Episode Transcript
[00:00:00] Speaker A: Hello and welcome to season four of the Mike Depp show, where every mortgage has a story. We are flying into 2026. Here we are the ultimate hub where hidden stories behind the mortgage industry come to light. My name is Michael Kelleher.
[00:00:16] Speaker B: Happy New Year. And I am Michael Zhao.
[00:00:18] Speaker A: And in every episode, Mike and I dive deep into the entrepreneurial spirit, the strategic insights and the breakthrough innovations that build the world's greatest mortgage companies. You'll certainly hear them today. So if you're in the audience or listening along in the car and you're looking to advance your career or you're scouting for industry leaders, hearing their perspective or just exploring opportunities in fintech prop tech, you're in the right place. So let's get ready to unlock the story behind every mortgage.
This story is going to be particularly, I'm guessing about your story because we have on today Eddie Perez, who is CEO, AKA the chief of wrestling egos and anything else there at epm. He's also, which we talk about a lot with the Mortgage Bankers association, he's a member board of directors, he's, he's done everything there. And if you've listened to some of our older episodes, Eddie's actually Mike pointing out to me our first three time, three time guest. So welcome Eddie. And before we begin, I think Mike Zao had a quick question for you based on how we left off our, our last show.
[00:01:30] Speaker B: He laugh yeah, last show you were a little bit distracted. We want to ask you how is your son's hand doing? Because he had a, he had a minor incident, cutting it up and you're like texting and distracted and so on and so forth. What, what happened?
[00:01:48] Speaker C: It was, it was fine. He was just, you know, out playing in the woods doing stuff as a teenage boy will do, having fun, doing things with which I'm glad he was doing, not sitting in a room stuck on some video game or something of that nature. And he got cut right here above his knuckle and he had to get it like two stitches. The irony is the injury looked way worse than it was. Two stitches is not a lot, but the blood was just everywhere. So he must have hit something right here that just squirts out a lot of blood.
[00:02:17] Speaker A: He had baseball season coming up. Was he able to play?
[00:02:19] Speaker C: He, he took off baseball this year and he focused a little bit more on volleyball. I think he's going to focus a little bit more on baseball again, but he wanted to do more volleyball and then know now he wants to focus a little bit more on Baseball.
Yeah.
[00:02:31] Speaker A: Volleyball is actually the fastest growing sport in America right now. Go figure. So trying to get ahead of that there with, with my daughter.
We asked you to come on. You have for years really backed up, whether it's social media putting it out there, but sending a message that really parallels the new year spirit.
You shouldn't have to wait for one calendar date to have that. You have it all, 365 days. But for those that use this as a catalyst to get started on the right path, what do you think and what's your mindset here in 2026 for the loan officer or the future leader of mortgage?
[00:03:10] Speaker C: I think the industry is at a crossroads and I think people need to come to certain terms with certain things that are just not going to happen.
And what I mean by that is the industry is in a full blown identity crisis. And the reason I say that is for close to 20 years the identity was hold off. When there's a slow period in refis, the government will do some sort of intervention and trigger another refi boom.
And the joke used to be for years, oh yeah, they've been saying refis are going to run out essentially since the 80s and they never have. Well, they kind of eventually did.
There's still a decent amount of refis that are done. However, all those refi booms pretty much generated more rate and term refinances, just lowering a rate, lowering a term than it did say cash outs.
Today, most of them that are getting done are cash outs. I don't. I think you'll see small pockets of streamlines and earls that get done because that's on the gubby bar where the benefit really lies. And they're a lot more payment sensitive so they'll look for certain costs, even though maybe it doesn't justify initially, but it's all about cash flow and some people are leaving there to go to hay paper. But the reason I say that is, is the perpetual refi booms and the rates to be to 2 to 4%.
They're not coming back, guys. And I think that that has caused a full blown identity crisis and I don't think a lot of people had really.
Well, first of all, you have to. It's like anything, you know, as I say, you know you're an alcoholic until you realize you are an alcoholic and then you can do something about it. It's the same thing as I don't think people, they firmly believe refis are coming back at some point and they're just really not. And I'm not going to say there aren't opportunities. But what a lot of people don't realize is what I would call the tsunami of second mortgages that are coming because everybody keeps always pointing to the 35 trillion in equity. And I'm not telling you that's not accurate. What I'm telling you is second mortgages after 2008 didn't really exist till recently.
So once again people will not have to refinance and they can then consolidate that debt and not have to give up their 2 to 4 to maybe even 5%.
So in some cases it makes sense. In some cases there's no choice because they've already hurt their credit and they have to do a cash out refi, especially under the FHA product. The challenge is though that that's just not enough and the industry still hasn't really done a realignment and a reset. You know, there's still a lot of glaring issues that nobody really wants to address and those that address it get called all sorts of names and everything. And I just think at some point in time this industry is going to be significantly disrupted because of how long people took to not really realize the force through the trees.
