[David] Good job, Les. I appreciate the tribute to Charlie again, he actually sent that in a couple of weeks ago because we had some audio production issues. We did get that played, so we used it this week. It was a good job. Markets are closed today but there’s a lot going on. Before we go there, Les Parker’s newsletter. TM Spotlight, you can sign up for it. You get the paid version for free by putting in the word power in the signup code, that’s short for power seller. Anyway, check out his newsletter letter. It is so jam packed with some really good content and it’ll help you understand the markets. Just dive into it. It’s for everyone at all levels. Bill Corbett. Good to have you here, friend. Digesting what we’d find. The markets are closed, so Matt Graham is not with us, so let’s dive into what’s happened. Nice little rally at the end of the week last week, bill?
[Bill] Yeah, so the markets are closed in the US today, there’s a lot of real estate out there that’s not the US and a lot of very friendly bond activity taking place and Monday in Asia and Europe, I think last I looked, the tenure was down to 4.03. I hadn’t been following it closely, so I don’t know that if it made a run to four or what, but for the folks in the US there could be some pleasant news when they walk into the office tomorrow. But there’s one of the things that was in Les’s section that dovetails with. Two things that I saw that I wanna point out together. One is I saw end of last week where Gavin Newsom in California had signed legislation that their wonderful democratic controlled house and senate out their passed of mandating consistent volume on podcasts. We’ve all listened to podcasts where the intro or the commercials are at a louder volume than the rest of the podcast. Is it annoying? Absolutely. But I’m not sure that’s appropriate legislative time meanwhile, so while they’re doing that in California, Trump has put together and is going to be announcing some banking regulatory changes. That as they flow through the regulatory system, our projected, and this was based Financial Times article projected to release $2.6 trillion in lending capacity. Basically reducing a lot of the capital surcharges and I don’t know, between those two. it’s far from a toss up as to which one is better for the economy. If you want consistent podcasts, go to California. If you want economic expansion right in addition to solving a lot of, the problems in the Mid East, there’s a lot of things that Trump is doing on the behind the scenes regulatory side. Which was one of the things that drove a lot of the growth, I think, more than the tax cuts in the first administration and they’re picking up right where they left off. Couple of other things, there’s also an announcement today by JP Morgan Chase is committing $10 million of their own money, right toward lending for critical US security investments. Think raw, rare earth minerals, the processing, et cetera. folks are getting on board with what’s it gonna take for the US to be back to its leadership position in the world. Another thing that hit me, and I’m all over the place. United Healthcare in a kind of footnote in United Health’s Financial, actually in ARPS financial statements. So United Healthcare gave them a $9 billion donation. And for context. That’s 31 times what they get in member dues every year. So when ARP is out advertising and supporting the extension expansion of the Obamacare program, just stop and think who’s actually behind all of that. The last thing I had, which I thought was very interesting is right, the home building industry was all excited. Bill Pulte is coming into FHFA and he’s a home builder guy. He is a fan of home builders, et cetera. He got on his soapbox last week and said, look, you, if you want housing affordability to increase, then maybe the home builders need to take a look at what their margins are and start significantly reducing pricing on housing. I’m not sure if he falls into the fan of home builders category.
[David] Yeah, I’m not sure. He’s gonna be under card list this year. That is for sure. Yeah. That’s a good point. When you look at Bill, when the cost of in like in San Diego, 40%, and this came from an interview you did at TMC, I think it was the year before when you were interviewing the head of the National Home Builders Association, and 40% of the cost of San Diego is regulation.
[Kittle] Yeah, it is. He’s since retired. Yeah. Jerry’s retired since then, but that’s exactly right. You can attack a lot of things at closing. You can attack the price of homes or lack of inventory. But in order to put a shovel on the ground, how many permits do you have to have all the way through for your contractors, for your electricians to dig a hole to buy the property, and all that goes into it. So all these municipalities that add on along with what the state charges is ridiculous and ridiculous.
