SHOW TRANSCRIPT

 

 

Speaker 1 [00:00:03] Hey, welcome to another episode of the Go at John Show, we just wrapped up our conversation with John Tomasello of Birken Herbert Bank. He chatted today with us about lending, what you need to go through if you’re self-employed to get a loan. John tells us a couple of great stories, one about his grandmother. And you’ll also enjoy hearing about the parallels between Burke and Herbert Bank. And It’s A Wonderful Life. So I hope you enjoy listening as much as we enjoyed chatting with John Tomasello, Burke and Herbert Bank. So welcome to another episode of the Go with John show, and today I’m excited to say we have John Tomasello here with us from Birken HERBUT Bank. Welcome. Thank you for having me. Yeah. So really, I’m very passionate about Birken Harbor Bank. I’ve been banking with them since the 90s. It’s a great organization. I think they have great values. And I think that’s one of the cornerstones of being successful in business, is to surround yourself with people who have great values, because then I think you’ve got people in your corner who have your back. Right. So so it’s a great organization. But so so tell me a little bit about yourself. And, you know, how did you end up at and Herbert Bank, I guess. And please bring us through your travels through Wall Street because we’re always interested to hear about that.

 

Speaker 2 [00:01:36] Well, you know, I, I got a job with Fannie Mae because I was the only person that got an A in this class in quantitative analytics in college. So this guy that was the professor work at Fannie Mae.

 

Speaker 1 [00:01:49] Right.

 

Speaker 2 [00:01:49] So I he hired me and I thought, well, this is great. I’m going to be working for a candy company. Yeah. And so I literally got there and I said, well, where’s the candy? Where’s the manufacturing plant? And he just looked at me with this weird look on his face like, how did you get an A in my class? Right. Well, Tom, you said, I’m going to be working for Fannie Mae. Where’s the Candie’s? Yeah, Fannie Mae is Federal National Mortgage Association. We do loans here. Right. So that’s how I came into the business. And I worked there for a little while. And, you know, I just slowly regressed into, you know, all kinds of different things, like we did the very first credit scoring model.

 

Speaker 1 [00:02:25] Right.

 

Speaker 2 [00:02:26] So this was back in the late 70s, OK? And we built this thing. Now, remember, I’m fresh out of college, so I don’t have a clue what I’m doing. I’m here to, you know, make candy.

 

Speaker 1 [00:02:35] Right.

 

Speaker 2 [00:02:35] And my job was to travel all around to the Fannie Mae offices and gather all this information about loans. Yeah. What makes it go and what makes a bad one. So the rocket scientist, guys, they developed the computer models. We put it all together and we took it to the Congress. Yeah. Said, Hey, we got this great thing. Hundred points, you get 50 points, you get the loan, you get less than 50 points, you don’t get the loan. Right. And the congressman said, we’re not doing this. Get out of here. Right. And so we were gone. So we did that. I got to be part of the team that developed the very first mortgage backed security with Salomon Brothers and luminary up there on Wall Street. Right. And that’s was my first taste of Wall Street. So but lo and behold, I went into retail and then I got into secondary marketing. And my venture into Wall Street was because back in the mid eighties, there were these things called CDOs collateralized mortgage obligations. Right. You basically just take a bazillion dollars worth of loans. Yeah. You bundle them up and then you strip them off. And and so you might buy them at par, but then you might sell them to a casualty company, a bank and then an insurance company and each of them, because they want a certain segment of this, the security, they pay you more. Right. So they pay you one or two or one of three. Right. So I just keep the difference. Right. So that was my foray into Wall Street. OK, and that’s how I got into, you know, the real end of mortgage banking. But the spreads became very narrow. A couple of years later. I just said, you know, I was flying up there every single day and flying back every single day at a Newark airport to the Gaithersburg Municipal Airport.

 

Speaker 1 [00:04:13] Wow. So that’s tough life. It was. How long did you do that? Two years.

 

Speaker 2 [00:04:18] OK, and my money was great. Can’t complain about that. But I had a family to raise. And, you know, like I said, those spreads got very thin. Yeah. At one point you’re only making maybe 10 basis points. Right. So to me, it just wasn’t worth it. Yeah. So I come back to Maryland, I go into retail, I spend a couple of years in retail. And that led me to actually, you know, develop a bigger mortgage company for a big builder. So we took this little this builder, this local builder who ended up selling out to a huge conglomerate builder. Right. And we took that from virtually nothing up to where they were doing a billion dollars a year.

 

Speaker 1 [00:04:57] Wow.

