#992 Josip Rupena On How To Use Your Bitcoin To Get A Mortgage

Josip Rupena is the Founder & CEO of Milo Credit. They offer clients Bitcoin-backed mortgages for the purchase of real estate in the United State.s. In this conversation, we discuss this new mortgage strategy, the credit market, why you might be interested in a Bitcoin backed mortgage, how the product works, and why no one has started a Bitcoin-backed mortgage company before Milo Credit. Josip joined us in our Miami studio. To see the video of the segment, go to "The Best Business Show: LIVE" YouTube Channel ======================= LMAX Digital - the market-leading solution for institutional crypto trading & custodial services - offers clients a regulated, transparent and secure trading environment, together with the deepest pool of crypto liquidity. LMAX Digital is also a primary price discovery venue, streaming real-time market data to the industry’s leading analytics platforms. LMAX Digital - secure, liquid, trusted. Learn more at LMAXdigital.com/pomp ======================= The Pod Pro Cover by Eight Sleep is the most advanced solution on the market for thermoregulation. It pairs dynamic cooling and heating with biometric tracking. Go to https://www.eightsleep.com/Pomp to check out the Pod Pro Cover and save $150 at checkout. Eight Sleep currently ships within the USA, Canada, and the UK. ======================= DeFi Technologies represents what’s next in the digital economy -- providing simplified, trusted access to crypto, decentralized finance and Web 3.0 investment opportunities. Institutions and investors can gain diversified, secure, compliant, and easily tradable access to a diversified set of industry-leading equity products and protocols, through a single stock purchase on a regulated exchange. Currently listed on U. S. (OTC: DEFTF) and Canadian (NEO:DEFI) exchanges. For more information or to subscribe to receive company updates and financial information, visit our website at http://defi.tech =======================

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:02Anthony Pompliano?

  What's up everyone, this is Anthony Pompliano. Most of you know me as Pomp. You're listening to the Pomp Podcast, simply the best podcast out there. Now let's kick this thing off. Joseph Rapinoe is the CEO and founder of Milo Credit. In this conversation, we talk about mortgages, the credit market, and why no one's built a Bitcoin-backed mortgage program yet. I really enjoyed this conversation with Joseph, and I hope that you enjoy it as well. Before we get into this episode, though, I first want to talk about our sponsors. First up is LMAX Digital, the number one institutional crypto exchange. They offer clients the deepest pool of crypto liquidity on the planet, underscored by 100% uptime track record through volatility spikes. They leverage LMAX Group's liquidity relationships and ultra-low latency technology. LMAX Digital is the market-leading solution for institutional

• 0:47Anthony Pompliano?

  crypto trading and custodial services. If you've never heard of LMAX Digital, it's probably because you're not an institution. They have no retail, only institutions. They feature a sentential limit order book, streaming spot Bitcoin, Ether, Litecoin, and Bitcoin Cash, all paired with US Dollars, Euro, and Yen. LMAX Digital, they're secure, they're liquid, and they're trusted. Learn more at LMAXdigital.com/pomp. Again, LMAXdigital.com/pomp. This episode is brought to you by Eight Sleep. Eight Sleep is the single best product that I have purchased over the last three years. It completely changed my life. I'm not joking, pay attention. The Pod Pro cover, which goes over your mattress by Eight Sleep, is the

• 1:29Anthony Pompliano?

  most advanced solution on the market for thermal regulation. It pairs dynamic cooling and heating with biometric tracking. You can go to eightsleep.com/pomp to check out the Pod Pro cover, and you save $150 at checkout. They currently ship within the United States, Canada, and the UK. And I told you, it changed my life. It helps me sleep deeper, helps me sleep longer. I feel much more refreshed, and I have better energy. You want to know how I have relentless energy every single day? Because I sleep on an Eight Sleep. Seriously, go check it out, eightsleep.com/pomp today. This episode is brought to you by DeFi Technologies. DeFi Technologies represents what's next in the digital economy. They're providing simplified, trusted access to crypto, decentralized finance. And Web 3 investment opportunities.

• 2:12Anthony Pompliano?

  Institutions and investors can gain diversified, secure, compliant and easily tradable access to a diversified set of industry-leading equity products and protocols through a single stock purchase on a regulated exchange. DeFi Technologies is currently listed on the US Exchange at DEFTF Stock ticker and the Canadian NEO Exchange at DEFI. For more information or to subscribe to receive company updates and financial information, visit their website at defi.tech. I'm really excited about what these guys are doing. I've become an advisor to the business and I highly suggest you go check them out. Go to their website at defi.tech today.

• 2:50Speaker 01

  Anthony Pompliano runs Pomp Investments. All views of him and the guests on his podcast are solely their opinions and do not reflect the opinions of Pomp Investments. You should not treat any opinion expressed by Pomp or his guests as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of his personal opinion. This podcast is for informational purposes only.

• 3:14Anthony Pompliano?

  Joseph, how are you?