[00:05:59] Speaker B: And I think that one of the things that we have to be able to look at last year there were three issues that were coming down when it comes to the industry itself. It would be servicing AI and brokers. Oh my. And I think that when we look at the, how poor actually the originator has been when following up with past clients, that, that is, that that's going to be a bigger play as servicing comes into play with the, with the Mr. Cooper and, and Rocket and UWM and trying to figure out that whole thing, AI now mastering online applications on behalf of, of those, potentially those servicers. And then can brokers catch up and, and take over retail? There's a, that's a lot to unpack in that one statement.
But can you address what your opinion is first?
[00:06:58] Speaker C: Since there were a few, I want to make sure I address it in order first.
[00:07:01] Speaker B: Now let's address servicing first.
[00:07:03] Speaker C: Well, there's a bigger elephant in the room that nobody wants to talk about, which is I believe it's March 4th when the trigger lead bill goes into effect. And what that's going to do is yes, it's going to reduce the trigger leads to, you know, the consumers that every time they apply in those trigger lead shops they thought that was giving us a bad reputation. And I'm not going to sit here and say yes or no. I'm going to say that that's up to somebody's own opinion. They can have their own. I do believe if you're getting called from 200 people in Crazy text message, I do believe that's a little bit crazy and overboard.
However, that actually gave strength. The people with big portfolios.
I don't think people realize that because now they don't even have to defend their book. It's going to be automatically when there's a credit score or anything of that nature.
I think they're going to have a natural defense system. And what a lot of them already do is they don't give you a payoff that fast. They give you a payoff in five to seven days.
They give you a payoff in five to seven days because that triggers their team and then they go behind you and beat you. And I don't think people really understand that.
And yes, the originator did not stay on top of their book because their argument was the refis were always coming. So for essentially 19, 20 years, oh, I'm not getting this refi from this customer. I don't really care. I'm getting new ones from somebody else. And that's if they even did refi business. Because I remember I had an office in Orlando that was like 90 something percent purchase and they wouldn't call their old leads.
And their argument was when I had my own internal team do it, that I was stealing from them. However, I showed them that literally four or five consumer direct shops got more of that business refi than they ever had.
So I think from a servicing standpoint, yes, servicing is going to become a big play. It's going to become a big play in different ways.
You know, are you going to start aligning yourself now with the bigger servicers just to sell it off? And hey, if the customer gets refinanced, that's really on you and your responsibility. I think you'll see a lot of that. I think you'll see that a lot of servicers are now going to have their retention team because they have to. You know, the largest servicers now have an army at their disposal and they're just going to start going after your book. So the narrative that you own the client I think is a false narrative. And I think it's long gone because the irony behind it is you're basically saying that you believe in slavery, that you own it, it's mine, like I got to lean on it and you don't. And these consumers, to your point, will shop around a lot of times because they never heard from you again until there's a credit pool and they got a notification. So I would really challenge anybody on that one to take the ownership and shame on them. Because the originators that I have seen that stay in front of their clients are always the ones that get the refis too. Because at the end of the day, the customer, as long as you're within a certain range, would rather stay with you if they know you and you stayed in touch with them so you showed them respect instead of like, oh my God, I ignored my girlfriend all these years and all of a sudden I'm upset that she left me for another guy. What the heck do you expect? I mean, come on, guys.
So I think that's the play in servicing.
That was question one, which were the next two that you had?
[00:10:01] Speaker B: The. The next one is your thought on AI when it comes to the origination process and then throughput at the level of the imb.
[00:10:12] Speaker C: So once again, like I say, there's an identity crisis because it used to be about 4 or 5,000 to produce alone, we're at 11, 12,000. There's been an explosion in cost.
Well, the only way to take down cost is to take down the human ele of it. And the only way to do that is through either some sort of tech AI, or I think what becomes even bigger in this industry that you saw over the last three, four years is offshoring. I think a lot of duties are going to get offshored overseas because now there's even AI software that the person, regardless of how they speak, will talk in an American accent or a British accent or anything of that nature. So the language barrier goes away.
However, it's going to bring up speed, it's going to bring up efficiencies, because in those markets you can literally work 24 hours with the help that you bring there. And I think it's going to slice the industry truly into process and systems and just carve out certain pieces that have to be done onshore and then a majority moving offshore. Because that drop in cost is going to be what I think is the real disruption piece that's done by the organizations that embrace that. And you already have quite a few that have embraced it and moved it overseas. It was just done very quietly. And that's why you've seen an explosiveness of growth on those organizations even the last few years, because they really dropped their cost.
So I think AI is going to continue.
The question is, what AI is it going to be? You see, AI has been Around a long time, it's just been called automation.
Now, you know, if you remember conference calls or you remember when you would call to make reservations on the phone and do everything like that, that's AI guys.
Now the question that's changed is machine learning. And the question is going to be is, can they keep up with the machine learning? I do believe that there's some texts that could do that, but at the end of the day it's going to be to try to drive down costs. And I do believe the AI agents nowadays talk almost as good as a human and can do a lot of human duties.
But unlike the human error, if you tell it to make a few hundred thousand calls, it will. So you almost get what a more loyal human and a dedicated. Obviously that brings up a lot of fears. However, what I've learned is AI is just going to replace the people that I don't believe deserve to be in the industry, that don't really, they haven't really earned the right to stay in it. They just feel like it's owed to them and they've been in a long time. And really that entitlement that I think is really huge in the industry, that like I say, why there's an identity crisis and nobody really wants to address it because it's not really.
