[David] Thank you, Matt. Appreciate it. Good report. Lot of data in there. So much to talk about. We’re gonna get into that analysis. But be sure to sign up for Matt Graham’s MBS live news service by going to mbslive.net. Put in LOL for the sign-up code, and you will get a extended trial period. Just sign up for it. It’s affordable, and it is so relevant, especially in these kind of markets. All right, Bill Corbett. I liked one thing that Les said, especially when related to Japanese monetary. Their situation was that they put a tourniquet on it rather than solve the problem. I think there’s a lot of tourniquets being applied in a number of situations right now and to stop the bleeding, and love to get your comments on these reports.
[Bill] So I think there are two main things right now. One is I believe that Warsh and the Fed are now looking for a reason to raise rates. I think they feel like the inflation prognosis is not getting better but they gotta wait and see what the data says. And, they’re in a tough spot because September can be real, but then the next meeting is right before the election…. Are they gonna wanna raise rates then? I doubt it. It would be pretty extraordinary if they did … I think the other thing that is not helping anybody’s understanding of what’s going on is Trump, again, continues to jawbone that the US should have the lowest rates, in the free world. If rates are, higher rates are driven by inflation and economic growth, right? And part of the reason US rates are higher than a lot of other countries is our economy’s growing a lot more than those other countries. So that’s not really a bad thing, and I think he does a lot of disservice to, the economic messaging when he’s entirely focused on rates, which low rates typically have a, at least a huge component of it is weak growth. I think somebody needs to redo his cue cards. The other thing is, and I’m sitting here looking at a chart, and, when the Middle East was, relatively stable, all of late February is when the 10-year was flirting with 4%. And whether you agree with the reasons for going in or not, we can went into the Middle East and pretty steadily rates have moved up to the 470 range on the 10-year. So if somebody says what do you think is gonna get rates back, 10-year back down around 4%?” I don’t know. Figure out how to put the genie back in the bottle and go back to what it looked like in February. Yeah. Good point. it’s not gonna happen, and- No … frankly it’s getting old to hear, and Matt mentioned, you’re in these three or four-day cycles that not only is nothing getting accomplished, but when you take the noise out of that, it seems like every cycle the two sides are getting further and further apart, not closer together
[David] Yeah. So moral of the story, Bill, get used to these rate levels and possibly higher. We may be seeing the lowest rates- Yeah … of the year. And that’s distinctly possible. The stubborn facts are is we do have a good economy. Much better than most of the rest of the world. And so you compare that, what’s the outcome of that? Inflationary or in- inflationary pressures come with that. Mr. Kittel, your thoughts.
[Kittle] The Iranians are liars. There is no deal. The Strait of Hormuz is not completely open. Oil has risen. Trump still doesn’t wanna kill anybody. As confirmed by Vice President Vance yesterday and again today, we are in the middle, used it twice, of this conflict. The middle is not close to the end, and they’re going to try ultimately to squeeze them economically. Yeah. The Iranian government, whatever leadership is there, could care less about killing anybody. They’ll kill anybody and everybody. They’ll hold on forever. And so now oil’s back up above 80. Warsh is looking at this. That’s the inflationary pressure across the board, period. Therefore, I agree with Bill. He’s probably looking at raising rates. And life goes on. The economy’s good. Which isn’t great … and until this particular administration comes up with, and I say at about this one, Biden, the first Trump administration, and go all the way back to Obama. We don’t have and have not had a defined housing policy in this country. And until we can get rid of regulation across the board- And put together more inventory that would lower prices a little bit, and do the other things that we’ve talked about on here, which sound like a broken record. Title insurance revision, homeowners insurance address the abhorrent cost of that. Get rid of the upfront HUD MIP. You can do all these things collectively. They’re not only good for the consumer and the country, it’s good politically from an optics standpoint for the administration. And so that’s it in a nutshell. Rates are gonna go up a little bit, and this is the market we’re in, and the war in the Middle East has no end in sight unfortunately. No. No, this one is it was sold to us one way, it’s turning out to be something altogether different as far as the duration of this. So yeah, put on your seat belts. We got a long ride ahead of us, so good. Alice, good to have you with us. Thanks for dialing in.
