The Mostly Real Estate Podcast, with Declan Spring

Episode #51 - Dominic Villa - Mortgage Market Chaos: Navigating Rates, Tariffs, and Policy Uncertainties

• Declan Spring

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What happens when global politics, tariff wars, and housing policy collide? Mortgage expert Dominic Villa pulls back the curtain on today's chaotic lending landscape, revealing truths that every homeowner and buyer needs to understand.

When the stock market plunges but mortgage rates inexplicably rise, something unprecedented is happening. Dominic breaks down this counterintuitive financial paradox, explaining how China's massive holdings of US debt create a precarious situation where tariff policies could potentially send mortgage rates skyrocketing above 10%. This isn't fearmongering—it's the reality of our interconnected global economy.

Beyond the immediate concerns, we explore why today's real estate fundamentals differ dramatically from the 2008 financial crisis. With homeowners holding substantial "real equity, not inflated equity" and lending regulations emphasizing verified income and ability to repay, the foundation remains solid despite economic turbulence. Dominic offers practical advice on fixed versus adjustable-rate mortgages in this environment, noting that "boring and predictable is everything you want in your housing payment."

The conversation takes a critical turn when discussing the potential dismantling of consumer protections. Through personal stories, Dominic illustrates how the Consumer Financial Protection Bureau has saved homebuyers tens of thousands of dollars by preventing predatory lending practices. His concerns about the privatization of Fannie Mae and Freddie Mac highlight a looming threat to mortgage affordability that few are discussing.

Whether you're in the market now or planning future real estate moves, understanding these forces will help you navigate one of the most complex mortgage environments in decades. Listen, learn, and make informed decisions that protect your financial future.

For more info on Dominic Villa and Castle Hill Mortgage click here. Follow Dominic on IG @MrDominic. Follow Declan on IG @DeclanSpring

Dominic Villa is Mortgage Banker with Castle Hill Mortgage NMLS ID: 1187381

Declan Spring is a licensed CA REALTOR® DRE#01398898

Speaker 1:

This is Declan Spring. Welcome to the Mostly Real Estate Podcast. My guest today is Dominic Villa. Dominic Villa is Vice President of Business Development at Castle Hill Mortgage and most realtors who've been working in the East Bay for you know several years will know Dominic. He's a very popular loan agent. He was a very popular loan agent before he became the VP of business development at Castle Hill. I thought it was high time that I had somebody on the podcast to you know sort of discuss what's going on in the mortgage world in light of the current administration's tariff policy and the chaos that it's causing. Stock markets ups and downs, and then the bond market threats to the bond market. So I hope you enjoy this conversation with Dominic Villa. I hope you enjoy this conversation with Dominic Villa. I'm here with Dominic Villa, castle Hill Mortgage. Dominic, how are you Doing?

Speaker 2:

good Declan. Thank you for inviting me on today.

Speaker 1:

I am so pleased you're here. You know you and I we've worked together in transaction. You've represented clients on the mortgage end while I represented them in the purchase as a realtor, and I've always enjoyed working with you. You've kind of grown away from doing that specific thing. What are you doing right now?

Speaker 2:

Super good question. I've gone out of the world of individual production and into the fancy VP title role that makes you feel good about yourself, yeah. So no more kind of boots on the ground transactional stuff for me, into the fancy VP title role that makes you feel good about yourself. So no more kind of boots-on-the-ground transactional stuff for me. It's a little bit more kind of high-level company process management as well as just kind of taking a step back and overseeing more things instead of being in the mud.

Speaker 1:

Okay, how are you enjoying that?

Speaker 2:

It's a really big change. I'll say that there's pros and cons to it. The pros are it has pushed me to be more creative, to really dive into market dynamics, even outside of our own little localized market here in the East Bay, and that has always been something that I've enjoyed this pursuit of knowledge and the self-growth. The con is, I don't get to see the people that I love and have worked with on a day-to-day transactional basis like yourself, and so there's a little bit of that missing.

Speaker 2:

So this is why I'm super excited to be here.

Speaker 1:

It's like oh, this is like the old times you get to chat. You know it's funny as I sit here and we're 2089 Rose Street in North Berkeley and the very first time I met you, you know, was I don't know eight, 10, I don't know. Years ago you were hosting an event, as you often did and probably still do, I don't know for realtors over here at the what's the restaurant?

Speaker 2:

La Cocos. That's my best friend's family's restaurant. I worked at the one on Piedmont Avenue in college and yeah it's. They're always very accommodating anytime I'm trying to do anything.

