[David] Thank you very much, Matt. Good job on that. Be sure to check out MBS live.net for all the nanosecond updates on it. I love this website. It’s got so much information. It’s on right behind me all the time. Les is giving me a bad time about having the screen behind me. But it sends a good message and it’s great and especially when you look at what’s happening today and you see it in real time. So you can sign up for MBS live.net using the LOL for Lykken on Lending podcast and get an extended trial period. Just take out your credit card and sign up. So affordable. Alright, Mr. Parker, you’re here with us. So good to have you joining us live. I am excited. So we’re gonna start off with you. No, we’re gonna stay true to what we do. Corbet, let’s get you started, get your comments on what we just heard. Then we’re gonna get over to let’s, come on.
[Bill] So, especially with the non-New news this morning I was having flashback to the movie war games where Matthew Brodericks character. Teaching a computer Joshua with a kids game tic toe that nuclear war, mutually assured destruction was not a good thing. I feel like there’s a lot of corollaries in there, there somewhere there’s just so much stuff flying around now that, do you take it back to a kid’s game to show is there really have a path to win at this game? There’s a lot of things that have to change. I’m not going against everything the administration is doing. If they’re gonna play the short term pain for long term gain, they gotta figure out how to build up some credibility in a hurry. Because otherwise the pain’s just gonna wind up becoming unbearable. And that’s number one. Number two boy, if you’re running a secondary shop right now, forget try thinking. You’re smarter than the market, which is what a lot of folks do. If you think you can even be reacting in anything close to an appropriate timeframe now you’re crazy and if you’re a CEO and you sense any of that from your secondary folks, you better have a heart to heart fact because you could be completely upside down before you even know it and it is outside of the norm. And I was going back and looking at something, over the weekend, it’s there’s a lot of corollaries now, and they’re talking about, especially in the equity side, the biggest sell off since 2020. But, having been around for quite a while, like there’s a lot of history out there of you think you’re in the middle of massive sell offs and then it just grows exponentially from there and maybe, so especially again for secondary folks, right? How many people actually understand now what the rules are in terms of futures and limits and all of those esoteric things that you say never come into play and all of a sudden could be real.
[David] I was thinking about this About black swan events, and we’ve had some throughout our career path Bill in our years in this industry. I don’t know that you’d characterize this as a black swan because it was fairly well telegraphed in advance of what he was gonna do. So, it’s not a black swan is something that happens just out of anyone’s back. Love to get your thoughts on that. Not a black swan, but certainly, and I take a little bit different tactic on this from you. It is I understand about consequences. I’m actually for these things because we’ve gotta change something and whatever we have to do, and it that does feel like dropping a boulder in some otherwise calm water.
And it’s gonna have some repercussions, no doubt. the pain that we go through gets at the result and things start getting parody, and we can really, truly true to fair trade if that’s possible in this crazy world I’m all for it.
[Bill] Yeah. And to your Black swan comment, right? This is not a Black Swan event, because you’re right, it has been well telegraphed, but that doesn’t mean a Black Swan event cannot pop up in the midst of all that something going on may cascade and hit, some certain component, a country or whatever that starts at cascade. But then you look at it and go okay, that’s a Black Swan event.
[David] Yeah. Great point. We got Les Parker here. So Mr. Spotlight himself, let’s get you on.
[Les] I thought you usually had David Kittle make you shot.
[David] We got, we’re gonna get kid’s comment, but yeah.
[Les] Okay. I was ready for all the snide remarks, so Now I have to get myself re prepared by the way, so yeah.
[David] All right. Mr. Kittle, go ahead. He was pointing like this on the screen here, but I don’t have you set up like that. That’s where you are at his screen. But anyway, Kittle, you were shaking his head as singing. I thought that was great. That was well produced. I love that. I thought it was relevant and he was singing on tune with a great voice. Am I saying that just because he’s here? No, I’d say that without him. I’d rather say it behind his back. All right, Kittle, come on.
[Kittle] Les, that was outstanding. You look wonderful today and that’s the best song I’ve ever heard in report. I just can’t tell you how much I look forward to hearing that every week.
