Cannon Connect - Guest Robin Smith

On this episode Cannon Connect, Phil sits down with Robin Smith, a Senior Loan Officer at Prime Lending whose unique approach to mortgages and investing is reshaping client experiences. Drawing from her extensive knowledge and personal journey, Robin pulls back the curtain on the mortgage industry's inner workings and shares her fresh perspective on today's market landscape. She reveals powerful insights about blending traditional lending with investment strategy, while offering her vision for elevating the advisory industry. Don't miss this compelling conversation that bridges the gap between mortgages and smart investing, as Robin shares expertise that could transform how you think about home financing and wealth building.

Resources:

Phil Buchanan on LinkedIn

Robin Smith on LinkedIn 

www.robinsmithmortgage.com

Transcript 

[00:00:00] It is Phil here with a Cannon Connect for the month of October 2024. As you recall, for longtime listeners, Cannon Connect seeks to connect industry professionals who are doing creative and unique things to provide value added services, both to the advisory community, but most importantly, To our end user clients today, we've got another great professional who's doing creative things to help advisors be more impactful in the lives of their clients.

Today, we introduce Senior Loan Officer of Prime Lending Robin Smith to Cannon Connect. Robin. Welcome. Good to be here. Fine. So how are you? Well, doing fantastic. And, um, Robin, just to, to introduce you and introduce your firm to, uh, to our listeners, uh, you are in the business of providing loan [00:01:00] services.

through financial intermediaries to their end user client. Is that correct? To be very specific, we, Prime Lending is a residential mortgage lender, so mostly banking, also offering some brokering, but yes, strictly in the residential loan business. I don't do commercial, I don't do, you know, anything fancy, but we do do residential.

So we're financing the home, we're financing the house, we're financing the second home, we're even financing the investment properties. Got it. So I'm curious, uh, at age seven, I'm guessing when, uh, you know, an aunt or an uncle or a grandparent or even a parent looked at you and says, Robin, what do you want to be when you grow up?

Maybe this was not the number one or number two thing, or maybe it was. How in the world did you get in this business? You know, it's funny that you mentioned seven years old. I'm originally from the state of Pennsylvania and at that time, I don't know if it still is, but at that time they actually used to do, um, aptitude testing starting in [00:02:00] first grade.

To help guide you and they do it every few years. So they would do it to help guide you through making career choices when you were an adult. And I don't know how much from 1st grade. It's consistent, but I do recall the results were my number 1 field would be banking and my number 2 field would be sales.

And I went, Oh, no. Because what first grader wants to go into sales or bank it? So the irony is it's apparently something I've always had an aptitude for and just didn't have an interest in until I actually got involved in the business in my extremely early twenties. Got it. So I'm just I'm floored by that.

Uh, that that fact pattern right there that you actually were taking aptitude tests. , um, in, in like first and second grade and, uh, that you even knew, uh, what banking or sales was at that moment in time. Um. I may have been, geez, I may have been in grad school before I actually understood what what all of that was.

So [00:03:00] that's that that is absolutely fascinating. So, um, you, you, you've supposedly got this aptitude for it. Uh, you, uh, you know, theoretically, you, you finish your education. And then what? What happened? Did you? I guess you did actually go into sales and go into banking. Is that right? I did. I did. In fact, it actually interrupted my education.

Um, I was studying, I had started with nursing and got pulled into studying genetics. So way back in the 1990s, when that was a leading field for science, um, I was asked to leave a nursing program to join a genetics program and offered a full ride, which I happily took, but at the time, and if you remember back in the 90s, we used to work our way through school, So I was working my way through school.

I was, uh, supervising a bar in pub. If you've ever seen the movie Groundhog Day, that little town square is where my career in mortgage lending started. And there was a mortgage broker right next door who came in [00:04:00] several times a day for a Diet Coke, and he'd smoke a cigarette. Again, it's the nineties. So people still did that back then.

And he always said to me, you should come work for me. You should come work for me. And one day I actually got upset enough to walk next door, still with my apron on and say, what exactly would I be doing? Thinking he meant as a receptionist or, you know, some type of administrative position, and he looked at me and said, I think you'd make a great mortgage loan officer.