 

Speaker 2 [00:04:58] So I actually did that for twenty four years. Yeah. And then I retired. Yes. So now I’m playing golf every day, playing with my grandkids love in life. You don’t have a care in the world. Yeah. And I get this call from this guy, Bergen Harbor Bank. Right. And they basically say, hey, here’s the job. You know, we’re doing a couple loans a month. We’re not really doing a lot. How’d you like to come on and expand? It really need to get into Alami lending. I don’t know if you’re familiar with

 

Speaker 1 [00:05:26] that, but what is Alami lending to

 

Speaker 2 [00:05:28] us? That’s low and moderate income. OK, so Berghain Herbert, we’re just weren’t doing enough. So we really are pushing and we’re still pushing that to do low and moderate income loans to people that really need them that you know, struggling to, to bring up the cash. That they need so. So we’ve been expanding that, but it literally took four guys and Mr. Burke to actually get me to take this job because I was very happy just doing nothing all day long.

 

Speaker 1 [00:05:56] Right.

 

Speaker 2 [00:05:57] So I drive from Maryland. I leave the house around four o’clock in the morning. Yeah. So that I can beat the two hour traffic to Alexandria. Yes. And then I try and leave at two or three. But lately I get there at 6:00 and I don’t leave till 6:00 or 7:00 anymore.

 

Speaker 1 [00:06:11] Right. You’re back to work. I am, yeah. So that’s that’s

 

Speaker 2 [00:06:16] how I kind of came to work in Harbor. But the thing that I’m really impressed me about the bank is before I actually accepted it, I would go to the branches and I would visit. Right. And you walk in there and everybody greets you at the door. Right. It’s not like some of these big behemoth banks where nobody knows your name. This is a place like it’s a wonderful life, right? Everybody knows your name at Bachenheimer.

 

Speaker 1 [00:06:40] You’re absolutely correct. You’re absolutely

 

Speaker 2 [00:06:42] correct. And our our you know, our motto our tagline is at your service. Right. So, you know, we’re a community bank. We’re about three point three billion, I think, now. Yeah. And and everything that we do is based on the service to the customer. Right. How can we help you and how can we make it easier? What can we fix. Yeah. So if you have an issue, they don’t just push it off to another department. Let me try and figure it out for you or let me walk you over to somebody who can.

 

Speaker 1 [00:07:11] Yeah. And you are absolutely correct. And I love that about the bank. I spend a lot of time in and out of the Vienna branch and the folks there, every time I walk in, they know my name and there’s very little turnover. I don’t I mean, in your in your in your bank in general, there’s very little turnover. There are not too many businesses out there that that that I utilize their services. Where there’s there’s so little turnover is there is a broken herbut so it’s nice.

 

Speaker 2 [00:07:42] You still bank at the V.A. branch. Yeah I do. You know they’re building a new one.

 

Speaker 1 [00:07:46] Yes, yes. Yes. But it’s still going to be the same.

 

Speaker 2 [00:07:51] It will be the same people, the same friendly people. You get the same service, a great service. But they kind of outgrew that little teeny branch parking stuff there.

 

Speaker 1 [00:08:01] Yeah, yeah, yeah. You got to fight for the one or two spots that are out front.

 

Speaker 2 [00:08:04] Yeah, I park over at the shopping center next door so that I don’t take up a space. Yeah. Every now and we’re opening a branch in Fredericksburg. Nice. Actually maybe even too. I don’t really I’m not involved in the branch system itself, but I do go out to a lot of the branches. Yeah. And we’re trying to expand that footprint. We did close one of the branches in Old Town because it was right down the street from the other one. Right, right. Makes sense. You know, I was walking my very first day on the job. I was walking with my boss job on Accorsi, who runs the home equity line department. Right. And we were walking up King Street and I said, look at this office right here. There’s bars on the window and it’s right here on Main Street. Who works there he goes. Well, that’s Mr. Burke’s office. What I said, is he ever there? He is there right now. I’d you know, I only talk to him. I’d never met him. Right. So he he actually has a office right on King Street. And, you know, he’s not there all the time. Sure. But he’s out in the community all the time. He walks up and down the street, shakes hands. Yeah. And he still is is a good, you know, ambassador for the business that comes in. Right. Commercial loans, residential loans. He does it all. Yeah. Fantastic. He’s a I don’t know if he’s fourth, fifth or sixth generation, but there’s always been a Taylor. All right. Burke. Yeah. At the at the company. Amazing. And you asked me about, you know, the parallels and. Yes. So I’m going to tell you that, you know the stories. You’ve seen the movie. It’s a Wonderful Life. Yes. Where you walk in and what’s the guy’s name? Rasmus. Or I forget the old guy’s name, the uncle or whatever is. Right. So Jimmy Stewart walks. Yeah. Yeah. You know, where is the money? Where is the money? And the guy’s got a parrot on his shoulder. The banker. The banker. Yes. And that was one of the birds I think it was. Taylor Burke actually used to run the bank and had this parrot, I’m told, on his shoulder, and people would come in to talk to him and the parrot. That’s amazing. And I just I just couldn’t believe what I was hearing. Yes, that’s true story. And, you know, if you’re in the boardroom, you see all the different Berk’s pictures up on the wall along with all the other. Yeah, but that that was an interesting thing to me that. Yeah. Especially that Mr Burke would just walk up and down. I constantly am, you know, I’ll go get a cup of coffee and I’ll see him just walking up and down the street. Yeah.

