Exploring the Opportunities of Mortgage Services for Modular Home Builders w/ DHA Financial, LLC[podcast transcript]

John McMullen

Hello and welcome to Inside Modular: The Podcast of Commercial Modular Construction, brought to you by the Modular Building Institute. Welcome, everyone. My name is John McMullen. I'm the Marketing Director here at MBI. Today I'm joined by Danny Langerman, CEO at DHA Financial. Danny is here to talk about new financial opportunities for modular home builders, manufacturers, and developers. Danny, welcome.

 

Danny Langerman

Thanks. Appreciate it, John. Thanks for having me.

 

John McMullen

So, tell me about yourself. Danny, what's your background and how did DHA Financial come to be?

 

Danny Langerman

So originally, my wife and I are actually from Madison, Wisconsin, went to school at UW and then moved out to Denver in 94. When I moved out, I actually got into the stock brokerage business. Then in 2001, my wife and I formed DHA Financial. So, we got into the mortgage business back in 2001. Set up our company then and had a couple of employees at the time. We've been enduring and thriving, ever since.

 

John McMullen

Before we dive into too many more questions, I just wanted to thank you for attending World of Modular. I met you a couple of months ago in Orlando. How was that experience for you? I think it was your first time, right?

 

Danny Langerman

It was and it was excellent. For us it was a chance to get out and introduce this program to the building world and modular came up. Both my wife and I were at the expo, and it turned out great. I mean, the amount of people that were there in Florida and Orlando when we were there was actually really surprising. The products, builders, manufacturers, and the developers, it was an awesome experience. I appreciate the invite.

 

John McMullen

Excellent. I'm glad you were there, it was good to meet you. So, you mentioned you started DHA 20 years ago. I know the past 20 years have been full of huge ups and huge downs for the mortgage industry. So, tell me about the mortgage sector now. What opportunities are there for companies that might want to offer them?

 

Danny Langerman

So right now, I think with where interest rates are at, where the economy is, where all the investors are looking, as far as inflation goes, I feel like we're topped out on interest rates. So, I think that from here going forward is going to be an excellent opportunity on the mortgage side of things. To be able to generate additional revenue, to generate business, I think it's going to be great for everyone. For the modular side, home builders, stick builders, I mean, the entire industry. I look at now as a great time to really capitalize on the mortgage sector when it comes to in specific building. I'll stick with the modular home building industry.

 

John McMullen

What services does DHA offer that might really appeal to modular builders, manufacturers, and developers?

 

Danny Langerman

So, right now we are a mortgage company, plain and simple. Like you said, we've been in business for 23 years. We lend with our own money, we have in-house underwriting, we have in house processing, we fund and close in house, we have all the essential loan programs FHA, VA, USDA, we do construction to perm loans, which is a great thing for the modular side. We can actually use our investors’ money rather than having builders or developers going to the manufacturer and having to put up a bunch of their capital in order to start the modular process. First and foremost, what we've come up with and what we've started to really introduce this year, is a RESPA compliant joint venture mortgage program to where now builders, manufacturers, even developers within the modular world can own their own mortgage company. It becomes an additional layer to their vertical to where they can add profit to what they're doing right now rather than just hand out this additional profit to the larger banks and other mortgage companies where they're really not getting anything in return except for perhaps coffee or doughnuts every six months.

 

John McMullen

So as a mortgage company, tell me about some of the products that you offer. Are there different levels, varieties or types? Tell me about that.

 

Danny Langerman

For us again, we're being a standalone mortgage company. We have all the products that are offered out there. If there's a product that we don't have, we can always look into it. But currently we have products like conventional VA, FHA, USDA loans, we do construction loans as well, what time clauses. We can also do reverse mortgages, which are purchases. Then we also have a program to where we call it our Contingency Loan Buster program. So we can actually eliminate the contingencies for builders, manufacturers, or developers, where the buyers are selling a house, but in order to qualify, they actually have to have that house sold before they can buy a house that's being built. We actually have a program where we can go in and we can purchase the house from the builders, or developers, and then wait for that borrower to sell their house, and then we're able to sell it back to them.

So, it will not interfere with the forward direction that the builder and developer wants to do as well. So, on top of that, we have competitive rates. If there's an interest rate out there that we need to take a look at in order to possibly compete with or even beat in order to get the business, I'm always up for doing that. With all these kind of combined, we rely a lot on technology as well. So, our technology is going to make it as efficient as we possibly can for both the builders and our partners as well.

 

John McMullen

It's interesting you say that, Danny. I remember when buying my house about two years ago, we ran into that contingency issue ourselves. We didn't qualify to buy until we had cash in hand from selling our house and lucky for us we had a place to go. Does that often come up in your business?

 

Danny Langerman

That's a great question, John. We have that come up quite a bit, especially with our builder partners. You've got that contingency, you're not able to qualify, but what will we do is have an investor that will actually go in front of you and they'll purchase the home from that builder or that developer. Then what they'll do is they'll rent it back to you until you have your home sold. Once you have your home sold, then it comes back to me as the mortgage company and then you will rebuy that home back from the investor at the same price you would have bought it from the builder. So, we've got that interim investor that will help with that process. Now, keep in mind that this type of contingency will work only if it's with a conventional or if it's a VA loan. It won't work with an FHA loan, but if we can get around it, that's what we'll do. Instead of you having to go out, spend additional money, rent, and store your belongings for another month, we can actually have you move into the house. You're renting out that house from the investor. Once you sell your house, then that investor will go ahead and sell it back to you as you had intended to do.