[David] Absolutely ridiculous. Yeah. Yep. And by the way, that was a really good interview. I’ve made notes of that one and I still refer to it because and it’s again, it’s California, the crazy west coast with Gavin Newsome in there passing legislation bill. That was hilarious. Passing legislation that we have the came consistent audio levels all the way through, or you can’t, what does that mean? I think we have pretty good audio.
[Kittle] Over regulations consistent in every state. However California is, the poster child for it and so is the northeast. Where everything is, Connecticut, New York, everything up there it’s horrible.
[Kittle] Yeah. Truly horrible. Anyway, Mr. Corbett, good report. Good thoughts so you’re anticipating a nice surprise tomorrow morning. We’re recording this folks on Monday at around noon central time. So this will be released tomorrow. The markets will already be open. So hopefully we’re your thoughts are true, but we still have our target on 3.80 bill. Do we not?
[Bill] We do.
[David] That’s what Les said. So I’m going with what Les says.
[Bill] Yeah. One and down. Get to less. Yes. Staying close to less has served me well for 40 years. I’m not gonna change now.
[David] I’m not gonna change now. Now what was interesting, last week I spoke at the Housingwire Mortgage Banking Summit. And I did a session right after Logan Motashami spoke. And what was one thing that Logan departed from? What Les, I believe has said, correct me if I’m wrong, bill. He said that a lot of what’s gonna be driving rates lower is what’s going on in Europe. Logan Motoshami said, no, it’s gonna be jobs. So is a cross, is it the two? What are your thoughts?
[Bill] Oh I think it’s gonna have components of both. I think the way I would look at it is, so first, yeah. Still have the job inflation dynamic that has to play out. And Bloomberg TV this morning had folks on and going through the logistics and timing of when we’re gonna get releases, but they’ve got a lot of folks that are saying inflation could be ticking up back up a bit to be, let’s say rounded to 3% and that’s gonna keep a drag on lowering of Fed funds dramatically. I don’t think they’re saying that it’s gonna eliminate any more cuts this year, for example. But I tend to think that the inflation and jobs are on the long end gonna kind of balance each other out and the significant drop in rates. Therefore I’m still thinking, is gonna come from outside of the US shock.
[David] Yeah. You said, look at when going on right now and with Israeli Gaza, the, all the hostages have been released as the headlines I’m seeing right now. It just went double check that, that’s very encouraging and that’s leadership. Even Obama and Hillary were on. I dunno if they were singing Trump’s praises, but they were giving him a compliment that this is significant because no one’s been able to get this thing done in two years and it’s gotten done. The hostages are free, so how is that gonna be responded in the markets? I’m not sure there’s a correlation, but it’s great news. We’re all rejoicing for the hostages and their families and for the nation of Israel, actually for everyone because that battle seems to be getting winding down. It’s had so much tragedy in it now. If we could just eliminate the Ukraine war, that’d be stop that one. That’d be even better. Anything more you wanna share on the markets bill as we are in a what’s the Holiday. National Indigenous People’s Day.
[Kittle] So that’s Columbus day.
[Bill] Yeah, my calendar still says Columbus Day. That’s Columbus.
[David] Oh, good. I’m sticking with Columbus Day, but I saw it pop up today or going on. Are you serious?
[Kittle] I don’t celebrate anything I can’t spell David.
[Bill] So not only that, i’m a lifelong sailor. I’m always gonna celebrate somebody that, sailed a, got in a boat, and had a very successful journey.
[David] Yeah. All the way across the pond. Exactly right. Yeah. Right.
[Bill] To me it’s not any more complicated than that. Yeah, that’s good.
[David] Mr. Kittle, you raised a really good point of what’s going on with the reduction in workforce reduction for the whiff that’s going on in as a result of the government shutdown. Share with some of the things you’re reading and hearing. And again, we haven’t been able to confirm all of this, but I’m hearing significant. And I think Trump went out and said, this is gonna be a reduction of workforce in the democratic category. He’s going after it.