They want to keep the hustle going that they're really needed when they're really not.
[00:12:44] Speaker B: And the third which actually encapsulates both of those questions is when it comes to the actual originator, Does wholesale or broker lending supersede retail because of consumer direct and retention and servicing? And does AI encapsulate the replacement? Eventually, maybe not this year, but in the future as a result of it, of the way that it takes applications and collect documents and things, does the broker actually use it effectively in conjunction with the imb, Wholesale IMB they're working with so they can actually get ahead of that?
Or is it something that we need to or are we so far away from that that we shouldn't even care or shouldn't even matter? So does the broker take, take their step ahead of retail this year as a result of technology and the resourcefulness of the wholesale imb?
[00:13:42] Speaker C: Well, I think you got to look at it more like an army. I don't think wholesale has enough originators on that side of the equation. I do believe that that will continuously keep morphing because at the end of the day, originators want flexibility and there's no bigger flexibility than the third party origination side. And it doesn't mean you've got to do business with all 200 and something lenders. However, a good 5 to 7 can probably cover you on mostly everything. And then that also keeps it equal balance when it comes to the type of products that you provide, the type of pricing you could provide and the access to the credit.
So I see that being a part of it.
Look, you know, retail exists because, and there's, and there's I think a confusion also when it comes to retail. I do not consider consumer direct and retail the same.
And the reason why now, because you got to understand this industry, all originators, for the most part, I do not mean this in a negative way. I mean it more as a reality way.
Every originator to a degree is an order taker. The question is, who are they an order taker to consumer Direct, they're an order taker to the employer that pays the leads in marketing. So that's who they're an order taker for.
To retail. They're an order taker to the. And not just retail. This could also be wholesale. The originator that gets it from real estate agents and builders.
And then you have the very, very few that I would call direct to consumer.
And that is the people that could be on YouTube that generate, truly generate their own leads and dictate it. But that's a very, very few. So I would tell you that most originators really should focus on becoming marketers and grow in their influence. But grow your influence by talking about different type of loans, different type of scenarios, really storytelling.
And I believe whoever does the best storytelling really understands it. The difference between.
Because retail and wholesale in that sense are B2B. I mean B2C business to consumer. It's just what channel do you depend on it? You know, retail's been successful because the originators that are in retail do have more knowledge usually. And what their biggest knowledge is is that they don't want to do anything with the process. They rather turn in the file, walk away and get somebody else to carry it. On the wholesale side, a lot of that burden falls on you. It doesn't have to necessarily. There are definitely processing companies out there that can do a lot of the heavy lifting. However, that part of the equation hasn't really gotten out there for whatever reason. I don't know why. I don't think it's a lack of knowledge. I think it may be a lack of processing companies that exist or it could be a comfort. Because I think at times, and I've seen it, you know, just in My own operation where it was somebody that was in retail and then they go into wholesale and they have no idea how the whole process works because they got into the business anytime after 08. If you want to really understand wholesale, you had to have been in it before 08 when it existed and then it went away. So I think consumer direct will continue to grow. I firmly believe that.
And I do believe that wholesale will continuously chip away. How long will it take?
They'll chip away at retail, but for different reasons. Because I believe the retail model is just too expensive to run. And at some point in time what people need to come to terms with, and I'm not saying that in certain areas where there's nobody in wholesale, there can't be successful pockets of retail.
What I'm saying is it's just too expensive to run that model and eventually that gets chipped away. Because what people really don't want to deal with except in this industry, is that we're a commodity at this point.
We're money. That's what we provide.
We provide the number one drug in the world, which is the United States dollar.
That is not a niche. And you got to be better, faster and cheaper than most of the people out there. Cheaper, faster and better within a relative small window. It doesn't have to be a massive window of opportunity, but you do have to have a competitive advantage over all three.
And I think that that's changing the industry because I think of it more like the industry's turn into what a gas station is. And we've seen that and we see how people harp about it, that if gas prices one place is 10 cents more a gallon, they will literally drive a mile or two down the way, disrupt their day, lose focus just to save, you know, two bucks at the gas pump. So I think people forget the behavioral economics that are driven all by emotions of what price is today. And I think that there was a time and point that that information wasn't accessible.
However, I've seen some requests from the borrowers where it's very obvious they typed that in the chat, GPT or whatever and really told them every single detail you got to provide for them. So the consumer just has a lot more knowledge today than ever. And if they don't know it, they can ask a machine that'll tell it exactly what to do and really drive a hard bargain for it.
[00:18:26] Speaker B: Is complacency going to be a continued unintended consequence as a result of technology and also the low interest rate environment that we experienced four years ago and because I, what I unfortunately seen, I personally off, off the record interviewed about over 40 residential risk and I haven't and it's unfortunate and, and they don't know who they are so I won't mention them but I haven't really seen a high level of willingness to learn about the industry.
