CHRISTMAS SPECIAL: Navigating Change: Housing Policy, MLO Comp, and the Future of the Mortgage Industry with Greg Sher and Taylor Stork

[David] Listeners, we have got another podcast for you. That's going to be a great one, but we're calling this one take two because somehow, the technology messed up when we recorded the first time. these two graciously came back on and we're recording it again. Joining me today is Greg Sher. Everyone's knowing about this guy posting like crazy and the infamous, maybe brilliant Taylor Stork. Good to have you here, Taylor. Good to have your Greg. I'm excited to talk with you again today. I'm sorry we had to do this again, but sometimes do-overs are the best. [Greg] That's all right, that's all right. You know what? things have happened since the last time we talked, [David] You're giving me a lot of grace and mercy, by the way, we usually get on these calls, by the way, listeners, one of the things I should say, Greg Taylor and I get on regular calls talking about all that's going on in the industry and Taylor and I are trying to do our best to control Greg and all his posts out there. So if something goes wrong, it's not Taylor's or my fault. It's just Greg doing his thing. You know what I mean? But we're doing our best to make sure he stays in the lanes and,  doing some good posts, but it is an honor to work with you, Greg and Taylor. know how much I enjoy you as a critical thinker, lot of perspective, especially what you're doing with CHLA. Let's get started. We're going to start out our discussion, talking about the future of HUD and the GSEs. I want to get some perspective from the two of you guys about Scott Turner, the person who's been named to be the new HUD secretary. Any data points on that? Greg? [Greg] It's funny because since the last time we talked I did hear something about him from an industry insider. So this is good that we are re-recording. Lots of conversations around HUD zoning, which apparently he is an expert on and Donald Trump has taken advantage of HUD zoning to build structures and I've been told there are meetings happening right now to get ready for it. [David] Really? [David] When you say HUD zoning What do you mean? That's what I was going to explain for our listeners. What do you mean by HUD zoning? [Greg] Well, I can only assume that this means zoning certain areas as being eligible for government contributions to building dwellings, to build dwellings. So that's all I know. But I know that he is meeting with officials. He knows his way around the block, so to speak. And I've been told that this is something that's important to Trump and that it might be something he leans into. So aside from that, this is his second time in the Trump administration. He was part of 2019 Trump brought him in, not in this capacity, but by all accounts, he's a man of faith. He was a division one college athlete. [Taylor] I would like to say that he was a San Diego charger and as a San Diegan, that's kind cool. [David] Yeah. Very cool. Yeah. I was in San Diego there. I remember him really well. Yeah. [Greg] Yeah, that too. Yeah, so he played in the NFL. So he told his mom when he was 10 years old, he was gonna do whatever it took to get into the NFL. And he was right. So this is someone that's not afraid of hard work. [Taylor] Well, and he was also a former staffer for another San Diego charger that ended up on Capitol Hill, wasn't he? [David] Yes, he was. Yep. he's been involved in politics supporting and he made a run for it himself while he was in California. And that didn't go so well. So he's been playing a supportive role all ever since. we know his very conservative background. he is a motivational speaker. He's not going to be someone that was going be boring to listen to in conferences when we have him in and showing up And I think he has a real vision for what it is. one of the things that's been clearly stated is that we have a housing supply problem clearly, and they're wanting to go into it. They're going to be also looking at solving, creating more first time home ownership opportunities is one of the things that they're going to try to do more of. And love to get your perspective on a CHLA. You see the need and we're in work inside there a lot. Taylor, what's your thoughts on Scott and what we can anticipate changing? [Taylor] Again, San Diego charger can't be bad. I can't say that I'm an expert on this particular area. I think there's gonna be a lot of wait and see regarding the various different appointments and positions. Clearly, look, let's be honest for a second. The HUD secretary is an important cabinet position, no doubt. They're arguably the senior advisor to the president on housing. [David] Yes. [Taylor] One of two senior advisors on general monetary policy, the other being the Treasury, currently held by Janet Yellen. However, when the wheels hit the road, when the rubber hits the road, it's the FHA director, it's the president of Ginnie Mae, it's the CFPB director, the FHFA director that are going to ultimately be the people that are making. The critical tactical decisions and pointing us the direction we're gonna go. [David] Yep. One of my friends name being circled in for FHFA. So we'll find out. Hopefully we're going have people. You've already said no, you've already turned it down. I'm glad you don't want to create your opportunity. That's hilarious. Yeah. One of the things. Yeah. And there's a long drive home. The point. Yeah. It's just down the street. I'll tell you what I'm anticipating is a, I think we're going to, I think when you look at, know, we look at what the efficiencies we're going to have [Taylor] I'm not, I already said no to it. I said no, Dave. [David] Yeah, it's a long drive to DC. [Greg] Well, for some of us, for some of us, it's right down the street. Just ask the MBA. They learn the hard way. [David] Coming, is that we're going to see a smaller HUD, a much more efficient HUD. And so think a lot of people that are working at HUD, could anticipate them entering the workforce again, because. [Taylor] Yeah, and that gets tricky right? Because some of the bureaucracy that is out there could be scaled back, certainly. But there are things that we need. not for nothing, last night they announced that they're giving a government holiday on Christmas Eve, that's great if you're a government employee. But if you need wires processed by the Fed, it can become problematic. If you need your transcripts processed, it can be problematic. And God forbid, the government shuts down again. [David] Yeah, exactly. [Taylor] Greg is going to give you a long list of negative impacts that happen when people in the government don't show up to do the work that those of us that are taxpayers need to have done. [David] You raise a good point. there's certain functions. know Ginnie Mae has been understaffed woefully understaffed. so when we're talking about what I'm talking about is. [Taylor] Woefully. Which