[David] Good job, Matt. Lots of important information, what happened last week. I tell you, this tech stock and what’s happening there is playing a big role in what we’re experiencing right now, and a lot of us have been expecting it. I actually recorded a podcast with Pavan, and I’m gonna try to get that roll- We, we recorded on Saturday and we’ll try to get that rolled out even today so that you can listen to his perspective on it. He’s a tech guy. He’s working in the AI space, and the fact that he had a real strong opinion about this. He’s of the opinion that we’re not gonna see rates g- falling as low because this is a tech sector impact, and he thinks where things are gonna settle down, we’re gonna head back up. We don’t know what’s gonna happen. But we do have a great panel discussion here. We always start off with Bill Corbett, also affectionately known as Corbè amongst us LOLers. Bill, good to have you here. Thoughts?
[Bill] Yeah. Thank you, David. So I wanna hit on a couple of the things that Les was talking about, right? Les has been talking, we’ve talked about for a while that the range for the 10-year was 490 to 535-ish. So the fact that it’s- Got to and then now is below 490. That’s good news, bit of a relief, But I think, and this kind of goes to what you were just saying, don’t read too much into it. Yeah. I think the other thing that Lash talked about so he’s talking about, okay, we get under 490, then maybe 475, That’s not your typical bull market type move, I think we’ve talked about for a long time that the range on Treasury’s 4 to 5%. I don’t see anything that’s gonna take it down into the lower end of that range. But the most important thing that Lash talked about is so maybe if we get a little improvement in rates and lenders squeeze their margins, then maybe you could see rates, at or just below seven. This is not an industry that’s been flush with cash. if you’re squeezing your margins that doesn’t sound like a long-term winning strategy, Be careful what you wish for or what you’re seeing taking place and, is discounting in surgical situations a smart move? Absolutely. But if that’s your strategy going into 20- ‘ 27 I’m gonna squeeze my margins a little bit more than the next guy, then I would hope you also have an exit strategy.
[David] Yeah. That that’s so true. We were talking before we went live about the Learjet that went down on Sunday that got into icing. I would say that’s actually a pretty good metaphor because you could continue to do that. You’re gonna be flying into some bad weather and conditions, and you’re not gonna be able to control your plane. Mr. Kittel, launching off on that.
[Kittle] Let’s look at some things across the board today. The last report we were talking about that the Fed may be worried about the economy slowing, yet we get, last week third quarter GDP comes in at 3.4. It was 2.2- Yeah … second quarter, and that’s all due to some government spending, but it’s consumer spending- as well.
[David] Way more consumer spending than what has been.
[Kittle] As bad and as unaffordable as it is, there it is. To Bill’s point, 10 years under what is it, 480- 4.87 right now, and oil across the board today. Stock market’s up almost 500 points, and oil across the board today is down from $7 to $11 a barrel in the crude So it might be just a quick whatever, but as some gas prices will fall, rates will fall, the market’s up, our economy’s still strong. And so that’s a mixed signal to everything that you’re hearing on the reports. Just is.
[David] Yeah. But it’s fascinating to see the times that we’re in and what’s affecting rates. Alice, your thoughts as you listen to all of this good stuff
[Alice] I think you know me. I’m gonna be the one with the operational hat on, and so when I hear that people need to tighten up on the margins, it is that time of year where you do have- to look ahead to that winter quarter. And lenders who are planning ahead, if you think you need less staff over the winter, now is the time to solve that problem- Yeah … and not get yourself in the situation where you’re looking at staffing adjustments in December, which then everybody goes, “No, you can’t do that around Christmas,” right? So now is your moment to think ahead to the, that winter quarter into January, February. Some markets are immune to that, based on their seasonal position, but as– many of the markets are not. when you talk about having to cut the margins in order to make all of this work over the next t- couple months, that’s my two cents there. The good shops know they have to do that, and now is the time to do that planning.
[David] Yep. Very good. Said, and a number are. There’s fatigue out there like I haven’t seen in a long time, especially with the– in the IMB world. A lot of people are really tired of just hoping and praying for something to turn around here, and I think we’re– and we’re wa- it’s encouraged by where the direction rates are. But Marc, you and I have been at this thing for… m- most of us that have been on the podcast have been on this just for a long time. Your thoughts on the market conditions?
[Marc] Yeah, I want to add something that I was involved in a conversation with two pretty good friends of mine. They’re pretty far up the food chain with big box stores, and I’m talking about the ones you pass on about every street, and they’ve been around for decades. And both of them were doing a woe is me thing with me independent of our conversation, and then we just happened to be at the right place at the right time, and we had a 45-minute conversation about this. The stores have been planning for Christmas, and they plan, months in advance for that. Yeah. And they think they have over-bought big time, okay? Based on supply and demand. And the one guy said, “Yeah, we’ve over-bought.” And the other guy says that’s not necessarily a bad thing, ‘ cause what we’ll do is here we’ll have a big rush on stuff at Christmas time. We’ll offer some big sales. We’ll still make a profit. We move it through the food chain. We keep our people employed.” And I love the way this guy’s thinking. He’s thinking it’s all about survival. How do you survive from one thing to the next? these names are household names, and they’re difference- two different stores. And for them to be saying, “We’ve overbought and we’re in a jam, but you know what we’re gonna do? We’re gonna take and pass this on to consumer, and we’ll make enough to cover our cost our carry costs and shipping and all that, but we’re not gonna really get into the black solid on the sales. But we’re gonna do something for our customers, and we’re gonna let them know we’re doing it and why we’re doing it, and that’ll mean more to us long-term.” And if you think about it, if we had more of that going on in our environment today where people were telling us why they doing it and why they have to do it and doing this and doing… What’s gonna help us and whatnot, and it was a little bit more open kimono, I think all of us out there would love understanding our market in not tech speak, but in four or five words, good, bad, ugly, and how’s it gonna be? ‘Cause we learn how to live with that. We have to live with that stuff every day. And here we are talking about big box stores. Two of them are dealing with something, and they’re gonna pass the savings on to their customers, and I thought that was un-frigging-believable.
