See a Need, Fill a Need | Steven Trowern, Temple View Capital

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For this episode, Kevin had the unique pleasure of sitting down with the CEO and Founder of Temple View Capital and MCM Capital: Steven Trowern. They talked a lot about Temple View’s history and growth over the years and discussed their focus on maintaining a startup mentality. Kevin and Steve also spent some time comparing the pandemic crisis to the global financial crisis of 2008 – and had some laughs around the TARP program of 2009.

Mr. Trowern is responsible for execution of investment policy including asset acquisitions, structured financing and investment performance strategies. Prior to joining Temple View in 2007, Mr. Trowern founded MCM Capital, an $8 billion distressed asset management company, and was co-founder and Chairman of Dynamic Capital Mortgage, Inc., a $1.5 billion residential mortgage lender. Mr. Trowern has held investment banking positions with Lehman Brothers and Citicorp, and credit research with Moody’s Investor Services.

Mr. Trowern earned a Master in Business Administration from Kellogg Graduate School of Management at Northwestern University and a BA in Economics and Political Science from University of Michigan.

Episode Transcript

Thank you to our sponsors for this episode, Liquid Logics and Private Lender Link.

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Kevin Kim:
All right, everyone, welcome to another episode of Lender Lounge with Kevin Kim. Today, our special guest is Steve Trowern with Temple View Capital and also MCM Capital, correct, the two companies?

Steve Trowern:
MCM Capital, Temple View Capital, couple other companies we’ve started along the way. Yes, [crosstalk 00:01:51].

Kevin Kim:
All right. Well, Steve, thank you very much for joining us today.

Steve Trowern:
I appreciate you having me on, Kevin. I even appreciate more of the fact that you pronounced my last name correctly.

Kevin Kim:
I did. Oh, yes.

Steve Trowern:
I’ve been married. We’ve been married… I’ve been married for 22 years, and my wife does not pronounce my last name.

Kevin Kim:
I’m so happy, because I was actually [crosstalk 00:02:09].

Steve Trowern:
You got it on the first try.

Kevin Kim:

Well, a lot of folks are… We’re really excited about recording this episode, because we don’t get a lot of time to listen in from people like yourself, Steve, because we don’t really… We’re at the trade shows a lot. We don’t see [inaudible 00:02:25]. We’re just talking about this. I really would like you to introduce yourself and the company for our audience, and we’ll go from there.

Steve Trowern:
Sure. You’re really talking to MCM Capital, which is MCM Capital is really the original genesis of what we do. My background, I’ll give you a quick background on me. My background, I spent most of the 1990s in investment banking. I did telecom investment banking, M&A, and corporate finance for Lehman Brothers. I had no exposure whatsoever to the mortgage side of the business, so the credit crisis that followed was not my fault, but we’re doing our parts-

Kevin Kim:
We have no one here from Lehman, right?

Steve Trowern:
I’m doing my part to help clean it up. Then I started a company in 1999 after the dotcom crash, but… I’m sorry, prior to the dotcom crash, there was a lot of really interesting things going on out in California. I was in London at the time, and a couple friends of mine wanted to start a business in Silicon Valley to create sort a Dell of consumer electronics for integrating devices and music and content sort of Napster and Dell combined. The idea was really big that it didn’t quite get off the ground.

Steve Trowern:
We didn’t raise enough money prior to the crash, but one of the ideas that came out of that concept or came out that experience, which I take no credit for whatsoever was a little white MP3 player with a wheel. My partner, Tony Fadell, a friend of mine growing up, and partner in the business eventually took that idea and worked with Steve Jobs, and that turned into the iPad.

Kevin Kim:
Wow.

Steve Trowern:
He was really… We were there at the beginning. Tony’s gone on to great fame and success by creating Nest, and selling Nest to Google, and then doing some really interesting things now. I’m still working stiff, so we-

Kevin Kim:
You’re in real estate. It’s okay.

Steve Trowern:
Yeah, but I like the idea of really working in an entrepreneurial environment, starting from scratch, and essentially making it up as you go. I looked around for opportunities to do that same method, but maybe with a little less technology or capital risk, I should say, a capital raising risk. We settled on creating a residential mortgage lending operation, which I grew with a couple partners from 2002 until 2011. We made it through that crisis, but the 2008 crisis was pretty… It was pretty nerve-racking, right, particularly when you’re personally guaranteeing warehouse lines, and the world’s upside down, and your warehouse banks have run out of money.

Steve Trowern:
It was a really-

Kevin Kim:
What kind of lending were you guys doing back then?

Steve Trowern:
We were just doing really A and Alt-A residential, conventional lending. Correspondent lending, we grew to about a-billion-and-a-half-dollar-year company, which in the early 2000s was sizable. By today’s standard, it’s not very big, but it was a great experience, but more importantly, it got me into understanding how the mortgage credit markets really functioned. We started to see in early 2007 and certainly into the summer of 2007, we started to see some cracks in the credit markets. By this time, I had become business partners with a couple folks near where I live just outside of Washington, D.C., who later became my partners in MCM.

Steve Trowern:
We were looking at opportunities to buy performing but at-risk mortgages that historically would trade for 98 or 99 cents on the dollar, and we’re suddenly trading at 70, right? It looks like a pretty interesting trade that we do for a couple weeks or a month or two, and then go back to our regular day jobs. That was 2007. There was some friends and family money raised to develop a proof of concept. That led to raising a series of funds as a sub-advisor to some big financial institutions. Pickwick Capital, we worked for.

Steve Trowern:
They give us a $500 million allocation to go and buy essentially performing but at risk mortgages. Then over time, one of two things happened to the opportunity, either the price of performing at risk more mortgages crept back toward par, or the mortgage or the borrowers themselves fell down, and the loans became nonperforming. That was a much more common result, right? As you got into 2009 and 2010, the opportunity really shifted to a distressed environment. There was a lot more opportunities just to invest capital into non-performing loans.

Steve Trowern:
Our focus really shifted. We reinvented the company, really took it from a well-run, well-oiled aggregation purchase refinance platform to a distressed investment advisor, to a distressed asset manager. We spent the next, call it, eight years working for large institutions. Oak Hill Advisors was… We had the longest assignment with Oak Hill, but we worked for Neuberger Berman along the way, JP Morgan’s trading desk. We had big institutional clients, and we became a fairly institutionally designed and developed platform.

Steve Trowern:
In 2017, as my partner, Mike Niccolini, likes to say, we decided to stop being Mr. Spock, and want to be Captain Kirk. We went out [inaudible 00:08:43]. We raised our own capital. We got a commitment from a middle Eastern sovereign wealth credit investor. We created a fund to continue to do what we were doing directly in the distress space, but without a sponsor essentially behind us. It was very free. We were able to do things for ourselves. More importantly, we were able to develop businesses outside of our core mission that we had been prevented from doing before due to different conflicts of how the compensation would work for us or for our sponsors.