Speaker 1:

And did you meet your wife at one of those events?

Speaker 2:

I did. I actually met her at Broker Tour when she was a brand newly licensed agent and I was just a lender hosting a condo unit open in a large complex, and that was the first time that we actually met, so we met in the business you met in the business.

Speaker 1:

Yeah, well, I'm speaking, of course, about Felicia Mara's villa. You guys got married fairly recently, yeah.

Speaker 2:

I feel like these last years have all been dog years, not as an indication of how the marriage is going, but more like how the world is going, and so we will be celebrating year number three this fall.

Speaker 1:

That much already. Wow, congratulations, thank you.

Speaker 2:

I don't want people to complain about this. Marriage stuff is easy so far. I'm going to keep my fingers crossed. It stays that way. You guys make it look easy.

Speaker 1:

You're both very polished on Instagram as well, and I for one like to follow you on your Saturday mystery vegetable tour at the Farmer's Market in Martinez.

Speaker 2:

That has been a really fun kind of staple in our marriage so far is we go to the Farmer's Market every weekend. Felicia picks out a vegetable, brings it home, surprises me and I have to cook dinner with it.

Speaker 1:

And you're an excellent chef and you're Italian heritage. You spent a lot of time there. I know you just completed a marathon over there.

Speaker 2:

Yeah, just finished running a marathon in Rome. My idea was for my first marathon, like being in Rome would be a great distraction to make me not see how bad I'm feeling because I'm focusing on monuments? Not the case. I was very aware of how bad I felt the whole entire time Very proud, I did it. I will never do one again and if you're thinking about doing a marathon, you don't have to Like go to therapy, it's probably easier, but if you want to, I can always give tips on that front.

Speaker 1:

Wow. Well, you know it's an impressive accomplishment, so well done on that. And you make a carbonara that's to die for. Well done on that. And you make a carbonara that's to die for, and one of these days, because Danica, my partner, my fiance, is desperate to try the carbonara and I'm like you know what, let me get him on the podcast and see what.

Speaker 2:

I can do. There might be like a somewhat unofficial waiting list for like couples dinners with carbonara on the menu, but I feel like we can maybe bump you up that list a little bit. Okay, listen.

Speaker 1:

I think you're a pleasure to follow on Instagram. I really do, and I don't. You know, I don't say that lightly. There's a lot on Instagram and I think Felicia is also wonderful and people should follow you both. It's just a lot of fun. You guys are fabulous together and you're really great professionals. So if you want, just throw it out in case I forget later.

Speaker 2:

What's your Instagram handle? You can follow me at MrDominic M-R-Dominic D-O-M-I-N-I-C. Simple, easy, and I might be a little biased, but I would agree with you. I think me and Phil have a good time and we are mildly entertaining and maybe slightly above average. If you're wanting to tune in.

Speaker 1:

You guys are great and, of course, Felicia was one of the very first guests I ever had on my podcast. I've talked to her several times and wish her only the best with her. She's got her own brokerage now, Marlo.

Speaker 2:

Yeah, Arlo Holmes.

Speaker 1:

Arlo sorry.

Speaker 2:

And I am feeling like I'm always trying to keep pace with her because she's always pushing things forward everywhere and doing it with so much energy and I do not know how she's not tired all the time because she's doing everything everywhere all at once.

Speaker 1:

She's remarkable. Are you schlepping open house signs? Not yet.

Speaker 2:

She has not enlisted me for that thankfully, and that is also something I have not volunteered yet for. So hopefully she does not tune in for this piece of the podcast and we can just gloss over that. Okay, sure, I will not edit this out, though, just be aware, be aware.

Speaker 1:

Well, listen, clearly, I've been following you guys on Instagram. You and I have worked together and, for various reasons, at this moment in time, I was just looking to have a quick conversation with somebody about what's going on in the mortgage world, in your world, you know, with the current administration's policies and this sort of chaos. I think chaos is a reasonable word.

Speaker 2:

Quick, light, easy conversation that's super refreshing is what we're looking for today. Yeah, so we're not going to get necessarily.

Speaker 1:

Well, we're not going to get into politics, but I do want to just stick to what it is you're an expert in, which is mortgages, and I want you to explain to us, you know, what is going on in your world, in your mind, as we go through the ups and downs, the daily grind of putting up with the tariff policies and the various things that are happening. And even today, for example, every time I open my iPhone and look at whatever I read on my iPhone, whatever I read on my iPhone, I think our current president can't wait to see the back of Jerome Powell. That's his latest thing. Like, why is this guy still so? It's very difficult going.

