Pod Insights The Moneywise Guys 5/20/25 The Mortgage Maze: Fixed Incomes, Housing Costs & California's Gas Price Crisis About this episode The Moneywise Radio Show and Podcast Tuesday, May 20th BE MONEYWISE. Moneywise Wealth Management I "The Moneywise Guys" podcast call: 661-847-1000 text in anytime: 661-396-1000 website: www. MoneywiseGuys.com facebook: Moneywise_Wealth_Manageme instagram: MoneywiseWealthManagement Guest: Allyn Medeiros, Sr. Loan Officer / Branch Manager - Agape Mortgage website: www.agapemtgco.com/
Transcript 0:00 Speaker 00 From the Garo Ellis padded radio room off Stockdale Highway, here is Money Wise. Call or text into the show 24/7 at 396-1000.
0:39 Speaker 00 Here is Money Wise.
0:40 Speaker 01 Money, money, money, money. Welcome to the Money Wise Show. We are live from the Garo Ellis padded radio room off Stockdale Highway on ESPN Bakersfield, 1230 a.m., 101.1 FM, and always streaming at MoneyWiseGuys.com. You can call or text into the show 24 hours a day at 661-396-1000. Today, we're your hosts. I'm Sharad Wade and...
1:02 Speaker 02 Frank Lee.
1:03 Speaker 01 Frank, how you doing, man?
1:04 Speaker 02 Pretty good.
1:05 Speaker 01 Good.
1:05 Speaker 02 How about you?
1:06 Speaker 01 I'm doing, I'm doing all right.
1:07 Speaker 02 Fabulous Tuesday.
1:08 Speaker 01 It is a fabulous Tuesday. Weather's still nice. This is where we're getting our money's worth in Bakersfield right now.
1:14 Speaker 02 Yep.
1:15 Speaker 01 This weather. Super great. I want to thank our listeners for their participation into the program, and we have a couple of messages that we're going to start the show off with. Do you have it there, Frank?
1:27 Speaker 02 I had it for a second. Let me just get it right now. Okay, so I'll start with the first one.
1:32 Speaker 01 Yeah.
1:33 Speaker 02 Okay, "Thank you. My wife and I have been approached by a group, and they are not real financial advisors." Ooh, sketchy. "They work at a big-name bank, but have been calling all of my family members that use their bank. Seemed pushy. Was wondering why our bank would share our info."
1:48 Speaker 01 Yeah, that is interesting, right, Frank?
1:51 Speaker 02 That's a Sammy question right there.
1:53 Speaker 01 Yeah, seriously. And, you know, I did a little investigating. I've, I've heard of this, you know, second-hand of this happening because a lot of the banks have...
2:04 Speaker 01 Also a brokerage arm or a, or a financial advisory arm. And, but that sounds like that's not the case in this, with this listener, right? Doesn't it, if they're not financial advisors, you know, what are they calling them for?
2:17 Speaker 02 I don't know, maybe, maybe if like, A, you have at least $50,000 in your savings, checkings, we're gonna give you a call, kinda thing. Cause I know before MoneyWise, I, I was looking for other places and then, and one of them was like another big name brand, uh, bank.
2:34 Speaker 01 Yeah.
2:35 Speaker 02 And I think I had, I had a friend working there and they're saying if there's anyone with a certain amount of, amount of assets in their savings or checkings, they'll send it over to their wealth management team. But I, again, like, it would be weird for them just to be reaching out, out of the blue, rather than the, the teller be like, "Hey, you qualify for this, like our, our team can contact you," kinda thing.
2:59 Speaker 01 Right.
3:00 Speaker 02 It's like, it's cold calling.
3:01 Speaker 01 Yeah, that's what it seems like, which it seems very inefficient and also can be off putting. And if it's not a financial advisor that's calling them, then it's, there's just some sales call, right? They're probably trying to sell.
3:13 Speaker 02 Yeah, annuities or.
3:14 Speaker 01 Life insurance, maybe, or some other financial, uh, product, like a CD or some, some sort of other bank product. But it, you know, and that's pretty common. It's common for banks or credit unions to want to solicit, you know, your, your, their customers with other providers, other services. And you probably didn't know this, but you get annually that privacy notice that we all get from every company that we've ever done business with. And I'm sure listeners are just like me, where you just barely look at it and you just toss it. Cause like, what are you gonna do? And there's, there's, you have the option, and the state of California has a Shine the Light law.
4:00 Speaker 01 Not sure when it passed, but I think it was several years ago. And the law grants you rights to know what personal data is being collected about you and to know whether your personal data is being sold. They have to disclose to. Whom they're selling that information, they, you can, you can say no to the sale of your personal data and you can access what that personal data is that they have. And you can also request that a deletion of all of your personal information from whatever company. So I think in those important privacy notices that we all get, it kind of it's in that fine print.
4:35 Speaker 02 Yeah.
4:35 Speaker 01 Hey, you know, if you, if you object or have some issue with our, our partners that will be, you know, sharing your information with, then you can contact us and we can, you know, you can opt out kind of thing.
4:47 Speaker 02 It goes to show how important it is to really read through the 50, 100 pages. But it's, it's, no, it's for real though. It's, they, they have it in fine print, like privacy notice, like even with our accounts that we open, we make sure on our end that we check off that do not share private information because that's valuable information for the, the client.
5:09 Speaker 01 Yeah.
5:09 Speaker 02 So we don't want that data to be shared. So we, we check it off and like, no, don't share.
5:13 Speaker 01 Yeah.
5:14 Speaker 02 This reminds me of the, you ever seen South Park?
5:18 Speaker 01 Yeah, I've seen a little bit.
5:19 Speaker 02 There's an episode in there where,
5:23 Speaker 02 they, they use the, uh, Apple as an example, and there's this one real like bad spinoff movie called The Centipede.
5:31 Speaker 01 Uh huh.
5:31 Speaker 02 I don't know if you.
