[Alice] Thank you, Matt. Check out MBSlive.net for up to the nanosecond updates, and use the sign-up code LOL to get an extended trial period without having to put in your credit card number. All right, let’s digest what Matt was saying, and of course Les as well. He packed a lot into that short bit, but w- was landing on the Fed meeting. So can we start there, Bill with really looking at the fact that we don’t have the forward guidance, and you go from 40% believe there may be a rate or that chance is built into the market, but then conversely, do they really think there’s gonna be a change in the, in rates? What are your thoughts?
[Bill] So 4 out of 10, 10 out of 10, 12 out of 10. there’re a bunch of things that are going to be fascinating in this Fed meeting, So the first thing… and it- this has come up before, where, the Fed can hike rates without hiking rates. two things that I’m watching for maybe more in this meeting are, the number of dissenting opinions, right? So the Fed when… take out the forward guidance, what they tell you from the meetings is actually, there’s a lot in there. And they come to a consensus decision, but they still are communicating dissent on the ultimate vote. So if you have, let’s say you have four folks that dissent that they believe rates should move higher. You’re gonna see short-term rates probably tick up, so maybe that in effect counts as a rate increase. That’s number one. And then also, We’re gonna get a very brief statement, There’s still, I think, going to be enough information in there to tell you where they are leaning, right? And they’re not gonna give you the conclusion, but if the data is still there, and again, a lot of it comes down to, the dissents and that’s gonna tell you whether you’re gonna get an increase or not in the future. Then you start looking at timing because then you start coming up close to election. There’s gonna be a lot of noise and they’re still gonna rely on the data. But, the reality is, and we talked about this last week, right? The drivers of inflationary concerns right now are not going away. And, so oil rallied from around $100 a barrel down to 90. Oh, that’s great, oil’s down. It’s still up, and the yo-yo up and down cycle is not going away. I think you’ve gotta look at the path of rates being flat to higher going forward. Now, I also think, that the inverse reaction, the more aggressive the Fed gets in Dealing with inflation and how war starts driving his new mandate, You could still see long-term rates trending down from here. Not dramatically, but, still staying in the range. And I heard somebody on Bloomberg this morning I think summed it up really well, right? They said if, They could come up with seven or eight scenarios right now that would lead toward higher rates. They could only come up with two that lead to dramatically lower rates. One of those is a meltdown in the stock market, and the other is a recession which we don’t want either one of those So you don’t, it really, again, whenever we say, “I want lower rates, I want lower rates,” you gotta think about what’s driving the lower rates. Yeah. ‘Cause I don’t– you’re right, I don’t think either one of those two would, be on my wish list.
[Alice] Yeah, both of those sound way too harsh. And it’s interesting that you do have to get people to think about be careful what you wish for. David Kittle, anything you wanna add about the markets?
[Kittle] Oil’s down s- almost $7.50 a barrel today, to Bill’s point. After being up last week, it’s bouncing all over the place. Two personal comments. Stocks are up today just a little bit. Three houses go up for sale in my neighborhood over the last 10 days, they’ve all sold. A club I belong to- I think it’s two houses close to a very desirable home’s gone immediately as soon as they’re put on the market. So the buyers are still out there. And something else that gauges with the activity is Mortgage Collaborative. We have our conference coming up in Austin, Texas in September, and registrations are strong. And as usual, we have more lenders than we have preferred partners or vendors going, which we lead the industry in that ratio. So the demand to go to quality conferences with good content is still there. People are still doing business. They’re not doing it and filling their pipelines maybe like they were earlier in the year, but the sentiment is still strong. And I think Bill may have said this a week or two ago, everybody’s pretty much settled in, this is where rates are. And for what we’ve been opining on for a year and a half, go do business. You can’t wait for the market and hope. Hope’s not a strategy. I think that’s a Corbett quote. He may have stolen it from somebody, but, Oh, sure. I stole it from somebody. Yeah, you stole it from somebody. So we’re still in a good place. And his analogy of getting a rate change without the Fed moving, I think is incredibly intuitive. I’d never heard it really expressed that way before, but I think that’s exactly right. You know what they say, the dissenters, what comes out when they release the minutes of the meeting, and people are looking because they’re… again, I think you framed it too, Alice there’s really no forward-looking data so far for this new Fed chair, a lot of it. And so I don’t think they’re gonna move on rates. I’m one of the 12 out of 10 that says no. 12 out of 10.
[Alice] I think it was brilliant Bill, that perspective about the Fed can hike rates without hiking rates just by a little less forward messaging, but the information is there. So I have a question to your thought, Dave, about data. Have they talked about yet what new data they’re actually going to start using? ‘Cause that was a conversation early on. Have we seen any new data being used in their analysis? Was that for me? You know what? Still, yeah
[Bill] They have not, and that is one of the task forces that has been set up. So the goal is- Okay … to have information by year-end, but they’ve also said that it is bringing in additional sources of data closer to real time, right? I think they’re clarifying that they’re not looking to replace the government data, but- Okay … bringing in more information and, nothing definitive yet. And that’s the other thing is, if there is ever a time if, to back off on forward guidance, th-this I think is the right time because, forward guidance is gonna come from the military strategists, not the economics world right now, right? ‘Cause an-anything you’re planning going forward depends on what version go… And the outcome and, I’m sorry when, massive changes in direction and strategy coming out, a tweet a minute. If you’re the Fed how could… Even if you wanted to, how could you give forward guidance?
[Alice] That makes perfect sense. Yeah, so it’s actually the instability that we’re seeing in the market is caused by other factors. The Fed staying out of it is actually helping keep some additional layer of instability out of the market.
