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Coffeez with Joe Shalaby
Getting Deep with Tom Davis | Coffeez for Closers with Joe Shalaby Ep. 42
00:41:27
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- [00:04]
Joe
What's up everybody? Welcome to another episode of Coffees Foreclosers where success is served daily. Today we have a special guest with over 20 years of experience in the mortgage industry. He manages wholesale, non delegated and correspondent non qm, non agency channels for all of Deep Haven. A lender, a top lender in non agency, non QM lending. Known for developing exceptional sales teams and driving national growth. He's a top producing sales executive in mortgage banking. Get ready for insights on growth strategies from one of the industry's leaders. Please welcome Tom Davis, Chief Sales officer at Deep Haven Mortgage.
- [00:48]
Tom Davis
Thank you for having me, Joe.
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Joe
Welcome to.
- [00:50]
Tom Davis
Appreciate it. Nice to be in California.
- [00:52]
Joe
Yeah, nice to be in.
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Tom Davis
Yeah.
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Joe
It's. Isn't it, isn't it beautiful?
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Tom Davis
Man? I took a little drive down to Carlsbad this morning. The ride was gorgeous, the ocean was beautiful, the mountains. This is God's country out here.
- [01:05]
Joe
It really is. Actually. I love Carlsbad. Actually have a second home there, so. But you know, you're in Florida, it's not too bad there.
- [01:12]
Tom Davis
It's great. I have the Bahamas 50 miles away from me. It's like from here to Carlsbad, The Bahamas are 50 miles from me. That's my second home.
- [01:19]
Joe
Yeah. That's awesome. That's awesome. So Tom, I like to start all our podcasts the same way. So what is your morning routine?
- [01:27]
Tom Davis
Yeah, for me is first thing I do, I wake up early every single day and you know, I have a plan. I look at the plan the day before, I look at my calendar and I work that plan.
- [01:40]
Tyler
Right.
- [01:40]
Tom Davis
It's all about driving revenue, driving success, helping my team achieve their goals, their financial goals. And I get to work usually around like 5, 6 in the morning. I get started, check some emails and then from there I'll hit the gym. So it's important to get in shape and you know, you know, work out. So I do about four to five times a week. I hit the gym, get back to the home or in the office and I go to work all day till about 8:00 at night. I'm always on seven days a week. You know, in order to be successful or highly successful, it takes effort, right. If you want average, average Success is a 40 hour week. I like to work 80 hours a week. So more effort, more success. No effort, no results.
- [02:23]
Tyler
Right.
- [02:23]
Tom Davis
So it's all about the hustle. You know, in your office you have those signs everywhere in here. I love it. I live by a lot of those mottos and quotes that you guys have here. And you know, I love the win. So in order to win, you got to work at it, right? You know, it takes hard work.
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Joe
Yeah, yeah. You're grinding all the time and I love it.
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Tom Davis
Never stop grinding.
- [02:40]
Joe
I love it. We have the same mentality, you know, we both resonate with each other. So I'm stoked that we had that mutual introduction and Tyler knew that, you know, we would hit it off once, once he. He met me. So he's been talking about you for a long time now. What year did you start in the mortgage industry?
- [02:58]
Tom Davis
Pretty much. I started pretty much right out of college and I have a degree in finance and management and I did some retail for a little while and then a buddy of mine was a wholesale account executive and this was early 2000s. And he, I asked him how much he was making and he told me he was, you know, he was a producer, not top producer, but he, I told him this fax me as W2 and his current pay stub. And so at the time, my wife was pregnant. And after he faxed it to me, I said, look, I told my wife I'm going to fly to. Back to Fort Lauderdale time. I was living in Ohio for a couple years. And so I flew back to Fort Lauderdale, interviewed with the managing director of this wholesale shop, and he hired me on the spot. So he said, come back, start whenever you can. So I flew back down. My wife was pregnant. She followed me a couple months later and first couple months was very interesting because my son was actually born in a hurricane and my wife was pregnant and we went back to Florida and a hurricane hit, you know, two months after that and you know. Yeah. So that, that's kind of how I got into, into wholesale, into mortgage pretty much right out of college.
- [04:20]
Joe
I can't believe you had the intuition to realize that you wanted to validate that person's income before you even made the move. Yeah, I wish I was that wise.
- [04:30]
Tom Davis
Yeah. And I said, look, I said, if this guy's making X, right, I'm going to make 2x. So I was in the wholesale space for, let's call it four or five years. And then the financial crisis happened. But right out the gate my wife had a baby.
- [04:45]
Tyler
Right.