 

Speaker 1 [00:10:23] Yeah, it’s great. I mean that’s that’s what a community bank should be. Yeah. You know, absolutely. You know, low turnover and the the principals, the managers, the, the branch managers are part of the community and that’s what it is at Burke and Herbert. And it’s nice.

 

Speaker 2 [00:10:37] Well, here’s another thing, too, if I can if I can put in a plug for the bank. Absolutely. When we make. Let’s say we make a loan and it doesn’t quite fit the cookie cutter mold, right, so we don’t have to send it to a big committee. Wait two or three weeks. I go to Joe and Jeff and I say, hey, guys, here’s this loan. Yeah. Let’s take a look at the merits. Do we want to do this loan or not? And within 10, 15 minutes, we’ve made a decision.

 

Speaker 1 [00:10:59] Right.

 

Speaker 2 [00:11:00] So whereas most places you go, you got to wait, you know, 45 days for somebody, some bigwig to make a decision and sign off on it. Yeah, and that’s what goes on at Birken Harbor. Yeah. We have that ability to make that decision pretty quick.

 

Speaker 1 [00:11:15] Yeah. And I think technically, you’re the oldest bank in Virginia, is that correct?

 

Speaker 2 [00:11:18] We were founded in 1852, OK. In fact, when I had to get a couple licenses, I said, you know, where’s our charter? What you know? And they handed me this piece of paper that literally looked like the Declaration of Independence. It looked that old. It was Kino’s crusted on the sides and it had somebody’s signature on it. And I want to say it was December. I don’t know, but it was dated 1850. Is that on display somewhere?

 

Speaker 1 [00:11:43] That should be.

 

Speaker 2 [00:11:45] I have it in my computer. Yeah. Yeah. But I don’t think it’s actually on display anywhere, but yeah. 1852. Right. So there are lots of like I don’t want to name any names because a lot of these people nowadays wouldn’t be politically correct to tell you who was on our board and. Sure. Sure. Back in the eighteen hundreds but lots of generals and congressmen and senators or bankers with us. Yeah. But you know, but we really want to reach out to the entire community all across the spectrum. Right. Doing our fair lending and making sure that we’re serving the entire community. Yeah. Not just the congressmen and senators and things like that.

 

Speaker 1 [00:12:22] Right. Fantastic. I think you guys do a great job at it. So thank you. Good deal. All right. Well, we’re going to take a quick break. And when we come back, you’ve got a you’re going to tell me about your grandmother.

 

Speaker 2 [00:12:33] OK, I will.

 

Speaker 1 [00:12:34] Yes. All right. We’ll be right back. OK, so, John, you’ve got a story or two you can share with us about your grandmother.

 

Speaker 2 [00:12:42] My grandmother? Yeah, my grandmother was first generation Italian, OK? They came over on the boat. I think it was the Mauritania with my my then grandfather. OK, now this will give you a little insight to my grandfather was 45 at the time and she was 17. Wow. Yeah. Well, robbing the cradle. Yeah. But so anyway, they met on the boat, they came over and the rumor has it that he was in the Cosa Nostra, which is, you know, modern day mafia I guess. Yeah. And so they had to change the name. So technically my name is Thomas Kelly with an eye. Yeah. But they knew that Thomas Celi was Cosa Nostra from Sicily. Right. So they changed it from an I to an O when they came over. And so that’s how they actually got into the country because they weren’t letting Thomas Kelly in. Wow. So anyway, years and years later, I was having this conversation with my grandmother and I was like, you know, I never knew my grandfather. Dad said that he died of pneumonia. Yeah. And she goes and she starts laughing. Yeah. And she catches pneumonia. And then she says, if you can afford to die of a pneumonia, it’s only because of all of the bullet holes up to his chest. So she knew. Yeah. Yeah. And that was my first, you know, even getting a haircut, you know, over in Wheaton, Maryland, you see all these guys coming in in black trench coats and fedora hats and you wonder, what are they doing in a barbershop? Right. So it’s interesting. Parallel. Yeah. And my.

 

Speaker 1 [00:14:14] So what year was that? What year was was your grandfather killed?

