Episode 9: Student Loans, AI & Fannie's Credit Box

🚨This week on No Surrender:

From student loan repayments and AI to credit policy and the latest jobs report, we're unpacking the stories that could have lasting effects on borrowers, lenders, and the housing market.

🔥 Recruiting Ethics in our industry: Where's the line?
🔥 Foreclosures at 6 year high? What's the data telling us?
🔥 SAVE student loan repayments ending: What happens next?
🔥 AI: Consumer sentiment says one thing. Venture capital says another.
🔥 Fannie further tightens the credit box: What are the downstream impacts?
🔥 Wall Street's BLS protest: What's behind the backlash?

Transcript

SPEAKER_03 0:18

Every stay is hard. Damn it all that business they have. Make the small ones fly. Drop the things around every detail counts. They're blame, then we write it out. We're back.

unknown 0:39

Let's go.

SPEAKER_04 0:41

Different circumstances, though. I've got beachware behind me. I've got sunscreen here. A microphone that doesn't work. An iPhone case that doesn't fit my phone. And 59 pages of notes.

SPEAKER_00 0:56

You're missing pen.

SPEAKER_04 0:58

I'm at the beach.

SPEAKER_00 1:01

How is it?

SPEAKER_04 1:02

It's great. I'm in Ocean City, Maryland.

SPEAKER_00 1:05

Jealous. How's the crabs?

SPEAKER_04 1:07

The crabs are great. They're great. They're not as uh good as main lobster, which I know you love. Kobe, what's happening, brother? You're the eighth wonder.

SPEAKER_05 1:15

The eighth wonder today. I'm lean leaning in to you calling me the eighth wonder of the world when you when you uh were surprised at a take I had around student loans. So leaning into that moniker, we're gonna see how far we can take it. Maybe it'll be my new my new branding.

SPEAKER_04 1:29

Yeah, it's good to see it's good to see both you. Kobe, you've got a you have a different background now.

SPEAKER_05 1:33

So yep, in the Bay Area today. Uh be here for the next couple of weeks and then uh then the big move, the big move from the mountains uh to Reno.

SPEAKER_04 1:43

That's exciting, buddy. Uh look forward to my invitation. We've been talking about uh uh a trip, by the way, Aaron.

SPEAKER_00 1:49

Uh we're gonna go to the bunny ranch, right?

SPEAKER_04 1:51

No, like the three of us are going on a like a you know, like a trip together. Oh, a no surrender. No surrender a no surrender bro weekend. Are you down?

SPEAKER_00 2:00

Let's go.

SPEAKER_04 2:01

He's like, who should we invite? I'm like, really? Obviously, Aaron. Duh. All right, so we have a lot to tackle uh this week, like every other week. Recruiting ethics in our industry. Where do you draw the line? Foreclosures at a six-year high. What's the data telling us? Those are two quick things. I told you I have a lot of notes here, so I'm not even uh be able to get to all of them. Uh save student loan repayment is ending. Um, Kobe doesn't feel good about this, wants to make all kinds of concessions, I think, for these poor people that agreed to this debt. AI consumer sentiment says one thing, uh, venture capital says another. AI costs, um, we'll get into that. Uh Fanny further tightens the credit box. At the same time, uh FICO 10T is out of the market. Um, a little bit of a contradiction there, perhaps. And the BLS is uh very much up for debate. And then, of course, we have the war. Looks like it might be back on. I guess real quickly we can we can move that to the top and just what the heck is going on here, Kobe? You may actually be right. You didn't believe it in the first place, and now they're trading missiles back and forth. What is going on here, Kobe? What's your best guess?

SPEAKER_05 3:13

Uh my best guess is uh, you know, Trump is is trying to continue to push the agenda that he has, and he's not comfortable with uh ending it on kind of uh on meek terms. Uh the Iranians are are a ridiculously crazy regime and have been for years. And so, you know, they're they're having a hard time coming to terms with the concessions that they have to make. Um Israel in the mix and and the conflicts that they have going on with uh with Lebanon and Hezbollah, uh that's adding to it. Um, you know, and I and I think uh Trump saw the price of oil go down and realized uh maybe I can push this further without creating any more economic distress, so why not? So, you know, I I think we'll get to another ceasefire and we'll be back here next Thursday talking about how the war is back on again. That there just doesn't seem to be any end to this cycle.

SPEAKER_00 4:04

Oh, Greg.

SPEAKER_04 4:05

I'm looking at the bond right now, so that's it.

SPEAKER_00 4:07

Yeah, we're 10-year.

SPEAKER_04 4:08

Yeah, 453, the 10-year. You know, look like we were down uh a few days ago into the 440-ish range. Sure. So I mean that's not good for for interest rates. We do seem to have some momentum. Things aren't gangbusters, but we don't need this. That's for sure. And the Republicans don't need this either, do they?

SPEAKER_00 4:31

Well, it's just bad news for everyone all around, right? I mean, this is a war we shouldn't have been in in the first place, and and we just have now we're we're kind of stuck in the mire, and hopefully we can figure a way out soon.

SPEAKER_04 4:41

No, we're poking the bear. Speaking of poking the bear, hey, this is a great segue to our first topic. So um I got a little bit unhinged this week, I will confess. So I got a call from a branch manager, one of his loan officers last Thursday received this DM. Hi, I heard today that NFM, which is my company, let go a large percentage of its team. If you decide to also make a move, please let me know. I support more than 25 different IMBs looking for branches. Most are paying upwards of 100 basis points on 12 months uh prior production. Uh let me know. And so uh I ended up writing a post about this, and I called James Zeldon out, and um it led to a lot of uh emotions back and forth, depending on what side you're on and what you believe in. But you know, I was accused of uh using my platform of 40,000 followers uh for bad, and to me, I'm using it for good. Um, it's never easy when you stick your neck out, uh, but to me, um, you do it knowing and feeling like you're rooted in the right cause. And the right cause for me is this issue with recruiting that has been pervasive for years and years and years of sloppiness, of uh the wrong approach, of having wrong information, of focusing on what's wrong with your company now rather than what you can offer them at your company. And so this really landed in a certain way with me that I was just like, you know what? And so to the people that are saying, well, why not just pick up the phone and call? Which um that was the response in in a post that was made just moments ago uh from James Kleiman, our good friend here, and a FOTS. He's a FOTS, he's a friend of the Show. Yeah, um, the mortgage scoop, you know, nothing is private anymore. And so this just landed. Uh the mortgage scoop is a great newsletter. This just landed moments ago, where uh James talks about how I made this post. And apparently his partner, um James Eldon's partner, took exception with this and had some pretty pointed things to say uh about me, you know, including saying that I should have picked up the quote unquote fucking phone. Um, you know, basically that um, you know, I didn't handle it the right way. I feel like I handled it the right way. Um, this was a way that I chose to use it. I'm I'm amazed at how many people want to tell me what my brand is or what it should be or how I'm on brand, off brand. You know, your brand is unique to you. It's whatever you whatever you believe in. That's your brand. So um I'll stop there and you guys can chime in. Aaron, you can you can take first crack at it.