• 3:15Speaker 02

  Excellent. Good to be here.

• 3:16Anthony Pompliano?

  I'm very excited about this. Let's start maybe first with how does a bank underwrite a mortgage? Like if somebody goes to apply for a mortgage, what assets do they determine I can underwrite with? And then why do they not include some other assets?

• 3:30Speaker 02

  I mean, a lot of it is really driven where mortgages actually end up going. So mortgages end up going mostly to Fannie and Freddie, right? You know, government. So they have a process to really look at person's ability to pay. They'll look at what their income is and look at what their assets are. They'll look at how much that person can put down in an overall transaction. And what's happened is that over, you know, the last sort of 60, 70 years of originating mortgages, they've learned a lot of things and they've learned that it's really important for people to, to, to have the ability to pay. And, you know, over the course of, you know, on the back of really sort of 2008, the government decided that, you know, they're going to basically come up with these ratios on, on income and they're going to want to be able to prove it and they're going to want to make

• 4:13Speaker 02

  sure that that income is continuous into the future. So assets like Bitcoin and crypto is really hard for them to actually consider today, but they're really looking at, at all kinds of, you know, just other assets that are mainly, mainly liquid that they're really comfortable with.

• 4:28Anthony Pompliano?

  Got it. And so when you think about this Bitcoin and cryptocurrencies has obviously become an asset that wasn't here in 2008 and now is very, very popular. Is it just that they haven't gotten comfortable yet? Or is it something where they've identified specific reasons why they don't want to include it? Like, hey, we've done the work, but we don't want to include it?

• 4:49Speaker 02

  Yeah. Yeah, I mean, I think that they're, they know that crypto's here, right? And it's here to stay. So I think that it's very, very clear that that's going to be the case. I mean, statistically, last year, one out of every eight first time home buyers in this country sold some crypto for their real estate transactions. So I think it's undeniable that people have crypto and it should be considered. I think it's a matter of time. I think that it's probably going to take companies like ours and probably others as well to show them that this is a much bigger piece of individuals' wealth and that they're going to have to start to think about it.

• 5:16Anthony Pompliano?

  So it really is just you need the upstarts to kind of push innovation and then eventually they realize, hey, these people are making too much money. We got to get into that market, right? And they try to come compete.

• 5:25Speaker 02

  Yeah. And then the reality is that this is wealth, right? I mean, I think that that was sort of like phase one, right? You know, is this going to be around? Yes, it's going to be around. Now, you know, does this make a borrower make their profile stronger, right? If they have the ability to liquidate some crypto to make mortgage payments, then that should be, that should be a consideration. And today it's not. And I think that that's one of the reasons why we created our product is because we saw that gap.

• 5:46Anthony Pompliano?

  When you think about the product that you have, is it just you just underwrite Bitcoin or cryptocurrencies? Or you use it in holistically look at crypto plus whatever other assets they have?

• 5:58Speaker 02

  Yeah, we have to look at the whole, the whole bar, right? I mean, I think that that's the element that a lot of people assume, well, if I only have, if I have Bitcoin, then a lender should be comfortable with me just having that. And the reality is, when you lend money to someone for 30 years, right, you've got to really feel good about that person. You've got to feel good that they have the ability to pay. You've got to really look at all these other elements. And, you know, if you really just sort of think about, you know, what is 30 years? You know, 30 years, you go back to, you know, early 90s, right? You had a, you had inflation, you had a savings and loans crisis, right? You had long-term capital failing in, you know, 98, you had the dot com crisis, you had the financial crisis, you had everything that's happened in the last 10 years. So it's a long time to be able to underwrite a consumer and you got to feel Good about it and the way you do that is looking at their assets, you look at their income,

• 6:41Speaker 02

  you look at how they've paid and ultimately, you know, are they going to continue to earn income to be able to pay your loan? So yeah, we look at, we look at everything.

• 6:50Anthony Pompliano?

  When you think about real estate, I think a lot of people think about real estate prices themselves and there's obviously volatility. 2008 is a great example where the prices went down. I remember I talked to Kyle Bass, who's one of the people who shorted the housing market. And I asked him, I said, how did you know to short it? And he said, we were on a call with a bunch of analysts and they said, you know, as real estate prices go up, you know, 2% a year or whatever. And he goes, well, what happens if they don't? He goes, that never happens. And he goes, what? And he started paying more attention because they literally were just so kind of ignorant to the fact that prices may actually go down. And he realized the models would all break and there'd be this huge dislocation. That's pretty well understood, I think, by most people in the market now that, hey, real estate prices go up and down and that can cause problems. But something like Bitcoin and even stocks,

• 7:33Anthony Pompliano?

  as an example, in recent times, they have a lot of volatility. So stocks right now are down 20% or so. Bitcoin's down 50%. How do you think about volatility in the actual net worth or assets of the borrower?

