Episode 4: Fed Chaos, UWM Drama & Housing Pressure

Fed chaos. Inflation fears. UWM drama. FHA stress. AI replacing originators?

Yeah… this episode went everywhere.

Episode 4 of No Surrender officially introduces Erin Dee alongside Greg Sher and Coby Hakalir — and the debates started immediately.

This episode dives into:
 🔥 Trump, the Fed & political pressure
 🔥 Inflation and consumer pain
 🔥 The UWM vs Rocket battle escalating
 🔥 FHA delinquencies & underwater borrowers
 🔥 Whether AI will eliminate most loan officers
 🔥 Why parts of the economy may already be cracking

Plus… childhood photos, sock puppets, and absolute chaos.

Hot Takes. Fierce Debates. No Surrender.

Transcript

SPEAKER_04 0:36

Oh yeah, baby. We back. We're back. We are. I always wonder how people could move their heads like that. That's amazing. All right. We're back up and running. Aaron D, COO of Interlink. Good to see you, my friend. Former president of the Texas MBA, current ResBog member. Yes, sir. That's the governing body of the Mortgage Bankers Association, right? How many of you are there in there in that group?

SPEAKER_01 1:06

I believe 40.

SPEAKER_04 1:07

Yeah, 40-ish, 40 to 50 somewhere. And then, of course, Kobe Hackalier. A mainstay and a good friend, T360. Good to see the two of you. No surrenders back up and running. And uh tip of my cap to our good friend Jen McGuinness, who is going to be doing something with me. Just the two of us.

SPEAKER_05 1:28

You can make it. You can make it if you try.

SPEAKER_04 1:31

I know, I know. Well, you know, she's a she's brilliant. And uh we we've we've had we had a lot of conversations about how she and I can really take all that she knows and put it on the right stage. And so we're gonna be doing that. So stay tuned for that, folks. I don't mean the right stage, she's on enough stages, I mean our own show, and that's coming up here soon. But no more about that. It's time to get into no surrender. Uh, but before we do that, we have to look at how far we've all come. Okay. So we're gonna go back and look at some younger pictures. This is from June of 1984. This is me. Uh, I had broken my collarbone. This is the first surgery I ever had. I was in a sling, and this is uh probably six months after my shoulder was operated on. Was playing tackle football with my brother Brian. Um, I was just a young man, 13, and he went and tackled me and landed on me. And when I told him I broke something, he was laughing at me. I of course you all can notice the trophies on the table. Um, yeah, great athlete. Uh Kobe Hackalier here. I mean, look how far you've come, buddy. Is this uh your bro?

SPEAKER_08 2:33

That is my younger brother, yeah. Three years younger than me. Um never broke one of his bones. Um, and uh, if you if you notice the pin on my right lapel, I I you can't really see it in the picture, but I know because I wore it for a really long time. And it said, support wildlife, throw a party. Um, and if you look at the thumbs up I'm giving, uh, you know, what what image could you associate more with me in that photo than party animal? Fonsey? 10 or 11 years ago.

SPEAKER_01 3:04

From good times Tomcat.

SPEAKER_08 3:07

My little Tomcat patch, which was an actual cat. Um, and I don't even know what shirt I'm wearing. It looks like some mountains with snow on them. I mean, as embarrassing, yeah, as embarrassing a picture as it gets, but well, we say we save the best for last.

SPEAKER_04 3:21

Enough about you. Look at this. Look at Aaron D.

SPEAKER_01 3:24

Don't that velvet vest is solid.

SPEAKER_04 3:27

That is hot. Were you wearing a backpack? What's going on there?

SPEAKER_01 3:31

No, that's my vest, baby. I was I was hot for the vests in my those, those are suspenders, though, right? No, those are I that was a vest.

SPEAKER_08 3:40

Okay, because I I pictured I pictured you making balloon animals wearing that outfit.

SPEAKER_04 3:45

And then the magic of AI when you put the three of us together and ask AI to make us all look somewhat like we did. Uh Aaron, you look, you look almost exactly like your picture. I think the other two, whatever. Take a look at it.

SPEAKER_01 3:57

Listen, I my youth springs eternal.

SPEAKER_04 4:00

Yeah, it does. Well, we have a lot to go to get into today. You guys ready to jump right in?

SPEAKER_01 4:04

Let's do it.

SPEAKER_04 4:05

All right, we should start with the Fed chair, don't you think? We have a new Fed chair as of yesterday. Kevin Warsh is uh firmly entrenched and uh jumping in at not the greatest time ever. CPI headline 3.8 year over year, highest since May of 23, hottest monthly core CPI since January of 25, energy up 3.8% month over month, gasoline 28.4% year over year. Shelter is even up, real wages, uh, you know, not doing much of anything. Airline fares 20%. So the question is what are we gonna get? We're gonna get the hawk, the guy that made a name being a hawk, Aaron, or are we gonna get the guy you know, President Trump, just drilled about being a little bit more of a dub?

SPEAKER_01 4:54

Well, you know, as somebody who feels a little bit burned by, you know, Pam Bondi, Cash Patel, Christy Gnome, and how I had high hopes for them and they did nothing. Um, I'm I'm I'm trying not to set my expectations too high, unfortunately. Uh, as much as I like what Kevin Warsh has done in the past, I'm I'm concerned that that his family, his ties to Trump are are going to disappoint us.

SPEAKER_04 5:16

Well, what does that mean though?

SPEAKER_01 5:18

Meaning I I think I think he's gonna follow Trump's plan. And I I don't I don't think he's gonna follow some of his prior policies. I don't think he's gonna be that hawkish.

SPEAKER_04 5:26

What do we think that plan looks like? Could there be an emergency cut somehow in the face of this stubborn inflation?

SPEAKER_01 5:31

I don't know that there's gonna be an emergency cut, but I definitely think that that he's not gonna raise, and I think what he he potentially should, if we're depending on how long this war in Iran goes on. Um, I think that he is gonna push to hold and even and even cut, but I don't think it'll be an emergency, but I I still think he's gonna follow the plan.