Steve Trowern:
We really were able to recapture the entrepreneurial spirit that we had in the early days of 2007, where it was just made up. We created a full service, real estate brokerage business called Alta Realty. That also has a joint venture with the nationwide title company. That was really to get our best real estate agents there for us to help sell properties, manage RAO, provide evaluations, really be our trusted boots on the ground because we were a nationwide buyer mortgages, and we didn’t have local representation everywhere we were, and so we needed to get that in the form of having agents and brokers working for us.

Steve Trowern:
That business continues to the day, right? It’s a real estate business, and that’s growing. We’re certainly always looking for interested agents to join our network. So if there’s anybody out there in your listening universe who wants to hang their shingle with us, we’d be more than happy to take that call, but we also really responded to a need or a demand from the investors who were buying REO and houses from MCM. Over the years, MCM bought somewhere in the range of 33,000 loans, and worked out… Of those 33,000, somewhere in the order of 8,000 or 9,000 turned into houses, whether they were through deeds in lieu of foreclosure or foreclosure or short tails.

Steve Trowern:
A lot of those houses were liquidated and sold to first time home buyers, to regular retail home buyers, but also to real estate investors. A lot of the real estate investors who were buying houses from us started to ask us for seller financing. We historically just had a internal informal pass the hat among the partners lending business, where if we saw a deal we liked, we would just pull our money together and lend into it. We decided in 2016 and early 2017 to institutionalize that so that we could build best of breed origination platform to continue to meet the demand of the people who were buying houses from us, but also just the greater shift we’d seen really in the private lending world where you had taken an old fashioned, disaggregated country club lending or small lender network around the country.

Steve Trowern:
We started to see some of our peers who are becoming institutional grade, raising institutional money, accessing the capital markets and putting in place more… Monetize is not the right word, but more of a standardization of product types and distribution channels. We, in hindsight, wished we had started our process a couple years earlier, but we hit the timing right. We were able to raise a series of rounds of equity capital into a fund that we manage. That fund continues, and we’ve got some separately managed accounts as well as our limited partners in that business.

Steve Trowern:
We’ve successfully issued a couple of securitizations, and we’ve got REPA financing. We’ve got some partnerships with some large institutions that allow us to really be a market leader now at Temple View Capital in terms of fix and flip financing, ground-up construction financing, and then rental financing, commonly referred to as DSCR, debt service coverage ratio lending, which sometimes bleeds into a non-QM world of lenders, but it’s been a real growth opportunity for us. We’re pretty proud of where we are.

Steve Trowern:
I’ll pause there and take a breath if that’s [crosstalk 00:13:47].

Kevin Kim:
That’s a great story though. I didn’t want to interrupt. It’s a really good story there, because its very unique. I mean, we don’t get a lot of stories like that. What was in interesting among everything you just said is there’s an interesting balance that I rarely see folks that come from Wall Street that have that institutional capital markets background, but then also having that entrepreneurial see a need, feel a need approach to the business, and blending those two together, right?

Kevin Kim:
We see folks who are extremely strong at one or the other, but then when the two tried to meld together, sometimes there’s conflicts. I think you guys approached it very well in the sense that when you said you wanted to become Captain Kirk, and you took that independence on, but let’s take a step back because I’m seeing a lot of common threads that I’ve pull at a little bit. Let’s talk about the entry into the private lending space, because that’s what this podcast is all about, private lending.

Steve Trowern:
Sure.

Kevin Kim:
You guys jumped in in ’16, but it really sounds like you were jumping in before that along the lines of what the market was like before ’16. Like you said, country club deal is more fragmented type of approach. These are just deals that you guys are doing privately for the properties that you guys owned. At the time, was it fix and flip as well? Was it more of a short sale type of acquisition financing? What was the typical transaction for you guys back then?

Steve Trowern:
I mean, really, it was anything. It was somebody who wanted to maybe buy a property, wanted to use a nursing home they owned as extra collateral. It was really bespoke portfolio type of lending, but what we really did… Let me back up a little bit. I talked about that 8,000 and 9,000 properties. Of those, a third so called 3,000 properties needed rehabilitation work in order to make them suitable for conventional financing or to maximize the MPV of the asset, and we sold it. We started to do our own rehab work for stuff that we had taken through foreclosure or through some form of taking property or title to the property.

Steve Trowern:
Because of that, we had to develop a network of contractors around the country who would do work for us on time and on budget. We had to understand how that worked. We had to think about what it was to maximize value and where and at what point in time and how long the project would last. All of these things that we were doing are really the same process and development and decision-making processes that are now fix and flip borrowers were going through as well, and continue to go through. It’s the same thing.

Steve Trowern:
We really… We decided to create our own lending platform. It was really the beginning of the institutionalization of the market. The market really hadn’t gotten there yet. There was a couple larger lenders who I think we’ve sent [inaudible 00:16:57], but we really took the approach to say, “Well, what would we want?” If we have all these houses, and we got to finance them, how would we do it? What would we want to get? Everything we’ve done has been designed around satisfying the demands of the borrower, right?

Kevin Kim:
Well, because you were the borrower in a lot of context with the builder.

Steve Trowern:
We were. That’s who we were, right? We are real estate investors ourselves, and we get it. We get what people are looking for, and we get the flexibility they want to see, and the responsiveness they want to see. We’ve not only designed products and processes around with that in mind, but we’ve also hired a lot of people who are from different backgrounds, right? Not everybody we have here came from a mortgage background. The senior leaders, we’ve got people from Wall Street firms. We’ve got people from law firms, different walks of lives.

Steve Trowern:
We’ve got people who are in the operational or support staff that came from different backgrounds who are just smart and hungry and can help us figure things out. Because even today with how much standardization has come into the marketplace by virtue of having access to capital markets, that’s provided some standardization or at least standard guideposts for the industry to start to follow. You’re still having to solve problems every day, and make things up as you go.

Kevin Kim:
Right.

Steve Trowern:
We like to hire people who have just a fresh way of looking at it, right? We don’t want people… We don’t hire people and say who want to be told what to do from day one. It’s great when they come and say, “You guys should consider doing the following three things in this order, in this fashion.” We’ve kept this entrepreneurial startup feeling about us while we’ve been very successful at raising capital and having a nice balance sheet that we can [crosstalk 00:19:02].

Kevin Kim:
I want to ask about that though, because you’re hinting toward a nice copy we always cover on the show is is the company itself composition of the company? Let’s go back to when you guys jumped into… Actually, let’s go back even further. You and your partner, I’m guessing, is it Nick, I think?

Steve Trowern:
Mike Niccolini and [crosstalk 00:19:21].

Kevin Kim:
Mike Niccolini. You guys started the company together, but I mean, two guys, I’m guessing it was the bootstrapped [inaudible 00:19:29] approach. Today, how many employees now under both umbrellas?