Speaker 1:

It's too early, in my opinion, to see any dramatic change in our local East Bay real estate. Market. Rates are stable enough so far and it seems supply, as ever, is lagging behind demand. So we're seeing some record setting prices in Berkeley, as we often do this time of the year. Anecdotally, there's fears and concerns out there, but so far the market seems to be holding itself together. Now, that's not to say that couldn't all collapse or change at a moment's notice. So give me your thoughts. Where are we with mortgage rates right now. What's going on?

Speaker 2:

The average mortgage rate as of today, coming in here at market close, was 6.875% nationwide and I would say that it has been an incredibly volatile to the last two weeks. Just as you kind of referenced tariffs on, tariffs off, retaliatory tariffs, bond market crises so that high we've been over 7%. We've been in the mid 6% range in the last two weeks. It's an incredibly volatile time but I would say that the trend right now is kind of a tentative settling. I think the extension of like the 90-day tariff pause has given the market some breathing room and I think it's giving us, maybe personally, a little breathing room not to freak out and say, hey, let's see how this plays out instead of let's freak out right now. Okay, well, that's good, see how this plays out instead of let's freak out right now.

Speaker 1:

Okay, well, that's good. I mean, like when it comes to cause, we've seen rates, you know change. You know in a single day, um by you know whatever amount. And like when you're trying to lock a rate now somebody's in contract, I mean what's that? Like it's, it can't be easy.

Speaker 2:

It's not easy and it's. You're dealing with a lot of emotions.

Speaker 1:

And I think that like, as you know, anyone who's shopping.

Speaker 2:

Right now, with everything that's going on, it is a very emotional time, and it can even be more emotional when you're seeing your portfolio and retirement accounts fluctuate more than mortgage rates are. And so, while we do see fluctuation and volatility on a day-to-day basis, something like we've had this last two weeks doesn't happen very often. We don't see swings like this outside of 2020 or 2008 or 87. So we don't see fluctuations quite like this. So when we talk to a buyer and I think this is the general consensus for anyone who's out there shopping if there's a rate that works for you and you're comfortable with the payment, lock it in, it feels so much worse to lose a rate that you had and have it get worse than it does to have maybe a little bit of improvement Right.

Speaker 2:

So it is incredibly hard to play the market right now and anticipate what's coming down, because even the professionals on any sort of investment firm out there they're struggling. You're probably not going to be able to time it 100% accurately yourself. So if it works for you, lock it in and just be comfortable stressing less.

Speaker 1:

Oh yeah, that's really solid advice. It really is, and I'm reading a little bit about the resurfacing or more of an interest in adjustable rate mortgages and I'm personally just thinking we've got another three and a half years of this. I'm not sure that I'd look anywhere else other than a fixed rate. But that's just me and I haven't given it a huge amount of thought. But are you having more conversations about adjustable rates?

Speaker 2:

I'm having way more conversations about adjustable rates, but those conversations aren't quite what you'd expect. So historically I would say that adjustable rate mortgages will usually give you a little bit better of a rate. Maybe it's an eighth of a percent.

Speaker 2:

In some periods of time it was up to almost a half a percent for the first three, five or seven years of your mortgage and then it adjusts once every six months or once every year after that to wherever kind of the market rate is.

Speaker 2:

But right now, because there's not a lot of investors in the secondary market buying those adjustable rates, there's not a huge a incentive on the rate side for the adjustable versus fixed. They're almost trading at the same levels right now. Okay, so it's kind of all about that secondary market and right now the secondary market mortgages is assuming that, hey, interest rates as a whole are going to be going down before those adjustments hit and as a result, we don't want to give discounts and, you know, purchase these on the secondary market if they're all going to be paid off on the early side, and so they're almost trading at the same rate. And if you're trading at the same rate, go fixed. Boring and predictable, I think, is everything you want in your housing payment and no dark clouds looming over your head in any sort of near or short-term future.

Speaker 1:

That's again very sounded, but you give good advice, dominic Villa.

Speaker 2:

I've been doing this a little while very sounded, but you give good advice.

Speaker 1:

Dominic Villa, I've been doing this a little while. Let's talk about. I do a blog post on our website every Saturday and I and I always have a paragraph about the 10-year, the yield and the 10-year treasury bond and you know it being the benchmark for mortgage rates. Um, so I, you know we, we try always. I you'll remember. Any time last year we were looking to Jerome Powell. A lot of consumers are looking for him to bring down the rate and they're anticipating the mortgage rates will go down. It didn't happen, they went up. So let's just go through the steps of what exactly? How are mortgage rates kind of set? Where they're set in relative to the 10-year, the yield on the 10-year Treasury bond?

