[David] Good job, Matt. Appreciate your insights and a lot of great detail there. Good commentary. I love his calm voice through all that. He’s just pretty much nothing but the facts, ma’am, nothing but the facts. Bill, I’d love to get your thoughts on all… Oh, by the way, before we go there, be sure to sign up for MBS Live and go to his website, mbslive.net. Put in the sign-up code LOL for Looking On Lending to get an extended trial period without having to put in your credit card number. Of course, just sign up for it. It is so affordable and so important, especially right now. I have that open on this other screen right to my side here all the time, and I’m watching it. All right. Bill Corbett, let’s get some perspective on all of this. Roy Orbison’s song- Well- … Isn’t Really All Over based on listening to Parker talk.
[Bill] Okay. So first for Alice, who’s our official record keeper. Yes. So Les- Les hang- Les mentioned 440. But he did not include a timeframe, therefore it cannot count as an official prediction. Okay. Let’s- You need a n- Well- you need a number and a timeframe for it to go into Alice’s book. Yeah.
[Alice] But that’s, but- But I did write that down because- Yeah … I thought it was… Yes, go ahead, Bill. Yeah. Yeah, go ahead, Alice. I’m sorry. Starting with what Les said, and it ties in with Matt. It’s where are rates going, right? Tell me where the two different wars are going and you’ll get an answer to that.
[Bill] But a, couple of things and I think first, if the Fed does not raise rates this week, I would look for a pretty significant negative move in long-term rates. I think the market would totally trash that, and that’s when you’ll hear even more about the 1980s style bond vigilantes basically saying to the Fed, “Okay, if you’re not gonna do what you’re supposed to, we’re gonna do it for you.” But it… A, a couple of things that are- That’s a good point, Bill. Really good point. A couple of things that, to me stand out so looking at CPI last week, one of the categories and I forget who turned it on to me, but I’ve been following it for a while. So there’s a subcategory in CPI, food outside the home, so restaurants, and that is still increasing at a 3.4% annual rate. Now, the thought process being if you’re struggling what’s gonna be one of the first things to go? And it’s eating out, and that’s still been holding up pretty strong. The other thing so we talk about oil prices, and that’s just a… You know what it is, but it’s still a bit of an abstract term. But- Yeah … diesel fuel just hit $6 a gallon. I just saw that. And the entire economies of the world run on diesel fuel. It’s the trucking, it’s the shipping, it’s so much machinery. And, my take from the inflationary side is while oil prices are high, they haven’t hit the level where folks really capitulate and start making other drastic lifestyle changes, and that kind of keeps it in the worst range from an inflationary perspective, right? The diesel not only impacts the truck, but then everything that’s shipped on the truck goes up in price. So I think from the Fed’s point of view, while oil has been, in a, reasonable range and can point to it’s not blowout highs, it’s actually in the worst place for monetary policy because it by itself is not changing on a large scale consumer behavior, but yet it’s driving inflation. So we’re hanging right now, 495. We hit 5.003- Yeah … about an hour ago. I first would not take any solace in the market hitting 5% once and rallying and closing below that. Whenever there’s a major technical level and psychological level, it’s gonna get tested a bunch of times before a new trend emerges. So yes, it’s important to watch, but, if you see a headline tomorrow that said the 10-year hit 5% and, “Oh, look, it rejected 5% and it closed at 495, and happy days are here again,” look the other way, ’cause there’s a train coming that’s gonna hit you. It, it’s- Okay. It’ll take multiple attempts- Before we’re really sure. And, again it’s always… It’s hard when we have these conversations the week of a Fed meeting to say gee, where do I think rates are gonna go?” Can I tell you on Wednesday afternoon? Yeah. This week more than ever. Yes. But, then we throw the- Yeah the ultimate curve ball coming in, right? So Trump, in one of his tirades last week, came out and said if the Fed doesn’t lower rates, then we’re gonna impose all these tariffs on any country running, that we’re running a deficit with.” Really? You… That, that’s how you’re gonna try and threaten the Fed? Come on.
