[David] Thank you Matt Graham. I appreciate it so much. All right, let’s start with you, Mr. Bill Corbet, your thoughts on Les’s commentary and then also what Matt was saying.
[Bill] As we lead into les’s commentary, I wanna point out that I have found a group of people that must be incredibly bullish on the US job market and the economy. And that would be the Starbucks union workers that went on strike because they don’t like being told what color shirt they have to wear.
[David] Really? I didn’t catch that headline.
[Bill] that’s the best you can come up with the, did. So are they employees that when they were growing up, did anything that their parents told them to do?
[David] I dunno. It’s pretty wild. Pretty interesting.
[Bill] So the other thing, because it ties into where rates are going, what Moody said, but as I’m listening to a lot of the budget conversations and I’m getting more and more frustrated and pessimistic every day. What I would like to do is sit because they vote on procedures to talk about legislation that eventually they’re gonna vote on. What I would like to do is sit the entire Congress, house of Representatives and Senate down and have a hand raise, two questions. Do you support government revenue? so tax rates at the percent of GDP that they were on January 1st, 2020, so before the pandemic. If you agree with that, raise your right hand. The second question is, do you agree with the level of government spending on January 1st, 2020 as a percentage of GDP? Raise your left hand. We need to define the ground rules as to what Congress’s objectives are before they start getting into all of this arcane policy discussions and things that are coming into play 5, 6, 10 years down the road when the reality is we’re gonna be broke by them and we as I’m watching what Congress is debating is their priorities, what they have to do, what they can’t do. So, we’re spending as a country way too much money and everybody is kicking that can down the road. And by the way, every time rates tick up, it just gets worse and worse.
[David] Worse. Yeah. Our interest bill just goes nuts. Yeah. Yeah. So true.
[Alice] Yeah, they were, they’re arguing right now. What I was listening to the recently in a couple of news reports, I always have to validate, right? You can’t just listen to one or even five. But they’re like, to Bill’s point they’re looking at smaller issues, what does this add up to be in five years? But today, the total number still sounds like it’s going to, the budget’s going to be a couple trillion higher in 10 years with what is going out. What’s getting outta committee right now? So it’s the interest expense is astronomical right now. It’s the highest expense we have. We have to stop borrowing, take a light on. I have borrow more. Yeah. Yeah. Mr. Kittle?
[Kittle] To Bill’s point, Alice’s point, and they’re exactly right. But all of a sudden the interest expense is up because we’re no longer on cocaine candy for 15 years of zero interest rates at the Fed. So it didn’t cost us anything to borrow other than the actual principle. Now, they’re coming home to roost, the chickens and now it’s going up higher and higher. So we cannot continue to borrow. We can’t. And it’s whether somebody has the stones to stand up, regardless of which side and say, no, we’re not doing it anymore. Because we will be broke at this point. Yeah.
[Alice] And we recognize, that the current administrative administration inherited a problem. Okay. But still can’t use that as a reason to not work, to try and get things a little more in line.
[David] Yep. Absolutely. Mr. Helm, thoughts?
[Marc] The bottom line, I agree with everything that’s been said so far and just put it in our personal situations. If we operated like our federal government, we would’ve been debt in debtors prison before we were 20. It’s just amazing. We can’t borrow it is individuals money like that and not have money to pay it keep going in the hole bigger and bigger. And so our federal government can’t either. And I just don’t think that I think there’s some things that could be done with reclassification of debt and the way we handle it in this country that might help a little bit, but we gotta get realistic about it. We can’t continue to have trillion and trillion dollars of debt that we don’t pay, can’t pay. And the only way we can pay it is through our budget. And that’s just ridiculous to go keep going in a hole to pay interest.
[Alice] One of the comments, I don’t know, did you guys watch Scott Bessant on meet the press and there was a lot this weekend on that and there, but there was one phrase that I’m going to keep here. It was interesting that you said he used the term strategic uncertainty.
[David] Strategic uncertainty, interesting.
[Alice] Strategic uncertainty.
[Marc] And that’s oxymoron.
[Alice] Pardon?
[Marc] That’s oxymoron. I think.
[Alice] I think so too. So it was just I thought well we’ll have to see. ’cause that’s really where we’re at right now.
[David] Yeah. Allen, you wanna weigh in?
[Allen] I don’t have anything significantly different to add great feedback.
[David] Good deal. Appreciate it. Thank you everybody for that discussion. We are definitely looking at the numbers. Alice, you sent? Yeah. Bill, you had something? Final thought.
[Bill] So now let’s tie it back directly to what Les’s is evolving position and a significant move down in rates is less likely. So that move
[David] By June. By June, he said by June, but by June. By September. Yeah. So let’s put that in context, right? Yeah, I agree. Yeah.
[Bill] And, so let’s look at the very simplistic level the two things that would’ve accelerated that move down, right? one would be significant economic weakness. And so that hasn’t manifested itself, right? Which when you stop being a loan officer, a borrower that is completely crack addicted to interest rates. At the end of the day, that’s a good thing. The economy is not greater, and therefore rates did not drop dramatically. So we again, keep everything in context. The other side is, the less likely that there’s a real budget reform taking place, the more skittish the market is, which tends to keep rates higher. So that’s the bad reason that rates are not moving significantly lower is that the lack of confidence on the fiscal responsibility of our entire government? RSDs eyes, everybody? Yes. But let’s look again the other side, because the economy for right now is holding up fairly well. That’s what’s keeping rates from dropping.