 

Speaker 2 [00:14:18] Oh, I have no idea. He I never knew him. OK, so it had to be, you know, I guess before the 50s. Yeah. I don’t really know. I never met him. Never knew him. Right. Nothing. And then of course all my father’s brothers were killed also. Wow. Yeah. Am I. Yeah. That’s, that’s something there. Oh it’s a it’s a fascinating story, but my mother’s maid of honor was one of the Bonnano daughters. Wow. So, yeah. And he was of course the Kabo to cop to Tuti. Yeah. So it’s just, you know, but I never knew any of that end of it. I just was always around it but never so.

 

Speaker 1 [00:14:53] Yeah. So you, you scared it out. Yeah. So you went to college and you got on your own path away from the family business.

 

Speaker 2 [00:15:00] I did. I did. Yeah. I was into baseball and golf and you know, now my passion is golf of course, but my grandkids take up a lot of time too.

 

Speaker 1 [00:15:09] Yeah. So how often do you golf.

 

Speaker 2 [00:15:12] Well used to be every day. Right. I got it down to about a two. Yeah. But now I’m more like an eight and. Right. I play once a week. OK, in the weekends with my brothers. OK, what

 

Speaker 1 [00:15:22] do you love about golf. What is it you love about the game.

 

Speaker 2 [00:15:24] You know it’s the serenity but the competition, you know, you’re always fighting against yourself but then you’re playing against your friends. And you know, the other thing is you can play with anybody, you know, anybody, even if they shoot 120. Yeah. You just give them strokes and you go out there and you OK. And it’s a close match, even though they may shoot 120. You shoot seventy eight, right? So right now, but it’s the serenity it’s getting away from the hectic is, you know, mortgage banking, everything’s a crisis. Yeah. You know, everybody wants to get in their home or they have to close. Yeah. Especially when rates are going up and or, you know, nowadays, as you know, everything is being written non contingent. Right. Even if you have to get a loan. So there’s no nothing you can’t screw it up.

 

Speaker 1 [00:16:07] Right, exactly. So how do you cope with the stress.

 

Speaker 2 [00:16:12] You know, I’m a fairly laid back person. I see that and, yeah, pretty calm. So my demeanor, you know, as I get older, too, I get more calm. Yeah. And I just take deep breaths and, you know, sometimes I’ll just walk away from it. Right. So I just got to get away from it, you know. And, you know, you got loan officers that are screaming that I need this deal done. I need that deal done. And then your process is saying, well, I don’t have this document or that document. Right. And then so then you got the underwriters saying, well, I don’t even like the loan. Yeah. So. So you have to be the diplomat.

 

Speaker 1 [00:16:43] Yeah. You’re stuck in the middle.

 

Speaker 2 [00:16:44] Yeah. And you don’t want to take anybody off shore. So you’re just trying to be nice too, even though you want to scream at them. Yeah. But you know, you just take it all in and you try and find a happy camper.

 

Speaker 1 [00:16:52] Yeah. So how many people do you work with that are getting prequalified before they go out and find a house, or is it usually they find a house and then they’re calling you for the loan.

 

Speaker 2 [00:17:00] Now virtually everyone gets prequalified.

 

Speaker 1 [00:17:03] That’s really good. I’m glad to hear that. And I highly recommend that for anyone listening that, you know, I run into quite a few people who get deep into the process before they decide to get their financing in line. And then it turns out they can’t do what they thought they could do. Right. Or it turns out they can do a lot more than they thought they could do. You know,

 

Speaker 2 [00:17:26] we can you know, it’s funny. We can usually get them more than they think they can get or more than they want. Exactly. Every now and then, it’s the other way around. But the biggest problem is, you know, you’ll pull their credit and they’ll they’ll be something on there that they didn’t know was on there that might mess it up.

 

Speaker 1 [00:17:40] You know what? And that’s that’s that’s a really valuable piece of information. And I’ve heard that from so many lenders over the last 20 years that I’ve been in the real estate industry. It’s the lenders say all the time that that people get surprised by what’s on their credit report. So really, if you’re thinking about buying a house and you want to get out there and have a transaction, the first thing you should do is engage with the lender and get your credit polled and find out what’s going on. A lot of people will say, I hear from the lenders because I’m not in the lending side of real estate, but I hear people will tell lenders, you know, I want to get prequalified, but I don’t want you to pull my credit. You hear that a lot?