- [04:46]
Tom Davis
We just moved back to Florida and I only in order to be successful, I had to put into work. I was making more phone calls than anybody, being more strategic on who the brokers I was going after. And within that first year, I became a top rep in the company. Five years, top rep. And. And then the financial crisis happened. And for me, I was very fortunate because while a lot of the products, non agency products, and products overall went away, I ended up getting a job at JPMorgan Chase in a small division there called the Rural Housing division, and crushed it for eight years at Chase doing USDA loans. So became an industry expert, bought more USDA loans than anybody in the United States. And as you know, the riches are in the niches. So that was a nice niche for eight years when the market was kind of slow and all these products kind of went away. I had a product that people needed. It was 100% financing, no money down. And I just been very fortunate in my career to. In UP markets, I do extremely well. But in down markets is where I really excel, because in down markets, you have to hustle out, hustle everyone else to drive the production.
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Tyler
Right.
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Tom Davis
And so. And I've been able to make some great moves, you know, in down markets, including my last one I did, you know, two and a half years ago when I landed at Deep Haven. That was a phenomenal career move for me.
- [06:07]
Joe
That's awesome. You know, one thing I'm really impressed about with you, Tom, is your grit. Now, what inspires you to have such a hustle mentality?
- [06:17]
Tom Davis
Yeah. So everyone's a little bit different, right? So, you know, we all have a story. My story. My name is Tom Davis. You would think that I was born in the United States, but I was actually born in Cuba. My father was in the US Government. He was actually born in San Francisco. He met my mother in Cuba, and we came to the United States. And growing up, my mom worked a couple jobs and really worked hard. It was the worst feeling to see my mom. She's an angel. I love my mom. She's my hero, an angel. And I saw her, how hard she worked, and I really, I really, you know, that it was a bad feeling.
- [06:55]
Tyler
Right.
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Tom Davis
And so that's what has driven me at an early age. I started working when I was 13 years old, mowing lawns and being very entrepreneurial, spirited at a young age. And I didn't. I never wanted to have that feeling of not having and seeing my mom work. And so my mother, who's really driven me, and I started at a young age, really hustling every day, whether it was mowing lawns, selling candy, doing whatever.
- [07:22]
Tyler
Right.
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Tom Davis
And so that's always carried. I always wanted more and wanted to achieve more and just wanted to be the best self, you know, the best Tom Davis that I could be. So.
- [07:32]
Joe
So at what age did you realize you're an entrepreneur.
- [07:35]
Tom Davis
I would say at 13 years old, I had 20 lawns and I bought. A friend of mine had like 15 lawns, and so I bought his lawn. So then I had 30 lawns and I had, I was making all this cash and I didn't know what to do at the age of 13, 14 years old. And so one of the, in middle school, I actually had a teacher. It was a math teacher. His name was Alan Gabor Witz. I forgot the guy's last name. But he was a wealth like financial advisors for all the teachers in the county. And so this teacher who was a wealth advisor, asked everybody after class, who wants to be a millionaire, right? And the guys and the girls who raised their hand, there was only a couple folks that raised their hand. They stayed after class. And so he started teaching us about mutual funds in sixth grade. And so a week later he came to my house, he met my mom and dad, and he got me started in investing in mutual funds in sixth grade. And so since sixth grade, I started investing money. And that's one of the reasons why I got into finance at an early age. And with money, there's three things that make money grow, right? There's time, interest, and how much you put into the vehicle or the fund.
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Tyler
Right.
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Tom Davis
The investment. The number one thing that makes money grow is time. So I've been very fortunate to have time. And time's a very important asset that we have. And you know, throughout the day, you know, one of the things that I do is when I look at my calendar and I have white space, if I have the white space, you know, I fill it up, right? Because it's valuable. And just like you, people manage their money or manage, you know, a lot of different things. Like people should really manage their time better because, you know, you can be more efficient and be more strategic about how you utilize that time. Everyone says time is money, right?
- [09:33]
Joe
That's right. That's right. So one thing that you're known for in the mortgage industry is like, you are the figurehead for the non QM space. Like when, what year did that start?
- [09:42]
Tom Davis
Yeah, so I mean, I love non agency pre financial crisis. And I always been a niche guy and you know, as, you know, conventional government to me is not really exciting. It's kind of boring. And in non qm, it's more common sense underwriting, manual underwriting. And back in 2012, after Dodd Frank was passed and ATR was passed, there was a company was a pioneer in the non QM space, was deep Haven, where I work today as the chief sales officer. And they introduced non qm. They were, they brought liquidity to the space. They brought, you know, created the products that we see in the marketplace today. And so I really, I was going to conferences, you know, around the nation and what I really was intrigued by how they were creating the market. They were providing liquidity. So early on I wanted to be a part of it. And about three years ago I went all in. All we do is non qm. We're one of the largest buyers, investors in that space and it's a great space because we serve entrepreneurial, spirited borrowers. Non Chum is meant for self employed. There's 18 million self employed people in the United States that account for 33 million businesses. Right. There's a lot of migrants in the United States. We have mass migration. When those folks come to the United States, they work very hard. A lot of them start businesses as soon as they get here, right?