Speaker 2:

Yeah, and I think that we'll kind of combine both of those. I think we can talk. You know, Powell and the Fed funds rate, the short-term rate and then the US Treasury. So Jerome Powell is in charge of kind of the federal policy and the federal funds rate, which is everything for kind of short-term debt. So when you see credit cards, car payments, home equity lines of credit, those are all going to be based on that federal funds rate.

Speaker 2:

Now that rate is very data-driven and it's all with trailing data and, unfortunately, one of those data pieces that Jerome Powell doesn't use when he's coming up with what he should do with rates is consumer sentiment. And so, while consumer sentiment was hey man, what are you doing? We're all struggling here. You have to look at the data, and unemployment is the big kind of indicator of what they look at in determining policy.

Speaker 2:

So not just inflation, also unemployment. Those things are tied very hand in hand together, typically, and so that's kind of where the short-term funds rate is. So that's the one that's more publicized, it's the one that's in everyone's face, and so it's totally normal to say, hey, this and mortgage rates, and they're, if I hear the word rates, they're the same, they're in the same bucket. Mortgage rates, however, are long-term debt, and so the benchmark for any sort of long-term debt really comes from the US Treasury, so those Treasury bonds are what everyone looks towards when it

Speaker 2:

comes down to hey, what are we setting for rates that are in long-term like a 30-year fixed-rate mortgage? And so when they look at those hey, those US Treasuries that 10-year US treasury is basically how would I phrase this? I feel like it's a very nice, like old person's investment. It's no risk. I'm using air quotes. It's no risk. You park your money there. You don't make a bunch of money, but you're not going to lose everything. It's guaranteed return. It's like when you get a savings bond for your birthday as a kid from your great aunt and in however many years, it turns into 50 bucks instead of the 25 that she bought it with.

Speaker 1:

Right.

Speaker 2:

So that's kind of what that is like. So it's great for if you're on a fixed income, if you are risk adverse, you park your money there. It stays safe. And so when you're looking at other long-term debt because that's the benchmark you have to make it a little bit more enticing, because other debt typically comes with a little bit more risk than those bonds do, and so the mortgage rates will usually take that as the benchmark, that US 10-year treasury, and then add a little margin into it, and that's usually how we get our mortgage rates. Now this is also a mechanism in the market of like, hey, when do rates get good, when do they get bad? And that really comes down to kind of being able to watch the relationship between, say, the stock market and then the bond market, as the stock market's surging and it's on an upward swing and we've been in the largest period of economic growth that we've ever had. I think it's been 16 years of a bear market in.

Speaker 2:

America. And if you're, you know, have your money in there. You're watching it go up and you're not moving it. And so the bond market. What they have to do? To say, hey, we need investors over here, we're trying to sell this US debt. They have to raise their yields to try and entice people in. And so, as the market's skyrocketing, what we see is those bonds have to increase their yields and consequently, mortgage rates go up to try and entice consumers to come in.

Speaker 2:

Hypothetically, when the market dips, we start seeing people pull money out of the stock market, look for safer investments, and that's where they retreat to the bond market, and then they can lower those yields, so lower the rates, and then that short-term rate of return gets less and mortgage rates go down, down. Now you mentioned tariffs, and this is where we saw things act atypical, like this last week, where tariffs and retaliatory tariffs really made the bond market act in a way it shouldn't, because we saw a big drop in the stock market. Yes, and hypothetically you'd see the rate on the 10-year treasury go down, but instead we didn't.

Speaker 2:

We actually, we actually saw it go up, which is unbelievably counterintuitive and a little scary, not just systemically for what we have here and how we benchmark things and how we hold our debt, but also what it looks like for just mortgage rates and rates moving forward. And overall, I say we're not going to get into politics. I'm going to do my best not to what this looks like longer term relationally and how much negotiating power and leverage we actually have if something like this can be impacted in a very simple and really quick way.

Speaker 1:

Wow, so I think it scared the pants off number 47.

Speaker 2:

Yes.

Speaker 1:

And he very quickly hit a 90-day pause and things felt a little better. As you said at the top of our conversation, there's a little bit of breathing room right now because it scared everybody right?