SPEAKER_04 5:50

Oh, Kobe, there's a chance. I think that the uh futures market is calling for something like a 30% chance of a hike by the end of this year somehow. What do you think of that? Is that gonna happen?

SPEAKER_08 5:59

Yeah, I mean, it all all the signs seem to be pointing towards that, except for the biggest sign, which is the guy sitting in the Oval Office who doesn't want that. And, you know, I I think the deal was struck long before Warsh set Warsh sat in front of the Senate confirmation hearing and took all the abuse he did from Elizabeth Warren uh and others. And um, you know, I I think the deal has been struck. He's got he's got to basically play ball. I think that the deal in his mind is if I play ball for another year or so and I do what the boss wants me to do, then you know we enter into the next re-election cycle, and suddenly this becomes you know a different uh math equation. Um, but I think for the next year, he's gonna be under a lot of pressure to do what the boss wants him to do, which is to make the numbers look better, especially if you cut it even into a shorter point of view. It's the next few months as we head into the midterms. Um, I don't see how he cuts. I I I but you know, I I don't see a hike coming either. I think he's gonna probably hold the line somewhere in the middle. He's gonna probably get abuse for it. Um, but I think that's that's probably where it's gonna wind up happening. But uh this the sock puppet, the sock puppet analogy was not the worst I've heard from Elizabeth Warren.

SPEAKER_04 7:06

And and and have you have you heard it before, Kobe? More on that in a moment, but let's listen to Senator Warren just beating the hell out of Worsh at his uh this was just at a hearing. This was not the confirmation hearing, this was just for him to get vetted out. This this occurred in uh mid-April. Yeah, so we're gonna go back and listen to the beginning of that because it's you gotta love the sock puppet reference.

SPEAKER_00 7:35

Having a sock puppet in charge of the Fed would also give the president access to the Fed's powerful authorities.

SPEAKER_08 7:44

I love how the dude, the dude behind her just like did not react to that at all. Oh yeah, that noise.

SPEAKER_04 7:49

Well, you know, Kobe, it's really interesting. I I don't know how this happened, but I went into my drawer at home. I have got a sock drawer, and and I went and I pulled out the first sock that I could find, and somehow this appeared. I don't I don't know. I don't know what the hell happened here, but I mean so many jokes. This looks like you, Kobe. Uh so this is uh this is the Kobe Hackalier sock puppet.

SPEAKER_08 8:15

If this was a late night show, I could say something right now that I'm not gonna say right now.

SPEAKER_01 8:19

But correct, correct. I have I am restraining myself as the newbie on the show, but I have so many.

SPEAKER_04 8:26

This is really hard. Okay, I'm gonna just uh I'm gonna blow right past that. If you look at at the mortgage industry right now, though, bonds staying at under 450, rates staying below four and a half percent, purchase application data positive for the year, nine positive weeks to eight negative. I mean, housing is not doing terrible. You know, if we if we if we step back, if we zoom back, personally, I think I'm I'm pretty pleased given the headwinds where housing is right now and and what the spring market has has delivered, Aaron.

SPEAKER_01 9:00

Um I'm wholly disappointed, to be honest with you. I think we we should have it's restrained from where it was. I mean, look, at the beginning of the Iran war, things were looking a lot better. I think we were all feeling very positive about the spring buying season. Sure, rates are are kind of staying within range, but I think they're far higher than they would have been otherwise. And I think that just consumer sentiment right now is keeping them on the sidelines. People are still having to move, life events still happen. I just moved to a new state.

SPEAKER_04 9:28

Um, but but your your life event is that you just like to party, be single, and have a great time. That's your life.

SPEAKER_01 9:34

I mean, are you is yeah, what's wrong with that?

SPEAKER_04 9:37

Yeah, I mean, you know, that's not the everyday American though, you know. Oh, great. But like events have you didn't own a Kobe sock?

SPEAKER_01 9:43

No, and now I'm really mad because I feel like we need merch, and that is merch number one.

SPEAKER_04 9:47

I was going for a hoodie, but now it's the first piece of merch that's going out. People are people are gonna line up for this, no question about it. We'll have to start selling these at NBA secondary. The three of us will be there in just a few hours, right? What do you Kobe? What do you make of the market?

SPEAKER_08 10:04

You know, I think both of you are right. You're right to be disappointed, but I think the context has to be talked about as well, which is you know, we all went into this. Lone Depot especially went into this year thinking this is gonna be a big refi year, and they moved back into wholesale. They made that bet. A lot of companies thought that that was gonna happen. Uh, I'm sure NFM and and uh Interlink, no different. And then the news changed. And then, you know, we thought, okay, well, now we're in for a disaster. We're gonna see rates in the sevens again, we're gonna see the housing market come to a complete crash and standstill. Gas prices are gonna be $8 a gallon and nobody's gonna want to move, and everybody's gonna sit tight. That hasn't been the case either. So while we haven't had the refi boom we were all hoping for, or at least, you know, a refi boom let uh what we have had is steady activity in the market. Further indication of this K-shaped economy where you know the people that are economically viable are still doing things, and the people that are suffering are are suffering even more. Um, but I think all things considered, if you think about the news that we've had and inflation rising, if you strip gas out of that, we've still had uh pricing inflation. Um, add to that the gas and add to that the fact that we're in this war now that has been going on for almost eight weeks now, that you know we thought was gonna be a two or three-week affair. And like you said, the bond market holding steady under that 450 mark. I think all things considered, we're not in a bad spot. And and we're a lot better than what we could have been given the news. If if if if I had told you two, this is what's gonna happen in the spring during the midst of the spring selling market, you would have probably thought the outcome was gonna be worse than it is now. So I think both of you are right. I think Aaron, you're right to be disappointed with the expectations coming into the year, but Greg, I think you're right to be mollified by what's actually taken place based on where the news has been.