[David] Yeah. Yeah. That was not the most brilliant thing to come out of the White House here recently. A lot of things that you kinda scratch your head about. And, and- But anyway, that was one- And sorry and that, comment did not hit the Stupidest Comment of the Week award, right? ‘Cause the one that was either right before or after that is, “Oh, yeah if the Republicans win the midterms, we’re gonna give everybody $5,000.” Seriously? And, Bessent has been out recently, and his mantra is that the US is gonna grow its way out of the debt and deficit and the percent to GDP. And that, is sound economic theory, right? Whether it’s good or bad it’s sound theory that, if you can grow your way out of your debt. But the only way that you can even start to do that is by not spending, right? I- You can’t spend your way out of a hole. You can grow your way out of the hole, but you can’t spend your way out of the hole, and I don’t think that anybody in Washington right now is paying attention to that.
[Bill] And that’s the other reason that I think even when the two wars get resolved, that will lead to a significant improvement in rates, but it’s not going to be to the level that it could’ve been because the spending side is out of control, and there’s nobody- And so- … that has any thoughts or plans as to how to rein in the spending side. And that’s what’s gonna keep the long end of the market down. When you see a rally happening, Bill, do you see… W- what do you think any feeling if this happens when this war does wrap up, where could we return to? Anything you wanna predict there or give at least a range that may be reasonable? So Les and I over the years have agreed almost all the time on direction. I tend to be more conservative than him on the magnitude of the change. So I might say that maybe instead of going back down 10-year to 440, let’s say that it’s maybe rallies into the 460 range so you get three-eighths or so on mortgage rates. Six and three-quarters, maybe six and a half. I think it takes wars ending and real significant spending reform- … to get back to where we were.
[David] Yeah. Yeah. And the probability of that based on what we’re seeing today is on the slim to none challenge part of it. Exactly. And, again our economy and our industry has done well with the 10-year between four and five.
[Bill] If you start holding on to we have to get back to pick a number in, low fours, below four to do well, that history says, that’s not true, and therefore you’re excuses for other problems that are occurring.
[David] So when you talk about a top, establishing a top, it’s gonna take numerous attempts, approaches to the just above five. Any idea what you’re talking about? I was asked that wa- question, and 505 came to mind. We won’t know, but any thoughts you have? Unless we’re talking about a 10 year, at the 10-year rate …
[Bill] I don’t. I think five to 510 range, but I also think that if rates move higher, again, a lot, the, the Fed or other, large events, could it go to 515, 520? Yeah. Yeah, but I don’t… That’s not a prediction, it could. And the other thing is when you get to the end of a range like this, day-to-day, week-to-week volatility increases. cause everybody’s having the same thoughts and conversations. “Okay, we hit the top, rates are gonna go down.” They either start leaning that way and have to cover a bet that’s wrong, or they start to see rates drop, and they pile on, and they can accelerate it. So that, in this area, I would expect to see, and I think this is what we’ve already been seeing in the last week or so, day-to-day moves are gonna get larger than what folks have been used to.
[David] Greater volatility intraday. inter, within a week, but intraday. So really comes back to having an important service, being able to monitor that. One question I’m sure is being, going around, how does Bill monitor what’s going on? I know you read Les’s, faithful reader of Les’s newsletter. But what are you doing when you’re, with these pretty wild gyrations intraday?
[Bill] First, I tend to try and Not focus a lot on intra day, right? ‘Cause first, if you’re running a hedging program you’re protecting the value that’s already there. And- … typically you don’t trade first thing in the morning ’cause the market’s still settling down. Get the feel for what the day is gonna be. But, be proactive and not be that secondary person that’s sitting there with their eyes on the screen, sweat on their brow all day. ‘Cause if that’s the way you’re operating day to day, then you’re doing your job wrong. And again, we’ve talked a lot about too that you’ve gotta be disciplined and plan ahead because so many of the things that, events that have come up are after hours. Yeah. So even if you say, “I can push the button faster than anybody else,” that implies that the market is open. And this is also something that Les has advocated for years, right? But, this is where having, options in your hedging strategy comes into play. ‘Cause that’s what’s really there to protect you for the things that you can’t react to.
[David] Yeah. The overnight stuff. Yep. Good luck. Good stuff. It’s really having an impact on people’s psychics, Mr. Kittle. Everyone’s head’s just going like, “Oh my gosh, how much trauma can we handle? This is it.” And you find a lot of people are just really struggling with it. You’re a golfer. You know the power of that six inches in between your head. You’ve had good days on the course and not such good days, although you’re better, you’re a far better golfer than I am. But talk about the psychic that, what’s going on in people’s minds with this up, we’re just crossed over into 5% on the tenure.
