[Alice] Thanks Matt, and thank you for that. Great update everybody. Check in with MBS live.net for up to the nanosecond updates. And I thought I heard Matt also mention he publishes a daily video make sure that you’re signed up for that. Use the sign of code LOL to get an extended trial period without having to put in your credit card number. All right, so I was taking a lot of notes on Matt’s segment and also with les’s comments about stagflation. So Bill would love to hear your thoughts on the markets today as we unpack all this.
[Bill] All right, thanks Alice I think right at the end, Matt hit a couple of things which also tied into to Les’s comment. And so the first thing is so between part of Friday today why have rates rallied? Maybe the sell off was a bit overdone, right? Everybody is, reacting to the headlines and then as the news gets some level of clarity, maybe that position gets reversed somewhat. that’s just another way of saying we’re in a trading range. It’s gotten wider than what we were used to, but, loss talks about 4 52 from a technical perspective. Route numbers, the range is still four to four and a half. And as, as folks get nervous and it pushes the high end and then digest what’s going on, maybe it’s not that bad. The stagflation and then the what Matt described as the demand side. The demand side is a polite way of, and he did mention recession, slow down growth. Tends to bring rates down, right? So folks are reassessing. If oil prices go up and the general demand in the economy doesn’t change, that’s inflationary. But there’s now the growing sense that especially as you get infrastructure damage, and this looks like it could go on for a while, the higher oil prices are going to roll through the economy, number one and that’s higher likelihood is gonna slow down growth more than it’s gonna lead to inflation. But this stag, which I think is a very real risk, is some level of both happening. And that’s maybe where the bond market is swinging a little bit towards lower growth ultimately. Leads to rates declining. Probably not a lot, right? Because Mr. Lichen was here. He would take that comment and interpret it to be the 10 year treasury is gonna be back in the threes soon. And that’s not what I’m saying. Okay. Thank you for the clarification. Yeah, another thing that I think is helping today is, so was speaking earlier and he is still of the opinion and matching what the market’s saying that the oil scenarios right now probably are not leading to rampant inflation, therefore higher rates, number one. Number two, they feel like they’re getting some data on the past tariff increases and that added to inflation, a little more than a half a percent. They feel like. Was a one time event, and therefore when that works its way, if that worked its way through the system, absent the oil shock, then inflation metrics would be right in line with their baseline that’s a lot of ifs and maybes in there. For the real answer, the real validation of why have rates improved a little bit. I agree with Matt. It’s position squaring it probably went a little too far and that’s a great place to be right up until the next true social post and bang, hold on tight because nobody knows where it’s gonna go.
[Alice] Thanks Bill. You said a lot, I’m gonna reserve some of my comments on the. Running the government through social media. Have to stay quiet on that one ’cause it has a lot of impact. But back to the stagflation. And then one of the things that you mentioned that I think helped me anyway with simplifying things is the difference between a shock, a one time shock in the oil prices for this or something that will have a long drawn out more ongoing impact and ripple effect. Dave, mark, do you wanna add anything?
[Kittle] I would say if you’re gonna have oil prices rise like they have, and gas is up, I heard this morning, on average about a dollar a gallon over the last few weeks guess what? You’re gonna have inflation. It’s duh or hud, which is duh spelled backwards, right? It’s okay, rates. I have improved a little bit and I don’t know how much of in a scenario like this, if I’m running my company today, if I’m gonna sit here and really be focused on what the markets are doing and what’s going on. Because you can’t control this and you’ve just gotta go out and generate business at this point. Yeah, rates improved a little bit. Great news. Is it inflationary right now? Everybody hates that word. Yes. Why? ’cause oil prices are up. Why are oil prices? Because of what’s going on in Iran. I’m not overly concerned about. The market in the long term. Just my sense and my gut. I got nothing to back that up except, maybe 50 years of seeing markets go up and down and I wouldn’t panic at this point, I don’t think anybody is, but with an improvement in rates, go out and talk about it. That’s something positive to talk about.