SPEAKER_04 11:42

You just say mollified. I said mollified, yeah. What is that for? I've never even heard of that. That's that's that's a new one for me. Uh, you know, the the uh the economy is cracking, though. Like underneath that veneer, we've got some really telling stats that Aaron's gonna dive into in just a little bit. But first I want to talk about the president who was asked, this is not mortgage related, but I really feel like this guy got set up. He was asked about you know, going to on his way to China where he is right now. Uh will he be thinking about, you know, in in terms of uh ending the war in Iran, how much of his thought process will be about Americans that are hurting uh financially and you know the economy? And this this was his answer. It's been it's been heavily debated, uh, this reaction. And I've got my own opinion. I'm sure you too do as well.

SPEAKER_03 12:33

When you're associating with Iran, Mr. President, to what extent are Americans' financial situations motivating you to make a deal?

SPEAKER_06 12:40

Not even a little bit. It the only thing that matters when I'm talking about Iran, they can't have a nuclear weapon. I don't think about Americans' financial situation, I don't think about anybody. I think about one thing. We cannot let Iran have a nuclear weapon. That's all. That's the only thing that motivates.

SPEAKER_03 13:00

So uh earlier that the only thing that matters to you when it comes to Iran is so I understood that.

SPEAKER_04 13:06

But to me, he answered the question honestly. He's catching a lot of slack for it as if he doesn't care about the American consumer. Just putting that aside for a minute, he was asked a question. Like, if he believes in his heart of heart that he is trying to stop the world from ending, he's trying to stop a nuclear war that could wipe off continents, wipe out continents, then that's the right answer. What's more important? Focusing on the American economy or making sure civilization is still around. That's how I saw it. Maybe I'm being too literal, too black and white. How did you two see this?

SPEAKER_01 13:37

Well, I think the beauty of Trump is that he always says the quiet part out loud. And he in multiple occasions has had comments and statements where he really, I don't think, gets it and gets what Americans are going through from an affordability standpoint, right? I mean, he clearly outlined in Davos, Davos that he had zero desire to do anything to bring home values down, even though that is a single thing that would help affordability the most. And they were in a lot of areas inflated with 2% interest rates, and we are not in a 2% interest rate environment anymore. And that's just one example where, you know, I to me, I I just don't think that he does care that much. I don't think he understands the American what the average American is going through. And I think that that, you know, when you go into a war of choice that ends up causing all of this pain for Americans, he clearly doesn't care.

unknown 14:24

Yeah.

SPEAKER_08 14:25

I yeah, I you know, I disagree with Aaron on a couple of those points. One, you know, the beauty of Trump. I'm not sure where I find the beauty of Trump, but it it does pain me, it does pain me to have to say I completely agree with his answer. Um, you know, I think the the the presidency, whether you're qualified for it or not, is a really difficult job. And you are juggling a million balls, not three, not five, not a thousand, a million balls. And the biggest thing you have to consider when you're president of this country is the safety and continuity of this country. And so if you're asked, you know, are you going to care about, you know, would you trade low let's ask the question a different way, right? If they had asked him, Mr. President, would you trade Iran having a nuclear weapon for $3 a gallon gas heading into the midterms? How's he supposed to answer that? If the consideration is the future of civilization and a terrorist country having a nuclear weapon versus us having a little bit of pain at the pump for a couple of months, and maybe we don't take that road trip this summer, I think it's a good trade, don't you? Um, I think that's the only answer to the question is I can't think about what's going on in people's checkbooks if we have nuclear ballistic missiles pointed at us and our allies. So I completely agree with the answer. I think it's the right answer. I think um it's a it's a bit of a gotcha question because they're trying to get him to.

SPEAKER_04 15:44

That's what I think. Yeah, he got bamboozled on his way to you know, flying the 20 hours across the world. Aaron, we're just Aaron, we're disagreeing with you. You're not going to quit on us. That's fine, that's fine.

SPEAKER_01 15:52

I disagree with the premise, though. I mean, we obliterated their nuclear capabilities back in July. So I disagree with the premise, but that's probably for another debate.

SPEAKER_04 16:00

Yeah, well, I think it's all these points are different points, though. Right. I'm simply focusing on the question he was asked, and he gave the right answer. No question. Nothing else should matter. Nothing else should matter other than keeping nuclear weapons out of the hands of those crazy people.

SPEAKER_01 16:15

Which we did in July, but fair.

SPEAKER_08 16:18

Well, which which we which we claimed we did in July, which which was not the correct claim. That was a little bit of grandstanding to to kind of pump up the military and to mollify, I'll use it again, the American people. But really, what that what what we did was we put them in a bad position, and then we realized that you know we didn't finish the job and we have to, and they're not a country we can negotiate with.

SPEAKER_04 16:38

So Kobe, why do I feel like you're like uh opening up the dictionary, learning like two new words a day? Are you that guy? Yeah, I'm not gonna put it in play.

SPEAKER_01 16:46

I get an email every morning mollified, everybody.

SPEAKER_04 16:50

Mollified, don't forget. And uh, hey, we got some breaking news here. Bring it home for us, Kobe. We're gonna we're gonna pivot into the topic that is has just engulfed the mortgage industry. That's UWM. But this just happened minutes ago, Cob.

SPEAKER_08 17:04

Yeah, I mean look what look what time I sent it. The timestamp is 9 44 here, Pacific Time. We go on the air at 10 a.m. Pacific time. Literally sent this to you guys a minute later. I happen to get on the phone with James Kleiman, very appreciative of not only the reporting he does, but his willingness to get on the phone and talk me through this because I didn't have time to read it. Um, so I want to give him credit for where it's due. Uh, I don't think anybody is as hard is a harder working man in the business than James Kleiman, right?

SPEAKER_04 17:29

And no one has a better, no one has a better top hat collection either.