 

Speaker 2 [00:18:20] Not a lot, but I do get that, that they’re not serious. OK, now, here, a lot of them will have they’ll shop around. Yeah. So they may have one or two or three lenders. But what they don’t realize is that if if I’m pulling your credit is three different lenders are pulling your credit. Yeah. Your scores might go down two or three points. Right. But if I pull your credit 15 times within 30 days, it’s not going to go down. Right. So they are shopping around and that’s why they think, well, if you pull my credit, my score is going to drop ten or 15 points. Right. That’s not really true. Yeah, but there’s this myth also is out there that I have to have a 700 credit score to get a loan. Right. And you don’t. Yeah. You know, I mean, FHA doesn’t really even have a minimum credit score, but the investors that buy them, they do. Yeah. And they fluctuate now. Used to be, you know, five eighty to 620. But but a lot of our investors are saying, hey, we want 640 or 660 now. Right. And so it’s you know, a lot of customers are saying, wow, I heard I can’t get a loan without a 660, but there’s still plenty of lenders out there will go down to 620. Yeah, but you, you know, there’s also this this myth that you have to have 50 or 60 thousand dollars. And that’s not true either.

 

Speaker 1 [00:19:35] Right. So what do you have to have? So what do you what do you tell? So is there an average Joe for you? Like like your is there is there a what is kind of the average consumer that comes that lands on your desk looking for a loan and what advice would you give them? What is your source. So you may not have an average Joe. I’m not assume I’m just wondering is do you have like a bulk of your. Customers that fall into the same kind of bucket from a from a networth perspective, not really.

 

Speaker 2 [00:20:12] You know, this Alexandrea McLaine is a haven for high net worth people seriously, but across the board, 660, like your average credit score. OK, but you can’t really put a an equity on it right now because there’s so many people. Prices have gone up so much that everybody seems to have 20 or 30 or 40 percent equity. Right. But for the person actually buying a home, you know, typically 10 percent down. Yeah, but we want people to know that you can still buy a home with three percent down payment. Right. FHA requires three and a half, but Fannie Mae and Freddie Mac have these home ready programs where it’s only three percent. Yeah, we at Burkean, Herbert, we have grants that we can give people to do so if their income is below the median family, 80 percent below, we can give them a 7500 dollar grant. Wow. And they don’t have to pay this back. They can use it towards down payment or closing. Wow. And then, as you know, if you can convince the seller to pay some of the closing costs, I mean, you can get in with very little cash down. Right. But it’s got to be the right opportunity. And right now, with everybody back and, you know, bidding up and jacking up the prices. Right, it’s hard to get the sellers to do anything right right now.

 

Speaker 1 [00:21:21] Where do you write mortgages? Do you write mortgages in all markets in Virginia or are you just in the markets where you have branches?

 

Speaker 2 [00:21:28] We actually do loans in Florida all up and down the East Coast. I just did one in Montana now because we’re a national bank, right? Well, even though we’re just local. Yeah, but most you know, 90 percent of what I do is here in Virginia and Maryland, D.C. got you. And we’re starting to do a lot more with the low and moderate income families. Right. And I just want people to know that, you know, that’s that’s available to you. Right. But, you know, we because, you know, it’s so expensive to live here. We also have phenomenal jumbo pricing, too. So we just came out with a, you know, three percent jumbo loan, up to three million dollars. Right. And there’s no points on that. So, you know, your AP is only like three point eighty three. Right. So it’s a great product as well. But then we just have all the other basic stuff as well.

 

Speaker 1 [00:22:14] Yeah, yeah. Yeah.

 

Speaker 2 [00:22:15] Fantastic. Yeah. But you’re absolutely 100 percent right. Go in and get prequalified first. Get that prequalification letter. Yeah, I know most people don’t put a whole lot of stock in it. Yeah. But at least you’ll know, you know, what you can afford, what you can get or

 

Speaker 1 [00:22:30] what you want to spend. Yeah. Yeah, yeah. It’s, it really is so important. It’s so important. And then, and then get your credit pulled to make sure there’s not a surprise there you know.

 

Speaker 2 [00:22:39] Yeah. Because you’ve got to get it fixed quickly if and there are companies out there that will help you fix it. And then the other thing we can do is if somebody, you know, has a lower credit score, maybe they’re in the five sixty five eighty. We have a model, a computer model that we can pull and it will tell us what to do. Right to get your score up. So that’s the first thing people like to do, is they want to pay off their debts. Yeah, well, that’s not always a good thing. Yes, because if I have a car loan, let’s say, and it only has 2500 dollars. Left, right. But I pay it off. Well, now it’s not on my credit report, so it’s not increasing my scores.

 

Speaker 1 [00:23:16] Gotcha.

 

Speaker 2 [00:23:16] So we tell them, know if you can qualify, just leave it on there. Yeah.