• 7:45Speaker 02

  Yeah. And I think big consideration when you do a mortgage is, one, the ability for someone to pay. And I think the second component is their willingness to pay. So when you actually structure a transaction like a mortgage, you're really looking at it and making sure, does the consumer have really enough skin in the game, right? Do they actually have a down payment? What is that down payment? And is that enough for them to continue to pay in periods of volatility? It's funny that you sort of say, you know, where real estate prices have been because if you look at the last sort of 60 years, the only time you really had a drawdown in real estate prices, you know, with the trend, was really through that financial crisis period. If you look at it from the last 10 years, right, it's been nothing but up and to the right. I think it's, it's going to be interesting to see at what clip, but if you look at the last 10 years, it's appreciated at 8%, right?

• 8:29Speaker 02

  Last year it was 20%, you know, different on sort of geos. But you definitely have to look at the long-term, the long-term trend that, you know, probably diversifying with real estate, it's a good thing, right? For from a wealth creation perspective.

• 8:39Anthony Pompliano?

  Yeah. And when you're underwriting these types of mortgages, are they all residential or they can be commercial as well?

• 8:45Speaker 02

  So right now with the loans that we're doing, we started off doing mainly investment properties. So individuals that are buying properties that are cash flowing, that are generating some type of income. We felt that that was a good place to start because it allows us to really underwrite the consumer, underwrite the transaction. There's cash flow, right, from an income perspective. So it fits better with our current model. Now, we want to start to originate at some point, you know, primary homes. But we're really looking at it, given, you know, we've had thousands of people that have applied for loans with us and gotten pre approvals. What do people want? Do they want a mortgage? Or do they want a property? So we're thinking creatively around that structure. Because a lot of the things of how the existing mortgage market and the regulation, you know, Respa, TILA, Dodd-Frank, all these other things, it actually doesn't work well with

• 9:30Speaker 02

  crypto today. So we're thinking a lot more creatively around that.

• 9:33Anthony Pompliano?

  And how does geography play into this in the sense of Miami and kind of South Florida's up, you know, maybe 25, 30% and other geos might have only been up 5 or 10% over the last 12 months? Like, do you do geographic specific underwriting? Or do you just look at the borrower itself? And it's kind of a one size fits all across the country?

• 9:51Speaker 02

  Yeah, we're really looking at it in three parts. You know, one, it's the borrower, right, their assets, their income, their ability to pay. Two, it's the real estate, right, the property, you know, do we like the property? Do we understand what this property could rent for? Do we understand what it could sell for? So that's an important consideration. And then we're also looking at just how the transaction's structured, right, from a regulatory perspective, right? Do we feel good about it? Is there an existing framework? So yeah, we really look at all components. Interestingly for us, you know, as a company, we've done over $100 million in loans to mainly international customers buying real estate here in the US. And those states are generally Florida, California, Texas, Colorado, Arizona, right, some of these other states. And we're seeing very

• 10:33Speaker 02

  similar trends for people that have Bitcoin and crypto wealth that they want to buy in those markets as well. So it's telling me that people want to live in desirable sunbelt regions as opposed to, you know, some of these other suburbs.

• 10:43Anthony Pompliano?

  Yeah. When you think about the investment properties themselves, why would somebody want to use their Bitcoin as collateral versus use other assets they have or, you know, job and income or something like that? Is it a necessity? Or is it because there's some sort of advantage?

• 10:58Speaker 02

  I think what we found with the consumers that we've done loans for, it's a desire, but ultimately it's a really strong desire that they want to keep their Bitcoin. They don't want to sell it. They don't want to have it trigger a taxable event for them. So for them, it's a really important consideration. And I think that the other element is just because you can sell it and have enough for a down payment, it doesn't necessarily mean you're going to qualify for a mortgage. So you need someone to understand that that crypto wealth came from somewhere. You have to be able to run KYC on the consumer. You have to be comfortable with the actual crypto itself. So it's not something that any type of lender can do. And it's one of the reasons why we came up with this product because we felt we would understand it from that first principles perspective as opposed to basically trying to make it fit into something else.

• 11:43Anthony Pompliano?

  When I look on the website for the Milo credit crypto mortgage, there are six things that you all kind of call out. I think it's like the high level benefits. So the first is you can borrow up to $5 million on a 30-year loan term. You can finance up to 100%, no money required to qualify. There's low rates, 5.95% to 6.95%. Safe and trusted custodian. You don't have to sell your crypto. And then you accept Bitcoin, ETH and stable coins. The one that jumps out to me is finance up to 100%. Explain that in terms of, I think when most people hear that, like, whoa, what's going on here? How's that work?

• 12:21Speaker 02

  Yeah, that's a big one.

• 12:23Anthony Pompliano?

  Yeah.