by the way, let me interrupt you. Ginnie Mae makes a ton of money for the government. Ginnie Mae is a fundamentally profitable organization. If Ginnie Mae was a private company, that would be stock you wanted to buy. [David] They do. Yep. Yep. Absolutely. Speaking of stock you want to buy, let's talk about the GSEs. The last time Trump was in administration, there was a concerted effort to privatize them. Love to get your perspective on that, Taylor. [Taylor] I think it's going to happen again. actually, there's a lot of talk and a lot of different discussion about privatizing, reprivatizing the GSEs. This concept that there has to be consensus within Congress, HERA and the structure of the original conservatorship already has a predetermined process so that the GSEs can exit. I think that a abrupt unplanned exit could have terrible unintended consequences. And so I think we need to be thoughtful about it. I hope and I think that most of the policymakers in Washington, including some of the newcomers into this space, hopefully they will recognize that an abrupt exit would be dangerous for mortgage in general and for our economy as a whole. But I think that an orderly planned exit can make a ton of sense. [David] Catastrophic. [Taylor] CHLA and most of the trade associations, to be honest, have long advocated for an exit whereby the GSEs continued to have a strong regulatory approach, a strong regulatory influence by the government, something akin to a utility model that feels a little bit like a public-private partnership. And I think that's going to be important, no different than it was with the railroads back in the early 1900s when they needed to change. [David] Yep, and they did. Greg and I happened to take a little bit different view of this. I do not want to see them go be privatized. Their core fundamentally to our housing finance system we have. If it's not broken, why fix it? Greg? [Greg] I'm with you. I spoke to Mark Calabria, I don't know, eight months ago, former FHFA director. I'm not trying to name drop, but his point, I see his perspective, look, it was never supposed to stay like this. It was always supposed to be temporary. He's very stuck in what it was supposed to be like by law, what is the object you're supposed to strike and strike it. [Taylor] But you're good at it. [David] And he just did. [Greg] Easier said than done because a couple of factors. Right now, the last thing that we need is for things to get even clunkier when it comes to affordability and just the process around housing. And there will be inevitably bumps in the road through that kind of transition. So they're making money. The last time I looked, maybe the numbers have changed. was something like a billion dollars a month. I mean, that's a lot of money. [Taylor] No, they're making a lot of money. Billions and billions a month. Billions and billions a month. [Greg] Yeah, so nothing's broken. So what are we really trying to fix? And those people that want to go back and say, well, it was never intended to be this. That's fine. Things change. Right. And so I think it's one of those areas. [David] Well, you know, what's really interesting, you go back and study the origins, you know, and they started out as government entities. mean, they were, yeah, they were, that's exactly right. They started as a part of the federal government and now they spun out into quasi status. So we had publicly traded companies, then came back in with the housing crisis. But I mean, I think everyone thinks they were separate, but the reality is no, neither Fannie or Freddie, they started out separate. [Taylor] It's called the Federal National Mortgage Association. That's what Fannie Mae is. Federal National Mortgage Association. Right. [David] And so I think we are back to where we started. The question is we go out and privatize them to what extent? I remember it was a number of years ago back when the quote unquote efficiencies of wall street were doing real well back in the nineties. And they go, why do we even need a Fannie and Freddie. Wall street is now so efficient. we don't need it. And then how did that work out for us when the liquidity crisis hit? [Taylor] How well that worked out. [David] We had the issue with long-term capital when they failed, sucked the liquidity out. We watched what happened when we got creative in our marketing strategy and how we created products that were just not sustainable. And we ran into the housing crisis. We need a Fannie and Freddie in place. And I think the concern I have is if we privatize them, what I could see combining the two of them possibly. No, no, All right, why? [Taylor] No. Competition is good. We want competition. When you combine things and you end up with only one credit score, there's no competition and then people do whatever they want. [David] Okay, we're going to get into that one in just a minute. So now we're you do it. you, you, you hit one of Greg's nerves on that one. That one just like. [Greg] Yeah, let's open up that Pandora's box right now. [Taylor] You notice how I can do that? can transition right into a mess. Throw the rope, roll the grenade in the room, and then sit back and go, OK. Talk about yourself. Listen, this [Greg] Well done. [Taylor] It is the topic that introduced Greg and I in the first place, what, like 16 months ago? This is very first conversation we ever had. It's true. [David] Is that right? my gosh. That's amazing. Well, the bottom line is we are going to have new administration. We're going to seeing there's clearly looking for new efficiencies, a smaller government. And so how that plays out, we are going to have to just fasten our seat belts and watch out. think the most important part is the MBA, or I think it's more like CHLA is what you're doing is yeoman's work. Taylor there at CHLA. And I think that is one, you don't have some of the conflicts that the MBA has that are inherent to what the MBA is trying to do. they have an impossible task of trying to please both ends of the perspective. have the IMBs, but in CHLA it's really representing the IMBs more than anyone else. So hopefully we're going to see, you be playing a bigger role in it. So kudos to CHLA. And if you haven't become a member of CHLA, you need to listeners, just learn about it. [Greg] Yeah. David, NFM, the company that I work for, just joined CHLA. I announced it on my LinkedIn profile a couple of days ago, and I've had a really unique vantage point getting to know Taylor, getting to know Scott Olson, who grew up on the Hill. [David] Good. [Greg] Very smart, very rational, very thoughtful, thought provoking. They involve the members and I'm already seeing a major benefit for our organization and I can't wait to work alongside them as they continue to craft LO Comperform, which is a very important topic. It's long overdue and Scott Olson, he worked alongside Barney Frank for years. So he knows about Dodd Frank as well as anyone of that room in that