5:32 Speaker 01 I haven't, no, it's not ringing a bell.
5:34 Speaker 02 Don't watch it.
5:34 Speaker 01 Okay. It's stupid.
5:36 Speaker 02 They, they use those two examples and like, uh, I, I think it was Carmen or one of the, one of the four main guys.
5:43 Speaker 01 Yeah.
5:44 Speaker 02 Basically the Apple, uh, rep is telling them to sign something. But he doesn't read the disclaimer. He just signs it right away and then his case gets worse and worse and worse. Like all these bad things happening to him. It's like, read the disclaimer. And it's like, and then it gets to this point where that's, that's where the centipede movie comes in and like, how it all tangles in.
6:05 Speaker 01 Oh, gotcha.
6:06 Speaker 02 Towards the very end, when he becomes this thing, he's like, he finally reads through all the, all the disclaimer. He's like, okay. And then he signs. And he's like, okay, that's all you needed to do.
6:16 Speaker 01 Yeah, it's, it's, you know, we're so inundated with disclosures and.
6:22 Speaker 01 You know, privacy statements and every website, it seemed, not every, but so many websites have the, you know, the opt out for, for them to track. Just like so annoying, like, can we just not track me? Can I just say, don't track you? You gotta go through the, sometimes multiple boxes to click to opt out so that your information isn't, you know, at too, too much out there. But it, it, it just seems more and more as though privacy is just an illusion.
6:51 Speaker 02 Yeah.
6:52 Speaker 01 It's very difficult to be totally private. What you want to do is you want to be, uh, let's the word, actively involved and
7:01 Speaker 02 Like proactive.
7:01 Speaker 01 Yeah, proactive and just monitoring and making sure that nothing weird is going on and.
7:06 Speaker 02 Yeah, yeah, exactly. Cause if you're on the grid, no matter how small of information you're providing, you've already provided enough information. As scary as that is, but there are ways to safeguard that. Cause I know Apple now has built in privacy.
7:22 Speaker 01 Yes.
7:22 Speaker 02 Uh, settings in the like Safari or whatever.
7:25 Speaker 01 Yeah, right, yeah.
7:26 Speaker 02 Cause that's their whole thing.
7:27 Speaker 01 That's their whole, Apple's like, a lot of them are jumping on that, you know, privacy. You know, claiming that, you know, they're keeping everything private. Facebook got in trouble, you know, for some of this data that they were selling to Cambridge Analytica. I don't know if you followed that a few years ago, influencing elections and, you know, with just, you know, basically private information from people. And, you know, they, you've heard the adage, I'm sure if it, if it's free, then you're the product. If you're getting something for free, then you are the product.
8:00 Speaker 02 Yeah.
8:00 Speaker 01 Which is, you know, it's valuable. Your private information, what you, these companies can, you know, extract from you is very valuable, but people just give it away for free.
8:09 Speaker 02 You know what? That also reminds me of the, you know, when you go to the mall or events and there's that car out in display and says. You can enter in for a chance to win this brand-new car.
8:22 Speaker 01 Yeah.
8:23 Speaker 02 You're essentially giving them your information and I think it's in the fine prints that they're able to sell you.
8:28 Speaker 01 Now, they can sell you stuff, send you stuff, and call you and all that, yeah.
8:32 Speaker 02 Because again, if you're winning, if you're entering to win a free car, it's like you are the product.
8:36 Speaker 01 That's it. Yeah, exactly. It is costing you something.
8:41 Speaker 02 Yeah.
8:41 Speaker 01 Besides the time to fill out the card, you're not probably going to get a lot of calls. I mean, I've had to change my setting on my phone to basically block unknown calls because it's just all-day texts. And the other, I'm getting so many texts in the last few months, and it's been like a national trend of saying that you have a debt that's owed. And it's usually like a toll, like you're on some toll road and that you owe, you know, $4 or $3 or whatever. And then it goes to collections, and it's a total scam. It's a total fraud.
9:14 Speaker 02 Oh, interesting.
9:15 Speaker 01 And they're just, you know, just like spam text.
9:17 Speaker 02 Yeah.
9:18 Speaker 01 It's so maddening because I know people are getting, taken advantage of.
9:22 Speaker 02 Yeah, that's coincidentally, we actually got a text like that, too.
9:26 Speaker 01 Oh, did you?
9:27 Speaker 02 Yeah, it was like you're late on your toll payment or something.
9:29 Speaker 01 Yeah, and you would think, oh, it's really common, especially if you live in the Bay Area. If you travel a lot in the States, it's like, oh, yeah, I guess I blew through that toll, so I'll pay it now. And then you give your private information and payment information, and then it's gone. And they can then either steal that from you or just take the money and run. So maddening. Got another message. You have it there, Frank?
9:52 Speaker 02 Yep. Good afternoon, guys. I saw a picture of Gero this morning, and it made my heart so happy. He looks younger these days.
10:00 Speaker 01 Oh, that's sweet.
10:01 Speaker 02 Thank you.
10:01 Speaker 01 Yeah, actually, last night, Gero and myself and Chris Pelster from the office and Sharice Grell, who has consulted MoneyWise for many years, went and saw a Dodger game last night with Gero, and it was awesome. It was really, really great. Gero had a big smile on his face. And Dodger Stadium was very accommodative with his wheelchair, and we had a great time. It was really nice of Sharice. To share her tickets with us and so I don't know if that's the picture they saw, but he, he does look good.
10:34 Speaker 02 Yeah.
10:34 Speaker 01 Looks good.
10:34 Speaker 02 That's good. Yeah, I know he came by the, uh, the picnic outing.
10:39 Speaker 01 Yeah, that's right. Last week here at the office.
10:41 Speaker 02 Yeah.
10:41 Speaker 00 He, he always looks good.
10:43 Speaker 01 Yeah, that's true.
10:43 Speaker 00 I've, I've never seen him look bad.
