[David] Yeah, good report. Thank you so much Matt. Be sure to sign up for Matt’s outstanding product MBSLive.net. You can sign up for using the LOL code. You can extend a trial period without having to put in a credit card number, but you just put in your credit card that you wanna have the service. Especially what we have looking forward or we’re looking at we gonna have some interesting days. And how do you know how to talk to your customers if you’re not looking at real empirical data? up to the second, up to the nanosecond? Get signed up for MBS Live.net. Appreciate it. Let’s get into a good discussion. Bill, we always turn to you have you, we call you the, our Parker interpreter. So interpret away. I know you’re in the car today. Hope we can hear you well enough, but come on, talk to us.
[Bill] A couple of things about Les’s commentary. So, first question is, what if treasuries are hosting a party and nobody shows up? So tenure goes to 360. That probably means mortgage rates come down by three eight, 7%. I think origination activity right now is gone into a funk, and that may not be enough to change it. Especially if it’s on top of economic weakness where some of people that were on the sidelines going, yeah, I need rates to come down so I can sell my house, buy another house, and not get completely hosed on the payment difference. Maybe economic uncertainty keeps them on the sidelines a day. I think that’s, where it’s dropping is good news, but I wouldn’t automatically start signing up for more volume if you’re on the sales side of an organization because I’m becoming more skeptical that there’s a significant lift out there.
[David] So, you doubt that we’re gonna see a lift if lower rates happen, is what you’re saying?
[Bill] Correct. All right. And in the very short term tactical. So if you’re an originator and you’ve got customers on the sideline and they’re waiting for a certain rate I would be paying an awful lot of attention Thursday morning when you have unemployment coming out on a shortened trading day before a long weekend. That could be wild in any direction and could be wild in both directions in the same day. So stay tuned there, and I guess my third point is there was a lot of press last week about Waller and Bowman, lobbying hard for a rate cut in July. And to me the media was making that out to be like big news, but yet not talked about it previously with the dot plot. Basically half of the Fed was dot plot was predicting multiple rate cuts. So, the way I look at that is now we just know two of those seven people. I don’t think it was nearly as newsworthy as it was made out to be.
[David] Yeah, I agree with you. I absolutely, I agree with you. What’s really interesting is I got, just before we started the podcast, I got a really good friend of mine Russell, who is out looking to sell his home and buy a home and he really wants to move. His wife really wants to move. But guess what they got? They have a two and seven, 8% fixed rate mortgage on their current home. They’re looking to buy a home that’s half the price of their current home and have a mortgage, half what their current mortgage is. And guess what I told him? He says, what’s the rate? I said, eh, I plan on six and three quarters. Now if you did, if you were to lock up now, it might get a little bit lower. And he says, he did the quick calculation. I’m having half the mortgage amount and my payment is the same because of where interest rates are compared to where they were. I said, get over the 2.7578 to get over it. Get over it. This is the reality. And look at, we would’ve been thrilled to have these kind of rates at any point numerous times throughout the history of our 50 some years we’ve been doing this Marc. It’s just crazy. Mr. Kittle, you’re right there with us. We’ve been thrilled to have a six handle rate, but thrilled to have it. But I think it’s the economic certainty that you’re really hitting on Bill that has got more people spooked. About making a 30 year commitment or a long-term commitment on a major purchase. I think you’re hitting on something right there, Bill. Thank you David, your thoughts? I saw you nodding here as you’re listening to Bill talk a little bit.
[Kittle] Yeah, I love the term Bill put out there. Nobody shows up to the party. That’s a great thought. If rates fall, we still have one problem in the marketplace, and that’s inventory and first time home buyers. So even if rates fall for first time home buyers, there’s no inventory for them to buy and building is down. So that’s the conundrum, the cycle that we’re in right now. Great points that he made. This is gonna be the next six days. Come back next Monday and see where we are. And it’s a roll of the dice.
[David] I think fact also that we’re heading into a, extended weekend. Once everyone do, it’s risk off when it comes to extended weekends, you don’t know what’s gonna happen.
Over there.
[Kittle] That’s Bill’s point. So we come back here on this podcast a week from today after a long weekend and everybody could be in shock or we could just be whole hum. Yeah. But just to the comment about the Fed.
[David], that’s that kind of uncertainty really driving these markets. David, I think it’s keeping people and I think listeners that are that, that are on the origination side of the business right now, what are you gotta keep doing? You don’t sell rate, you sell buy now. This is an opportunity. This is, you just gotta continue to be talking to the realtors, provide leadership. It’s about leadership. Marc Helm, speaking of leadership, that’s one of your favorite topics. You’re coming on, you come on in and talk.
