Episode Transcript
[00:00:00] Speaker A: Hello and welcome to the Mic'd Up Show. It is Thursday. We say Thursday every time because if you're listening, we give a chance to go on our LinkedIn or YouTube live, make comments and we'll put them up for the chat. We typically have a guest and we have some great guests coming up in in order to hear them. And you want to hear them live and ask them a question and then be featured in this podcast. You just tune in every Thursday at.
[00:00:25] Speaker B: 2 2pm Eastern and of course at 11am Pacific. For those of you who may be in California or on the west coast.
[00:00:33] Speaker A: This is a very relevant podcast today as our audience is supposed to be anybody in the mortgage industry, processor, loan officer, underwriter, any vendor in the industry, or we're seeing a lot entrepreneurs now with no mortgage experience that have an idea they want to bring to market. You will end up at the conferences. I had a LinkedIn post you could look at talking about how it's my 156th, 170th conference, I got to do an exact audit, depending on which ones you count.
And we try to on this show bring people on that you will see at the conferences. And today we're here to report back one of the more informative conferences of the year as a bellwether conference, you could call it, where independent mortgage bankers all come together and discuss what they are doing, what they are seeing. And then the Mortgage Bankers association gives them some forecasts to talk about. Because it's the beginning of the year, it is one they look forward to hearing. So everybody was in the opening ceremony with Marina Walsh and Michael Frantoni, chief economist for the NBA, took some notes there. I'll also say Stan Middleman, who is going to be our guest February 20th, and Michael and I have a homework assignment to read his book. But his book's called I'll have to get the Exact Name around the Corners. But he certainly made that his theme and he probably will on his show. His big takeaway was mortgage leaders think traditionally very linear. They look at profit and losses. He's talking about the good ones. They look at profit and losses. They quote cyclical cycles they're used to. They then try and figure out ways out of their problems by doing what they do best, looking at the numbers, trying to crunch them. And the winners were the people who right size their ship correctly. But he went further and said you have to start thinking beyond linear or the real winners are thinking in 4D. And he went, he went into that, including predicting that housing will drop 30% like 1988, not like 2008, where it happens regionally. And he said by the time it hit Massachusetts last year, last in 1988, it was already done in California versus 2008. Housing prices dropped everywhere. So he sees a regional drop of 30%. Which, not to bury the lead, but we'll sort of. Mike and I work very well together and this is our first conversation since the conference. So we're going to talk like two people. How'd the conference go? I'll make command somewhere. I'll let you help navigate what we get into. But we're going to talk a lot of, well, at least for the first half an hour before the ramblings and the innovation parts of it. I think there's some substance I took away from there, Mike, to give to the audience.
[00:03:31] Speaker B: Well, before we talk about the state of the, of the vehicle of money itself, meaning that the, the, the mortgage industry loans out the money, which is fine. Right? This is what we do. However, let's talk about the state of the industry, the general sentiment. You know, when you, when we, when anybody attends a trade show, a conference, a convention, whatever you want to call it, you, you know, a few years ago when we, you know, you and I, when we went to some of the NBA events, it was, it was actually a little pathetic, you know, and in, in this last year, it was, you know, I only went to the NBA commercial multifamily last year. Well, that's not true. I went, I don't. Anyway, it, you know, there's definitely a sense of more positive. And as we, as, as you exit the imb, what, Mike, what do you think the leaders of the mortgage banks, what do you think they're looking forward to? Since it doesn't really look like originations are going to be increasing and purchases are probably on the rise, but you know, without the refinances to support it and not very much new inventory coming on aboard with new builds or construction. What do you think is the general sentiment of the leaders, either wholesale or retail, on, you know, Fannie, I think or Freddie predicted that we're going to have some, some increase, but does, you know, everybody, everybody eats from the same pie and the trough is getting smaller as far as originators are concerned, but the companies are not.
So what is the general sentiment now as we exit that the show and go into actionable. Actionable either consequence or actionable things that, that they're coming out with as a result of either A commiserating or B, let's go do it one is the.
[00:05:34] Speaker A: Good news is 75% of IMBs were profitable in the last quarter or the fourth quarter and the third quarter. 17 basis points, 18 basis points. You would have to go back to have to look at the chart here, but you'd have to go back almost to 2022 for even a profitable quarter. And they were losing, I think 60% of IMBs were losing in most quarters money.
And it goes back to what Stratmore said. You, you don't put bips in the bank, you put cash in the bank. So going from a focus of what kind of bips we're making to what is our end cash is something they can start to look at now that they're finally profitable servicing. But 55% of non depository involved in servicing. So a lot of companies have made a pivot where they've at least tried to grab some servicing. But I think a lot of that's made up by the larger companies.
Delinquency is benign right now, not much of it. But they're starting to talk about will it pop its head. I saw a post today from a cold caller who said four people that they called today were 60 days behind that they pulled credit on. And then the comments section started to talk about that. So FHA is 11% delinquent, but that number is off a little bit because I spoke to a leader, the Housing Wire Conference, very respectful person that says at about day 80 they're on the phones and they're calling to restructure FHA to keep it from being this delinquent. And they put it on the back of the loan. So I think that number would even be higher.
The problem is natural disasters. Taxes are going up everywhere, condo homeowners associations are going up. When you look at all of that, the talk outside of the sentiment was around conservatorship.
So sentiment was the North Star, right? Were they in a good mood or a bad mood at the conference? They were in a good mood. The sexy topic was out of conservatorship.