- [11:05]
Joe
Yeah.
- [11:06]
Tom Davis
And so those are, that's, that's about 14% of our population was not even born in the United States. There's high net worth, high income borrowers, investors. If you look at last year, 26% of purchase transactions in the United States were investor transactions. Those are very entrepreneurial, spirited. You know, investors that want, that want to invest in real estate. And so I just love the product because you're serving entrepreneurial, spirited borrowers. And you know, I love it. You know, that's, that's, that's, you know, to me that's my passion is the non QM space.
- [11:43]
Joe
And then at what point did you start like being the spokesperson on all the panels and just kind of being the figurehead?
- [11:49]
Tom Davis
Yeah, I mean I eat and breathe and you know, nine qm.
- [11:53]
Tyler
Right.
- [11:53]
Tom Davis
That's all I do. I do. And for me, like if you go to conferences or you go to people, people's shops, no one goes into those shops or no one wants to hear about conventional or government loans. It's all manual aus. So for me, you know, like if you look at the mortgage space, two years ago the mortgage space was a $4.4 trillion market.
- [12:13]
Joe
Yeah.
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Tom Davis
And originations this year will finish around like 1.6 trillion or 1.8 trillion.
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Joe
Wow. Almost like a third less, huh?
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Tom Davis
Yeah, like 60% down almost.
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Tyler
Right.
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Tom Davis
From 4.4 to 1.6. One point this year is 1.8. So about three years ago, a little over two and a half years ago, I came to Deepaven. The reason why, because I knew that purchase money was where it's going to where that was the place to be. But refi business was going to be almost non existent. And I knew that originators needed products to compete, to retain talent. I knew they needed products to serve other referral sources that they never, they never thought of.
- [12:56]
Tyler
Right.
- [12:57]
Tom Davis
Because two years ago, three years ago, 75% of the business was refis. It was just easy to manufacture, easy to kind of generate loans. So today's like, you know, if you look at originator count in the United States, it went from like 150,000, 160,000 to like 80,000. It, you know, we've lost like 60, 70,000 originators in the last two years. Yeah, the originators that are in the market today are the folks like you and me, very hard working, entrepreneurial, spirited, they're here to work through it. And they are embracing 9QM in a major way. I mean we're seeing, look, last month was a period of time. Existing home sales last month were the second worst in the last 10 years. So second worst month over the last 10 years. And we just came off an all time company record for production in the second worst purchase month in the last 10 years. And the reason why is because borrowers are adopting these products and they're leveraging them to tap into new referral sources. They're leveraging them to go after the top Realtors in the United States. And so we're teaching our customers, our partners, how to leverage these products, how to source these loans, how to be more tactical and strategic. We talked about time. So if you look at Realtors in the United States.
- [14:20]
Tyler
Right.
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Tom Davis
The top 5% of Realtors, they account for 90 or Realtor teams, they account for 90% of the listings. Top 5% account for 90% of the Listings. So the bottom 10% of the, excuse me, the remaining 90, 95% of Realtors in the United States only have 10% of the listings. So if you're an originator, right. And you're in the mortgage space and you're calling on Realtors, like you should be contacting the top 5% that have 90% of the listings. So you know, if you look at production and people that aren't producing, they're spending a lot of time calling originate or realtors that don't have listings. So what we do is we train our clients, go after the top 5%, be more strategic and tactical and use these products as an end to go into those realtors and show them how you could put more borrowers in the homes, show them how you could how that Realtor can maybe leverage these products because Realtors, a lot of them own investment properties. So when you teach them about a program like an investor program, dscr, they're going to want to leverage that product on their own.
- [15:27]
Joe
And they're all entrepreneurs, they're all self employed.
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Tyler
Right.
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Tom Davis
They're all 1099 self employed. And guess what, guess who the Realtor works with. More self employed people. Title insurance appraisers, contractors, builders, you name it, roofers, plumbers, more self employed people. So then now once they adopt it, now they, you know, you start getting this, you know, this adoption so that we, you know, year over year 9qm is almost going to 2x, almost 2 1/2x in a market where the market's down like significantly, you know, it's going to two and a half x over last year's number. So yeah, yeah, it's super bullish.
- [16:09]
Joe
That means that entrepreneurs are making more money.
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Tom Davis
Absolutely.
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Joe
Which is amazing. That's great to hear. Whereas the regular, you know, non farm payrolls are, they're declining.
