Lykken on Lending

[David] Let’s get our regulars starting with you, Bill, love Parker’s optimism and about that, which does imply what Matt was talking about is we’re going to see the half. Question is when? your thoughts.

[Bill] Couple of different thoughts. First, there’s a lot of frustration right now in the market where unemployment comes out and then almost immediately, the Fed goes into their blackout period so you don’t get to listen to a couple of weeks to the Fed governors talking about the data. Now we actually have to wait until the FOMC meeting. I think what everybody is trying to understand is how do you marry the Fed being data dependent with, are they reacting to a single point of data, or are they looking for a couple of months quarterly trends? I don’t see them going to have at this meeting, regardless of what the data comes out between now and the meeting, but as Matt said, between their statement. The question and answer afterwards, they can accomplish a lot with beyond just how much they actually move rates and I don’t think to your point, a quarter point move doesn’t change that the confidence in what Les is talking about, right? There’s a lot of time between September and the end of the year, especially when you need to go back to the fact that mortgage rates, longer term rates tend to lead to fat. Even if the Fed is slower on cutting on last, it’s because there’s stronger inflation data. Mortgage rates could trend down in advance of the Fed cuts, either late in the year or early next year.

[David] That’s got to get mixed into this with it being an election year too. How does that factor in your mind, Bill?

[Bill] That’s a great question. I don’t really know, but I. think it probably keeps 50 basis points in the corner. On the other hand, it depends on how you’re going to interpret the data. 50 basis points could mean that they see things with the economy being worse than what other folks do and how does that play in the election cycle.

[David] Great point. Alice, you got your pencil out. You heard what less was saying. What’s the temperature there at Union Home? there seems to be overall optimism of all the people attending  the TMC conference here, what’s going on in the market. The best attended conference I’ve seen and been to here in a while, at least from the TMC standpoint and so your thoughts.

[Alice] Yes, I have that written down and marked in my calendar, end of the year, Les is predicting will be below 6%. He sounds very confident that we’ll get there. I think the comments that you’ve made Bill and what Les has been reporting on the whole time, definitely indicate we could get there. I am not someone to try and predict where rates may go. I leave that to Matt. He’s the one who  and he’s good at not trying to predict but just really give us the facts what I thought was interesting in what Matt said today was analytical clarification it’s not just the numbers and the words, right? If you talk about wordsmithing, but after hearing the tape essentially then there’s more analytics to go on after that and then the market thinking it’s more like 25 basis points, but for me from boots on the ground, I’m happier with a 25 because really all of the servicers out there if you’ve got a 50 basis point drop, you are in a panic looking to try and hang on to your servicing as so many customers now become in the market to refi so that 50 basis point could cause some real chaos for servicers.

[David] Yeah, Marc, understand servicing as well as anyone in the industry, your thoughts Marc on this and that’s I want to start with the MSR retention quarter. We already have that baked into the pricing and what’s your perspective on a 50% and what it could do to MSR?

[Marc] I agree 100% with what Alice just said. A 50 basis point move rather could really have a dramatic effect on the servicing value because I think a lot of people will move over that. That’s going to be enough rate to move a lot of potential borrowers. But I also think that the other topic that we had to address I think we can get below six this year. I really do and I think Les is on target on that to some degree, but I think it all is really going to depend on who gets elected. hate to say that. I think that if you have the liberal side get elected with the advanced spending programs and all this other thing, I think it’s going to hurt the chances of the rate going lower. I think if you get more financial responsibility from a conservative side, I think there’s a good chance that the rates will get below six, but cause I don’t think that election where the first thing the new administration to do is go spend a lot of money we don’t have, it’s going to help our rates. and that’s what tends to happen when somebody’s trying to make a name for themselves after winning an election if they’re spending money and, that’s my big fault with this country. We’re never going to get anywhere if we keep spending money we don’t have. You can’t be everything for everybody. Sometimes you got to play the cold, hard fact that we don’t have the money to do it and quit spending money we don’t have.