[David] Oh, brother. Yeah. Yeah.
[Les] I have the feeling that there is a gag reflex that he is pushing down. So we…
[Alice] and by the way I yield the floor for my time to Les.
[Kittle] I’m not yielding this. I do have one comment that in all seriousness, I’m not yielding. I’m not yielding, I’m not yielding Is the one thing that I want to say is the jobs number. Okay. One because we’ve talked about that forever. Bill and I go back and forth. What’s really in it? I think it’s one of the first couple of jobs numbers that are positive where we don’t have any government hiring in it. Okay. And so that’s a really positive, good number going forward I think it’s a bigger deal than he made out of it on his report.
[David] Yeah, there you go. Okay, good. Very good. I agree with you a hundred percent. All right, Parker, come on in. one thing I wanted to bring today, I’m glad to have you here though, by the way. Really glad to have you here.
[Les] So I wanted to help people understand that these were just wild moves, right? Yeah. On I think it was Thursday we hit, it may have been Friday, but anyway, we hit a low yield in the tenure, it was three eighty nine, I believe, but call it three 90 in the 10 year yield. And then we bounced back up to, call it 410 or someplace in that 405, I don’t know, someplace around there. And then overnight we went right back down to 389. In addition to that, what’s been happening in oil was dancing around $70. It had gone up to 72, back down 68, but dancing around 70 and overnight we went below 60. So the real big news that came out was OPEC now going to increase supply, which if you increase supply, generally you will see prices drop. And that’s what we’re seeing. It was OPEC plus. So it does include Russia. So, the environment is for lower rates and now we have attacked 390 twice. So I would say the trend the bullish trend, the trend to lower rates is still intact, so that’s intact. However, today we’ve bounced back up to 414, 415. Yep. And that shouldn’t be a surprise either, simply because over 50 countries now are saying we’re negotiating with the US. A couple had already said Israel, and I think India said, we are going to make some changes. Korea and Vietnam actually came back, did the same. Korea and Vietnam. That was it. Yeah. Vietnam and Israel were gonna immediately open up some things. India’s also and South Korea have said we’re on board with making adjustments and then there’s now been 50 countries that have been in contact with the administration and they wanna negotiate. There’s been a lot of talk about tariffs since during the campaign, during the transition, and even with the inauguration and the talk. There’s some confusion over the talk, and part of that is you have a promoter in chief that we have is Donald Trump. So he does things in a colorful way and in a promoting way. We have the privilege of operating this program with one of the greatest promoters in mortgage banking, and that’s David Lykken and Dave at times uses language that is maybe not precise, but that’s not the point of a promoter. It’s not to be precise. That’s what Bill Corbet’s for. That’s what Marc Helm does well, he’s broad perspective, but he’s, we balancing his servicing background makes him very precise and the best not to put everybody else down on the program by comparisons. The absolute best presenter you’ve ever had on this program has been Alice for years. She’s concise. She gets to the point of issues and gives you what she has research to be truth factually true. She doesn’t want to really get in the arguments of, is it a fact or not a fact by, she wants to research and make sure it’s really is a fact because you also get into, is it a fact or not a fact. So the facts are about tariffs that it’s confusing. So, Trump has looked at tariffs from, and has his administration and the treasury and the trade negotiators and the commerce secretary to look at tariffs through a total eye. That is what are all the effects of their economic protection policies? So if you look at outright tariff, it may only be 10% in most European countries, but if you look at how the VAT works, you end up seeing that’s a much higher number. So the enemy, if you want to call them enemies, the ones that have been taking advantage of the US in economic trade, the two biggest culprits are China and Europe, the east, the EEMU. So, the economic union aspect of Europe and how do you fight, they’re both equal in their contributions to the world. I have a global economy chart that was published in today’s newsletter. In fact. The US is 26%, Europe is 15%, and China’s 17% fairly balanced and then you put everybody else is a little less than 40%, call it 40%. So, the global game is between these three parties, China, Europe, and the US and even though we are close allies with Europe through NATO and other things Europe really has taken advantage of a lot of things. We have