[David] Thanks, Matt Graham. Appreciate it very much. Be sure to sign up for Matt Graham’s MBSLive.net service. It has updates at the nanosecond. It is so powerful, especially in these volatile times. Looking at his screen right now, when you look at where we have been seeing the 10-year Treasury, it’s at least leveled off a bit down here. At a more tame rate, we’ll get the feedback from everyone. But anyway, when you’re signing up for, MBS Live, be sure to put in the LOL code so you can get the extended trial period without putting in a credit card. You need to put in a credit card, just buy it. It’s so affordable. It’s got so much information. Can’t live without it. All right. Bill Corbett, good to have you here with us. I appreciate your commentary as always. Interesting song choice by Les Parker, “Changes,” Three Doors Down Any insights?
[Bill] I think Shane did a really good job of describing what we’re seeing right now. So Matt gave a very technical description of what’s gone on in the last week or so. My answer to folks is typically way more simplistic when they, kind of get into the nothing’s happening, but why is the market selling off? Well, clearly some of the buyers took the day off, and there were more sellers than buyers, right?. But the main point being, everybody got so focused on oil in the Persian Gulf, and then Matt introduces, a very thorough, very detailed explanation. You’re sitting there going, “Wait a minute, but that’s not what everybody told me I should be paying attention to. From the secondary perspective, your job is to hedge a pipeline, not speculate. So if you’re caught in the, ” Well, but oil was coming down-” Right … “and I completely missed this quarter end balancing,” then that tells me you’re trying to be a trader, not a hedger, right? And if I’m a CEO and it went against me, and the secondary guy’s sitting in front of me and he’s going through the long detailed explanation, brings to mind that old adage of, if you’re explaining- Yeah … you’re losing. try and, understand the market to trade the market. That’s not what secondary is supposed to do. Great wisdom there. Um, which, right, so then gets into the inevitable, where are rates gonna go? Well- inflation’s still a problem, and contrary to whatever MOU is flying around, the war in the Middle East isn’t over, They’re not shooting right now, but the war’s not over. so I don’t know how, until both of those play out, that you can or should develop a strong conviction on where the market’s headed. everybody’s spinning the numbers, but, there’s, still a lot of product that’s not getting out of the Persian Gulf that is needed throughout the world. So I think we’re in this, range, really until both of those get a whole ton of clarity. And again, an MOU is not our- war’s end.
[David] Yep. So true. Mr. Kittel, thoughts on what you heard today from our experts? When you listen to someone like Matt giving, data like that, it’s not the most exciting. I mean, Les goes in and puts in music parodies, and tries to sing, and tries to do the same thing as best he can with macro stuff. Matt gives us numbers, the factual stuff. The fact is that we are stuck in a range. We’re… A nice rally. Good improvements. So there has been some reasonably, but we’re still stuck at a six and a half. The MBA put out… Was it MBA or… Someone was commenting, I’ve read some articles recently, that is the reason the housing markets are g- coming back and is more robust is because the market is finally adjusting to the reality? Maybe a six and a half interest rate range is, kind of we just need to get used to it and get on with life and the markets.
[Kittle] Well, if, you know, if you’re a loan officer, you shouldn’t be a personal hedger on rates. And somebody that quotes, you just need to go out and do loans. And we’ve said that for months and months and years. Yeah. The 10-year is down a little bit today, which is great. Yep. We’re also on a hol- Yeah. Two days in a row we’re getting into it. Yeah … we get a holiday week, and the market usually gets defensive b- right before a three-day weekend, you know? Yeah. And probably you’ve got two and a half to three days, as we were talking earlier. This day’s halfway over, you got two days left in the week to go out and do business probably, ’cause it’s the Fourth of July. Yeah. I’m, well, I’d be interested in, in… Even though we, we do have this semi-pause in the war, interesting comment from Bill. This is a question to Bill. It looks like, you know, oil’s down about, at least it was, the WTI crude, about three bucks a barrel. I paid, uh, $3.09 a gallon, two days ago at Costco here in Louisville. You know, it was 445 three weeks ago. That’s a lot- Yeah … drop. Mm-hmm.
[David] With, with the war, it doesn’t look like it’s really over yet. It’s, other than we’re negotiating and, in a position of control. So, yeah, Bill, what’s your thoughts? And then Alex get ready.
