[David] Thanks, Matt. Appreciate it very much. Be sure to check out Matt’s website at mbslive.net for up to the nanosecond updates. You can get the extended trial period by putting in LOL in the signup code. Also, you will not have to put in a credit card number if you go that route, by signing up and putting in the LOL code, appreciate it, Matt. Very good, very timely. A lot to talk about. Let’s get over to you, Mr. Corbett, on your comments on it. I’m interesting, the word stagflation kind of leaped out at me when Parker was talking. That and then the whole, everything teetering on the Strait of Hormuz staying open. Your thoughts on what’s happening, looking at the jump up today, then I’m reading also Matt’s notes about the UK. Make sense of it all for us.
[Bill] Yeah. So before we, we delve into that, the first thing, again, we’re recording this on Monday, Alan Greenspan passed away. So rest in peace. I know. Rest in peace. And I think its timing is very interesting in that Warsh is being compared in a lot of very positive ways to Greenspan. That’s where he learned a lot. So Greenspan lived to be 100. Great life, great career. Certainly did a lot of wonderful things for US financial system. On to the immediate and so the first thing, the other news out of the UK, right? Is that the street in front of 10 Downing Street is closed right now with some construction going on, that they’re replacing the front door with a revolving door. Since they they’ve gotten annoyed having to change the locks as frequently as they have been, that’s hilarious. Yeah. Six, six in seven years. That, yeah, that’s, it’s just And then- Yeah … who they have coming in is probably the most liberal of them all. Yeah. So we now have Fed Chairman Warsh, and I think we got to see a lot of what he’s all about last week, The first thing is he’s been telegraphing that he thinks the Fed communicates too much. And so his statement at the end of the meeting was 130 words versus 340. I found that interesting, and I think the other thing is- … the two most prevalent phrases that he used during the rather brief press conference were task force and price stability. And, a lot of the things that have been talked about for the Fed and mission creep and just needs to be restructured. He went in and he’s setting up five different task forces to address each one. I think he was pretty clear that they’re gonna be a combination of resources from inside and outside the Fed. I think it’s one of those where he’ll say, “I don’t have preordained conclusions.” But I think that’s window dressing. I, think those committees are … They’re gonna have very specific marching orders. It’s long overdue, so that’s gonna be a huge positive. And then the next thing he talked about pretty much was price stability. Price stability, and committing to the inflation target of 2%. if you take him at face value, the is he gonna come in with a cutting bias? I think he pretty well answered that question. We’ll see. And then by the way, and we’ve talked about this before, the Fed removed the easing bias, which when you look at the way the market reacted, especially on the short end, is by itself a Fed increase, right? Short-term rates moved up- Yeah just based on the changing of their messaging. The other thing, and a couple of folks in publications over the weekend and Juan Claudio Sáenz, who used to work at the Fed he’s had a piece out about Warsh being the shadow Fed chairman, right? That by not communicating as much, he’s gonna be following the market instead of the market reacting to the Fed, and that’s, good or bad, that’s gonna lead to more market volatility. And Lass also touched on that in his newsletter, where, in a low volatility environment, regardless of whether rates are moving up or down, if volatility is low, hedging becomes pretty straightforward, right? And the more volatile the market gets, the more you need to look at the way you’re hedging and not just plan on executing trades between 9:00 and 5:00, for example, right? What’s gonna happen to your position when either the market moves really fast or the market moves really fast outside of US business hours? I think in general, the combination of what’s going on in the Middle East, and is gonna be going on for quite a while, and where the Fed is going is, for the secondary folks and, for anybody, I would expect a more volatile environment going forward.
[David] Yeah. What would be driving that volatility other than geopolitical?
[Bill] It’s just more uncertainty about where- Not having the signals? Where the Fed is thinking and not having as many signals.
[David] Yeah. Yep. Yep, that’s what I was anticipating. I was thinking lesser signals. I can’t wait to get Alice’s feedback, ’cause you, Alice spoke in Ohio, and two of my favorite people spoke there on this topic. And so let’s get in your thoughts about what you heard there from Chris Bennett as well as, Tim Rood, tim- Yeah.