It's their order takers just like you said and the unintended consequence behind that is going to not only be a lack of a follow up to retain clients but also the lack of just general knowledge breadth of how to do how, how the packaging of the origination of a mortgage loan works. They don't know secondary, they don't know processing, they don't, all they know is get a 1003 and that is a.
[00:19:24] Speaker C: Challenge and they don't know how to really get a 10 out 3 because they know how to take it. They know how to send you a link and make the customer pay it all. Here's what I'm going to tell you.
I wouldn't even say it's an unintended consequence. I think it's far deeper and rooted in worse. And what I mean by that is I think there's a sheer out entitlement and arrogance that's out of control.
I, I, I think that they think, I think unfortunately in 2003-2022 with 8 or 9 refi booze, whatever it is, 10 I don't know. I've had so many people give me mixed numbers. However, it was a churn and burn environment.
I also would compare it almost to like the 90s in baseball when essentially everybody pretty much in baseball was on PEDs and that's why home runs and RBIs and stats were up.
I think 03 to 22 was a PED market and we're no longer on performance enhancing drugs. So you wonder why.
And it's very simple. We're not going to go back into quantitative easing because debt's at 37 trillion. Back then it was at 12. So don't think that the old medicine is going to work for the new things. I think it's created an arrogance and entitlement that is unmanageable. And let me tell you a funny story.
So I'm, I'm part of some of these Facebook groups and no joke, over the last three weeks something like 30 lenders including mine were listed as sucking the biggest of the biggest everybody and I laughed because of the arrogance of the originator and having dealt with it is that half the times they didn't Package the files.
[00:20:56] Speaker A: Good.
[00:20:57] Speaker C: But they want to play victim. Well, let me tell you something guys, if you create the problem and then you play victim, I'm going to go even one step further. That's actually the definition of gaslighting, which most people don't really know. And I think a lot of originators have just become gaslighters on their own firms out there and they're really just not as good as they think they are. And this isn't me knocking them, it's just kind of a reality. And I understand that they're all going to tell me the same story that no, it's not me, it's everybody else.
However. Yeah, I don't think the knowledge is up, I think it's down. I think people have no idea how to calculate income. I don't think they know how to.
And that's perfectly okay. If you don't, there's softwares out there that'll do it for you. You just gotta plug in the information.
So it's not like it's hard to get the answers. I just think there's a greed, an arrogance that's so out of control that I just, I see the ones that are willing to learn, I see the ones that are willing to order, take, I see the ones that are willing to work on their skills regardless if they're even that good at knowledge. Just continuously taking market share away because of just the arrogance and the self righteousness. And almost like the mindset is I deserve this business instead of it doesn't matter what you deserve, you got to go out and earn it every day.
[00:22:13] Speaker A: Yeah, I think going into this new year it's your message seems to be, it should be the message close more loans than you did last year. Kind of ignore a lot of the noise. Right.
Speculation conversations.
I get. My question is at the enterprise level. We'll start where I talk to people and I'm very aware of who I'm talking to, how I sound and how maybe I come off. But you talked about pockets earlier. This is what I wanted to go over with you. And you can twist it into a, a motivational speak for these pockets. But are we focused as an industry on trying to make like the top performers really on their own island and that's the people we don't need to be pontificating to and it's more the median and the low performers that are the ones that need the motivation, the need to get on the phone call or need to get out, get out of the industry.
Or is it the Opposite. So when someone like me posts or you read someone posting and they're speaking to a whole enterprise as a lender and IMB a wholesaler, are they missing more that they're leaning more towards the high producing or more toward the low, the low producing when they're voicing their opinion. And then how does that group, I guess become better in 2026 in your opinion?
[00:23:35] Speaker C: Well, I don't think you need to ever cater to the C and D players because all you need is generate more C and D players.
My only concern with that statement is, is that high producer really not toxic potentially?
Are they a high producer that realizes that 100% of the success is not on them?
Do they appreciate the support and the processes they get out there? Because at the end of the day, no originator is their own capital source. And I think that's where they really miss the boat on. Was your capital source a good provider to really help you grow and get your business to the next level and appreciate and have gratitude?
So I, I, I think that once you do that evaluation, you pour into the people that believe you can help them grow. And maybe they're a B player that you can help turn into a A. But what I found is C and D players that are all over this industry will stay that way because somebody's told them that they're important and they're one or two loans a month make a difference and they really don't. If anything they harm the industry because that's where you see a lot of these horror stories that happen because they didn't know how to qualify their loan.
[00:24:49] Speaker A: Where do you see the A and B players getting the reinvestment into making a bigger moat around themselves in there? I always say win your zip code. I feel one positive about what we've gone through since 2008 is not too many people in each zip code really wanted to be the face of that zip code as a loan officer. And so some people have this, this tailwind that they're going to be able to ride till they're 80 years old. If they want to stay in the industry just locally, maybe they can't expand past two zip codes. And our industry struggle a lot with that. Like one's not good enough, they need two and then they need three and they, they thin themselves out. But you see the retail side and like they're just bragging about have the lowest cost and we'll give you a P and L with no marketing. And I, I almost, I believe that's such the Wrong message. I don't want to get call people out because I might need them as clients someday. But I can't believe that's, that's a worse one. And then the brokers, I guess they would need to run their own comp well enough to make sure that they're smart enough to put, put 10% aside or, or something like that. Right. Where do you see the future marketing come as LinkedIn leaders seem to think the right answers just take all the marketing out of P and L. Well.