[Kittle] Well, one, I think things are improving- Yeah … but I still, what I’m hearing is, let me give you this right now, what I’m hearing is that even though, and if we’re stuck in this range, the small guys in the business are getting killed right now they’re really struggling So your community banks, credit unions, they’ve got other things that they can do, and the big banks and the big companies- are owning the market right now. Yeah. And so it’s a struggle out there if you’re a little guy, a little independent and-
[David] Yeah, I think that’s why we’re seeing as much consolidation. It can… I mean, more consolidation. It was predicted by the National Mortgage News that we’re gonna have more consolidation in 2026 than we’ve had in any given year before that. That may be the high watermark of consolidations. I wanna get over to Alice and get your… You always have insights as you listen to us talk. I know you work on the operation on the side and you work also on the compliance side, but your insights as we listen to this is always valuable. Thoughts.
[Alice] Well, you know, so I’m a literal person. I am a detailed person. I like the way Matt describes things and, being a compliance brain and reading the laws, you follow along as best you can, and have to sometimes listen to it two and three times. But Bill, you said something that, prompted a thought to me about being a trader versus a hedger. I spent a lot of years, I ran loan delivery. We had to work very closely with secondary. I was running all of operations. And also have worked in a lot of companies that had operational efficiencies that I’m wondering if you see this too, that comes from that exact same thing. Someone in secondary is actually, because of the way they’re behaving and managing their trades, they’re causing severe inefficiency in loan delivery and in the operations either before them or even, upstream and downstream, right? It can… such a mess because- you gotta race to get stuff out, but now post-closing is to keep clean- cleaning up the mess, or they’re not communicating exactly the way that they need. And so I just wanted to see, get your thoughts on that. With today’s volatility and, do people need to focus on that as well, since we’re all about cost structures these days? Oh, we are so much about cost structures. Yeah. And volatility causing more problems operationally because people are acting like traders versus hedgers. Maybe that’s a more direct question on that. Yeah. That is a great observation. And any strategy in secondary absolutely has to be vetted with the front end and the back end. This is a low margin widget business, so it’s moving the loans along the assembly line as efficiently as possible, right? So if you’re building cars and, the secondary is the, salesmen and they decide that they can get more money for red cars than blue cars, so they immediately start selling blue cars and then call up the factory and said, ” Hey, everything coming off of the line starting tomorrow morning has to be blue.” Yeah. It’s not gonna work. And- Nope. Not working … and I’ve seen that, unfortunately too much, where secondary will either make a strategy change because of an opportunity or make a strategy change to cover something else, and it just, it completely blows up post-closing, and then it snowballs from there, right? And, somebody decides to go from delivering to the GSEs to doing loans with the aggregators, for example. Ooh, that was a big one. And then the loans are getting, reviewed, and all of a sudden there’s a bright spotlight on some operational controls that maybe aren’t as good as people thought. Then you’ve got suspense loans and, it goes from- Oh, boy … being a well-oiled machine to a mess in a very short period of time. Yeah. That’s a great analogy with, switching from Fannie to, correspondent or even just any kind of private investor. So, I was just curious, if all that would still fit together. If the volatility at the same time people need to watch for the impact of what’s happening in secondary. I love your analogy with sales, because they always think it’s the loan officer who screwed everything up, but I can think of plenty of times it was execution. Yeah. And last-minute changes to execution that really caused the challenges. To that point, when I go in and look at a company and, I’m going in to do an end-to-end review the first thing obviously I look at is the secondary reports, but the next thing that I look at is post-closing. Mm-hmm. Because if a company has- I do too their post-closing tracking, reporting, they don’t have problems- I already know what I’m gonna find when I look at the front end of the ops world, Cause post-closing’s always the stepchild. Nobody pays attention to it. Right. And again, if the company, has that under control and well-documented, that tells you most of what you need to know about the company. – I can tell you, as a CEO, I used to pay attention to it. Yeah. Right? Good Lord, that costs you the money. You can’t get the loans purchased, well, and having the data was the other clue. Do they have the data, right? Yeah. Mm-hmm. It’s one thing to go, “Well, no one’s told me I have a problem.” Okay, well, do they have the reports to actually properly show you? Okay, great. Thank you. Yeah. Yeah. Good, good. Yeah, early in my career, I had two company sales. One blew up and one almost blew up, and it was because they didn’t have control over the trailing docs. It’s an area that people never want to go back and look in those, that part of the company until things start stacking up. I’ll never forget one company, we went in there, they asked for more production, and we cranked it up. We brought them a lot more production. And then we went in and they said, “Dave, we need to have you come back to Texas.” This is when I was originally running sales or running a production for a western United States of a c- mortgage, particular mortgage company. I went back into the shipping department and I said, “We’re