[Alice] Chris Bennett of Vice Capital Markets and Tim Rood Impact Capital. Yeah, so we had a… There was a panel discussion held at the Ohio Mortgage Bankers Association conference that I was at last week. And so Bill, to your point- Spoke at it … they were saying the same thing. Yeah, I did different sessions. That wasn’t the secondary, yeah. I’m so sorry. I listened to the secondary- You’re so welcome … because it was fascinating. It’s fascinating. So but it was very interesting, ’cause so the meeting in was before the Fed meeting so thank you Bill for all that. But they were saying some very similar things that you hear. Warsh is going to be focusing on different things versus, the inflation rate. The Fed, they’ll be the buyer of last resort was one of the comments versus the first resort. So maybe there’s more buying discipline to just more or less run off the balance sheet as opposed to trying to build the balance sheet. So Bill, I was thinking that would be something I’d like to hear your thoughts on. And so there was a, just a lot of just the same thing that you’re saying, a lot of volatility and having to watch that could this possibly lower rates in the long term. But and then doing away with the dot plot also seemed to be a topic of discussion- The r- that, that seems to be something- Yeah. There, it’s pretty clear. Okay. Yeah. So anyway, I wonder your thoughts on that.
[David] Seems pretty clear that the dot plot is not gonna be not gonna be the thing that’s gonna be driving a lot of the decision.
[Alice] Yeah. And same thing that Bill just said. The market isn’t gonna be able to, analyze every word, and it’ll be the market or the Fed being, watching the market behind the scenes and not trying to lead the market.
[David] Yeah. I think, Bill, that gets us to explaining the volatility. Because if you have the Fed signaling what they’re gonna be doing, explaining it as they go along, then levels things out. But when we’re gonna be doing some real intense guessing, at least early in Warsh’s the, taking over n- as the chair it’s gonna be leaving a lot of people trying to figure it out. It seem… in your opinion, Bill, does it seem like he is going to be a stronger leader than we’ve seen before?
[Bill] I definitely think so. he clearly is coming in with this task force he set up with, five different, all, each one very significant agendas, and recognizing that he can’t drive all of that change by himself, right? So he said at the meeting he’s, at that point he’s, what, 10 days in, and that he is already in the process of building out the task forces, right? It’s not an aspirational, “This is something we’re considering.” And, He was asked the question in the press conference, and I was really surprised that he answered it when somebody asked when are we gonna start to see the results of these task force?” And he had the perfect opening to give a very vague we’re just pulling the concepts together,” et cetera. and he said that he expects to see solid information by the end of the year. And- Wow … in terms of the way the government operates that’s a blink of an eye. Yeah. That’s a good one.
[Alice] And it does seem like he’s gonna use… I’m sorry. Is he gonna use different data sources as well, do you think?
[Bill] Yes, he is absolutely going to be using a lot more real-time data than the standard government production releases. And, I don’t remember whether it was this or another meeting, but he pointed out that Bank of America, for example, based on their consumer banking, has real time daily indications on the way money’s moving around, ATM transactions, debit card, credit card. His point is, that’s the stuff that the Fed needs to be looking at and not relying on data that is one to three months old by the time they get high confidence in it.
[David] Yep, that’s, yeah, a little bit more dynamic, more happening. Mr. Kittle, your thoughts?
[Kittle] Just one reflection. I was lucky enough as an officer, and I still think MBA does this, but got to meet in the Federal Reserve board room twice with Alan Greenspan back in the day. And this is a great quick story. We’re over there meeting with him. This is 2008, I think, and we’re sitting in the room. My particular job that day was give him information from MBA’s perspective on adjustable rate mortgages. And I’m sitting right- That’s right, that was big back, yeah … sitting next to Rob Couch and Couch is going through what he’s supposed to be doing, and Greenspan is sitting across from us, and he’s not even moving, his eyes are closed. And his eyes are closed for 30, 45 seconds, and everybody thought he’d fallen asleep. It was truthful. And finished, and as soon as Couch finished what he was saying, his hand came off his face, he opened his eyes and gave a complete… He was listening the whole time just with his eyes closed. But we were all looking at each other “Has this guy died?” Is he alive? Did he die? Is he even there? Yeah. Yeah. But to the point about Wash, Powell never gave me the impression that he was really a leader. He was always reacting- … rather than what Bill said a minute ago, old data. And to Bill’s point, he… Warsh is gonna come in and he looks like a leader, he acts like a leader. And one of the volatilities that has, since he’s taken over, that has been immediately removed is the volatility between the Fed chair and the president. Trump drove a lot of volatility around the Fed because he didn’t like Powell and he wasn’t doing what he wanted him to do. So there’s a great relationship to start out. Even though I believe I’m correct on this, Trump was the one who nominated Powell on his first term. He did. Yeah. Okay. And he went the other way. They got to where they didn’t like each other. So that volatility is gone from this. I’m gonna be a supporter of this because I don’t think it’s the Fed’s job to drive this. It’s to protect and react on current data. And if that’s what’s gonna happen here, then the market’s gonna drive itself and market’s ought to drive- Yeah … more free market- It’s good to free- … manipulated market. It’s good to maybe feel back then
[David] Free markets are… It seems like we’re getting back to that. I sent you guys a video that I watched, and the thing, the part that, that was most interesting to me is how Warsh and Bessent worked for the same family office, one of the most successful investors out there. And that was the part, the relationship with Bessent that I thought I wanted you guys to focus on. I didn’t give you any parameters. I want you to listen to the whole thing at the end of this video. By the way, listeners, we’re gonna put a link to that. I just put a warning label on it by the time you go through. Just listen, it’s coming from a Bitcoin kind of perspective at the end. I thought there were some good points there. But what about the closeness, apparent closeness that was suggested in this video between Warsh and Bessent having been working for the same family investment firm long private investment firm? Thoughts on that, Bill?