Steve Trowern:
We’ve got a total of about just under 100 employees across-

Kevin Kim:
100 employees.

Steve Trowern:
[crosstalk 00:19:41].

Kevin Kim:
It’s funny because I never really hear any company [inaudible 00:19:43] no matter how big they get to exceed that number. It’s always sub 100. Everyone seems to have that smaller company approach, but let’s talk about that culture, if you will, of entrepreneurialism and startup vibes, I’d have to call them, because we had to have similar approaches here. We’re a see a need, fill a need type approach. You can be on my team. You can be a corporate attorney, but you see on the operation side, you can volunteer to help suggest a little solution, and the all hands on deck approach is how we grew.

Kevin Kim:
I’m hearing similar things from you. How did you guys foster that type of business model as you guys grow, as things become more institutionalized? People will come lateral in from Wall Street companies, like you said, and they’re probably used to a more hierarchical type of pyramid. How do you guys foster that type of business mentality internally?

Steve Trowern:
I would say part of it is by design. So part of it, we hire people who we know will bring a new, fresh entrepreneurial look at whatever they’re doing. It could be for someone who’s joining as an HR coordinator or someone who is joining as a COO or joining the capital markets team, right? Anybody that we’re hiring, that’s the quality we’re looking for. We meet… Every single person that is hired here meets all the partners. It’s a requirement. Because of that, we’ve been able to literally have the people that fit into the culture that we want to create.

Steve Trowern:
The second part of it is probably not necessarily by design, but by necessity. We’re constantly having to solve problems. Again, what’s different about this? I’ve been in consumer residential mortgage lending, and I’ve been in commercial or business purpose lending. The residential side, you have Fannie and Freddie and FHA. You have the government-sponsored entities who create this massive framework. There’s vendors and there’s software providers. There’s so much infrastructure.

Steve Trowern:
It’s the largest part of the U.S. economy, and so there’s an enormous amount of infrastructure already in place. You just have to find your way through that, or adopt the best technology you can find. You should be somewhat successful because the road is already paved for you. In business purpose lending, for all of us, we’re solving problems that come up every day that we didn’t anticipate. Knock on wood, we haven’t had to face a shock of a… Other than for April or March, April, maybe May of 2020 when the shutdowns first started occurring and COVID really hit the U.S. hard, we haven’t had any major exogenous shocks to the system, right?

Steve Trowern:
I’d be curious to see how we all hold up. I think the sector will hold up really well, but I wonder if all of our peers will hold up as well as I think we will. During COVID, we didn’t stop lending. We didn’t furlough anybody. We didn’t land anybody off. We continued to hire. We continued to meet the demands of our customers, and we were there for people. That’s because we were successful having a culture that stayed together of raising capital.

Steve Trowern:
I think we were successful raising capital at Temple View by virtue of our success and recognition of the work we’d done at MCM Capital. I think we just showed up on the scene with a PowerPoint deck. We would not have been as successful, but because we had-

Kevin Kim:
Well, you guys also had multiple sorts of capital, right? It wasn’t just…

Steve Trowern:
Yes.

Kevin Kim:
We talk about this a lot on the show. It’s capital sourcing and reliability of capital. It sounds like you guys had multiple avenues.

Steve Trowern:
Yes.

Kevin Kim:
You had balance sheet capabilities. You had capital markets capabilities. You get all of it, so you weren’t that… It wasn’t that much of a shock to the system because you can rely on your balance sheet.

Steve Trowern:
I think that’s correct. Our balance sheet, again, everything that we are or do is usually either out of either by design or necessity and right. We have had… We have made strategic errors in the past in our history, where we have single sourced our capital, which puts you in a position where you’re not really… You don’t have that flexibility or strategic opportunities you normally have.

Kevin Kim:
No.

Steve Trowern:
We’ve learned from that, and we will never ever have single-sourced capital again.

Kevin Kim:
A lot of us learned that. After COVID, a lot of the industry learned… I mean, you got to have some alternative solution.

Steve Trowern:
Fortunately or unfortunately, we had learned it before COVID hit. So when COVID did hit, we weren’t scrambling. We weren’t… We were cautious, right? We weren’t going to ignore risk around us, and so we did reign in some products a little bit just to watch and see where the market went-

Kevin Kim:
Of course.

Steve Trowern:
… but because we had picked good partners, and I’ll make a point to say that our primary banker’s Goldman Sachs. They were great. Our bank is the Congressional Bank of California. They were great. Our REPA providers had… We weren’t faced with a lot of margin calls or pressure. We already had our bonds in place, and so we had stable capital on the financing side. Our equity was stable. Our partners and our limited partners in that were great partners, because we’ve shown in our path that we were able to weather different storms.

Steve Trowern:
If things [inaudible 00:25:32] south and our portfolio became more heavily distressed, we’re workout guys.

Kevin Kim:
I hope you’re enjoying this episode so far. Before we move on I really want to tell you about a great sponsor that’s joined us for the show.

Kevin Kim:
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Kevin Kim:
Workout capability, that’s still there, right? You guys are still actively investing in distressed… It’s not as available as it used to be, but I mean, still actively investing, right?

Steve Trowern:
Our NPL book at MCM is still continuing. We still run it. We still manage a multi-hundred million dollar portfolio of MPL. The business purpose lending, the private lending has delinquencies. You get projects that fail. There is absolutely a need to do workouts and loss mitigation. We do all that in house.

Kevin Kim:
There you go.

Steve Trowern:
Some of the restrictions during the pandemic in terms of foreclosure moratoriums and eviction moratoriums took away some of the tools like the lienholder would normally have, or at least delayed them. The process has been a little bit more complex over the last year and a half [crosstalk 00:28:39].

Kevin Kim:
Back to your problem-solving mentality though, right? I mean…

Steve Trowern:
Yeah. Then you have a problem, and you got to get everybody together, and try to solve it. Sometimes it’s as simple as… Not as simple, but it’s something that it’s marketing related. Sometimes it’s products. It’s understanding where the world is. It’s understanding where the world’s going. Back to your question from a few minutes ago about how we maintain this culture, part of it’s by design, right? We want to be prepared. We want to be ready. We have our battle scars. We’ve been through things before, and so we know what to do when things don’t turn out the way that you want them to.

Steve Trowern:
But part of it’s just by necessity, right? Borrowers experience problems. Right now, I would say that the biggest challenge faced by most of our customers is they can’t find inventory, right? It’s the same problem around the entire country. That’s partly the reason they exist because the housing sector in the U.S. is the housing stock is old. New home building is not keeping pace with demand. You’ve got millennial shifts, demographic shifts that are driving home ownership. You’ve also got demographic shifts that are driving Airbnb and short-term rentals.

Steve Trowern:
People don’t want to stay in hotels anymore. They want to have the feeling of home away from home. By way of example, we recently launched a DSCR product that is targeted toward Airbnb or Vrbo. Euphemisms for short-term lending or short-term rentals. We’re using… We rolled that out as a way to help our borrowers build wealth through investing in short-term rental housing, right? That’s an enormous part of the market that’s not being addressed by anybody else.