But you could tell in the room a lot of lenders know if it goes out of conservatorship it probably will be higher rates for longer. And are they pushing for something that maybe some of them don't have the stomach to handle? That was a sentiment I heard at at the tables in something they're just making sure because the Mortgage Bankers Association, Bob Brokesmith went up there and gave some of what the NBA is going to be doing and they are trying to get it out of Conservatorship, but with some rules in place and I could probably bring those up. But what are your takeaways from that so far?
[00:08:26] Speaker B: That's a lot to unpack. Let's, let's start with mortgage loan servicing. You know we have, we're going to have freedom. We have Stan coming up here in a few weeks and with freedom doing a lot of servicing on government loans.
You know, we were at one point in time less than 1% default on government loans, whether FHA or VA. And now you're talking.
Was that correct? Was, did you say it was 11% default?
[00:08:54] Speaker A: FHA now conventional still very low.
[00:08:58] Speaker B: FHA just. Did you say that it was 11%?
[00:09:01] Speaker A: Yeah.
[00:09:02] Speaker B: That's pretty scary. Taking into consideration that now our, our sample size, you know, and you know, when you look at the social economics, your sample size of all the people who have taken out FHA loans in the last five years, mainly first time buyers and loans have been harder to underwrite foreign originator than in the last two, three years than ever before. Right. When rates are low, underwriting just went through and FHA loans were almost non existent because. Because sellers just wouldn't accept accepting FHA offers. But nowadays even with, you know, even though we've had less inventory, you still have FHA loans, first time buyers still to see delinquencies go from less than 1% up to 11.
Environment that we're in right now with looming inflation, with the cost of just, you know, milk, gasoline, insurance, property taxes still going up in a lot of the nation only because those are, those are. And insurance costs going up in a lot of the nation because of what's going on with natural disasters or whatever and with the increase in prices, property taxes going up because not every state's like California where it remains staying that I could definitely see how that 11% and even with Stan. Was it Stan that said that was going to be a 30 decline regionally?
[00:10:23] Speaker A: Yeah, I'll give the year he thinks probably closer to 2030, 2031. I should have raised my hand and said on one of our previous shows Michael Zhao did predict, you know that we would see a drop from like 19, 2033 would come back to next year's levels. But he is saying something a little bit more catastrophic from a if you actually hold the loans right. Because most are originated right now will be 20, 30% underwater.
[00:10:54] Speaker B: In order for that to happen, I mean there's going to have to be some economically speaking, wage speaking, you're going to have to see not only demand Deposits and banks go down from, from incomes that are less than $250,000 gross income in, in most MSAs. But also looking at, you know, just looking at that, just trying to figure out why are there delinquencies and the FHA loans was it. It couldn't have been due to really poor underwriting it, could it? I have no idea. So we're out of that 11% delinquencies. How many of them had debt ratios? Maybe the, maybe the actual LTV is below 80% and the debt ratios went to above 50. No idea. Right. So there, there's no breakdown actually on, on why there is an 11% default ratio.
And for the most part, I bet you a lot of those LTVs are. I don't think they would be underwater. It would be hard for me to imagine. Even though we haven't seen a huge increase over the last year with the mortgage insurance attached to fha, I don't think there's going to be very many losses.
[00:12:00] Speaker A: He was pointing out at the 30% there'll be losses. In fact, one of the more, I don't know if you want to call it entertaining, but talked about points of that was, you know, it was sponsored by a mortgage insurance company.
Sure. Essent. And he pointed out when this happens, the repurchase risk, the mortgage insurance companies put it lightly. They're going to go through with a fine tooth comb what you did on your loans before they start helping you with those loans, you know, as it happens. But you know, a big picture, unless you want to touch that third rail.
[00:12:38] Speaker B: Yeah. Real quickly. I think that anything that goes into default or anything they're going to be looking at really. And, and I can, based upon his numbers and based upon how I see history, I can very much see that happen. Right. The, the first three years of a mortgage loan with amortization schedule with or with the lack of principal being paid down onto it.
I could see that originations in, in 26, 27 and 28 are going to have a negative effect come the 202030 to 2033, because you're not going to have very much principal paid out based upon amortization schedules. And then if, you know we're going to see another change in, in the presidency, whether, who knows, it could go in either direction. We don't even know, historically speaking, politically speaking, how other leaders, based upon current leadership actions are going to react to either, you know, international trade. Is the dollar still going to be strong? Are they going to purposely try and make it weaker to create More international trade within the next presidency? I don't know. I have no idea.
[00:13:40] Speaker A: I'll tell you. Stan was. When he was talking about don't be linear or d seeing around the corners, he talked a lot about the price of oil and how he's predicting that will cause rates to actually go down in the fourth quarter. He's predicting lower rates in the fourth quarter.
And on the servicing side of things, I think it's important to point out the way Stan talks is at such a higher cerebral level than most people up on stage. Looking forward to him coming on the show because you can tell he has these conversations in his boardroom, adds these conversations as he's making large transactions. This is something that is not just speaking based on what he's heard, but this is speaking based on what he does and has done. So he was talking about how the price they're willing to pay today is not automatic and it's not the price they're always willing to pay. And he means for these MSRs, for the actual or for the MBS, when he actually buys the, you know, portfolios. And he pointed out he did not lean in as hard in the previous years as people think. He didn't like the price as much two and three years ago. It was last year that they love the price of credit and that's why they went out and they bought, you know, a large, large amount of it right where they became a top three servicer. He said, charity begins at home. You have to mine your Stewart. And 2022, they had to right size their operations.