[Kittle] Yeah, so I was thinking about that, David. And he I was equating what Bill was saying to, to gas prices as an example. They go above $4. They’re at 2.90 two or three months ago, and they get to three and three whatever. They go above four, and they’re in the mid threes or the upper threes and everybody’s in a panic, and I get it. But it goes to 4.19, it comes back to 4.08, and then it’s down to 3.91, and you feel good. Yeah. Although it’s still way up from where it was, but you feel good because it came through a psychologic, back through the psychological level of $4 a gallon. You can still get it at Costco here for 3.65 a gallon. At the normal stations here it’s 4.10 or whatever. 40 cents a gallon’s significant if you’re a Costco member or a Sam’s Club member. So it is psychological. And Bill was talking about, and he was not making a prediction. It goes above five, and then it settles back to 4.60 and everybody goes, “Okay,” ‘ they feel comfortable with that. Three months ago- There was predictions out there it’s gonna go back down to 420 or the range was lower. I know. Now we’re gonna be okay at 460 based on what Bill said, but he gave that particular scenario. Yeah. So it’s how far up it goes, then it comes back, and then you feel good about it when it goes through the psychological level of five or four, whatever it is. We didn’t mention, and I don’t think Matt did. If he did, I missed it. We had a, a non-farm payroll report 10 days ago or whatever it was. Three times the prediction. Yeah. They predicted 53,000. Yeah. 162,000. Will that change or be adjusted? Properly. Yeah. But three times. Economy is strong right now. Three next over. Yeah. Unemployment rate is holding at 4.1%, so there are jobs out there. The economy’s going. But it is tough.
[David] Yeah. It’s between the ears. But I sit and look at it of this. People are still- … there’s events happening in people’s lives where they need to buy a home. I got a job transfer. I got a promotion. I got this happening, that happening. And there are people dying. People are needing to- … sell homes, refinance. Divorces happen, need to refi- There’s so much happening, and the question is what are you gonna let happen, listener, between your ears to affect your ability to produce? And I think this is what’s really comes in, and that’s we say to the, loan originators listening to this, and we say to the managers listening to this, how are you speaking to people? Are you speaking in terms of fear, or are you speaking in the terms of this is what we need to adjust and having good leadership? We’ve all watched a good coach grab a football player when the things are not going well with them on the scoreboard, and a good coach grabs that player- … that’s struggling with that thing going on between their ears, gets ahold of them, refocuses them, pushes them out in the field, and the game turns. It’s so much about leadership in the what’s happening. I think it’s important what you read. Read the facts. We’re, appears to me, Bill, that would you say that we’re in a 460 to 5, little over five range right now until it gets, till we get better? I mean- Yeah … it sure we broke out, so we’re in is yet to be established.
[Bill] Yeah, definitely. And you’re right. It’s, we say it all the time, right? You control what you can. And- Control…
[David] And what you… What I’m telling everybody- Yeah, I- … they better control their narrative within their company, or if you’re a loan officer, what you’re saying to the realtors. Because people are gonna gravitate to those that have an attitude that they’re, “We’re gonna overcome this. We’re gonna make that happen.” When I when the burn, building is burning down, when it feels like it’s burning … it usually is not burning down. You actually look, we got good activity going on. As you pointed out, Dave, non-farm payroll jobs up three acts. When you look at what’s happening in housing, people are moving, homes are selling. No, it’s off from the highest levels. But if, what are you saying to your people? What are you t- how are you talking? This is such an important time. Leadership, we’re gonna find out so much. Another thing that’s going on out there, we just have saw some headlines, I won’t mention the name of the company, where again, another top producer of one of the bigger companies out there just left. And you look at that, several people have left this company. But when you really look at what that producer is costing them, that company to originate, I happen to have insights into this, and you look at it, you go like, ” This isn’t a loss.” You’re losing a big top line number, but the concessions you’ve been making to keep that person in your company just has them at break even. If, and if you really look at it, is it a break even? I’m telling you, people, when they look at the top line number are not looking at the net revenue, they got their eye on the wrong ball. The wrong metrics. We’ve gotta be looking at the bottom line number, and there’s some of these loan officers that are moving around out there for the next big, signing bonus. I’m telling you, I’m gonna follow a leader who’s leading this. And I’m thinking of one company. I was happening to one of my clients. I’m wearing the shirt today, Alcova Mortgage. They got strong leadership, and they’re grabbing their team. They’re good coaches. They coach well. I’m using them as an example, again, giving them a shout-out. But it really makes a difference in what you’re saying to your team. So think about that, listeners. What are you listening to, and what are you saying? If you’re a loan officer, what are you saying to your realtors? If you’re a manager, what are you saying to the production teams? If you’re an ops manager, what are you saying internally? This is a good time. The strong survive. Only survive. We can go on and on about this, but there’s risk of being on a soapbox. We better move on. Bill, David, before we move on to rates, and I want to get to Alice’s thought commentary on the rates, but anything else you guys want to add?