Steve Trowern:
But to understand and to do that, and understand how to normalize the rental income rates by markets and understand where risks might lie out against longer term leases and longer term lease collateral. You’ve got to have different people involved in that decision making. You got to hear different points of view from operators, from credit folks, from capital markets. You’ve got a lot of constituents really to bring into that conversation, and that’s [crosstalk 00:31:02].

Kevin Kim:
When you’re looking for these, I mean, whether it be new associates or executives, and you’re trying to hire, what are you… When they meet the partners, what characteristics are you asking about or looking for? What specifically are you doing to evaluate this problem-solver mentality or this entrepreneurial mentality to maintain this, because you said by design and necessity, right? But when necessity comes in, you need to have that right type of person in that seat.

Kevin Kim:
It’s a staffing issue almost of how you recruit people like this, and it’s a challenge. I mean, it’s hard to around recruit in general these days, but especially when you’re looking for that type of person, what are you doing to filter through the candidates, and get those type of people?

Steve Trowern:
Are you preparing your resume, Kevin? I don’t know. We’d love to have you.

Kevin Kim:
No, but I’d like to hear more about it. I mean, we have the same desire to recruit those types of attorneys and staff members, but it is challenging. We all want those types of people, I feel like.

Steve Trowern:
It’s probably the most challenging component of any business. This is not unique to private lending. It’s unique-

Kevin Kim:
No. No. Absolutely not.

Steve Trowern:
Every part of the economy is facing the same situation. When we’re lucky enough to get people who are looking for a job or who are available to us, you’re looking really for people who have shown a pattern of being self starters, whether that’s in sales, certainly in sales, right? Now, when we hire account executives or business development managers, we use those terms mystically across the sales staff, but you want to see people who are not afraid to invest in themselves, old school origination, finding relationships, finding borrowers, meeting with brokers, meeting with correspondence. We have an aggregation channel correspondence.

Kevin Kim:
Almost like trying to look at the resume and look for examples of hunger, that level of hunger.

Steve Trowern:
Yeah, hunger and confidence, hunger and confidence, because to be largely commissioned… A salesperson requires some courage and requires some confidence in order to go out there and try to make it in a world where you’re relying mostly on what you’re producing. With the support staff or our senior management, again, you’re looking for people who have brought change or sustain change, or just show a propensity to bring change to whatever they are doing. Sometimes it’s people coming from maybe from their first job out of college, but you can see somebody, how they performed in school, where they went to school, not necessarily the caliber of the school, but how they approached their university, what classes they took, why they went there, what went into their decision making.

Steve Trowern:
That’s really what we’re looking for, people who show a propensity to have that… when they’re put into a situation, a collaborative situation with other people who come from maybe totally different backgrounds that they can hold their own, and they can feel confident in their positions.

Kevin Kim:
But they can also be the one that starts actually demonstrably show that they’ve taken initiative to make a change happen, right?

Steve Trowern:
Yes. If you look across at our seven or eight senior managers, most of them have been here since if not the beginning, then very close to the beginning. All of them have succeeded, because they just found things to champion. They found things that needed to be fixed, and they went and fixed it.

Kevin Kim:
I like that.

Steve Trowern:
They didn’t wait to be told. Nobody told them. Nobody said, “This is a mandate, and you got to go do it.” They just found ways to go, and bring, and come call a meeting and say, “Here are the five things that I’m recommending, or that I’ve already started to put in place, and this is why.” That type of person thrives here. The person who’s waiting for command and control, probably, it’s not our management style to have that. [crosstalk 00:35:17].

Kevin Kim:
I think that those people thrive in this industry too. There’s so many… Like you said, every day, something comes up. In this space, especially, there’s always new challenges, new kinds of borrowers, new kinds of deals, new kinds of capital solutions. It becomes a never ending firefighting type of business. On the legal side and on the operations side, I’ve heard consistent themes of that, right? That’s awesome that not only are you guys hiring like that, but all the partners are evaluating the candidate, which is hugely important, I feel like, maintaining that level of, I guess, almost organizational flatness, if you will, and encouraging that.

Kevin Kim:
That’s cool. I mean, it’s very hard. As a company grows to the size of 100 employees, partners don’t have the time to go sit down with a new associate or a new out of college, new graduate almost, and those types of hires.

Steve Trowern:
We meet everybody, but we also delegate… We know we have a great management team here who will train and integrate and promote them and get them acclimated to the culture.

Kevin Kim:
Cool.

Steve Trowern:
One of the things that I do tell all the young people who are coming in, some people are coming from traditional lending backgrounds or some other professional background that it didn’t use to be the case. When we were hiring for MCM in the early days of buying NPL, pools of mortgages, you didn’t know when the next pool is going to come out. You didn’t know if you’d win it. You didn’t know if the government would step in, and, I don’t know, freeze sales from the GSCs, which would impact the entire market, so it was very lumpy, very difficult to plan for, and it was essentially a trade.

Steve Trowern:
You bought a bunch of loans, and then you spent a couple years working them out and with the goal getting them to zero. Our whole purpose was to put ourselves out of business if you think about it that way. What we really, really like about private lending and about Temple View Capital is that we are manufacturing yield, right? We are getting credit for a perception of higher risk than Fannie and Freddie paper for what is in reality not a significantly greater amount of risk.

Steve Trowern:
The collateral is very similar between a conventional residential lending. The process is different. The credit is different. The project reviews are different. The evaluations are different, but fundamentally, the finished product, the collateral of a finished rehabilitation or a newly constructed home is the same collateral, and you’re getting better yields. One of the things that I tell people that we’re bringing in now is that this is not a short-term trade. This is not where there’s this interim that all these non-bank lenders are filling.

Steve Trowern:
This is a permanent part of the U.S. housing sector, which is the biggest part of the United States economy, and it’s not going away.

Kevin Kim:
No.

Steve Trowern:
The banks, for lots of reasons, historical reasons, regulatory reasons really don’t want to participate in the bespoke construction or rehab lending. Certainly not doing that on one-property basis. They might finance a home builder who has a development somewhere, but they’re really not looking to do what we’re doing on a bespoke level. The rental finance loan, this is an enormous area of growth for this economy. As a real estate investor, I think it provides a great hedge to either… If you’re a fix and flip [inaudible 00:39:20] manage rental properties, you’re creating and adding value while you’re flipping or you’re rehabbing the house.

Steve Trowern:
If the market is great for selling houses, then you can make your returns and go off and do it again. If the market isn’t there, or you don’t like the prices you’re going to get, people still need a place to live. Those same people who are being driven out of purchasing markets or purchasing homes who maybe want to sit on the sidelines for a couple years and wait to see how, you know, when home prices begin to stabilize or the growth begins to slow well, they’re renters, but they need to live there, and they’re good credit.