[Alice] Hello. So I hear everybody saying about the high likelihood of rates going up. What I haven’t checked lately, and I guess after hearing this conversation I wanna go do that, is see what the latest house price index X’s are. With everything going on it seems like the housing market itself as far as prices, some areas have cooled down. There are still the occasional hot pockets, but are you guys seeing that, buyers are out there with the lower rates? I’m sorry, with the rates that they are and the potential for rates to go up do you see that impacting originations purchase market at all right now? And Bill you’re running a business, so you, what do you see?
[Bill] I would say that things are pretty steady, right? It’s hard to tell because the purchase refi mix gets out of whack by refis going up and down. But it’s steady, it’s just not at a phenomenal level that everybody’s hoping for
[David] Yeah. Yeah, I would say the same thing. Steady’s okay, right? We can take… Steady you can live with. Decline is when it starts to be a problem. Yeah. Obviously.
[Kittle] Personal comment to that is my youngest son, getting married in October, just bought a house. And when you equate it to what I bought 50-plus years ago, whatever it is, it’s almost, to the number, 10 and a half times what the house was I bought in the late ’70s, my first house. Think about that, 10 and a half times on the sale price. Yeah. It’s a new home. Yeah. It hasn’t been lived in, but that’s… and in Kentucky. Yeah, but
[David] So has earnings. So has earnings gone up dramatically from the-
[Kittle] Absolutely, but still, it’s like-
[David] Yeah. We were talking about this, David, here or recently on a, separate call, and we were talking about what you were earning when you started in the market and what I was earning when we got in the market and what our rents were and how we started. Yeah, it… That’s, that is a bygone days when it comes to so many aspects of it. We can’t even look back at that. It feels like, grandparents talking about how they walked five miles through the snow. I think we’re in a market right now which is, steady. What I’m hearing, Alice, from the clients that I’m talking to, and just I was on with my friends over at Alcova this morning, and they go, yeah, they’ve seen a little bit of a drop in ask, but overall it’s been a steady, good year. People are… Earnings are there. They, everyone should be focusing on cost. Every, at least anyone I talk to, you gotta be talked to dealing with your cost to originate because we’re seeing that. There’s some new threats that are coming on that I think are really interesting. We’re gonna talk about those, ’cause I think it’s a time to do another industry SWOT. We may do that as a podcast one time. Let’s do an industry SWOT: strengths, weaknesses, opportunities, and threat. And what are we facing as an industry? And I think we got some interesting days ahead, but that’s another topic for another day. Marc, you’ve also been in the business for a long time. Your thoughts on production and your thoughts on what we’re seeing in the markets right now.
[Marc] Back in the ’70s, guys, I was one of those people that had a assumed a loan at 18 and a half percent, was glad to get it. So talking about rates nowadays is small potatoes compared to that. Of course, if it was on a house that was 10 and a half, 10 and a half times higher sales price, I wouldn’t have had it. That’s for sure. That’s positively sure. Wanna make a couple comments. Going back to the early things we talked about. When we talk about the powers that be, whether it be the Fed or whoever have any kind of influence on rates, if any of them are weighing anything they do based on what’s going on in Iran, it’s stupid to do that until something really happens over… ’cause this, dialogue like, Mr. Kittle said, going back and forth is not solving anything, and it just is going back and forth. So I don’t think we need to have a bunch of movement on that. I will testify to two of the environments I’m involved in financially that originates home loans. Both of those are doing extremely well right now, and volume is up a good bit. Is it up, 100%? No. Is it up 25, 30%? Yes. So I, I can attest, and one of those is in Alabama and one’s in Texas, so it’s a fair split of the market there between the two. So I think that’s something positive we can do. But I just don’t see… I don’t see how we’re gonna– we should be letting that thing in Iran continue to affect our pricing any way, shape, or form or rates