[Bill] Yeah, I think there’s definitely a similar style in having worked closely together with someone, right? It doesn’t mean you always agree, but you understand their thought process, where they’re coming from, and therefore, how to work together, right? Again, doesn’t- Yes … you don’t have to agree, but, there, there is a- But you also have an anticipation of understanding of how someone thinks. Yeah. And have a rela- have an established relationship, and that’s the part I think that I’m probably most looking forward, is how Bessent and Warsh are going to be I think com- back channel and communicating a bit more. Not only back channel, I think just out in front communicating with each other and communicating in the exact same language.
[David] Yeah. That’s the language. That’s a good way to put it, Bill. It’s the language. Because of the common background and where they both came from. I can’t remember the name of the family firm that they managed for, but it was… it’s one of the most respected places around. So the fact that both of them came out of there, pretty interesting. I think there’s gonna be a better coordination between the, Treasury and the feds than we’ve seen in the past. So very fascinating. We’re in volatile times, but that’s… I think the volatility is gonna be back, but, that’s… Is this gonna challenge the secondary? Are we gonna find the secondary guys being more challenged by this, Bill?
[Bill] Oh, absolutely … company. Yeah. I mean- Yeah … that, that seems like a rhetorical question but there’s some … I think that we’re gonna see the separation between the capital markets people that really know what they’re doing and those that were, I think, probably not as talented, quite honestly. Yeah and it’s talent and it’s discipline, right? There, there are a lot of- dis- that’s- … really smart- … a good way to put it … really smart secondary folks over the years that got steamrolled because they thought they were smarter than the market and didn’t maintain- … their discipline. Really good point, Bill. That’s a really good point And then, If I was running a secondary operation right now, I would be sitting down with the executive team with some of these articles and saying, “Okay, so let me explain to you what volatility- means to us on a month-to-month, quarter-to-quarter basis and what could happen, And, you review the policy, for example, where it talks about, the outlier parameters and going, “Okay, we haven’t had this discussion of X happening in the last three or four years. Let’s have the conversation now before it happens,” ’cause it will happen going forward. And, use this to reengage with folks on an educational level and not wait until that outlier day actually happens.
[David] Yeah. We’ve got some interesting dates. Any thoughts on what’s going on in the UK bill and the impact? Is this short, gonna be fairly short-lived? It seems like there’s so much… The revolving door, how you started it, that construction going on in front of Downing Street with a revolving door. It has been a lot of that. Is this in reality gonna have much of an impact other than just… Can’t say that was unanticipated- I- based on all that’s going on over there.
[Bill] I don’t think it’s gonna have a huge impact and of the different things going on right now. Yeah … it’s not something that I would spend a ton of time on. One of the other things- It’s the- … and again, it’s that also was, kinda got overshadowed, but the, UK banking regulatory environment, they’ve just come out and said, ” Yeah, by the way, you know those changes that the US is pushing on Basel III? We kinda feel like we wanna go down the same path.” And that, they’re starting- They’re important, yeah … some of the… Yeah, maybe the folks in the US, we like the- Aren’t completely crazy … pushback that’s going on. Yeah … I found that fascinating,
[David] That’s a good observation. Kittle, you had a thought on that.