SPEAKER_00 7:34

So, you know, I have a full-time day job, so I I am not often read in in all of your your LinkedIn chat uh spats. Um so I got read in on this one a little bit late, but here's the thing one, you don't owe him anything, he's trying to poach your team. Why do you owe him a phone call? That is absolutely ridiculous. Two, you're sending a DM to something with with information that's not public knowledge, clearly to try to poach, right? So so this whole um, I believe Kleiman's article at the very end said it was private outreach with no ill intentions. You're trying to steal his originators. What do you mean you have no ill intentions? But this the fact that it's become a thing and now it's an article and all of this, and we're tattletaling, it kind of just feels like baby bitch playground shit.

SPEAKER_04 8:22

Okay. And Larry Silver in the comments uh asked a great question. Why didn't that recruiter pick up the phone and call me before he besmirched uh us to our employees?

SPEAKER_00 8:31

Correct, exactly. That's right. So here's the thing the my my friend and colleague Gary Royal told me one thing about how he recruits that it's based on trust. And you have to build trust. And without a foundation of trust, you're never going to be able to successfully recruit somebody. And so taking unverified rumor and gossip and trying to recruit against that is exactly the opposite. You're not building trust, you're trying to go off of lies, mistruths, half-truths, unverified information to recruit. That's not the way you do it. You need to build trust and build relationships.

SPEAKER_05 9:04

Cob. Yeah, I mean, I want to find out more about why Aaron doesn't have time to jump into the fray on LinkedIn during her day. Like maybe she needs some help. What do we how can we help you? Um look, you know, what's what's getting lost in this conversation for me, and and you can have an opinion on it. I I agree completely with Aaron. I agree with you, Greg. I I I did show up in the comments there to support you on this because um, you know, I I this guy deserved it. Bottom line, you know, if you're if you're if you're acting on information that's either lazy or malicious, you deserve to be called out. And if you're comfortable, if you're comfortable talking about it in the dark, you should be comfortable talking about it in the light. That should be the barometer, that should be the test. What's not being talked about, and I haven't seen it in any of the comments, although I haven't been back in there since I dropped mine, is what about the loan officer? Why is it okay to try to recruit loan officers with information that's either false or lazy? And how many instances do we see of loan officers being lured to companies on false information where false promises are made, there's no recourse, there's no complaint process through the MBA or whatever other governing body we want to lend power to for this. And the loan officer is the one that often gets recruited. And then if they get recruited with a big bonus package that has a clawback, they're the ones that suffer in the end after the promises were were unfulfilled. There's no protection for that loan officer in our industry. We don't have any agreed upon recourse. And so the only possible recourse and the only possible reply here was what you did, which is to say, get off of my turf and lay off of my loan officers. And so I think I think I think we need more structural uh arguments, more structural um things in place to protect loan officers from these kind of practices. And and again, whether they're malicious or lazy, to me doesn't matter. Um, but that should be the real uh direction of this conversation is how do we protect LOs and how do we make this a fair playing ground for everybody?

SPEAKER_04 10:56

Yeah, I want to read something that's in James Kleiman's mortgage scoop article that he just released. So um this gentleman, James, his partner, um, is a name that a lot of people know in this industry from the HousingWire days, Richard Bittner. He was uh the CRO at HousingWire and a co-founder. He was part of the group that sold HousingWire to Clayton. Um and so uh this is what he says. James wouldn't have sent this message if the info had come from outside of the organization. Somebody may have lied. That's possible. I don't know. Maybe someone had a vendetta, but it came from inside the house, and that's the reason we did this. It was a private fucking message, is what he says. Private fucking message. There's nothing private, okay? There's nothing private out there. So that this is the reason I did this. Because if you have the balls to go out there and make statements, then you need to be able to back them up. And nothing is private. Everybody knows things get shared, especially when you have loyal employees. And another story I heard from this is that they heard from an underwriter we let some people go. So, what's the correlation between hearing an underwriter was let go and reaching out to a loan officer to say, we heard you lost a large percentage of your company team. The bottom line is they didn't know shit. They were extremely lazy. This was a cut and paste job. My understanding is they sent the same message to 11 or 12 people. It's irresponsible. And if I lose followers over it or people um think that I'm abusing power, um, then that's okay. I'm all right uh to be the sacrificial lamb here to make the point. And I guarantee you, these people and others will be more careful the next time they uh craft a message, right? And make sure that their sources are okay and that maybe they lead with the benefit they can add, not what's wrong with your company. Um, in terms of my brand and what it should or shouldn't be, and all these people that want to tell me that I'm off brand or that, you know, I somebody wrote, I used to really believe in you. I thought all of us was great. You, Josh Katz, a name I respect. Um, he came out and said, you know, apparently it's some of us, not not all of us. Diego Sanchez said that I was punching down. It's amazing, all these opinions. I put my foot down on FICO, I put my foot down on the NBA with a single credit score. I put my foot down when um Sierra Pacific rolled into Union Home and decided not to pay their people. I put my foot down when Draper Kramer decided not to pay their people, and I got some people paid. Um, so you know, I've talked about this problem plenty. I've posted many times about this. Clearly, it doesn't move the needle. This will move the needle. And I apologize if I offended anyone. Believe it or not, it wasn't a personal attack against James. I know it feels like it. Um, he just happened to be, you know, the one in the crosshairs at this time. And I don't wish him ill will. I don't wish their company ill will. So that's that's my last take on that. Anything else from you guys?

SPEAKER_05 13:49

Uh I agree with everything you just said, except you shouldn't be apologizing to anybody. You didn't do anything wrong.

SPEAKER_00 13:55

Well, and I think there is a lesson in leadership here is for those of us who are leaders at our mortgage companies, we need to make sure that our loan officers know that that we are transparent and that we have an open door policy. And if they get this slop in their DMs, come talk to us. Let's have a real conversation and we're willing to share share information with you. We're not hiding.

SPEAKER_04 14:14

Oh, and then and then Bittner went on, Bittner went on to say that clearly we must have something wrong if somebody on the inside told gave them this tip. I mean, he's now not only did he run over us with falsities, now he's now he's doubling down saying it's our problem. I mean, that is that's outrageous. I mean, it just shows you that I made the right call, right?

SPEAKER_05 14:35

So, you know, I'm ultimate, ultimate in gaslighting.

SPEAKER_04 14:39

Yeah, and I also want to say that I had to talk to the branch manager of this individual for an hour to to convince him that you know it's not true. We didn't let anybody go. In fact, we're growing. And he he wanted me to make a promise to him that I wasn't going to go anywhere for several years. I had to literally peel this guy off the wall because of this irresponsible recruiting. And even if it was true, it's still irresponsible. So uh we'll move on. Now, Young, if you can do me a favor, because I don't have great visibility here uh and pull up the next uh visual on foreclosures being at a six-year high. And what's the data uh telling us? Um, Kobe, my man, you are a viral star. You got your first feel for what it's like, I think, to really, really go absolutely bananas with a LinkedIn post. Uh, you got over 100,000 impressions on this post and talking about how um the pandemic produced basically two different sets of of people. Dive into this, but first tell us like where do you stand on the on the impression count right now and what was it like to have a post just take off like that?