[Kittle] It was an announcement at 4:00 PM on Friday. I’ve pretty much confirmed all of it, but there was a rift reduction in force and it’s all employees in the HUD office of counseling, which is the OHC. It’s effective in December, all but one employees gonna be gone. So that’s the situation.
[David] And that’s not a furlough, that is a permanently done, out, gone.
[Kittle] That’s correct. So even if they. Reopen the government today. This is already done. That’s about 1500 HUD approved counseling agencies across America. So it sends a message to every consumer out there right now. So I think, gonna pivot to and make this run totally by the private sector, which is the only way you would save something like this, right? The housing counselors out there get their money or they get subsidies from HUD for doing this. Somebody’s gonna have to pick up this slack. So the second thing is, I don’t know if everybody knows what a CDFI is, but it is a community development financial institution. And , he’s also going after the CDFIs.
[David] That is fairly significant. There’s a number of mortgage, there are a number of banks that are CDFI lenders and I know of a couple of them. And that’s game over for them.
[Kittle] That’s out of the Treasury Department. All right. So it went all employee in the treasury CDFI group. I mean it essentially shatters the CDFI program. Just don’t know. But that’s a big wow. And that can affect, that is a big wow. That can affect some credit unions who were set up specifically under this program.
[David] I’m thinking one, one particular bank that we interviewed on this podcast that could be dramatically impacted by that.
[Kittle] So yeah, so he’s taking everything private and personally I feel horrible for people losing their jobs, number one. Of course. Second of all, if we can’t afford it as a country, then you have to reduce the overall, and we all know the government, just look at what Doge found out, number one, but the government’s bloated and some of these things just need to go private. We can’t afford them anymore.
[David] Nope. And it’s so true. It’s so true. Yeah. Bill, any thoughts on what you’re seeing? When I think of hud, are you hearing any reports out there, but this reduction in work, this whiff reduction in force is not a furlough. This is permanent. He’s going after EPA is just getting decimated. 89% of that. Group is being eliminated. I think they got their notifications on Friday. 89% get that. That is basically guts that then there’s a whole lot going on. I can’t remember the exact percentage in the Department of Education. If the Democrats thought they were gonna win on this in some way, shape, or form, this is backfiring on them and their programs and their favorite pet projects in a big way. And again, we’re not trying to sound political here, but the reality is this government shutdown you’re negotiating against the master negotiator. And I got a feeling you’re gonna lose your thoughts, bill.
[Kittle] At the end of the day, the government has to spend less money. Yes. And there are, you ran on that. Few things that the government can do better and more efficiently than the private sector. That’s where the government resources have to go and I can sit there and give you a whole lot of really valid reasons why Meyer counseling is really important to. First time home buyers to supporting the entire housing industry. But that’s not the argument, really. The argument is where can that be done the most efficiently? And it is, turmoil is never good, but if the service is valuable and it comes right down to the individual people and they’re good at it, they’re gonna settle into the private sector and continue doing. It’s their life’s passion, and I know I hope that a lot of ’em continue to do it, but in a way that’s ultimately more efficient for everybody. Yeah. Exactly right. So much so true. Yes. Which in turn could lower not much, but it lowers the cost of getting a home loan. If you can do efficiencies right, then the cost of counseling gets down to bill’s point. Yeah.
[David] Marc Helm is dialed in. Mark, any thoughts on what we’re talking about the reduction in work?