10:45 Speaker 01 Yeah. Let's get that last message there, Frank.
10:48 Speaker 02 All right, let's do it. Uh, hey guys, what happens to forgotten retirement accounts if the original financial institution has merged or no longer exist? Have a great day.
10:59 Speaker 01 Yeah, this is a great topic. I would like to bring it up every once in a while and that is the government has a process in place for a company that you may have done business with and they owe you money. If that company goes out of business or that company is bought by another company and, or that company has your money and they can't get a hold of you to send you the money, then they are not allowed to just keep it. I think that's a misunderstanding by the general public. They think, well, you know, they, they just keep my money. I'm never, I'm never going to get that rebate or I'm never going to get that refund, whatever service that you were using. The, the, the fact is it's illegal for them to take that money, even if they can't get a hold of you.
11:43 Speaker 01 There's a process that they have to go through and that company has to send it to the state's department that manages unclaimed property. So most states have an unclaimed property office and these are through the excheatment laws. I remember this excheatment word is, was funny because Gero would always talk about how, he would always like saying that word, excheated.
12:06 Speaker 02 Excheat?
12:07 Speaker 01 Your money gets excheated. It sounds so nefarious, but it really is just going to an unclaimed property office. The state of California, we've got one and we've actually done some of this research on the show with guests. Uh, I think you and I did it on, on one of these shows.
12:24 Speaker 02 Yeah.
12:24 Speaker 01 I, I think you may have found, we both found some family members that had some unclaimed property.
12:29 Speaker 02 Twenty dollars or something.
12:30 Speaker 01 Yeah. I, I found one as a hundred bucks. I got a hundred bucks from Carvana because I bought a car of four or five years. From them and apparently there was a rebate that they didn't send to me. So I had to go through that process, but I got a hundred bucks.
12:45 Speaker 02 Lunch on you?
12:46 Speaker 01 Lunch on me? There's pizza in there. The website for the state of California is sco.ca.gov. SCO stands for, I'm sure, State Controller's Office and California.gov. So on that, on the State Controller's Office, you can find unclaimed property. Or if it is another state maybe that you lived in, there is a National Association of Unclaimed Property Administrators. And you can find information at unclaimed.org. There's also a National Registry of Unclaimed Retirement Benefits. So that might be more closely to what this listener is talking about. And that's at unclaimedretirementbenefits.com.
13:29 Speaker 01 It's great that they have these resources because it's so common for a retirement account to become orphaned. So which we call it in our industry, an orphaned retirement plan. It's so easy. You know, you work at a company for a very short period of time, maybe contribute a little bit of money. A lot of people think, oh, I guess it's gone and they forget about it. No, no, no, no. Go find it. It won't take much. And the best place to start is if there's a contacting the successor institution. So you can usually find your account, even though you're contacting a new company. That company bought the old company's information. So they should be able to find yours in most cases, your information.
14:10 Speaker 02 Yeah, yeah. Especially if the institutions have merged, like that money's there.
14:15 Speaker 01 Yes. Yeah. And if it's not there, then they have moved it to the state. And then you can get it. You can get that money from the State Controller's Office. So great stuff. Good questions, good comments. Keep them coming our way. When we come back after the break, we're going to be joined by Alan Maderos. We're going to talk everything mortgage, lending, interest rates and all that fun stuff. We're Money Wise, don't go anywhere.
14:36 Speaker 00 Don't forget, Money Wise is more than a radio show. We're an independently owned, local wealth management firm with 60-plus years of collective experience. Our financial advisors are here to help you, Kern County. Together, let's be smart, be safe, be money wise.
14:58 Speaker 01 Welcome back to the Money Wise Show. We're your hosts today. I'm Sharad Waite. That's frankly, stop giggling over there. Is it the song?
15:05 Speaker 02 Well, I heard Allen.
15:06 Speaker 01 Yeah, Allentown.
15:08 Speaker 02 Allentown.
15:08 Speaker 01 Yeah, we're in Allentown now. Here's the mayor of Allentown, Alan Maderos. Hey, real quick, I got another message here. It says, oh, nice. Hope G got a Vin Scully bobblehead. He did. We all got a Vin Scully bobblehead. And it was Vin Scully in like, it looked like he was in his twenties. He was very young Vin Scully bobblehead. It's kind of cool. And it was funny, there was people that were walking around the stadium going, hey, I'll trade you your bobblehead for this jersey. Or for, you know, something else.
15:38 Speaker 00 That's a whole different world. I mean, those Otani ones, people were in line for hours and then immediately selling them.
15:45 Speaker 01 I heard, I heard about that. I think Sharice told us about that. There were people that, because it's limited to like the first 40,000 or something. And so people like go the night before.
15:56 Speaker 03 So I'm gonna go tomorrow to try to get the Will Smith bobblehead.
15:59 Speaker 01 Are you really?
15:59 Speaker 03 Yeah. So that should be a good game. Plus, we got Corbin Burns, you know, from Bakersfield.
16:04 Speaker 01 Oh, yeah. He's gonna be pitching for the Arizona?
16:07 Speaker 03 They're just getting smoked right now. Sorry about the Dodgers. Just like so many injuries, but their confidence level, I think he's gone side. Anyways, I digress.
16:14 Speaker 01 Yes. No, it was, it was kind of gloomy last night.
16:17 Speaker 03 Yeah.
16:17 Speaker 01 It was, I mean, they were trying.
16:18 Speaker 03 Well, the first inning. I mean, I go to the bathroom, come back, I'm like, what happened?
16:23 Speaker 01 Yeah, not good. Other couple errors and, but it was beautiful weather. Stadium was always great.
16:28 Speaker 03 Oh, yeah.
16:29 Speaker 01 I mean, just nothing like professional baseball, Dodger Stadium. It was awesome. So, yeah, we got the Vin Scully bobbleheads. So Alan, lots happened since we've had you on.
16:40 Speaker 02 A lot has happened.