SPEAKER_05 15:42

Uh well, you know, it was uh I've I've had others that have that have done this in the last couple of years since I've started really leaning into LinkedIn. Um this one uh right now is about 140,000 impressions. Um, and it's really stirred up some conversations and and the conversation actually went in a little bit of a different direction than I initially thought it would. So the the basic premise here is that there the foreclosures are are are up significantly, six-year highs since 2019. 39% of them, as you can see on the uh on the board there, came from people who purchased 2022 or later when they bought at the top of the market, both in terms of home values and interest rates. So there's the haves and the have nots that we're seeing. And and so and so this brought up, you know, now look, we're at 280,000 foreclosures now, just to give you some context. At the height of the great financial crisis, we were at 4 million. So this is not a this is not doom porn. This is just, hey, this is interesting because it it talks about really two things. One, it leans into the discussion about the marry the house date the rate, because the people that marry the house are still dating that same rate, and that marriage seems to be in trouble if you look at these numbers. So it it it's it leans into that conversation a little bit. Number two, a lot of the comments, and and this is something that you know we've talked about and we should continue to talk about. And I did another post this week about it, is the variable cost of homeownership, property taxes, insurance that seem to be skyrocketing and a runaway train. And, you know, are we having the right conversations, both about um down payment? Are people putting down enough money? And and what are the dangers of not putting down enough and and the consequences of not building equity fast enough through that? Um, what are the what what should people be thinking about and looking at when it comes to homeowners insurance? What should we be doing from an underwriting perspective in our industry when it comes to insurance and trying to gauge where those premiums are going to go over the next three to five years? So the the the real point of this post was to say we should be having different and more meaningful conversations with our borrowers. And those conversations should reflect the market and they shouldn't just be sales tactics, they should be real introspectives into where the market is and what it means to buy a home now. And are you really ready? Um, so it it obviously got a lot of traction. People seem interested in the conversation. Um, and I think it's uh it's something we should be actively talking about.

SPEAKER_04 17:57

Aaron, we addressed this before, you and I did. Like, and remember this was tied to the what's our responsibility as mortgage professionals?

SPEAKER_03 18:05

Correct.

SPEAKER_04 18:06

You know, how deep into the truth do we go with a consumer? Like you can't get on with a consumer right now and make guarantees about home appreciation. Um, we should be having the same conversations probably about taxes and insurance, and and there should probably be some governors in place when we have these moments where um those ancillary uh things are are taking DTIs up. We should somehow be able to real-time pivot and the agencies should maybe even assist. IMBs aren't gonna like hearing this, but you know, perhaps there should be a cap on DTIs in moments like this for certain borrowers.

SPEAKER_00 18:38

Yeah, I agree. I think, especially in the FHA book, where we need to be looking at this. And and you know, I am glad that Kobe kind of clarified this is not Doom porn. I know we'll have friend of the show, Logan Motoshami, jumping in our DMs with some charts telling us where we're still at a you know all-time lows on foreclosures. So, you know, we're not flashing the war the the red light yet, but we are flashing, right? We are saying that there is a market with stress. And I had a post a few weeks back that somewhat talked about this that a lot of people disagreed with me that that we have a K-shaped housing economy. And I think this just supports that we we really do. We have the pre pre-pandemic and the post-pandemic. And I'm part of that post-pandemic group. I bought my house in Austin in February of 23. But the one thing I think we also need to be considering here is the implications of builder loans, right? Builders were they've they've put forth significant concessions so they did not have to lower values. And a lot of these concessions were FHA buy downs, permanent buy downs, right? And even permanent buy downs with temporary buy downs on top. And when those payments change, when your escrow adjustments come in, these borrowers get into trouble. And they have zero, not only do they have zero equity, they are also underwater in some cases, especially where there was a lot of new builds at these higher values that resale just can't compete with. And so I think there's just a lot of factors that we need to be considering um, you know, going into this. Again, we're not freaking out just yet. I do think that if unemployment starts to get crazy, I think that, you know, if we start to see a ton of foreclosure sales come in and values go down even further significantly, that that we need to look at right. So there's things that we can look at um before we need to panic, but we need to have our eyes on it.

SPEAKER_05 20:19

And look, this underscores to me that the importance of if we're if we're talking about the loan officer role in the future of our business and how to future proof against AI and AI voice agents and automation and and is there space and room for a human loan officer in the future of our business, these are the points where it comes into play. If you are leading with communication, with education, with guidance, if you're having those right conversations with borrowers, that's how you future proof. If you're if you're talking in sales points, marry the house, date the rate, or or whatever else you can come up with that might rhyme to entice somebody to buy a home, then you're doing a disservice and and you're and you're making yourself ultimately obsolete in the process. So I think it speaks to a broader conversation about what the role of the loan officer is now in a market that certainly has a lot of variables and a lot of implications. And talking about a 30-year fixed rate, like it's the most rock solid thing in the world when we know that that's not the case anymore. Um, I think that's the broader conversation to be had here. Correct.

SPEAKER_04 21:20

I know it's extreme. We're coming out of an extreme low interest rate environment, followed by an extreme high interest rate environment. So it's not exactly historical apples to apples, but isn't this the natural evolution of the cycle? You know, uh last in, first hurt when things stop improving and increasing? Like what is so beyond the pale in this instance? Or are we just going, are we just going down into the valley of the latest cycle?

SPEAKER_00 21:48

Well, I think this is why we need to be having these conversations because we need to to be looking at those numbers and saying, do we need to adjust in real time? Do we need to make changes to to DTI profiles? Do we need to be um in Certain areas looking at what it what are our insurance rates going up. You know, we know that's a problem.

SPEAKER_04 22:06

Who's going to do something about it? This has been everyone's been screaming about this.

SPEAKER_00 22:09

It has to be done at the agency level, right? It it absolutely has to be done at the agency level. And I think, you know, we're going to we're going to talk a little bit about that here. But um, the stress on consumers is real. There's a lot of things that are coming down there that are it's gonna make it even harder on them. And so it individual lenders are not gonna go and start saying, well, I'm not gonna originate this loan that I get an AUS approval on because the guy down the street's gonna do it and I need the the the loan too. And so we need to at the top top level start looking at do we need to look at adjustments into in guidelines.

SPEAKER_04 22:41

Wait till the student loans start to start to hit, huh, Kobe?

SPEAKER_05 22:46

Yeah. Want to jump into our next topic? We're uh we're all staring down the barrel. So last week, you know, we talked about um this proposal that has you know a very outside chance of ever going anywhere, but it was the 2% cap on student loan uh repayment or interest. Um and we we use that as kind of the fulcrum to have a conversation about student loans and their role in in the lending industry. Um this week, you know, we're we're we're coming on this point where the save student plan that uh that was a product of the Biden era that was since unwound by the courts, um, that's coming to an end. And so borrowers now have 90 days, and I think we're getting near the end of that 90-day period, which is what makes this story timely, for those borrowers to choose a new repayment plan, which is gonna add hundreds and hundreds of dollars to some people's monthly bills, which in turn will affect their ability to buy homes. And so the conversation that we've had is is around obviously this is this is a separate issue than than as it relates to mortgage, but uh this is gonna affect 8 million people. And and uh, you know, that's that's a significant swath of the home buying population. Um college educated people, the ones that have the higher degrees, tend to have the higher debt. Um and I think there's a direct line to be drawn from student debt, which has um, you know, it's $1.77 trillion right now. Um it's gone up something like 1200%, tuition's up 1200% since 1980, which is five times the rate of general inflation. If you want to look at where the first-time buyer age is gone from 1980 to now, it's gone from about 28 years old to 40 years old. You can draw a straight line from student loan debt rising in lockstep with the stuff with the first-time buyer age because it's locking them out on the DTI basis. And we have DTI stats to back that up as well. But the DTI denials went up from 29% to 35% just over the last few years. So more people are getting denied because their DTIs are out of line. So there's there's a there's a moral and ethical discussion to be had around student loans, and there's a practical discussion to be had around student loans and how they're affecting our industry. But um, the much broader conversation, I know I've used broader conversation three times today, but the broader conversation is uh yeah, I'm uh yeah, that's the winner.