- [16:19]
Tom Davis
Yeah. And entrepreneurs and self employed people, they're well healed. They usually have higher net worth. If you're dealing with investors, look, you know, investors, once again, 26% of the market is investor transactions. The in the investor space.
- [16:36]
Tyler
Right.
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Tom Davis
We have existing inventory right now on the market, about a million units.
- [16:41]
Tyler
Right.
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Tom Davis
And we have a 5 to million, 5 million to 7 million undersupply housing or homes in the United States. So there's a supply, demand imbalance. Right. So you know, one way originators could really take advantage of the market and differentiate themselves outside of the non QM space is by helping bring housing stock to the market. Now how do you do that? New construction. So new construction is now 30% of purchase transactions today. 30%. Two years ago it was only 15%.
- [17:09]
Tyler
Right.
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Tom Davis
Because existing homes are not on the market. No one wants to sell because of those lower rates.
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Tyler
Right.
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Tom Davis
So if you could provide construction solutions for a home or a community or you know, of multiple homes, that's how you bring housing stock to the market. Also you have a lot of homes out there that are not habitable today. And so what do you do there? You could rehab them and bring them to the market. So if you have those, they're called residential transition loans. I'm actually here for a big conference, I'm on a panel talking about residential transition loans and non qm. And so the fix and flip bridge, ground up construction. If you have those products and you have non QM products, it Gives you a competitive advantage. You could serve all borrowers, not just the agency borrowers that are in that small box.
- [17:53]
Joe
Yeah, there's a much bigger box in the non QM space.
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Tom Davis
Absolutely huge opportunity in the space.
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Joe
Let me ask you this, you know, you're seeing a ton of success right now in the non QM space and in the mortgage space in general. Like what are you foreseeing in the future? We talked about non QM possibly doubling. What else do you foresee?
- [18:13]
Tom Davis
Yeah, I think you're going to see non Kim continue to grow in a major way over the last next 10 years. You're seeing what happened in Q1 of last year, that accident with some of these regional banks. The way a home builder finance is being done, that's changed. Bank credit is at a 20 year low. So banks have pulled back on a lot of these portfolio products, construction products, multifamily loans, commercial loans. So you're seeing bank pull back on that. And we expect that to continue to happen over the next 10 years, maybe 15 years. And the reason why is because there's a regulatory pieces that are coming out, such as Basil Endgame that require banks to have higher capital ratios. So banks are actually pulling back and private credit is coming in. That's where we kind of fill that void. And so, you know, I think we're in. Our gig economy is super strong, very entrepreneurial, spirited country. That's the like the engine behind our country.
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Tyler
Right.
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Tom Davis
It always has been. And so I think the agencies have pulled back on certain products, you know, on second homes and investor homes, they kind of pull backs. And so, you know, non chem is going to continue to grow and we're forecasting it to be a sizable part of the market over the next five to ten years.
- [19:32]
Joe
That's awesome. And that gives the people a lot of hope because a lot of people are going all in on the non qm.
- [19:36]
Tom Davis
Yeah.
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Joe
Business right now. Now, is there a specific skill or mindset that one must have right now to be successful in the mortgage industry or in any entrepreneurial industry?
- [19:45]
Tom Davis
So there's a couple things, right? So number one, hustle is you have to have the hustle. There's, you know, I call it the hustle muscle your heart, right? So you gotta have the hustle muscle, right? So the heart, you gotta wake up, outwork everyone in this market, in every market, it doesn't matter if it's up or down or just horrible market, there's opportunity in every market. It's either you win or someone else wins. Either Someone, either you take someone else's their share or they take yours. I know me, I don't like when anybody takes anything from me. My family, my sales team. I'm sure you feel the same way, right?
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Joe
Yeah.
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Tom Davis
So you gotta have the hustle.
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Tyler
Right.
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Tom Davis
Outwork everyone and then from there, you know. The other piece is be an advisor to your referral partners, an advisor to your clients. You have to be, you know, help them not just by offering, you know, service, but pick up the phone and become a product knowledge expert. Help them structure loans, help them put deals together that maybe they don't have the expertise. So having product knowledge and having product expertise, that what, that's what really sets you apart. It's like any other profession. I mean, I'm sure you had, you, you've worked with attorneys and you go to see a doctor, right? If you're going to have a surgery or you're going to put a financial plan together, are you going to go to the, the, the, the, you know, the person that's new to the industry or new to that space? Are you going to go to the expert? You're going to go to the expert. Same with the loan originator.
- [21:17]
Tyler
Right.
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Tom Davis
So Realtor calls it, or a borrower calls that originator and that originator doesn't know their product.
- [21:22]
Tyler
Right.