And as interest rates rose, they realized that he had to get out of retail and go with this model of servicing and retention. And they liked the credit. But in 2022, they weren't, they weren't willing to lean in because he had to correct his balance sheet first. And he wanted to make that very important to others that even though he liked the credit, he wanted to correct his balance sheet first. So maybe in retail, if you can recruit this group, you just, you have to make sure your balance sheet is where it needs to be.
[00:15:49] Speaker B: I would wonder, just going down this road real quick, there's a book that, you know, if you're in cap markets, I'm sure you may have seen it. I don't know if you've seen it, but it's a book called Demystifying Secondary.
[00:16:01] Speaker A: Okay.
[00:16:03] Speaker B: And the author specifically writes in there that your cap markets or secondary desk is not a P L. You should be looking to either break. You know, you're Looking for the sharpest pricing possible and, but it's not necessarily a P L that needs to be profitable. And I, when I was, when I was actually a full time retail originator while I remember talking to one of the owners of another company one time I'm like how come there's no P L for, for secondary in cap markets? But he looked at me and just lose.
[00:16:36] Speaker A: I don't know.
[00:16:37] Speaker B: I. That you know that's, that's not my, that's not what I do. I rely on Cat Marcus to do that. But based upon what you're talking about Mike, it sounds to me that if servicing is going to be such a, you know, freedom going from a combined retail wholesale model to strictly wholesale or incorrespond it that you know you have to rely a little bit on, on a little bit of profit taking somehow if not in the hedge then somehow in the actual trade itself.
[00:17:06] Speaker A: And remember everybody talks about they have the model where they believe every one they buy is three and a half more refinances. So there's their math. Just some more points on what he said that we always say you have to recognize it's a cyclical environment. Mortgage industry is not static, doesn't stay in one place. It's a one that is not volatile. So if you're not willing to see the change, which is a big point, you will be crushed by the change. So seeing around the corners is his theme. He says the values of homes have gone up. The environment out there isn't great.
So if rates stay higher for longer then inflation goes up and he believes you'll see a different market and it could last for a while. Said and he thinks property's going to go up and then. Correct. And he is very bullish over the next couple years though.
[00:17:57] Speaker B: Was there any mention or talk at all during the conference regarding the blockchain or crypto not as an investment but as an avenue of delivery of information?
[00:18:08] Speaker A: No, did not. Tokenization did not really.
It may have come up in one. Okay, just looking at this, Bob Brooks mis said Section 199A will continue to get bipartisan support. You'd have to Google exactly what that is. You said capital gains is, is not in the cards. Changing the capital gains which they have people have said obviously is a great way to move supply eliminate the. That's not in the cards.
Housing supply, tax credits. He talked about the, this power of the Mortgage Bankers association by the way while we were there that what's it called like an abundance memo that went out with a freeze that they had to unfreeze that the memo Trump put out. If that had went through, many of the top lenders would not have done VA or FHA this week.
[00:18:57] Speaker B: Whoa.
[00:18:58] Speaker A: Yeah. So the NBA was working that day on making sure that there was protection there. And by the end of the night, I think everybody, you know, had received those emails that the NBA had made sure. And it actually will be back up on February 6th I believe to talk about. But for now, you know, there are freezes in there that will not affect the FHA or VA or certain parts of it that would. At least the top lenders did not want to get involved with the gfe. You told the story about how the government gave payroll tax relief to the United States for two months or for one month maybe and pay for it. They put a 10 bip G fee for 10 years on your Fannie and Freddie and that is coming up in the next couple years. And so it's going to be on them to try and get them from, you know, doing it again or worst case saying that was a good idea, let's double it. They're going to be pushing for HUD mortgage insurance, eliminating the life of the loan on the FHA mip, which I want to point out, just like conservatorship might be a nice short term boost, but if people are already golden handcuffed, those MI payments equate to much larger differences in by hundreds of thousands on what you can afford. Oh yeah, people will not be moving period if they, you know, get a 600 off FHA payment or I know, maybe more realistics like 389 off.
But if they go to their new house, they're going to get the 389 plus you know, the increase.
[00:20:34] Speaker B: I mean that makes sense. I mean, yeah, I mean let's, let's talk about conservatorship because I. Is there is the sentiment that pro conservatorship or against conservatorship of the government sponsored enterprises. And for our listeners who don't know, GFP stands for government Sponsored Enterprise, which also is commonly known as Fannie Mae and Freddie Mac. And currently they are in conservatorship under the United States government. So if they leave conservatorship and are independent organizations, publicly traded organizations for profit organizations, how is it going to affect mortgage rates and the industry in itself? So is the general sen. You know, those are for our listeners that are not necessarily on the mortgage industry. So what do you think is a general sentiment then by the leaders. Do they want to see conservatorship or do they not want to see conservatorship?
[00:21:27] Speaker A: I, I have the message. I have notes here. I mean it's gonna sound like you, you teed that one up for me on what the NBA stance is.
[00:21:34] Speaker B: Yes, I did tee it up actually.
[00:21:36] Speaker A: Okay, you want to make a guess before I go on what you, what you would say as a leader?
[00:21:41] Speaker B: I have no idea because I wasn't there. So I mean, and there was and you know, frankly, this entire, through the entire week there was so much news that was going back and forth. I don't even, you know, you know, money's not emotional people out, but our decision making is also based upon the emotions of the news that we receive. So actually I have no idea. Why don't you help me out here?
[00:22:01] Speaker A: Well, first I'd like to pull up Greg Schur's post that talked about because I know you'll enjoy this. The opinion of American Pacific Mortgages. Bill Loman who was a guest on our show recently and thanks to him probably started a lot of these great guests who runs American Pacific Mortgage, thousands of loan officers across the country. And Bill Cosgrove, who his partner Al Blank agreed to come on our show. So we'll have union homes, you know, founding partner on.
