This Hot Topic dives into one of the most complex and consequential moments in mortgage and housing finance, where policy uncertainty, affordability pressure, and rapid AI innovation are colliding. Industry veteran Tim Rood joins to break down what’s really happening inside the Beltway—from why housing continues to take a back seat in Washington, to the structural imbalances between buyers and sellers, to the hidden constraints shaping GSE reform and FHA policy. At the same time, we explore how AI is not just a buzzword but a transformative force that could redefine cost structures, competition, and customer experience across the industry. If you’re trying to make sense of where the market is heading—and how to position yourself ahead of it—this conversation delivers clarity, context, and actionable perspective.
[David] Listeners. We’re in for a real treat today. We’ve got joining us, Tim Rood doesn’t need much of an introduction. He’s been around for a long time, but in the industry, like, I have a couple of great hair talking, some people say, should we pay attention to gray hairs? We need fresh new blood. Well, I tell you, there’s a lot of history. The philosopher Santiago said, what you do not learn from history, you’re doomed to repeat. So, we have a couple of guys have been in the industry many, many, many decades. We’re helping you avoid repeating some things, but there’s new things going on in the industry and there’s no one better to know what’s going on in the Beltway than Tim Rood. He’s built a career of being an insider and especially on policy. So Tim, welcome to the camera. Good to have you here in the podcast.
[Tim] Dave, thanks for having me. I think the word you were looking for is wisdom. I think that’s what we’ve accomplished. That’s where we are. We’re now in the wisdom category. Yes, we are not the… So I can live with that.
[David] We’re down to gray hair and wisdom. Well, the thing is, is that there’s so much and it’s, but it seems like things repeat. We’re seeing cycles repeat a lot in this. we saying some of the things that are going on broadly speaking, is this a repetition? Are we in a cycle? Would you identify it as that? or how would you characterize what’s going on in the housing finance system?
[Tim] Boy, it seems to be a lot of thrashing about with no clear direction. I think we’re starting to get some direction. But before, you know, I’d say in the last month, we’ve gotten more clarity. But it does seem to be that, you know, that, wow, people like us who are in housing and mortgage finance, we see all the problems in technicolor up close. But from a political standpoint, I’m pretty sure the Speaker of the House had already recently said he’s like, look, nobody cares about housing. Like, they just don’t see it as a problem. It’s the same thing with GSE reform. We look at it in the nuance, but credit’s available, credit’s reasonably cheap. It’s in every market every day, so, on some level, while the affordability is an inconvenience and certainly is going to be a problem when it comes election time, housing and mortgage seem to be on the back burner to some obviously bigger, more pressing issues.
[David] Yeah, we got some bigger pressing issues. Let’s talk about your perspective. Give us an overview what you’re seeing from within the Beltway and if you could give us an overview and a good Tim Rood digestion of it.
[Tim] Yeah, yeah, let me think about it. I mean, look, you got to think about what are the goals first to the administration and then you can look at the apparatuses that they’re either using, should be using or trying to use to get there. Right? so obviously, if you look at it from the standpoint, first and foremost, clearly, they want more competition. Right. So they’re looking at you’ve seen the executive orders, you’ve seen the Basel things. Obviously, they’re looking at increasing competition. They’re looking at concentration risk. So they’re looking at the IMBs having too much concentration or being too concentrated in the market for origination and servicing and then they’re looking at bringing community banks back in. I mean, as we all know, they should be. There’s making special exceptions for that and then there’s also the affordability standpoint where they’re looking at, what can we reasonably do about affordability? And I think that they’re quickly realizing that there is no quick fix to the supply problem and any of the fixes on the demand side when you haven’t fixed the supply problem only in order benefits to the sellers versus the buyers. So, it’s sort of an enigma at the moment. But if you take it a little bit further…
[David] I just want to object on that note right there. I was reading your newsletter this morning, by any way, anyone who wants to get an inside perspective from a true veteran who has his finger on the pulse, you should sign up for Tim Rood’s a newsletter, his blog. How can people do so?
[Tim] Yeah, you can go right to our website. Also at the bottom of the newsletter is a signup sheet. It’s been remarkably successful, not to be braggadocious, but thank you for the plug. But yeah, I think we’re up to about 10,000 subscribers on it.