[Marc] Listen to this comment today. Makes me think about a couple of things. I wish we had a transportable mortgage so you could take your mortgage with you when you buy a new house, that’d be nice. Preserve that rate. We’re never gonna have that. But I’m really been sensitive to rates here recently. I got a young gentleman who was a caregiver for my brother and his wife. They’re in their early thirties and got two children and they wanna buy my brother’s house and I wanna do that for them. Because they stood by his side for three and a half years helping him ever, which way they can. And the problem is that the interest rates is gonna kill him right now. You can’t, I don’t, I’m not sure I can make it work. I’m trying to figure out some creative finance and all.
[David] But still these rates are relatively low.
[Marc] They are, but for him in affordable housing arena, it’s not a good rate. You know what I mean? These lower income folks that are really having a hard time qualifying and transferring the. Home under their name and getting it for a decent rate. And we found that article you sent us that we read, I paid a lot of attention to it because yeah, the almighty spread is ruling the range right now and the spread is dissipated on people. I think we’re gonna have some quarterly profit situations come out this quarter that are gonna make some of these companies that we thought were making a lot of money look pretty sick in what they’re making because the spreads disappeared on them a good bit too, as they tried to be able to make more loans and be competitive in the market and all. It’s just it’s not a good story right now and I gotta wait and see. Let’s get over the, holiday and see what happens. But I certainly say hope that what we’re hearing about the possibility of two rate drops. Before the end of the year are in play. At least two are in play to help us out a little bit because I think there’s a bunch of people out there needing the loans right now, and again, I don’t know how you cure the problem, Mr. Kittle talked about if the supply is not there, the supply is not there.
[David] Yeah. Every lower rates, it doesn’t matter where their rates are. That’s right. Yeah. Alice, when you sit and think about the big picture, by the way, Alice I, we were talking just beforehand. I want to give a shout out to one of the listeners that texted me. He said, I didn’t know Alice do so much about economics she makes, and you, you always opined. So what are your thoughts on what we’re talking about here, Alice?
[Alice] Oh thank you. Yeah, I, just when you do this a long time and I managed all the departments throughout a company at one time or another, or all at once, you have to learn a little bit about secondary. For me, it’s just enough to be dangerous and I like to, I just to ask questions. So for me, the situation we’re in now, this is not a surprise. We knew this when rates were artificially held low. We knew this volume as it was building of people with 2% interest rates was going to cause this problem. So this is not a surprise that this is where we’re at. My question I guess is does anybody see that because the President and others really want this to be a much lower interest rate, that one of the motivations behind that is to, obviously in the US budget projections, if we had a lower rate, that would certainly help our budgetary projections because now the rate that even the US would have to pay on its items would now be lower. Does, am I making any sense, am I using the right words here? So it’s a conflict with the Fed mandate on why or when they modify rates versus what the country needs to actually try and get some momentum in the mortgage space and in the housing space.
[David] Yeah. Great. Great. Great question, Alice. I think there’s an advantage to the us There’s an advantage to the housing and there’s so much advantages to us here in the US If we have lower rates, it’s gonna help the economy, gonna help what we’re paying as taxpayers to interest our interest bill, which is enormous. That’s why I keep telling everybody, read this book, the Tower Basel, B-A-S-E-L. Read it. Marc just started referencing it. I’m gonna start thumping out a lot. It is the secretive bank and not secretive in the sense it’s a secret society, but it is a lot well-known bank. It’s the bank to all the central bankers in the world. And it really taught me some things as I read it, the unintended consequences when we do something here in the United States and there’s a flight to the dollar or a flight away from the dollar, it can have unintended consequences across the global landscape, geopolitical and be very destabilizing. And so we’re a part of a larger very complex financial system globally. And I gotta tell you this BIS the Bank of International Settlements, which the power Basel’s about really gets into that. Marc, I thank you for calling attention to that because it’s one book I’m telling everyone be reading that book. Andrew Berman already has it, bought it and put it on his. Next I’m gonna listen to it. He says, I’m right now listening to the other book recommendation Unreasonable Hospitality. It’s a great book for everyone to read on service and how to think about customer service. But anyway, let’s get back to wrapping this discussion up as I really wanna get an MLO Comp mortgage loan originator compensation here in just a minute. Anyone else wanna add anything? Allen, you wanna add anything to what we’re talking about?
[Allen] No. I think some of the great minds on this podcast have shared some of the great thoughts.
[David] Great thoughts and great minds. Good. Thank you, Alan. I can’t wait to. Yeah, bill.
[Bill] So David, one, one, just to overly simplify some of the conversations, because you’re right with the Bank of International Settlements if things are so intertwined, but there’s also a segment of it that’s just not that deep and complicated. And when I look at a lot of Pulte’s comments lately, the easiest way to explain that to someone is that’s somebody who has maxed out all of their credit cards. So they’re getting on the phone with Visa and MasterCard going, you need to lower my interest rate because I’ve spent too much money, there are a lot of credible arguments about monetary policy, but I’m sorry, Pulte is coming across as. I’ve spent too much money. So you need to help me out.