willfully allowed them to take advantage for a number of political issues. But that’s now changed and to change it requires trying to do this in a global way rather than in a specific targeted way. And I think that gets drowned out in the dialogue. To be able to address China and Europe, you really have to address all of it. because there are some, plenty of others that have done, are not playing quite fairly. So that’s how this policy has been put in place. Now the simple thing, the calmness and it’ll only take a moment. So I wanna bring in the harmony, the peaceful harmony is when someone’s trying to move narratives, they’re trying to move dialogue. They’re trying to move negotiations, there’s going to be reactions to them and markets have a tendency to build in certain items that they have usually they can sink their teeth into, but then they will use the actual announcement of policies or changes like what happened the other day with tariffs to now put on the bets that they wanna put on and it will be driven, as you said, Dave.It can be driven by or maybe it was Matt Graham said it, that it will be somewhat driven by major money centers. International investment bankers, people with real money moving the market, they will use this news event to really push certain trades, whether it’s with others or themselves and mortgage bankers need to understand that when these events happen, number one is that seldom will mortgages react to the same degree that treasuries do in these events and this was a perfect example. it didn’t overly it did move and it certainly would’ve panicked traders, but the majority of mortgage bankers are not majority, excuse me. I don’t wanna say majority. All mortgage bankers are financial intermediaries. They’re all financial media area and their single risk. There is no bigger risk than this. Their single risk is and always will be delivery risk. They are gathering up loans and they’re then getting them out into the industry. There was a Financial Times article said that I thought was summarized our whole industry. It came out today, which is interesting. The vast majority of US mortgage assets are repackaged into mortgage backed securities. Rocket says it’s securitizations are particularly rapid with some loans only staying on the balance sheet one to two weeks. Now should we use one to two weeks as the turn time? No. But can we use 30 days So if the turn times in mortgage banking is 30 days, essentially it has a financial systemic risk that’s 30 days long. So mortgage bankers every single day of the year, do what David Kittle has told you, go out and sell, and you’re selling the American dream. You’re selling how does that family want to be able to accomplish their goals? and what size should the home be? It may be an individual, it may be a couple families together. It may be multi-generational if they have to assess the markets in the sense of where they can buy, what neighborhoods they should be in, what schools should they be using, if they have to commute to work, how do they commute to work? Those are practical decisions that loan officers are helping consumers understand. They also are helping consumers understand, if you’re gonna do any refinances, why are you doing a refinance? Are you trying to reduce your overall credit debt? Are you trying to just get your payments lower? If it’s a, no cash out refi, are you suffering certain economic distress that you can maybe alleviate by doing some items with your mortgage? So that’s what mortgage bankers about. Very practical items and the mortgage companies are trying to mitigate their delivery risk by putting out products that are viable and get them into the door and then get them out into security.
[David] Great point. Yes. Mr. Kittle?
[Kitte] I would add something. I agree with what Les just said. The biggest risk on the delivery, I would add one word to that. It’s delivery quality because the quality of that delivery. Repurchase.
[David] Yeah. One thing is deliberate. Another thing has to have it bought, which goes to the quality.
[Kittle] Bought, but then do you have any repurchase risks? Because as market Yeah, slow down. The GSEs have typically started diving into back, so it’s the rep and warranty and how that loan looks and the quality of that origination.
[David] Yeah thankfully with CFBs, being, whatever’s the, whatever’s happening with CF pb, at least from the regulatory side, we don’t have quite as much risk. It’s still there, but not as pronounced. But we’re gonna get into that with Alice here in just a little bit. Les, it’s so good to have you here. I’m really interested in your Adam Quinones quote about Rocket that I thought that was good.
[Les] Rocket star. Rocket star.
[David] I wanna get your seeing as you’re here with us live today. I’d like to get your perspective on that, especially as you look at. Where things are headed with some of the consolidation.
