In this episode of Optimal Insights, the team discusses the factors driving mortgage rates higher as the 10-year Treasury approaches 5% and mortgage rates near 7%. The conversation covers inflation data, global energy market disruptions, Federal Reserve expectations, government debt issuance and the broader economic forces influencing interest rates.

The team also examines recent developments in artificial intelligence, including regulation, competition among AI providers and potential implications for financial markets and economic growth.

In the second half of the episode, the team recaps the recent Optimal Insights Capital Markets Forum in Nashville, sharing key takeaways on non-QM lending, housing affordability, borrower trends, mortgage servicing rights (MSRs), excess servicing strip (ESS) opportunities and operational efficiency in today’s lending environment. The episode concludes with a preview of Optimal Blue Summit 2027.

Key Topics

• 10-year Treasury yields reaching 5%
• Mortgage rates approaching 7%
• CPI and PPI inflation data
• Global energy market disruptions and oil prices
• Federal Reserve rate hike expectations
• AI investment, competition and regulation
• Capital Markets Forum highlights
• Non-QM lending growth and lender strategies
• Housing affordability and generational homeownership trends
• Mortgage servicing rights (MSRs) and ESS structures
• Preview of Optimal Blue Summit 2027

Chapters

00:00 — Market update: Treasury yields and mortgage rates

09:40 — Inflation, Federal Reserve expectations and AI developments

19:19 — Capital Markets Forum recap and Optimal Blue Summit 2027 preview

Optimal Insights Team

• Vimi Vasudeva – Managing Director, Hedging & Trading Operations
• Jim Glennon – Senior Vice President, Hedging & Trading Operations
• Alex Hebner – Hedge Account Manager
• James Cahill – MSF/MSR Account Manager

Production Team

• Sara Holtz – Executive Producer
• Matt Gilhooly and Alex Kreuter – Producers

Commentary included in this podcast is for informational purposes only and should not be construed as legal, trading, hedging or financial advice from Optimal Blue.

Mentioned in this episode:

Get Ahead of What’s Next at Optimal Blue Summit 2027

The mortgage market keeps moving. Optimal Blue Summit 2027 brings together industry leaders, innovators, economists, and technology experts for three days of market intelligence, hands-on learning, and meaningful connections. Join us February 1–3 in Scottsdale, Arizona, to hear from Troy Aikman, Bob Broeksmit, Michael Fratantoni, Joe Tyrrell, and other influential voices shaping the future of mortgage. Optional training sessions and a championship golf experience are also available. Early-bird registration is just $199 through October 31. Register today at Summit.OptimalBlue.com.

Welcome to Optimal Insights. I'm your host, Jim Glennon, Senior Vice President of Hedging and Trading Operations at Optimal Blue. Our clients and industry partners have long relied on Optimal Blue for trusted insights and commentary. And these podcasts are an evolution of our commitment to keeping the industry informed. Let's dive into today's episode.

All right, welcome everybody. Welcome to this episode of Optimal Insights. We've got a great show as always for you today. We are here making sure you know what to watch out for, whether you're an originator, a capital markets person, or just someone interested in the mortgage industry and some good market commentary. We will kick it off here in a moment with a market update. Lots to talk about there, lots pushing rates. And then after that, Vimi and I will talk about our Optimal Insights Capital Markets Forum that we attended and hosted and

Presented at last week with a ton of our teammates, a ton of our clients. Just an excellent event. Wanna kind of recap the highlights there for you. And then we will look forward to the summit, which is coming up here in February. So before we get to the market update, just in the way of data, you probably all know this by now, but the 10-year hit five percent this morning, today being Monday, briefly hit five percent, did drop below that, at least as of the moment that we're recording this.

That corresponded with the OBMMI, 30-year fixed conventional at about 6.95 on Friday. So just kissing the seven handle, not what we want to hear, but we kind of have to, you know, deal with what we're l looking at right now and and and figure out which direction we go from here, or do we just see that seven handle appear and that's kind of where rates are going to be for the rest of this year? let's get into it, gentlemen. Welcome, by the way. Thank you for being here.

Let's start with what is pushing rates right now other than you know, in addition to the traditional things that have been pushing rates for the last couple of years, the supply, the likelihood of the Fed either pausing or raising rates, the inflation numbers, the solid jobs numbers, all that, right? Like we know there's very little motivation or pressure.

to push rates down. But what's I mean, what's with this recent spike up to five percent?