• 12:26Speaker 02

  Yeah, we've given out, let's see, so we've had over 1,000 people that have applied for pre-approved letters with us. I would say probably about 40% of those have actually gotten a letter. And a lot of those are actually, they're shopping, right? All across the country trying to buy homes. So we have a bunch of realtors calling us up and saying, you know, what does this mean? Because we've never heard of this. And this was really around trying to provide that solution to not sell your crypto. Right? If you're basically going out and you have to sell for a down payment. Then right away, that sort of removes a lot of the benefits. So we wanted to allow people to just sort of pledge sort of that one to one ratio. You want to borrow a million dollars, come to us, you know, post a million dollars of Bitcoin. We're still going to run appraisals, title, insurance, right?

• 13:09Speaker 02

  We're going to do all these things in behind the scenes and make sure that we're really comfortable with the transaction. But you're not going to have to liquidate it. So, so that's, that's, that's a really big deal for a lot of consumers.

• 13:16Anthony Pompliano?

  And so it's not an under collateralized loan. It's basically one to one where you've got to have the collateral equivalent to the loan amount that you want here. Walk me through, what is the logic behind making it one to one versus over collateralized or under collateralized?

• 13:31Speaker 02

  So conceptually, we could ask for less, right? So if you think about it, that if you were to basically post a down payment and you had Bitcoin, well, how much would you generally post? Well, you'd probably post two to one, three to one, four to one, right? In terms of, you know, from a dollar stack, from, from a, from a crypto perspective. So we wanted to think about it in a transaction to say, all right, this consumer is, is not going to basically be able to get a down payment. We're going to provide that down payment for them. We're going to give them the mortgage and we're going to wrap it all into one. So that ultimately means that, yes, we could ask for half of the loan amount. But then that would introduce potential volatility to the consumer because of how volatile crypto is. Arguably, maybe not as volatile as the stock market recently, but, but still volatile, right?

• 14:13Speaker 02

  So I think that that was something, really thinking about it from a consumer's perspective, where if you get a loan with me today, right? I don't want to put you in a margin call tomorrow, right? I want to give you enough, enough room. And what we saw is that the individuals that have that one to one ratio, a lot of them actually have a lot more crypto as well. So it's, it really strengthens the bar profile.

• 14:29Anthony Pompliano?

  So if you do one to one, talk to me about, uh, let's just, uh, you have an example on the website that says, uh, I want to borrow a million dollars. I put a million dollars of Bitcoin up as collateral. Bitcoin goes up, doubles, right? Now my million dollars of Bitcoin is worth two million dollars. What happens to the loan? What changes?

• 14:46Speaker 02

  Yep. So, so we looked at that, that if the value of the collateral goes up, uh, there's an element where, depending on the agreement that you choose to have with us. You know, you can either remove some of it, or, um, it will actually lower your rate at that point in time if you choose to actually keep that crypto with us. So it really allows you to have the benefits of essentially making a transaction, uh, less risky for us. And then the consumer is actually getting a lower rate because of that.

• 15:09Anthony Pompliano?

  Opposite example, I put a million dollars, I borrow a million, one to one, Bitcoin drops 50%.

• 15:16Speaker 02

  Yeah.

• 15:16Anthony Pompliano?

  What happens?

• 15:17Speaker 02

  Nothing in that situation. So the value of Bitcoin, you wouldn't get a margin call until it drops 65%. So that million dollars turns into 350,000. They'd have to post more, or they can reduce the loan amount. You know, either, either one is, is okay. And trying to get it back into a, a ratio that's acceptable.

• 15:33Anthony Pompliano?

  If it drops 90% and I bought a house, I obviously have the house and I had my million dollars worth of Bitcoin. Now my million dollars of Bitcoin is worth 100K.

• 15:44Speaker 02

  Yep.

• 15:45Anthony Pompliano?

  I get margin called, I don't post any more collateral. Do you just take my 100,000 dollars worth of Bitcoin and I keep my house?

• 15:51Speaker 02

  Yeah. As long as you're continuing to make payments, right? So that's that element where we created this waterfall structure where sort of the first thing that we're looking at is a crypto. Right? So if you don't make payments, then we have the ability to liquidate some of it to make sure that you're still making payments. Obviously, that's not designed to be a repayment plan. But it's, it's really a convenience. If you stop making that payment and there's no more crypto for us to essentially liquidate. And you continue to make your mortgage payment, there's no issues, right? You can still, you know, own your house. It's still fine. If you stop making payments, then we're going to go into sort of the old way of basically having to go through a foreclosure process. The question that I get a lot is from individuals saying, well, you have the house, you've got all of this sort of home there.

• 16:30Speaker 02

  Why do you need so much crypto? And a lot of it is because people don't understand that having an illiquid asset like a house, it takes a long time to actually foreclose. Right? On average, it can cost up to $50,000 to foreclose on a property and can take up to 12 months. So during that period of time for a lender, it's actually a liability because you have to pay taxes, you have to pay maintenance, right? You have to carry all this other elements. So this transaction with having Bitcoin and having real estate from a lender's perspective, I think is, it's a superior mortgage product because you have the benefits of something liquid, but then you also have the, the benefits of something tangible, which is the real estate.

• 17:04Anthony Pompliano?