[Kittle] Yeah, I think, The market’s more reactionary and it’s bigger news that Michigan lost its basketball coach, Dusty May to the Mavericks- … than the change on 10 Downing Street. Yeah. And- That’s funny … I think it’s a yawn, actually. I did text really quick to make sure that it has been quite a few years, so I texted a very close former chairman while we’re sitting here and I said, “When did we go over and see Greenspan? Was it 2008?” He says… It came back, and he says, ” No, you’re losing your memory. We went in 2004.” I said, “Okay. Thanks for telling me.” Okay.
[David] Yeah. But to have the opportunity, and one of the things I think I’m so glad you brought up Bill, the Greenspan’s passing. He was iconic. He was known. His style when you sit, like you were talking about, Kittel, sitting there. I’ve heard that said before, that people would sit in front of him and they go is the guy here? Is he listening?” I don’t know if you’d call that active listening, but intense listening to the point where you just know this man is taking in everything that is being said. Very bright guy, and what an iconic figure during a tumultuous time in our country. Very interesting.
[Kittle] He literally was the smartest man in the room when we were there. You know- Yeah … whether you like, I was about… I think he what? He was Fed chairman for 18, 19 years, so-
[Marc] Yeah. Yeah. Yeah, pretty iconic, pretty brilliant. Marc Hale, any thoughts on this? You’ve been around this industry as long as I have been and almost as long as Kittel has been. But we’re- Yeah … we got both Kittel beat.
[Marc] I’ve got a number of comments here and, I think the most important thing I wanna say is, I think the idea of Wash setting up those committees to, help develop positions on things is one of the smartest things I’ve heard to be done. And if the outcome of that is good, I think it’ll be good. And it all depends what I’ve… I’ve been on committees like that before in different s- situations. It all depends on the quality of the committees, ’cause I’ve been on committees where there was one superstar and the rest of the people weren’t worth a damn. But I’ve also been on committees- Yeah with seven superstars and they couldn’t come to agreement on anything. So we see all that. The interesting thing about this I truly believe the market was created to give us something to talk about on the show, because we can talk about it and talk about it and talk about it, and the fact is it’s gonna continue to change and it’s gonna continue to be different than what we think it’s gonna be, et cetera. But I’m hoping out of this Fed chairman we’ll have a different thing happen. I think he will be more of a person… And don’t take me wrong on this, just read between the lines. More the person who helps with the right reasoning, creates the market rather than reacting to the market. Yeah … I’ve always had a problem with a Fed chairman reacting to all the stuff, housing starts and all these things out there that many of them don’t understand, and they got this super team of intellect, very intellectual people that do all this fact breaking and put charts together and all that stuff. But the reality is there’s things you can’t control. Like in the southern part of United States right now, there’s no housing starts because all the builders are interest- real concerned about getting stuck with housing. So what’s that done? Prices on housing have gone crazy, and it’s knocked a lot of people out of buying houses. I’m seeing- Yeah … people put prices for houses in Alabama that haven’t been seen per square footage in areas of, pretty nice areas of Texas for a few years. So we have that kind of thing going on. But I think the most important thing that’s gonna come out of this is that as we analyze what’s going on in, the marketplace and continue to do that, I think there’s gonna be a different kind of focus come out of this Fed chairman that we haven’t had in a number of years. It will be maybe the Greenspan intellect, but be a more conversational than we’ve had before, because with Powell, it was his way and the highway. That’s the whole reason people don’t don’t think about this that much, but the reason why he and Trump didn’t get along there so much, they were cut from the same bolt of cloth. Yes. Different way, different ways they presented things, but still- Yeah … the same bolt of cloth, and that made it, Interesting … dramatic and all. But I think we’re gonna see a lot of changes, and I’m all for it, but I think we gotta quit being reactionary to too much stuff. I’m a student of history. If any of us on this phone call- Yeah … think this Iran war is over, I think I need to go get you drunk somewhere, because it’s not. That’s right … it will be not… You look at all the places in the country, the only thing that kinda settled down a little bit like Trump thought it would be was Venezuela. I was kinda surprised that didn’t, that kinda went by the wayside. It wouldn’t have been for them supplying oil to us during all this catastrophe going on, we would’ve had some major, problems with or we were importing from other countries because of what was happening in the Middle East. So I just think we need to pay attention to what’s happening out there and and watch it, and I think we’re gonna see a whole new subset of things help control the market in a go-forward basis, ’cause we see all the volatility that related to the Iranian conflict, yet- What really happened? Up and down, and up and down, and we’re same place we were before, and we still don’t have that thing resolved, and I don’t think we’ll ever have it resolved the way everybody thinks it’s gonna be. So we’ll just see how it goes. But those are my opinions about it, and I just- Too bad … I’ve just seen so much in nearly 49 years in this market now that I’ve learned to roll with the punches and pick up the best things you can and use them, and the things you don’t like, try to work around them. And the things that you do reinforce them so they stay in place for a long time. I’ve done a four or five, Go back to what Alice was talking about. I’ve done about four or five mini consulting sessions on the Vantage score and FICO with different investment banking firms, and they’re all trying to get a handle on it. And what’s really was amazing to me is I can spend an hour talking on the phone, they still don’t understand it. And they said why is that? We’re having a hard time understanding it.” Because I said, “Because I don’t really understand it. I know what the products are, and I know why they’re created, but, it seems like to me we got the we got the car driving a driving a driver rather than a driver driving a car when you have the credit bureaus- Yes owning FICO. So that’s a weird situation in my book. So that’s my thoughts. Interesting.