It's a confluence of different factors. the geo and I think they're all things that we've talked about before on the the cast here. think there's there's the geopolitical situation surrounding energy prices that have have spiked inflation and and you can talk about, you know, how long that's gonna feed through or if that's a one-time shock and then what that'll do when it is eventually resolved. there's the just a massive amounts of debt that we've talked about as well that are just flooding the market, whether it's from, you know, the AI.

hyperscalers, whether it's defense, and this is happening all around the world. tapping debt markets to secure their their cash needs. and then I think in the background to all this is a US deficit that is growing by the day with no real plan to handle it long term in sight. You know, we'll we'll raise the ceiling

every twelve months or so. but the spending will continue is kind of the the MO and and I think we're we have yet to see a a real reckoning with that from from Congress.

Right. There's still this idea, or really the only path that the administration at least sees is growth. We will grow our way out of this deficit. We'll grow our way out of this debt without hopefully significant inflation or any sort of recession that might be a side effect of it, or that we'll come along with it, or that will be a pause in that growth. And the I don't know. The stock market seems to believe some of that narrative. The stock market still is breaking records almost every month.

Where meanwhile, as you said, there's no political will to slow down the debt machine in the US and probably not in other countries as well. So we're kind of along for the ride at this point and hoping that the hyperscalers and the AI trade is what allows us and other countries to be hyper productive going even just in the short term. This is not like a thirty year plan. It doesn't feel like this is going if it's gonna happen, it's gonna happen in the next three to seven years.

otherwise we're at sixty trillion rates are at eight percent and and so on, right? Like it's it's an interesting saga that's playing out. And and again, I th I think we're a little bit along for the ride at this point, but the markets seem to like it. They didn't like the tenure hitting five percent today though. We did sell off a little bit on that news, but then it felt like some of that money went back into bonds and we're, you know, as of this moment, we are at four nine five.

Which still that's higher than we've been since twenty twenty three. So that's not not you know, not a great sign.

Yeah, I mean yeah, it's it's bouncing around, but if you look over just even the past five trading days, it's it's higher, much higher than than it was at the beginning of of the week prior. So

yeah, I think we're just gonna continue to see that that pain point pressure, which which does put you know an upward limit on on lending.

Right. Let's talk specifics just so everybody can get an idea of what numbers came out last week. We did get CPI not horrible despite gas prices being where are we at? Like d what were you saying, James? Are we are we at six dollars in California right now?

It

yeah, California's sitting at six dollars. We're sitting something like four dollars n twenty nationally, so really kind of pushing up above where

You know, even a month ago, right, we were we were really cranking back down and suddenly it it's ramping back the other way as the Iran war continues to trunnel along. There was escalations this past week with the Houthis in Yemen. I know we actually talked about this on a previous podcast, but there's technically two straits that you do need to keep your eyes on. as well as the Saudi Arabian pipeline, which would cut straight through Saudi Arabia and would connect between these two straits, was shut down this weekend.

After or Friday, after multiple attacks. So something like 20% of Saudi Arabia's oil goes through that item. That is how they've been able to navigate some of this pressure of the war over the past seven months. That's kind of shut down immediately. It really is going to cause more long-term headache.

Yeah, the downtime for this this east west pipeline as they call it was I think it was quoted at three to five weeks this morning. they they do need to do pretty significant repairs to that. And and as James said, that is how oil that was being extracted in the east of the country that would normally be exported via the Strait of Hormuz, was being pumped across the subcontinent to the western side where it could then be exported on on ships, thro usually through like the Suez Canal or off to Asia through

Mm-hmm.

the

Baba Mandab Strait, which as James said, it has come under Houthi supervision, so to speak. and and specifically the Houthis have said that that there will be freedom of navigation through that strait. They're not blockading it the way the Iranians are, except for ships that are Saudi flagged. They they specifically have

Yeah.

their gripes with the Saudis. The Saudis are are bombing them in in in cahoots with the the

legitimate Yemeni government that is recognized by the UN. So that I c I I personally think that there could be room for more escalation there if if there was to like a full blockade of some sort on that strait as well.

And it it's three to five weeks to repair that pipeline, assuming it doesn't get hit by another missile. Right. So it like it's

Right. Right.

Right. Right.

do you even start to repair that thing if you think that it there's a shot, it's a big waste of time.

It is a stationary pipe

Right.

in the middle of the desert. Hard to defend the entirety of it.

Yes, and hundreds of miles long. And meanwhile, the the economic sanctions, just the economic D Day, like don't seem to be bearing any sort of progress, which is I think probably a little bit frustrating, but also maybe a little bit expected. This during this entire war, it's been pointed out many times that the people of Iran are used to being under stressful conditions. They're used to being

relatively poor, very poor by like American standards, just to the point we probably can't understand how you could how you could withstand the sort of sanctions and difficulty and downtime that they're experiencing over there for their economy. Yet they're they're you know, at least on its face, seems like they're remaining resilient in this in the economic side of this battle. So I don't know where that leads us, especially when both sides are doing their best to ensure that there's no safe

flow of oil or anything through both straights or the the pipeline. It's bizarre. It's almost like we're we're all fighting on the same side of the war and hoping that somehow hurts the other side. I don't know that that's full anyway, fully appreciated by by everybody out there.