[Kittle] I would say go back to one more time when you’re sitting down with somebody that may be hesitant- You’re there helping sell the house for the realtor. Maybe somebody’s getting cold feet in a pre-qualification or even after they’ve signed the contract. Make sure you can sit with them and structure the loan, show them how they can afford it. There aren’t many good high sides to higher interest rates, but you do get a bigger interest deduction. In an inflationary market, the value of your asset is gonna go up. It’s not gonna go down. – You’re building wealth.
[David] I bought a home when interest rates were at 18%. Yeah. Because it was the right thing to do at the right time. I got a heck of a buy on a home, and I bought it and then refinanced. So guess what? There’s deals to be done. Bill?
[Bill] I heard of a conversation purchase buyer was getting skittish, rates had gone up a little bit, and the loan officer asked the customer, said, ” Would you rather have a house or your Starbucks every day?” And the guy looked at him, and the loan officer was smart. He had done the math, right? Obviously knew the customer well enough. He said, “Okay, you didn’t lock in. Rates have gone up. The rate difference, payment difference- would be covered if that person gave up going to Starbucks every day. Yeah. And you have an appreciation- And I thought the way, he didn’t expl- he explained it in terms that immediately connected- Yeah … with the customer
[David] This is leadership. This is the kind of leadership we’re talking about, Bill, is how are you leading? Are you leading in a way that communication has the impact that’s necessary? It’s good stuff.
[Alice] You guys have covered so much. I’ve taken so many notes. I’m gonna stay on this track with the LOs. A couple of things I would just throw in. you have to decide if in your sales strategy and where you are today about being more face-to-face. Are you the person who- Yes. Yes … is not really great at the technology? I think it’s a huge number of loan officers or percentage that are, more in their senior and haven’t really embraced all the AI and all the technology. So if you’re in that, I need to be face-to-face, I need to be involved, make your plans and your strategies around that, and growing and becoming more efficient. If you are someone who’s in that tech space, you’ve been good at online, then another recommendation I don’t know if people think of is if you’re good online, that means you can reach more people in other markets. And so should you be licensed also in another market that allows you to expand your portfolio in a market that is maybe doing better than the one that you’re in. So a couple things to think about, but at the end of the day, w- whatever your sales strategy is, that you have to be better at planning and growing in this kind of supply and demand- … that we’re in. Then you’ve got to be more efficient in your operation. And I’m gonna go back to what we said at Union Home. We said, “Promises kept,” and that included, I’m gonna get stuff done by this day. I’m gonna call you by the end of the day, and if I don’t have it done by this day, you’re gonna hear from me why. Just plain old, good old-fashioned accountability and efficiency is a tremendous way to earn business. But I do wanna also segue back to what Bill was talking about on the rates, and everybody talking about this 5%. I had to go look this up, ’cause I wasn’t sure if my memory was correct. It’s been 19 years since we actually closed above 5%, right? Is that correct? It was- I think that is … July of ’27. So we’ve seen it today, like you talked about touching. But it’s been a really long time. Close. Most of the people in the market have not seen that number.
[David] That’s right. That’s really a good point, Alice. Really good point. Alan, you were starting to say something in, Yeah … I didn’t mean to cut you off there. Sorry about that. Go ahead.