  So if I take a million dollars of Bitcoin, I give it to you, I get my million dollar loan. You have the private keys to the Bitcoin or what is the custody situation? And then how does it work in terms of who's in control at what point?

• 17:16Speaker 02

  Yeah, so right now, the way that we're doing is that the individual transfers their Bitcoin to our custodian. So we work with a number of custodians, all sort of the top custodians, they're licensed insured. We don't want to have the risk on our side directly, right? We want them to basically hold it in custody. That's what they do, they do it really well. But it's important for us to have it on our side. So then that way we can liquidate in the event of non-payment. And that allows us to give a consumer a good rate, a very attractive rate. You know, given how much rates have moved, you know, if you look at a comparable loan in this structure, you'd probably be closer to sort of 7% today, 7% or 8% even. And we're lower than that, so you do get the benefit of it.

• 17:52Anthony Pompliano?

  Got it. And then when you think about insurance, you said that the custodians themselves, basically the risk and the kind of mitigation of that risk is on the custodian's side, not necessarily you guys trying to become Bitcoin experts or whatever.

• 18:07Speaker 02

  So it's custodied there. Actually, as a company, we have Fidelity bonds, insurances, cybersecurity policies, Arizona emissions policy and all these other sort of securities as well. So I think it's an additional layer of protection.

• 18:19Anthony Pompliano?

  Yeah. Talk to me about mortgage rates right now. Obviously, they're much higher today than they were eight months ago.

• 18:24Speaker 02

  They've moved quite a bit.

• 18:26Anthony Pompliano?

  What have you guys seen over maybe the last 12 months? Because I think they were at very, very low and now they're decently high. What are you seeing?

• 18:32Speaker 02

  Yeah, I mean, we were looking at the end of last year and expecting rates to move up. I think that most people don't realize that mortgage rates were moving up in 2018 and rates were higher from a Fed perspective. And we had already started to normalize rates and then COVID happened. So now what's different is sort of, I think, the velocity of how quickly this has moved to the upside. If you look at a conventional borrower that has perfect income, perfect profile, very, very strong credit, they're probably borrowing somewhere around the 5.25% level today. You know, slightly over 5%. So I think that, yeah, rates have moved. And then if you think about, you know, any other product that, from a loan perspective, that doesn't get sold to the government is going to have some type of premium to that and slightly, slightly higher.

• 19:17Speaker 02

  So if you look at most sort of non-conforming, right, not conventional mortgage rates, they're all sort of in the sixes today and many of them in the sevens, right, depending on loan to value and other ratios. I think the expectation is that where we are, they're probably going to sort of stabilize around these levels. I think a lot of it of what's out there is just borrowing costs, right? So if you think about most lenders, they have a cost of capital. They have to basically borrow to go out and do these loans. They put them on a warehouse line and then they turn around and they sell them to the government or they sell them into a bank or into a secondary market. There's a cost for that. That cost has gone up significantly. So between that cost and where rates are, it just means that mortgage rates are going to be higher for, for everyone. It just gets passed on the consumer.

• 19:59Anthony Pompliano?

  And when you think about somebody who's coming to borrow, it's interesting from your perspective because you guys are the ones who are extending these. Talk to me about like interest only mortgages versus principal and interest and like how you think about pros and cons and which one's better for the, the actual lenders and then how people should think about it.

• 20:15Speaker 02

  Yeah, that's a, that's a great question. I mean, it's one that we think a lot about because in a 30-year amortizing, amortizing structure, for the first really three to maybe even five years, a big majority of your payment is actually just interest. So it gets baked in on the front end of it. So what we found is that a lot of the individuals that are buying investment properties, they prefer to have an interest only payment because it's actually 20 to 25% lower on a monthly basis than that amortizing payment. So it gives the consumer the option to attribute more from a principal perspective when they actually want, but they're only paying interest on the money that they're actually borrowing at that point in time and they have the choice to amortize. So we think it's actually a better structure for most individuals. Generally for people that are buying primary homes, for them, they want to have that amortizing

• 21:00Speaker 02

  feature in it because it, it really becomes sort of like this auto saving account for them, right, where they don't have to think about it and it just sort of piles up. But someone who's an investor who's really looking at it from a perspective, how much cash flow am I getting every single month? I want to match my liability, right? I want to be able to sort of be as close to it as possible. I don't want to be taking money out of my pocket every single month for that investment property.

• 21:20Anthony Pompliano?

  Yeah. And then when you think about things like adjustable rates versus fixed rates, how does that, you know, kind of break down it? And really, in an environment where rates were low, now they're high, maybe it even changed how people should think about this in the last, you know, 12 months.