Yeah, yeah, I think it's it's worth keeping in mind when thinking about the as they rolled it out the economic D Day, that yeah, Iran has been under sanctions for decades now. and so the the the sanctions they rolled out were weren't, you know, cutting them off from the world, overnight. It was, you know, an incremental increase to something that was already some of the most powerful, sanctions regime in the in the in the world.

We've been seeing oil over the past week coming back up and with this news on Friday the pipeline shutting and over the weekend of more hooty activity in Yemen, we're seeing oil creep up and up and up more and more. We were back kind of close to eighty, just even two, three weeks ago. So we were talking about it before the inflation report came out that you know, PPI is probably gonna come out high and it did. It came out at about five point four percent. And that can only stay that high for so long before you start to see it bleed through to CPI. now we're seeing

Oil and gas is creeping back up, so we will probably see some inflated CPI reports next time around. But even this time around, core was 0.1% increase. It's not a lot, but it is back to increasing, whereas this summer it's been slowly chewing down. So suddenly moving the wrong way. And that just that immediate inclination put the odds that the Fed is going to do a rate hike this week increase significantly.

It's now up to about 90% that we will in fact see a quarter point hike rather than staying flat or a cut that was suggested.

Right. Fine just finish the job, right? It feels like we we could be close even with energy prices spiking. So it it it feels like the Fed is gotta be in a weird dilemma right now as they you know, start their meeting tomorrow. I don't know what to hope for. I feel like the the quarter point's already priced in if it goes that way, especially with a five percent ten year. It might kind of be a no

I don't know, non event.

Yeah, it's been aggressively priced in over the course of the last week, week and a half, both on the Treasury front and and you see that bleed through into TBA, MBS. it's been, you know, pretty, pretty brutal from a pricing perspective on the mortgage front for sure. but you know, this is exactly what Warsh has been asking for. He wanted the market to send him a message, and I think this is the message, we we've

hiked rates, it's your turn.

Right. Yeah, so those I mean, we kind of meandered into it. I wanted to be sure we covered the FOMC, but that's basically the deal. Is the the Fed is quieter than previous feds. That's their intention. We don't know which way they're gonna go tomorrow, but very recently the money is pointing towards a quarter point hike slightly, but also could easily see a pause.

All right. what else on the Fed, gentlemen?

I think that's kinda what to keep an eye out for. think what what worth keeping in mind is the other central banks around the world. the Bank of England to the UK's central bank, they're meeting on Thursday and then the Bank of Japan is expected to have a a decision on Friday. Bank of England nothing is expected there. But Bank of Japan, which has been under the microscope with the the yen carry trade and everything, is expected to hike. So, you know, another

degradation to that the the the yin carry trade is is likely there is as it becomes more expensive to borrow money in Japan.

And through Scott Bessett, the United States has agreed that we will be continuing to assist Japan with the carry trade and with their currency. So if they do end up with a hike and if it does degrade carry trade more and more, there might be more US monetary action in the market. So we could see which would push European bond rates around likely, and by extension that might bleed back into US rates.

So that, you know, right now we're back below five percent on the ten year, but I would postulate we might see that over the next week get back above five and maybe even chug a little bit further.

Yeah, I typically don't believe in like technicals, technical trade, that sort of pressure. But I do feel like, you know, w when we you break a major level like five percent, sometimes there is a tendency for rates to want to break one way or the other significantly. So could we see five point two before we see four point eight? Hopefully not. But that would be the next that would be the next leg in this this drama, right?

I

I think the only other big news and item to watch out for is all this talk around AI cropping up this weekend.

On I believe Thursday last week, OpenAI employee, a former open AI and former

anthropic employee came out saying AI is gonna destroy the world and that he had to quit now that his stock options are vested because it was

going to destroy the world. There's been a little, you know, a lot of talk around it actually. The

Dario of Anthropic, Altman of OpenAI, and others have come forward and said, Yeah, we think that we should slow this down. We should think about some sort of regulation. The House and the Senate are actually going on vacation for the eighth time this year, I think, in about a week or so. So they need to scramble to try and put something in place. And meanwhile, the administration has said they don't think any further regulation is really necessary. So there's just a lot of talk around it right now.

I keep kinda throwing out water cooler items, but I think that this is one of the big ones for people this week.