Speaker 2:

Because, as you said, it's investor sentiment A hundred percent, investor sentiment 100%. And I think if we look at tariffs, tariffs look like they now, in hindsight, look like they were a lot of posturing as a negotiation leverage to say, hey, we're trying to get something or negotiate deals, whatever it might be. And this right here, once we saw a sell-off of the US Treasury bonds and US debt to show that, oh, hey, we're going to put things on pause, we're going to make exceptions for certain products that kind of shows like, oh, it was kind of a bluff or posturing. And so I think that I don't know how viable tariffs are going to be moving forward. And I think the market is understanding like, hey, there might be an alternative path. We have to look, but we still, I think, need to cool some tensions between us and China before the market really settles and kind of can breathe easier soon.

Speaker 1:

Yes.

Speaker 2:

One thing that's important to know just in relation to tariffs and what you're rooting for like political party aside is China is the second largest foreign holder of United States debt, and if they were to decide to sell off 25% of that debt, the impacts in mortgage rates would be unbelievable. You'd see mortgage rates go to over 10% as a result with that bond sell-off. So they do hold cards, they hold a lot of cards, and they are being pretty responsible in how they're using them in relation to everything right now, but who's to say how that persists?

Speaker 1:

Right, and you know, the first I read of anyone holding cards was also Canada, mark Carney. You know this was a play by Mark Carney and perhaps he was working behind the scenes with leaders of other nations who also hold US debt, and I think Canada is the fourth largest holder of US debt.

Speaker 2:

I believe it's Japan, china, luxembourg and then Canada. So, canada, they have a smaller piece of the pie, but even that small piece has a lot of power.

Speaker 1:

So they have a big lever, yes, at their disposal. That, we know, scares the pants off. Number 47.

Speaker 2:

It scares the pants off of everybody. I think that if we all look at that and look at what it can do to mortgage rates, long-term debt holdings and just our system of the value of our dollar, I think it has some major implications that we would all love to avoid.

Speaker 1:

Right, okay, so here we are in our 90-day pause.

Speaker 2:

Yes.

Speaker 1:

And where are we with something like consumer sentiment right now?

Speaker 2:

I think consumer sentiment is exactly kind of where you'd expect it to be, is one that's very tentative, and I think that we see that a lot in just our market right now. Yeah, we see that a lot in just our market right now.

Speaker 1:

Yeah.

Speaker 2:

There's a lot more scrupulous discernment with when to move forward, when not to move forward. As a buyer and I think that what you see with sellers maybe you're seeing it already is with market prep is, hey, the majority of my equity is tied up in my home. I don't want to liquidate what I have in the market. Yet how can I leverage equity to move or to get market prep ready? What are these potential tariffs going to do with any sort of market prep, from finished appliances to drywall, to lumber, to paint? And what does that do for the buyer side, who's trying to pull their funds together to compete in a really competitive market where inventory's always tight and demand's always high? And are they going to be more likely to take on a fixer or a project if there is this worry of the basic essential costs rising after they get in the door?

Speaker 1:

Yeah, I have actually had that conversation this morning about somebody who's with a property that needs quite a bit of work and whether this was the year or pause till next year, various personal reasons that they might have. But there was a massive concern around the prep costs and you know, we can only speculate, we can't, we can't know, and that's what makes this administration so difficult, because they're just giving us chaos.

Speaker 2:

And yes, and it is. We're trying to do our best not to freak out and I think that you know we're all. We're all. We're not disheveled here, we're all put together in this room for the most part, and so I think we're doing a pretty good job of not freaking out right now and, uh, you know um and gosh, yeah, I mean, even you know our labor.

Speaker 1:

I, I perish to think you know what, what could happen? Because, as we all know, these, these men and women from other countries, they are essential, uh, they're very essential. They they're not wanted by the current administration, but they're essential to our economy. So, so we're all grappling with that.

Speaker 2:

A hundred percent, and so between the layers of just labor, the people that are part of our communities, the people that are skilled, there's not a lot of that outside of I mean we're not putting children to work here.

Speaker 1:

I would hope. Have you seen any of those memes? You know any of those memes where you've got like just you know average Americans, just like screwing in little screws on iPhones or whatever you know? And it's just like this is not going to happen.

Speaker 2:

Yeah, that's me. I don't know how to do anything and I would be at the whim of you know, someone wanted to charge me exorbitant prices to fix repair remodel. Be at the whim of you know, someone wanted to charge me exorbitant prices to fix repair remodel. I'd have to do it or opt not to do it. Luckily, my wife, felicia, is pretty handy and loves doing DIY stuff. We have a little gender role reversal at home. I do the cooking and cleaning and she does all like the manual labor and building and we live life harmoniously like this. Yeah, yeah, that's true, that's true.