 

Speaker 1 [00:23:21] You know, I mean, that brings up the fee because I do a lot of land transactions with it, with the new home construction that we do. And I meet people all the time that have cash. Let’s say they have three hundred thousand in cash. They go to a lender, they get prequalified, then they find a piece of land they want and the land is three hundred thousand dollars. And now they use their three hundred thousand to buy the land and they don’t involve the lender. Well now they don’t qualify for the loan anymore because they’ve spent their cash and. Right. You know, so you can accidentally do things that you think are going to be helpful to your situation that actually hurt your situation. So it’s good advice. Yeah. So good advice. All right, fantastic. So we’re chatting with John Tomasello. We are going to take another quick break and we’re going to come back for our final segment. Thanks for all that information, John. OK, so we are back with John Tomasello. So far, I’ve gotten your name right every time. That’s amazing.

 

Speaker 2 [00:24:27] Yeah, that’s a victory in and of itself. Even my mother can’t pronounce it right.

 

Speaker 1 [00:24:32] I don’t believe that. Well, she probably still says Thomas Kelly. She probably does.

 

Speaker 2 [00:24:37] I don’t even think she knows who I am anymore.

 

Speaker 1 [00:24:42] That’s awful. So, so, so. All right. Let’s talk about let’s talk about. So thanks again for coming in. I’m really enjoying hearing about your programs and learning a little more about you. And I’m very passionate, like I said about the Birken herbut institution. It’s amazing. It’s really. It is so hard, I mean, if you just stop for a second and think about it, it is really hard to get a business going. It is even harder to keep a business going. It gets you know, as time goes on, it gets more complicated and more difficult. And you’re growing. You have growing pains. And but but to have a company that’s been around for a couple hundred years is just mind boggling to me, you know, and it’s and it’s I haven’t been down to Old Town Alexandria in a long time. I used to go there all the time. In fact, I used to live on Duke Street in the 80s. And, you know, I remember the old one armed bandit adding machine on the counter at and Herbert, where you could go in and out of your deposit and print out the ticket and you would take your paper, take it up to the counter with your deposit slip. And it was just a really cool experience for me. And it and it’s still today sticks with me. Yeah.

 

Speaker 2 [00:25:56] Well, you know, and and they didn’t even have a computer in the company until I think I want to say in the 90s. Right. When everybody else was doing them in the 80s, it maybe even later than that. Yeah. So even in the 90s you would walk in with the old passbook. Yeah. And they would fill out the passbook for you. Yeah. And one of the older Burke said, I want everyone to know their name. Right. And so we have a such a loyal clientele, a lot of people just call and say, you know, I’m not shopping around Burke and Herbert is my bank, right. Or No bank is my bank. And my my father was here. My grandfather’s here. And I will be a member here. Yeah. It’s just amazing to me how many people feel that way.

 

Speaker 1 [00:26:35] Yeah, it is. It really it’s it’s they’ve earned it and you earn it. You earned it one client at a time and it takes years and years and years, you know, it takes years and years and years to develop that bond with the with the customer. So I’m glad you’re here.

 

Speaker 2 [00:26:48] But know in our commercial clients, I mean, they’re not just numbers to the commercial guys and to us in the mortgage department. So if somebody missed a payment, we give them a call. We don’t just send them a notice. Right. We call that’s any problem is can we help in any way?

 

Speaker 1 [00:27:02] Yeah, that’s the way it should be. That’s what we do. Yeah. Nice. So let’s talk about a little bit about lending again. And so when you’re self-employed, I think that’s that’s a whole thing, getting a mortgage. So what do you put people through when you’re self-employed? So for all the folks out there listening that are business owners, if you want to get a mortgage, it’s totally different than if you’re if you get a W-2. Right. And you’re working for another company,

 

Speaker 2 [00:27:34] without a doubt, especially if you got a loan back in 04 or five or six. Yeah. And this is common. Everyone tells me this. Well, I didn’t have to give you all this stuff back then. Right. Well, that was then and this is now. It’s like interest rates. If you call me and say I got a quote yesterday, that’s no good anymore because I get rates three or four times a day now. Yeah. So and it’s the same thing. So you and you ask about the self-employed people. Yeah. And in a manner of speaking, we put you through hell. Yeah. And it’s because of mostly because of covid right now. So if you’re a self-employed person, typically you would have to give two years of tax returns. Right. If you own more than 25 percent of the company, then you need to give the business tax returns. Right. And they always seem to forget to give us the key ones because the key ones, even though the company may have made money, you may not have profited from that one. So the K one tells us how much you got. Yeah, but the biggest thing with covid is now you have to sign an attestation form, which is something no one had ever done until covid. So now that the form says, you know, my business hasn’t suffered any setbacks because of covid, we’re still doing the same amount of business or we’re not right. Or this is how we’re impacted and this is how we’re going to get through it. Yeah, you cannot use the covid income or the income from the government as income, but yet you have to count the debt so you get screwed there. Right. But then the biggest thing for the self-employed person is now you need a profit and loss statement. Now, the profit loss statement is a double edged sword. If the profit and loss statement shows us that you made more money than you did on your tax returns last year, well, then we use the tax returns from last year, which OK, but I made more. But but we don’t know that this is just your handwritten PNL, right? However, if the PNL shows less income than we used to pay, now,

 

Speaker 1 [00:29:31] that’s not fair.