[David] No, but if you could have, if you give, you know, if you give good information, but if you give them good information, it draws people in. That’s why we’re having the success we have. the interviewer is with aside, seems like we’re able to get some great guests on like yourself. Okay. Now what your newsletter said today, this is the greatest number balance as the word I’m using as I read though, that between buyers and homes for sale, we’re having, it’s just a talk about what you wrote today in today’s newsletter.
[Tim] Sure, yeah, it’s a snapshot in time, but it seems to be worsening in terms of, know, it’s sort of hard to get your arms around. You see the same stats that I do, which are we have a 3 million house deficit. We have a $5 million house deficit. We have a no house deficit. All we’re looking at right now are the active buyers versus the active sellers and for whatever reason, use your imagination, pick up a newspaper, turn on CNBC. There’s a heck of a lot more sellers now, 630,000 right now in the market, then there seem to be active buyers and obviously that’s caused some agita in the market. You’re seeing new home sales, which are sort of related, but not the same stat. They’re sitting on what, 10 month’s worth of inventory. You’re seeing price declines. You’re seeing a lot of creative moves that they’ve made to ultimately make the properties more affordable, taking down like forward commitments. Whoever the hell those guys are using to forecast interest rates and took down these long-term commitments, well, you or I should hire them because they seem to have played it like a fiddle and it worked out like a champ, but it looks like a lot of buy downs that they made ultimately to make those houses more affordable and there’s been some concerns about whether that isn’t, you know, sort of seller funded down payments in disguise or might be artificially inflating some of these things. We all know that, you know, in isolation, they’re probably fine, but if they pick up as a common practice, then you’re going to have some distortions in the market. So that’s really what we were teasing out was sort of a little bit of the hyperbole around, there’s not enough housing, that’s what’s causing the affordability problem. You’re like, well, it’s a little lumpier than that. There’s probably too much spec built housing that’s out there, which builders haven’t done in a long time. You’ve seen that in multifamily also. You’ve seen it in commercial, not just in residential. A lot of that was, yeah, multifamily and commercial are, you I don’t know how religious your viewers are, but I’d be crossing myself because a lot of people, sort of good sailors in calm seas, took advantage of low interest rates, built a hell of a lot of multifamily and commercial, and then now they’ve got a reckoning as these bullets come due and these projects no longer pencil out. But that’s a separate distraction from the residential, but the residential side, when you see spec building on that, clearly they were trying to answer the call for more product. But as it turns out that at these prices and at these interest rates and then macroeconomic forces driving affordability challenges, you know, make pulling that, pulling out that pen and writing that check a little bit more difficult. So hopefully this is a gully. Hopefully interest rates will get back below 6%. If they do, I’m feeling a lot more sanguine about things. If they don’t, again, I don’t know if I should be wiping my brow or crossing myself or getting into food service or hospitality, but it’s going to be a problem.
[David] We talked on Monday’s podcast, the podcast we just recorded this past Monday about all these factors and we talked yet there’s a greater optimism in the market than I seen that I’ve seen in a long time and that’s evidenced by the pipelines. We’re seeing pipelines still continuing to grow. Even though we’re in the midst of a very concerning war that’s driven up gas prices costs for rates to jump up here. We’re seeing yet, there is an end to this whole, what I would many would refer to as madness and there’s a strategy that is gonna be good for Americans and good for the housing market. Your thoughts on that.
[Tim] Well, let’s just start with things like the EOs are good examples of the administration taking efforts to sort of arrest the affordability crisis. Look, I think that’s one of the few things that they can do. Right now, if you’re waiting on legislation, even the road to housing, which has got bipartisan support, doesn’t have it in the entirety and that’s certainly a long ways to go. Even if and when that gets passed, you’re still light years away from it having a real impact on supply. So, then if you look at things like the executive orders, which I think are welcome, God knows every person in the mortgage industry, if you’re looking at enforcement environments and regimes, supervisory enforcement of regimes, the prescriptive requirements that we all had to do and live up to for origination, servicing and everything in between, obviously created a tax, probably three to four X what it was before that great financial crisis. Looking at and addressing those issues are certainly critical. The challenge of course becomes, know, there’s what should happen and then there’s what will happen in this town. And while all of these things are logical and ambitious, you can’t underestimate the fact that these things are gonna take a lot of work and these are requests, these are not mandates. These are like, check these things out, look into them, do your best, yada yada. But if you look at places where they’re really leaning into HUD, the CFPB has been gutted. They don’t even have enough staff to finish the rulemaking from the original Dodd-Frank. So the idea that you’re going to gin up new proposals and then be able to address the comment period and then produce those things again is one of those, if had a watch, I’d be setting it to you should live so long. I I don’t think they’re going to be big issues for some time yet. But again, they’re…
[David] Yeah, at a federal level there, that’s true. But at a state level, you know, it’s almost like we’ve seen the diminish of the CFPB in DC, but we’re seeing 50 new CFPBs across the States and that’s creating another set of problems. I’d love to get your thoughts on that.