SPEAKER_08 17:32

Oh, absolutely. And by the way, he'll be in New York. He lives in Brooklyn. We'll see him, we'll all see him next week. So very excited about that. Um, I talked to James. So this goes back to uh when Rocket bought Mr. Cooper, Mr. Cooper holding a sizable portion of UWM uh loans on its books. And uh almost immediately after, I think it was one or two days later, at one of the UWM sales huddles up at Pontiac, Matt Ishbia told his uh his minions uh let's go get as many of these loans back and off the books as possible. And they created pricing incentives for the brokers to go and refinance these loans and get them off Mr. Cooper's books. Um at the time, uh you know, I'm sure Rocket noticed it. Rocket sat by, Rocket said, you know, uh vengeance is a dish of best served cold. And uh they waited and dropped this lawsuit. They dropped this lawsuit at a really interesting time. Uh, we all know what's happening with the UWM and two harbors, which we're gonna get into and we'll talk about that more. But also of importance is today, when this lawsuit broke, today is the UWM live event up in Pontiac, where UWM is celebrating itself and its accomplishments, and there are many. Um, but uh the timing of this could not have been worse for UWM on a number of levels, and Rocket was extremely strategic about when they dropped this hundred million dollar lawsuit in their lap. So more much more to come on this, but this is really the first shot across the bow we've seen. We've seen a lot of shots across the bow from UWM towards Rocket. This is the first time we've seen Rocket firing back in a in a in a big way.

SPEAKER_04 18:58

No, I would say they did it kind of covertly when they took over uh Mr. Cooper, which had a lot of UWM's loans. That was the first shot. That well, that was seismic. That was like uh an atomic bomb. But yeah, I mean, the timing's not great. And and and and nothing, no timing is good for UWM right now, Aaron. I mean, they're uh they're right in the face of a lot of controversy right now, and they're trying to get uh this two harbors deal done across country, stubbornly uh outbidding them until recently. I believe it was yesterday or the day before that UWM raised uh they raised their bid now to $12.50, but the board uh doesn't like it at all. In fact, um reading from an article uh uh around the the elevated price, the board's already responded within 24 hours, calling their proposal illusory. Is that is that how you pronounce that, Kobe? You're the wordsmith here today. Predatory and unactionable. That was yesterday's word of the day. Uh so the the vote is May 19th. Um, UWM's taking a lot of heat. I I created a LinkedIn LinkedIn post just a couple of days ago, which has you know upwards of 30,000 impressions at this point. Um, definitely a hot take that hey, everybody, stop piling on. Like, yes, it's okay to question MSR valuations and uh the integrity of your numbers, but to wish them dead, I don't think does anybody any good. Uh, because there are a lot of there's a lot of people out there kind of uh dancing on their grave right now, Aaron, hoping that they just go away. And I don't think that's good for the mortgage business.

SPEAKER_01 20:38

No, I completely agree. I mean, I think that it's good to have you know some level of competition. Now, when you talk about somebody having 40 plus percent of a channel, then you can you can say, hey, is that is that really truly good for competition or not? Um, but I just think it's bad in general because we see so many times, and I think you pointed this out in your post, that there's been a lot of times people have been counted up for dead and they came back and they're doing just fine. I mean, these are people that own and run businesses and they've put their entire family and life into it. They're not gonna go down without a fight. I do think it's really interesting that the ISS group came and basically admonished the the two harbors board for not giving the UWM offer better thought or more thought. Um, they basically said that they are doing the shareholders dirty by by just dismissing the UWM claim as well. So that's another layer that's come in the last couple of days I've found interesting.

SPEAKER_04 21:34

Kobe, I don't I don't understand this. I'm putting you on the spot, but if they've got 2.2 uh trillion in servicing, yet it's the purchase price is you know uh a fraction of that. Is it all just bad paper? Like how how how is that a deal that you can buy that amount of servicing uh for what amounts to a fraction of that amount?

SPEAKER_08 21:56

Yeah, I think I think the question is how two harbors is run. And I think it's a question of also how much debt they have. They are severely overleveraged.

SPEAKER_04 22:04

Yeah, that second point's the best one. Yeah, it's the debt.

SPEAKER_08 22:07

You know, and I and I think that that's why this comes at a at a discount. Um, you know, the the um going back to, you know, is this good for the industry, you know, or or is it bad or or the optics of it? I mean, this is this is at the end of the day, this is America's biggest lender. The optics forget, and I don't want to forget about it, but the 6,000 people that work there, or whatever the number is right now, but it's thousands. I mean, that's a company town in Pontiac right now. I I I went and visited UWM in December, and at the car rental, when I told them I was going to Pontiac, they said, Are you going to visit UWM? Like, there's no other reason to go to Pontiac, Michigan anymore. That's Pontiac, Michigan is UWM. And those are 6,000 people that come every day and eat their lunch there, and there's a workout room and the whole thing. Those are lives, and those are people that are that are our brothers and sisters in this business, and we should care about them.

SPEAKER_04 22:54

This is let's talk about Chris Whalen for a minute. He's he's a very, very uh highly respected uh expert in the financial services space. He's a name that everybody knows. He penned an article a few days ago basically saying that they're very that they're running the countrywide playbook where they have inflated MSR values, they bought the market, they've been irresponsible. Um, Kobe, I want you to tell us what we're looking at right now. And you pulled out a couple of excerpts here from that article. And and what do you make of uh of uh what Chris wrote?