conversation. That's where IMBs need to be. [Taylor] Yeah, well, so can I just thank you? I just want to thank you both because Dave, you said some really nice things and Greg, that post you put up on LinkedIn, I swear when I started seeing the responses, I got a little teary eyed. thank you. [Greg] People love you, You are loved by all. [David] Well, I think there's the need. Why did we have such an overwhelming statement in this last election is because there was people that are just fed up and tired of certain aspects of the political world. I appreciate so much what the MBA has done. We miss David Stevens. We miss him a great deal. He was a tremendous leader. we need some new leadership. It was really, it was David. David has been a longstanding friend. We've known each other for many, many decades and I just so miss him. And, but. [Taylor] They just want to introduce me and Greg for the record. [Greg] Well, in a lot of ways, the MBA has a thankless job. it's hard. Look, it's a big machine. They've done a ton of good, but they're also huge at this point. know, FICO is a member. Look, they're a member. It's widely known. IMBs are members. So when you start to talk about, yeah, we're a member. [Greg] We need the MBA to do their job. They've done a great job, but they're not gonna win every time. think 2024 was a very difficult year for them. Between triggers and the FICO increases, [David] That are there, when you follow the money and when you have the look at who's paying the largest dues in that, don't tell me that doesn't have an influence on where you're going to be going with policies and recommendations on the Hill. it's a conflict. I respect it. I understand the difficulty of it. So kudos, join CHLA and you'll see your money be well spent. Let's talk about, you brought up MLO comp. [Greg] Yeah, I agree. [Taylor] And I just want to point out many of our members are members of both and I'm a member of both and there's a lot of trade associations in housing and mortgage and they do a lot of good work and it's important that we have a lot of voices. So just to say that. [David] Yeah. Yeah. I think it's important to realize we got multiple voices, but, we just, really want to start seeing CHLA rise up as a stronger voice amongst those because there's been one strong voice with a few little ones chirping around the side. And now we need to increase a CHLAs voice out there. So, [David] Very excited. Let's start talking about MLO Comp. Scott Olson at CHLA has played a big role in that, has really made some great arguments for that. Greg, let's start with you, your thoughts on the needed changes of MLO Comp. mortgage loan originator compensation. [Greg] Having sat in the room with CHLA over the last year or so, I do believe that something is going to happen, that it will be changed. can't exactly say how. I know that we've had a lot of discussions behind closed doors, but I'm hopeful and optimistic, and I think a lot of it is rooted in a price we continue to pay for the financial crisis. Well, I agree. mean, we're going on two decades right now, and I'm not... [David] Yeah, we're still paying a bit, how long do you have to pay for that? mean, that has been around. [Taylor] For as long as Fannie and Freddie are still in conservatorship, because that's part of the price. [Greg] Yeah, right. There's a lot of things going on here. There's technology and how that has helped to move. There's AI and all these other things that are driving the cost to originate down. And it's also benefiting the consumer because there's a race to the bottom when it comes to rates. What's broken is this model where you're paying your loan officers 125, 150, 175 basis points. At the end of the day, the deals that they can win at that comp are few and far between. So they're having to push down in many instances, the rate, the comp, all of that. And I just think that you need to clear the deck and reboot. To me, when I look at the landscape, not a popular opinion, but I believe that loan officers should be making somewhere between 85 and 90 basis points. To me, that's the level set that is necessary, but if that doesn't happen, I do think that if Loan officers are willing to take less comp to win a deal to match a price and lenders are willing to make a little bit less. They should have that ability. Most businesses have that ability, right? The mortgage doesn't. [Taylor] Ironically, that's exactly the cornerstone of the Sitzer Burnett settlement with NAR. That's exactly the cornerstone of why the Department of Justice was pursuing the entire realtor commission structure as a conversation. It was in order to increase competition. It was in order to give the consumers the ability to negotiate specifically the compensation for the broker that was selling them or helping them sell or buy a house and so to have a model where one half of the business is mandated by law practically to negotiate compensation, and then the flip side of the coin, the other half of the business is prohibited from negotiating compensation, it literally boggles my mind to understand it. It's like Bazaar Land, but it's Bazaar Land. [Greg] Well, it's a massive thing over. It's like DOS. It's long overdue for an overhaul. We're still living in 2008. [Taylor] Yeah, it really is. One thing Scott will tell you, he was in the room for the negotiations over LO Comp when the CFPB was created by Elizabeth Warren and others through Barney Frank and Senator Dodd. And during all of that period, Scott was front row. He ran the financial services. He was in charge of banking for the financial services committee. So what's interesting is. The original intent of LO comp was not what it is today. The whole concept of proxy was never what it has turned into today. The intent was to change the model where a certain segment of the business, I'm gonna just say it was brokers, where brokers were pricing up, pricing up, pricing up pre 2008. And we can go back and go watch the movie, Big Short. they did a pretty good job of making the example. The idea was to stop that model where you priced up a loan to consumers who didn't know any better and couldn't spend for themselves. But that was pre-2007. We live in a post-2020 world where consumers have more information at their fingertips than our own loan officers do. Consumers often walk in the door telling us what our price is going to be long before we tell them what our pricing looks like. Our loan officers are navigating through some of the most competitive environments [David] Exactly. [Taylor] They've seen since, I would argue, since the mid 90s. Dave, you remember what the mid 90s looked like. I think Greg was still in grade school. So our entire environment doesn't mandate the model that was created under the LO Comp rule, nor how that model has been changed by, I would say, the CFPB over the last 15 or so years, incorporating in these proxy rules. You know, it's time to re-talk about this conversation in the