I just remember Bill Cross Cosgrove said the federal House. And this according to Greg Sheriff's post who will also be a guest on the show coming up here in two weeks. The Federal Housing Finance Agency to me is dangerous where you have one person that literally controls Fanny and Freddie Mac and the whole ecosystem. Housing finance of America. It's wrong. So but I would say for the most part people seem to be saying for getting this out of conservatorship but also recognize, you know, where they are in the rates. You know, Bills also quote as we think the next two years are going to be a continued fistfight and that's the way we're approaching the business. And we want to be one of the 80% that survives versus the 20%. And that's just the reality we believe we're playing in. I believe Bill has a great servicing portfolio to be able to handle the short term spike that a leaving conservatorship would cost and in the long run would become a bigger winner by having more control in the private market.
I think you are more regional people with less of a servicing. Maybe don't want to go through those pains for two more years and would like a little bit of a boost. I Will say, okay, I'll just read Bill Lowman's while we're on it so we don't have to go all over the place. Right. His take was if you're operating in any blue states, I think you're going to see even more regulation. I think some states are going to be brutal, especially if you start looking at potential CRA requirements in certain states. And there is why you have your mba, there's more of that. CRA now applies to independent mortgage bankers.
[00:23:59] Speaker B: When they say cra, are they talking about the, this, the 80, 86 or 87 Community Reinvestment act or are they talking about something else?
[00:24:09] Speaker A: They are talking about what you're saying. I know traditionally it's like where you lend money, I mean where you actually take deposits. You have to lend in, I think for IMBs. I don't know the exact way, but there is now if you're originating in a certain area, there's certain rules that you have to fall under. If you're a certain size.
[00:24:27] Speaker B: It's kind of a joke to me.
[00:24:29] Speaker A: But okay, I think this mortgage companies that actually originate them now and sell them to banks to meet their, you know.
[00:24:36] Speaker B: But yeah, I mean if you here in San Diego, if you talk to somebody out there and they're like, oh yeah, you know, how many cras have you done cra? I mean like in San Diego, the average originator, if you ask them about, you know, how many community reinvestment athletes you did, they're like, that's not even a part of, you know, it's like we have six guns. It's not even one of the guns.
[00:24:58] Speaker A: I don't think it was a huge, I think it's now part of the process.
It's also what I always said, if the CFPB ever did go away, which is a hot topic, still wasn't really talking about there, but you'll just see the states pick up the slack. And I guess this is what Bill's saying is the blue states are going to pick it up a lot more than the red.
He says President Trump can lower the MIP on federal housing and HUD Office of Housing Loans. We have the fund which is at five times statutory requirements. So there's an opportunity that the fund is bloated at the cost of consumers. So if you lower the fund on the FHA loans which aim to get people into homes, help first time homebuyers. So if you do that, you're essentially doing the same as lowering rates, just different than what I said. Don't eliminate the MIP from the people that already have it. Give a lower MIP to get in would be better for housing supply movement is all I meant. Not better for consumers. I'd have to think about that. But it's definitely. I see what he's saying.
[00:25:58] Speaker B: You know, builders, I'm gonna digress just for a moment. Take a, take a tangent here just for a minute. Builders build for profit as, as Logan motorshami will often say on their Housing Wire podcast. But developers when they're building multi family and, and I'm going to talk about multifamily just for a moment here. You know, we make the assumption when we talk about Fannie and Freddie that it's only for single family dwellings when the reality is that they're also doing loans to SCMBs, loans to commercial multi, multifamily, whether small balance or large balance. And when I, when I look at whether we're supposed to take it out of a conservatorship, I look at, well, does that mean it's going to make it easier to get multifamily mortgage loans for the, for the commercial brokers? The Commercial broker MBA Conference multifamily is coming up here in February here in San Diego. I'll be talking to a few people about that. And then if, and if it comes out of conservatorship, does that mean there's going to be more of an emphasis back onto the retail consumer, meaning the single family condo, one to four family homeowner and that would that cause easier lending? In other words, if we change the leadership from taking it out of conservatorship, does that mean. Because based upon current leadership situations, I'm not sure if we actually have the right people with the vision. And as Stan talks about thinking going outside of that, that realm with the right vision to actually bring it from, hey, you know, we screwed up 20 years ago, we're not going to do that again when reality history could repeat itself. And unfortunately I don't know if we have the right type of leadership at the present time of knowledge base that if we took it out of conservatorship that we would actually, that they would lead and help lead independent mortgage bankers and the industry into a better lending environment. And I would like to say that we did, but I'm not sure if we do.
[00:28:01] Speaker A: Just to segue, one of the pieces Stan Middleman said is he took his family and his sons in how they run the company a week before and they went over all of their revenue models and he Said gave us four. He said their interest, what they're making losing exactly on interest, then on their MSR value, then on their securitization business and then on their fees. You might not have the money to buy all those MSRs but you could get into the multi family space. There was a lot of talk about alternative programs. The non qms are killing it. That's not a bad indicator of a great way to run your board meetings for the NE for the next year or two is is start to create these verticals and have serious talks about the profitability of each one and sort of going with what you are. You just gave them another vertical where maybe they don't own huge servicing pool but they could look at other property types and then how they're benefiting there.
And here you're up segueing into Bill Lowman's final point. Very similar to Bill Cosgrove and together they combined for about 47,000 loans last year, which is $15 billion of mortgages for America. I don't think we can run our companies anticipating any lift in 2025.