SPEAKER_08 23:27

Yeah, I mean, most of what Chris wrote, I would say, you know, all of the stuff that is that is rooted in fact was you know, seemed to be accurate, is is is is is fact-checked appropriately. He makes salient points. In fact, the board of two harbors referenced his article in the rejection of the latest UWM offer. Where I where it falls short is the is the countrywide comparison, which we'll get to in a second, but he's basically making the case that their servicing book uh went down in terms of volume, but went up in terms of valuation by double digits, whereas other companies are not coming close to marking up their MSRs. And so if you take what they're actually valuing their MSRs and their conforming book at about 5.5 and recognizing that the market is nowhere near that, if they were to have to sell off their MSRs, that would severely impact their cash on hand and their valuation, and it would put them in even worse position than they're in now. Um, and so the valuation was called into question. The methodology for you know the the offer they made for two harbors, if if the shareholders were to take that in stock and not cash, it would come at an even bigger discount than the 1250, it'd come down to something like 750. And then the the biggest point he makes, which I think is why we've been chasing this wrong headline, is he doesn't think UWM is going after two harbors for the servicing. He thinks they're going after two harbors because they want to borrow against the servicing. Uh, and and that further enforces the argument that UWM has some severe cash issues that they're trying to make up for. Where he falls short is the comparison to countrywide. Uh countrywide, a whole different story. Countrywide was making loans that that people ultimately were never going to be able to pay back on the premise that because the home values were rising and would forever rise, it would be okay. And even if we had to foreclose on them. UWM's book is all Fannie, Freddy, and Ginny. It's it's it's clean, it's good loans. Um, obviously they've got a they've got a market share play where they're trying at certain points to to drop their rates low enough to recover, especially if you think about what they were doing when they were trying to recover the Mr. Cooper loans from from that book. Um so UWM has some inherent business model issues in terms of how they're approaching market share and trying to get market share, the all-in mandate, the the the pricing incentives, the the buy downs that's that's still active right now till the end of June. All of those things mean that the more loans they do, the more cash they're going to bleed. So they've got some inherent structural issues that they need to correct. But to make the comparison that they're countrywide, um, you know, is is is I think a bridge too far for most people. And certainly Aaron, what's your take?

SPEAKER_01 25:54

Yeah, actually, when I I agree with that. When I read this, I I just kept going back to board governance. And this is why, and the way the company is run, this is why you need to have a good independent board. And UWM operates under an exemption where they don't have to have an independent board. And and to me, that's just where I keep going with is if you if you do not have good governance, especially in a company this size, you're gonna run into these problems. And it, I think that that if it they had a more independent board, we'd be in a much different situation with them.

SPEAKER_04 26:25

So, Kobe, you say you say we're focusing on the wrong headline. What what's the right headline?

SPEAKER_08 26:30

Uh the the right headline is is America's biggest lender operating on a faulty business model that is gonna cause them to go out of business the bigger they get, the bigger they get, gonna actually bring about their demise the faster that that they grow.

SPEAKER_04 26:42

Yeah, is there another story in here about what kind of public face you put on things and how you rub people the wrong way and how you should always leave every bridge uh erected? Because I mean he's been he's been scorched earth. I think there are a lot of people that are remembering that, right? Memories are short.

SPEAKER_08 27:00

Yeah, I you know, I certainly think that there's validity to that argument. Um, you know, he's he's he's definitely, you know, they've they've taken an approach to the market that uh we'll call it unique. Um, but yeah, they've they've you know they are America's biggest lender, but at the same time, they also operate as a very isolated entity. They are completely siloed, you know, aside from the broker channel and and those brokers that are devoted to them, which is over 40% of the broker channel, by the way. Another reason why we should care about them going out of business, because they they do have 40% of the broker market, and that's an important channel in this country. Um, but I think the way they've gone about doing business, the the strong arm approach, um, you know, I think that that's coming to roost right now. And it's coming to roost on social media. I think the reason they're getting so much of the backlash they're getting is because, you know, people are people are that there's the level of Schadenfreude. There's another new word for you.

SPEAKER_01 27:50

Oh, I love that word.

SPEAKER_08 27:51

The level of Schadenfreude that's out there on social media is all of because of the attitude they've taken towards the industry over the last 20 years, and people are kind of sick of it.

SPEAKER_04 27:58

Yeah. Well, but but let's look at a scenario where something does happen materially to them. You know, I I hate to talk like this, but I think it's we we should have the conversation. Like you mentioned that they're 40% of the broker community community. What happened? What would happen if that frayed if all of a sudden people had to scramble in a day? Would that be good for IMBs? Would that put them back in the driver's seat in terms of momentum? Would they all go to Rocket and uh Penny Mac and other lenders that support the broker channel, a combination of the two? Like when you think about that question, Aaron, what do you how do you answer it? What do you what's your gut tell you?

SPEAKER_01 28:36

Yeah, I mean, you know, they're not just gonna shut their doors. You know, you're looking at a fire sale, or is it gonna be a Merrill Lynch to Bank of America or, you know, Bear Stearns type situation where they are so big where they would somebody would have to step in. Ginny Mae, right? Ginny Mae is gonna have to deal with their servicing portfolio. And so do you have private equity come in and they're really just gonna want servicing? So, really, to me, it's it's what happens to the originations. And I think that a rocket is absolutely gonna be happy to scoop in and take over Lone Depot, the other players in the market. They're gonna come in and try to steal that origination share. And I think you're gonna get some sort of private equity, some something like that, or Carrington even come in and you know take over that servicing book because that's gonna be appealing. Um, it's just that origination side is not gonna be worth much to any new one coming in. So the the bigger players that are left are gonna step in to take it.

SPEAKER_04 29:25

Yeah, when you said loan depot, what was the context there?

SPEAKER_01 29:28

Oh, they'll they'll they'll try to come in and get you know take the origination share. Yeah.

SPEAKER_04 29:32

Okay, and I wasn't clear whether they were gonna get taken over in that scenario or they were gonna participate. Oh, no, sorry. No, they just what because a lot of people probably were Kobe. Anything on this before we move on to uh Amir's claim, Amir Saeed's claim that five percent of originators will be doing 95% of the production in three years?

SPEAKER_08 29:50

Yeah, nothing, nothing, you know. I mean, look, you know, UWM is not again, not like countrywide, because I don't think there's a big buyer out there like Bank of America was for countrywide. So I don't think that's gonna happen. Um, as far as where their originations go, if they were to fold in that in that unlikely scenario, the brokers are a very proud channel. They're very happy with their accomplishments over the last 10, 15 years, how far they've come, the technology they've implemented, the offerings they have. I think they're gonna, for the most part, stay broker. I think Rocket would by far be the biggest beneficiary of this with Lone Depot and some others as well. Um, but you know, to me, I you know, my my official take is I hope it doesn't happen. I hope they figured out how to write the ship.