Steve Trowern:
They’re good… It’s a good sector to have exposure to, and so you’ve got a hard asset that, by definition, has some inflation protection built in, and you’ve got an asset that does well in an upward hot housing cycle or in a renters cycle. It’s really… For us, we couldn’t be more excited. I’m personally much more satisfied helping to build a manufacturing plant of yield and yielding assets than to buy slugs of loans that we then spend the next couple of years trying to get rid of.

Kevin Kim:
Right. I mean, the nature of the NPL practice is you’re just digging yourself out of a hole constantly. It’s an interesting practice to be in, and it’s in the vacuum, right? But the private lending sector, I mean, you already brought it up, so let’s pull on this thread a little more the idea of the U.S. economy, and now the advent of the DSCR product for our clients has really taken this space, and exploded it beyond what it used to be. I mean, the fact that I would say now almost every major lender in our space is now doing DSCR in some way, shape or form, but balancing that with some of the concerns that not just Wall Street but even Main Street investors have expressed on the inventory side of things.

Kevin Kim:
From my standpoint as an attorney, I’m no economist. I’m no financial wiz, but I can definitely see it seems like there’s two almost conflicting issues going on here, right? You’ve got this super, super hot demand for more and more DSCR product, but also for acquisition in general, but then you have this massive challenge when it comes to investors who want to buy more properties and also homeowners who want to buy properties, and then balancing that against Wall Street interests that are buying up rental homes themselves.

Kevin Kim:
It makes me wonder like, “Are we headed toward a pattern in which are owners… Are we going to be a society of renters?” It makes me wonder, because we have to encourage… I mean, are we as an industry promoting a society of renters instead of home ownership and wealth building? It makes me wonder because when private lending first started out, we were all about wealth building, helping folks buy homes, build new homes, buy new homes approach. But then with this DSCR product and just the massive appetite, it makes me wonder is this almost counter to our interest on the fix and flip side or on the acquisition side?

Kevin Kim:
What are your thoughts on that?

Steve Trowern:
That’s a lot to interrupt, right?

Kevin Kim:
It is. I’ve been struggling with this for a lot, because someone told me that some Wall Street firm is buying up whole cities. I was just like, “How do we expect to compete when they’re buying up whole cities?”

Steve Trowern:
Yes, having large institutional players buying individual properties has clearly contributed to the demand. As we talked about, the supply is not there. We have not kept pace with supply since the [inaudible 00:43:36].

Kevin Kim:
Ever. Ever.

Steve Trowern:
It’s slowing down. There was a period during I think Reagan’s first term, where for two years, we were building more houses than we were… Part of that was hangover from the inflationary period of the late ’70s and the OPEC chips or OPEC oil impact, and we’re going way back. But if you actually look at the historical home ownership after the creation of Fannie, because that’s the beginning of when you had a government mandate for people to buy houses, the GSCs were created to promote home ownership, not renters, right? That’s why the GSCs don’t do a lot of this stuff because that’s not their mandate.

Steve Trowern:
Their mandate is to help people buy houses and live there. If you look at the historical home ownership, it was in the upper sixties, so somewhere between 66 and 69% give or take depending on the decade of homeowners versus renters. That home ownership peaked at 72% in 2008. You could argue that there’s probably some… You’ve got components of the population that want to be renters, because they want the flexibility or they don’t have the stability in their home lives. Then you’ve got people who maybe who don’t have the right wherewithal to maintain home ownership.

Steve Trowern:
When you get into the seventies, maybe that is north of the natural inflection point of what home ownership should look like. Maybe it does… It should be-

Kevin Kim:
Is that staying steady, 70%-ish?

Steve Trowern:
It has been bouncing between 67 and 69%.

Kevin Kim:
[inaudible 00:45:20].

Steve Trowern:
I haven’t seen the latest data, but it’s right in that range. What you’re seeing is you’ve got affordability indexes that aren’t getting completely blown up, despite home prices going up. You’ve got interest rates continue stayed low, and they probably will stay low for a period of time. A delta variant or a gamma variant or whatever comes out after, it’s probably not going to change that dynamic, so I think we’re in for period of several years of continued low interest rates. Most economists seem to think that this inflation we’ve seen is really a supply chain working itself out after COVID.

Steve Trowern:
Maybe we’ll see whether there’s permanent inflation or whether that drives interest rates, but what’s really driving the housing market is not interest rates or underwriting guidelines, which is the case in 2007 and 2008. What’s driving it now is macro shifts, people buying their first homes, people wanting to buy second homes so they can work during a pandemic from the mountains or the beach or wherever. We’re seeing this whole thing that is a wide scale shift of how people view home ownership. But at the same time, you are also getting people who view rentals as just the more flexible natural option who don’t want to be burdened by owning properties.

Steve Trowern:
Those people used to be homeowners, right? I don’t think you’re promoting a nation of renters as much as you’re accommodating demand for flexibility, and now, people are renting. Probably what you’ll start to see more of is you’ll start to see more lease to own type businesses out there, which we’ve seen, where people get out of the way to the mortgage debt, but not have to vacate the house, and then can become a renter with maybe an option to repurchase the house or to sell the house down the road. Really, people are looking for optionality and flexibility, same thing the borrower’s looking for.

Steve Trowern:
They want optionality. They want flexibility. They want to be able to react quickly. They want to be able to find new ways to add value. That’s why we’re seeing a real increase in demand for ground up construction, because it’s hard to find inventory, and it’s hard to find inventory that you can add value to, and get a return on the other end. Until that changes, I think this is the world we live in. I think we are just beginning to scratch the surface of the rental finance products, because I think there are 15 or 16 million SFR rental properties in this country.

Steve Trowern:
Maybe that goes… Let’s say that number goes… Because Wall Street’s buying houses, and there’s more people who want to be renters, maybe that goes to 18 million. Two million houses is an enormous number. In a world, in a country or a market where we normally see four million houses trade in a normal year, two million houses to shift would be a huge shift, a huge macro shift. I just think we have to be ready for whatever comes to that. Be ready to [crosstalk 00:48:31].

Kevin Kim:
After that see a need, fill a need approach.

Steve Trowern:
Builders, address the needs that your borrowers want, right? That’s all we’re doing, finding ways to address, to meet their demands that are not being met by traditional [crosstalk 00:48:42].

Kevin Kim:
You raised an interesting demographic point that our listeners should really pay attention to. It’s not just necessarily… You’re saying home ownership is staying steady within a certain margin, but there’s that change in desire from the borrower side, and wanting… This could be a product of instant gratification. It could be a product of just more capabilities, but the idea of being flexible, having more flexibility, more customization has… I’m of that generation as well.