Thank you Greg Sher again for this. I think you need to go through 25 and at least through the first quarter or after of 2026. Whether it's your forecast, your cost structure, your margins we just talked about. Right. You have to be really careful trying to price your way out of it because we are all razor thin on margins as is. I think this is a wakeup call. You guys can reach out on the show to Michael Z for any help. Wakeup call that at the end of the day we have to remind ourselves we're not just a sales industry, we are a secondary industry. And right now margins are so thin and it segues into looking. He basically said the same thing. Look at every quarter and plan for that change because that change will crush you, as Stan said. But just plan for it. If your margins are so thin you have to be more ready than ever before on some catastrophic variable that you weren't ready for. I think they call it a business continuity plan. Have a business continuity plan just in case with the margins where they are.
[00:30:16] Speaker B: You posted, I don't remember but recently you posted my cocking about originators needing to change, companies needing to change for the revenue model. I had an originator reach out to me saying hey, with Zillow, you specifically posted about Zillow if you remember doing that a few days ago and I.
[00:30:35] Speaker A: Had like 10 people at Zillow repost post. Isn't that.
Thank you to all the employees at Zillow for reposting that.
[00:30:44] Speaker B: That's a, if you, if you're a retail originator or even a mortgage broker, you should actually be, that should be like the wake up call. I need to change, I need to somewhat know how to be more value add for the borrower. Because every time I talk to someone that's online, you know, I begin to ask some questions and I'm like, these are, these are, they're all order takers. Right? And so Mike, I address this to you on a text message privately. Just you and I, I'm like mobile app. There it is.
Yeah, there is a lot when, when you go and get an NMLS license, you get to learn about fair housing, equal opportunity and maybe a little bit about truth in lending. But when it comes to actual financial education, number one, you're not going to get it from the originator at the Zillow place. They're just, they're order takers. Give me the lowest rate and then pump and dump that thing.
Whereas now as, and I know that, you know, guys like Bar Habib and in other, even Todd Duncan and, and other, and other people in that, on, on that, on that ramp have talked about teaching fiscal literacy to the general consumer.
Even though we've had such a huge drop and we have some really intelligent originators that are out there, the other 80% don't have the current wherewithal in, in my opinion to actually go and teach about financial literacy. And, and I read all about all kinds of other trades outside of the mortgage industry and they talk about saving. Saving, save. Saving is a fear based action based upon someone's inability to understand how to actually invest. And I think that when we, there's, there's not enough information in conjunction with finra, SEC financial advisors on teaching people how to be actual investors because people, and this is more of a soapbox for me, but I think that, you know, we, we as an industry, we can be better leaders in teaching consumers how to be better investors. If we're going to talk about being a better business owner and thinking out of the box, then we shouldn't be looking at saving. We're talking about, you know, if you're only making 19 basis points per for funded mortgage loans and if Strathmore is going to go and make a comment to say that dollars, which makes a.
[00:33:04] Speaker A: Ton of sense in the bank.
[00:33:06] Speaker B: That's right, you can't put bips in the bank. You will put dollars in the bank. But when, when you're putting Those dollars in the bank, what is that investment? Are you buying more MSRs? Are you buying more platforms for your originators? Are you buying and investing? I should not even buying. Are you invest. What are you investing in that are not BIPs but are real dollars to multiply the profitability of BIPs, which turn into dollars to increase profitability. And if, if you're not doing it as a, as a leader or an originator, then yes, Stan's right, you're. That business model is going to eventually fizzle out the way of retail. Retail department stores have been done with Amazon. That's the direction we're headed toward in mortgage originations.
[00:33:59] Speaker A: I agree. I, I think right now it's a manufacturing industrial revolution in mortgage where AI is replacing task based. Except task tasks. So they're AI tasks. Problem is they're doing it a lot out of the los. So like they're starting the los, working their way back. I shouldn't say it's a problem, but it's very narrow. Or they're doing exception based so we can get a couple. There's a resurgence of OCR because it's finally working like it was supposed to 15 years ago. It can take a document, it's priced much better, classify it and again put it in your los.
You're seeing AI now, I think more on. What's that?
[00:34:39] Speaker B: We didn't address enough of this with Tim when we had him on the show. Tim Lee.
[00:34:44] Speaker A: Oh yeah, we didn't. But he's, he's just so brilliant. We'll see what he does. These are just very narrow, narrow points. In fact, what he's in point of sale, I don't really have a, a huge read. I will say many people are talking to the big point of sale because of the con. So forget about the tech. Like the great tech Tim has on his point of sale. This is a company that works great in Encompass where they already are. Right. And there's the contract. There's no contract length. So that's something obviously when you heard the numbers, why it works great. The next piece you'll see is I'm seeing a lot of AI on Voi Voe. So like can we go out and get the, the data? And this fits well into what I said about the marketplace with ICE or another marketplace. But I just don't see anybody being able to compete. So with ice, we'll say if they can help you get Michael Zhao's income amount faster better ways than right now. Just you put in your bank account information into my Widget, there's AI there that's all in manufacturing operation of the loan. There was a lot of that at the conference and people were meeting with it. In fact with my agentic AI client that works with the top builder there, I or one of the top I was having meetings around that but I others were out there having meetings. I was going to say everybody in one of my clients, I felt like that was my pipeline. Not to go off subject here on the A conference but people want to know like who was there. The people that are buying or thinking about buying because they're in a good spot, probably the top 100, they're in the top 120 IMBs.