[Alice] Exactly. And really if you’re listening to this podcast and you get the insight from bill and you and Mark and Matt and of course Les, then you’ve got some facts to work with to talk about to help your customer not feel like it’s something that they’ve gotta jump on with focus on other things. And you can be intelligent about what’s really happening in the market. Mark, anything you wanna add?
[Marc] Yeah, I’m gonna, I’m gonna tell you that my year, years I add ’em to Mr. Kittle. We got a hundred years yeah. We might know something about it. I will tell you one thing that, I think we need to focus on right now is, and that is positively what Mr. Kitten talked about. We need to run our businesses the best way we can considering all the factors around us, because we’re not gonna change these things that’s happening on a daily or weekly basis or hourly basis in some cases. And we don’t know the outcome. We don’t know how long it’s gonna ask. I can’t wait the first time at a ground troop. Appears on the ground over there, the whole world’s gonna change, and the first time we take massive casualties over there, the world’s gonna change Again. I don’t wanna see any of that, but it’s a possibility it can happen. So I just think we’ve gotta pay attention to our business and do what we can to survive during this period of time and realize there’s no clear answer on this. I mean that oil is about as volatile as anything can be right now. And if that’s going to continue to control markets and whatnot and change things around, then we’ve just got a guessing game to where we can hop in line at one place or another. So I think it’s business as usual for us and do the normal good job, but we do day in, day out to stay in business. ‘Cause I don’t think it’s gonna change anything. And I don’t think most people understand that. I think we understand that ’cause we’re in the business, but bars don’t necessarily understand that much. And I haven’t seen a big pickup. We had a little bit of rates going down and we had a little pickup on that, and then it’s back to normal again. And I don’t have any great surprises that it’s gonna happen to us in a positive or negative way in the next two or three months. I think it’s gonna stay even keeled. We can talk it to death, but I’ve seen this cycle so many times with so many factors changing it. I don’t think it’s really gonna dramatically change one way or another. But people are gonna need, homes are gonna buy homes and people that aren’t, and people are gonna try to find the best rate they can and the best service they can. So it’s up to us to keep our industry growing and successful by doing the best job we can for our customers. And that’s what it’s all about.
[Alice] So I have a quick question then for the group. We talk a lot about the origination side, these little ticks in the market that we see. If you’re trying to protect from losing your portfolio, there are a lot of lenders out there that are using, very sophisticated software to really jump on the borrower for any 25, $50 change in their monthly payment and start, robo calling and soliciting them. So how much and maybe this isn’t something that the origination side has to focus on, but as a protective portfolio concept of not wanting to lose your servicing values and your loans and servicing are you seeing the same logics have to apply there?
[Marc] Yeah, I think so to some degree. A couple of the big players, and I’m not gonna name any names, we’ve been talking about ’em on here before, or consolidating portfolios, et cetera. And, one of the reasons they’re going out and consolidating buying these portfolios is they see that ability to mine those portfolios for future loans. What, I have a problem on that, ’cause I’ve seen it too many times. There’s nothing wrong with that philosophy to mine things as long as you’re doing a positive impact for a customer. But, the problem is when you’re trying to squeeze something together to make it work and the bar’s got fees rolling into it, et cetera, and they don’t really have that much of a reduction rate, do we really save ’em anything and we send ’em through that turmoil that’s out there with all the costs associated with it, again, just to turn around and go after ’em two years from now when the rate goes down again, or whatever. So I think we’ve gotta be careful how we handle our portfolios internally, but I think everybody needs, if you don’t have an active program. To take care of your servicing portfolio, somebody’s gonna take it away from you, and that’s what you gotta be concerned about. And I think that’s when we incorporated monthly statements in it to, rather than coupon books in our business that made a dramatic impact. And I probably was one of the first ones in the country to use that vehicle to talk to our customers about refinancing and other things because those opportunities come up where people want to do a add-on to the house or wanna buy a new house or upgrade in their subdivision or whatever. But staying in contact with our customers. So I think this is one of those times when whether you’re prepared to do it or the rates or cooperating, doing something beneficial with a customer, I think it’s a good time to start messaging your customer on your portfolio because if you don’t, somebody else will and you’re gonna lose that loan if you don’t communicate effectively with your customers.