Kevin Kim:
If you tell me I can have it both ways, I’m likely in, right? The idea of having flexibility is ideal for someone like me and others in my position, but even new market entries for home ownership, there seems to be a demand for that. I just wonder, is there going to be anything left that you said though, right? I mean, as long as ownership rates are staying in a macro level, I agree with you that everything is a macro perspective right now when it comes to new homes. I just hope that we’re not facing a situation.

Kevin Kim:
Well, the situation that we’re in isn’t permanent, and I just got a… I did an interview recently. They said they’re starting to see some adjustments to these hyperinflated values. We’re joking about this recently. There was this home in Washington state that was posted as a little slice of hell, and it was just destroyed. The internals were destroyed. I don’t know what happened. There are probably a family of… Bears are living inside of it, but it sold for probably around $800,000.

Kevin Kim:
Things like this are happening, right? Homes here the other country are being bought… We’re being bought for hundreds of thousands over asking, and in a matter of days. I mean, I want to ask you guys, what are you guys seeing from that standpoint to see… Do you concur with… The last interview we just did was about they’re starting to see a little bit of adjustments there, and it’s getting better. It’s not as frothy as it once was even a month ago.

Steve Trowern:
Again, you have to either affect the demand or the supply. The demand is almost unchanged, because every investor right now who listens to this podcast or has been involved in this sector plus couple years would jump on that opportunity if they saw it, right? They haven’t gone away. They still demand. The macro shifts and demographics, we talked about, haven’t gone away. Wall Street has raised billions of dollars in private equity to go and build strategies out for rental. Those demands aren’t going away.

Steve Trowern:
The question’s like, “Where does the supply come from?” You’ll see some supply come out of the relaxing or the ending of foreclosure moratoriums, because a lot of those properties, they’re not occupied in many cases. It’s not like it’s old ladies being kicked out of their houses. These are just properties that have been more rental properties before something happened. It’ll create more supply, and you’re seeing more credit available for the rehab and the construction of new houses. Those two things will contribute to supply. Neither one of them is sufficient by themselves or even together to offset the continued demand.

Steve Trowern:
Even if demand were to fall by 10%, you’d still have a rising home price environment because the demand-

Kevin Kim:
There’s little supply.

Steve Trowern:
… people [inaudible 00:52:13] supply period. So until you address that, and home builders can’t bring on properties at a fast enough clip. They’re also… They’ve created this infrastructure and strategy, and they own a lot of land, and it tends to be in exurb or suburban markets. What we’re seeing is COVID was a little bit temporary where people moved to their parents’ house or whatever, or maybe went to their lake house. But really, the beneficiaries of…

Steve Trowern:
If you look at the 2020 census, the beneficiaries of all the growth have been cities, and those cities have… They need to have urban renewal, so they have to have rehabilitation of urban housing stock, and you got to have infill of… I don’t mean the inner city, but I’m talking about close in suburbs, and the cities need to have some of those vacant lots built on. That’s what we’re seeing [crosstalk 00:53:12].

Kevin Kim:
That raises another question then, right? We’re talking about residential SFR for a long time now, but we do not have some Metro infill and rehabilitation and improvements there increasing inventory that way, right? I mean, all of our clients who do SFR one to four family are doing condos, but there’s also the component of multifamily. While we do see a significant uptick in multifamily in the private lending space, we don’t see a lot of folks that are doing it on volume.

Kevin Kim:
I mean, one of the objections that I’ve heard is because of the agency powers, that be, right? There’s a ton of agency capital that’s handling all of multifamily, but with a lot of the renovation work, rehab work or conversion work that’s happening, what is Temple View doing? What is MCM doing when it comes to multifamily in this current marketplace?

Steve Trowern:
We haven’t because… Again, one of the things that I talked about before was that we were pretty successful raising capital for Temple View because we had made returns for our investors, NPL land under MCM. People knew us. We were not on… We’re new kids on the block. One of the reasons I think people had some trust in us is that we stick to our knitting. We have only done one to four family properties since these-

Kevin Kim:
So very disciplined. You guys haven’t deviated for the after class.

Steve Trowern:
Haven’t changed, have not looked at… We don’t do any mixed use. Haven’t done it. We do finance conversions because they end up as individual units for [inaudible 00:54:44]. We will finance those. But having said that, there’s probably the next opportunity for a lot of these guys. We have put some thought into it, but it would be a lie to tell you that it’s even half baked. It might be an eighth baked, but to look at five to eight units, because there’s a lot of similarities between five and eight unit properties that do fit under FHA and GSE guidelines.

Steve Trowern:
They’re pretty similar to a four unit. The difference between a four unit and a six unit just isn’t that great. There’s a lot of six units on college campuses around the country, which are great markets to lean into. The dynamics and the risk characteristics are just not that different. It’s when you get in north of 12 units that it’s a totally different animal. You really need to have local knowledge, and it’s hard to do that in any kind of scale, because we’re a national lender for us to do that.

Steve Trowern:
I could see us potentially someday doing something along in the near one to fours, so call it the five-day units. But really, there’s so much opportunity and such a need to address just in the one to four markets that we could spend the next 20 years doing nothing, but [crosstalk 00:56:01].

Kevin Kim:
That’s true. That’s very true. I want to ask you guys about… You mentioned this very early on about spotting cracks. You said you went back in ’07. You started spotting cracks in the credit markets, right?

Steve Trowern:
Yeah.

Kevin Kim:
With your investment banking background, you started seeing those cracks in the credit markets, and COVID was a credit market liquidity type crisis for our industry. I would say short term, I think most people pivot and figure things out considering how much capital’s available right now. But going forward, what are the fundamentals that you guys were watching back then that we should be paying attention to looking forward?

Steve Trowern:
Well, just talk about COVID for one second. Don’t underestimate the impact that the federal reserve had on its messaging and on its bond purchasing programs, right? I mean, they’ve been… J Powell has been very clear that they are not doing anything other than maybe thinking about tapering till 2023. I think that that has had an enormous impact on the credit markets, because they learned their lesson. What happened in 2008? The treasury did a tarp, and it was a made-up number, and the fed cut rates a couple times, and then they-

Kevin Kim:
It was absolutely a made-up number. There’s a blank line. They just filled it.

Steve Trowern:
But it wasn’t until after the world had completely fallen apart. It was not until bear was gone and Lehman had filed bankruptcy that the fed really several months afterwards before that… That happened… Leman Lehman Brothers filed bankruptcy in September 2008, and that real big bond purchasing and fed actions didn’t start until October or November. They’ve learned their lesson. The current fed learned their lesson from that period, and so they would-

Kevin Kim:
It’s good to hear the government learned their lesson for once.

Steve Trowern:
Yeah. I mean, to their credit, it was… You got to come out with every gun blazing on your battleship, and then figure it out later versus trying to target [crosstalk 00:58:19].

Kevin Kim:
They definitely deployed those capabilities during COVID. Do you think that was the primary driver or what allowed basically [crosstalk 00:58:29]?