- [21:23]
Tom Davis
And doesn't know how to structure the deal. And they feel that they can sense it. Do you think that Realtor is going to call them back? No, they're going to go to the expert. Just like a financial advisor or a doctor or surgeon. Right. You're going to, that's, that might be their paycheck for the month. They're going to trust the advisor who they know they could trust to get that loan closed or whatever it might be.
- [21:43]
Tyler
Right.
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Tom Davis
So know your products inside and out. Treat your customer like you want to be treated. Put them first every day and mean it. And out, work out, hustle everyone. That, that's, that's how you win big and that's how you become highly successful.
- [21:57]
Joe
That's right. That's right. I totally agree with everything you just said. Now, after all the success you've had in the mortgage space, you know, you don't really need to grind this much. How do you continue to find that motivation to wake up and out hustle everybody?
- [22:09]
Tom Davis
You know what, for me, it's a lot of different things. But, you know, my family, my kids, you know, I work every day for my family and my kids and so they motivate me, you know, in different aspects My daughter, you know, motivates me and goes to the gym with me. She, she, she has that grind as me, My son has that grind. My son's actually just graduated, going into college, he's going into finance. So it's like a family kind of DNA that we have, which is a super, you know, I'm super fortunate and you know, to have that right, and to have my family, the support there. But, you know, for me, my team at work, man, they go all in, all day, you know, seven days a week. They push hard. You know, I'm there for them. You know, they don't work for me. I work for them. Right. And so, you know, my team, I would say, and just, I hate losing. Hate it.
- [23:01]
Joe
Yeah.
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Tom Davis
So I wake up every day, I want to win. I want to win big.
- [23:05]
Tyler
Right.
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Tom Davis
And so I'm, I'm always looking at ways to win and push the ball forward and grow. And once again, I don't care if we're in the down market, up market, I'm always just going to keep pushing.
- [23:16]
Joe
That's right.
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Tom Davis
And you know, the hustle, you know, brings the results into success in any market.
- [23:22]
Tyler
Right.
- [23:23]
Joe
So Deep Haven is known for having a lot of top talent. How are you? And you're the chief sales officer of the entire organization. So how are you continuing to foster talent at Deep Haven?
- [23:33]
Tom Davis
Yeah, so look, we're growing. Like I said, we're hiring all across the entire platform in operations and sales. You know, in the last two years, even though the market has been down, let's call it 60%, right. We've grown our customer base 4x5x in a down market.
- [23:54]
Tyler
Right.
- [23:54]
Tom Davis
There's, you know, there's maybe 24,000 brokers out there. There's thousands of mortgage bankers out there. There's 90,000 plus originators. So we're just scraping the surface. So there's plenty of opportunity. You know, you do a great job on social media. You have a lot of followers. You know, people don't. Can't buy from you if they don't know who you are.
- [24:14]
Tyler
Right.
- [24:15]
Tom Davis
So you do, you're really well, you do a really great job. Phenomenal job at getting out there. People know who you are.
- [24:20]
Tyler
Right.
- [24:20]
Tom Davis
So that's what I try to do with non qm. I want everyone to know who we are. I want everyone in the United States. I don't even overseas. I'd like the people to know who we are.
- [24:29]
Tyler
Right.
- [24:30]
Tom Davis
And so we're just pushing to grow the brand and grow, create awareness. And so, you know, we're looking to hire and add the right people with that hustle and drive. And so, you know, it's, you know, there's plenty of opportunity out there. So we're just going to continue to go out there and grab it.
- [24:46]
Joe
Love it. Now, what do you think the key factors are for the success of Deep Pavement to quadruple over the last couple years?
- [24:54]
Tom Davis
Well, I would say it's not just the last couple years. So what makes us unique is we have expertise, knowledge and focus. We've been doing this for a little over 12 years, so we're not new to the space. We were the pioneers and we have within the platform we have a parent that manages close to $50 billion, actually over $50 billion in assets. They're the largest owner of single family homes also in that ecosystem. We own a servicing platform. They own a servicing platform. There's another business that focuses on construction, renovation, fix and flip bridge. So, you know, all the components, everything's done in house and all the components to our platform are in house. We don't use third parties. And so I think what makes us unique is our capital structure. With our parent, we have a diversified exit execution. We have the ability to securitize. We've done over 20, 24 securitizations, but we also have the ability to whole loan portfolio loans into funds that our parent manages or funds that are our parents funds or funds that they manage for investors.
- [26:09]
Tyler
Right.
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Tom Davis
So having the ability to securitize and whole loan portfolio loans, that actually gives you a diversified exit strategy. Because securitizations in that market, if it becomes suboptimal, like when rates rose and we saw spreads widen in the mortgage space, securitization became suboptimal. So the whole loan. That strategy, the other strategy that we have actually, you know, we had better execution than the market and a lot of folks don't have that, that additional execution.