SPEAKER_04 30:25

Aaron, you almost just went completely off the screen. What is going on over there? Tell me.

SPEAKER_01 30:29

My my new house doesn't have a proper rug yet. So I'm and it it's I think it's are you slide?

SPEAKER_04 30:34

Are you sliding or something?

SPEAKER_08 30:35

It's uh yes, she got it, she got a discount, it's built on an old Indian bureau mount.

SPEAKER_01 30:41

See, business hasn't been great this year. I'm gonna having to go with discount chairs.

SPEAKER_04 30:45

Yeah, you see, if she had a sock puppet, she could put it under the wheel, it wouldn't move. You see that? I need to be sock puppet. So I I went to uh GrowthCon, which is Amir Said's go-coaching kind of marquee event in Chicago last week. And Amir did a great job. It was a packed house, very impressive lineup of speakers. Um, it no mortgage people really on stage. It was all motivational speakers, people that talked about their stories and how to overcome adversity. It was really kind of a mindset type of gathering, but he did spend a few minutes talking about the originator of the future, and this was very interesting. Let's uh let me share this and then we can comment on Amir's claim.

SPEAKER_02 31:34

I'm gonna share with you.

SPEAKER_04 31:35

That's uh that that's uh pretty sizable claim, Aaron. I know you've got some opinions on this, so why don't you go ahead and be the first up here?

SPEAKER_01 31:43

Yeah, so to quote my favorite, one of my favorite shows, it's always sunny, there's an implication there, right? And that implication is that you're gonna have it's it's gonna be automated, it's gonna be AI, you're gonna lose that personal touch. And so I have a couple of pieces of data here. This is from a recent Stratmore survey where if you look at the NPS score when an LO calls with a status update, so giving that personal touch on a loan, that NPS score is 88 on average, but only 15% of loans actually is this is actually occurring, right? So it's a very small percentage right now where we're we're giving that personal touch. But when borrowers get it, they give a really great NPS score. And even below that, if you look at first-time buyers who are who are choosing based on a personal relationship, it's 87% of those. And so I think that that 95-5 stat is really ignoring the fact that people really, really want still to have some sort of personal touch, personal connection. Um, the next slide that I have, I think shows that where, you know, if you're we're looking at uh, you know, how many people are wanting to have that human off-ramp or having a human uh human in the loop, so to speak, on their mortgages. And from 2025 to 2026, this has actually gone up by 9%. So more people are still looking to have that in that human in the loop. You know, they understand AI is going to be part of it. A large think 80% or something expect AI to be somewhat a part of their process, but more and more people, they still want to have that human. And so how you can get to that 95-5 number and still give consumers what they're saying they want, I don't I don't see it as being possible.

unknown 33:24

Go.

SPEAKER_08 33:25

Yeah, you know, I you know, I love Amir. Uh, you know, he and I started our loan origination careers around the same time. We're about the same age in Chicago. We go back a very long time. I remember lunches with him around the Great Recession when we would, you know, just kind of get together and commiserate. So uh much love for Amir. I couldn't disagree more with this premise uh for a lot of the reasons that Aaron said, um, you know, and also if you're a coach, you know, what a, you know, why not say something like that to an audience of believers already? And and if you tell people that, you know, there's going to be the ones who step up and and try to gain more market share are in position now to do it, well, then your audience self-selects. And as a coach, that's a it's a good business model. Um, where I do, where I do think that he has an underlying good point, I don't agree with the 95-5 outcome, but I do think his reasoning is sound in that if you're a loan officer that is doing the right things, that has a good team under you, that has a good team working with you on the processing and closing side, if you have good marketing, if you're if you're retaining your customers, you're doing a good job providing value post-close, then AI is going to help you scale that business and you're going to be able to do a lot more business than you're doing. The difference between the internet that came about 35 years ago and AI is that the internet came about and it allowed large enterprises to scale. Think about where Amazon would be if there wasn't the internet. What AI does is allows the individual to scale in a way that's never been done before. So the premise that he's talking about, I think is completely right. I would love to see him dive into more of that and talk to him more about that. I don't believe in the 95.5 because at the end of the day, you can scale up. But if you do scale up on the loan side, you're going to need more people under you. That's going to be more loan officers. And then also, what happens to that other 95%? Who's doing it? Is that all unprofitable loans that you know somebody you know still dragging along doing? Um, I just don't see that happening. But the underlying premise is super compelling and I think should be talked out a lot more.

SPEAKER_04 35:11

Yeah, I agree with you. I think the headline could have been that there'll be half as many loan officers in two to three years as there are now. I could see that. And you know, the ones doing the line share of the business business being a smaller segment of that. I mean, I I can see that happening. I think less people are going to be doing more business. I I can't imagine a scenario where you've got five percent doing 95% of the business. Or you know, that just that's a big number, and I agree that he's got a group of disciples in there. Crush the industry, by the way.

SPEAKER_08 35:46

Because I mean, think about those higher-producing originators are not necessarily the most profitable for a mortgage company. So now, if you've got all the production in their hands and the other ones are doing much less production, that would that would crush most people's business models right now.

SPEAKER_04 35:58

But but you can see a rush to the exit potentially if AI really kicks in the way that people envision that it will. Like the ones that are are that come up the first in searches, the one that are using Google reviews, the ones that are like prominently the experts in their town, they're gonna just start to collect more and more business, and it's gonna be more and more difficult as uh margin compression continues and the cost to produce as a result of AI goes down. There's not gonna be that 130 to 150 basis points to go around. That's a scary prospect. It's not gonna be 595, but could it be 90, 10, 1090? I think it could be.

SPEAKER_08 36:32

Potentially. I think what it really is is a wake-up call to say, hey, the business is changing, the optics are changing, the way that people are searching for loan officers is changing, the way that they want to interact with loan officers is changing. Either be on the forefront of it or get left behind.

SPEAKER_04 36:44

Yeah, and he made all those points.