framework of 2020. It's going to be one of the key hallmark policy pushes that CHLA makes. We're going to push hard on this. [Greg] Of all this, we have refi fees, have LLPAs, I mean fee after fee after fee has been levied upon the consumers that they're supposed to keep us away from. Can you imagine? [Taylor] And there's no other business model that I know of. You tell me if I'm wrong, where the government decides that an employer can't negotiate through and work with an employee and dictate how the employer and the employee are going to compensate for a process. [David] Has got to change. And I really believe we're set for it, especially when we have a new administration that's interested in creating greater efficiencies and better benefits to the consumer. what we have, our current MLO system is actually works against the goal of helping a consumer get the best mortgage under the best terms. So I think is the possibility that changing in 2025 or is it second year 2026, any thoughts, projections? [Taylor] So the CFPB has broad authority in this area. And I mean, I personally talked about this with senior leaders of the CFPB during the current administration, and I cannot wait to talk about it with whoever's in charge of the next administration. They have broad authority with regard to how they police, how they do rulemaking, how they exam, all of those things. I believe that if they chose to that they could take some pretty aggressive, dramatic action quickly. However, we're not going to wait around for that to happen. We're pursuing a few different avenues as it relates to LO Comp. And one of those is re-looking at what an actual proxy is and suggesting some specific definitions for it. Because this idea of proxy has turned into anything and everything that you can fit inside of a box is a proxy. And naturally, that wasn't the intent as told to by the people who created the rules. You can literally call one of those two lawmakers whose name is on it and he will say, yeah, that wasn't really what we meant. [David] I remember running into Senator Dodd and the Dallas airport as we're flying out. And we were just finishing up a mortgage conference and we were all standing in line, ready to go through. I tapped him on the shoulder. I said, you have to go through the same line as we do. And he says, just like the rest of you all. And I said, well, anywhere, this is a group of mortgage bankers back here. And the course of my peers were just horrified that I'm tapping on the shoulder of the guy that created the legislation that everyone hates. It was learned to hate. Anyway, so I started talking. said, I got to ask you a question. If you had a chance to do a mulligan, on Dodd Frank, would you? He says, yeah. Are you kidding? There were so many things we were working to get right, but like anything else. Yeah. You wish you could do them all again. So he was transparent about it. And this is one of those ones. I think it's going to happen so fast. And I mean, the most important part again, get involved in an organization that is going to be leading and instrumental in making those changes that doesn't have the conflicts. Again, CHLA. So this is not intended to be just an advertisement for a big promotion, but at the same time, I'd have no problem doing that because I think, you guys, especially Scott, are uniquely equipped to make that place? Let's get into the manual. he is. And in the part that I'm joy most there's Patrick Lencioni says that the ideal team player hungry, humble, and smart. He is all of those guys, crazy smart. He is humble and he is willing to work just really, really hard. [Taylor] That's amazing. mean, I've learned so much working with him for the last couple of years. It's been fantastic. [David] He's hungry for change and he will make it happen. So I applaud him for what he's doing. Let's get into talking about operational manufacturing costs. $12,000 to $13,000 per loan is just absolutely not sustainable and we've got to get it down. More importantly, if we continue to tolerate that, others are going to come in from the outside. I know companies that are doing that are manufacturing at a fraction of that cost. [Greg] Yeah, Mortgage Bankers Association at annual said that it cost $10,700 to manufacture a loan. I ran that by Stan Middleman, founder of Freedom Mortgage, and he laughed in my face pretty much and said, that's a bunch of crap for the most part. You paraphrasing was much more gentle about it. But his point was it's all the people that are getting paid on every single mortgage transaction. You're paying your LOs too much. You're paying your regionals too much. You're paying their regionals too much. There's too much excess fat. He makes the claim and I can't quite get there, but he's worth a more money than I am. We all know. Now, he said that it should cost 30 to 40 basis points to manufacture a loan. [Taylor] And he wrote a book. Don't forget he wrote a book. Yeah, I agree with him. He's right. Because you got to think about this. look, full disclosure, I am a licensed loan officer. I have been for as long as they've had licenses, or at least as long as I was old enough to have one. I had a license before we had licenses, because in New Jersey, they had licenses before licenses. And I still close the occasional loan once in a while, because I like to my fingers at it and know what my customers are going through. Here's the reality. We all know, look, math, right? Every eighth in rate is roughly 50 basis points, give or take, when you look at the buy down grid, right? Give or take, sometimes a little off depending on how the secondary market is working. So if you're paying out 150 basis points in commission, what that's actually doing is it's putting 3/8 of a percentage onto the interest rate for your borrower. So you have to start to ask yourself the question, 3/8 of an interest rate over however long they keep that loan, that's a pretty steep price to pay. [Greg] Yeah. [David] Exactly right. [Taylor] Are we demonstrating that value? That's probably the better way to put it. [David] No. The reality is, the bigger threat is to those that are not seeing this as, those that I'm talking to as a consultant. I talk to all these third parties and they're seeing opportunity to come in and disintermediate, destroy, disrupt the current structure. And they're coming up with things and it's all being done through me. [Taylor] AI is coming at us fast and furious. It's gonna be here. It's actually already here. [David] It is already here. We've got Pavan and Angel AI that has got his costs down well under a thousand dollars a loan. We've got Radius Financial up that's been working on it. Keith and Sarah have been working on this up in the Boston market, relentlessly working on it by using little pieces of bots and things like that to continue to take out the human process out of it. And the reality is just so much of what we're doing does not require a human element