And I said, cool. What is that? And I've been in the industry ever since he and I, in fact, are still friends and it's been nearly 30 years. Love that. Love that story. What is that? You hear what the story is and the answer is cool. Let's go do that. So obviously the, the path from that day to present day has been just a linear straight line.

No, uh, no, no ups and downs. Tell us about the journey that, uh, that took you from, uh, saying [00:05:00] cool. I think I would like that to, uh, to the role you, uh, you sit in today. So from there, I went on to a bank, and then to, I finally went to work for a top five lender after that, and that was GMAC Mortgage, no longer in the industry, but that, that's back when GMAC Mortgage was carrying the whole of GM.

And was by far their largest revenue center. Um, from there I moved into management. Some mistakes we don't repeat. I did that at American Hill Mortgage for a couple of years and decided that there's a difference between running a branch and running a team. And I don't enjoy having to worry about, and again, I've been doing it a long time, things like fax machines.

So, you know, for the most part, um, I've been with Prime Lending actually for, it'll be 15 years in less than 60 days. Oh, wow. Okay. All right. Unpack crime lending a little bit for us. Uh, again, you said earlier that, uh, the primary focus of the [00:06:00] organization is to provide, um, primary and secondary resident and, uh, also, uh, loans for, uh, for acquisition of, uh, of real estate.

Um, what's the, what's the, what's the business strategy there? What's the, uh, how does that whole process work? Um, so prime lending is actually a top 10 purchase money lender, meaning when people really believe it counts and they're buying a home, they are very likely to choose prime lending. Uh, when.

things are important. We begin the loan with someone like me who originates it, take it all the way through processing, underwriting, typically funded ourselves and are at the closing table with our own funds to get people secured and into that home. Okay, well very good. So how, how do advisors access you?

Um, or arrangements with companies like prime lending, much like arrangements with asset managers, mutual funds, [00:07:00] etcetera. There's a, uh, uh, contracted arrangement with the firm. You have to have to pass through standards and muster. How does how does that whole process work? Um, no. And honestly, for the most part, it has to be done on a strictly referral basis.

Much like I, as a licensed loan officer, do not have the capacity to invest funds or make investment advice on any other type of program to my clients. Um, the typical investment advisor does not really have the capacity to advise in the actual mortgage capacity to their clients. That requires licensing, just like I do.

You have to have your series 7 or your series 8 or whichever license is required for the product that you might be selling. We have to be licensed as well. Some it's on a state level. Um, I am federally licensed, so I'm licensed and able to do business in 49 states, um, [00:08:00] excepting for Arkansas and the 5 boroughs of New York, which I don't get a lot of call.

I occasionally get a call or do a loan in Manhattan. I have someone there that I refer it to. It's just a little nuanced, but everywhere else. I learned. So Colorado, California, Texas, Florida, you name it. I'm there, um, the way that it works with the relationship that I have with the advisors is very different in that.

It's referral only. They're handing their client over and hoping that I am handing back someone that is in better financial shape and that is pleased with the experience, that has had a good experience, that is a fan of the experience that they have, because I'm really just one more tool in the arsenal of the advisors that I work with.

I am one more glance at how things could be put together, should be put together, and one more piece of putting together the overall goal planning that the advisors are doing with their clients. Very often, the home is a goal. It might be a second home. It might be that dream lake house. It might [00:09:00] be that beach house.

So, in working with advisors, there's a number of reasons for them to send their clients, um, the number 1 being loss and attrition. When your client goes to a mortgage company. If they are going to a bank, if they're going to a Chase or a B& A or a Wells or any large firm that's also offering financial advisory services, your clients are absolutely going to be looked at, their assets are going to be reviewed by that department, and they are going to be marketed to and sold.

So the moment you're not guiding the mortgage, you are allowing your clients to be put in a position where the company that provided that mortgage is out there selling against you. And marketing against you and they can look at those asset statements and see everything that they need to see from how things are allocated know how to sell it.