or anything until we figure out what the game plan is. Because the biggest concern I have on that, and we all should have this concern, if the way out of that for us is we’ve gotta pay them for everything we destroyed over there, we’re crazy as hell. I don’t wanna give those people a penny over there for anything we blew up. And they’re– they seem to think they’re not gonna make a deal till they have that. And then I think they wanna go into war with Yemen and try to stop the rest of the world from going up and down to that, water flow there. Let them have at it. I think that’d be an interesting thing, Yemen and Iran against the rest of the world. I don’t know if y’all saw that, but Russia kinda took a position, and China did too, individually recently about that, saying they think the the strait should not be controlled by Iran Which I thought was real interesting Yeah. That was interesting So that’s my hodgepodge, David All right. Good stuff. I think we can… We’ll move on from this, ’cause there’s so many other headlines I wanna touch on. But I wanna say again, thank you to Matt, Les, and your comments for, on rates. I think at the very least we’re… They are where they are, and we’ll stay here. But as far as values, home prices, we’re seeing what I’m seeing. As I work with clients all over the nation, it’s very regionalized as far as what markets are getting hotter, where things are at. I was just looking at a paper here in Knoxville, Tennessee area, and it’s got sold signs all over every single one of the homes. And some of these homes have had talk about inflated values. These values are going up. There’s this, there’s a real influx of people. Demand is high here, and we’re seeing a good amount of sold properties. I wish that was home with the case for my property back in Texas. They keep thinking it’s sold, and it keeps lingering on. But anyway let’s talk about what major news headlines that happened last week. UWM stock took a tumble to an all-time low. There’s been a lot of voices out there about how U- d- UWM has been handling their business model and how they’ve been playing as a competitor in the market. Probably no one more vocal than Rich Zerbinsky, a good friend, someone we know and has been very much… and it seems like everything that Rich has been saying is going to happen actually happened. So I’d love to get your take on this from that standpoint. Marc, I know you have to leave here pretty soon, so we’ll start with you. Any thoughts on the UWM debacle that’s gone on?
I’ve been following that really closely. The interesting thing about it, some of the same grounds in that litigation that’s going on are things that I dealt with Apprentice or company with another major player whom you know the principles of real well, David. And it’s interesting, it’s it’s the right hand calling the left hand out. Unfortunately, I think we would all agree, it needs to be resolved, but at the same time, it sure isn’t good, image for the industry right now. It’s really not. And you can see that in what’s happening to UMW right now on that. But I don’t know how that’s gonna turn out. You can get a bunch of experts in a trial and they can go in different directions, and you think you got a win and you don’t. So it’s gonna be interesting to see how it plays out. I think one of the sides has a pretty strong case, and the other one has weak defense in my opinion, but we’ll have to see how it shakes out. But it’s gonna have a major effect on our industry, I guarantee you that. People are gonna watch what they do on a go-forward basis, ’cause it can get expensive. Attorneys aren’t cheap.
[David] Yeah. This one, from their losses were extraordinary by anyone’s standards. Got Pavon and his head of capital markets on a podcast that we did on Friday. As soon as the news started getting out and I was looking at everything else, a lot of people asked us to come in and make some comments, so we did. And so it, that ensued some really interesting private conversations about where the markets are at. It’s really interesting how people are dancing a little bit on the UWM, what they perceive to be their grave. They’re not going away now. We may see some changes on who’s running things. There’s a pers- speculation about that. But Bill, I’d love to get your thoughts. when I texted this headline out as it was going on, I loved your comment. “You mean you can lose a little bit on every loan and then make it up in volume?” It’s been that was a great comment, and too many think like that, sadly.