[David] Yeah. Yeah. Great point. Really good point. My credit card bill is too, I overspent. So it’s your problem. Reduce my interest rates, Mr. Credit card company. Okay.
[Bill] And what Powell really wants to say is if you want interest rates to be like they were before the pandemic, then you figure out how to get the national debt back to the level it was before the pandemic. This is a fiscal problem, not a monetary policy problem.
[David] Yeah. That’s really profound statement. Yes. And that brings up, we’re talking about Pulte, about him introducing the crypto. Going into crypto. I got it. That was fun when I sent that one around to get everyone’s response. We’re gonna talk about that in just a minute, but let’s wrap this one up by saying, folks, when it comes to interest rates, just take what you’ve got. If you’ve got a borrower, get ’em closed. Just get ’em closed. I hope you’re having a good month last day of the month, quarter in. So let’s get on let’s start with the Pulte. There was a real reaction, Mr. Kittle, you had a real strong reaction to what I forwarded around the email or the letter that I was sent to me as it came out from Pulte about considering the crypto space, I mean going into crypto. But talk about that. You had a pretty visceral reaction to this. I was it you that, or was it you or Marc, both of you? Just that this is effing crazy.
[Kittle] Something like that. Yes. I don’t know if I very professional expletive or not, but I will certainly say I think there’s too much risk in it. You have to look at who backs it, right? Who backs crypto? It’s not the United States government. Yet, I should say, we’re trying with Trump and we get paid to mitigate risk in this business from the loan officers we hire for reputational risk. The loans we put on our warehouse lines, we take a risk there. We take a risk, we underwrite. And that’s not something I would want to get into. Maybe that’s just too old guard,
[Alice] But no, it’s not old guard. It’s common sense. Thank you, Val. It’s a proven history of understanding risk analysis and who pays us back. And when we don’t know the source of funds and where people got their money, it impacts the risk and who pays us back. A source of funds is a big deal, and with crypto, you never truly know. The whole idea behind it is that, you can move money around secretly. So, it’s difficult to really be firm that this is my borrower’s own investment. And so where’s the money coming from?
[Kittle] We have a saying when you’re in the cockpit and when you fly into something like this and look at it and you don’t like it, and you do a 180 out and we need to stay as far away from this right now to Alice’s point as possible. I think it was a ridiculous suggestion.
[David] He’s playing to his boss because his boss Trump is telling everybody that we are gonna become the crypto capital of the world. On, this note, everyone go listen to the podcast released last Wednesday with Lee Bratcher of the Texas Blockchain Council. It was really interesting. And you look at how Trump is pushing the stable coins and then the tokenization, and then what we really got into talking about the policy as it reshapes banking and real estate. It was an intro class, barely a primer, but it was a good one. We’re gonna, Leah’s agreed to come back and dive into this in a much bigger way. So go back and listen to that, everybody. Very important. Marc, you did, I think it was one that you came across with the sleeve on there on the, when I sent that out.
[Marc] Yep. Crazy world. We’re in folks. Crazy world. I think what I’m gonna do is start my career over now at the ripe age of 74, and I think I’m gonna go into sales and just sell men’s clothes. I’ve worn every size in the world, so I’d be good at that.
[David] I worn every size. You are hilarious. All right we’ll get into that, but Allen, this does trip over into your area, the crypto. We know it’s coming, Alan. There’s just no if, ands or buts. It’s gonna be here. It’s overtaking us. It’s how do we do this and how do we play into this when it comes to the real estate world? Any thoughts, Allen?
[Allen] We still can’t get a digital mortgage loan sign, so I’m not really so worried about crypto taking over the mortgage industry. We’ve been talking since COVID about people signing things remotely. I called a doctor to make an appointment for something today, and I actually asked the lady if I was speaking with a robot, and she wasn’t happy that I said that, and I felt like I was talking to an AI agent and she said she was just having a bad morning, and I apologized. I don’t think we’re ready for as much technology that’s about to hit the rest of the world. So yeah, crypto maybe can be considered at some point an asset, but it still, even to that extent, I think we’re far away when you can make your down payment through Venmo or PayPal. Maybe PayPal you can, but when you can make a Venmo or a Apple Pay or anything like that for your down payment, or it can be considered an asset, then we can talk crypto. But honestly, David I think it’s good to know about, it’s good to understand. There may be a few people that dip their feet in the water, but you think the agencies in the current state right now are gonna start accepting crypto? Let’s get to digital Mortgages being signed online first.
[David] That’s really hilarious. It’s really a good point actually, because you look at how long it’s taken just to get a digital mortgage launch in this industry. It’s really something else. All right.