SPEAKER_04 24:57

That's the winner today.

SPEAKER_05 24:58

I'm moving away from pearl clutching into broader conversation. But the the the conversation that we need to be having is, you know, what are we doing with our uh the youth in this country? You know, are we are we selling them a bill of goods when it comes to their college education? And and the other thing, you know, we we we talked about was um how these student-led student loans are not dischargeable through bankruptcy. And that was a provision that was made in 1976, um, that's since been expanded in 2005 to not just federally sponsored student loans, but private as well. And so what that's created is is this is this uh desire to put out as much as many loans as possible as quickly as possible. And from an economic perspective, the incentive has only been for the colleges to raise their tuition because they know that somebody's going to fund it on the other side with a loan that a 17 or 18-year-old is going to take out and now be responsible to pay for the rest of their life. And you can make you can make an $80,000 mistake with credit cards when you're a kid and you can discharge them in bankruptcy. You can't make an $80,000 mistake with student loan debt and discharge that in bankruptcy. So there's there's some structural flaws to all of this that I think are important from a ethical and economical standpoint, but they they do affect our industry because we can see the first-time buyer age getting pushed farther and farther north of 40 as this continues to be an issue.

SPEAKER_00 26:18

Well, I think we can pin this for another day, but I I think we can disagree. Like I would disagree that that 40 number is reliable. Um, it has increased, but but if you look at the actual the Humda data versus the whoever NAR, whoever did that mail-away survey, I think that 40 number is in question, but we'll we'll we'll set that away for a bit. At the end of the day, it's getting bigger, right? It's getting it's getting higher. And right, so I don't I don't want to take away from that because ultimately I do I do agree. We've had we had this conversation, and the thing that scares me, and this kind of goes back to the prior conversation that we had, is I went and ran the numbers. So, you know, under today's environment, if you have a student loan reporting as a zero dollar payment on your credit report, Fannie Freddie FHA have very clear guidelines as to how you can calculate that payment on half, you know, half the percent of the balance, 1% of the balance. I went and compared those calculations to what the new payments would be under the multiple different payment guidelines using the $55,000 average balance at various median incomes. And in basically every single case, the calculation that we're using is far less than what the new payments are actually going to be. So, one, you have borrowers who are qualified on in some cases, hundreds of dollars less than what these new payments are actually going to be. And in other cases, now you have more swaths as these payments get into place that are not going to be eligible, right? So you have a servicing issue that that is going to happen and you have a new borrower situation. 45% of FHA first-time home buyers have student loans. This is going to be a big deal, right? These payments are going to be a big deal. And then you also have to look at the ramifications that this is going to have on other forms of debt, because if I'm now having to make a higher student loan payment and a higher student loan payment, which by the way, could eventually turn into a garnishment, could make it so that I have an you know a federal debt now on my Kivers, whatever. Um, what's that going to do now if they have to make a decision between making paying their credit card and paying their student loan? So, what ramifications is this now also going to have on payments of other forms of debt? Uh, studies have said that people are going to choose their student loan over paying their credit card or even their car note. And so there's going to be downstream impacts on this. And I honestly think that's probably why earlier this year the Trump administration pulled back on doing garnishments. They said it was to like make system updates, but I think that you know the credit industry may have stepped in and said, hey, this is this is not good good for us. So um, but regardless of the reason with these new payments, we're we haven't qualified people for them.

SPEAKER_04 28:59

No, wait, I we haven't qualified people for them. Okay.

SPEAKER_00 29:03

Meaning, meaning the people who who were in the z these payment plans with zero payment due, if we qualified based on the half a percent or one percent of the balance, and we got somebody into a loan on like the max DTI on that amount, when the payment when these plans are now coming due, the new payment plans are going to be significantly higher than what we're doing.

SPEAKER_04 29:22

Well, I bet, but they they obviously agreed to make a payment at some point.

SPEAKER_00 29:26

Yes, correct.

SPEAKER_04 29:27

Yeah, so then that was delayed, correct?

SPEAKER_00 29:29

Yes, yeah.

SPEAKER_04 29:30

So there's a lot to this story. Okay. First of all, let me bring it down from the sky, down to the ground. The the concern is that you have people that are already struggling uh with their DTIs with all these other things we're talking about, taxes, insurance, uh, the high rate that they thought that they were dating, that they're now shackled to. Um, right. So you so then you you tack on a $400 payment, a $600 payment, and all of a sudden your DTI, now you have to start to make some of these decisions you're talking about. So the concern is that defaults will go up. That is the concern, right? So, you know, the other part of this, which Kobe's not really gone into here, is Kobe believes that a lot of these students were wronged, that they were sold a bill of goods in the first place. I mentioned it. I mentioned it. Yeah, but you didn't go deep into it. And I, you know, this is the eighth wonder of the world material here, Kobe, as you know. Uh Kobe and I have have disagreed on this. His take is is that uh many students, because of their age, because of promises made by for-profit institutions, got in too deep and didn't know what they were getting into, and now they're holding this bag um and they don't have the education they thought they'd have, or they can't get the job that they thought they'd have. Um, it doesn't that doesn't land with me. And the other question here is they they had a payment that was delayed. What did they do with that money? What did they do with that money? Why all of a sudden were they not taking that $500 a month that they were supposed to be paying that they were given a grace period on? They did not invest that money. Is that is that our fault too? Uh what did they do with that?

SPEAKER_05 31:01

You're assuming you're assuming they even had that to begin with.

SPEAKER_04 31:04

Well, whatever the payment is, they obviously at some point were going to have a payment, right? And that was delayed. We just talked, that's why I teed it up there. So, what did they do with that money that that that they could push out, right?

SPEAKER_05 31:15

But that's my that's my point. I don't know if they ever had that money. If if you look at where tuition has gone up, it's gone up five times versus inflation since 1980. Guess how much general wages have gone up versus inflation since 1980? Zero. So we're talking about people coming into a world where tuition costs 10 times what it used to cost in 1980, against five times against inflation, but they're coming out with the same wages against inflation that they did. So it's gotten much more expensive, and they're not coming out with a job that's commensurate with repaying those loans. So doesn't that seem to be that the why is that?

SPEAKER_04 31:51

Why aren't they coming out with the job commensurate with with the because we've not we've not seen the wage growth in this country?

SPEAKER_05 31:57

But on the other side, we've seen I mean there's no promise to see wage growth. Well, there's a promise to get a job to repay the student loan debt. That's that's the whole premise of this, is that come to come to our education, you'll get a good job.

SPEAKER_04 32:08

That comes down to more than your degree. It comes down to how sellable you are, how believable you are, how passionate you are.

SPEAKER_05 32:14

That's not what the colleges are selling. That's the problem.

SPEAKER_00 32:15

Well, but that's why we need changes to the system.