[00:26:02] Speaker C: I think organic marketing as Gary Vaynerchuk would tell you is going to be the key. I'd actually tell you you got to market but you got to build your own brand and really have value that's driven by the brand. And I would say it's a medium to long term game. But I would definitely tell you understanding also what social is going to benefit you. Like do I need to be on Facebook more because agents are there more. Do I need to Instagram? I think LinkedIn is a complete waste of time if you're an originator. Complete waste of time. You know I would tell you that Facebook and Instagram would be better for you and in particular Facebook because that's where the agents are, that's where the listings are also. What I, I don't think people realize is part of the reason it's there is because meta to advertise on cost a lot less.
So I think you could have a bigger reach if you did it absolutely the right way.
I think the ones that differentiate themselves come to terms with being an order taker. They understand that it's the system's a commodity and you become an order taker. What's a commodity and how can I become a better marketer? I mean I would even you know, challenge anybody if they're an originator. They don't understand self employed income or anything like that. To do videos on it, to learn a little bit about it and talk about the self employed income. Because then the people that deal with self employed income or the agents when they do know it, understand that you actually know your knowledge well. And I think to gain knowledge isn't going to be that tough. The resources are all there.
The guidelines have never been simpler. You know, 90% of loans are done what I would call and not called. I mean the only private capital in this business is non QM.
So 90% of the the market is government backed for lack of a better term and finance. So you know, that's public money versus private money.
I don't think it takes a whole lot to differentiate yourself because there's not really that many guidelines or things that you can stretch. I just think it's really going to be those that market themselves well.
And I can totally see where the P and L. But the problem with the P and L model, because I once had it myself, is that all the P and L operators don't really want a P and L. They just want to pee.
Everything's supposed to be paid by the company.
Everything is their expense. No, I wouldn't do this. Oh, you understand, I deserve all this money. So I'd almost say it's more like the David Koresh model. And for those that don't know it, just go look up that show on Netflix called.
I think it was called American Apocalypse, which tells the story of David Koresh.
I think a lot of the individual P L models are cult leaders and drink their own Kool Aid. And I know that because I once had some and they really did get high on their own supply and then they left EPM or went to other place and didn't have as much success.
I. And what's funny is they got here doing, you know, 10, 20, 30 loans, got up to 100 and they thought it was all about them.
And I'm not saying that they didn't have a part on it, but obviously if you had a career at this level and then you go to that one, was it really all you. All of a sudden everybody was oppressing and holding you back.
But yeah, that's kind of what my belief system is on that one.
Now the irony is the P and L model works really well in wholesale because comp is established right out of the gate. There is no smoke and mirrors or what could be hidden on the back end.
You know, three, 400 basis points, things like that. So because comp is established straight up, then it's a math game of can you run a business? It's real easy at that point. I actually think it works really, really well. Which ironically, when the P and L was created before 2008, everybody was a broker that was under that model. It was after the crash that it morphed into the retail side. But I. I firmly believe that that retail side of the business is just net branching just dressed up and now called P and L. Because net branching is kind of like subprime. People don't want to be associated with that, even though they may act that way.
[00:29:41] Speaker B: We talked about that very briefly earlier in the year where we talked about the average either broker or retail doesn't really matter. You know, if you had a P and L model, you ended up, you know, you could say you were getting 150 basis points, but after all the expenses you're down to 65. Right.
And, and, and, and actually this past year was even more expensive than talking to a few other originators only because the cost of marketing got increased. And if it wasn't the cost of money, it was the cost of time combined. So once you include the cost of time and money, you were actually earning 65 before taxes. You were down to like 45 and 50 before taxes.
And, and it was just a horrific year if you are the originator or even the imb because now you have to deal with cross recruiting, industry recruiting in, in addition to buying out the.
[00:30:28] Speaker C: 90 day, the 90 day rate sheets because I always think it's hilarious, somebody goes to a new company, they get a 90 day rate sheet and then they bump it on them because they can know they can hold them in there.
I'm exposing a lot of things that piss a lot of people off. But you know what the best part is, guys? I don't care.
Yeah, yeah, yeah, yeah, yeah.
[00:30:52] Speaker B: And I'm not.
[00:30:54] Speaker C: Yeah. I'm not one that judges people. I really am not judgmental. I can call out what I see is accurate factual data and I'm very good at deciding what are the behavior or economic pieces behind it.
Only because small obsession of mine is my minor in college was sociology. And these are really individual sociological effects that turn into a community. So that's where behavioral economics comes from, the sociological.