 

John McMullen

Why, I guess is my question. Why would builders and manufacturers want to vertically integrate and include these mortgage services? What advantages would that offer them specifically?

 

Danny Langerman

First off, it's already built into what they're doing right now. I look at the stick builds and stuff, too, you've got your Linar, your Richmond, your Dr Horton, all of them have vertically integrated mortgage companies within their business themselves. They recognize that number one, they can obviously capture that mortgage revenue, that mortgage income and that profit that's generated from the mortgages. The one thing that I don't feel like they really capture is not only can you capture the profit based off the mortgages when you have buyers that are buying the house, but rates right now are high, and they're going to go lower. Now, these builders, manufacturers and developers within the modular industry can also capture the refinances, the revenue and the profit that's going to be generated by the refinances when rates start to go down as well.

So having an extra layer to their vertical, and it generates additional revenue. In this type of world right now, I don't know how many builders, developers, or manufacturers out there aren't interested in making some additional money on what they're already doing. I'd be pretty surprised.

 

John McMullen

So how would they go about that? I know many manufacturers are very good at what they're good at. Services like these might seem to stretch the existing resources that they have. Are there certain steps they might need to take to get started?

 

Danny Langerman

Yep. First off, all you have to do is give me a call. This is a plug and play model. So, we don't have it to where they've got to get licensed, and they've got to get all this additional work done. No management really needs to be done. So, it's revenue that they're generating, and they become partners with us. What we do is more or less a percentage of distributions that they're able to receive. Once we generate this, the mortgage revenue is distributed to these the partners every month. So, it's a very simple plug and play process. All you have to do is give me a call and I'm happy to go over the program myself with them.

 

John McMullen

Are there other partners that you've had who've successfully added these mortgage services to their verticals? Are you able to share any information about how that went for them?

 

Danny Langerman

Yep. We've had multiple other partners. We actually have a home warranty company that's partnering with us along with obviously realtors, and teams of realtors as well. We started the program back in 2018. We just kicked it off this year, which is six years later, roughly. So, we do have proof of concept and we've had partners and stuff that obviously are enjoying the benefits of adding an additional revenue source to what they're already doing.

 

John McMullen

Are there any additional hoops that modular manufacturers or developers might need to jump through as opposed to stick built or anyone else?

 

Danny Langerman

No, it's very similar stuff. I think that if it's hoops, it's more or less kind of with the stick builders more than it is with the modular builders. We can actually save the modular builders, instead of them going to a manufacturer, instead of the builders having to use 50% of their own capital to start the build with the manufacturer, we can actually contribute a percentage of that as well upfront to save capital for that builder. Then we can also do a final payment to the manufacturer, to save even more money to the builders themselves. So, it's less capital out of pocket for the builders, and the developers towards the manufacturers. They don't have to spend that money or that capital upfront, they can save it and they can increase their volume and obviously save them more capital. We use an investor's capital rather than their own.

 

John McMullen

I feel like I've missed a question. I know, financial things are not really my strong suit. Is there any other information that you think modular manufacturers, builders, developers might need to know or want to know about this program that I haven't thought to ask?

 

Danny Langerman

Yes. What we do is we set aside stock within our company. There is a capital purchase within our company, and you become owners or the builders and manufacturers, developers become owners within our company. Then they actually own their own mortgage company going forward. So, there's a capital investment with it. It's a small capital investment and we can go over how quickly the return would be. I think it's something definitely worth looking into and I think a majority of builders and manufacturers will find out that it's extremely beneficial to add this layer to their vertical.

 

John McMullen

I’m glad I asked because that answer actually helped clear things up in my head. So, thank you. What's next for DHA? How are you guys looking to grow over the next three to five years?

 

Danny Langerman

So, for us right now, we're licensed in four states. Colorado, Florida, Idaho, and Texas. We kicked this program off and the one thing that we've decided is, if there's a manufacturer, if there's a builder in a state that we're not licensed in, and they're interested in partnering with us, we want to go ahead and expand into that state. So, our goal right now in the next three to five years is to expand in as many states and partner up with as many builders, manufacturers, and developers as we possibly can so we can grow the product and what we have. Also, so we can offer the modular sector something that I don't think right now is being offered.

 

John McMullen

How can interested companies, wherever they may be, get in touch with you?

 

Danny Langerman

So, we're members of MBI and also obviously, they can give me a call directly at my office 303-733-3922. They can also send an email out to me at Dlangerman@dhaloan.com. So, by all means I'm available 24/7 just like any other self-employed businessperson is so feel free to call me anytime.

 

John McMullen

Very good. Well, Danny, I really appreciate your time. This was educational for me. I hope it was for other people. Thank you again.

 

Danny Langerman

Yeah, I appreciate it. Thanks for having me and I appreciate it as well.

 

John McMullen

My name is John McMullen, and this has been another episode of Inside Modular: The Podcast of Commercial Modular Construction. Until next time.