[Tim] Yeah, I heard it perfectly said. think it was Jeb Mason. was great. He said it in either a conversation or something where he’s like, know, if you look at the CFPB, it’s sort of like kicking over in an amyl. Like, okay, you hollow them out. You’ve got that place and then the next thing you know, you got ants everywhere. And then every state’s taking this up. And then every state’s got a different point of view. I mean, I’m also in the AI side. So you’re watching this thing with horror. know, as states are trying to get out in front of federal legislation that may or may not come and may not be consistent. So in any case, yeah, I think that the states have clearly picked up the mantle and the only, depending on your perspective of whether that’s a good thing or a bad thing, is that the CFPB just no longer has the resources that the states had relied on in terms of legal resources, lawyers, and all these different policy experts that they could bring to bear to help the states with these supervisory and enforcement actions. Without that, I mean, states are certainly not flush. So I’m sure they’ll use this as an opportunity to stuff their coffers. yeah, the states are certainly a big issue. Not to mention that comes to the EO on building, ambitious, needed, but we all know that the buck stops at the state local level.
[David] Well, I can’t wait to get into talking about your latest AI ventures. I’m to, we’re going go there in just a minute because I’m really excited about what you’re doing. there some, again, it seems like everyone’s getting the AI, let’s not go there just yet. want to get more about your perspective inside the beltway as to what, how should executives be thinking about the rest of the year as how are you advising your clients?
[Tim] Sure. I mean, like I said, obviously the interest rates, there’s not much you can do about, I think from a regulatory standpoint, the two big things that people are looking for outside of the EEOs, are we going to get any relief from the LLPAs? Are we going to get any relief on the MIIP from the FHA? And I don’t want to be a bearer of bad news, but I’m not optimistic about either one. I would say that from the GSE perspective, they’re dealing with a rare occurrence of a trilemma, right? Where they’ve got three sort of competing issues, right? You’ve got to get, hey, if you want to raise capital, if you want to do an IPO, okay, great. Then you’ve got to get your ROE up and maintain it. That’s inconsistent with LLPAs. You want to get out of this mess and get out of conservatorship? the issues that we were talking about were LLPAs and MIP premiums. So here’s the issue is if you look at Fannie Mae and Freddie Mac, they’re dealing with what I would call a trilemma. I mean, it’s not a made up word, of course, but it’s a trilemma in the sense that they have three sort of competing issues going on there. If you’re looking to take the company’s, you know, public through some sort of a club deal, a private deal, preferably not with five Emerald Empire, you know, participants, let’s mix it up. But either way, you need an ROE that’s attractive enough to gather to garner that investor interest. You also need capital, right? So, if you’re going to get out of conservatorship, which quite frankly, I think this is their best hope for getting out of conservatorship is building the capital, statutory capital required to get you out. Okay. Good idea. Also inconsistent with reducing LLPAs. I need that money coming in. These are, these are like two headed monsters coughing up thousand dollar bills. Right? And then you have the last part of this, of the trilemma, which is affordability. Okay. So I know I’ve got a mandate to improve affordability. None of those things are consistent with improving my capital position or improving my return on equity. So, therefore earnings rather. So therefore you’re in a pickle and I think that that’s what they’re dealing with. So, I was ambitious or hopeful about a change in the LLPAs or the G fees. I’m less so now. Because of those reasons, I think that the competing priorities are pushing too hard on the ROE on the capital side. And maybe when push comes to shove closer to the elections, if interest rates keep going up, then there’s a fighting chance for a cut in LLPAs. But barring one of those further exogenous events, I don’t think that they will. And on the FHA side, again, the MIP, you have a similar problem, which is, yeah, we’ve got six times more capital than we ever need, flex and do whatever you wanted to do to celebrate that. But then in reality, no offense to the team there, is that the current book of business is not exactly what you would hope. Yes, so the other issue was the MIIP. What are the prospects and likelihood of dropping the MIIP? And again, this isn’t a slight to the current administration, but there are some challenges here, right? Those current policies and also the, just general and economic environment means that the people who are buying and using the FHA program, we can see just by the numbers are stretched. I mean, stretched thin. The highest DTIs we’ve probably ever seen at FHA and then you’ve got these new, these sort of novel credit products like buy now, pay later, crypto payments. They’re not even showing up. So you can’t even put them into your sort of cashflow analysis. not being reflected in that. And then on the servicing side, all of the failed loss mitigations, the re-defaults on mods, unrecovered partial claims. It’s a pretty staggering set of issues that they’re up against. And that money, that 11 % or 12 % that they have in statutory capital, Buddy goes fast. And I think they’re holding onto it like a light raft because any of this stuff could go sideways in a hurry. God knows if I recall, if property values drop by 1% just as an example, that takes away 1% of the statutory capital. So property values drop by five, obviously that looks like about a seven or 6 % capital level. Then you start to get a little moisture on the forehead, right? And that’s. the early innings. Yeah.