Yeah, it’s an interesting analogy, knowing that we have Waymo out there, and we have cars that are truly doing that, driving the people rather than the people driving the cars. That’s interesting. Yeah. But yeah I go back to the days of Volcker, where we looked at what happened with the spike up and then trying to correct the economy. So I don’t think we have a Volcker there. Hopefully have more of a Greenspan-esque thinker, but it’s gonna be different. Not like anything we’ve seen in years. All right. We got to move on. I’m interested in getting… Thanks so much everybody for your comments on that. we should move on to the bills, getting comments on the cost originate. What’s your thoughts on driving costs down?
I’m all in favor of it. I think to your point, a lot of folks are making Dollar-based decisions without trying to look at their business holistically. Yeah. And it’s really the same argument of I’m getting all this technology and it’s not saving me time or money. Where are you using the technology? How are you sequencing it? A lot of today- Very good point … you’re ordering, you, you’re ordering multiple services. Are you doing it rapid fire, or are you doing it at the appropriate point in the loan when, maybe- Yeah … your confidence in the loan has gone up? Again, different business models, there’s no one answer, but I agree with you. I think folks are looking, at a monthly invoice and saying, “We have to cut this invoice by 50%.” Yep. Instead of saying, “How do we make the whole business more efficient?” ‘Cause frankly, that’s harder to do, right? It is. It’s a lot easier to walk out of your corner office and say, “This invoice needs to be cut by 50%.”
Because it’s figuring out who’s gonna be that’s where some of the dysfunction comes in. I think that’s the thing I’m just listing our listeners, be careful of the dysfunction that this is setting off. It’s essential that we be looking at, you, you must have taskforce, like Marsha’s setting up. But then we gotta be looking at how to drive costs down but, and do so more aggressively without it becoming dysfunctional. We’re watching it happen, where some dysfunction is showing up at some companies and it’s really unhealthy. So we’ll be having more talks on that. We’re gonna get some talented CFOs on that are doing it well and having some great success in it. And it’s been done through technology, but it’s not just throwing more and more technology at it. So great point.
[Bill] One thing that’ll stir the pot a little bit, but what’s one of the two biggest costs in originating loans, and still nobody addresses it, is LO comp. And, Oh, Mr. Kiddle, can you ever let go of LO comp? My gosh. It comes from having owned three lending- Yeah.
[David] No, you’re just spot on, I’m teasing you. You know I’ll give you a bad time- Oh, you are … because we both share that, yeah. But it’s- Yeah … it’s there. It’s the elephant in the room cliche. It is. Welcome to Dave Kiddle cliche. You know what? I’m gonna give it a shout-out to Chris George, who’s a good friend of yours, David, and a friend of mine and someone I’m talking to. I’m looking at some leaders that are stepping up and doing some things about what that is. They’re using technology in a brilliant way. I can’t really get into it much other than just say- There are some people that are paying very close attention to their costs and what they can do to increase production, increase the income for their MLOs while driving down the per loan cost to MLOs. And there’s things that you could be doing. Pay close attention to the leading companies like CMG out there. It’s really good.