16:42 Speaker 01 Just over the weekend, we had the latest credit downgrade of US debt. This was the third and final major credit reporting agency that downgraded US, I think it was Moody's, from AAA to AA1. Now, we have, none of the major agencies have us as the top rated. How does this impact mortgages?
17:11 Speaker 03 Well, I mean, at the end of the day, it just comes down to risk. And who's willing to continue to invest in mortgage-backed securities and US Treasuries? So if we default on any of our debt, that's a big red blinking sign saying, hey, we're not gonna be able to manage the debts that we pay. The truth of the matter is, is that we've been in this hole for such a long time. You know, so it's not a big surprise, and that's why I think the market has really just shook it off. It hasn't been like a major market mover because it went in the line with the other ratings. So it's not like a big shift. But for mortgages, the thing that we're looking at is stability in the markets.
17:54 Speaker 03 And the bond market generally has some net benefit when stock market is hurting.
18:00 Speaker 01 Yes.
18:00 Speaker 03 So we didn't see that shift. Things were kind of down for a little bit.
18:04 Speaker 01 Yeah.
18:05 Speaker 03 But then, all of a sudden, we're back to par again. So the article you're referencing right now, we're talking is from Investopia? Investopedia, sorry. And they're basically stating that interest rates are gonna hover in the sevens, which they have been. They dropped below, I think we hit a bottom, actually it was a peak on the image that I sent you guys on April 4th, where interest rates dropped down to around 6.3.
18:31 Speaker 01 Mm-hmm.
18:32 Speaker 03 And then now they're back up to where they've been hovering for about two months now. And that's been in that high 6 to low 7 range. So that's been kind of common, and people are still buying real estate. It's one of those things that I think that if the need is there, people are just not waiting any longer. There's like, I can't time the market. I just gotta take action, especially for my family. We're in the selling season right now, so people that are looking to buy real estate are actively looking because they want to be able to be in their home before school starts again. It's interesting how those cycles kind of go through, but April officially starts the home buying and home selling season. And things have been pretty steady recently.
19:13 Speaker 01 Yeah, it's hard for people to get out of their current mortgage because generally it's a lot lower than the new mortgage.
19:21 Speaker 03 Oh, it's easy to get out. It's hard to swallow.
19:23 Speaker 01 Yeah, that's it. That is.
19:25 Speaker 03 It's hard to accept the fact that it's double, if not a time and a half, or maybe, you know,
19:32 Speaker 03 two and a half times what their interest rate is.
19:34 Speaker 01 Yeah, and not only that, but you have people who are giving up their tax basis. And so they're, you know, they're, even if they have a lot of equity that they can roll into the new property, they're going to be paying a lot more in property tax.
19:44 Speaker 03 However, if you're over the age of 55.
19:46 Speaker 01 Oh, is it 55?
19:47 Speaker 03 And it's 55 and you're owner occupied, you can move that basis anywhere in the state of California now. Previously, it was actually localized to the county that you were in.
19:57 Speaker 01 Right, right.
19:57 Speaker 03 So that is a net benefit, especially if you're, and that's the biggest movement of segment of equity are those that are considered to be 55 and older.
20:05 Speaker 01 Yes.
20:06 Speaker 03 Which if you think about it, that's where all the concentration of wealth really is. It's not your twenties and your thirties and your early forties. It's 45 and older. People that have had 25 years of opportunity to save. Now, remember, in 2008, 2009, 2010, the crash, if you will, the rebuilding process, there's a lot of scarring emotionally for people that were in those boats as well. They have mostly gotten back into the market or seen the fruits of that time in the market. But timing the market is such a hard thing to do.
20:40 Speaker 01 Yes, it's, it's, I'd say it's impossible.
20:45 Speaker 03 Yeah.
20:46 Speaker 01 But, and, and that's why we've always said, you know, you buy a house when you can afford it.
20:50 Speaker 03 Correct.
20:50 Speaker 01 And so, you know, if you can afford it, then now you're just going to have to work around working within your budget, and that can be hard. Real quick, the 55 and up, being able to maintain their tax basis.
21:07 Speaker 03 It basically takes whatever they have as their tax basis and it rolls it to the next property as long as it's higher.
21:13 Speaker 01 Yeah.
21:14 Speaker 03 Okay.
21:14 Speaker 01 The new property is.
21:16 Speaker 03 More expensive.
21:17 Speaker 01 Oh, I see.
21:18 Speaker 03 And they'll carry over that initial base and the difference will then be taxed.
21:23 Speaker 01 Oh, oh, you still get taxed on the difference?
21:26 Speaker 03 Correct, because that's the improvement amount.
21:28 Speaker 01 Oh.
21:29 Speaker 03 But see, let's just say that you had $400,000 of the tax basis. You buy a $550,000 house.
21:34 Speaker 01 Yeah.
21:35 Speaker 03 You're moving that $450,000 over to the new residence.
21:38 Speaker 01 Right.
21:39 Speaker 03 So, the county of Kern actually has done some presentations about this, and there's also some information from the tax assessor's office that you can freely get online.
21:48 Speaker 01 And so, in this example of a $400,000 house, they sell it, they buy a $500,000 house. Their property tax is just based off of the $400,000.
21:59 Speaker 03 The initial portion, but you do have a difference.
22:01 Speaker 01 Of that $100,000 difference.
22:03 Speaker 03 The county will still have a catch-up aspect to that.
22:06 Speaker 01 And how does that work?
22:07 Speaker 03 Well, it's an assessment. You have to petition. They don't automatically do that transfer of your basis.
22:12 Speaker 01 I see.
22:13 Speaker 03 But that's all done post-closing, too. It's not done through escrow. So, you have to make sure that you're aware that you need to petition the county for that change.
22:22 Speaker 01 I see.
22:23 Speaker 03 The same thing for, let's say, a disabled veteran that has 100% Disabled Veterans Benefit. They can petition the county after purchasing a property to lower their tax basis because of their disabled status.