[David] That’s early. It’s, it’s a good overview. You write about this in your blog and I encourage people again, sign up for that blog. We’re going to put a link to it, it’s really important to kind of keep this, this perspective from someone who understands it. In my opinion, better than most. Let’s talk about some of the recent win on Basel within the, the MBA has been advocating for that was some good news that came out this week. I guess maybe it’s last week.
[Tim] Yeah. I think it’s a positive development in my case. What I don’t like about the change, look, we all know it’s overdue. The banks left. The mortgage bankers obviously picked up that market share, the ball that ran with it. They’ve done a fabulous job, I think most could argue, in a difficult environment on a lot of different levels. Should banks be back in? Yes. Should you have a balanced market? Of course. Should you have parity? between the competitive advantages of one over the other? Yes. If you’re going to go through the trouble of reducing the things that matters to all mortgage bankers I think are great, the supervisory and the enforcement regimes, cooling those things down and getting back to more of a guidelines-based versus a prescriptive rules-based model, I’m all in favor of. I think that’s great. But what I’m struggling with is while we’re doing things to get the banks back into the industry, I don’t know if it’s, you could call it ambivalence, you can call it hostility, you could call it ignorance. I don’t know. Choose your own phrasing. But there was a great opportunity that seems to be missed where at the same breath that you were giving relief to get the banks back in, particularly community banks on a variety of different levels, is why not take the opportunity to address the folks who are already in the damn business, who are doing all the work, that are taking all the risks on behalf of the American home buyer or prospective home buyer. Why aren’t we doing anything using the banks, using the Federal Home Loan Bank, using the Fed? Best I could tell, they’re all involved in this process. Where the hell are the liquidity triggers? We got nothing to help us with liquidity. You got nothing to help us protections with funding. So, it’s sort of riddle me that, Batman. don’t understand if this is, it’s a little bit, well, like I said, it feels contrived. Nothing speaks louder than silence and the omission of non-banks or IMBs, whatever you want to call it, whatever language they should have used, they clearly didn’t use and I doubt that that was an accident.
[David] Yeah. Very interesting. That’s good analysis, we could go down any one of those trails that you just covered, but I want to move over to some of the new things that you’re working on. Everyone’s focused on AI and you are as well. You have some really exciting initiatives going in the area of AI. If you could give our listeners an update and kudos to you for, by the way, you seem to be on the cutting edge of so many things.