Speaker 1:

So it seems at this moment in time that, similar to gold, you know, real estate is still a fairly safe bet. Now, you know, I would imagine that's part of why we're still seeing a robust apart from the supply-demand dynamic. But you know it's maybe you know there's a lot of intergenerational wealth. As you know, locally here money gets passed down and you know I would imagine that it still seems wise and reasonable to put money into residential real estate. It's a safe place to park when everything else, including the bond market, might be you know, under threat A hundred percent.

Speaker 2:

I mean real estate is a proven commodity throughout recessions. There's only one recession where it didn't like leap up in price and value, and that was 2008, which was a massive system failure. So it wasn't a typical recession like with what we were potentially looking at right now. So real estate is a proven commodity and I think that Bay Area real estate is proven to be one of the most resilient commodities and we saw us even like Berkeley, for example, like when you look at the national hit real estate took in 2008, berkeley was largely unaffected by comparison.

Speaker 1:

That's true, berkeley was, you know, we got out to Richmond not so much, but yeah, and so let's talk about that just for a second, because I was having a conversation this morning again, and it's always part of the daily grind to talk to people about what were the underpinnings of the recession and and the complete and utter lack of or you know, we're not. None of those underpinnings exist right now. In fact, the contrary, I would say. After you know, after a period like 2021, early 2022, where rates were at 2.75. The amount of equity people hold in property nationwide now is it's just night and day compared to you know going into 2008.

Speaker 2:

I mean so? Yes, and it's real equity. It's not made up inflated equity like it was in 2008.

Speaker 1:

Right, yeah, it's the real thing. So, nationwide, people have huge amount of skin in the game, yes, and so the underpinnings aren't there.

Speaker 2:

The underpinnings aren't there. The lending regulations and guidelines are dramatically different than they were prior to 2008. The ability to repay has been at the forefront of every government-backed mortgage. That's being done, and so we don't have every system out there. We don't have all the we'll call them creative financing that was in place where they weren't verifying income assets. You could buy an investment property and borrow up to 125% of the value of that investment property that you're buying.

Speaker 1:

It's so scary.

Speaker 2:

Yeah. So you're already coming in with negative 25% equity on a loan that's going to blow up in your face within three years, and they didn't verify your income and ability to pay back that mortgage.

Speaker 1:

It's so scary. I actually want to walk you through a conversation I had with a lender back in 2004. It was the year I got my license, because I actually wanted to understand what was going on a little better. So I went through the process of getting my license. But just immediately prior to that I chatted with a lender and the lender said you know, we're looking at everything you've given me here. We can give you a loan of this much.

Speaker 1:

He said it's not enough to purchase that property that you're interested in. He said but what if I told you what you need to tell me you make and that would allow you to buy the property?

Speaker 1:

It's a no-doc loan, we'll call it a no-doc loan. And so let's say, I told you you need to make X amount more annually to purchase that property. How much do you make now? And I said oh, and I added that and he said, oh, we can give you a loan. I mean, that was literally the conversation. It took five minutes.

Speaker 2:

Yes.

Speaker 1:

Right. And he said don't worry, At the rate property is appreciating, we'll refi you into your fixed loan, no problem. You know, and that was the whole thing right House of Cards. So as a result of that awful recession, we did something emerge called the Consumer Financial Protection Bureau.

Speaker 2:

Consumer Financial Protection Bureau, CFPB for short. We love acronyms in this industry.

Speaker 1:

Now I know an Instagram post you had a few months ago caught my eye because I had read about you know, the current administration's interest in dismantling that. Let's talk about what the value of it is after the recession was after the recession, and what your concern is around its dismantling.

Speaker 2:

So I would say that I am a rare egg in the lending business and I am a big fan of the CFPB, and it's not just because I've had clients that work there that are now potentially displaced from jobs. I love what the CFPB stands for and I love seeing the reaction that my industry, the mortgage industry, had once it actually came into I don't want to say power, because that makes it feel authoritarian but once it came into play and being so post 2008, crash because of the exact lending practices that you were talking about. Like, hey, if you were to make up some fair your tail income, like what would you make it? Like, okay, let's give you a large loan based on this made up number that you just told me.