22:37 Speaker 01 Yeah.
22:37 Speaker 03 And those are things that, if you talk to people that do this all the time, they can kind of lead you down the correct path to get into the contact with the correct people.
22:47 Speaker 01 Yeah, no, that's great. We're going to take a break. When we come back, we're going to be joined more by Alan Maderos. We're talking about lending, and mortgage, and interest rates, and much more to talk about. Don't go anywhere, we'll be right back.
23:04 Speaker 01 We're the Money Wise Show. Thanks for tuning in. I'm Jared, here with Frank. Joining us today is Alan Maderos from Agape Mortgage. Alan, I think we covered pretty much the latest credit downgrade and mortgage rates. Was there anything else in terms of mortgage rates? Well. Yeah, use that microphone.
23:25 Speaker 03 I should probably talk into the mic.
23:29 Speaker 03 I just have a conversation with my friends over here, guys, off the air. From a dust field. Yeah, no, no, so here, here's basically the, the message. Interest rates have been somewhat stable and they did not take a big change because of this downgrade. So if you've been waiting on the fence to do something, don't wait any longer, especially if you need to buy the house. Uh, if you're looking to refinance, I don't see that the market's improving dramatically. I would just take the action, especially if you're paying high interest now on certain things. As I mentioned off the air, I don't do a ton of refinances. I do do them, um, specifically for cases that make sense, but that's where you just get information, be an informed consumer. At the end of the day, I'm not trying to sell you anything. I want to give you the best information, make an objective decision.
24:13 Speaker 03 But sometimes you just need to get out of your own way because I've seen people carry debt like it's their best friend and they drag it around the house and they drop it off at the front door. And then they go out and go to work and they come back and pick it back up and go into the house again. I'm like, why are you guys not putting a plan together to get yourself out of debt?
24:29 Speaker 01 Yeah, yeah, good advice. So HELOC versus a reverse mortgage?
24:33 Speaker 03 Oh, so as we've discussed, the number of people that own properties free and clear in the United States, what percentage do you think that is?
24:43 Speaker 01 I know it's a much higher percentage than I would have thought.
24:46 Speaker 03 Sixty? No, that's a bit high.
24:48 Speaker 01 Okay.
24:48 Speaker 03 Forty-two percent. Forty-two percent of people in the United States own their home free and clear. But guess what age group that is?
24:57 Speaker 01 They're in their seventies.
24:58 Speaker 03 Over the age of sixty-two. So there's been a push specifically for people that have limited income in retirement because of inflation, that their cost of living is really not maintainable, if you will. So they're looking for other reasons to live more comfortably. So because of that, the option for what they call home equity line of credit or HELOC has been presented to a lot of these homeowners. And sometimes it makes sense to do so. It gives them extra cash to be able to live a little bit more comfortably, consolidate debt if they have any, or just take that vacation that they've lived so long to want to do, but they never did. But then also the option, if you do proper planning.
25:41 Speaker 03 Perhaps there's a situation where your kids don't need anything and your house is paid off free and clear, or you have greater than 60% equity, then potentially a reverse mortgage may make sense.
25:52 Speaker 01 Mm-hmm.
25:53 Speaker 03 Because it allows you some flexibilities of eliminating any type of obligations you might have. And if you do have a mortgage, say 40% against the value of the house, then a reverse mortgage will pay that off and it will give you additional cash in most cases so that you don't have any monthly obligations. Therefore, if you're living off of, say, social security in a small retirement account, those funds will go further.
26:17 Speaker 01 Yeah. So you're not making a payment.
26:19 Speaker 03 Correct.
26:19 Speaker 01 You're not making a mortgage payment.
26:20 Speaker 03 Correct.
26:20 Speaker 01 And you're not paying the loan back.
26:21 Speaker 03 Correct. And the one thing that I think is a misunderstanding about reverse mortgages is this. They do not max out the equity usage.
26:29 Speaker 01 Right.
26:30 Speaker 03 They're very conservative and they do so because they want to always maintain an equity position.
26:34 Speaker 01 Yeah.
26:35 Speaker 03 So that's why they'll usually only go to around 50, 55% of the value of the property. The older you are, the less equity you need. But generally speaking, if you have 50% or greater equity in a reverse mortgage, it may make sense, but you have to meet the other criteria.
26:49 Speaker 01 I was surprised that you were on the show last year sometime and you talked about a HELOC or home equity line of credit that's not a revolving line, right? I think that's what I'm thinking of.
26:59 Speaker 03 It's a fixed rate second mortgage called a HELOC, but it's a fixed rate home equity line.
27:04 Speaker 01 That's an important distinction.
27:05 Speaker 03 Correct.
27:06 Speaker 01 Because I see people getting themselves in trouble with a HELOC because it's just like a credit card.
27:09 Speaker 03 Yes, it's a very large credit card and it's very tempting. It's very quick and easy to grab money. But if you get a fixed rate second, it is a home equity line because technically the definition is using home equity. But it's a line in the sense that, say, you have $100,000 that's available, you draw $100,000, but you pay $50,000 back, you have now freed up $50,000 that could be used in the future. So that's why it's called a line. But these are fixed rate contracts, which means that you have a very predictable monthly payment on that and you can pay it off faster by accelerated payments.
27:41 Speaker 01 Yeah. No, I like that. I like that idea. There's been some news. Maybe you can share this cost of construction.
27:51 Speaker 01 Kind of getting in the way HUD Secretary is saying.
27:54 Speaker 03 Yeah, so one of the big challenges we have is affordable housing. This is true in Kern County and many, many parts of the country. And a lot of it has to do with the cost of construction. It's not just the raw materials, but it's the permits, the licensing, the requirements for certain types of, you know, surveys and other factors that make that affordable house that's $150,000 unbuildable here in Kern County. I can guarantee you, if we brought to the marketplace today 500 homes that were $200,000 or less, there would be a waiting list.