• 21:34Speaker 02

  Yeah. Yeah, I mean, usually when you have adjustable rates, you tend to be a little lower than fixed rates. Right? Fixed rates, locking up an interest rate for 30 years at a set rate in spite of potentially rates moving higher is not great from a lender's perspective, right? There's risk in that. What we are seeing, though, is, interestingly enough, in the curve, you can have an adjustable rate mortgage that goes out five years or seven years, and it's not necessarily that much lower than the 30-year. So what's happening is that the curve is basically telling you that we don't think that rates are going to be that high, that inflation is going to be that high for a sustained period of time, meaning longer than five years out or seven years out. So I think that today, if you can get a 30-year fixed rate mortgage, you're fine. If you can get a slightly lower rate from an adjustable rate mortgage, and you can go out

• 22:19Speaker 02

  five to seven years, you probably should do that because you might get a shot. Maybe when rates come back in, maybe three or four years out, right? Whenever we get on the other side of this inflation story, you might have an opportunity to refi again.

• 22:29Anthony Pompliano?

  Yeah. What is your thought process in terms of how high mortgage rates can go in the next 12 months in the United States?

• 22:35Speaker 02

  Yeah, I think that there's a possibility that they go up, call it another 100 to 150 basis points, right? Point, point and a half. I think that that's definitely within the realm of possibility. And that's really just the function of what the Fed is doing, right? They're going to be raising rates, they're trying to normalize them. So assuming everything else remains constant, right? Borrowing costs and everything else, they stay where they are, you would expect the things sort of get pushed out a little bit higher. And that it's probably sort of in that 1% to 1.5%.

• 22:58Anthony Pompliano?

  Will we see 10% mortgage rates in the United States for the average, like, borrower?

• 23:03Speaker 02

  I hope not.

• 23:04Anthony Pompliano?

  Yeah. That's pretty crazy, right?

• 23:06Speaker 02

  Yeah, yeah. I mean, yeah, I think that, you know, we were talking to a lot of individuals last year that were debating whether they should cash out from their properties after, you know, when they didn't get a loan. And we were talking, you know, I think this is probably all-time lows, right? I don't think that we'll probably see levels this low for a while.

• 23:23Speaker 02

  It's hard to say whether we get to 10% or not, but I think that there definitely is a world where depending on the borrower, depending on their situation, right, if they have lower credit and everything else, they will see a 10%. I think on average, though, for a person getting a conventional mortgage, I see that less likely because that would really, really slow down the housing market significantly.

• 23:40Anthony Pompliano?

  Yeah, and I think this is one of the key things is obviously the housing market exploded. We saw real estate up 20% or so on a national basis. And there's some dynamics at play here that are interesting in the sense of there's not enough housing coming online, right? There's some trends of people moving, so moving out of cities, moving to suburbs or other cities. But also, obviously, the loose monetary policy drove immense incentive for people to go borrow capital. Is your expectation that we should see home prices start to come down as well because of just the monetary policy stuff, even though the lack of inventory and the trend of people moving are still kind of in play?

• 24:16Speaker 02

  I mean, housing is really sort of predicated on a couple of things, right? Sort of personal situation, right? Where are you in your life? And if you're getting into sort of peak home buying years where, you know, I think last year, the average first time home buyer, the age was 36. A lot of it is predicated on your personal situation, right? Where you are in life. And there is a shortage, right? There's a 5 million home shortage out there. And I think that there's an element that individuals want to buy homes. I think that COVID fundamentally changed it where for a long period of time, over 10 years, people didn't really think about a house as something that was necessary. But now with the shift where millennials are getting into peak home buying years, the next generation is also going to want to start buying homes. I think that there's going to be a really

• 24:56Speaker 02

  strong bid for people to want to buy homes. And I think historically, rates are very low still, right? In the context of that. So what I actually see is a lot more innovation around mortgage and mortgage structure, right? And companies getting a lot more creative around how do they solve for the down payment issue? How do they solve for the other aspects? Because it's not that people can't afford homes. They can't afford the monthly payments because they're paying rent already. And rent is very closely tied to borrowing costs, right? Between mortgage, taxes, and everything else. And that spread is the one that I actually watch very, very closely. And that's fairly close by. So If you solve for the down payment aspect, a lot of people are going to buy homes. If they can buy homes, then really homes aren't going to really soften. So I don't really see a situation where we get this massive sell off, right?

• 25:41Speaker 02

  I think that 2008, 2009 was a fundamentally different market where we were extremely over levered. I don't actually feel that we're very over levered right now.

• 25:48Anthony Pompliano?

  Yeah, so really it ends up being, I think I saw the average new home in America is now like over 500,000, 600,000 dollars, right? The average home in America, I think is over 400,000 dollars. And so when you look at those numbers, you're saying that the down payment is the biggest problem or the biggest obstacle or friction point for most people, not so much the ability to actually service the mortgage and pay.

• 26:10Speaker 02

  I think you do definitely have a component of that, but that's offset by, you know, a lower interest rate, right? You can get creative around interest only, right, versus that, right? So that that brings your debt to income ratio, which is a big component, right? So that's been fairly low and that really came out of the financial crisis that, you know, the Dodd-Frank, when they enacted that, they made it a requirement for lenders to run a ratio and make sure that this person can actually afford this mortgage. And I think that that is one of the biggest challenges that I think gets missed when people are talking about, you know, DeFi and a DeFi mortgage and all of that is that there's actually real liability for someone who is lending. If you don't actually find out how this person's actually going to pay you back, right? Like you can go out of business and you can potentially go to jail, right?

