isolated incident with Wells Fargo from your perspective?

Or is this potentially a tip of the iceberg? And we're going to see more announcements and moves like this. I think we're going to see more announcements and moves that people are going to change the way we did credit. You know, monopoly used to be a game of money. And now they have a monopoly with debit cards and credit cards.

Yeah, it's the world is getting to go that direction, whether we like it or not. And I Dave Ramsey wouldn't wouldn't approve. No, he would not like it at all that that debt snowball is not going to work on that. So yeah, I think I think part of it is teaching us how we're going to run money. You know, you know, with your clients, you should have three to six months worth of living expenses. I've got clients that I can't refinance or $700,000 house because they have no reserves. They have no money as a leftover.

They're living paycheck to paycheck. Now, I've always encouraged my retiree or pre retiree clients to establish a home equity line of credit, not to use it, but to have it there and available. In case of worst case scenario, I mean, you've got 100% mortgage free paid off house, whose money is that?

It's yours. But you go to the bank and you ask for some of it. And their first question is, how do you plan on paying us back? So right, having that home equity line of credit established was always something that I said was a good safeguard, not to be used just because but in case of serious emergencies.

This is obviously you know, this move by Wells Fargo and if we continue to see this as a larger growing trend going to impact potentially retirees ability or anybody's ability to access that capital that they've got within their their own home. I had a lady call yesterday she owns two houses free and clear. She lives mostly in cash. She's got really bad credit. She can't get along with me. So you know, she's never paid for anything.

Yeah, she's not a positive. Yeah, collateral is not a problem. I'm like, just sell one. She's like, Well, I don't want to. And I'm like, well, you don't get to do evidently you've done what you want to with your credit all this time. That's why it's so crappy.

So there are rules and a lot of people don't like you know this, they don't want to play by the rules. A lot of my retirees that I see in business come to me and we do reverse mortgages. Now, I know that's not a good thing for some people, it depends on who's in your household. And if you want to leave the house to your heirs free and clear, but a lot of people you know, there's a line of credit now with a reverse mortgage that earns you 5%. That can be used in the case of a home equity line not being able to be had anymore.

So they're going to be alternatives always come up. When one door closes, somebody always opens another one with different interest rates. It just changes the way we borrow money. A lot of the loans from the fallout of 2008 are coming back, I know you're not going to want to hear that. We've got a lot of no verification loans, the same kind of loans and kind of loans, no income, all you have to do is pay a little bit higher interest rate.

And that allows investors to buy more properties because as the government and the reserve try to clamp down so hard on some of these lenders and saying you've got to have 25% or else there's somebody going to crop up with another way for you to buy that property, and they're going to have different rules. So I think we just have to be doing our due diligence now maybe look a little harder if you need that money. I wish people would anticipate and you know this being a financial advisor, you know, long term care costs money, life insurance, a lot of people wait till they're too old or sick to get either one of those. Just start planning plan ahead for the bad stuff. You know that stuff's coming.

So quit thinking that it's not going to happen to you because it is I can't tell you how many I got a call yesterday from a lady. She is 67. And she and her husband decided to get a divorce now. And she's like, What am I going to do?

And I'm like, we're just going to pivot, you're going to sell your house and take that money and we're going to invest some things for you. And, and you know, things happen, people die, people get divorced, and you just have to be ready for that. Don't think it can't happen to you because it can always happen in Murphy's law. Well, my my job is as a planner to make the bad things happen on paper to be prepared for them if they are real life, but people don't like that.

No, they don't. But it's it's it's going to make you better prepared for if and when those bad things happen, we can always plan for the worst and hope for the best. And I think that's the attitude that after the planning process is over, you can carry out through your life as you are living not worrying so much about those things. Sure. So with this line of credit, I don't think I think someone else is going to pop up and have it, you can look at your credit unions, they're still going to lend they have a so what I learned about the financial world is everybody has a different set of rules. That lenders have a different set of rules on broker, I got different set of rules on a bank, I've been vice president of a bank, and you know, you don't have to have a mortgage license to sit at a bank and do loans, the bank umbrella covers you. Well, they're not licensed. So, you know, you come to someone like me, and I'm licensed, I should be able to put you in a better position because I have more products to serve. I think we just have to tell everybody to, you know, start looking and and go to the professionals to help you because there are many, many ways to accomplish the same thing. You know this from your business as well.

Absolutely. Again, Debbie Bloyd, CEO of DLB mortgage. And what's the website or contact information? Debbie, you want to promote your site? So yeah, it's moneystrategieswithdebby.com, or DLBmortgageservices.com. I'm kind of all over the place, Instagram, Facebook, come find me, I'll be happy to help.

All right. And then the Dallas Fort Worth area. If you are looking for any kind of guidance in the housing market, certainly a great resource for you.

So Debbie, appreciate you being on the program. Any closing thoughts on this move, this announcement by Wells Fargo? Any impacts potentially that we did not cover that you think are important to note? I think this is the writing on the wall that things are changing. And I think people need to get their financial house in order. I think taxes are going to go up. You know that taxes were going to go up.

You can't print all this money and give it away to all these families and businesses and it not cost us anything. So I think people just need to get ready and be prepared for inflation. Prices are going to go up. So now might be a great time to figure out if you want to downsize or move around the country and start taking control of your finances rather than just wait for things to happen. And this is not going to be indicative of all the financial banks are not shutting down. The sky is not falling. It's just shifting. So it might be rainy for a while, but the sun will come back out.

And I think we just need to take better care of our own families. Like I said, this impact may not impact you. It doesn't impact me. I don't have a home equity line to start with. So it's not going to impact everybody.

It's not an across the board deal. Thank you so much for your guidance, your input perspective on this announcement and what it means for American consumers, borrowers, lenders and our financial our financial outlook into the future. Thanks so much for having me. This has been Planning Matters Radio. The content of this radio show is provided for informational purposes only and is not a solicitation or recommendation of any investment strategy. You are encouraged to seek investment tax or legal advice from an independent professional advisor. Any investments and or investment strategies mentioned involve risk, including the possible loss of principal advisory services offered through Brooke's own capital management, a registered investment advisor, fiduciary duty extends solely to investment advisory advice and does not extend to other activities such as insurance or broker dealer services. Advisory clients are charged a quarterly fee for assets under management while insurance products pay a commission, which may result in a conflict of interest regarding compensation.

This has been Planning Matters Radio. The content of this radio show is provided for informational purposes only and is not a solicitation or recommendation of any investment strategy. You are encouraged to seek investment tax or legal advice from an independent professional advisor. Any investments and or investment strategies mentioned involve risk, including the possible loss of principal advisory services offered through Brooke's own capital management, a registered investment advisor, fiduciary duty extends solely to investment advisory advice and does not extend to other activities such as insurance or broker dealer services. Advisory clients are charged a quarterly fee for assets under management while insurance products pay a commission, which may result in a conflict of interest regarding compensation.