[David] Yeah, Alice put sent out to everyone. Those of us on the podcast just before we got on about the upward and downward revisions on the labor statistics. Alice, that was really interesting because a lot of this depends on economic forecast, depends on accurate reporting, and you look at these wild swings in the data share with our listeners what you were, what you sent over. We’re looking at the numbers, but if you could run down through them and I think it was really interesting.
[Alice] Bill actually kicked it off, so I wanna give him credit for, kicking off the discussion and really trying to get to this $818,000 adjustment that was made to the March, 2024 report. So the report is made through a lot of algorithms that I won’t bore you to death here, but it go runs from April to March, and then when they get the actual tax numbers to determine that benchmark, then they go back and adjust it and so they adjusted the March, 2024 number to be off by, it was overestimated by over 1800 thou, 800,000 jobs. Sorry, I don’t know why I’m tongue twisted on that one. So I wanted to, I was curious how that…
[David] That was the tail end of the Biden administration because you, we always right reflect on this, so it’s the tail end and so when it led that over into Trump’s administration and then they call it out, the accurate number, they made the proper adjustment to it.
[Alice] So yeah, it’s a call out to an error on the Biden administration. Absolutely. Yeah. And I won’t share with you, do you guys wanna share what your reactions were in the text when Bill first told them?
[David] Yeah, bill. That was a good call, but yeah, Alice, thanks. What? But this is something kill you’ve been talking about for a long time. We just can’t trust the numbers out there because of where they’re at and then you look at, so in 2023, there was $187,000 downward adjustment. In 2022, there was 568,000 upward adjustment, another 2021, 374,000 upward adjustment. Downward 2000 or 250. In 2020. We could go on and on through this list. It’s really interesting, the inconsistencies that we find in the reporting numbers that all our interest rates are based on your thoughts, you talk about this all the time.
[Kittle] I’m thinking about lemme tie something back into about interest rates and what Les said, and try and put it into what you can and what you can’t believe. Everything is either accurate or inaccurate, or your predictions are gonna be accurate, or you’re gonna have to extend them or revise them. End of the day, every day you have to put all this caveat. Let me finish one thought. In 45 days, if everybody said and whether, and I’m not going back to lesser predictions or anything else, okay. There’s not an implication of that, but over the last four weeks it was, looks like rates may come down by June. Now it’s not June, and now maybe it’s September, in 45 days, everybody that runs a company or every individual loan officer in 45 days, you’re at the end of June and you’re already looking at the end of the third quarter for production and closing. Alright. Years, three quarters of a mount over in 45 to 60 days from now. You can’t wait for September for rates to come down and at the end of April and May. You can’t wait for June for rates to come down and bet on the come like that. You have to go out and do business every day based on the environment you’re in and all this prediction stuff is great, but it doesn’t mean anything at the end of the day because that consumer and that borrower wants to know today what they’re gonna and what their payment’s gonna be and how much down and what is it gonna appraise for in this environment and we have to start looking at the present as much as the future because again, in 45 days, third quarter’s done for what you’re gonna have in your pipeline coming in and what you’re gonna close by the end of the quarter.
[David] Very true. Yep. Mr. Helm thoughts, we look at that word downward adjustments.
[Marc] I’m dealing with downward adjustments in rural America. You’ve heard me talk about this last few weeks. It’s just not going anywhere. It’s the people out there, many affordable housing borrowers and the rates are just not something they can work with right now. So we have much more turn down on applications than we do approvals right now dramatically.
[David] Also just an overall turn down on activity, real estate activity, for example. I feel your pain. Marc, you were you over the years talked about, how you had a home in a really nice home in Houston of for sale. I have a really nice home for sale here in west of Austin, about an hour in Marble Falls and we’ve had zero showings, even a phone call in the last two to two and a half weeks, not even a phone call. So we’re driving out to do a price drop on this as we head into the Memorial Day weekend, and hopefully that’ll bring about some activity. But the activity as far as the number of people calling and looking for homes right now, it’s down. It’s because of all that’s going on in the industry and the uncertainty that is felt out there in the industry or in the, by the consumers. Interesting. Yep. I could go on and on about this, but..
[Kittle] Hey, David? just a quick question for Mark. You got more turndowns than anything else there, Mr. Helm? Overall, is there a theme in the turndown? Is it over indebtedness? What are the credit, what is the theme for most of your rejections? If you could share.
[Marc] Break it into two parts. We do regular lending, FHA, VA, Freddie, Fannie, Ginnie, and then we got our chattel lending and chattel lending. We turn five applications down to get one. So that’s manufactured housing. People just can’t afford the payment. And it’s the same thing on the same thing on the regular loans we have the real homes that are out, not manufactured housing. It’s that’s the majority of our turn downs are the debt to income ratio and they just can’t handle the payments.
[David] Yeah. Chattel usually has a higher decline anyway.
[Marc] Yeah, but David, it is usually two, two and a half to one.
[David] Not, not a five, one ratio. Okay.
[Marc] Yeah. Not five. Yeah.
[David] That’s interesting.