So I'm just seeing these behaviors at work and I'm. One part of the reason that I spoke out over the last two years is I thought a lot of good people had kind of bought into the hoax that refis were going to come back and a lot of them have ruined their careers and their financial situations hoping for the day the Fed, that's why when feds are going to cut interest rates, that's going to. Yeah. What's happened to the rates? It's been cut, I don't know, six times in the last 15 months, whatever it is, hasn't really done anything to interest rates because once again, if anything it's going to stoke some inflation. It's going to cause interest rates to go up. But a lot of people don't understand that even though the information's all there and there's not just people like myself, Barry Habib, my guy Phil Mancuso, others that share all the information. So it's not like this is a mystery.
But I, I just think that people have a hard time accepting what is out of their control. And the irony is the only thing that you can control is how you react to a situation. So your only true controllable is your mindset and who you associate with there. However people don't, they think the refi boom's coming. You know I've been saying that they're trying to say that 3 trillion is going to show up this year. I have no idea how. It's not really there.
I do think second mortgages are going to keep going because consumer direct debt is out of control. But I don't see, I don't see all this refi. There'll be pockets, there'll be pockets, but that's it.
[00:32:47] Speaker A: Cost is lower, right? Like the title and all that is actually lower on a, on a second mortgage. Whereas a hundred thousand dollar and eight hundred thousand dollar loan, some of these fixed costs like an appraisal are the same price and they're also doing it like in 15 minutes. It's getting much close to like the affirm model. And the beauty is your loan officers now can finally deliver it as lenders and not have to broker it out all the time. Which is sorry you as a broker can actually deliver it and not have to give it to some fintech firm that really isn't a mortgage company.
I do want to jump to our commercial before we do something to think about on the other side. Eddie, we had Sam Harris III in comments. We don't run away from comments here.
He's got this own your zip code which I like, I say it all the time.
He talks about equity I would say and I think this is maybe where we agree but we never talked about it. I don't think a loan officer really could even want equity in, in a, in a company until the company could figure out how to sell something beyond like you just said, GSE loans because you're not actually selling anything. It's not like if they could figure out how to make money on a ring that gets installed after every closing that, that might be different because that's an actual product that you want a part of.
So that's something to talk about. I also, we. Yeah. And then he talks about residual income. Like that obviously is the biggest problem for loan officers not being like the insurance industry. But it's not the lender's fault. They're not typically making that residual either. That's a whole servicing right thing. So, so we can just jump into that real quick on is there a pathway in the future for loan officers five to 10 years from now to ever get any residual income? Or do you think that now.
[00:34:42] Speaker C: Well here's why though.
[00:34:45] Speaker A: You can hear why after. So they stick.
[00:34:47] Speaker B: Okay.
[00:34:47] Speaker A: Stick to the commercial. Yeah, give them a little or you the lead.
We'll be right back in a minute after our great sponsors.
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[00:35:35] Speaker E: The company can do the configurability. So we have no code on this so they can go in their settings, they can set it up all the way down to loan officer if they want to. We also have a customer support team that's assigned to each account if they want they can overhaul everything if they wanted to. They have a new product especially dynamic apps. With dynamic apps we can fit multiple, we can fix the Fannie Freddie loans, we can new construction, one time close HELOCs, you know whatever those workflows are, they can design that workflow for each individual app. Now what's going to take it to the next level is the AI and the OCR piece.
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[00:36:41] Speaker A: All right, we're back. One quick note for our pricing, product and eligibility. Poly is a strong sponsor. We'll be looking for new sponsors in the new year and hoping that our audience looks up some of these sponsors as well as gives us a like and a share if you listen to this. Now let's jump back in with Eddie Perez, CEO co founder of EPM and really one of the rising companies in mortgage. He has the technology and I see a landscape where EPM will be this top company throughout 2026 longer into 20, 27 and higher and higher. So we're lucky enough to have him a third time on our show and he'll remember us when he's sitting on the very top. Eddie, we gave you kind of a controversial question there, but I think we at least jump into the fact that every loan officer I Even asked it 12 years ago is way it would be nice if we got some, some mailbox money after closure even if we.
[00:37:42] Speaker C: Didn'T get it, however, that was sold under the river so long ago, even before I joined the industry. And I'll explain why the only way for them to get residual would be if they got servicing money.
And the irony is every lender that buys it or even every lender that generates their own MSR puts a price on the street where at least a year or two has already been paid in advance.
So for a sharper price upfront, they've already compromised themselves. So it's just not going to happen.
It's literally why it's been compromised.
And that's the big thing is that model got compromised a long time ago and then after 08 it just got tripled down. I mean you got some servicers that'll pay 4, 5, 6 multiples. So just to give that perspective, 4, 5, 6 years of the MSR value upfront, where the hell are you going to share it? What on year eight of the loan?
So the irony is no is not really that controversial. You just have to understand how the math is.
So here's what I would challenge all them to think. They are already residually getting it and they're residually getting it because they've got a better front price street and they may be able to sell better because of that. That's it.
[00:39:06] Speaker B: I would challenge that only a little bit, Eddie. Only because I think it's similar to the person who cash flows on investment properties.
If you own investment properties in Ohio or Texas or somewhere where you, where you have higher cap rates versus California, you might have a 8, 9, 8 or 9 cap rate. But if you're, if you have a cap rate in California, your cap rate might be 2 or 3%.