[Tim] I’ll tell you, brother, it’s been a wild ride. Look, we started this almost two and a half years ago based on the observation when ChatGPT came out. We all know about artificial intelligence, machine learning and all of those different things. But when you start to see the commercial, the consumer application of these things, you quickly realize that when people talked about the cost of knowledge going to zero, you’re like, wait a minute, I’m in the knowledge business. That’s a bad thing. I don’t like this. So, that was really the catalyst, the genesis of my jumping into this is holy mackerel. When we sold my last company, the Collingwood Group, we sold it based on a simple principle, which was we couldn’t figure out how to syndicate the knowledge between all the smart people around the room, right? Which means you might have a good boutique business, but you don’t have any leverage. You don’t have any scale. And the fears of me being at an MBA conference at 80 years old at the bottom of an escalator, flipping business cards at people’s heads gave me enough concern that I’m like, this is a good time to be irresponsible. So I resigned. We started this company. back then, I mean, it was a point in time and things have radically changed. Think about beginning of 2024 when we started, we were just like, hey, man, this is a 70 trillion dollar market, real estate. Does anybody think that this doesn’t warrant its own sort of, call it whatever you want, AI platform, you know, that’s comprehensive, that understands the nomenclature, the use cases and things like that. So we went out and built something that was sort of like grounded truth. It wasn’t a figured out machine that was based on, you know, numbers and vectors and all of those things, but was based on facts. What’s been factually verified, published, whatnot. We wanted to be in the fact retrieval business because like you, I didn’t want something to figure something out for me. Just give me the facts and we’ll take it from there. So we built that out and we had some great commercial adoption of that. But what you quickly realize, and I think that the industry is realizing this in AI overall, having a viable product is very different than having a commercial grade software solution. So, we had great traction with the AI tools. And then you quickly realize that when you start doing like enterprise sales, that people turns out are really mindful about things like governance, security, privacy, and we were less so. And I see a lot of that at that point in time. And I’m seeing a lot of that today where people spin up a prototype where like, hey baby, we’re in business. You’re like, are you? mean, I’m sure it’s fun for you and the family, but no commercial enterprise would adopt it. And that’s what we had to reconcile is like, do you harden these things and then bring it to market where it’s fully built out and defensible, but the market ain’t waiting for you. These profit pools are not static. They’re moving constantly.
[David] That’s so true. The market is not waiting for your boy. There’s a sound bite there.
[Tim] So, you I was describing it to somebody like the other day is like, it’s like having a, you know, an AI business is sort of like, I don’t know, beachfront property. In the morning, I’ll go out and I’ll build a sandcastle. I come out at lunchtime, you’re like, what the, where the hell is my sandcastle? It’s like the ocean reclaimed that sandcastle. You’re like, all right, I’m going to build a bigger sandcastle. I want to build it further from the beach. I’m going to dig a moat around it. You know, all of these things. I come back out at dusk, it’s gone. So you either got to figure out like I’m either no longer in the sand calc, I’m getting where I’m going to move. And I think that was a realization that we had most recently. We’re announcing a partnership that’ll come out in the next week or so where the of the realization that my mind and my checkbook of me and my investors wasn’t a suitable defense to the foundation models and the large language models that are out there. Claude really came out with some stuff and then Genesis right afterwards, I mean, It’s amazing what they’re doing. So nothing is sacred, nothing is holy.
[David] And at the rate that it’s coming out, it’s just the rate of change is just extraordinary.
[Tim] You cannot be in this thing casually, brother. That’s the thing is I wouldn’t say that we were in a casually, we were in it all the way, but you don’t know what you don’t know. So I would caution folks who are in that business is take a good look around, look at your competition, how defensible is your moat? We looked at it from the perspective of, you know, a lot of the residential business outside of, you know, the stuff that we do more advisory related stuff. Intelligence and trust were the two things that you could count on, you know, to survive the AI tsunami. Those things, while the cost of knowledge goes to zero, the value of trust and intelligence, you know, sort of second order, third order effects of policies and things like that, that was the real currency. So what we figured out is let’s find a way to kind of harvest more of that business intelligence, the conversations that our advisors are having, the conversations that we’re having with our clients, anonymize it and sanitize it in a way that we can build out a fund of knowledge that complements our own fund of knowledge on facts and starts to really embellish it in a way that’s really useful for folks who are trying to implement these things and make judgment calls about policies, EOs, prospective legislation, you name it. So we’re working through those issues right now.
[David] So when you, the product that you are bringing to market or you have to market, where do you stand in that? I’m trying to recall from our last conversation, because things I know are very fluid and moving. Do you have a product at market or are you bringing one to market?