 

Speaker 2 [00:29:32] It’s just screwy is whack. And so but so if your income is increasing, then we average your income. But if your income is decreasing more than, say, 15 or 20 percent, then we use the lower income. So when we get your tax returns, what we’re looking at is how much revenue did you bring in? So let’s say you have a medium sized company and you brought in, you know, three million, 600000. Billion last year in revenue. Right. We want to look at that bank statement and make sure that you were bringing in about 300000 dollars a month in revenue. Right. Because that’s what you put on your PNL. Right. And so, you know, if those bank statements don’t show that, then we put you to the third degree. Well, right now, a lot of businesses are cyclical. Yeah. So we get that. So we try and go back a little bit further. But at the very least, because they’ve extended the tax deadline now, a lot of people haven’t filed tax returns. Yeah. So now I need two thousand twenty tax returns and I need the first quarter PNL for 2021.

 

Speaker 1 [00:30:37] Right. I just went through that with Al-Rifai and I started my reify in January and they asked for a PNL for twenty one. And I said, Are you serious? I go, it’s two weeks old. Twenty, twenty one. And but but it took so long to get the reified done I finally ended up having to produce a pencil for this year. It was then it got to be February, March before the, before the loan closed. But yeah it was, it was very, very frustrating experience for me. You know, it was it was not a lot of fun. So yeah, I can I can imagine. You must be you must have a lot of self-employed folks that are really frustrated with with you and your phone calls.

 

Speaker 2 [00:31:23] Well, you know, I get involved personally in a lot of them. So because I want to make sure if the loan officer doesn’t see something and we have computer models, we want them to as well. But, you know, a lot of self-employed people write off a lot. Yeah. So I got this one customer who was in a construction business and I looked at the tax returns and I said, there’s nothing here. What am I going to use here? She writes off everything. Right? And the customer is like, well, and she’s looking for a big loan like three or four million dollars. Yeah. And the comment was, well, how could I survive if I didn’t make the kind of money I’m telling you. Right. I understand that. I believe that you do. Right. But I can’t prove it.

 

Speaker 1 [00:32:01] Right.

 

Speaker 2 [00:32:02] So, you know, I, I couldn’t do the. Yeah. There’s just nothing on the tax returns. She just wrote everything off that she could possibly write off so that she didn’t have to pay any taxes. Right. So that that happens. Yeah. And a lot of people, you know, you get these people that start their own business. Well, we have to show that you’ve been in business for two full years. So you filed two full years of tax returns. Right now, that’s where Burke and Herbert Bank really is different than other banks. If we look at a situation and we have a commercial relationship, we’re all about the relationship. Right. So if we know your business and we know what’s going on, we can look at that and say, OK, maybe they haven’t quite been, you know, this long. Right. We’re very comfortable that they’re bringing in the revenue. They say, yeah. So you wouldn’t get that at a big bank that has a cookie cutter model. Right? Right. So that’s what we do. Yeah.

 

Speaker 1 [00:32:54] Very, very cool. Yeah, very cool. And then just just to talk a little bit about the W-2 folks and, you know, so so the qualification process for them is a lot easier. Right. You just need

 

Speaker 2 [00:33:06] it is to some extent, we all use these computer models that Fannie Mae and Freddie Mac have right now and we run them through the computers. And if the computer says yes, then, you know, we’re pretty good. If it says if it says referrer, yeah, then we kind of have to look at it. If it says caution, then it’s probably not going to work unless we can figure out why. Yeah, but the biggest thing that people should know is that it isn’t so much about the net income that you bring in. Yeah. VA still does that. Yeah. VA takes your net income and they take out all your bills and your mortgage. And if you have like four or five, six hundred bucks left over, you can get the loan. Yeah, but FHA and conventional, they have two ratios, you know, one is the payment to the debt and the other the more important one, the back ratio is your income divided into your total monthly debts. And we really want that to be around 45 percent. So if your income is ten thousand a month, we want your mortgage plus your car loan, credit cards, student loans, everything to be under 4500 dollars. Right. That’s not a rule. Technically, Fannie Mae and Freddie Mac will approve a loan up to 50 percent and FHA will go all the way up to 57. Yeah, but we want you to be more comfortable than that. So we we kind of look for that guideline. And a lot of the investors are saying, no, we’re not going to go up to 57, even though FHA allows us to.