So, it's, it's a risk that any advisor that is not guiding the mortgage of their clients is taking is losing them due to the [00:10:00] mortgage. Yeah, you know, it is kind of interesting when, um, you know, a client is seeking to get financing, he or she, or they are very apt to turn over anything and everything that's going to enhance the ability to, uh, to not only get the loan, but to get preferential rates, right?

Uh, absolutely. And, and in doing that disclosure, uh, I can see exactly what you're saying that, that, uh, that opens that information up to be, uh, reviewed by many different eyes there. So that makes, that makes a ton of sense. Let me ask you, um, you know, a lot of advisers, um, and less so today, but there's still a lot of advisors out there that see their primary role and responsibility as one of providing investment management, counseling, advice.

Uh, coupled with, uh, maybe some retirement planning, maybe a, a bit of legacy planning. And they look at issues like [00:11:00] lending as, as something not, not beneath them, but so far outside their, their normal course of services, uh, that they just, they don't feel comfortable in how to bring it up. Uh, they, they don't have a good working relationship with a professional like you.

And so it becomes kind of one of those out of sight, out of mind scenarios. Uh, what's, what's your advice for those advisors other than the, the risk factor that you talked about right there that, uh, they may be opening, uh, their client up to be, uh, poached by another organization? How, how do you encourage advisors to think through this process of how to surface it with their clients?

Well, if you consider just the retirement planning aspect, let's look just at that one aspect. The number one source of retirement wealth in the United States is home equity from primary residences. It accounts for by far more wealth than is in [00:12:00] all of the advisors accounts in every firm in the United States put together.

Estimates have it between 70 and 80 percent. It's traditionally been 80 percent. Um, that's dipped a little bit into the mid seventies, but that's a lot of wealth that an advisor might not be guiding. And if you're not guiding the biggest wealth that many clients have and the biggest source of wealth in the United States, you're really missing out.

On planning and on providing a more holistic picture to your clients, they need to know how much should we be putting down? What kind of rate are we getting? Do we want to be putting more money down? Do we want to be putting more of that money into investments? And that should actually be a decision that the advisor is very, very important.

And I will tell you the advisors that are sending me their clients, that's a conversation that we have. There's a conversation between the client and the advisor. There's a conversation between me and the client and me and the advisor. And then we have one together, typically, where we're going over how do we want to structure this?

How much is [00:13:00] going into investments? How much is being put down on the property? How is that impacting the rate and the payment? And how are we helping the client to achieve it? all of their financial goals, keeping all of that in mind while they're acquiring or refinancing a home. Got it. So it's, it's interesting that you, you, you talk about that, that interplay between you, the advisor and the client, because I definitely see the, uh, the challenge right there.

So, um, something that came up literally yesterday in one of the classes that I was, uh, was facilitating We were talking about challenges and issues that, uh, that clients are facing. And, uh, one of our students brought up an issue that, uh, I am thinking had you been involved in it, it might have a have a different story.

Uh, an individual, um, was an employee of a company in which, um, he owned a, a fair amount of, uh, stock outside of retirement plans. Uh, that company was purchased. It was an all cash transaction and, [00:14:00] um, he became a relatively liquid, um, uh, seven figure, uh, seven figures worth of liquidity. He wound up taking the vast majority of that liquidity and buying a lake house, paying cash that lake house.

His comment to the advisor is I don't want to be in debt. I want to want to use the cash. The challenge on the back end was he didn't withhold enough to pay the capital gain tax on the sale of the company. And so now he owes capital gain taxes for which he does not have any liquidity to pay it. And so he's in a situation of being, I think the term is is house rich cash to work.

Take that example and break down, uh, what, what you would do, how you would work with that client, how you would work that advisor to help them reach the right conclusion. Well, the first thing that the advisor needs to know, and [00:15:00] it's a very common misnomer. I'm always shocked how many advisors that I talked to that are not aware that unless the mortgage is taken to acquire or improve the property, the interest will not be tax deductible.

So if that client now In this posthumous situation chooses to refinance the house in order to have more cash. That's great. Number one, he's going to pay a higher rate because that's a cash out. And number two, that interest is not going to be tax deductible. So, things that we always need to consider, there's a lot of things that we're always looking at when we are discussing how much is a client going to put down?