And the reason I say that is because if you from, from a retail standpoint and as an investor standpoint, you get more of your cash flow up front. If you are in, in the higher cap rate areas because you have higher, you have lower prices to higher rents. But when you're in California you have higher prices to lower rents. But then if you're in California and you, and you decide I don't care what my interest rate is. I cash out refinance every four to six years because instead of getting cash flow on the monthly basis, I get the big payout toward the end.
And I think that if you are going to be an originator and you want some cash flow front or back somewhere down the road, and this may be a carrot or stick question, if you are a retail or broker origination organization, there's got to be, okay, if we have mortgage retention on the front end, we have and we keep the customer on the re origination side on the back end, then we're collecting this income. And if you're in a higher income area like, like in San Diego or, or Seattle or even New York City, then you could say, okay, we'll give you, we'll give you back end if these XYZ things happen, because these will happen. This is what happens in higher income areas. But if you're in like the Midwest then it's just not realistic. And the reason it's not real as you get just like in the same, in the same manner you have higher, higher cap rates and you get more, more, more monthly income. You're going to get more income as an originator on the front end because you just don't retain the same type of customer base. I think that if you're going to have the type, if you're going to have the argument it's not a one size fits all. There is a model which it could exist that, that exists when it comes to either larger market areas or smaller market areas. And if you're a company that decides to actually manage a business, a P and L in that way, then there is a way to create that. But there is not one size fits all. And can you educate, and can you educate the retail originator or the retail broker to manage a P and L enough or even understand finance as a business person enough to be able to explain that. I don't find that type of intelligence, by the way, in the industry.
[00:41:37] Speaker C: It's not intelligence.
Nope. It's acceptance.
The only way to say what you say is going to occur is if I took off one year of MSRs up front that's already paid in the price and spread it out, which they're not going to do. The originators are beyond obsessed with rates. There are more. Most originators today are glorified rate salesmen and you're basically telling them to worsen their rates to get a little bit of a bip over here, get out of here. Because here's gonna be the other question. What happens if it refis? Do I get a guaranteed time? No, you lose it. Forget it. It's not going to work. Not because what you are not saying, Michael, doesn't have logic, doesn't have reason, doesn't have something that could interest people.
The problem is if I said, hey, to build an annuity for you, would you be willing to to get a price that's less than 50 basis points? Let's just use a number.
I don't care how many of them tell you yes. What I'm going to tell you is 99.9% of them are liars. They would not do that.
And they would then complain about pricing, Complain about this. Like this is a commodity, guys. You know, you don't share revenue on commodities. We just sell money, guys. And we sell public money at that.
Yeah, maybe there could be a residual if there was in the non QM space, but you'd have to work for the securitizer and they would have to have their own servicing. I could possibly see that.
[00:43:12] Speaker B: However.
[00:43:14] Speaker C: Why would they do that when they don't have to? Because very few people actually securitize in the non QM model. So they would keep it for themselves since by the way, they're the ones taking all the risk. There's no risk on these government loans. You know, 90% of the market when it's Fannie, Freddie, Ginny, you know, FHA v. A, usda, it's all backed by the United States.
So I would actually tell you they don't deserve one because it's public money.
So now, unfortunately, I don't believe that'll happen. I'm sure a lot of people will question me. I'm sure people will create some model and I'm not going to tell you that some things won't show up. But miraculously their buddy down the street will have better pricing and that'll blow it all up.
[00:43:52] Speaker B: If you're solely non qm, is that a model that could work?
[00:43:55] Speaker C: I don't know enough about the non QM servicing values and how those trade MSR wise I don't know as much as what's made on the extra securitization and what are the, you know, what are the bonds paying out on that? I don't know enough of that information to be able to tell you. What I can tell you is this just off pure logic, if it's going to work somewhere, it's there because that has private capital, not public capital. That's what I don't think people realize private capital. It can work in what you're saying, what you're talking about cash flow versus that's all private capital that gets done on the property.
And what I mean by that is the person themselves take on the liability.
So even though they may have gotten a Fannie Freddie Jenny loan, what I'm saying is they're taking a private interest. This is going to have to take a private interest.
[00:44:43] Speaker A: I'll say too. And this is a shout out to me at adopt the brand. But what I try and help different people with that are coming into the mortgage industry is understand just because it makes logical sense it often will not get implemented in in mortgage. If you got this great idea you should probably go do it yourself because it's on the technology side. It's just not worth them getting the kickback versus just keep doing what they're doing. And I'm not saying this is everybody but on this side too. Do you think after that complicated scenario which I think I follow but I also have a finance and accounting degree and I still was trying there Mike.
But if you're in one of these high cap areas but you close two zip codes over and the loan officer was certain that it was part of that high cap area and now they got told that they're not going to get a residual income and 9 out of 10 times they're going to that Facebook group Eddie was talking about before. They have a reasonable conversation with their owner and then everybody's trashing this company and the owner saying I was trying to do a good thing for them.
[00:45:45] Speaker C: They want a residual.
[00:45:46] Speaker A: I gave them it. Now my company sh in the gutter. I should have just done the conventional stuff because I would have dominated like I would have. I'm getting no lift. And that happens in everything in mortgage and there's no doubt it would happen here. If there's any complexity. They're not gonna we talked about this this whole show.