- [26:43]
Tyler
Right.
- [26:43]
Tom Davis
So that's why a lot of folks actually sell us their closed loans because we have a diversified exit strategy.
- [26:49]
Joe
That's awesome. Actually, a lot of people don't realize, you know, that most non QM businesses sold to Deep Haven. Yeah, they don't know, you know, like we have like 50 non QM lenders that were approved with but at the end of the day, they're all just selling them back to you guys.
- [27:02]
Tom Davis
Yeah, I would say there's a handful of investors in the, in the non QM space, like a D pave and only a handful that kind of aggregate the majority of nine qm out there. So yeah, so we're fortunate. And on the correspondence side, we've been doing that since day one at Deep Haven. That's where we first started is in the correspondence side. So we have 10 years of that experience doing that.
- [27:30]
Joe
Now is there any advantages of going with some of these smaller guys? Their overlays seem to be a little bit more lax than Deep Havens directly.
- [27:38]
Tom Davis
Yeah, I would say, you know, if you're going with a smaller guy that's inexperienced, you know, we've seen a lot of companies that offer products and get themselves in trouble or aggregate products and go out of business. Like over the last three years we've seen some of the largest non kim lenders. You know, they bought a whole bunch of loans, the market moved against them and they were sitting on loans at 5% coupon and the rates were at 8 and they had to sell them at a discount and they were sitting on, you know, 500 million, a billion, you know, and so they lost a ton of money and it put some of these guys out of business.
- [28:19]
Tyler
Right.
- [28:19]
Tom Davis
So having the expertise and if, you know, if you go back just over the last five years, I think liquidity and having a reliable, dependable, stable liquidity is extremely important. So, you know, having the capital market horsepower that we have, you know, gives us, you know, competitive advantage and long standing, you know, power into the future. So.
- [28:44]
Tyler
Right.
- [28:44]
Tom Davis
So, you know, we're looking to grow the AUM and grow our business and we over the next 10 years. This is not a short, you know, term play for us, the investors and our parent like the assets that we manufacture. And so, you know, we're in a good spot now.
- [29:03]
Joe
How important do you think it is now? Piggybacking off of that? How important do you think it is for D pave to continue to take big risks like that? Risk is such as acquiring these type of assets, these non QM assets, some of them. Because you guys take pretty big risks.
- [29:20]
Tom Davis
Well, I would say if you look at the asset, it's not really a risk. Right. The average LTV is like a 72 LTV. Ficos are 740 and DTIs are in the low 30s. These are well heeled borrowers. They have skin in the game. 30% down or 30, you know, 30, you know, 30% equity. These guys, when they, when, when Covid happened, non QM folks didn't go into default and because they didn't want to lose 30% of their equity on these.
- [29:52]
Joe
Some of these non chem products are like 10% down 15% down.
- [29:56]
Tom Davis
Yeah, I mean it all depends. I think, you know there's, look at the overall when I, those characteristics that I told you, the 72 LTV, that's industry wide for nine QM for all production across the United States over the last year, last two years. So you know, and look the investors getting paid for, for those, for those loans, they're a little bit higher yield than the agency. But when Covid happened, those, those, those loans performed, there's a couple white papers actually written about, you know, the, those performance of those loans.
- [30:29]
Joe
Okay, all right, so non QM now is becoming much more acceptable on a national level, you know.
- [30:37]
Tom Davis
Absolutely.
- [30:37]
Joe
For the appetite for investors.
- [30:39]
Tom Davis
Every originator, like national top 10 originator, retail originator is doing non QM today.
- [30:45]
Joe
Yeah, absolutely.
- [30:46]
Tom Davis
Every single one. If you're not doing non qm, you're at a competitive disadvantage and you're not.
- [30:50]
Joe
Surviving in this environment. There's no way you could.
- [30:53]
Tom Davis
The guys that aren't doing 9QM, you know what I tell them? I say, look, I'm looking at my lock report today over the last six months and I'm looking at the lock report and all these lenders or brokers that are in your backyard, that are in other states are doing loans in your backyard and they're taking your market share because you don't want to adopt these products and your loan officers at our competitive disadvantage because you can't serve self employed, you can't serve investors. It's like if you go to your a lot of folks websites, they have FHA, VA, USDA, Fannie, Freddie, but they should have a tab on their site that says self employed Solutions, Investor Solutions. There's more investors in the United States than there's veterans. There's more self employed people in the United States than there's veterans.
- [31:43]
Joe
Yeah, way more.
- [31:44]
Tom Davis
And the VA program is one of the best programs out there. So you know, you should be focused. Why not serve self employed people? Why not serve investors? 26% of the market is investors last year.
- [31:55]
Tyler
Right.