28:29 Speaker 01 Yeah.
28:30 Speaker 03 All day, every day.
28:31 Speaker 01 Right.
28:32 Speaker 03 But see, here's the catch 22 with it. So you buy a house at $200,000 and you're the homeowner. Do you want it to stay $200,000 for the rest of your life?
28:41 Speaker 01 No.
28:41 Speaker 03 No. You want it to appreciate to that $400,000, right?
28:44 Speaker 01 Yes.
28:45 Speaker 03 Well, the reality is, is that everybody wants that, including the person who's going to sell it, you know, to you. They want you to have that long-term equity growth, but where do we find affordable housing? I be, you know, I'm not a real estate agent, so I can't really research it, but if you're listening and you're a real estate agent, tell me the data, which I can always ask agents I know, but are there really single-family residences in Kern County right now? I'm not talking about mobile homes. I'm talking about single-family residences that are $200,000 or less.
29:17 Speaker 01 No. I've never.
29:22 Speaker 03 No.
29:22 Speaker 01 I don't even think, we were just talking about this yesterday with somebody. They said they're, they're in the market for a house and they have been looking for, you know, quite a bit. And I think it's a, it's a higher-end house, but they're just out of curiosity, they looked at what they could find, just what they thought was the most dilapidated area of Oildale. And it was just this one-bedroom, one-bath, you know, 1,100-square-foot house, no air conditioning, you know, swamp cooler, and I think it was close to 300,000, something like that, 280 or something.
29:55 Speaker 03 300?
29:56 Speaker 01 Yeah.
29:58 Speaker 01 Like what?
29:59 Speaker 03 I don't know, but I'm not surprised.
30:01 Speaker 01 You would be surprised, yeah.
30:02 Speaker 03 No, and I'm really talking about new construction tracks. But even your homes that are in areas that we traditionally would not be looking into, just being very, you know, honest, for safety or whatever. You're not going to find much that's below 200,000. I mean, just being honest. There are flippers out there that will go buy properties, say in the 170 to 230 to 260 range. They'll rehab that house and sell it for over 250. So, you know, that's just, and there's a lot of money out there. It's shocking to me how many people will go and pay cash for properties because there's availability of liquidity out there.
30:44 Speaker 03 So, and you're competing against a first time home buyer that really could benefit by buying that house at that price, but they can't, they're getting being outbid basically by the cash buyer.
30:54 Speaker 01 Right. Yeah, and a lot of these cash buyers are coming in from out of town.
30:58 Speaker 03 True.
30:59 Speaker 01 So it's like, so easy for them.
31:01 Speaker 03 Don't, you know, put it past, there's a lot of very local investors that do a lot of business, so that's also, but you, okay, so there's two sides to that coin. I was at a, an event where I was talking to a bunch of investors and one of the points that I made to them was very clear. If you purchase a property and you rehab it and you flip it and you do a good job, you're doing a service to the community that's going to buy that house.
31:24 Speaker 01 Yes.
31:25 Speaker 03 Because they can't normally have enough funds to do the new countertops, to redo the flooring, to do the new roof, to repaint the house, to get the house back into presentable condition. They just don't have the resources to do it. You're going to make a profit and more power to you because you did a good service. You should be entitled to that profit, but don't do a shoddy job. Don't put just lipstick on the pig. You want to make sure that the work you do improves the house because that's going to be a benefit to the community.
31:57 Speaker 01 Yes.
31:57 Speaker 03 So, that's my personal opinion, but that's what I shared with them. So I was like, investors are great, just do a good job when you're doing the rehab.
32:05 Speaker 01 Right. Yeah, you're right. A lot of people don't have the money to do that, to, I mean, they're just barely able to afford the home.
32:12 Speaker 03 It's really odd, but how many of you guys, you know, listening out there have gotten to the point where you're like, I need to do some home remodeling? And the first thing you think is, you know, maybe I'll put new windows in, or I'll redo the flooring, or I'll redo the kitchen, or the... Every time I open up that conversation, the first number that comes to my head is $20,000.
32:32 Speaker 01 Right.
32:32 Speaker 03 That's just basic Windows.
32:35 Speaker 01 Yes.
32:36 Speaker 03 So like $20,000 15 years ago, still went a long way.
32:41 Speaker 01 Right, right. Yeah, yeah, definitely.
32:44 Speaker 03 It doesn't today.
32:45 Speaker 01 Right, yeah.
32:46 Speaker 02 Yeah, that reminds me of the conversation we had about increasing housing inventory for people and then potentially putting pressure on home prices to go down, but it seems like from a lot of the conversations I've heard, the issue is that, right? There's not a lot of inventory for new homes, new constructions, prices just keep going up. And one of the things that we talked about was the 3D printing homes.
33:13 Speaker 03 Oh, yes.
33:14 Speaker 02 Icon and Lenore partnered up and I think they're based in Texas. They've already built out a huge community.
33:22 Speaker 03 Yeah.
33:22 Speaker 02 And they were estimating that it takes about two weeks to get a home fully constructed.
33:28 Speaker 01 Yeah.
33:28 Speaker 02 Two weeks.
33:29 Speaker 01 I saw there's a 60 Minutes on it recently.
33:31 Speaker 02 Yeah, yeah.
33:32 Speaker 01 It's fascinating. It's not cheap, though. I don't.
33:35 Speaker 02 Right. So then that begs the question is like, look, if like total operation costs and cost of goods is at a minimum and you know, yes, you're going to have huge profit margins, but could you also play that in your favor and then reduce these costs where you can get people to buy the houses at a lower entry points?
33:56 Speaker 01 Yeah, that would be, that would be great if they can.
33:59 Speaker 02 Yeah.
33:59 Speaker 01 I think they've got some work to do.