Speaker 2:

There has been a lot of practices and the CFPB is in place to protect the consumer and that is why I love them so much. They are there as a watchdog, they are there as a safety valve and they are there as just an ominous threat to lenders and banks to make sure they're doing what's right and being transparent and honest with the consumer. I have seen the CFPB in their policies literally save buyers in this very market tens of thousands of dollars upwards to probably close to a hundred thousand dollars. What you're allowed to tell someone costs on a loan or the fees associated with it, you're allowed to tell someone costs on a loan or the fees associated with it. There's certain categories that have to be within minimal variances, or no variances at all, from what you tell a consumer to what you end up charging on the back end.

Speaker 2:

For example, say, I get you into contract in Berkeley, your home's a million dollars, and I tell you, hey, this is how much it's going to be. I disclose the loan to you and then at the very end I'm like oh, you know what? There's this thing called city transfer taxes that we didn't put on that initial document, and that's $7,500 that you're now going to have to pay. The CFPB wouldn't allow that, so there's a bait and switch in cost and fee structure. Got it?

Speaker 1:

Where the?

Speaker 2:

CFPB. What they put in Got it honest the average consumer coming in and buying a house. It's all brand new to them. They don't know what they don't know, and if you don't have something supervising and making sure people are staying in line, especially the banking industry, I think that that is a world that leads itself to a lot of problems, because we saw before that the mortgage and banking industry can't self-regulate.

Speaker 1:

Right, yes, unfortunately. Yeah, so I can see why you like it. Talk to me about the dismantling.

Speaker 2:

Well, I mean, there's a fight in the courts essentially to keep it open. I think that they closed the doors, it's been put on pause. I think it's very uncertain and I think, if this administration has its way, they want to roll back regulations, and the CFPB is one of them has its way. They want to roll back regulations and the CFPB is one of them, and I just feel like it opens up a lot of trouble, a lot of potential liability and a lot of things that no one wants for their clients or even for themselves. A personal story around this, to say two personal stories about the CFPB.

Speaker 2:

So when I first got into the industry, it was just post crash, when things were starting to recover. Cfpb came out. You could see the tension of every institutional loan officer that was working of oh my gosh, now I have to do this or now I have to worry about this. And it was such a mindset shift that people ended up leaving the business. It made it more. It made it a business that you were a little bit more proud to be in, because it wasn't as slimy or sleazy, and I think we have the CAPB to thank for that.

Speaker 2:

On the other side, a personal experience is Felicia and I we bought a property. We put a low down payment on it, so we had mortgage insurance property appreciated and we said, hey, we'd like to remove our mortgage insurance. The mortgage servicer that was servicing our loan at the time said, yeah, no problem, we'll remove it. Lo and behold, they had been charging me mortgage insurance for another two years and hiding it as a fee, with no option to remove it or see it. I called them and said, hey, we need to rectify this. They said no. They said no. They said no. I said okay, I'm contacting the CFPB.

Speaker 2:

And just by doing that. Within one week they had gone, sent me an apology letter, sent me a check back for everything and said I'm so sorry. Wow, and if the CFPB didn't exist, I don't know what you could have done.

Speaker 1:

Right. Wow, that's a fairly powerful story.

Speaker 2:

Yeah, that really is.

Speaker 1:

You know everybody has their favorite movie and I always love to go back and watch the big short I do too, you know, just to remind myself of just how awful things were, and utterly insane.

Speaker 2:

The banking industry is, for lack of a better word, a greedy one. And so again, if you're allowing them to self-regulate, I think that we are being in trouble, because self-regulation kind of leads to no regulation.

Speaker 1:

Yeah, that's right. That's right and there is. I don't know why it is. There's a suspension of morality in business, that you know.

Speaker 2:

It just drives me nuts, it's one of those things where it's like, with everything, I think that you say, hey, here's a line, and then you cross that line one time.

Speaker 2:

And then you start crossing that line again and again and that line just gets kind of pushed further and further out. And so without having a firm line, I think it's really hard and I do think that moving forward, one of my bigger concerns is the type of lending environment we'll have without regulation, with the potential privatization again of Fannie Mae and Freddie Mac that also this administration looks like they're potentially pushing for.

Speaker 2:

And just what lending options look like if we potentially head into a recession, and just how that also coexists with just lending practices I'm already seeing right now and what we can kind of describe as a very consolidated and constrained market.

Speaker 1:

Well, listen, there's so much in this conversation. I mean, I'm so grateful that you've just efficiently gone through all of this in an easy way, but there's a lot to unpack. I'm going to listen to this conversation myself a second and maybe a third time. I just want to end on this one. Real quick Talk to me about Fannie Mae, Freddie and potential privatization and what concerns you about that.