- [31:55]
Tom Davis
So if you're an originator out there, what I would do is look at your production for the last year and see if you're at 26%. If you're not at 26% and you're below 26%, that means you're under indexing the national average in California. California has the highest investor concentration. It's like close to 30, 31% per CoreLogic. So if your 31% of your production is not investor transactions, that means someone's Eating your lunch and taking your business. And so, you know, so you got to look at that stuff.
- [32:27]
Tyler
Right.
- [32:28]
Tom Davis
And so you got to serve, you know, those borrowers that are out there.
- [32:32]
Joe
Now circling back to your children, because I was very impressed about you discussing what your kids and how they.
- [32:39]
Tom Davis
Grayson. I told them to watch today. I sent them this, and hopefully they're on.
- [32:44]
Joe
I love that, you know, you've instilled in them that same grit. Mindset that you have.
- [32:49]
Tom Davis
Yeah.
- [32:50]
Joe
Now what. How did you do that? Because we're in a society of abundance, and you and I have been fortunate enough to, you know, be blessed and bestowed many gifts from this industry. Now, one of the issues we all face as parents is, you know, making sure that our kids continue to grind like us.
- [33:10]
Tom Davis
Yeah.
- [33:11]
Joe
Right. And we don't hand them everything, and they're not spoiled. And, you know, I. I really. I really noticed that, you know, you're raising your kids well, and you saw, you know, I try to bring my kids to come grind. Awesome.
- [33:20]
Tom Davis
Yeah. Your son yesterday, walking around the office and doing videos, I mean, that was, like, phenomenal. Yeah. Yeah.
- [33:26]
Joe
So I try to have them grind as much as possible, but I'm, you know, for the parents out there, listening, like, how are you instilling that same sense of grit that you have?
- [33:34]
Tom Davis
Yeah, I mean, for me, you know, first is education. For the right. Education is important. Then we talked about the hustle. So, you know, at an early age, my kids, you know, I got them into school, obviously, but, you know, and they played sports. So, yeah, I think that was good for a competition. And just, you know, but early on, I put them into extracurricular, like, learning, like, mathematics and reading, and that really has helped them excel, you know, throughout, you know, middle school, high school, and not going into college. My son's going into college, so I think, you know, that extra, you know, discipline, you know, they. That'll help them in life. And for me, they see me work. They see how hard I work. I always tell them, you know, my story and you know, what it takes and how hard it is. And it's a grind. You know, it's. It's tough.
- [34:28]
Tyler
Right.
- [34:28]
Tom Davis
Life's not easy.
- [34:29]
Tyler
Right.
- [34:30]
Tom Davis
So you gotta go out there. If you want something, you gotta go out there and get it. Like, dad's not gonna give it to you. You gotta go out there and get it. I'll support you. I'm behind your back. I always will be there. So you just gotta encourage them. And it's not like you gotta do it as much as possible.
- [34:44]
Tyler
Right.
- [34:45]
Tom Davis
And so for me, I'm always, you know, trying to give, you know, my kids love, give them advice and you know, you know, as a parent, don't look back, you know, after they're, when they, when they, when they leave the house and say, I wish I would have did this a little bit differently. Like, you know, start doing the stuff today and like love this, love your kids, you know.
- [35:06]
Tyler
Right.
- [35:07]
Tom Davis
And just show them what it's going to take to be successful in life. Right. You know, so that's that, you know, it's a day in and day out thing with the kids.
- [35:16]
Joe
It sure is. Now piggybacking on that, like what's the best piece of advice that you have ever received?
- [35:22]
Tom Davis
Best piece of advice. So we talked about when I was younger, the financial advice, right. With the teacher about, you know, getting involved in mutual funds and I was great. You know, I actually see as my kids are born, I started them in mutual funds early on.
- [35:40]
Joe
Really?
- [35:41]
Tom Davis
Yeah, yeah, yeah. Every, both kids. And so outside of that, you know, I've had some mentors in life and you know, very highly, highly, highly successful, you know, high net worth mentors. And you know, you know, we all, they're all the kind of similar, they hustle and they work hard and you know, one quote, a good buddy of mine, you know, he says, wake up broke, if you wake up broke, you'll never be broke. Hustle as if you're broke every day and you'll never be broke. So, you know, he'll send me a text, you know, once a month. How do you feel this morning out four in the morning, I'm like broke and I'm like, it's time to go. I'm going to go hard today. So outside of that, you know, I think I, yeah, I'm fortunate. Like I told you, my mom's an angel. Every day she calls me, I talk to her, you know, and I, you know, you know, I kind of do that with my kids and talk to my kids and you know, she always, she always gives me advice, you know, and she always, whether it's sometimes it's good advice, sometimes it's not. But she says, look, it comes from my heart and you know, you know, if I'm wrong, just, you know, let me know. But she's, she's, she's awesome.