• 26:52Anthony Pompliano?

  Yeah, when you see consumer credit explode upwards like it is right now, obviously, given the talk of the recession and people starting to get laid off, et cetera, what are the relationship or correlation to the mortgage market? Like if you see consumer credit go up, you expect to see people do something differently or it doesn't really have an impact?

• 27:10Speaker 02

  I mean, I think that there is, there is an impact, right? I mean, I think definitely it's going to force some people to sort of maybe wait a little longer, right? Maybe they won't buy that home, maybe they, maybe someone else will buy it. But I think we're, we're seeing that there are multiple dynamics. You know, there are geopolitical events, right, that are happening around the world that are making international people to want to buy in the US, right? There are people that are generating new wealth, right? People who have crypto who want to buy homes for the first time that they can actually transact and do this. So all of these things have, have a positive impact, right, on, on, on the desire for people to want to buy homes. So I don't see that really, really changing.

• 27:43Anthony Pompliano?

  What is the difference that you see between investment properties and like primary homes? Is there a difference in these trends when you see kind of movements in the market? You see capital getting more expensive? Is it, oh, I still go buy the primary home, maybe I won't buy the investment home or maybe I will go buy investment, but not primary?

• 27:57Speaker 02

  Yeah, I think that they're fundamentally different transactions, right? I think that someone who's buying a primary home, they're either going to pay rent, or they're going to try to essentially buy a property. And if they're going to plan on staying there for a while, then they're going to want to purchase the property. And now, because there's no cash flow, now you really have to underwrite them as a consumer. And you get into this whole mix of sort of compliance and regulation that I won't bore you with, but there's a lot there that goes into it. And then on the investment property side, I think that these are individuals that are probably a lot more in line with people that have made their wealth in crypto, because they're investors by nature, right? That's how they made their wealth, right? On average, what we're seeing is the people that are applying for loans with us, they bought crypto over five years ago. So they've been holding it for a long period of time, right? They've gone up and down with cycles.

• 28:41Speaker 02

  And I think that their approach is sort of taking this longer term position to say, all right, I am investing, I'm diversifying, I want to keep this for a longer period of time, which is why something that is like a 30-year mortgage actually works well. But they're very different fundamental motives of why someone's trying to do the transaction.

• 28:57Anthony Pompliano?

  Yeah. When you start to think about the market in a way of there's primary and then there's like this investment stuff, how do you think about the difference between somebody who's buying vacation homes? So they're not necessarily investment properties, but they end up being non-primary homes, right? What are you seeing there?

• 29:16Speaker 02

  Yeah, so if you want to sort of like split the market, you say, okay, well, how's a person going to make a payment?

• 29:21Anthony Pompliano?

  Yep.

• 29:21Speaker 02

  And if it's your own income that you earn from your wages, then that's your primary home, and it's your second home. Because even if that property is not rented, right, you still have to make payments for it. Whereas when you think about an investment property, there's the ability for you to rent it, it might be a short-term rental, and there might be some Airbnb component, right? You might rent it out for 12 months or six months, right? So now you're really looking at that type of cash flow and income. So it really splits the transaction. And there's really clear regulation of how you have to think about how you underwrite each one of those and what you're able to do. And you have a lot more, I would say, product flexibility on the investment property side than you do have on the primary and second home side.

• 30:00Anthony Pompliano?

  When you start to think about mortgages, one of the things I've never seen someone do at scale is vertically integrate the home producer and the mortgage provider. Like, they're two different and separate bodies of work.

• 30:13Speaker 02

  Yeah.

• 30:13Anthony Pompliano?

  Is that regulation? Is that just a bad idea? Like, why do you guys not go build homes and then say, hey, buy the home and we've got a built-in kind of mortgage product that's vertically integrated? Or somebody that's building homes go and start offering the financing?

• 30:25Speaker 02

  It's a great question. We've had a lot of conversations with home builders, right? And home builders, the way they look at it today is they say, we actually don't have a borrower shortage. We have a home shortage. So if you can help me build more homes, I want to talk to you, right? So it's actually the inverse. And many of the large home builders around the country, they do have lending arms because it actually helps them sell more homes. They provide financing, they provide certain incentives to buy those homes, and then they participate. The reality is that there's just a lot of homes in this country. So it's very, very hard for you to say, okay, if I work captively with one home builder, that you can actually get scale, right? When we started to do our loans for international consumers, we started here in Florida. We said, well, we're going to open it up across the US.

• 31:09Speaker 02

  And last year, we did loans in 11 states. And it wasn't something that we said, here, we specifically want to lend in this state. It was just that's where the consumer wanted to transact, and we had to meet them at that point, in that place. But I think that there is innovation there. I mean, I think that the biggest limitation, a lot of it, is really driven around title, right? And county, and how loans actually get recorded, and how you perfect your lien. That's really the biggest limitation to innovation.