[Allen] It’s interesting. I think- David Kittle said something a, a moment ago. All this great technology, I don’t know how many originators nowadays, it’s actually in something you said a moment ago, David, as well. Two, just two very quick points. How many originators nowadays really could price a loan out themselves without technology? And I’m not suggesting we need to train our loan officers to do that. For sure we should be leveraging technology, and there’s some great technology providers out there that help you present options. One of them’s called UpList. A guy named Jeff runs that company. Fantastic guy, fantastic technology. Actually, they’re a TMC partner. But the point I’m bringing up is you need to know how to present the information to the borrower, and the days where you’d go sit at someone’s kitchen table are gone. When I was originating loans, I went to everybody’s house, and I sat down with the husband and wife, and I walked them through it. I had my own Excel spreadsheet, and I would show them examples, and I’d write on a piece of paper on a yellow notepad, and I’d give it, the piece of paper when I was done. That’s how I did my deals. Now, they were all warm leads. I wasn’t cold selling. I was more fortunate. But we have to be able to explain to people how to look at the loan. Yeah … what you said, Bill, yes car dealers do that as well, by the way. You can afford the extra $30 a month. Stop buying coffee every Monday morning on your way to work. make your own at home. So that’s that. And then the other comment I wanted to make- was just around, in general, there are what you said, David, there are major life events happening. And so there is, there are things moving. I think people are still thinking that the market should adhere to a higher rate. I know someone right now just through friends, I don’t really know them well the point is that they are selling their home and they listed at the absolute highest point of the market and they had two offers already fall through. Y- you know why? Because the market is not the way it was and everyone just thinks they continue to just pull money out of the market, and you can’t do that. That’s not where we’re at. So you have to, as a loan officer, you wanna close the deal on someone buying a new home. You may have to talk to them, not tell them how to sell their home, but just help them understand where the market is. You’re a trusted advisor and you have to work in that capacity. Technology’s not gonna do everything.
[Kittle] Great comments from Alan, and especially what Alice said, and assuming she’s spot on for what she’s talking about closing above five. Yeah. We are officially in a territory where the gap between that timeframe those of us who were in the business before, been in it a long time, and who got in it with, at under five can no longer just sell interest rate, and that’s what we’re talking about here. You have to understand everything else that’s going on in the economy, the market, about that loan. We’re moving closer and closer to, I would assume adjustable rate mortgage territory. Yeah. You have to start looking at some of the small community banks that are offering, credit unions. If you want… you’re gonna have to have those relationships. Can I move my loan? You’re gonna talk to your secondary guy. Do we have any relationships with people that do ARMs- Yeah. No kidding … in, in the marketplace? So now you’re gonna have to go back again and structure the loan. If she’s right, and I know she is, then we’re not selling interest rate anymore.
[David] No. Nope. It’s selling, do you want this home? And here’s what it’s gonna take to get it, and here’s the benefits of it, explaining it the way we teach-
[Kittle] And here’s what you may have to give up. Now, do you really want the house? Yeah. Maybe you’re not gonna get that new car or the Starbuck or whatever it is. Or dinner. Give up your club membership. I don’t know. But whatever it is, if you wanna buy- Okay … the house and build real wealth, then you’re gonna have to start looking at the total debt load you have and what your lifestyle is and what’s most important to you.
[David] What I love about this business is we form relationships that last for years., I got a phone call over the weekend from a friend of mine who I had done a mortgage loan for, oh, f- 40-plus years ago, and he was asking me still financial advice. And he says, “Do you remember when you made me sell my wife’s white Corvette? She’s a flight attendant. I loved that car. I bought it for her.” Here’s the thing. They sold it, ’cause he went to his wife, I just bought you this new white Corvette. I know you’ll love it. I love you. But what do you want? The new house or that?” And she says, ” Honey, we’re pregnant.” And that’s the way he found out we’re pregnant. ” We need the new house. Sell the Corvette.” So what he did is he kept the VIN number for that Corvette. It was 10 years later, he found that Corvette, went and bought that same Corvette, and gave it back to her in the same color. Oh, that’s cool. That’s idea. I love that story. There’s these kinds of stories- that’s cool … you have to realize when it’s like, really what’s important. And I can go on and on, but that’s why I love this business. It’s a relationship business, and we form these relationships. Shout out to Joe and Cindy Wilson, now living in Gig Harbor, Washington. I love you guys to this day.