34:00 Speaker 03 If it's just going to be something where you're looking at long-term housing as being affordable and it never goes up in value, that's fine too, but that's not the hope of most home buyers, right? So the cost to construct is only one aspect of it. It's the other factor of communities that they want to develop. It's just more expensive. It's more complex than I think just saying, oh, I've got this tract of land, two acres. I can build 200 homes on it.
34:26 Speaker 01 Yeah.
34:27 Speaker 03 You know?
34:27 Speaker 01 Right.
34:28 Speaker 03 So they just don't have that capability of doing it effectively at a cost-effective price point, especially in California. My goodness. When you're out in Florida and you're looking at the gas prices and you come out here again, you get depressed.
34:39 Speaker 01 Yeah.
34:39 Speaker 03 Right?
34:40 Speaker 01 Yeah, it is depressing.
34:41 Speaker 03 It shouldn't be that. Somebody said somewhere? Eight dollars a gallon in the near future?
34:47 Speaker 01 Well, I wouldn't be surprised.
34:49 Speaker 03 It had to do with some other regulatory changes that could come that are already on the books to happen?
34:54 Speaker 01 Part of the problem is we're not building refineries.
34:56 Speaker 03 That was it.
34:56 Speaker 01 The refineries that we have are burning down.
34:58 Speaker 03 Well, they're not allowing them to be used.
35:02 Speaker 01 And they're not allowing them, yeah.
35:02 Speaker 03 So.
35:03 Speaker 01 And they're making it like financially unfeasible to to like build a new one or even to, you know, maintain one. So that's what I think is going to get people to wake up in in the state of California at least is is when we have eight $10 a gallon gas prices. That'll get people's attention. Yeah, you think? Yeah. I mean, I think the hope by the state of California is, you know, they're trying to get, you know, convert as much to EV before then, but that's just not gonna happen.
35:35 Speaker 03 Aren't they going back on the the ban?
35:39 Speaker 01 Yeah.
35:39 Speaker 03 Right?
35:40 Speaker 01 I think so. I think they're backing off a little bit on the ban.
35:43 Speaker 03 Yeah.
35:43 Speaker 01 So maybe maybe things are gonna change. Who knows? JP Morgan spoke up. He said a lot of things. I've seen quite a few headlines of JP Morgan from, I mean, Jamie Dimon from JP Morgan criticizing some of the mortgage lending rules. What do you what do you have to say about that?
36:01 Speaker 03 So what he's referencing is something called loan level pricing adjustments. It's all risk based views. So for example, somebody has a lower credit score, is putting less money down is a higher risk for a lender.
36:13 Speaker 01 Yes.
36:14 Speaker 03 Right? Because the credit score is designed to actually give the lender some idea of how somebody repays their debts. If you had recent collections or you've had something that you've been slow paying on, your credit score will reflect that. Well, in the credit system, they have something called an LLPA, which is a loan level pricing adjustment. And within that thought process, the cost of the rate goes up. Okay?
36:41 Speaker 03 Pretty substantially for lower credit scores and a lot of times your first time home buyers fall into that bucket.
36:48 Speaker 01 Yeah.
36:48 Speaker 03 So for example, let's just say that the prevailing rate is 6.75%. If you have a 640 credit score and you try to go conventional financing, you will pay on average 2.5% as far as points.
37:02 Speaker 01 On top of that six?
37:03 Speaker 03 No, no, no, it's not the rate, the cost.
37:06 Speaker 01 Oh, I see.
37:07 Speaker 03 So per $100,000, you're going to pay an extra $2,500. Okay, just for having that credit score.
37:12 Speaker 01 Just to open up the loan?
37:13 Speaker 03 Correct. So now if you have a 740 credit score, okay?
37:17 Speaker 01 Yeah.
37:17 Speaker 03 Instead of 2.5 points, you pay .25.
37:22 Speaker 01 Oh, wow.
37:22 Speaker 03 So it rewards, okay?
37:25 Speaker 01 Yeah.
37:25 Speaker 03 Higher credit scores, but it also impacts the window where people have opportunity to get in. Now, the corollary to that is government insured financing. So FHA, which is traditionally considered to be a first time home buyer loan, but it is for anybody, just to be very clear. It does not have those same types of adjustments. They do have some adjustments, but it usually hits below 620. But if you're above 620, you're very likely to get very competitive rates all the way up to 800 credit score because they're not going to reward you after a certain window.
37:59 Speaker 01 Yeah.
38:00 Speaker 03 But it always carries mortgage insurance.
38:02 Speaker 01 Yeah.
38:02 Speaker 03 So there's trade offs. So that's one of the things that he's pointing out. He said, "We could solve all these problems today if the banks would just take on more risk." But how do you do that? Well, we'll just remove the loan level pricing adjustments.
38:14 Speaker 01 Yeah.
38:15 Speaker 03 Banks are like, "No, that's for us, that's profit."
38:18 Speaker 01 Well, why would he say? He's managing a bank, he's managing the largest bank on the planet.
38:22 Speaker 03 But he's also saying that probably things have slowed down.
38:25 Speaker 01 Yeah, yeah, so it's better.
38:27 Speaker 03 Yeah. If you, you know, they say, "I think I can make it with my, you know, huge ram truck, I'm going to make it through that little opening."
38:36 Speaker 01 Yeah.
38:36 Speaker 03 Like, well, just make it a bigger opening. That's all they're trying to do. It's like, get as much into that pipeline as you can and you just loosen guidelines.
38:44 Speaker 01 But they have the mortgage insurance, so what do they have to lose?
38:48 Speaker 03 That? Insurance companies never want to pay.
38:51 Speaker 01 Yeah.
38:52 Speaker 03 If you have high foreclosure risk, would you charge more for mortgage insurance?
38:56 Speaker 01 Has mortgage insurance gone up?
38:58 Speaker 03 It has. Depends on the type of windows and buckets. So again,
39:04 Speaker 03 One thing that's not talked about recently, which is very clear on our end is that first payment default and loan default for FHA insured mortgages has increased.
39:15 Speaker 01 Yeah.