[Bill] Yeah, I think The biggest thing from the, industry’s perspective is to start looking, thinking two, three, four steps ahead, right? I Yeah … if UWM is going through an evolution and the model as they’ve been operating i- is not sustainable, and it doesn’t appear that way, That’s gonna have a wide effect on all the other wholesale groups that kinda got sucked in toward UDA. ‘Cause it’s either figure out how to be super aggressive or, wave the white flag and go find another line of business. So as UWM evolves, their competitors are going to be able to evolve and maybe move back toward what they believe is a more prudent business model, which ultimately, the way I look at it if you’re in the broker space and all of this results in little bit less competitive, price competitive side of the world, what does that do to broker shops and, do they start looking at the correspondent, space again? Do they start looking at going back into a retail world because maybe the, huge advantage that they saw in the past is not there. So it can have wide-ranging implications on the entire industry that- … I think are gonna take a while to play out, obviously. But If you look at what’s going on with UWM, don’t think for a second that it’s just about one company
[David] That is true. What’s interesting is you look at how competitive the wholesale market has been. I think we’re already seeing interest rates starting to… The margin’s fattening a bit because of this. I think we’ll see other companies like Rocket profit out of this. Oaktree is gonna possibly the investor, the investor banker that came in with $1.5 billion to add some capital back into this thing is gonna be the bi- biggest benefactor out of that. But, what’s this company gonna look like after this is done? Again, more unanswered questions. I’m sure more will be coming out. But at this point, it is, We now see Nicholas Basso is on the board at UWM, and Oaktree is taking a much more prominent place. So some would say maybe there’s an adult now in the room running the company. I’d say that’s an insult to Matt. I think he has been very aggressive and has done obviously extremely well since the earliest days. Alice, love to get your… This is another one of those Michigan lenders, Alice. This is in your backyard. I’m interested in your thoughts we have Rocket and UWM, two huge lenders right there, Michigan
[Alice] Well, Southeast Michigan has always been a great hub. Ever since I was back in wholesale back in the ’80s when it was in its, really its infancy as the broker market was really starting to expand. It’s always been a great hub for people who really know this business well and really are just great mortgage bankers. I think to Bill’s point, I think is huge, is getting this exclusive agreement or exclusivity out of the market, I think is a great step that I hope see, come out of this, is to really open up opportunity and just for the brokers themselves that they don’t feel like, “Hey, I have to go to this one place,” even though really the whole benefit of being a broker is that I get to shop around to multiple investors to do business with. We’ve been through these cycles before, right? You all know, can all name them in the past, of the giant broker wholesale shops that have gone out of business and don’t exist today. I think one thing that’s, obviously the reasons for that are different this time around. Yeah. But one thing I’m curious about is the technology. UWM’s model, a lot of these wholesale models are that, the broker didn’t have to have a lot of their own technology. They didn’t have to have a lot of their own safety mechanisms in place to stay in compliance, ’cause the wholesaler was basically doing it for them. So I think it’s just a heads-up to brokers that know your business. You wanna be bigger, you gotta grow up and really start to see what can you handle yourself to not be so reliant on your investor partners, and really try and get to that next level. Maybe for the brokers it’s an opportunity for them to grow and get to another level.
[David] Yeah. That, good thoughts. Mr. Kittle?
[Kittle] One thing, if it got mentioned, I didn’t hear it, but anytime there’s a lawsuit, which there is that’s a reputational issue. You’re guilty until you’re proven innocent on something like that. Your competitors are gonna sell rightfully or wrongfully against you. It drains your cash, and that’s part of the problem with the big stop drop. Not all of it, but part of it. And so you gotta have cash put in, as Bill said. And leadership at the top gotta change, gotta refocus if they’re gonna right that ship So lawsuits never help. Nope Even if you’re the one suing.
[David] There’s lawsuits and then there’s just this kind of there’s gonna be a lot of things to be coming out of this. I’m just looking at it from a standpoint of how does that much money get lost in a hedge position when that is happening? like we said on the podcast, I thought Pavand handled it really in a classy way on our Friday’s interview with him and his capital markets. No one’s doing a dance. There may be a few people. I’m sure there’s some people like Rich Zerbibsky who I would say predicted this. He may be doing a dance on this. But this has been a overall well-run company for a long time. No one’s joyful when we see someone stumble to this degree. I think we just have to learn our lessons as an industry from it and come together, and that’s what I wanna do is be a part of that discussion, not running UWM or Matt down because I have a lot of respect-
[Kittle] Nobody’s running anybody down, but, it’s a loss in cash, and there are other accusations out there in a lawsuit, right? And so you combine that is where my point is, then it’s, it’s not a good scenario. No, absolutely. There is gonna be a lot more written on it. Go check out what Rich Zerbibsky has written on the internet, on his blog and out in LinkedIn. As well as another one that was really good, Chris Whalen made some really good comments on this specifically. A lot of people have been predicting this happening to UWM because of how they’re running some, the way they’re playing the game. And so not a surprise to those that are close and watching to this. It’s just sad because it is gonna have an impact. I think the biggest impact is on broker pricing right now because I think it’ll s- back up, which is a good thing. Those that are in the wholesale lending business are gonna have a better chance because one very aggressive wholesale lender, UWM, number one arguably is not gonna probably gonna be their price quite as aggressive as they were in the past. We’ll leave it at that