[00:46:02] Speaker C: That's why I said no.
[00:46:03] Speaker A: They're not going to take the time to do the research. If they're not researching income calculation, how are they going to research?
[00:46:08] Speaker C: It's worse. It's worse. It's entitlement, it's arrogance and it's complete mercenary self agenda that has seized the industry.
[00:46:20] Speaker A: Yeah, you'd be better off reinvesting in some social media marketing plan that actually becomes your residual income.
[00:46:27] Speaker C: Then it would be wiser to keep improving the client experience. It'd be wiser to invest more in tech AI and offshoring. It'd be wiser to invest in things that are going to drive down your cost to put a better price on the street because that's going to get you more units.
People don't mind paying a little bit more because you see that in Chick Fil A.
You know, Chick Fil A is, you know, better, faster, cheaper. And people are like, no, they're not to 20% more, 20% more to a chicken sandwich.
They're not a hundred percent more. So in other words, if that sandwich costs eight bucks, they're not selling much anymore. Guys, let's be honest. You know, you can sell a quarter on the back end, maybe even 50 basis points in price, but you ain't selling 150, 200 basis points, which is essentially what would happen there. So get out of here, dude. It's a common. Because food's a commodity too. You have to understand the rules to the game and the behaviors behind it.
[00:47:21] Speaker A: And they don't cater to the masses like they are closed on Sundays. I'm sure there's somebody out there that was telling them you're losing 1/7 of your revenue by being closed on something.
[00:47:31] Speaker C: They are, they are. It cost them something like half a billion a year in revenue. When I saw that, that was years ago. It's probably more now. However, their firm belief is because they're not open on Sundays, why their Saturday sales are off the charts and their Monday sales are off the charts.
And they also believe because they have values that they stand for something. They explain why, that they actually get more business every day. And I would probably tell you there's a lot of truth to that because everybody knows Chick Fil A is closed on Sunday. And what happens is when they forget, they either remember and run there on a Saturday or they forget and they run there on a Monday. But guess what? Mondays are usually the slowest day yet they have some of the most Monday highest sales in the whole industry. I wonder why, guys. So in other words, they get the revenue with less labor costs because they closed for a whole day.
[00:48:18] Speaker A: What, what, what is that in EPM like in 2026 here as, as we close out the show, we appreciate you staying the whole time.
[00:48:26] Speaker C: What's the message? I'm telling somebody I'm running a few behind. Sending the message to my three o'. Clock.
[00:48:31] Speaker A: If we were to snip at this part, what's the message to the broker community out there on what EPM is doing? I will say I've seen firsthand this tech revolution that you are doing. I Believe it's going to be the, the best thing to hit as a kind of outsider, hit wholesale. They don't even know what's coming yet when they start. I mean, it's already there. But when they start to see it in their files in 2026. But beyond tech, what's that we're closed on Sunday type of message you want people to know about EPM going into the 2026 in the future.
[00:49:01] Speaker C: Simple. We are definitely on the forefront of offshoring jobs because that's going to lower cost and that's going to be able to provide also faster service. Because my goal is to eventually, because you can do that overseas, have three shifts of eight hours. So some things are going to be done in 24 hour cycles.
So I think that you can move a lot faster.
And that's really what it's going to be about because at the end of the day I understand originators real well. As soon as I say they see that approval or whatever, they see the milestones move faster, they've already blown the money. So they're closer to that money. So they're going to stay on it. And that's just the reality of the situation.
[00:49:35] Speaker A: Yeah, there is not a successful manufacturing plant in America right now that doesn't do the three shift, global shifts and everybody in mortgage wants to do manufacturing. That's kind of what you got to do.
[00:49:46] Speaker C: It is manufacturing, but they haven't accepted it.
And I think what people need to understand is they should read about Toyota, how they disrupted Detroit when Detroit had 90% of the world share.
[00:49:56] Speaker A: Wow. I mean, that's a mic drop. Any final thoughts, Mike? I know Eddie's got to go and I have to do the outro.
[00:50:02] Speaker B: So I, I definitely have more stuff, Eddie, but I think that this has been a, this has actually pretty, been a volatile show. Thanks for coming.
[00:50:10] Speaker C: My pleasure, my pleasure. Anytime.
[00:50:13] Speaker B: Yeah, I think that the entire origination community could be more and better informed if they were less selfish. Actually, they would end up making more money.
And I think that Eddie has hit a lot of points that are quite spot on. This is a great replay for the originator that wants to try to understand how they can be better.
[00:50:35] Speaker A: All right, Eddie, I'm going to give the outro. I'm going to text you some instructions. We appreciate you being on here. Thank you for joining us.
I'll hit you up on the tax. As far as everybody else, thank you for joining us on this journey into the heart of mortgage innovation.
Remember, every mortgage has a story and we're here to help you write yours. If you enjoyed today's insights, please subscribe, share with your network and connect with us on social media.
Until next time, keep pushing the boundaries and uncovering the stories that drive our industry forward Board.