• 31:35Anthony Pompliano?

  My last question is, a lot of folks who watch this constantly talk about BlackRock and all these organizations buying up all the single-family homes, and, you know, you'll own nothing and be happy type World Economic Forum viewpoint. What's your read on the changing nature of investors in the single-family home market?

• 31:55Speaker 02

  I mean, it's fascinating what's happening. And the way I look at it, and I say, well, if... You would rate them as the smart money, right? The smart money is going out there and they're buying lots and lots of homes in this country. You know, we as individuals, shouldn't we be doing the same, right? Because clearly they see something that's happened, right? They have all of this data, they have all the abundance of capital, right? They have the ability to invest in anywhere in the world. And this is where they're choosing to invest. They're choosing to invest in housing, right? And pension funds and sovereign wealth funds around the world are investing in real estate here and spinning up conduits so that they can actually buy more homes. So I view that that that becomes a really strong bid under housing. They're not levered, right? They're investing on a cash basis. So that means that that's a very healthy market.

• 32:37Speaker 02

  But if you look at where they're buying, they're buying in the regions where people are buying homes to start a family, that have good schools, that have safety. So I think that if you're buying investment properties, you probably want to be doing the same and following their lead and figuring out who can you work with? You know, what are the companies out there that are going to allow you to basically be able to move faster and get a loan quicker? Or think about even alternative models that have yet to be thought of. But a lot of companies like ours are thinking about.

• 33:03Anthony Pompliano?

  Yeah, it's absolutely fascinating. Where can we send people to find you on the internet or find out more about this product?

• 33:10Speaker 02

  Yep, so I'm on Twitter, JayRupena. And then also you can come to our website, mylocredit.com. And then our team is there. And then we also have a Discord channel, so you can post questions there. And we're really in this phase of gathering feedback, right? We're doing loans, we're helping people, but we want to continue to make a better product. So we want to hear from everybody.

• 33:28Anthony Pompliano?

  Yeah. My last question is, one of our sponsors, Eight Sleep, I got a notification this morning that said that my resting heart rate while I was sleeping was down 8%. And they were like, great job. And I was like, okay. It's because I worked out yesterday. What's your sleep schedule? And like, how does that play into your ability to execute?

• 33:46Speaker 02

  I've got young kids, so I don't know what sleep is anymore.

• 33:48Anthony Pompliano?

  Yeah. How old are your kids?

• 33:51Speaker 02

  Six and two.

• 33:51Anthony Pompliano?

  Oh, six and two. All right, I'm not there. I got a six-month-old baby and she actually sleeps through the night. So I feel like I get more sleep now than I used to because I know like when she goes to sleep, I better go to sleep.

• 34:02Speaker 02

  Yeah.

• 34:03Anthony Pompliano?

  But six and two.

• 34:03Speaker 02

  Well, maybe there's an idea. Maybe I need a baby eight sleep for my kids. Maybe that'll help.

• 34:06Anthony Pompliano?

  I've told them before, I'm like, hey, listen, if you could get the baby to sleep better, like, I'm sure there'd be a line out there. Door, right?

• 34:11Speaker 02

  We need that.

• 34:12Anthony Pompliano?

  Yeah, all right, sounds good.

• 34:14Speaker 02

  This is great, thank you.

• 34:14Anthony Pompliano?

  Of course, so anyone who wants to go check it out, I dropped the link here in the chat and go check it out. And also, I think it's just, this is a product that people constantly ask me about, right? And there will be people who say, hey, I like how it's done. I don't like how it's done, whatever. The important part is we go from kind of zero to one. Like, these products didn't exist, now they're here. And then as you guys learn more, you'll kind of.

• 34:38Speaker 02

  Yeah, I mean, we're really, we're sort of out there battling, right? We're out there trying to get out there into the world and, you know, engaging with everybody and, you know, that's the biggest part, right?

• 34:46Anthony Pompliano?

  Like. People are giving me shit because I said I was working out. Like, it's like a once a year thing or something, I guess, in their opinion. So, all right, man, well, listen, thank you so much for coming on. I really enjoyed this. And anyone who hasn't checked it out, if you're looking for a mortgage, whether for residential or for investment property, go check out MyLiquidity.

• 35:04Speaker 02

  Thank you, appreciate it.

• 35:05Anthony Pompliano?

  Sounds good, man, talk soon. Thanks so much for listening to today's episode. I really hope you guys enjoyed this one. Make sure you subscribe on Apple, Spotify, or your favorite podcast player. And if you're looking to try to transition to get a new job in the Bitcoin or crypto industry, we've got you covered. Head over to pompscryptocourse.com. We've developed a curriculum with the top teams across the industry. It's a three-week intensive training program with over 50 events packed into that three-week time period. Go to pompscryptocourse.com to learn more, and I'll meet you guys for the next episode.