SPEAKER_04 32:18

We need changes to the selling, come get an education. Let me give you another perspective to this, which we talked about in our production meeting. I'm just angling here, okay? So if you have a bunch of people that are all of a sudden, you know, that that wanted to get into a home but now can't because they suddenly have a DTI that's higher or they're just not comfortable because now they're looking at a student loan payment of six to eight hundred dollars. In theory, that could open up opportunities for the rung beneath them, right? Or or if they're less, if there's less demand for the properties that are out there, then potentially some prices will start to go down, and that will bring affordability more into the light. So this is not a black and white light switch issue. There's a lot to it, and I love unpacking this. This is a this is a great topic to keep an eye on.

SPEAKER_00 33:05

Well, one thing I do want to say because I've been the last two episodes screaming about needing caps, and I do want to acknowledge that as of July 1st, there are, thanks to the, I think it was under the one big beautiful bill, um, or whatever they're calling it now, the American taxpayer or whatever, there actually were caps put in on some programs. So graduate loans are now capped, still at like 200K, um, and the parent loans are now capped per student with a lifetime. Um and I think each individual person now is capped at like 237,000, which is still an insane amount of money. Um, but it's a start. And so I do want to at least acknowledge that as of July 1st, there's some semblance of caps insanity being put into the system.

SPEAKER_04 33:47

Kobe, do you think that the government should set up some kind of a hotline where you can plead your case? And if you can if you can prove beyond a shadow of a doubt somehow that you were misled or sold a false promise that that debt should be forgiven, therefore increasing our deficit?

SPEAKER_00 34:03

Uh bankruptcy.

SPEAKER_05 34:05

Uh uh I mean, you know, first of all, I think there are structural reforms that need to be made to the whole thing from the bottom up. The economic incentives are clear. The the more that the student loans are are able to be pushed out to borrowers that don't have any recourse on them, the more the universities are encouraged to raise their tuition because they know that the student loans will be there to fund it. That is the structural issue at at hand. If if if there's some recourse there, if there's some balance and regulation there that actually makes sense, I think this problem gets solved. Should there be a hotline? I don't know. I I just I just think I just think we're we're asking 17 and 18-year-olds to make enormous decisions without all of the information. That's my problem.

SPEAKER_04 34:43

I don't know. I don't have the data on how many 17 or 18-year-olds that are that qualify for student loans or they're going to. They all do. Let me finish the question, please. Hey, pay for that, right? Dollar, dollar bill, yo. Um, let me ask you this question. You know, the majority of them probably have parents, right? They're probably middle, middle class or up. And so, you know, these people aren't going in blind. My kids aren't going to go in blind. Uh your kids aren't going to go in blind. So to think to paint this picture that you have a 17-year-old wayward out there in the ocean, you know, buying everything that's sold to them, I mean, it's a little bit Pollyanna.

SPEAKER_05 35:22

I think I'm not making the claim that they're making these decisions on an island without any support, but they are making the decisions without enough information, without the proper information. Most people don't know the stats that I put forth. What and that's the parents as well as the 17-year-old. The problem is that even if that 17-year-old gets support or not, they're still the ones making that decision and that commitment that can hang around for the rest of their lives. So that's the issue.

SPEAKER_00 35:47

Here's the thing it's just like, how come vaccine manufacturers don't have have reprieve from lawsuits? How come student loans are special and that they can't be discharged in bankruptcy? They should be treated like any other debt.

SPEAKER_05 35:58

Well, the argument, the argument to that, Aaron, though, is that if they weren't, the rates would be a lot higher on them, right? And and there'd be a lot less competition as far as giving that money out. So yes, I mean that's the argument to that. Is that is it gonna be more difficult to obtain? And which is a lot of these loans are backed by the government. I'm I'm with you. I'm just telling I'm just giving you the other side of that. I'm with you. Accept so with you.

SPEAKER_04 36:22

I'll let go of this, Kobe. I could talk to you about this for hours. We do have some uh people here in the comments, our buddy Larry Silver, uh, financial literacy and affordability, affordable education.

SPEAKER_05 36:33

Are we gonna talk about Larry's owed to you in his on his LinkedIn?

SPEAKER_04 36:37

I have to mention uh Chris Christina Capell, who I know personally. She worked for NFM at one point. Um, just a total pro. And I know she's definitely a fan of the show. When we do get our gear up and running, which we're working on right now, I'm gonna send you something, Christina. Don't let me forget. The financial aid office will send to the 18-year-old, here's what you owe after the credit for scholarships and your federal student loan and your balance is X. They send no disclosure, nothing to address content on the student loan repayment requirements, other than the 18-year-old knows, oh, I don't have to repay until after six months is up after graduation. There's there is reform needed with the entire student loan topic and college affordability, which I know everybody here agrees to. Let's uh thank you for that. Let's go into the AI consumer sentiment uh versus venture capital, because there is a rub right now that my man Kobe Hackleer is tracking that was brought to the fore by the great people at the Stratmore group. Cobe.

SPEAKER_05 37:38

Yeah, so Stratmore has uh an arm of their business called uh mortgage customer experience, where they poll customers routinely on behalf of different lenders to find out about the experience of getting a mortgage and what's working and what's not, where the leads are leaking, if if you're the mortgage company wanting to understand how you're uh dealing with your customers. Uh and they found in the latest customer experience survey that fewer than 2% of refi borrowers and fewer than 4% of purchase borrowers found their lender via AI or digital discovery, and over 90% are still referral or prior relationship. So this speaks heavily to what we've been talking about. We we we debunked the Veterans United survey a couple of weeks ago and talked about the quotality survey that supports these Stratmore numbers. Um, that customers still very much want a uh human in the loop when it comes to getting their mortgage. But then we've also seen that the venture capitalists, and I think Greg, you had a different interpretation of what VC stands for, but venture capitalists, um, the venture capitalists are putting what I say. I I I can't recall right now, and I and I won't recall.

SPEAKER_04 38:42

Oh, yes, oh yes, yes.

SPEAKER_05 38:42

That's that's an inside joke.

SPEAKER_04 38:45

Yeah, got it. Okay, my bad. Yeah, yeah. Um, we're we're just would we share that with the pots group or chat?

SPEAKER_05 38:52

That's this is this is what happens when Greg's on vacation. We're like a we're like a step out of sync this week, don't you feel it? Like a half a step. It's it's because he's been on the road.

SPEAKER_00 39:00

No, I think it's hilarious.

SPEAKER_05 39:01

I think we're moving pretty well here. I'm happy with the pace here. We're we're doing we're doing great.

SPEAKER_04 39:05

I think you're just because you're because you're in a different setting. I think maybe you're you're a little verklump, maybe.

SPEAKER_05 39:12

I feel like I was in the same setting last week, wasn't I? I don't know. We have to go to the go to the tape. I don't know.

SPEAKER_04 39:16

I forget where you are. Let me call Warner Wolf. Was that a snort, Aaron? What was that laugh?

SPEAKER_00 39:21

Yes, it was a snort.

SPEAKER_04 39:22

That was outstanding. I love snorters. That's great. People that laugh snorter.

SPEAKER_00 39:26

Oh, I thought that you said something else when you said that last time. Sorry.

SPEAKER_04 39:29

Got it.