- [36:52]
Joe
So she's your greatest mentor.
- [36:54]
Tom Davis
She's awesome. Yeah.
- [36:55]
Tyler
Great.
- [36:55]
Tom Davis
Greatest.
- [36:57]
Joe
Yeah. I was actually going to ask you what's your favorite quote? And I think we, you mentioned that the other day.
- [37:02]
Tom Davis
I have A couple. Dress sharp, B sharp. That's a good one. Quote, slogan and success is my responsibility, duty and obligation.
- [37:13]
Tyler
Right.
- [37:15]
Tom Davis
Success is my obligation to my family.
- [37:17]
Tyler
Right.
- [37:18]
Tom Davis
Like if I'm not successful and I'm, it has to be my responsibility, you know, to provide for them.
- [37:24]
Tyler
Right.
- [37:25]
Tom Davis
And you know, I take that quote and those slogans, dress sharp, B sharp for the sales team. You know, you gotta be, you gotta be, you know, you gotta look good, you gotta know your products, you gotta serve your customers better than everyone else. So those are a couple that I live by.
- [37:42]
Joe
Love it. Now, if you were 20.
- [37:44]
Tyler
Yeah.
- [37:44]
Joe
How would you build wealth?
- [37:46]
Tom Davis
If I was 20, I would buy a ton of real estate.
- [37:51]
Tyler
Right.
- [37:52]
Tom Davis
Real estate. And I would put more money into the market and just, you know, I would compound my, my, my money a lot. You know, that's, that's the way I would do. I'd buy a ton of real estate. I wish, I wish I could have bought more real estate in my, you know, when I was younger, but I bought some. But, you know, I, I think real estate's the way to go because it's a great hedge against, of inflation and rents are going to continue to go up and there's a supply, demand imbalance like housing for the next 10 years, like appreciation is going to go up 4 to 5% a year and you're going to have rent growth. So real estate and then, you know, the stock market too, and bonds and all asset classes. I would, instead of wasting or spending my money on stupid stuff, I'd invest it in assets.
- [38:38]
Joe
Yeah. See, the young folks listening to this need to hear that.
- [38:41]
Tom Davis
Absolutely, yeah. Go, go read a book. Go. Definitely. If you're young and you know, read a couple books out there that, and work on your financial literacy and read about, you know, investing in real estate, read about, you know, investing in the stock market and do it over long periods of time.
- [38:59]
Joe
Now with the advent of AI and all the different things that are kind of against education, do you still think college is important?
- [39:08]
Tom Davis
Yeah, I think college is important for, you know, I think it's an important, it's important. Yeah, absolutely. Yeah. I mean, for, if you're. My son has, is getting a degree in finance, like, finance like, is a degree of money.
- [39:20]
Joe
Yeah.
- [39:21]
Tyler
Right.
- [39:21]
Tom Davis
So it depends on what you're going to school or what you want to do in life. But I think you could be highly successful and not have a college degree.
- [39:28]
Joe
Absolutely.
- [39:28]
Tyler
Yeah.
- [39:28]
Tom Davis
I know plenty of people that, that, you know, super, super highly successful. They haven't, you know, gone to College, but I think, I think, you know, college is good for the right person, right?
- [39:39]
Joe
Yeah. Like the liberal arts majors in communications or something. Those are going to have, you know, like, why go to college?
- [39:46]
Tom Davis
I think, I think, you know, it's good to, you know, in your career as you grow and you want to build a business or you want to build, you know, just your career. Like surround yourself with mentors and lean on them and ask them for the advice. Look, you know, you're highly successful. I'd like to learn from you. Is it okay if you could be my mentor?
- [40:07]
Tyler
Right.
- [40:07]
Tom Davis
And lean on them for advice and career advice and business advice. So I've been very fortunate throughout my life to have mentors as well.
- [40:20]
Joe
And mentorship is essential for me, like finding a good. I have many mentors and I always seek mentorship. It's imperative that one seeks a good mentor and just confides in him.
- [40:32]
Tom Davis
Absolutely.
- [40:33]
Joe
Let me ask you this. What's the most painful thing you've ever been told?
- [40:38]
Tom Davis
Most painful thing. That's a good question. The most painful thing, probably a passing of like my father. That was painful. I was at the gym at like 5am and I got a call from someone and like, hey, your father's not, you know, he's, he's. I think I need to call the ambulance. He had already passed away, but luckily for me, like two weeks before he passed away, he actually came and visited me for a couple weeks. So it was, I don't know, an act of God that he came and visited me for two weeks before he passed away. It's hard when you lose someone that you love, right? Lost my 98 year old grandmother about 10 months ago. She was.