Steve Trowern:
I think that the fundamentals when you started to look at really where the pain was and the shutdown was really more in the service world consumers. It wasn’t that wide spread. It was really targeted. The pain was on the baristas and the restaurants and Uber drivers. It was not so widespread, and manufacturing and housing. I think most people figured that out. On top of that with the fed action, it was really largely over by June, right? The green shoots had positive healing we started to see in May, maybe April, but really May of 2020.

Steve Trowern:
By June, it was… Essentially, I think everyone had realized that we were going to weather this, that it wasn’t the end of the world. [crosstalk 00:59:21].

Kevin Kim:
Well, I hope some of our listeners pay attention to this, because some of the people are still worried. I mean, I’m not going to… I speak to folks all the time about this, and they’re still worried about things.

Steve Trowern:
Well, I don’t think we see another… I don’t think we see shutdowns. I think we will be living… For the next several years, we will be living in an environment of masks and unmasks and booster shots and COVID misinformation and vaccine misinformation and all those things. I think that the investor community, both institutional and retail or local, I think are able to see through that. I don’t think that’s going to derail us. I think it will probably cause minor challenges for here and there.

Steve Trowern:
Sometimes for tenants who can’t afford to rent or for landlords who can’t afford not to have their tenants pay their rent, there’s going to be some adhoc challenges, but-

Kevin Kim:
No massive crisis like we saw [inaudible 01:00:29] March.

Steve Trowern:
No, I don’t think there’s any political will or capital anywhere in the country, even in… Go to Massachusetts. I don’t know. Pick your blue state. There’s no political capital will to have an actual shutdown. I think you’ll see targeted things with masks required and probably mandated vaccinations or proof of vaccines to get on a plane or to enter a stadium, but those things, they’re just rules, and people will find a way to comply with the rules.

Kevin Kim:
Right. We’re not going to see any crisis come from this. This raises another… I always ask this question to our guests, foreseeable future for the private lending space specifically. Since you guys are focused exclusively on one to four family, bullish bearish for private lending.

Steve Trowern:
Really bullish. Really bullish.

Kevin Kim:
I thought so.

Steve Trowern:
Again, all those things we talked about, it’s supply and demand. There’s nothing… There’s massive tailwinds behind a demand. There’s nothing that’s getting in the way of demand, and the supply is slowly trying to catch up. It won’t. Because of that-

Kevin Kim:
No indication of any crisis that are going to get in our way.

Steve Trowern:
Barring something, barring, I don’t know, maybe a massive terrorist attack or a whole new virus that no one’s ever seen that requires another vaccine.

Kevin Kim:
Sure. Act of God.

Steve Trowern:
Act of God, barring act of God. We can never predict those.

Kevin Kim:
Right. Well, that was 2020, right? Straight up act of God. We had no way to see this coming.

Steve Trowern:
No, and if we got through that relatively unscathed, then we’re going to get through just about anything. You’ve got real macroeconomic factors that are driving this. What I think you’ll probably see in the private lending sector, there are about depending who you count and how they’re set up, but there’s probably a dozen sizeable lenders, private lenders, probably more than that if you go into the smaller tiers, but let’s say there’s 12 who have access to capital markets and who have histories of raising capital and surviving through ups and downs.

Steve Trowern:
I think that those 12 will start to gather more market share of the overall market. I think the haves in this will start to weed out the have nots. The small lenders, the have lender whose capital is maybe from a family or from some high net worth individual or a mezzanine fund or some credit fund, I think that the cost of capital argument will start to wear on those on the… I think you’ll see the 12 of us. Again, it’s a ballpark. I’m using that as the overall side.

Kevin Kim:
I’d say around 20 to 30 depending on… There are some folks that are more on the aggregation side, not on the lending side as well. It’s an interesting proposition there.

Steve Trowern:
Sure. [crosstalk 01:03:37].

Kevin Kim:
I mean, that’s an interesting question though, cost of capital, right? You’re saying you’re predicting a continued competitiveness in pricing for interest rates, and rate compression is going to continue you think.

Steve Trowern:
I think you’ll see some rate compression on certain products. I think the spreads have stabilized on the DSCR for the most part. I think that… But in order to… Again, it’s not just the cost of capital so that you’re the market leader in price, but having cost of capital and reliability of capital to maintain markets so you can continue to grow. If you want to use your number of 20, I think it’s 12, but let’s say it’s 20. I think those 20, there are probably 700 or 800 lenders or brokers…

Steve Trowern:
There’s seven participants, market participants out there. I think you will see a lot more of the market share go to the bigger… the 20, whether they’re aggregating or buying or they’re broker source or capital source for the smaller lenders. I don’t think the small lenders go away. I think you’ll just see more market share concentrated in the hands of the 20.

Kevin Kim:
Well, this is another interesting question. We’ve had other people on panels that I’ve been on and moderated predicting a patterning towards conventional, where you have almost a pseudo GSC type arrangement, and you have your programs if you will like Fannie, Freddie, Ginnie, FHA, that kind of stuff. Those will be the… Then you’ll have a massive market originators. That was a prediction by a colleague of mine is they work for investment bank, and that’s what their prediction was for…

Kevin Kim:
Do you guys agree with that, or is that how you guys see this market headed, or are we looking to be a little more bespoke?

Steve Trowern:
I think it’ll still be on the fix and flip and ground up. It’ll be a little bit more bespoke, but you have seen standardization. The reason that you’ve seen standardization is because, again, those 12 or 20, they’re the ones who have access to capital markets. That’s why I’m making that… That’s the differentiator.

Kevin Kim:
Sure.

Steve Trowern:
The fixed income investors are the ones really setting the rules for what loans are being made, and so whether they’re rated security that’s full of DSCR loans, or whether it’s an unrated, short-term revolver that’s a fix and flip and ground up construction and bridge, the guidelines are going to start to morph and look similar. They’ll have similar programs, and then it’s just a question of who has the most reliable access to that capital. They can continue to share and maintain their margins, so they can grow and hire and continue to meet the needs of their borrower.

Kevin Kim:
You’re suggesting more of a standardization of underwriting.

Steve Trowern:
Yes. That’s happening. It’s been underway. [crosstalk 01:06:38].

Kevin Kim:
It is. It is. I mean, I’ve seen pretty much standardization when it comes… Anyone who’s working with a capital markets provider, aggregator is pretty much doing the same product, but it raises a question though. I have plenty of clients, and we’ve had guests on the show. They’ve built their brand around doing more of the esoteric stuff that they can do, because they’re independent, or they’re not tied to a capital markets provider, their true balance sheet, whether it be family office, whether it be [inaudible 01:07:07] investor or institution.

Steve Trowern:
It depends on, again, where their capital came from and how much it costs or it would cost.

Kevin Kim:
That’s a uniform challenge. I think everyone is… I mean, everyone on the show that has a balance sheet is always talked about. Our objective is always to get the cost capital down. If your cost capital is 9%, you’re just not… You’re scaling to 500 million to a billion. You can’t. You can’t. It’s just hard. You can’t sustain that.