[Marc] Yes, sir. I have I have a couple thoughts. One thought is that I don’t, you don’t necessarily have to agree with everything it’s done. One of the things, it’s it really bothered me was the defunding of the special education through the education part. That bothered me a little bit because that’s I’m not sure where we’re gonna see the support for that program to come unless it comes from the states and I doubt the states are gonna step up. That’s one concern I have, but I will tell you this, that, I just think one of the things we need to do right now is, and it’s the way it’s set up, we can’t change it right now, but it bothers me real bad that all these people are not getting paid out there and we’re doing all have to do all this other stuff when Congress still gets paid. The way it’s set up. That’s part of the law that was written and they controlled their own destiny right there on that. But I felt like if all those people felt a little bit more pain, they might be more apt to get something done and so I don’t know, but it’s really sad in this country when the political side has taken over. To run things. We shouldn’t be in a government shutdown right now. And look what the Democrats have caused happen to this country right now because they’re not stepping up and trying to do it. If you look back at the history of the shutdowns based on, it’s all about legislation and trying to tack these things onto the bills that passed to approve the budget. And it’s really a shame that happens in our country that we can’t move forward to get things done because a group of people just think they gotta get their boiler plate stuff they want done in their, especially all these other things done through. Really shame, but we’ll see how it turns out. I don’t have any positive feelings about it right now.
[David] Yeah. there’s a thing identified earlier about called the project 2025 and this was all worked out as to what they’re gonna be doing when they’re gonna be doing it. And if this would happen I really think that the Democrats love ’em or hate ’em, really made a miscalculation here because you look at how this is getting gutted. This is not furloughing, this is absolutely gutting out certain unpopular programs to this president and this administration. Very interesting. What do you see going on? Yeah, we talked about servicey values Mark a little bit. Any updates on what I’m actually hearing some deals getting done at six, six and a half.
[Marc] I heard of one last week, David, on Friday, that when it got done and it was real high I’m just totally heading back, amazed if we have a bunch of deals get done in the range that I’m hearing they’re getting done in. That’s certainly something that’s happened and I haven’t seen for a while. If ever really crazy.
[David] Yeah. It, I mean it’s, I think if ever these are at these levels, how are we seeing these values? And there was a real good I also spoke last Monday at the, we did the podcast and then I drove, finished driving to Dallas. I spoke at the HousingWire servicing, loan servicing workshop. And it was really interesting hearing the different perspectives on who’s holding what is the motivation for certain institutions. Buying and buying at these levels. It was a real interesting discussion, mark. And no one knows this better than you anyone.
[Marc] I heard one. David, I heard one. It was an interesting play. Some of the people got money in their bag. Wanna buy the servicing so they can do the refi on it. Yeah. When the rates go down. There now that’s a calculated risk. Yeah, that’s a real calculated risk. That means you gotta get it done before somebody else gets it done or you end up losing.
[David] Which means you be really, be really good at doing that. Because there’s some of these institutions or some of these companies out there, freedom, rocket that are just, they’ve got a machine built for churning your portfolio, refinancing your portfolio before you get a chance to do it. So I think that’s a lot of it. And so the higher multiples, I just, I just have a problem.
[Marc] I have a problem, David, seeing the map work, if somebody is paying, four or five points for servicing just to get a refi on it, what are they gonna have to make on that refi to make it. Yeah, and I don’t see the math working, but that’s what I heard. One person said we’re trying to buy up some of these portfolios so we can take advantage of it, and the rates bottom out, so yeah.
[David] I heard the same thing, and I heard sometimes Sarah saying, we’re hoping to get two refis out of these acquisitions. I said how are you doing at doing that with the portfolios you’ve owned currently or working on? And I get this blank stare, so it’s a great opportunity if you’re a seller, you should be jumping all over this jump all over this.
[Bill] Dave, what’s the the old expression. Hope is not a strategy.
[David] Yeah. Hope is not a strategy. That’s exactly right. Yeah. So true. If you’re hoping to refinance that loan, you’re overpaying for, all right, so I don’t wanna kill anything ’cause I have some clients selling into this right now and they should sell everything they can. Just, when you’re selling Marc, I think one of the things is don’t, it’s not always going to the highest bidder. It’s one that we can buys the whole portfolio or whatever you’re putting out. It’s the those that come up with the highest bid and then they knit. Pick what they want. You gotta be somewhat careful on that. A lot of people there that know you well, mark spoke well of you and they saw I, I was speaking and they go, yeah, that’s right. You work with Marc Helm, so you’re highly regarded in the servicing circles. Anyone looking for wisdom on that? I recommend you get ahold of Marc.