SPEAKER_01 36:46

Well, and I think I think the barrier to entry is easier too, honestly, because now instead of having to work hard for 10 or more years to become an excellent technician, you've got AI and you're an excellent technician in a year. And and that's gonna make the people who are willing to come in maybe do it for less, right? A small much smaller basis point commission that can be just just as good in in a much shorter period of time. I think that's gonna add an interesting dynamic.

SPEAKER_08 37:09

And by the way, well, the CFPB just changed their policies on NMLS licensing, so the barrier of entry just actually got even lower.

SPEAKER_04 37:16

Any deets on that? Or are you just headlining? Are you just headlining us?

SPEAKER_08 37:20

I'm just headlining you. Um, yeah, I mean, they they they they they took away a bunch of things that you know that didn't make sense and they made it a lot easier. So I mean, there's more to come on it, but um, it's just all part of stripping away the CFPB's power that's going on.

SPEAKER_04 37:31

But that was are you are you mollifying it in real time? Is that what you're doing?

SPEAKER_08 37:35

I I'm I'm mollifying both of you in real time.

SPEAKER_04 37:37

Thank you very much. Uh well, we got to end on a kind of a downer here, Aaron. You're bringing your first no surrender show and you're bringing all this negative data to the fore. What are we looking at here? So much negative data at once. That's that's actually used to four times so much negative data we couldn't even fit it on one screen. We had to like slide these four things into one picture.

SPEAKER_01 37:58

Lesson learned. I'll try to just use one at a time next time. Sorry, guys, rookie mistake.

SPEAKER_08 38:03

Change your tag to Aaron Downer.

SPEAKER_01 38:07

I put the D in Downer. Uh yeah, you know, I just think it's worth talking because I think there's a really interesting dynamic at play talking about where consumers are cracking right now. The FHA delinquencies for April just came out. And while the serious delinquencies were down just a little bit, it was much less than what would have been expected due to normal seasonality. And a lot of that, I'm sure, you know, you guys are aware with changes to the FHA loss mint policy, only getting one bite at the apple every 24 months, where since COVID, they've been able to basically just continue going back and forth and back, right? And they haven't really had to bear the fruits of not being able to pay their mortgage. Well, now we are seeing that these TPP rates, the failure rates of the temporary payment plans is upwards of 50%. So these people that are trying to get some sort of loss mit 50% failure rate, which means at a certain point, these people are going to have to look to gracefully exit their home because they just can't afford it and there's no more loss mit options available to them. And, you know, in an ideal situation, they can just sell their home, walk away maybe with some cash in hand with their credit salvaged and not having that foreclosure. And on the other side, the lender, specifically on the Jenny Mae side, um, they're not having to have significant cash advances. They're not dealing with, you know, three-year, four-year plus four uh foreclosure cycle, right? But what we're also seeing in the market right now is we're seeing where more and more homes in areas are have underwater homes. So the newer vintage of loans that have been originated really since 2022, these areas have not seen price appreciation. So if you're doing a an FHA loan at 96.5%, potentially with down payment assistance, you're already pretty underwater. Um, I'm thinking builders who do forward commitments and are keeping prices high by buying down those rates permanently. Same thing. We're seeing that in Dallas and a lot of other markets as well. And so you have a situation where these borrowers can afford their homes, they need an exit, but because values are declining, they're underwater, they're not going to be able to do that. They're not going to be able to just sell their home. So foreclosure, short sale is going to be their only option, which is going to continue to bring values down. And while that's from an affordability standpoint, that's helpful. These are people losing their homes that can't afford their homes. And you're talking about significant impact on Ginny May servicing and Ginny Mae servicers who are having to front all of these advances, escrow's, all of that. And so, really, what all this data is just saying is that we really need to be paying attention to these markets, the kind of the some of the top 10 worst markets are up here as well, where you're seeing underwater homes. A lot of these are going to be in that Ginny Mae space. You see, 4% of Ginnie May loans have negative equity share. Those ones are also ones that are going through delinquency. And so, this, if you're a Gini Mae issuer, um, you know, or you're even originating loans in these areas, you're going to see an impact to your MSR values. And so I think this is something we need to be looking at, especially with student loans coming, the Save Act forbearance plans are over, right? So there's just a lot going on with the consumer in that Ginny Mae space.

SPEAKER_04 41:12

Yeah, not to mention credit card delinquency rates in the United States have hit a 16-year high.

SPEAKER_01 41:17

Yep.

SPEAKER_04 41:17

With 13.1% of credit card holders 90 days or more past due as of the first quarter.

unknown 41:24

Yeah.

SPEAKER_01 41:25

Yep.

SPEAKER_04 41:26

That's uh that doesn't paint a pretty picture. I mean, that I remember when it crossed over when it was nearing that threshold of 1 trillion in credit card debt. We've zoomed past that. It's now 1.25 trillion. This, I mean, this is likely to be 2 trillion before we know it. All the things that we're talking about here on the tail end of this uh show, you would think are are going to lead to some kind of event, some some kind of a uh pretty remarkable slowdown. Maybe Stan Middleman will be right. Um, the the CEO of Freedom Mortgage who predicts, you know, and Chris Whalen did too, both of them, by the way. We talked about Chris earlier. I've interviewed both those guys, and they both have said that right around late 2027-2028, there's gonna be some kind of seismic collapse of the economy, and that could very well be what we're setting up for. As as you know, how it impacts mortgage, you would think that it would bring rates down, most likely. I mean, I I guess there's a stagflation concern. There's there's all kinds of different concerns that would uh play against that. But if you have a collapse or the consumers hurting, foreclosures increase, um, then there will be, I would think, uh rush out of uh equities and into bonds. And that would be a good thing from I mean, historically, Kobe, that's been good for mortgage.

SPEAKER_08 42:41

Yep. Yeah, you know, we're we're what we're seeing is the K-shaped economy now showing up in the housing data.

SPEAKER_05 42:46

Yes.