[Tim] So we have a product in market, which is Alfred. Alfred was an acronym, but it’s also a hat tip to one of my business partners, Alfred Pollard from the FHFA. He’s just a fund of knowledge. He’s got Cache as the only one-name person sort of in the industry. So we brought Alfred to market as sort of a real estate mortgage-related chatbot. And you quickly realize that getting better answers or having a 20% better answer wasn’t suitable. So how do we then make it more task oriented? So you built it into a workbench where people can collaborate, teams can collaborate by adding documents to it, regenerating it using what I would call a ground truth data. We have like APIs into about 25 different government agencies. So you’re pulling facts out to either embellish a document, update a document, create beautiful presentations based on prompts, all of those things that we found were kind of nichey. And then we saw through Claude and others that they’re really nipping at your heels and they become somewhat indefensible. So while those have been successful and we’ve been thrilled with it, what we figured out is, look, the advisory business, because of the chaotic nature of DC at the moment, not that this is the only time it’s been chaotic, but there’s so much ambiguity, which then creates all of this anxiety. We have a great team of former muckety mucks that we’ve been able to repurpose for these commercial purposes, that on some level, I could even spend 80% of my time trying to figure out AI when the smart, well-funded guys have figured it out and are building it, or I could take a step back, focus on our strengths in the advisory space particularly, and then partner in a JV with a company, I would call it sort of Palantir Lite, that works and lives on-prem, so it’s inside a company’s firewall, which we found was a huge problem for financial regulated institutions going outside of their firewall. I don’t care what protections you have in place, was a difficult sell. You wanted to be able to access data without it being a huge project. If you’ve got data that’s multimodal, all different types, you wanna be able to grab it in any form that it is, leave it, and then use it for whatever your AI use case is. Research, process improvement, call centers, originations, QC, a million different things. So, right now we’ve really focused more on the, there’s some residential opportunities still. We’re seeing a lot of work in the CDFI, HFA market, where we’ve got a community development initiative. We’re trying to build out really the skeleton frame of that really critical. mean, obviously it’s a hot topic, housing affordability, but it’s a very fragmented localized market that does these community development sort of advising to CDFIs and HFAs. So we found a way to actually use our technology. We’re coming to market with something that is meant to aggregate all of that intelligence, aggregate the successes in context of successes in community development at a local level, and then make it available en masse nationally so that you can take what worked, econometrics, policies, demographics, whatever your measurements of success are, you can apply those principles to your own use case in your own municipality community, and then actually bring the team to bear or inform the team, give them the necessary tools to do the work that they need to do and sort of benefit from the successes of other communities that successfully implemented these programs.
[David] What caught my attention is there’s a lot of data. We’re swimming in data. We’ve always known information has been readily available, but if it’s a presentation of that data, that makes such a difference to him and you showed me how you’re helping like the MBA on some of their slide decks. That some of the things there talk about that case. mean, this is a tool that really takes presenting the data to another level.
[Tim] Thank you. Yeah, I mean, we did some tests with a variety of professional associations. We haven’t signed up the MBA just for clarification purposes, but certainly what we wanted to do was look, mean, you never see the quickest way to see the blood drain from someone’s face is, hey, you mind putting that in a deck like, there it is. Clear my calendar for the week, right? So not only was it an administrative burden, but then you had to trust that whoever you were working with, it’s usually a team effort, but it’s ultimately using data that you could defend, that would stand on its own. So you had to have full transparency into the data sources and you had to have full confidence that those were accurate and up to date and then that was an integrated effort. wasn’t a, this thing is really good at slides and this other thing is really good at content. And you wanted to integrate them in a way that they were.
[David] Integrate those two. that’s, yeah. And I think what I saw is you did that, the level of the presentation of the data, the data was impeccable because it’s, you you guys are doing the job of really going through and validating that, making sure it’s defensible. But the part of that, many people fail in the presentation and how you bring this together. It was some of the highest quality slide decks I have ever seen. It was really, and it was, and it’s relatively easy because of the AI and how you’re doing that.
[Tim] Yeah, it’s meant to be looked if you could just upload a few documents and type in a colorful prompt, then you just get gave you the tools to take it from there. You know what was a week-long or multi week long process? You know, turns into a 15-20 minute 30 minute exercise depending on how you know creative you wanted to be on the editing side of things. So look, we’re very excited about that. But the reality is again, Dave, just to be intellectually honest, the other tools are just catching up and the challenge has been is how do you? How do you make a business and market out of being 20% better than the next guy, the big guys? So you either have to stay constantly in front of them, or in our case, we’re taking a step back and through this partnership, we’re saying, you know what, let’s just look at this specific use cases here. We can dig a deeper moat, particularly in multifamily in the commercial side where residential, I don’t wanna say is fished out, boy, but it’s packed. I mean, it reminds me of when I was a loan officer.
[David] Yeah. The blue ocean concept. where you go, go where there’s a whole lot of less people fishing and you’re going to have a much greater probability of success.