because it is replicable with what the technology we have today. [Greg] Yeah. Let me tell you what the biggest obstacle to cost to produce is excess in our tech stacks. That is the elephant in the room. I could lay out, I could... [Taylor] You mean like certain technology companies that charge you licensing fees, regardless of how many people you have sitting in seats? [Greg] That's another topic. Let's put that on the sideline. know, ICE is one of those companies, you've got a seat minimum, seat minimum should go away. I in fact said on a previous post on LinkedIn that there should be accountability clauses in every vendor's contract where if they're not willing upfront before you sign to say, here's how we're going to show up, when we're going to show up, what we're going to get done when we do show up with obviously some margin there of failure, no problem. So that you can grade them and fire them if needed, but we get trapped into these agreements with these vendors and it really puts people in a mortgage companies in a very tough position. If I just put my hand in the NFM lending where I work, the NFM lending tech bag and pulled out 10 random vendors, laid them on the table, I guarantee you there would be crossover. [Greg] Every single one of those vendors would have some form of crossover that another one of them does the same function, a similar function. And so we've had a race of tech, of money come into this space because we have been late adopters technologically, right? The mortgage business has maybe been the last big industries to adopt technology. We're not great at it, right? I just look at, there's so many things. Yeah, I'm not going get into it. My point is that we've had this huge rush of people to come in that haven't made money, by the way. Like, I don't know how many tech companies are making money these days, but I know anything. [Taylor] But Blend is losing less and Better is losing less. [Greg] Yeah, they're hanging on by thread. They're hanging on by a thread. Not all of them, but many are hanging on by a thread. So I think there has to be a shakeout to get to the answer to your question. Your question was, how do we get to a lower cost to produce? For IMBs, it starts with your tech stack. And it also starts with demanding more of these vendors that are desperate to get you before you sign on the line that is dotted. You need accountability clauses because if they're not who they say they are, you should have the right to say goodbye. [Taylor] That's an interesting concept. It's funny that we have one handful of vendors that are completely kind of at the mercy of that kind of conversation. But then we have this other handful of vendors that are completely immune to it, that would laugh at you if you brought that up. Some of them provide us with things like credit reports. And actually, I should say some of them provide our credit report companies with information and scores for credit reports or technology so that we can originate and process loans. [David] Yeah, who's going to survive the tech battle is he who has the biggest amount of capital in there. It's not going to be the most talented or the most innovative. We're at a place right now. He who has the gold is going to win this race. There's going to be a consolidation. We're already seeing that happen. That's unfortunate. You look at how many companies out there have four or five CRMs because this loan officer group that joined the company had to have this CRM group. But another thing, there's so much duplicity in so many companies, at least in the CRM space and so we're gonna see that consolidation happen. Is the best one gonna win? I'm not sure there will be. I think it's the one with the greatest amount of capital. And so anyone selecting technology, who you should be sticky with, is check the capital, check the money, because that's the one that's gonna last. It's not the one with the greatest features and all of that. It's just reality. [Taylor] Probably not. [Greg] That doesn't that but having said that that does not always lead to a process road of prosperity David because the companies that have the most cash that are doing well. Those could also be takeout targets and when that happens and I've lived this with Surefire as it is  traded hands all the way through Black Knight and Ice that is a very very treacherous road and that's actually what led us to switch CRMs. So just because they have all the cash in the and the coffers are full doesn't [Greg] I think to me, it's more about the people. Like I chose Total Expert because of Joe Welu who's the founder of Total Expert. And the fact that they've got people that have been with the company since the beginning. You know, they talk like me, they sound like me. We have real conversations. They care. You know what I'm saying? So to me, the vendor relationship, like it should start like any other relationship. the value you should put in, this is sort of saying the same thing, David, because your point was it's not necessarily about the best technology. It's about who has the most loot combine that with it's really about who has the best people. [David] Yeah. At the end of the day, people at capital is going to what's going to win this thing is what. [Greg] Taylor, you like that. I got an eyebrow raise out of you, buddy. I love that. It was just one though. I wasn't gonna say anything. I thought maybe you had a problem with the other eyebrow. [Taylor] Yeah, you got an eyebrow raise. Did I? Did. No, so I do have a problem with the other eye. Are you making fun of my physical handicap? That is not a very nice thing to do, Greg. Greg, sure. [Greg] I don't know of anything to count, other than being unusually handsome. [David] So the reality is that we do have a tech stack consolidation that's underway and it's going to be getting accelerated at a pretty steep rate. So the point is, yeah. [Taylor] Wait, let me just interject. Here's the good news. AI is coming at us so fast. We're going to see all new technology that we didn't even dream of two years ago. That's the other good piece. I simultaneously. So I agree with you and a lot of older, outdated, dare I say, archaic technology. Some of them is our main technology providers. Some of that archaic technology, although they may hold a dominant space in the industry. [David] You didn't know it was there? Yeah, exactly right. I agree with you. Yeah. [Taylor] Like, I don't know, 60, 65% penetration, new technology is gonna emerge and emerge so fast and be better. And I am very, very optimistic about new tech and AI and hopeful that it becomes kind of the great equalizer that enables smaller companies and middle-sized companies to successfully compete with the big guys, right? Because the more competitors we have in the space, the better it is for our loan officers, for our borrowers, for our realtors, for everybody. And AI and tech has the ability to bring in that level of freedom. [David] And we've