How are we going to structure this? And that structure being a piece of the overall financial picture that the advisor is putting together and managing for the client. Um All of those things need to be considered. All of those things should be a conversation with an advisor from size of down payment to interest rate to how the cash flow for the payment on the property is going to be in the future.

If this guy left himself [00:16:00] too poor for the capital gains, I wonder how he's going to manage the property taxes. They're probably pretty big, too. There's a lot inside there. Yeah, sure. Yes, and I'm often surprised how little, and financial advisors, they know so many things that I don't, that it boggles my mind at times, and I'm constantly looking up acronyms and new things that they have to say to me, but I'm often surprised at how unaware they are of it.

Looking at real estate as an investment. Yes, you live in the house and it's important. And that's where you put up your Christmas tree and you celebrate with your family and you raise your kids or you enjoy your retirement. All of those things are important. And I love what I do because I get the warm and fuzzy side.

I deal with advisors that have spent 30 years advising clients, but I'm the one who actually gets to be at the closing of that lake house. So they help them save for 30 years. I just financed that house, but I'm the one who actually gets to be there. So I do get the warm and fuzzy, which I think is part of why I've [00:17:00] always loved what I do.

But, um, just for an example, I'm refinancing an advisor, um, no longer with our sister company. And it's funny because a lot of people that do leave, I, I actually, our sister company has held top securities and it's funny. I still work with a lot of advisors that might not be there anymore. And I, I joke and I tell them, you may leave the company, but you don't leave me.

Stay with me. . Got it. I still work with you. It, um, this gentle that is, uh, that, that, that, that's a great and that's a great resource. Wow. Absolutely. Uh, this gentleman had lived in California for many, many years just outside the Los Angeles area, and had rented a home. worked as an advisor for 30 years and rented, never owned, moved and told me he was moving.

And I started pushing him. You need to buy a house. You need to buy a house. You need to actually invest in where you live. And he kept telling me, no, I'm making more money on my investments. I've got this much in the bank. And when he finally went through [00:18:00] with it and I looked at his assets. I hated to tell him that by running the numbers over the last 20 years, because remember, home appreciation is like interest, it's compounding.

That had 20 years ago, he put the 4, 300 a month that he was paying in rent, or it's a mortgage, he would have bought a property and been able to finance about 640, 000. He could have bought it with, you know, minimal down, 5 percent down fairly easily. Um, the average appreciation in the Los Angeles area over the last 20 years was 8.

62%, just average annual. By the time he sold that home and paid off the mortgage, he would have walked away with 3. 07 million. Wow. So the cost of not owning a home is a little more spectacular than what a lot of people realize, even very sophisticated advisors that really understand their investments and their investment strategies, but they're not as familiar [00:19:00] with the power of just basic residential real estate.

And the funny thing is what I do is easy because everybody needs a roof over their head. Not everybody necessarily. I mean, everybody does need an IRA in my opinion, but. You know, not everybody necessarily needs municipal bonds or some of the different products that advisors are selling, but everybody's got to have a roof over their head.

So, whether you're paying rent or mortgage, you're investing in something. The question is, are you investing for yourself or someone else? That's, uh, that's very, very well said. So, um, a lot of comments recently, uh, that I've been hearing from, um, from friends and associates. That the greatest time to have bought a home was two, three years ago when you could get a two or a three handle, uh, on a mortgage.

And now that mortgage rates have, uh, have kicked up, it, uh, no longer makes economic sense, uh, to, uh, uh, to, to go the mortgage route. They need to stay in their home where they got their, their low [00:20:00] interest rate. Uh, and, um, you know, although they would like to sell, they would like to like to move their, they're just going to stick it out, uh, based on interest rates.

your advice, your counsel what? Well, you know, it have an industry term for golden handcuffs and I'm place. I actually would l But my interest rates under 3 percent and it's fixed. So I'm stuck for the next several years. That, however, is actually exacerbating an already existing inventory ish. So, part of why housing has continued to climb, even as interest rates have climbed is because there's so little inventory and it doesn't take a lot of explanation of the basics of supply and demand for people to understand that.