[Tim] Well, exactly right. mean, it reminds me, I’m sure like you, when I was a loan officer in 92, out of college, 91, 92. And I remember I took it so seriously. It’s sort of like the AI thing too. Two and a half years earlier, you’re like, oh my God, we’re pioneers. Like we’re really doing this thing. And then you fast forward, you know, 12, 18 months and the next thing you know, you know, every mutton head was a loan officer by 1993 because that’s where all the money was. Right? And there was no barriers to entry. Now you have smart people and mutton heads who think like, hey man, I guess I’m an engineer now because I can use a tool to spin up a viable, a minimum viable product, which is like good for you champ, you know, but that might work for, you know, you and a couple of your buddies. But in terms of commercial grade things, it’s an expensive endeavor more than you can imagine. And the people you’re up against are fortified.
[David] Yeah. There’s a couple that come to mind. Pylon has Peter Thiel involved in it. It’s a very interesting fact that Peter has gotten involved, had the privilege of meeting Peter at one of Pavan’s events. And then also I noticed that Palantir just did a partnership with Motor, Go Motor and, M-O-D-E-R. I mean, these are, it’s really interesting for me in my mind to see who is starting to show interest and that the level that they are.
[Tim] Yeah, freedom.
[David] Certainly Peter Thiel is one sharp guy and has a lot of resources to go into it. And then you look at Palantir, those guys are brilliant at what they’ve created in the defense space. What does this mean for the future of our industry as we start seeing the Peter Thiels through Pylon, through Motor and Palantir now coming together? What’s your prognosis for how, this is heading?
[Tim] As my old business partner used to quote from I think Rocky III when they asked for predictions of was it Mr. T? Like what’s your prediction? Pain. That’s what I predict. Pain. Pain. Not for the which has, think a lot of people are, a lot of people are seeing that and that’s why we’re seeing the consolidation. We watched summit funny, just go inside a cross country. There’s a whole bunch more companies going into the bigs, cross country being the biggest of them, the rich standards out there. think we’re going to see a lot more consolidation, but another trend is starting up and that’s a bunch of new companies that is it the fools rush in where
[David] Angels fear to try it. mean, it’s a new that are coming in and they’re very innovative. And because I’ve worked in that space, I’m talking both of the consolidation space. I’m also talking to people that are new coming in with exciting new energy and ideas about one to dissuade on someone, try to bring them wisdom. That experience we talked about the wisdom factor. If you consider this, consider that. But I want to encourage this new growth. Love to get your perspective on the new ones coming in, the new entrance, as well as the consolidation that we’re seeing.
[Tim] Yeah, that’s a great question. So Palantir is a force to be reckoned with. I have some history with them and you have to look at the bigger picture. If you’re looking at, I used it for a different example before, but not on the show, but it does remind me of this. This is a similar parallel that if you were a huge AI company and you’re thinking about, okay, guys, big ideas, what do you got? What’s the biggest market that needs to be addressed?
[David] Yes.
[Tim] Where you’re like, okay, well, there’s you know, $2 trillion a year origination market. And 60% of the time, I don’t remember what the latest status, but let’s just say 60 % of the time, people say, I didn’t have a good experience. Like that was too much work. That was too much trouble. And I had to pay $12,500 or roughly equivalent in terms of closing costs. So if you’re an AI company, you’re like, okay, so you just told me about a huge business where the customers are constantly pissed off, that’s got a massive cost to originate and somehow these guys still make money. It’s like, yeah, they make 25, 50 basis points alone. It’s lumpy, but you’re like, everybody out of the way. That’s my business, particularly when it’s something that is rule-based and is so prescriptive, the rule-based as the mortgage industry is today, then you can see like that’s a dream state for artificial intelligence. So, that’s why I think you’re seeing companies like Palantir taking a bigger interest in it. I think that’s why you’re seeing new entrants, sort of AI native companies. And then you’ve got all of the SaaS companies that look, love them or hate them. I’m not here to bash any one of them. They’re challenged, right? You’re aren’t gonna meet many people who celebrating their LOS or even their servicing system and everything in between. But the reality is some of these things are a bit of red herrings because we all know the switching costs are brutal. So while it seems like an opportunity, none of these folks are resting on their laurels. All of those SaaS companies are building out their own AI functionality, features, responding to their customer needs. And then ultimately, I think that takes a lot of the oxygen away from the new entrance and certainly enures benefits to the big incumbent SaaS companies and then the whole agentic world is another matter which ultimately we’re going to be seeing.