a little backed up in here.” So I said, “Well, let’s go and take a look at it. I’ve run that area,” and this should be origination. I went in there, and they were going in to ship files, Alice, in the old-fashioned way where they were stacking files up along the wall, just stacking them up, and they would go look at files, and then the file, the pile would fall over. They’d try to push it back up. We have many more tools to help with the efficiency today, but we still have same issues showing up, although probably not quite as archaic as that room we walked into, watch where all the funded closed loans that the western half of the United States had stacked up in the shipping department. It’s their wall. They didn’t put the proper gears in or the proper brakes in place when we needed to. So anyway. So, you know, it used to be back in the day, if I can interject, the day, you know, 30 years ago, whatever. You’d have all these post-closing issues and missing docs, and many times it was the closing attorney. We had attorneys in Kentucky that were just horrible. Or you could trace it back probably to one or two loan officers that- Yeah … that allowed the loan applications, forced them through. Somehow they got through underwriting when you had your own underwriter in shop, you know, and, loans got closed, and we’ll get that at closing. Can we just give- Yeah … it at closing? Right. What’s in the deal? Well- Famous last words, right. Well- Yeah. You know, it’s funny you bring up the paper, Dave, because that really was the… If you have to say what’s one advantage of the paper, you can see it piling up in the boxes on the walls, right? When it’s just digital, it’s just a line on a screen, right? Nope. You know, it’s another line. Mm-hmm. Though I have 25 pages of post-closing problems. Well, the reason- But when they were stacking up the boxes and you had 900 of them up along the walls, the CEO walks by and goes, “I think we got a problem here.” Yeah. I remember the, you know, here we’re really digressing for a second. When finally FHA said you can go back, for so many years and shred your files, and you could, you know, scan and get rid of. I’ve, I’ve had, like, two new offices that didn’t have stacked boxes in them that you kept all these paper files in, you know? Well, see, and the reason I bring this up, the journey into the past about the files stacked up in the wall, and then you’re gonna go ship these files. They’re pulling files, and the file stacks are falling all over. Is I wonder with our technology today, we’ve solved the problem, but we don’t have the optics to go look at how bad things are. Because when you don’t have them stacked on the wall, you go And they’re stacked in our data files, but we’re not- You don’t see it looking at them the same way. I’m And then you- the capacity of the people in relationship to that number. Yeah. Exactly right. And I’m working with one CEO right now who clearly has no insights into how the back office role functions because he came out of the origination side. And I think anyone listening to this, if you’re thinking about launching your own company I encourage you to go ahead and do so. Actually, I’d ask you to think long and hard about it because it, probably will find me discouraging you, but it’s only to make sure I open your eyes up to what goes on in the back office. It’s, uh, you’ve got to learn this and become a student of the whole process and not just think… when that happens, I kind of put blame on both sides, right, so- The CEO, they ought to have a one-page, dashboard that tells them, you know, the 10, 20 metrics that gives them- Mm-hmm … that visual of the hallway, And, shame on the ops folks for not developing that proactively, ’cause, they’re trying to do, frankly, what secondary folks do, which is, you know, I’m gonna, I’m gonna hide behind stuff, and if I give you numbers I’m gonna make it so confusing you don’t understand them.” But as the CEO, you ought to be able to have a one-page dashboard that you get-. every single day that is constructed- Knows exactly … in a way that makes it clear when you’re looking down that hallway and seeing stacks of boxes. One thing Union Home did every single morning. We had that rooting meeting. Every morning, 8:00 AM, those numbers were being report, are being reported without fail. Yeah. It’s great accountability. I don’t understand how people manage in whatever business, but especially ours, how you can manage an area or people in jobs that you know nothing about and have never performed. Right … well, how many, Dave, but how many companies have formed and are forming who are good at origination and have no appreciation of the back office? I think the moral of the lesson is if you’re gonna do that, get out. If you’re gonna go out on your own starting a business, make sure you have spent some time in the halls of the back recesses of the company where very few people get to see. And I respect the companies that circulate, require people that are on the origination side go back and work, at least go ship some loans one month, and do that once a year. There’s some things about- It certainly makes you or loses you your money for the quarter or the year. Yeah. It just does. You know, when Alice talks about she’s detail-oriented, I live with one of you. So, it’s, it’s like- I think that’s actually- And I have a special place in my heart for deta- detailed people, Alice, I’ll tell you. Yeah, no, I think- We do. We need yings and yangs, right? Yeah. Perfect. Mm-hmm. The yin and yang business. Good job, good comments. I think we’re gonna be in this thing. I think I’m encouraged by what I’m seeing as far as activity in the housing market picking up. More and more evidence that the housing market is showing good, surprising levels of resilience despite the rates being stubbornly stuck at this level. I think we’re gonna be here for a while. Get ready, keep moving forward. But then we deal with compliance. Then we deal with regulation.