seen it begin to happen. It will happen at a blinding rate. [Greg] It's confusing David too. Almost every company I talk about talks about this idea of market intelligence. And it seems to me like everybody's got a different definition of it. The other day I talked to a vendor who said, we also have great market intelligence. And I said, the last six people that I've talked to around your space have also told me they've got great market intelligence and what you said to me was, yeah, but ours is better than all of theirs. It's like, you know, that's where that overlap comes in and confusion and it's just very hard to sort it all out. At the same time, have a lot of empathy. [David] That's right. Yeah. [Taylor] I started selling rates. I started selling rates 25 years ago and I'm going to the realtors office. What do you got? I got the best rate and the best service. No matter who you worked for, what you did, you always had the best rate and the best service, right? It's the same basic conversation. [Greg] Just want to say that I know I'm hogging up this topic, but I just want to say I also have a lot of empathy for the tech vendors that are out there. [David] I do too. [Greg] Who got in two, three, four years ago, put it all on the line, and it didn't turn out to be what they thought it would be, and they're hanging on month by month trying to raise more capital, and the runways not that long. So I'll take more calls now than I've ever taken before just to hear people out. Maybe I can find someone that I know in my rolodex and I can start to help this process of combining forces. That's how I look at it. [David] Well, we definitely expect more changes, but you're right, Taylor. The new is what's coming in. It's not the current list of vendors that are out there. We're having a new crop come in that is just going to eclipse this and bring product to market at a much reduced cost on a variable cost model. They're not going to lock you in for five years and handcuff you. Especially then saying that, well, yeah, but we've got 65% of market share so we can do that. That's dangerous thinking. [Taylor] Yeah, agreed. [David] And they should be changing that, or they're going to find themselves out of business. Let's talk about one of your favorite topics. FICO, you look at the cost structure. I mean, we have these inventors, we need more innovation and more people brought in. know Greg, you and our boats wagging around, but we've got to create the soap soap box for Greg to get up on and start beating and thumping on. All right. We, teed it up for you, Greg. Run for it. Yeah. Greg. [Taylor] Got something to say after Greg, but I'm excited to say it. [Greg] It's so absurd. We were talking about fees and we're talking about controlling costs to consumers, yet FICO is the only credit report that Fannie and Freddie will accept when purchasing loans. Think about that. And so they've created this monopoly and FICO has no end in sight. There is no competition. There is vantage score out in the yonder, but that's very confusing too, by the way. It's absurd that FICO has the control they have and that they're driving so carelessly down the road. And Will Lansing, the CEO of FICO who made $66 million, [David] That you, you were saying the other day, you were saying he sees a lot of room for them to increase their fees even more because. Yeah. [Greg] Yeah, well, he said it on a July 31 earnings call. Said for those of you that know about mortgage and aware of the fees and the amount of money that's realized through a mortgage, we are just a tiny little piece, as if this is some pie where anybody can just stick their hand in and grab the biggest sleds, like it's a free for all. [Taylor] It's a big, like a big grab bag of a pie and they should get a bigger share that they're not getting enough. That's what they think. [Greg] So David, you know how I feel about this. Trump administration passed an act which ordered FHFA to bring more competition into the credit space and that opened the door for VantageScore and as of the fourth quarter of this coming year, 2025, as of now, unless there's a delay or something changes, vantage score is going to be required along with the FICO 10-T. [Taylor] That's not bringing in competition. That's creating a duopoly where we used to have a monopoly. [David] All right. That's it. [Greg] It's not. So this is the thing. So again so we're actually, believe it or not, and people are not going to believe this, they're going to have to rewind this and play it again. They're going to be so mesmerized by this in a bad way. We're going to now be paying for two instead of one. So and I'm told, I was told today by a really good source that vantage scores costs. Taylor, they mirror FICO's. When I say mirror, I mean identical. So, when I ask the people at VantageScore, hey, what are you going to charge? we don't know. We don't have clarity on that. That's actually not true from what I'm told. [Taylor] Well, VantageScore might not have clarity. VantageScore might... I'm gonna get off my soapbox and let you go, Greg. I'm sorry. [Greg] Well, I mean, it seems like FICO even in this new world is still going to be very much at the controls and that's what we need to fight against. [Taylor] All right, so I would like to disclose something very personal. This is very, very personal disclosure. And I am serious about this. So this is my cell phone. Can you see it? I don't know. Yep. So according to Experian on the Experian app, my FICO score is 731. That's not a great FICO score, by the way. That's not a great FICO. I've had an eight something FICO score. mean, it's respectable, right? So let's just talk about that score for a second. [David] Yes. Yep. got it. 731 respectable. [Taylor] In my lifetime, I've never been late on a single payment for anything. Not a mortgage payment, not a car payment, not a credit card loan. I have three mortgages, right, because I have my primary and then I own some rental properties. I got two car loans. I have enough assets to make every single one of those payments for a decent amount of time. Now you tell me how accurate are these credit scores if I only have a 731? [Greg] Well, they're obviously there. [Taylor] And NPS, I work in an industry where I would have a hard time working if I defaulted on my loans, right? So how is this an accurate score if I only have a 731? Let's be honest. [Greg] Well part of the problem is FICO has been using the same archaic system for almost two decades. We're going on 20 years now. So they're going off of things like... [Taylor] Good thing they raised the price for that archaic system 500% over the last couple of years. wait, I forgot to impute this year's price raise. [David] Yeah. [Greg] So that's the deal. Is there more to be said on this topic? [David]  There is not a lot more that can be said. [Taylor] No, not until we roll out 10T and they raise prices again. [David] Yeah. The reality is, it's not going to get any