Speaker 2:

So I think the biggest concern for me is most likely this would make mortgage rates more expensive. I think when you have government intervention and it's done intentionally as part of monetary policy and it's done with the consumer in mind. I think that you limit price gouging and I think if we do a privatization of Fannie Mae and Freddie Mac that effectively have monopolies in the mortgage industry, they can control their pricing. And so we talk about hey, will they follow the US Treasury? What will those margins look like?

Speaker 2:

Are their government subsidies, actually helping them with their costs to keep those entertained and low If you remove the government aspect and they're privatized, are they still getting subsidies? Are those gone and now their costs to operate go higher? Effectively, though, what we can, I think, safely assume is that a privatization of Fannie Mae and Freddie Mac, away from kind of government stewardship would result in most likely rates getting worse, but we also might see more unscrupulous lending practices and guidelines, like we may have seen in the past.

Speaker 1:

Oh gosh, Okay yeah.

Speaker 2:

Can we end on a different note, like one that's a little bit brighter?

Speaker 1:

Yes, let's do that. What have you got in mind?

Speaker 2:

I don't know. I just know that it's Thursday. There's the farmer's market right across the street from your office and I think I'm going to go detox and just smell some flowers and pick some vegetables.

Speaker 1:

You office and I think I'm going to go detox and just smell some flowers and pick some vegetables. You should buy some mystery meat for Felicia. Turn the tables.

Speaker 2:

We'll get some. I think I surprised her one time and she surprised me by doing a half decent job, and so maybe we'll do that again tonight.

Speaker 1:

Go get some chicken liver.

Speaker 2:

That would be a very tough sell. It's weird. She'll eat a hot dog, you know, eight days a week and have no clue what's inside. But if I tell her like, hey, this is a chicken liver, then she won't touch it.

Speaker 1:

It's funny how that works, isn't it.

Speaker 2:

It's kind of amazing Felicia and little kids. I think it's the same way when you can, marketing is very effective on how you pitch things Well you know we have a lot to be grateful for and I'm grateful personally.

Speaker 1:

I'm just grateful that so many people in the local industry, here in the local real estate industry, do have great morals, and it's part of why, actually, I would say, you know, Berkeley did better than other places in the recession. It's a testament in large part to just how well run the local real estate industry is and how informed people are when they're going to get a loan, for example.

Speaker 2:

I'm going to go even a step further than that. As a lender, and especially now working in different markets, I will say that my favorite market, taking all bias aside for real estate is the East Bay, Berkeley, Alameda County market. I think we have the best level of professionalism, professional courtesy, amongst the community itself. I think you have hyper-educated agents, hyper-educated lenders, but also very fiscally as well as professionally responsible agents and lenders that make this community probably my favorite real estate community throughout Northern California and I think that we really set the benchmark here for what a real estate community can be from an education and a service level.

Speaker 1:

Well, that's not a good note to leave. That is a good one.

Speaker 2:

It's a much better one than the previous yeah.

Speaker 1:

So, thank you, dominic Villa. Let's make sure that everybody knows how and where they can find you online, if anybody wants to reach out.

Speaker 2:

Yeah, you can find me on Instagram at Mr Dominic, or you can find me in my fuller work mode at anything Castle Hill mortgage related.

Speaker 1:

Okay and I'll put I didn't really get into a longer bio here because I really did want to just drill down on you know, on topical matters, and but I will put a little more about you and a link to your, your whatever info you want me to link you to, and perfect.

Speaker 2:

Okay, We'll do all that stuff in the mortgage bonds and treasuries and tariffs and the CFPB are way more interesting than me in my bio, so I think we went with the right route.

Speaker 1:

Okay, well cool. Dominic Villa, thank you very much for stopping by the Mostly Real Estate podcast and I look forward to having you on again sometime as a guest in the future. Really appreciate it All right, I love it.

Speaker 2:

Thank you for having me, and next time, hopefully, I'll bring like a lot of good news instead of like, oh, scary news, so you're not coming back for three and a half years. Maybe. Hopefully it's three and a half and not six and a half, or seven and a half.

Speaker 1:

Don't, don't, don't, okay, that's Okay. That's it for today. This episode of the podcast was edited by me, with original music by Chuck Lindo and graphics by Lisa Mazur. The podcast is brought to you by the Home Factor. Realtors. Thehomefactorcom. Catch up on the latest news from the East Bay Market in their weekly blog published every Saturday at the home factor dot com. If you'd like to reach out to me with suggestions for the show, that kind of thing, please text me. It's that simple 415-446-8591. That's 415-446-8591. Thanks for listening to the Mostly Real Estate Podcast with Declan Spring.