SPEAKER_05 39:30

All right, Cobby, get into it. All right, so juxtapose that the the human in the loop element, it it it it backs up the quotality survey, which we know the quotality survey was robust and and and the sample size was was large. Um, and we know that uh quotality has found that 55% of buyers prefer having a human in their mortgage loop. So so the numbers, the numbers in both of these surveys seem to speak the same language that borrowers do want a human in the loop. But then we've seen that the venture capitalists just poured something like 45 or 50 million dollars into a bunch of fintech companies. So we started to have this discussion. Well, if if the surveys are showing that borrowers are wanting this human in the loop, why is all this money being poured into fintech companies that are deploying AI at scale to try to capture borrowers? And so the conclusion that that that we've been debating is well, is it bifurcated amongst the transactions? Does does does what customers want with a purchase transaction differ from what they expect in a refinance transaction and differ from what they might expect in a HELOC? Um and and if you look at where the VC cash is going, um, most of it is going to the HELOC uh fintech sector that is targeting customer equity for a couple of reasons. One, the the HELOC transaction is is a I want my cash out of my house and I want it as fast as possible. So it's it's much more of a transaction than it is a journey and a process that purchases. And number two, um the HELOC process has a lot less regulatory issues around it. There's no three-day rite of rescision, there's no uh RESPA issues like you have with uh with purchase, mortgage, and refinances. So that's why the money is is going there towards the the lowest regulated and the highest transaction basis uh possible scenario.

SPEAKER_04 41:06

Um it's also an easier loan, it's smaller amounts. Yeah, right. Yeah, for all those things, equities, equities capped at whatever percent. I mean, I don't think we're back to hundreds yet, but you know, maybe we'll go there.

SPEAKER_05 41:20

And and it speaks overall to to companies that are now um enacting servicing as a as a play. Um, getting in front of your customers to to capture those HELOC moments and those refinance moments, you can do that from a direct-to-consumer call center that's attached to your servicing arm because the customers are okay with that relationship. But if it's a purchase, you're going to want to have the retail loan officers on the ground. So that's where, so all of this is kind of supporting those arguments of where we see the industry going.

SPEAKER_04 41:46

Yeah, in terms of the money that's being thrown around, it's not a secret that many feel like mortgage is the last adopter of really wide-scale technology. And the other thing is the stock market and the markets are up. Uh, there's a lot of money out there on the sidelines. It needs to be deployed somewhere. Um, Aaron, your thoughts?

SPEAKER_00 42:04

Couple things. So, one, I think this, I think the Stratmore survey is just yet another good signal for where lenders, especially retail lenders, should be investing their AI development dollars right now. And that's in the middle of the stack, right? One of the things that came out of the Stratmore survey was that the biggest frustration and the thing, the biggest thing that impacts net promoter scores is when borrowers feel frustrated by being asked for unnecessary items or being asked for the same document multiple times, right? And that should be no surprise to anyone. And so, really, that tells me that as a lender, where I really want to be spending my AI dollars is not necessarily front of the funnel communicating and dealing with the consumer, um, but really in that middle of the stack, making sure my process is as clean, smooth, and efficient as possible, lowering my cost to originate, but also making it so that I am eliminating these duplicative and annoying requests to consumers. But I also think that we shouldn't miss the signal because if you look at where consumers are going to AI to get smaller, you know, restaurant recommendations. I actually used Claude to uh find and book a massage for me yesterday, right? Things like that. They're more heavily leaning on AI. And while now in today's environment, people, especially for these big, large financial transactions, want to have the um the human in the loop. I think that as we go on and get more experience with AI, more and more people are going to be comfortable with that. So I also think as an industry, we can't rest on our laurels. Otherwise, we will be ripe for some outside company to come and disrupt us. So I think we still need to be focusing on how we can, you know, how do we adapt and change as consumer preferences change and keep our eyes on that and don't lose it. Because if you look at the statistics, I realize that a lot of college grads are booing AI and I don't blame them, right? They're they're being told they can't use AI in their college because it's cheating, but then they're losing their jobs. To AI, you know, when they can't, they can't get a job. And so they're frustrated with it, but their usage of AI is super high. And so just because, you know, you don't trust it doesn't mean you're not using it. Um, and so I just think we all we need to make sure that we had do have our eyes on what the signal is going forward.

SPEAKER_04 44:20

Yeah, I think there are a lot of signals out there. I mean, I've I've got a few notes here. MIT study found 95% of business AI projects delivered no meaning, no measurable return. Michael Burry, who we've talked about before, argues tech giants are hiding the true cost of AI chips in their accounting to make earnings look better. Um, there's an argument the money's just circling. You know, NVIDIA funds OpenAI, which buys chips from NVIDIA. So demand looks bigger than it really is. And I think the takeaway for me here is that it's this is not going to be this thing that replaces us all. It's uh it's not. And the other thing that we need to be mindful of is there's just a handful of companies that own the AI space right now. And so there's a lot of control out there. I mean, you see you saw uh Claude uh disabled um one of the uh I forget the name of it, but they have huh?

SPEAKER_00 45:11

Fable.

SPEAKER_04 45:12

Yeah, they disabled that. You know, they these companies are taking all this information in and all these queries in, and they're looking at what's being coded. And so we're like the the world is playing out all of these ideas. We're just making those three or four companies stronger and stronger and stronger and give them more and more and more control.

SPEAKER_05 45:31

So I think we've seen that before. We've seen that before with with the onset of new technology. There's always the the two or three or four. I mean, look at how AOL is. This is different. This is different.

SPEAKER_04 45:40

We're willingly, most people hold things close to the best. We are feeding these machines all of our best ideas. They have a front row seat, and we're paying them to take this information.

SPEAKER_05 45:51

Think about how outrageous that is. I I don't think it's any different than any other advent of new technology. Uh, any uh it all starts with two or three or four companies that dominate, then the competition starts to roll in. That's not the point I'm making. It's not the point I'm making.

SPEAKER_04 46:05

The point I'm making is that they have a front row seat to all the innovating that's going on in their engine. There's never been another moment in time, I don't believe. And I understand that usually three to four to five companies have the line share of the market share and then things settle in. This is different because they're that all of the ideas, all of the coding, the next great companies are being created right in front of Dario and and Enthropic. Who has ever shared playbooks like that in full playing? You're theory of the feeding of the beast. Yeah, for sure.

SPEAKER_00 46:37

Yeah, okay. Well, Alex Harp had a really interesting, like 20-minute rant, and I'm no fan of his, but he had a really interesting 20-minute rant last week about how companies are overcharging and how it's right now the system is just a complete mess that I think is worthy of listening to, if you can understand what he's saying.

SPEAKER_04 46:56

Hey, speaking of a complete mess, how about the BLS? That's typically a pretty messy thing. Uh Kobe, you wanted to talk about this. Now, Young, if you're back there and we have a slide, pop it up here. Uh, but you know, Kobe, we're used to seeing revisions downward. There's been some talk that we could have some revisions upward. And there's uh been talk that maybe the BLS will go the way of the dot plots, which seem to be getting less and less popular. Uh break this down to the club.

SPEAKER_05 47:26

We had a clip from uh from Yahoo on this, didn't we?

SPEAKER_04 47:31

We did, and we do. And this is why you are saying that uh I'm a little fuzzy today, especially considering right before we went on, we covered this. It's really amazing.

SPEAKER_00 47:40

I feel like videos it's status quo, though.