My pipeline at my different clients, they were all there so it was good to be there. They're at different stages prospect, think it over. The ones that are not buying were not there. So when you were like easy mortgage apps back in the day those really helped the. I won't mention any names on here but you know you have a lot of regional IMBs. 20, 30, 40 lo shops in Chicago, Illinois, Virginia, Florida. Those ones weren't there oftentimes years ago they would be there, they would make you feel better because they would take the meetings. If you're not able to gain access to sea level at a high level you would probably have difficulty feeling like a lot of vendors there because the only people that are there are the larger people that are buying but they're just not sure yet. So they're talking to a lot of this but it's all manufacturing. My point was I think the next revolution, I don't know when it's going to happen next. You already see a lot of CRMs there. Total expert, obviously the leader. There's a couple, you know, right behind them that we're reaching out to for Twitch out for a lot of advertisement on our, on our different shows. But I think they're gonna at least start to be able to help loan officers get to where you're going or at least help them work together to build some content. And I, I heard a prediction, you know, Canva is really going to dominate the mortgage industry in the next two to four years. And so it'll be the CRMs that really bring out the best in Canva. Meaning loan officers can figure out how to use Canva. Their loan off their assistant can figure out how to use Canva. It's the easiest way to do make everything visually enjoyable. The you could write your own first time home buyer deck in it. Right. And it's One of those community no code pieces. So I could go shopping through Michael Zhao's public trainings if I want and then I can just change it up if you give permission.
That was the sentiment of the sales part of it. You know in the lobby up there I think we're obviously talking more of the meat but if people were curious like who's selling in mortgage it's all that manufacturing I would say from almost pre disclosure to closing, even post close document delivery there's some good OCR business engines. And then I think the CRMs not how they are today but their ability to work with data and their ability to make videos and somehow get to where you can start educating like you said that will be a big wave of new sales people I think in but it won't be grandfather CRM. I don't even know what it'll be yet but I think it'll be very AI driven and it'll be the next revolution come next year.
[00:39:04] Speaker B: Yeah, I, I, you know to address the first part servicing is going to.
[00:39:08] Speaker A: Be huge Servicing conference next week. I'm not going but just so everybody is aware.
[00:39:13] Speaker B: Yeah AI marketing, telemarketing and the sale of the servicing rights is going to be much, it's going to accelerate any IMB at this point in time. You know there's some of the smaller IMBs that don't have any servicing at this point and selling it off because of the correspondent relationships you're basically originating for somebody else at this point in time. You get to keep, you know, you get to keep the front end but the back end actually has much more profitability because of the annuitized nature of how business works. So that's, that's kind of if you're an originator on either a broker it's not going to kill your business unless your CRM whether it surefire or credit expert or whatever those need to be like investments today. Not, not just in servicing but also in the CRM if you don't, if you don't already have that put together.
[00:40:09] Speaker A: And on that note it's how is you as a loan officer? Are you connected to the servicing? Because maybe you don't have control of what your owner does. And so how do you stay personally, you know, connected?
[00:40:20] Speaker B: Which leads me to ask you Mike about the mobile app. I mean the mobile app isn't designed to be a CRM but with AI and cloud computing it's it that's something that's, that's a natural navigation that is coming.
[00:40:35] Speaker A: Yeah, they talked about the minority report coming right and geolocation being the most power. It's called a moid which is your mobile identification. It's it's a. It's on your device it's physically and you need to start to advertise and follow these devices and then when they finally tell you who they are they. It's limitless. So the beauty of the mobile is they can bring it to different wifi, connect to different wifi and then you can reach them. So I think getting a mobile app that actually does more than step one is just get a mortgage calculator that's on a mobile app to get your people off of Zillow Easy mortgage app still has one that's incredibly inexpensive. It's 500 and it's more just to grab a focus group of people like minded like me so we can build the next one that would just be for loan officers co brand. What's the next step? I think enterprise solutions larger enterprises need to be building out decisioning models first which is a client of mine Sapiens decisioning which a lot you you answer questions with models. So the question would be what is a first time home buyer who downloaded an app and has used our calculator eight times. How do we want to talk to them? We'd want to pull their credit let's say so then you pull their credit. If the score is here do we want to take them to Michael Zhao University or if their scores there should we be moving them faster to a loan or should we take it to the next level and maybe teach them about a 203k loan because they can get better inventory for the piece. The reason I say all this is you can get your loan officers to talk through building because these decision models are now no code and this is what can run a true app so that the app actually tells a story. Nobody in mortgage this was my point has built an app that tells a story or built an app that has given you a journey like the apps that people are used to and they don't have to be old Nintendo Quest journeys but based on who you are. The Starbucks app talks more and more different than to you by the day. My My JetBlue app now constantly shows the gate at the top of my phone and gives me a countdown till boarding time. That's a cool new app feature. I'm sure there's ways the mortgage companies could take care of that. My mobile app with Starbucks now starts to tell me in real time what's going on with my coffee And I always push the app. No lender has done it yet. They're too nervous to do it. But the first lender to really win is would be to design a mobile pickup type experience a faster one. And the customer obviously agrees to do some things in the app too. And number two, I think in return for doing that, the lender would have to give a real time push notification. 95, 97%, 99% read rate within 2 minutes. Their pocket vibrates Push notification anytime any of your workers are on their file in any of your start with the los. But if somebody's in the los, I know you're afraid to tell them, but that consumer should know that that company will win. And I will call you and I'll say Mike, you're in my app. What's up? And you'll say yeah, actually while I have you my AI showing me I need, I need this, can I, can I grab it from you while we're on the phone? That to me would be some of the ways the mobile stickiness and then like Stan said it's less linear. Like when you're doing something I in real time know it. My realtor could get a push now that I you go into Encompass, we'll call it caused me to get a push. So I opened up my phone. Because I opened up my phone, the realtor should get a push that I'm now active. So now they go into their phone all under the white label of the app. You see that? And then if you could keep going where their boss gets a push, their boss starts to say hey, that mortgage company's good. And then you need something like I always said, like you need something around it. Like people know what a mobile pickup is, right? These apps lack identity.