When you have an entire generation, primarily the baby boomers and some of Gen X that are at these low, low interest rates. We were kind of counting on them to move out of those homes and make those homes available to families as they retired, and more of [00:21:00] them are choosing to keep them because rates were low.

But I will tell you, the best time to buy a home is always today. Because if you don't already own one, or if you're in the need to make a change, the sooner you buy the better. Um, housing appreciation on a national basis can typically be counted to be four to six percent. Now, when you consider that's on money that you would be spending anyways, It makes good sense.

You know, that's 3 million. That would have been an initial investment if they had only put down 5%. That investment would have been under 40, 000. sitting for 20 years, and there aren't a lot of investments that you can make that good of money on, even if you're compounding it over 20 years. So the best time to buy a home is always the moment that you realize you need one.

Yeah, you know, I think it's, uh, I think it's really, really interesting, your observation that, uh, the low interest rate environment makes complete sense, uh, that it is keeping the supply [00:22:00] of houses relatively low, and based on supply and demand, We all learned about in basic economics. Um, if you've got less supply, then there is demand that's going to push housing prices higher.

So, you know, is the inverse true? If we were to see a lower interest rate environment, then that would, uh, open up the floodgates and put a lot of supply on the marketplace. Is that a way to think about that? Unfortunately, it doesn't look like that's how things are going to work. And the reason is we've had several years of higher home prices, which followed several years of COVID.

So they estimate that somewhere between 40 and 60 percent of first time buyers have been sitting on the fence for years. In other words, when rates come down, We're going to have some more homes come on the market. There's no question about that. We're also going to have more buyers coming out to buy them.

So [00:23:00] the expectation is that as rates come down, we're actually going to see home prices rise and continue to rise. Wow. Okay. Uh, there, there we have it. Uh, the, uh, the, the analysis of the, uh, of the lending marketplace, but also the importance of, uh, as as advisors having that conversation with clients pulling in, Trusting professionals like you to to really help with the overall analysis so that we don't allow our clients to get in situations where they aren't able to take advantage of tax deductions for for loan interest on the.

on primary, uh, primary or secondary residences so that they have the proper cash flow, uh, so that they don't make tax mistakes like not setting aside enough money to pay a capital gains. There's there's really a level of complexity to it that, uh, You know, a lot of times we just don't always think through with [00:24:00] our clients, right?

Oh, absolutely. And I will tell you one of the things when I'm consulting with the advisor and the client is what can we do to reduce, mitigate, or completely avoid a taxable event. So I've got clients coming to me that are going to take 200, 000 out of their IRA and I'm going, whoa, whoa, whoa, whoa, whoa, hang on.

Did you discuss that with your advisor? And they're like, well, he knows I'm doing it. And then like, what was his advice on that or her advice on that? Um, and frequently I will get on the phone with the advisor and let them know, you know what? That's totally unnecessary. We only need this much. And for them to realize how minimal of an impact it's making to the payment that it's typically not worth having to pay the capital gains or the income tax on that particular liquidation, it's, it's often not worth it.

The clients while, which also helps the advisor to retain assets under management. And at the end of the day, everybody wins. Absolutely. Best thing for the client. Best thing for [00:25:00] the advisor. And thankfully best thing for me too. Well, good deal. So, uh, Robin, if people want to, uh, learn more about you and learn more about, uh, not just your company, but others that are involved in this, uh, we'll make sure that, uh, links to your, uh, LinkedIn and, uh, ways to get in contact with you are available.

Uh, people may have more questions and, uh, I'm sure you'd, uh, love to take the opportunity to, uh, share some more of your, uh, wisdom and insight with them, right? Absolutely. We'll, we'll make that available through the show notes. Robin Smith, Senior Loan Officer with Prime Lending. Thank you for being on this month's Cannon Connect.

Thank you. Cannon Connect is a production of Cannon Financial Institute. Executive producer of Cannon Connect is Sarah Jones. Editing and mixing is done by Danny Brunner. Production management is done by McCall Chamberlain. So until we meet again, I'm Phil Buchanan. Thanking you for being part of the Cannon community.