 

Speaker 1 [00:34:31] Right.

 

Speaker 2 [00:34:32] So that’s that’s the biggest thing.

 

Speaker 1 [00:34:34] Yeah. Makes sense.

 

Speaker 2 [00:34:35] Makes sense. Yeah. The the other one, I don’t know if it’s an oxymoron or what you would call it, but you want to be totally open with the lender because we will find out it. Sure. We almost always do. Right. We have these things like LexisNexis, which is a system. It’s it’s kind of like the FBI for computers that we can access so we can find out all kinds of. Stuff about you that you never disclosed to us, right? And the biggest one that I find interesting is how many times somebody will give me a tax return. They don’t realize that we’re going to pull their taxes from the IRS anyway. Right. And it’ll be different. Right. That just boggles my mind that someone would give me a tax return thinking I’m not or they will they will have a side business that’s either making money or losing money, but they forget to tell me. Right. And so or they’ll have real estate that they didn’t tell us about that, you know, maybe they’re losing money or they’re making money on that. You got to give all the information you possibly can. So that’s and verifying the cash, you know. Yeah. You can’t just show up with cash on a mortgage loan. Right.

 

Speaker 1 [00:35:43] Got to verify. Right. Right. Yeah. And it goes back to what I said earlier at the beginning of this segment. You know, you start with your your situation. If you have cash, don’t spend it and don’t buy anything. Exactly. Exactly. Don’t go out and get that car. Don’t don’t go out and pay cash for land. If you want to build a house, don’t do anything without working with your lender.

 

Speaker 2 [00:36:06] Don’t change jobs. Exactly. Because we we now verify your employment sometimes the day of closing. Yeah. Usually it’s three or four days before that. Yeah. And also we check your credit a couple of days before closing to to make sure that you haven’t got any additional credit right now.

 

Speaker 1 [00:36:21] That opens up the door to a whole new conversation in real estate law, which are surrounding the financing contingency on a contract. Right. So, you know, you got to work with your real estate professional on keeping that financing contingency in place because your loan isn’t really approved until literally sometimes hours before settlement.

 

Speaker 2 [00:36:46] And it says on the commitment that if anything changes, we have the right to look at it and rescind our approval.

 

Speaker 1 [00:36:52] Exactly. So that’s all good advice. Yeah. Yeah, that’s all good advice. So, John, to talk a little bit. So I asked you during the last break, and I don’t I don’t know if you have anything or not, and if you don’t just edit this little piece out here. But did you did you did you come up with anything that that you maybe can share with folks some advice or some lessons learned from the road?

 

Speaker 2 [00:37:15] Or the one piece that I just said is give give the lender all the information you possibly can. Right. Work with somebody that if you don’t like somebody, first of all, you’re never going to trust them, work with somebody that you like and that you trust. Right. And make sure that that lender is using all the information and he’s giving you a prequalification letter that you can depend on, because, as you know, when you go to put in that offer, what is it like 20 some percent of deals are paying cash. Right. And 40 percent are going on contingent. Right.

 

Speaker 1 [00:37:51] So if you at

 

Speaker 2 [00:37:51] least have that prequalification letter, that seller might be a little more willing to look at your offer as opposed to someone else’s. Right.

 

Speaker 1 [00:37:59] Good advice. Good advice. So what about personal lessons learned from a business perspective? Life like getting ahead in business, getting?

 

Speaker 2 [00:38:10] Well, here’s the story. I like to tell everybody that it’s all about compromise. I’ve been married almost forty five years. Yeah. To the most wonderful woman in the world. And in 45, we dated for three years before that. OK, we have never, ever in 47, 48 years had an argument. Wow. Ever about anything. Wow. And it’s because you have to compromise right in it, whether it’s your lender or your realtor or the buyer and seller or whoever you’re working with. Right. Just compromise. Nothing. Sure. Nothing is really that awful is it. Right. Just learn to compromise.

 

Speaker 1 [00:38:48] Yeah. That’s good advice. Yeah. That’s really good advice. That’s amazing. So congratulations on your amazing marriage. You and you look you look good for it. You look healthy and you look happy. And so it’s it’s all got to be the woman you married.

 

Speaker 2 [00:39:04] Well, I hope she listens to this.

 

Speaker 1 [00:39:07] All right. That’s fantastic. John Tomasello, thank you so much for coming in today. Really enjoyed the the stories and your experiences with the lending world that we live in today. Thanks for coming in. Thanks for having me. It’s been a blast. Excellent. Thanks, John. Hey, John, thanks for coming in. I hope you all enjoyed this episode and go out there and build something extraordinary.