SPEAKER_04 47:42

No, that's all right. This is uh Yahoo Finance and Indeed Director of Economic Research, Laura Eldridge, talking about this. Whoa, it's I'm not hearing her today.

SPEAKER_02 47:56

We're joined now by hearing firm Indeed, is now out with some new insight on the labor market. And I'm pleased to say we're joined now by Indeed, Director of Economic Research, Laura Ulrich. It was really interesting that we did see that pullback within leisure and hospitality because heading into this report, the World Cup was supposed to provide such momentum to that sector. What do you make of that? And what is maybe sort of the tea leaves that you're reading from this report this morning?

SPEAKER_01 48:22

Yeah, I will say I was surprised to see the leisure and hospitality number as low as it was uh this morning. I am a big soccer supporter myself, so I've been to a couple of the World Cup cities, and there's a lot going on this summer with the World Cup, also. We have obviously just in a couple of days, our 250th celebration as a country. So this is a busy summer. So I was not surprised in May when we saw leisure and hospitality coming quite strong, but was surprised to see it pull back today. I will say it's just one month. So there can be survey noise for sure. There could be some variation where we see things kind of come back strong again in in the August report. So I'm not gonna read too much into it, but that was a surprise.

SPEAKER_05 49:05

Yeah. You know, as a I too am a soccer supporter, and I was surprised that the US barely showed up against Belgium. But uh, what a fun time in the World Cup. Um you know uh it's interesting to me the last two revisions from the BLS, and and and this is why I kind of wanted to dive into this, because there there's some really anomalous stuff happening here. The last two revisions from the BLS were like 900,000 jobs, the one before that was 800,000 jobs. And here we see five different Wall Street firms when a jobs report came in at half of what the expectation was, talking about how there should be a revision up, and that speaks to the um inaccuracy and the fallacy of BLS reporting in general. It's a very odd position to take because all of the BLS revisions historically have gone down, and this one they're saying should come up. And so I started thinking, well, what's in it for these Wall Street firms to be talking about um how this should be going up? Number so I came up with a couple of different theories, and these are theories only. Number one is this provides cover for uh for Walsh to hold steady and not do anything. This gives them the ability to not react to this, and when calls for a rate cut will come in, and that's going, which could potentially affect the portfolio stability of some of these bondholders who came out saying that this needs to be revised. Number two, Walsh has publicly said in his first uh in his first press conference about how he doesn't think the BLS data is reliable, and maybe we should be moving towards more privatized data sources. Now, who benefits from that? Companies like the woman that you just put on that clip, the director of research, indeed. That's a job posting platform, they would benefit from that, credit card reporting. Um, you know, they're they're all these private companies that would potentially benefit from being relied upon for this data. And who gets to invest in and prop up and act on the information from private companies? Wall Street. So to me, this is a this is a concerted effort from Wall Street to to uh give cover to Warsh and to also push forth the notion that we need privatized data instead of BLS data. So that was that was my take on this story. That's why I found it interesting this week.

SPEAKER_04 51:10

Meanwhile, we're coming off of downward revisions, right? So we've not had an up an upward revision, you know, from 172 to 129. Um Aaron, is this a hot topic for you?

SPEAKER_00 51:24

Yeah, I mean, obviously, you know, I've been all over all over the jobs data. You know, the one thing I will say is the the the reason it was revised downward is because the original estimate included seasonality for it. And as as much as Kobe has enjoyed the World Cup, if you look at um maybe using hotel occupancy as a barometer, hotel occupancy has actually been flat. We haven't seen the big pop in in hotel occupancy numbers. And so I think perhaps the uh you know the the need for jobs was overestimated for World Cup. But you know what? We also have two different, we have two more revisions that are going to come in before we see any kind of a reliable number. But that is exactly why we need to be looking at alternative data sources. Kobe's absolutely correct in that where there are several Bank of America, several, you know, Goldman Sachs, Chase, all of those who who have their own data research and that would stand to benefit for greater reliability on private data sources. But I don't think that that you should discount that because that doesn't mean that those private data sources don't have better data than what the the BLS is giving us, right?

SPEAKER_05 52:28

With you on that, with you on that.

SPEAKER_00 52:30

Yeah, absolutely. But you have to bring out the fact that there is a potential conflict of interest there, and that has to be brought up. Um, but I but I also think that part of the reason that that they're coming out here is because you know, Walsh has said we need to look at alternative data. And I think this is again a signal from the market saying, yes, we want this. Yes, this needs to be something that we're looking at. We don't know who is going to be on this task force yet. So I think it also could be messaging to the people, you know, whoever is going to end up being on that task force that this is what we need to look at, and that it kind of tacitly providing support for making changes in the numbers that are being utilized for Fed for the Fed rates.

SPEAKER_04 53:08

Well, we certainly need a better indicator, right? Because the market reaps the minute the number hits the tape, everything goes haywire one way or another, and then it goes haywire again when it's revised. It by nature of the BLS, it's always revised two or three times. So it's like they should come up with a different instrument. Um, we'll see who benefits. I mean, I think that if you have stocks, if you have a 401k, you should benefit from a more consistent uh reading, right? And maybe they won't need to go back multiple times, they'll find some algorithm. They should be able to. Um, lastly, Kobe, uh, looks like the credit box is tightening um at the same time. That 10T historical data. Aaron, you okay?

SPEAKER_00 53:50

I'm good.

SPEAKER_04 53:51

I think she's admiring her highlighting work. That's why she's smiling. No, no, you're helping, you know, it's I think you're if you're thinking to yourself that you're having a good hair day, you're absolutely accurate. You are having a great hair day. So that's I want to Kobe. You you know, you look good too today. I don't think I look so good, but you look well rested.

SPEAKER_05 54:12

A whole week on the beach. You look fantastic.

SPEAKER_04 54:14

Yeah, you know, uh vacations are not. I need a vacation from the vacation. Does that sound familiar to anyone?

SPEAKER_05 54:19

No, I feel like you've been at I feel like you've been at that beach house for like four months, by the way.

SPEAKER_04 54:23

I I feel like it's been 10 years. Can't wait to drive home the minute I shut this computer down in a couple of seconds. Um, anyway, um Fanny for the credit box at the same time, FICO 10T historical data is out. Uh Kobe, what are the downstream impacts?