[David] I’m not sure it could work with mortgage lending because of how thinly capitalized our build. I think that’s where-
[Bill] So actually, I think Marc read my mind and one of the things that I wanted to hit on so we’ve talked in the last week or so about the underwhelming executive order on housing affordability. So Marc just described two massive private enterprise public companies, private enterprise businesses that have recognized what they need to do to keep their business model flowing and to benefit them, their shareholders, their employees, and their customers. That’s what senior executives are supposed to do. So we’ve talked about all these in the past, but I just, I wanna lump together four things that FHFA could do without any external approval involved that would make a meaningful difference in the housing finance system. FHA MIP, LLPAs Guarantee fees, right? You’re starting on guarantee fees. You’re starting to see private MBS deals of agency owner-occupied product that are being done outside of Fannie Freddie execution because it can be cheaper. And then you’ve got the MBS purchases, right? that’s the one that kinda set me off on this morning when Halty talked about buying 200 billion a month, and never has come anywhere close to that. So those are four straightforward things that could be done immediately, forget all this credit score crap. I’ll just go ahead and say it, because that’s got such a long lead time and technology implications and it’s a mess. And it’s, it was a mess three years ago when I was, on FHFA working groups and explaining all the reasons they wouldn’t work. So four things that, again, go back to Marc’s example, that a private enterprise company would be doing all they could to get to the marketplace. We’re still waiting
[David] Yep. We are. But I think, Mark, your analogy or y- your story about the big box stores and what they’re doing, they can afford to do that. I’m thinking about the independent m- we have many ind- smaller independent mortgage bankers out there that are really struggling to keep ahead. Companies with their volume down 30, 40%. And to Alice’s point, they need to make the cuts, and many of them are making cuts now. And then you look at what we see as a bit of a rally. Is this a tech depression because of the tech sector that’s pushing rates down? Is this gonna be sustainable or it’s gonna be continuing? There’s just so many unknowns. But the little guy out there is the one that’s really struggling. There is more mergers and acquisitions going on right now. There are four companies in a particular state working on trying to come together, see if they can’t combine. And again, the, Alice to their point is if four of us come together, we’re only need one CFO, one CMO, one COO, and let’s try to pick. But that usually doesn’t go well because you’re doing that in a crisis. You’re not doing that in a long-term planning sense of really where this thing’s at. You’re doing it in a feeling of desperation. Most important thing is that we have got to be having important conversation with your counterparties because I believe some of the best counterparties are your best … Your, kinda your counterparties are some of your best advisors. Mr. Kiddle, you had a thought.
[Kittle] I haven’t heard that there were four out there. Don’t dispute that at all, but that would be the perfect definition of cluster. That’s what I thought too. let me just say to that, merging two cultures- Is one thing, yeah … painful enough. But four? I think that’s crazy, and your point is exactly spot on. This is Sounds like something out of panic- Yeah … instead of planning.
[David] Yeah, a strategic, well-thought-out plan. Which is what Mark was talking about with those… I’m so glad he brought up that the big box stores that are planning. They’re strategically thinking. They have the capital to do that, they’re level-headed. But that’s not what’s going on in the little box stores, and it’s not what’s going on- Oh, man. I just cannot imagine. Back rooms, everything else, systems, LOS, M-O-U-S-E, whatever you got, right? I mean- Yeah … it, that’s difficult. Yeah. One of the biggest things… A- and Alan, I want to, when we get to your segment, I want to talk about the LOS because there’s, everyone’s struggling to get out from underneath the stranglehold of the cost of, the biggest LOS out there, and their costs keep going up. And so many are trying to figure that one out, but we’ll get to that a little bit later. But good thoughts then on this. But the good news is rates are lower for whatever period of time this la- or as long as this lasts. Bill, any thought when your conversation with Les, it sounded like he’s more optimistic that this could actually last for a while
[Bill] Last for a while and have a large move are two different things, right? Could rates improve a bit and stay there for a while? Yeah. But that’s improve a bit does not become improve a lot more from there necessarily. Yeah. cause that’s the other thing is people take a little move and instead of adapting to that, they start with the what if they drop another 50 basis points? And then what if it’s another 50 on top of that? And, they- then you’ve played the what if game to turn your business model into something that’s five steps away from reality. Yep. Lots of discussion. And- Alice, go ahead.
[Alice] And I just wanted to add, for the four things that Bill brought up, those will have a bigger impact on affordability and the monthly payment than those minor movements in the rates will. Yes. So true. We could go on. We’re on an interesting ride. I mean I have a question for you guys. History seems to repeat itself in the mortgage business on a regular basis. Are we seeing new territory, guys, or are we seeing in some just same story, different chapter kind of thing, different time? What’s your thoughts? Bill?
[Bill] What do they say? History doesn’t repeat, but it rhymes. Yeah, it sure does. That’s a good way to put it, yeah. I think, say the word … I am definitely seeing things that we saw in 2004, 2005. Yeah. There were the- Yep The, the first steps in stupid we’re seeing…
[David] Yeah and if you look out in California they’re further down a few more steps down stupid than the rest of the market because of the nature of that market. And I understand it. They are working on survival. And but where that’s at. Your thoughts on that one, Marc?
[Marc] It’s interesting. We’ve gone in a big circle over the last few weeks, but all I can think about right now is we’re marching to that same old definition of what insanity is. Yeah.
[David] Yep. We are in interesting times for sure.