better. And the problem is we look to the MBA to again, address some of these issues. And FICO is one of the bigger, do playing firms that's there. And they were the major sponsor at the last annual event. And so it's, can we expect them to make a change on this? No, that is not going to bring the leadership. That's why, again, I believe in the leadership that CHLA is going to be bringing in the years ahead. I think it's really important. And then also I really applaud you, Greg, for getting out there and getting on the soap box. This has not been a popular topic for you to bring up. It's brought a fair amount of gunfire at you. [Greg] Yeah, for sure. That just goes with the territory. But IMBs all support it. There's a lot of frustration around the lack of ability to change things that are meaningful to this industry. LO Comp has been out there for a long time. Trigger leads. I don't believe that's going to happen. I'd like to talk to you about that real quick, Taylor. I know we're running short of time, but... [David] Yeah. Yeah. [Taylor] do mean? don't think the house is going to magically convene in the next 24, 48 hours before... That's not going to happen? [Greg] I mean, the fact that the Senate approved their version, they had already done that. They had already said that so I don't know what that whole thing was all about. A week ago or so where they announced it's moved onto the House. why was the MBA, why was Brokers Action Coalition so optimistic that this would happen? What happened that where it all fell apart at the last minute, Taylor? would say, well, the bureaus got involved and they really started to push back in a substantial way. And maybe that's what happened. I could understand that. Taylor, you tell us. What happened? How did it all fall apart? [Taylor] This is where I do my thing where I don't actually answer the question. You've, seen me do this before. So I know this, this, you're not going to let me. So, so look, that, that, well, Dave does it. Why can't I? [Greg] I'm not gonna let you get away with that though. now you're coughing? Is that part of the delay, the cough? Well, he's been doing it the whole conversation. So. [Taylor] Of course I don't forget to the record button either so you know there's that so yeah low blow it wasn't if you're gonna if you're come into the cage you're gonna rumble this is just the way I feel a little bit like Joe Rogan right now [David] Oouch, ouch, ouch. Yeah. I hit it. It just didn't work. yeah. That's exactly. If we ain't racing, if we ain't rubbing, we ain't racing. Go ahead. God. [Taylor] So, okay, I wanna say three or four different things. The first thing I wanna say is I've been saying from day one that we don't need new legislation to fix the trigger lead problem. We don't. We do not need new legislation. It's a little ridiculous that we think we do. Most trigger lead calls are violations of every single policy that you can think of. They violate the pre-screened offer of credit rules. They violate TCPA. They violate CAN spam. They violate numerous disclosure rules at the state level for non-disclosure of NMLS solicitations, unlicensed loan officers, yada, yada, yada, yada, yada. The list goes on and on and on. Our regulatory agencies need to actually enforce the rules that are in place today, and they have the authority to do that. The CFPB has authority over TCPA through Dodd-Frank in the first place. The CFPB can step in. [David] Yes. That's really good point. [Taylor] The data brokers that are selling the state in the first place need to be auditing who's buying the data and what they're doing with the data, specifically Equifax and Experian and TransUnion. They should be held accountable to actually monitor that pre-screened offers are being made. The state regulators need to be monitoring and reviewing and doing exams on pre-screened offers to find out that the pre-screened offers themselves were properly made, properly documented properly disclosed met the rules and requirements within Reg B and Reg Z, there is so much legislation already in place that it is not necessary to take a bill and attach it to a Defense Authorization Act, which many of us forecasted was never going to make it through the doorway and in fact ended up on the cutting room floor. Because it doesn't make any sense to put credit report stuff on a Defense Act. Let's just be honest. So that's number one. [David] Done all the time, but yeah, I agree. [Taylor] And I said I had three things, right? I wanna say number two, number two, shoot, I can't remember what number two was, cause I got so wrapped up in number one. thank you. It is all about the money. So follow the money just like Dave said, think about all the credit card companies that use trigger leads. Think about how much money Capital One and JP Morgan spend to send you letters in the mail. [Greg] I think you were going to say that it's all about the money. Follow the money. Follow the money, man. Follow the money. [Taylor] That is what you're up against when trying to cancel trigger leads. You're fighting that. And that is not gonna go down without a huge fight. Not to mention the bureaus and Equifax and FICO and all those guys. So there's the money factor, which is a huge factor. And then there's item number three. And item number three is fundamental. I'm just gonna say it, I hate trigger leads. And you're gonna hear me say the phrase, I hate trigger leads a lot over the next 30 days. I hate trigger leads. [Greg] Somebody should throw a .com after that. That would be powerful. IHateTriggerLeads.com. That's a great idea. I do. It would take a brilliant person. [David] Yeah. It's a great idea, but it's not going to... [Taylor] You think that's a good idea, Greg? Do really think that's good idea? I'm gonna get you a t-shirt that says IHateTriggerLeads.com. [Greg] It would take a brilliant person to pull that off though. [David] Yeah. Here's the reality. It's not going to make a difference for the very reasons you say it. It's not going to make a difference. We can hate it all we want. It's here to stay because of the economics that are behind it. It's just a reality. [Taylor] I supported, we supported, CHLA supported the Reed bill because it's a good bill and it was done the right way. We supported the Torres bill. We supported the Rose bill. We supported every bill. Some of them we liked more than others. I think that there are some difficulties with some of the legislative approaches. But again, the reality is our regulators can take action and solve a lot of this problem through simply acting. [Greg] So, I want to just throw something out. know you want to wrap David, but I'm sure you'll soon. The was that that was terrible. Boy, that's all. You did not sound like EPMD there, but the big obviously the biggest loser with Trigger falling apart is the. Is that is the consumer is the consumer, but think about this for a minute. You know who the second biggest loser is not far