[David] Yeah. That’s what I’m really interested. I’m really interested in perspective on this because you look at the big SaaS companies that are out there and the biggest one we all know, don’t have to name them. There’s just so much dissatisfaction with them. I mean, there’s so much anger at the cost it takes. It’s such a big line item on their expense side of their balance, of their income statement. And so they’re ready and hungry for someone new to come in. We do have some new attention. It’s going to be real interesting. I’m excited about your ventures. I’m looking at the time. I want to wrap this up just with the final question is, what is Tim Rood continuing to do in the future? And innovate, do these kinds of things. I love the fact that you’re still in the game. I’m 75. I don’t plan on quitting and leaving a market anytime soon. What’s the future for Tim Rood? So glad to see you still in it.
[Tim] So that’s a great. No, thank you for asking. Look, I’m 56, so I got an early start at this.
[David]Yeah, my gosh. Yeah.
[Tim] Look, I’m one of those people who hates the status quo. I had a great job with Situs AMC. I thought it was, you know, I was running government and investor relations for an international real estate services company. That should be the best job on the planet for most people. I’m one of those folks who I just could not stand the status quo. And I really wanted to get out in front of these things. And you know, I have four kids. I want to make sure that they understand personal agency, that they don’t rest on their laurels, and that they take risks. And those are scary things. And they don’t always pay off. Not the way you think, but sometimes when you lose, you win. And sometimes you win, you might’ve lost, and yada yada. So for me, what I would say is that we’re gonna be constantly looking at, know, where are our strengths? Where do we have real advantages? And then where can we capitalize and leverage those things for new emerging areas? And I think that’s how our thinking has evolved around the AI side, which is a little bit of divide and conquer. Our team has got great trust. We’ve got amazing intelligence. We’ve got great access to the community. And then ultimately now AI, because there’s so much of it, normally you would see the value split somewhere like 80% in the technology and 20% in the sort of relationships, intelligence, and all of those different things. I think that now has probably dropped to 50-50. if not benefiting more to the trust and intelligence side of the business as the AI becomes more commoditized. So I think we’re leaning into that. We’re looking at more ways of sort of taking advantage of some of the unattached, smart, well-connected folks that are no longer part of the government, that are no longer part of big institutions. And you build out an advisor network that leverages a set of tools that are designed to support them, create annuity revenue, make their jobs easier, and then make those advisory services economically available to more more people. Take away those economic disadvantages or disincentives.
[David] Well, congratulations on the successes you’ve had. I’m excited that you’re still staying the game. You’re a young man yet. I’ve got you almost by 20 years. I will be in August. I’ll have you by 20 years. And so we, I look at this. Yeah. Well, mortgage, there’s mortgage years and then there’s calendar years. You know that, you know that old story, but it’s great to have you here, Tim. Again, how can people reach out to you? My joints all feel like a hundred. Yeah. Thanks so much.
[Tim] Sure, you can reach me my email address, tim at impactcapitaldc.com, OL capital, same as our website. Our daily email is called the Daily Dose. That’s an easy way to find me. I’m very active on LinkedIn. I do a lot of speaking. So you’ll see some recent things that are things that are coming up in terms of conferences and such that we’ll be speaking at.
[David] That’s outstanding.
[Tim] You’ll see them on LinkedIn and Twitter and all those different things. GSC stuff, my God, don’t even get me started. if you ever wanted to see a separate one, there’s one for that. But yeah, I’m pretty out there, so look those up. Yeah, thank you for this.
[David] Yeah, you are. And I thank you for your ongoing efforts to continually help improve and upgrade our industry and help us stay focused on where we need to keep our eye on. What we need to keep our eye on is this thing is rapidly developing kudos to your success. It’s good to have you here. Want to have you back and more regularly. Be sure to read and sign up for his email. It is just packed with it. It is really good. Yeah. Daily dose of real estate. Yeah. It’s really good stuff. yeah. Well.
[Tim] Daily dose of real estate. you. Daily dose of real estate. Thank you, brother. I appreciate that. Just trying to keep up with you, man. My God, it’s exhausting. Okay, so.
[David] We’re to just keep at it. I love the interviewing part. love doing this. I don’t know. Sure. I do the best job of it, but I love talking to really bright people like yourself who are committed to making a difference. That’s what I’m trying to do and we’ll continue to do. And I appreciate the fact that you’re doing it. Yeah. Yeah.
[Tim] You’re living proof of that, leaning into your strengths and that’s what we’re trying to do. So congratulations, friend. Good to see you. Thanks for having me. Appreciate this. Hope to see you again soon.
[David] Looking forward to it.