SPEAKER_08 42:46

The aggregate defaults, they're they're actually going down if you think about, you know, if you add the conventional loans in there and the FHA stress is up, what it's 40%. Is that the is that the number? 2.6 million new student loans that are defaulted. Um, you know, at a certain point, yes, you have a K-shaped economy where one line's going this way, one line's going that way. But at a certain point, you know, you can't you can't just call it a K-shaped because you think, well, those lines are never going to intersect. At some point, the rubber meets the road and and the and the and the underlying structure of the economy will collapse at a certain point if we allow that to keep happening. Um, I don't think I know what the answer is today, um, but I think that what the first step is recognizing that we have this issue. And I think we're we went from a year ago seeing that FHA delinquencies were ticking up, and then about six months ago, we were talking about, well, the numbers are kind of skewed because of the TPP and because of some data coming in, and we shouldn't really pay attention to. And now we're like, whoa, now we've got student loans, we've got the credit card consumer debt going up and more of it defaulting. We've got the FHA loan stress that's coming up. Meanwhile, we've been talking about FHA MIP premium reform, saying that that the HUD has enough money, um, the 188 billion, the 11 or 12%, where it should be two. And we're like, well, they have too much money, we should reform FHA MIP reform. It's like, well, maybe not.

unknown 44:00

Right.

SPEAKER_08 44:00

Maybe that maybe that number's good. And maybe when Bob Rokesman talks about tightening the credit box for FHA, maybe there's something there. Uh, and if we look at where the top 10 housing markets are, they're all in areas that industry abandoned in the 80s and 90s, and there's a whole bunch of inventory, and people are moving there because the housing is cheap, and a lot of them are getting these FHA loans and they're not seeing a lot of property appreciation. Those are all dangerous loans that are being made right now. And those are the top 10 housing markets.

SPEAKER_01 44:26

Yeah, it's it's layered risk, right? I mean, what you're looking at in a lot of these FHA loans, and I think what Bob talks about is you have, you know, two, three, four layers of risk on there, high DTI, no assets, low credit scores, all of that. You know, I mean, yeah, I mean, that that that is something that should be looked at, quite frankly.

SPEAKER_04 44:43

Look at that. Kobe, you're on fire today. I don't know how you I don't know how you slid that. Uh, you know, Bob talking about maybe laying taking off some of the little risk off. And the context that he spoke about it, so that people know was in relation to the fact of FHA um the fund being at roughly six times the spat uh statutory requirement, and and uh them wanting them to lower the MIP. And of course, you you know, FHFA and and Ginny, they're looking at the at these these trends that we're talking about right now, going, hmm, we may want to keep that pot of money together for what's to come. And maybe you're right, maybe maybe you're flipping me right now that uh it's not such a bad idea to trade on the low end uh to get a little bit more on the high end. Of course, the detractors will say, well, we already have first-time homebuyers on the outside looking in. How is making it harder for them to get in? Well, we know there's risk associated with FHA loans. That's the nature of the product. So why would we make it even harder for the people on the low end? How would you answer that?

SPEAKER_01 45:46

OL or No, I mean, I I I think that that you need to look at not just year one and at the moment of closing that loan. I think you need to look at years two through 10. I mean, we have market areas that have double-digit every year increase in homeowners' insurance premiums. Escrow adjustments are our leading cause of delinquency right now in that book. And so I think we have to take a step back and say, you know, our you know, our it is a much higher, it is a higher book of business. Um, to Kobe's point, FA or FHFA G S E delinquencies are almost nothing. But but we're also putting people in in bad situations. Are we putting people in a situation that they truly cannot afford that they are just gonna be they're hurting themselves in the long run, um, be just because it looks good, we're patting ourselves on the back in year one?

SPEAKER_08 46:32

I think we have a dual mandate, just like we were we talked about the president earlier having all these different things to consider. We have a dual mandate in this business as stewards of this industry. And that mandate is to promote housing and to make sure that people have access to getting loans in a frictionless way and a good customer experience, right? All of that. We also have responsibility to protect the housing market. And if protecting the housing market in the short term means tightening the credit box in a certain part of the market that's not performing well because we see that adjustments need to be made, I think that's a bitter pill to swallow, but it's a necessary pill to swallow. And we have to communicate why we're doing that and why it's necessary. And we have to make sure that this, these numbers, like I said, rubber meeting the road, that 40% FHA delinquency, genny delinquency doesn't come up and bite us in the butt on the conventional side and destroy the housing market. So I think it's it's it's tough to have to communicate, and we don't want to see less people in the housing market. We want to see more people in the housing market, but sometimes you've got to do the tough thing to grow the bigger pie.

SPEAKER_04 47:30

You know, we haven't talked about non-QM loans. And you know what is going to be one of the first segments of loans to start to look pretty bad when values go down and rents go down. DSCR is all those DSCR loans.

SPEAKER_01 47:43

And rents are going down. Look in Austin, Texas, the delta between the average mortgage payment and the average rent is like $1,400.

SPEAKER_04 47:50

Yeah, and those rent payments will reset, and there are loans that are tethered to a higher number. What's gonna happen when that occurs? Correct. Yeah, well, I think we're wrapping it up. First no surrender, uh, the first relaunch of the new surrender. Aaron D, what do you think? You're gonna say I love it.

SPEAKER_01 48:05

Thanks for going easy on me.

SPEAKER_08 48:07

We did about a slide out of her house, but she's happy.

SPEAKER_04 48:10

Aaron, I'm considering sending this to you so you can put this under your chair.

SPEAKER_01 48:14

Please wash it first.

SPEAKER_04 48:15

I will, yes, I will do that. If I can get my hand out of it, it's it's kind of stuck in here. Um, all right, everyone. Well, that'll do it. We'll be back next Thursday and every Thursday at 1 p.m. Eastern for No Surrender. Thanks to Nyoung in the background, pushing all the right buttons. We love her. Thank you, Nyung. Enjoy the rest of your Thursday, and we'll see you again next week. So long.

SPEAKER_07 48:38

No surrender on the show. We go toe to toe. What's fair, what fails, who gets the whole?

SPEAKER_05 48:43

Hot news, hot takes, raises takes