[Les] So, you mean my single sentence in a song parody that goes so fast, no one can really understand all the I know a couple points I’m trying to make in about 40 seconds of content. 20 seconds of a parody. Okay. Yeah, I get it.
[David] You remember The Beatles, we used to sit down and we run the songs backwards to see if there’s any back mask. Game B. What was that? What was that called?
[Les] I never fell into that temptation.
[David] You didn’t, yeah. Bill’s. So we sometimes we play yours backwards to see if there’s another meeting to, which you’re really slipping in there. Joking. Oh wait. So your thoughts on the rocket star?
[Les]The single biggest concern that people have to be the mortgage banking industry has to be concerned with, is with consolidation, which there are some real positive reasons for consolidation, but. I don’t wanna make a value judgment on consolidation. It is the fact and Bill Corbett, David Kittle and I have all been talking and Marc Helm and we’ve all been talking about that consolidations is happening. I have been the one contrary, the only way I’ve been contrary is I do not believe that it’s merely a cycle, and that is now proving out that it’s not a cycle. So, if mortgage banking industry just 15 years ago, or maybe 10 years ago, 10 to 15 years ago was the top 10 were, was only 20, or it was only 10% of the market or less, but call it 10% of the market, the top 10 lenders and then for the top 50, it was about 25% of the market for the top 50. So, everyone beyond that, if you call the next 500, had the opportunity to, play with 65% of the market, 60%, 65, whatever you wanna call it and now we have Rocket has number of years ago they made very clear to the public how large they wanted to be and they say what they wanted to be at least 20, if not 25% of the market of the others that are in the top 10, how many of those have a comparable type of goal? If all 10 of them want 20%. We have a problem, we got a problem. Someone is, we can’t, yep. We’re not gonna have any industry but those. I think it’s realistic and there is a difference between size of servicing, which theirs now will be 16% of the all servicing is gonna controlled by them, but versus ties size of production. So there is a difference there and certainly rocket’s not at 20% on originations yet. So I think it’s not unreasonable to think that the top 10 is going to control 25% to 50% of the market and we’re already on that path and then the top fifth, the next 40 then we’ll be about double that number. So, there’s going to only be a 10% to 20% of the market for the other 500 people and until, I don’t think the mortgage banking world really understands that’s happening. Back in 2022 when I wrote contributed a couple chapters to to just Letterman’s collection on the mortgage. And it was the one I wrote on strategy. I said if a lot of certain things have to happen, but that by 2020, because this says what Jess wanted me to walk, write about what will mortgage banking look like in 2030? and I said that it will probably be 12 large tech companies that will control 90% or substantial amount of the markets and we are headed that direction. That’s, and that’s only five years from now. Now that’s not to panic everyone that’s out there. I was gonna say the non panic comes from, don’t worry about interest rates. Just go out and help people best maneuver these things. And when these disruptions come, they’re typically fairly short in nature that doesn’t mean that they aren’t step functions in that if rates drop significantly, then they stay down significantly or vice versa. But the single move, there’s not much you can do about it, but you’re going to, it’s going to settle down and that’s what’s been happening in mortgage banking in terms of Rocket. The concentration risk is what Marc Helm will be able to address a lot better than me. That concentration, has got some people nervous, is what it is. The concentration is when you’re issuing mortgage backed securities. There’s multiple elements. I don’t want to get too much in the weeds here. It really requires. Alice’s or Bill’s way to speak concisely about it, but mortgage backed securities for large investors. They like large pools, but they don’t like a large pool concentration that’s rich that is only issued by a single lender. And the reason is single lender, it as much as there’s homogeneity within mortgage banking on policies and procedures and all, it’s not completely. A good example is look what happened with Wells Fargo and their systemic problem and the way they solicit with bank accounts. Yeah. And we’ve had systemic or individual companies in mortgage banking that just explode because they did bad things. Yeah. So investors do not want to have, they like multi lender pools, large multi lender pools. Now you have two people who come together that their multi lending pool now will be a single lender. So it becomes a concentration risk of a single issuer. That’s the problem.