You would want to build some identity. And the beauty is you can copy so many ones that you use on.
[00:44:50] Speaker B: Your phone today there's only one problem, actually there's only one thing that's missing or two things that are missing. Actually the one thing that's actually missing before you even get to any of those applications that you're talking about is the customer needs to download the app.
And, and right, and right now there is a lack of gamification. In other words, client facing, borrower facing money spending, consumer using willingness to actually download the app and use it. By the way, I'm 1% so I may log off here by accident. And so I think that once the consumer has now the avenues you need social proof. If you don't have social proof, some anthropologist or Sociologist does some research on behalf of the industry and says look, you need social proof that says that all these borrowers are going to stop downloading everything. And until, until that happens, until that super bowl moment happens, everyone just says I got to download this because I now it's gamified. Now there's application not not act but actually application in your life on budgeting, spending, going from rent to buy, going from buy to move up, going from buy to savings in conjunction with the advisors, the financial advisors, the mortgage originat. Once it's gamified then it's game on. But until until then now you're gonna have originators all across the United States. I don't want to buy an app. I don't want to use an app. Why? Because I have like a 1% actually download rate of usability.
[00:46:19] Speaker A: Yeah some of them have a good amount without trying. But like banks use sapiens decisioning. Now you'll see in a lot of mobile apps for next best product at the bank. Like that's becoming a real thing. So you ask somebody hey, if you only had 300 left in your account, what the bank should we be giving them? So now when you open up your depository app it shows you overdraft offerings, right?
You need to get gamification rule number one and you need to think about it in your world.
Stop trying to make it like a carnival with bingo points. Right. And I think once you do that you'll be more authentic, the app will be better people use and you need. I've always said this, See you later Mike. I've said this, that Tesla in the Jeep like now make you download an app to start your car, right. Starbucks has you load up money so you can pay and make it easier. The airlines for years have been able you download it so it's a lot easier going through. You don't have to print the paper when you're in a rush. We would whiteboard we would figure out but lenders do need to get a little bit better and it can't be a pre qualification. We've had that for 10 years. It's gotta be something a little bit more that means something and there are avenues to do it. Whether you do it through getting creative or you can do it. Yeah just thinking outside the box. But I do agree with you Mike. Somebody needs to download the. I actually got the million dollar idea. So if a large lender wants to reach out I have it in my head I'm saving it around that like something that's actually but it would take, you know, a little bit of a game. But yeah, there's a company called Messa out there. Maya works for them.
Really cool. They're launching a credit card in the mortgage industry that you get points when you buy things around the home. You even get points on your, your mortgage payment. As a consumer, as a consumer, zero dollar annual fee. Your mortgage company can put their logo on it and you get like free Costco membership which is like $60. People want that. And usually the, even the Costco card doesn't offer a 60 membership for free. Then you get 150@ Lowe's to spend like real actionable reasons this company, there's ways to white label that and make that part of an app experience where now you're feeling like you're, you're being coached on how to be part of their community.
[00:48:37] Speaker B: When Jamie diamond put out that, the prime directive to Tim Lee's division when he, when he was on the air and he was talking about that, I don't know if you caught that or not.
People downloading banking apps was like, it was like we want you to download this app so you can do mobile banking. And this is only 15 years ago. You know, people are like download and do banking on my phone. Yeah, that's probably not going to happen. And look, people have whatever their banking apps or credit union app even you can trade securities and equities, mutual funds on, on an app. And I think that we are very, very close right now. Somebody's already got this in development to where people are going to start downloading those apps for the servicing of the mortgage and then connecting that not just to make mortgage payments but making financial decisions on their behalf. There, there's someone has already gotten on the road to gamify it. I don't know who, I'm just talking about it now because I think that they're already on it now. It's just a matter of it's not who's better, who has the better app, it's who does the best advertising to get that app on the road. Because Microsoft wasn't the best operating system for Windows that was out there, but they got the best amount of the best amount of marketing 25, 30 years ago. So they got out there. Now everybody has Windows on their IBM ThinkPad. So it's not the best app, it's the one that gets the most amount of traffic. And I think we're on, I think Mike, we just have to understand that.
And that's servicing. And when you control the servicing and when you control the borrower, when you control their, their manual applications of how they're making financial decisions, you're also controlling whether they're going to refinance, refer and, and conduct annuitized business for the originator.
[00:50:30] Speaker A: Yes. And you, you have push notifications. This is your way. First of all, it's around the TCPA act. It's. But if you, you bring them back in, Mr. Cooper can do it. And then you have sapiens to decide what pushes to bring back in. But I think many of these large lenders need to go in to their department of probably it, right. And say who's in charge of our mobile app right now? And go up to them and go do you think people download apps?
99% of them are going to say, and I talked to a couple out at the event, I felt like I was back in 2014 again, no, no, no, no. And they should just be honest with themselves and say then why the heck are you in charge of the mobile app at this company? How can I have somebody that doesn't believe in downloading an app in charge? Let's just get that out of the way. Because the entire world is on mobile apps. And if we can't figure out how to get somebody to download an app for their home, but they will for a cheeseburger and a quesadilla, we just need to be better. We need to find somebody better. We need to find somebody that gets it and then we'll worry about the budget, then we'll worry about figuring it out. But we certainly can't have you who tells me that nobody downloads apps download amp because Starbucks wouldn't become the fifth largest bank by depository in the world. If you count all the people that have loaded money on their mobile piece. If you took that cash, that's more cash than everything before banks now, they wouldn't have fallen into that without actually starting with the app first.