[Alice] Yeah. Bill, anything you wanna wrap us up with? And Dave, I’ll come back to you also on that.
[Bill] Yeah. So when, when you said robocall, it people, whether it’s origination or on the servicing side, people do business with who they wanna do business with. And there’s a fine line, you gotta reach out to the customers. Whether, again, origination, servicing side, I think you can go too far. And if the customer feels like they’re being harassed all the time, it’s not gonna work. Give them, the end of that. Give them a reason that they wanna do business with you and educate ’em along the way. Some of the servicing side, some of those initial outreaches, don’t make it a sales page. Teach ’em something, tell ’em, give them some good information to, to, again, get to the, okay, I wanna, I’m waiting for that next piece of information, versus when am I gonna get the next robo call.
[Alice] Yeah I’ve found over the years with servicing, how many customers, for example, really don’t understand what’s gonna happen with their tax bill. And you can be more effective in communicating something like that, like you said, that’s gonna educate them about how to be better at managing the mortgage that they have, as opposed to trying to, let ’em know, Hey, you could save a small amount of money and to Mark’s point, pay a bunch of fees. And that feels like we’re not being helpful, we’re just trying to get more money out of them. That’s a great point. Yeah. Yeah.
[Marc] I wanna add one. I wanna add one more thing, Eric, if I could, Alice, yeah. Too many times. We think about reducing rates on customers and a lot of times when we refine loans, we refine ’em right back into a 30 year mortgage and they might reduce the payment a little bit, but. There still is a dream for a small percentage. It’s smaller than I wish it was, but there’s still a dream for a small group of people in this country that they wanna eventually pay off their loans. So one of the things I’ve advocated with some consulting I’ve done recently is to people if you’re accessing your portfolio, is start running some models. If you do have a massive rate reduction, run a 20 year mortgage or a 15 year mortgage for your customer and give ’em that option because there are people that wanna build equity in their house and get their house paid off before they get to be 95 years old. When I see a person doing a mortgage for 30 years and they’re 65 years old, I just stand back and shake my head. It’s just never gonna happen.
[Alice] Market conditions in some areas might be moving in favor for more of that thought process. When people got used to just massive appreciation all the time, they didn’t have to think about that. Yeah. Because they were still making money. And now that we have a lot of markets that are sitting down at 3% or even losing then people maybe start to think twice about thinking of their, the house as just a piggy bank on top of the mortgage. So David Kittle.
[Kittle] Yeah, I’ll just say, everything Marc said really is spot on. It will never cease to amaze me as we go through these cycles. And I think we talked maybe on a podcast last year. This is probably, the seventh big cycle I’ve been through in a career. You have ’em every. Few years is the fact that it amazes me that we only think to communicate to Mark’s point about what we should be doing when we have a market shift. To your point, you don’t wanna over communicate and to where you bug the hell out of ’em. It’s like getting a robo call every day. You know what Bill said? But why? I put it rhetorically. Doesn’t everybody out there have a communication plan, whether you service or not to your customer and to let ’em know, because you’re right, Alice, they don’t understand where my homeowner’s insurance payment or my tax bill goes. And that’s just a regular education thing that I think that the customer appreciates. But we only think about doing these things and getting in touch with them when rates make a dramatic shift one way or the other. And then we’ve gotta save the customer. And so we just don’t do a good job as an industry communicating properly and with the correct information to the customer. And we should do that all the time, not just in volatile markets.
[Alice] Yeah. I think we could have a whole show just on that, on our recommendations on what would be good communication to a customer in servicing at this point. And we know we’ve got an expert in all of you and especially Mark on the call. Thanks everybody on the market.