[David] Yeah. Kittle, you had a real quick comment there because I wanna get over to Marc on the concentration risk and you’re good. All right. Mark, let’s get over to you into concentration risk comments.
[Marc] I got a few comments on that. Number one, it’s a very big risk. Especially if if you got somebody that’s taking a large percent of the market, it’s government business putting legitimate securities and having to handle the advances and whatnot, if you look at the compressed transaction of Mr. Cooper and also right in there, Rocket, it’s just the amount of money that’s gonna be out there is gonna be ungodly that’s gotta be advanced every month. So the thing you gotta worry about, and granted, they’re sitting there with balances, which they get to keep, but you can’t use one balance for the other. and the problem you got is, if we have a major failure in this economy, they’re going down anybody’s got that much concentration risk, they’re going down. If we have something, we have. 35% unemployment or everybody loses their money in the stock market going on right now, or God knows whatever, if we have a major issue in the industry I don’t know where they’re gonna come up. They got a lot of money, but it’s gonna be tough to handle what they gotta handle because of the dollar amount we’re talking about is major money. If all those people payment making.
[Les] To your point mark, making payment to your point about that, if we look at Covid when that hit the governments capriciously came in and said that mortgage bankers have to extend payments, have to, didn’t have, they didn’t have a choice that is have to extend it if the borrower wanted to have it extended. So the borrower still had the choice and major leaders in our industry set that if they had to deal with that environment. For more than four to six months, they would be bankrupt.
[Marc] That’s right.
[Les] So the industry was going to be bankrupt at the time we had a treasury secretary that had previously been in mortgage banking and mortgage bankers look to that administration, not under the Biden administration, at the former Trump administration during Covid and they say it’s because he was decisive in being able to get credit facilities out to mortgage bankers to be able to handle these advances.
[Marc] That’s right.
[Les] And that is a huge risk it we’re talking about
[David] Thank God we had him in there during that particular time where we’ve seen a lot more dead bodies. The graveyard would’ve grown quickly when it comes to what’s going on. Marc, anything else you want? This is such a good topic.
[Marc] I wanted to make a comment about the earlier conversation, if we could, about what is basically happening to us out there in the in the marketplace today and with the tariffs. I still believe that in my heart of hearts, that Trump’s tariffs are, have been mainly a negotiation stance to get what we want. Not necessarily to load up all the countries. I think the only country he really wants to load up are real tariffs is China. The rest of it. He wants to get us on an even keel so we’re not going negative and whatnot and I think he’s gonna come out of this. Okay. because you get more and more countries signing up, wanting to negotiate, and I don’t have a problem if China has a 40% tariff or 35% tariff. It’s been using this country for a long time. It’s now time to end that, absolutely. What was it? I’m all for it.
[David] Yeah. I was listening to Peter Navarro over the weekend talking about how Vietnam, we talked about Vietnam, quickly capitulated, and then he says they’re gonna keep the tariffs on Vietnam. It’s because Vietnam is a state of China. And so they run our products to Vietnam, and then they put a Vietnam label on it and get around the tariffs. There’s a lot of fixing that needs to get done. We could go onto that, but I think you’ve done, we’ve done a good job of adequate talking about it as it relates to market.
[Les] PS on the Vietnam situation. It’s largely in furniture, by the way. Yeah. Oh, that’s a good point. Yeah. Furniture.
[Marc] But let me, we tell something. The largest shirt makers in the country. Are using Vietnam for shirts. Okay, now, and what really happened? I was reading an article the other day. One of the persons bought one of those shirts and it had the label on it in Vietnam, and they flipped it up and right under there it was a China made China.
[David] Yeah. It’s exactly right. Yeah. Very interesting. We could get on and on again. Don’t get me started on overall, it’s gonna actually go well. There’s a lot of huffing and puffing about it, a lot of screaming about it, but I think this is gonna get us to a much better, get us back to parody and I don’t think there’ll ever be some something called free trade. There’s enough ations out there, but it’ll get us closer to it very good. Mr. Parker, I tell you, it’s so much fun to have you on here and participate all if you can, all the way through to the end.