[00:52:01] Speaker B: Right.
[00:52:02] Speaker A: And, and Schultz and the acquired podcast said he didn't even believe in the app, but he let them do it. It looked cool.
Sometimes you just gotta trust and I, if not an app, a mobile first strategy. But I think you've had a decade to be mobile first without an app.
[00:52:21] Speaker B: If you're a servicer out there and you're, you're missing the boat on this one, imagine that you have every single person that says, okay, I'm gonna, I get paid on the 1st and the 15th and I, and this maybe not so much on the, on the, on the west and the east coast. But probably more so in central part of the United States. You know, you sit there, oh yeah, every first and fifteenth I'm going to, you know, I, I pay an extra 200 bucks, you know, 100 or $200 and it goes into the app and now it's sitting there in some kind of escrow to go for principal pay down. But it sits there for two weeks. You take $200 times 1 million borrowers, you know, sitting, sitting inside of, sitting inside of the paydown account. And you're a servicer and you earn interest income off of that is, you know, you're gonna be buying, you're gonna be buying the servicing because of, because of the principal pay down potential of those Midwest mortgage loans. And I think that it is like the ultimate interest bearing investment. You know, when, when I, when I look at how many IMBs actually have a social media presence slash division, slash. I mean like you don't have like the 50, 50, 50 team person of working on social media presence for the purpose of mortgage loan servicing, for the purpose of, of, of retention. You just, you know, social media is just kind of like, oh, let's create some kitty cat video so people watch it so we can generate some more business. And it's just, it's so much more than that. When you look at the interest income that you could be generating and servicing for that.
[00:53:55] Speaker A: Yeah, mortgage in general to me is old school cable companies and they control the wires, they control the regulation and they think they control everything. And then Zillow is Netflix. They have come along and said you can cut those cords.
It's on mortgage companies now. Their secret weapon is their loan officers. And by not having an app, you're doing it not having a real app, with a real app strategy, not some cand of corn. You're doing a disservice to your loan officers and to yourself to be that next. Because there will be the next Hulu, the next Disney plus the next Paramount plus there's not going to be a ton of them. But you could be that app in this new world by doing a better job. The app does it for you. The app matches your loan officer with the past clients. The app can match people that they can get in the pocket. Then you just need to remind yourself that the loan officers are the talent. The actors, the, the shows still have to go into the container. Your loan officers are the content. Zillow's content was the zestimate. Right? You still have loan officers before it's too late. That's good enough. Content if you can make the right app and your container is the app to go up against old school cable. And there'll be enough for about four or five containers. And one of them will be who can use it to match loan officers, to tell great stories that they do and be a place where every loan officer wants to come because the company tells their story better to their clients and protects them from that unimaginable change that Stan Middleman talked about that can crush companies within margins.
[00:55:39] Speaker B: Yeah, Mike, can you believe we're at the top of the hour?
[00:55:42] Speaker A: Yeah. Your thing looks so good on the phone. I think that kind of threw me off.
Thank you everybody for joining. We have, I think so Stan Middleman show on the 20th, Mike is going to be the launch of our season four. So we have Taylor Stork next week and Great. Sure. The week after that'll conclude our season three. It's been a great season three. It's been fun doing it with you and had a couple people come up to me at the show and talk about random shows we had and how they learned more in that show. It was a lot of new salespeople in the mortgage industry.
So you're being seen, Mike, not just seen that you're having a show. People are actually watching the show and.
Yeah. Appreciating it.
[00:56:25] Speaker B: And for context, there are mortgage originators that are out there right now watching the show. So if you're a leader with an IMB there I've been, I've been called in this past week by mortgage originators. So they're one, they're watching this show. And if you're a leader of an IMB and you're not commenting, that means you're not being seen by certain individuals. You, you know, if you have a social media team, they can answer on your behalf. You don't have to be watching the show, but, but you know, the commenting is, is a big deal, you know, not just in Facebook but LinkedIn as well. And I think that type of presence when, when you make those comments, you know, it, it boosts your, I don't know what you call it, but it boosts it on, on, on the app or on the, on the website.
[00:57:12] Speaker A: What Mike's saying is that's why we tell you what time we host this live every week. We want you to come here and give you a free opportunity to amplify your reach.
Thanks.
[00:57:24] Speaker B: Oh, absolutely. All right. So it was, it was, it was great seeing you, Mike. I'm glad that the, that you're, that you're safe but you know you had to go back into the coldness of the east coast there.
[00:57:34] Speaker A: Yeah everybody wanted the fix and flip program and the Shelly Duffy video hit perfect timing so we are talking with a lot of IMBs and we were worried about warehouse lines they all are willing to do a little bit of RTL right now so if the the tide is changing in our space and it's time to get creative.
[00:57:56] Speaker B: Yeah I want to shout out real quick I'm, I I need to reach out back to one of our past guests Rudy Orman talking talking about non QLM and rtl. You know that this is that this is the space that we need to get back into and under and and lead originators to actually further understand because actually understanding DSCRs really is about ability to pay so I think you know we need to enter into the understanding of that space and it's much more profitable too by the way.
[00:58:20] Speaker A: There you go Rudy. We love you. Take care everybody.
[00:58:23] Speaker B: All right see ya.