SPEAKER_05 54:40

Well, you know, I found this story to be interesting because uh all of a sudden I get this email um, and I think it was from the MBA talking about how, hey, Fanny just came out with this kind of vague statement about um modification to uh to to moderate reduction. I'll read it from the screen if I can see it. A moderate reduction, the number of loan case files that receive and approve eligible. So there's a lot of layers to this story. Number one, you know, we seem to see Fanny and Freddie moving in a more conservative direction. Um we we know there's been directives around ITIN loans. Um, there's been the the special purpose loans are sunsetting for finally on July 21st. I did a post on that today, if you want to check out my LinkedIn. Um and then we also have this juxtaposition against Fannie um removing the 620 minimum this past November. So different signals, different kind of uh you know uh moves by Fannie and trying for us trying to figure out what they're doing. Um and then layer on top of that, that that FICO 10T just released 12 years of data so the lenders can kind of digest what the trended data means versus the static data. Um, and I never get data and data consistent. I'm always one or the other on those. Um depends on if you're watching the back or not. Yeah, or or it depends who I if I'm listening to the director of research from Mindeed, it might be data. So I think yeah, and let's look at the data. Um so so I think I think all these things are interesting. And to me, it's like, all right, well, if we have this FICO 10T and it's supposed to give us better results and perhaps make more borrowers eligible. That's certainly what vanish score claims it can do with the renter uh data data, then what does it mean if Fannie on the other side of this is tightening the credit box? And does it also mean Fanny and Freddie are are moving towards privatization and trying to clean up their balance sheet by moving more of these loans into the private sector anyway and trying to look cleaner for a privatization? And maybe the 620 was just kind of uh for appearance's sake to look like they were getting more inclusive. But meanwhile, behind the scenes, what they're not doing as much of a public job announcing is how they're tightening some of the standards on the back end. So, to me, there's some layers here about where things are going. Um, I think at the end of the day, to me, what what I really think is is interesting here is this discussion that we haven't been having, which is there's a lot of opacity around Fanny and their algorithms and their underwriting models and what they're looking at. And don't we deserve to have transparency? Isn't that what we're looking towards with the credit scoring? Why can't we have that same transparency with our GSEs? So I know I just dumped a lot on the plate here, but that's why this whole story was kind of super interesting to me because there's so many things to unpeel and and and and it's a giant lending onion.

SPEAKER_04 57:15

So if you're out there listening to this, Aaron, you're thinking, okay, changes, tighter, what changes? And we don't know that yet, do we?

SPEAKER_00 57:25

We don't. They they haven't given us if we go by what they've said previously, it's gonna be layered risk, high LTV, DTI. I think what could have happened, if you look at the timing for when they removed credit score, look at the credit score minimum, we're right now to the point where those loans are starting to go EPD, if if if they are, right? And so are they getting an early indication on how those are performing? And perhaps they open the box a little too wide on those super low FICO loans and they're seeing that performance data and they're needing to make an adjustment. There was an analyst that came out um last year when the changes were announced saying the models aren't tested for these low of a FICO scores. And so we're it's untested, and we're gonna get too many loans originated than we really need to, even though you've got lower LTVs, lower DTIs built in. So there is that. But I think this story also goes in and it it brings in other topics that we've talked about. We're we're about to see student loan payments go up much higher than what we've been calculating them at. We have insurance, insurance costs that have been going up. And so, and look at the look at the performance of the Fannie Freddie book compared to the FHA book. Fanny is making the adjustments that we're saying FHA probably needs to look at on the DTI side, right? And so are them up, is them updating the model a good thing? Perhaps maybe, but they've got to give us transparency around this. They've got to let us know we're out there originating these loans. How are how is my pipeline going to be affected, right? I've got loans that are, you know, borrowers that are pre-qualified, things like that. So to me, the fact that they're making the change isn't necessarily the the thing. And and our boy Tim Roode, friend of the show, who we love on his daily dose, was all over this earlier this week. This is one of the things, the stories that you would have been read up on if you were reading his daily dose, um, is is there's just no transparency around this. So what we are left with is in the absence of information, we're left to speculate. Is it because they went too aggressive on 620s? Is it because they're planning to go private? Is it because there's a reaction to student loan payments about to go up? All of these things, then in silence, they leave us to speculate. And that's really ultimately, I agree, is is the wrong thing.

SPEAKER_04 59:34

Kobe, you want to bring up the caboose on this one?

SPEAKER_05 59:37

Yeah, well, it's just just just really, really interesting things to keep note of. And uh, you know, another reason why I think this show has become as important as it is because we bring these topics to light. Um, and it uh it gives us the opportunity to discuss them, and I and I'm hoping it gives the industry an opportunity to discuss them. Uh, but again, you know, we we we need we need more transparency from the GSEs. If if privatization does offer a route, I think privatization offers some short-term pain in terms of uh rescoring risk and and how the secondary market is going to view loans, but I think ultimately, good for the industry, good for the borrower. Um I'm I'm I'm I'm now in a position where I'm convinced that we need that to happen at some point soon.

SPEAKER_04 1:00:14

I mean, based based on all these headwinds that we've talked about, I'm in favor of them tightening the credit box. I think it makes sense because ultimately the lender ends up holding the bag anyway. If I don't look I'm not opposed to it. So yeah, I'm not opposed to it, but be transparent about it. I get it. Well, give them time. When did this come out? Isn't it pretty recent?

SPEAKER_00 1:00:31

Well, it came out with no information.

unknown 1:00:35

Yeah.

SPEAKER_04 1:00:36

Aaron, uh Aaron, you're you're on ResBug, you're you're tight with the folks that are doing the great work at the MBA. Maybe you can do some digging. I know they're probably trying to get clarity too, right? I mean, but we did hear Bob Brooksman uh say at one point that he would potentially be in favor of tightening things up on uh in the lower end of the credit box on FHA uh in exchange for lower MIP or you know, some kind of relief with the fund at you know the 6X. So if you could if you could bring something back to us, but just real quickly on Tim Rude, I I can't get enough of his uh of his newsletter. I mean, Impact Capital is just incredible. Uh the daily dose of real estate. He is a FOTS, he is a friend of the show uh for sure. And they just launched the Washington policy implementation tracker. 30 federal housing policy requirements tracked from directive to actual rule. So, you know, now you know what's in the works, what's stalled, which deadline actually hits your business or next. It's just incredible. I and it's free.

SPEAKER_00 1:01:40

Love free.

SPEAKER_04 1:01:41

You got it, you got to go get it. This has been a great show. I appreciate you all bearing with me. I know I had some uh, you know, I'm not quite uh cruising at my altitude here. That's I flew through some clouds. We had uh a jet stream, you know, I think it was in the wake of another plane that was two miles away. But uh I am getting in my car after a week here in Ocean City, Maryland, and immediately heading back home. So I should return to normal, which most people would say I'm not that normal. Um, you know, my normal, whatever that is, uh, next week. You know?

SPEAKER_00 1:02:12

Can't wait.

SPEAKER_04 1:02:14

I meant what I said about your hair, by the way.

SPEAKER_00 1:02:16

Thank you. I actually watched it.

SPEAKER_04 1:02:18

And Kobe, you look great too. Will you be the eighth wonder of the world uh next Thursday or no? What do you think?

SPEAKER_05 1:02:27

I don't know. It depends on how our production meeting goes. I may get I may get a new nickname. Yeah, you never know.

SPEAKER_04 1:02:33

Where where would we be without without Nyoung? That's the question.

SPEAKER_00 1:02:36

Our favorite.

SPEAKER_04 1:02:37

Yeah, she's back there. I mean, she's she's doing all this editing, she's just going crazy back there, trying to keep up with us. I popped her up on screen. She's like, Oh my goodness, my hair's in a bun. So do I turn the camera on? Yes, you turn the camera on, Nyoung. You take a bow.

SPEAKER_03 1:02:53

Doesn't no one no one cares about your hair, it's all good.

unknown 1:02:58

Thank you.

SPEAKER_05 1:03:01

She's still in recovery mode.

SPEAKER_04 1:03:02

Yeah, we love you. We love you. Been a great show. We'll see you again next Thursday, everybody. Until then. So so long, long.

SPEAKER_03 1:03:11

No surrender on the show. We go toe to toe. What fails? What fails? Who gets the oh? Hot nose, hot takes, raises takes.