39:15 Speaker 03 And the reason why is FHA has been historically more flexible as far as higher debt to income ratios, lower credit scores, but those pose the highest risk to a lender because they could also get into financial hardship faster.
39:29 Speaker 01 Yeah.
39:30 Speaker 03 Okay, but they've always had an opportunity, okay, to maybe work out a plan with them. They call it a forbearance or some other type of modification that now has become more easily accessible due to the lockdown. When we had COVID lockdowns, a lot of people went on to some type of modification or forbearance programs.
39:53 Speaker 01 Right.
39:53 Speaker 03 And they were able to create what they call a secretary lien or a second where they take any money that your arrears in and they put it on the house as a silent second.
40:02 Speaker 01 Yeah.
40:02 Speaker 03 And the only time you had to pay it off is if you sold or refinanced that mortgage.
40:06 Speaker 01 Oh, wow.
40:07 Speaker 03 But it kept people in the homes.
40:08 Speaker 01 Yeah.
40:09 Speaker 03 Vacant homes are not good.
40:11 Speaker 01 Right.
40:11 Speaker 03 So it's always better to try to keep them in the property. But the mortgage insurance, that fund right now for FHA is huge. They have not paid out claims.
40:21 Speaker 01 Yeah.
40:21 Speaker 03 But if we see a foreclosure cycle happening, they may have to pay it out, but they also, when they go to the market, are going to sell at the highest they can get so they don't have to pay claims. That's, that's the way insurances work for me. Let's be honest.
40:36 Speaker 01 Yeah, right. Yeah, very fascinating. We're gonna, we're gonna take a break. When we come back, we have a listener question asking about affordability of a home and a couple more things. So we're gonna get to that when we come back. Don't go anywhere.
41:10 Speaker 04 Happy birthday Buster Rhymes.
41:14 Speaker 04 Do you know that Alan?
41:15 Speaker 03 I did not. Actually, I thought Steve was beatboxing. Then I realized, oh, no, that's Buster Rhymes.
41:20 Speaker 04 I do it over here, but.
41:21 Speaker 03 I can tell.
41:22 Speaker 04 Nobody can hear me.
41:23 Speaker 03 You should see the way he covers his mouth with his hand and he gets into it. Stands up and starts throwing stuff on the ground, but it's quiet in his room.
41:30 Speaker 01 Well, welcome back to the Money Wise Show. I'm Sharad here with Frank and joining us Alan Maderos from Agape Mortgage. Alan, we have a listener question here you can help us answer. Says, "Did I hear home insurance premiums are going to go up another 20% here in California? That's going to be a killer for homeowners. Have you seen homeowner's insurance go up? I mean, I know it's gone up, but you see it continuing to go up?
41:53 Speaker 03 Yes.
41:54 Speaker 01 A lot more, like 20%?
41:56 Speaker 03 Probably more than that.
41:57 Speaker 01 Oh, don't say that.
41:58 Speaker 03 So here's the reality. So California had a moratorium that was placed on it for insurance commissioner approval of increase in premiums. That's one of the things that drove State Farm out of California.
42:11 Speaker 01 Yep.
42:12 Speaker 03 So as a result, when they started canceling policies, they had to pick up the slacks of these B-rated companies were like, "Okay, we'll insure you." And then when it comes to it, if you don't collect enough in premium to pay out the losses, what happens, right? So your A-grade companies will say, "We'll come back, but only if you do these things."
42:31 Speaker 01 Yeah.
42:32 Speaker 03 And that's called a rate increase.
42:33 Speaker 01 Yep.
42:34 Speaker 03 So one of the things that they have talked about, and it's probably already been approved, I'm not sure, so don't hold into this, that the insurance commissioner of California has approved an increase in baseline insurance for property insurance costs.
42:49 Speaker 01 Yep.
42:49 Speaker 03 So because of that, yes, insurance is going to go up and the concept is, is that we raise insurance for everyone to collectively reduce cost for everyone.
42:59 Speaker 01 Right, which sucks. It still sucks. Another message here, Alan, it says, "The cost of living is so high right now. I feel bad for these young'uns who will need multiple jobs to be able to purchase a home these days. I'm a high school teacher and I'm hearing from a lot of my graduating class that aren't even thinking of college to better their future, going straight into the workforce. Do you think that's going to be the new norm? Thank you guys for the show and looking forward to taking my kids to the Woolworths when it's open." Come to the Woolworths. Enjoy feeding them when it's open. But the comment of, you know, young people being able to afford a home. I imagine you don't see many like
43:36 Speaker 03 No, so
43:37 Speaker 01 High school graduates buying a house.
43:38 Speaker 03 No, no. Generally, so the average age for a first time home buyer has moved up from 34 to 38.
43:45 Speaker 01 Oh, wow. And how long?
43:47 Speaker 03 In the last six years.
43:48 Speaker 01 Holy smoke.
43:49 Speaker 03 So because of that, people are coming back home to live with parents or grandparents. And they're trying to either get themselves financially stable and or save. Or they just decide to cohabitate with family and just live out the rest of their life because it's so expensive.
44:05 Speaker 01 The boomerang, they call them the boomerang, right? Generation coming back home, living with mom and dad. Oh, man, I don't think that there's anything on this planet that would incentivize me to move in with my parents.
44:19 Speaker 00 Been there, done that.
44:20 Speaker 01 I wouldn't even go, I wouldn't go stay with them at Christmas, let alone live there. Well, thanks so much for tuning in, Alan. Thanks for coming.
44:29 Speaker 03 Great time. Thank you so much, everybody.
44:32 Speaker 01 Want to remind our listeners, you can find us wherever you stream your podcasts. And also remember these three things, be smart, be safe, and always be money wise.
44:44 Speaker 05 Securities offered through LPL Financial, member FINRA, SIPC. Investment advisory services offered through LPL Financial. LPL Financial and Money Wise Wealth Management are independently owned and operated.
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