behind. [Greg] Anybody want to guess? Okay. Nope. I hate when people ask me questions where I know I'm going to give the wrong answer. if I could strike that record from the record, would. But since it's you, Taylor, I kind of like that you got the answer wrong. Servicers. Because of the carve out that they had in the trigger legislation, the one that the Senate was okay with, they were going to be the only ones that still had this ability. [Taylor] Loan officers that are dealing with this nonsense. [David] Servicers. Yeah. that could use trigger leads. [Taylor] Let me just correct you. Under the Torres bill, they were going to be the only ones. When Reed brought his bill, we had some additional input and we were able to say, whoa, wait a minute. The originator of the loan is the organization that actually has the relationship with this borrower. So you don't be carving out, you got to include the originators in this conversation. Sorry, I do that. [Greg] You're getting in the weeds on me, buddy. Just hear me out. If I'm Stan Mittelman and I've got this enormous book of a trillion dollars in loans, every time he pulls a credit, the company that originated the loan, they know that's going on. There's all kinds of different tech companies out there, of course, because they do everything that notifies them. And that then becomes competition. So the fact that there was a carve out in there for them to be the only ones if they're holding the book, unless contractually otherwise stipulated. In other words, when we sold our book to Freedom, [Taylor] I think what you're saying is that you hate trigger leads. [Greg] Well, I hate triggerleads.com. What I'm really saying is that, just imagine, like, do you think Stan was happy about this? I'm not speaking for him, but when he saw that the MBA couldn't get it done, can you just imagine how infuriated he must have been? Because if he was already converting at 70% in a world of triggers, imagine how much his book stood to go up if there was nobody else getting those notifications, he had even less competition. I know he's got the best systems and the best this and that, but he might have, how many millions does that lose servicers if the ball game stays the same? Tens of, hundreds of millions. [Taylor] Well I don't know. let's and fair credit where credit's due. There's a lot of people that leaned into the legislation and it just didn't work and there were multiple trades and CHLA was one of them. We supported the legislation. We just also focused on the fact that there's other ways to attack it. [Greg] Well, and I just want to thank the MBA, CHLA, Kate Sweeney, Brendan McCullough, BHP. [Taylor] BAC and NAMB by the way for the record NAMB was actually the first trade association on this. NAMB was the trade association that kind of broke the story. What two years ago I think when the original proposal from Rose was announced it was NAMB that was pressing on. [David] That's good. Yeah. [Greg] All of them. everybody that put, I'm not sure there has ever been. This has to be top five most. But Taylor, I if you combine all of the resources, the time, the money, the man hours, the travel, all the meetings, this has to be one of the most costly losses. [Taylor] This is an all of us. It's an all of us thing, Greg. Like all of us. [Greg] That our industry has ever seen when it comes to lobbying. It has to be number one, right? I I don't know if you can think of something in your head that rivals it, but just a thank you to everybody that put their heart and soul in it, in particular, the MBA, because they fought super hard. [David] Yeah, exactly right. Yeah. Don't be discouraged. Keep on the state gun. As we wrap this up, [Taylor] Yeah. Stay on it. [David] Taylor, I want to hear what are the initiatives that CHLA is focusing on in 2025. [Taylor] Wow. All right. So I'm getting tested. First and foremost, heavily into LO Comp, but not just LO Comp, there's other components of Dodd-Frank that it's time to revisit. think that we're going to see, look, we're gonna see a different kind of environment moving into 2025. It's just the reality. With Doge and all of the Doge, Duck, Dip, Dopp, Dip, Duck, Doge, Do see how I just did that? It's gonna be Doge Ball. We're gonna be playing Doge Ball next year. I literally just coined that on this call, #dogeball We're gonna be playing Doge Ball this year, this time next year. We're gonna be navigating through an administration that is looking to eliminate and reduce and streamline, which in a lot of cases is a great thing. But while we're doing that, we have to be thoughtful and advocacy over the next 12 months is gonna be more important than ever because [David] That's pretty clever. Yeah. Yeah. [Taylor] The people that are coming into the space and are making suggestions like delete the CFPB, those people often don't have all of the understanding and information about how that impacts our industry, right? So I'll give you a classic example. I woke up this morning and noticed that we now have a federal holiday next week that was unintended and unannounced. anybody notice that? Christmas Eve is now a holiday because of a stroke of a pen. Well, so Greg knows what happens when you have a federal holiday. [Taylor] Can't wire any money, can't get transcripts, can't get flood, can't do a lot of things, right? wait, Trid, we gotta count days and make sure we have sufficient days in our disclosures for Trid, because all of our Trid rules are wrapped around business days and all of our business days are wrapped around holidays. So the point here is sometimes great ideas and good intentions end up with unintended negative consequences, right? And shutting down. [David] Exactly right. [Taylor] I don't know shutting down FHA would be a really bad unintended consequence. There are some great opportunities for us to have a huge impact for the positive, but you kind of have to thread the needle sometimes, right? And so it's going to be more important this coming year, I believe than ever before, that you're active and involved and part of the conversation in shaping what the housing and specifically the housing finance industry looks like under a new administration. [David] Okay. [Taylor] We're going to have to give a lot of guidance and make sure people understand how decisions impact us when it comes to wheels on the road and boots on the ground. [David] Such a good point, such a good point. [Greg] Well said, well said. This has been a pleasure, guys. Let's do it again soon. [David] That's been a real joy. I appreciate you boys coming in on again. We got this one recorded. The good news is a recorded it's in the tank. So we're going to wrap this up. Merry Christmas to everyone. And guys do not hang up because we got to make sure this gets all the way loaded up. All right. All right, everybody. Thank you so much. Yeah. [Greg] All right, see ya. So long, folks. Happy holidays. [Taylor] Happy Hanukkah too. All right. [Greg] Shabbat Shalom.