Steve Trowern:
My other prediction for this sector would be that you’ve seen it already happen, but most of the independent guys in that 12 or 20 number have either been subsumed by their sponsor or by one of their main customers.

Kevin Kim:
Or use consolidation.

Steve Trowern:
They’re going to see some more consolidation. I know of three that I don’t know whether they’ve been in the public domain, so I won’t mention them yet, but I know [inaudible 01:07:58] happened recently or will be done shortly.

Kevin Kim:
I think I know what you’re talking about.

Steve Trowern:
I’m sure you can [crosstalk 01:08:06].

Kevin Kim:
There’s probably the others that we’re not even hearing about yet that I’ve heard the whispers about too. I mean…

Steve Trowern:
There’s one big one that’s going to get done shortly, but we remain. Temple View Capital remains independent. We don’t have a sponsor.

Kevin Kim:
Actually, I was going to ask that. Yes, there’s no talks about that for you guys. Are you going to stay that way?

Steve Trowern:
No, but there’s… Never say never, right? I mean, it would make sense. One of the things about these businesses, not to get too far off track here, but we have a… Our capital is essentially funded capital that we have our own money in and then third party money with institutional credit, so bonds or repo of facilities… It’s essentially an operating business. It should at some point be an operating business with a permanent balance sheet.

Steve Trowern:
At some point, we will probably look to find a partner that is a longer term partner, not somebody who’s just willing to accommodate something in order to get assets, but really looks at this as the long term.

Kevin Kim:
But will you demand operational integrity and not independence is a good question to ask there, because in M&A, that becomes the big…

Steve Trowern:
Depends on the partner. Depends on the deal. Depends on [inaudible 01:09:31].

Kevin Kim:
Makes sense.

Steve Trowern:
Somebody said… I was asked by a eight-year-old recently about a house, my house. He just kept asking if it was for sale, because he liked the color of a wall or something. I said to him like… His name is Sebastian, “Sebastian, everything’s for sale.”

Kevin Kim:
Name the price.

Steve Trowern:
Make me an offer I can’t refuse.

Kevin Kim:
That’s true. That’s happening, right? It happened before. It’s happening now. I wonder about what it’s going to do for our space. It’s interesting how we’re starting to see entries, exits, consolidation, joining forces. It’s going to happen. It’s a foreground conclusion, but I’d like to hear you guys maintain that entrepreneurial spirit about it. I think that’s the key to success in our space, right? You can’t-

Steve Trowern:
It’s always a balance to maintain… What makes these things special makes them tick with having permanent or quasi-permanent capital. That’s always the balance. At some point, we’ll get a decision in front of us to think about.

Kevin Kim:
Fair enough. Fair enough. I like that.

Steve Trowern:
That’ll be part two of our podcast.

Kevin Kim:
Yeah, part two. We definitely got to get you guys back. I want to close out with one last question for you, Steve. This goes to the next few years for Temple View Capital. What are you guys concentrating on? What are you guys excited about moving in 22 and the 23 for Temple View?

Steve Trowern:
Growth, we do want to continue to grow. We’ve got… We have the right balance sheet. Now, we’ve got to fill out our production staff and systems. We’ve done a bunch of product enhancements. We’ve opened up new channels of origination, so we’ll continue to push all of those to grow. We feel very good about that. We’ll probably look at a couple new products. I think that one… I talked about putting out innovative products. The Airbnb or short-term rental product we think is pretty innovative [crosstalk 01:11:42] rolled it out, so that’s great.

Steve Trowern:
I think we’re working on a construction to perm product, so one [crosstalk 01:11:49].

Kevin Kim:
Definitely. Definitely.

Steve Trowern:
That could be really appealing to people who want to follow the BRRRR Strategy, the buy, rehab, rent, refi or whatever without having to refi, and just have it as a traditional one close construction loan. Hopefully by the end of the year, we’re talking about that. Then it’s just a question of making sure that we’re not seeing bubbles or areas of risk. So far, we haven’t. We do watch home affordability indexes pretty closely. We watch days on market. We watch all sorts of… We pull all sorts of data.

Steve Trowern:
We’re data junkies. We pull all this data. We’ve been doing this for years for our NPL book in Temple View. So far, it’s a pretty even… There’s areas that we prefer maybe not to lend at maximum LTVs, but for the most part, most of the country’s pretty healthy. Again, there’s real tailwinds behind us. We’re pretty good about it, but [crosstalk 01:12:52]

Kevin Kim:
Are there any MSAs that you’re really excited about?

Steve Trowern:
We’re risk managers, so usually, if you ask me, I tell you, I’m going to say is that I’m not excited about it.

Kevin Kim:
Let’s hear it.

Steve Trowern:
Here’s the [crosstalk 01:13:04]. I mean, you can… I’ll tell you what, how about Austin, Texas? You can go… You can… Southern California is moving to Austin, Texas.

Kevin Kim:
Yes. I get emails every day about beautiful houses at Austin.

Steve Trowern:
[inaudible 01:13:21] not hurting Southern California’s [crosstalk 01:13:21]. Austin’s crazy. I think that’ll probably cool down a little bit just because they can’t, again, meet the demand. There’s so much demand. You can’t actually build of [crosstalk 01:13:30].

Kevin Kim:
They don’t have room. They only have two million people.

Steve Trowern:
[inaudible 01:13:31] are rumor. There’s pockets of the Midwest that might be a little bit soft that we’ll keep an eye on. But for the most part, the world’s pretty healthy. I mean, it’s about finding good deals, and finding the right values and finding the right borrowers who have experience in those markets. We’re very careful about that.

Kevin Kim:
I like it. Well, data entrepreneurialism-

Steve Trowern:
Keep on track. That’s-

Kevin Kim:
Exactly. Data and entrepreneurialism combined, I like it. That’s a really good mix. Well, you know what? I think that’s all we have a time for today. Steve, I want to thank you once again for joining us on Lender Lounge. It’s been fun getting to know you and your story and the company’s story. We’ll see you guys at the next show sometime soon, and hopefully we’ll see Steve out there once at an event as well.

Steve Trowern:
Great. Kevin, it’s been a pleasure. I appreciate your time.

Kevin Kim:
All right, thank you very much.

Kevin Kim:
Thanks for listening to Lender Lounge with Kevin Kim. I hope you enjoyed this episode as much as I did. If you did enjoy, please leave us a five star review on your podcast platform, and be sure to follow our show to be notified of new episodes. If you’re on YouTube, don’t forget to smash that like button, and hit subscribe for more content from all of us here at Geraci. Lender Lounge with Kevin Kim is available on all podcast platforms. Referrals really help us spread the word, so please send this over to someone you think might enjoy it.

Kevin Kim:
See you next time. This is Kevin Kim signing off.

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