[Bill] Yeah and let me give you one example of the layer on layers that is going to be impacting things going forward, right? So a lot of the manageable increase in oil prices in the beginning of the war was helped by China had been stockpiling oil for quite a while, right? Why they were smart enough to do it and the folks that were starting the war didn’t think of that that’s a whole ‘nother conversation. But they are now starting to import oil again. So what’s that demand and what’s that gonna do to the prices even if nothing else changes, right? these are things that are changing so rapidly. It’s not an on/off switch, right? And again, go back to the oil embargo in, 73, the first time oil card was played. That was literally an on/off switch, We relied on a massive amount of oil coming out of the Persian Gulf, and they all got together and said, “No.” And- you deal with the consequences. Now it’s changing day by day. Who’s importing? Who has what supplies, right? Can oil get out of the Red Sea going south past Yemen? Maybe we’re not so sure today, so now we’re gonna send it through the Suez Canal, right? I’m like, okay, if you’re in Italy, you’re like, “Okay, cool. I don’t care.” But if you’re in Singapore you’re dealing with Saudi Aramco and they’re like, ” Yeah, so that oil that we were gonna send you, and now we’re gonna have to send it out through the Suez Canal, so it’s gonna take a, little bit longer to get to you guys.” every day it’s pull through, put a new card down and figure out what you have to do.
[Alice] Yeah. Marc, anything you wanna add?
[Marc] I just wanna say I’m proud to be on a podcast with Bill and Dave because you’ve said more that makes sense in the last seven to eight minutes than I’ve read in the last six months. So it’s really nice to have somebody do an assessment that makes sense and is understandable for the rank and file people out there, because I just wish more people would pay atten- like the regulators, pay attention to what you say, because you got more solid comments than I see in most review articles that have been written about our economy. And that’s really frustrating to say that, but it’s true, and I think most of us on this call would agree with that. So kudos, guys.
[Alice] Absolutely. Bill?
[Bill] Thank you, Marc.
[Kittle] Yeah, thank you, Marc. That was mostly Corbett
[Alice] Well, I think all, all three of you have just a tremendous amount of experience and wisdom to be able to help our listeners just see through noise- that’s out there. There’s so much noise. And to just get focused on what your messaging is very clear about is that there is not going to be some major rate drop coming ahead that you should be counting on for a big refi boom. And so what’s your strategy for the purchase market that you live in and work in? Expand your licenses. There’s so many opportunities out there. Dave, anything you wanna add on the origination side?
[Kittle] No, not really. I- it’s difficult sometimes for me because there’s such a gap between when I started, and I’m still in the business, much like Marc and and Bill. A little behind both of us. When I talk about how much higher interest rates were when I got back in the business, and it’s a legitimate pushback houses only cost 35,000.” And my response is incomes were 17,000 on the average.” So it’s pretty relative as it goes through. But still, to originate back then at 18 and a half percent on FHA and VA loans, rates kept going up when I got in, but we just kept finding ways to get people in houses, whatever they were. And if you focus on the rates, which we have said over and over, you’re gonna miss business. Because somebody’s gonna talk to that buyer and figure out a way to get them in the home, how they can structure that loan, and that comes with experience and patience to sit down with people and spend the time. The loan application anymore in this environment can be, how long should the loan application take? As long as it needs to figure out, to get all the pertinent information you need, if you got a good clean buyer, great, it’s not gonna take that long. But there’s a lot of challenged buyers out there right now. I’ll go back and finish with this. If they’re listening or if they read the letters you can help a little bit, especially on FHA purchases, get rid of the upfront MIP. It’ll give that borrower some equity that they’ve never had before because almost 100% of the people add it back into the loan. And that’s something. That’s a half a percent right there. It is.
[Alice] It is. So- And we looked at the math that, they should be able to afford it with all the capital that’s sitting in that mutual mortgage insurance fund today.
[Kittle] What, they’re five times over what they’re supposed to be. Yeah. They don’t need it. And it’s not their money. I’ve heard people in the government go we need that money.” What do you need it for? If it’s sitting there and delinquencies aren’t high and it’s five times and you ha- you’re not burning through, what do you need it for? And if delinquencies start to occur again and they need it, then put it back on.
[Alice] Make it a temporary program. Test it out and see. Yeah …
[Kittle] Make it, yeah, maybe for 18 months or put it on today, which they could do with the stroke of a pen- and run it through the end of 2027 and see what happens.
[Alice] Yeah. I’m with you on that. I, when you first brought it up, I thought, “Ooh, I, I’m not sure. How would that work? Would the fund be solvent?” Does, because I, I’m always thinking about what’s the ripple effect for these types of things. But when you really do take a look at it, you go, this is very doable, and it does have a big benefit to the borrower. They would still pay the annual MIP, so it’s not a to- the fund would not be totally void of income coming in. That’s right … and for all of you, yeah, it’s, so it’s doable. And just think of the impact to the borrower’s monthly payment too. So lots to think about.
[Kittle] So you, the last thing I’ll say about it, I can’t believe- Sure … there’s t- the other side to this from the administration’s point of view, when affordability is out there all the time, politically it’s a great move for the borrower in the market. Absolutely. But politically, it’s an awesome move for the Trump administration, and they’re not listening
[Alice] Yeah. Yeah, I don’t know why. They should at least listen, right? You like that they at least put it out on the table for the feedback. So very doable. Yeah. And yeah, focus on the borrower’s qualifying payment and building their equity, and then that’s what that option does. Thank you, David. That was terrific.