[David] I’m really interested in what you heard when you were in Europe, you’re over there for a whole month, having a wonderful vacation. So happy for you.  What were you picking up on the headlines? because I’ve often heard, when we’ve traveled to Europe, I’ve heard the headlines over there. When I’ve been over in Europe, I’ve been completely  different sounding than what we’re hearing back here in home. What’s the flavor over there, Marc?

[Marc] I’m going to tell you a story that is going to blow you away the population of Norway, where we spend a great deal of time, is a fairly liberal environment and just about everybody, as soon as they realized we were from the United States, asks us about the political environment over here and all, and most people were really dismayed that Harris was the presumptive nominee for the Democratic Party because she didn’t have a really good track record at all in Europe and how she handled herself, speaking, which she didn’t really have a good track record in the United States, how she handled herself. So they’re amazed at that. When I got over into a more staunch conservative base in the United Kingdom, in the British House let me tell you what we saw. We saw a bunch of Trump for president signs. Think about that, going to British Isles and driving around on buses and taking these tours and all. Why would people in Great Britain have Trump for president in their yard? Unless they really felt strong about it. So, I saw that, which was amazing and those are the two major things. One was questioning Harris is a nominee and the other was some signs that just popped up. I didn’t have a lot of questions about Trump at all. But I think that one person in the British Isles did say that they liked the fact that Vance is a military veteran and that they feel like the Republican party will stand up to all these things happening in the world that people need to stand up to, wherever it might be in, whatever it might be, it’s happening out there that needs an opponent to that we should stand up for.

[David] It’s good to have you back, Mark. That’s for sure. Alan, any thoughts on what we heard about rates in the market?

[Allen] My feeling is that rates have already been dropping and just I really like to mirror what David Kittle says rates still are very low. I know it was many years ago and the economy was different, but my 1st house was 7% and that was a great rate at that time. 6 ½% I remember it was my 2nd house. Yeah, things harder to purchase and buy and our economy is really not doing that great and everything everyone else in this program just said, yeah, 100%. But I don’t know if rates are really going to move or not. We’ve got a problem right now in different places in the country with inventory. We’ve got HOA fees that are so high that the homes won’t sell, even though there are condos and they’re selling for under $300,000 a block away from the beach. There’s other issues. There’s other types of regulation. There are realtors that are still listing extremely high where the price has to come down, but it’s an artificial drop. It’s not a true drop in value and then the news is really nice. Prices are falling in the markets crashing. It’s just like everything’s a disaster right now. So yeah, if rates come down, that would be great. If I decide to list my house the next couple of months and it sells, that’d be great. But  three of my neighbor’s homes have been sitting for over 30 days on the market. And I live in a golf course community in a very high desirable place. So, something’s going on and I don’t know what it is.

[David] It’s absolutely going on. Good comment. Thank you, Alan. Appreciate it. Again. I want to thank you, Matt Graham, for what you’re doing. Sign up for Matt’s MBS Live website. You can do so by putting in the LOL code. Yeah, Bill, do you add something to that?

[Bill] Before we move off, there’s two things going on that make you really question  what goes on in Washington, D.C. So, we’re sitting here dissecting what the Fed is going to do and the impact on rates and yeah, when you look in the other direction at the treasury, so the treasury has been issuing more and more short term debt, but they’ve also been balancing that out by buying back and retiring longer term debt with the driving down Long term rates, but by issuing more short term debt, right? We’re talking about is the fed going to lower rates? Yes! and the treasury is almost doing everything to keep short term rates from going down so that’s number one and the other thing that I came across this morning and it’s being talked about in both candidates camps about the United States starting a sovereign wealth fund and right markers in Norway, which  has a phenomenally successful fund, but it’s because of all the money from oil and their budget surpluses, and I’m still trying to get my head around our country that’s running massive deficits. and start a sovereign wealth fund to invest money that we don’t have.

[David] Yeah, great point. The implications if that continues, we’re going to have more of an inflationary environment, which is going to be, it’s right now at this point that it has been genuine organic.

[Bill] the government mandate right now to be used really simple.  Stop spending money.

[David] Yep. We’re gonna hear a lot of that in this election cycle. That is for sure. Thanks, Bill. Appreciate it very much.