Yeah, I think you're right.

I agree.

I think you're gonna continue to hear about this one at least through the end of the year. I mean AI's been a hot topic now for two, three years and I think this conversation is just beginning, but I I was also struck by how quickly it feels like the switch was turned on for this conversation. Just almost overnight. Every headline is is AI gonna kill us and you know, the regulation that's that's needed. personally

am unsure of of you know if the reasons they are publicly stating are the reasons that they they are looking for additional you know regulation in their space because right now it's a pretty unregulated, almost entirely unregulated space. but, you know, I I I do think that conversation is gonna continue to evolve.

Yeah, I think the subtext there, Alex, right, is there is some speculation that some of these AI CEOs, owners of stock interest, owners of, you know, or folks who are responsible for the future of some of these businesses, they see some threats out there. Maybe that threat is the AI itself. Maybe that threat is their competitors, right? There's there's some motivation to say, hey, we gotta slow this thing down.

There's some of these open source models that are not very highly regulated, but those open source models are also compar competing with the anthropics of the world. So yeah, d it's hard to know what people's intentions are in these situations. But also I don't want you know, the administration did come out pretty confidently this morning and say we don't need further regulation. I don't not sure I want to be the person to say that either, if there are consequences that come in the next

you know, three to six to twelve months when one of these models goes rogue and, you know, shuts down the power grid or whatever. Anyway, that's just all speculation, but something just to keep in mind, gang, is is yeah, the ten percent chance that AI will kill us all makes for a really good headline. But also just think about I believe that was one person who said that. It was the gentleman that you mentioned, Alex, that that quit. I believe he was with Anthropic and Open A AI at some point.

But also, you got to wonder what everyone's intentions are in this in this situation, which still is remains highly competitive. We've said it before, not all of these hyperscalers and all of these AI companies are going to make it, right? It's a major competition out there right now, whether you're talking Silicon Valley throughout the US, then get into into Europe and Asia. It's it's it's kind of an arms race right now that is expected to continue growing exponentially. So how do you I don't know, how do you give yourself a little bit of an advantage or maybe

Maybe give your competition little bit of a disadvantage.

Absolutely.

Absolutely. Yeah. Yeah. If you are attuned to any of the the you know, the bearish voices in the room when it comes to the AI, you know, a lot of them will point out the long road to profitability a lot of the you know, the the main hyperscalers, especially the AI labs themselves, are are currently facing, it could make sense to maybe red tape a few of your competitors with with regulation. An argument could be made there.

Right.

All right, now I feel like we've covered it all. We feel good, gentlemen.

I think so. I do.

All

right. As always. Yeah.

Yeah, ten percent bad, but ninety percent good.

Okay.

We'll find out. All right. Thank you for the time and the wisdom. Appreciate it, James. Alex, talk again soon.

Thank you.

One quick note before we get back to the conversation. If you enjoy the kinds of discussions we have on the Optimal Insights podcast, you'll find even more of them at the Optimal Blue Summit 2027. What I love about the summit, it's not just the presentations, it's the opportunity to connect directly with lenders, capital markets leaders, product experts, economists, and peers who are all working through many of the same challenges and opportunities that face our industry. The conversations that happen between sessions or at dinner or at happy hours are just as valuable.

I think, as the ones that happen on stage. If you will be joining us in Scottsdale this February for the conference, my teammates and I are very much looking forward to seeing you. If you're not sure yet, learn more and register at summit.optimalblue dot com. I believe early bird pricing is available through october thirty first.

All right. Welcome back to the podcast, Vimy. Thanks for being here.

Thanks for having me, Jim.

So Vivian and I would just wanted to do a little bit of a recap of the Optimal Insights Capital Markets Forum that was held last week on Thursday. We had about 90 of our clients come visit in Nashville, Tennessee, had a great time. It was a super packed one day event where we talked about all things capital markets that are affecting our industry right now and some some ideas for the future.

Just super collaborative. You know, it's the eighth one we've done. So we I feel like we've really fine-tuned it pretty well. The team, our product team, the desk team. We even expanded it. We had Kim Melton join us from our our PPE support team. Just had a really good, you know, open discussion for about eight hours with a ton of we had I think we had a hundred and forty slide deck that was really well put together and and just a like just a well, well done

event and our our event team did as always just a tremendous job setting the thing up, finding the good hotel. Had a little, you know, social event that evening at Old Red down on Broadway. So that was a lot of fun. And so yeah, the the the theme of it, which I thought was pretty fitting for the market that we're in, it was the next basis point was what we were we kept repeating. The next basis point, finding that next basis point, being more deliberate about

generating margin, especially in a a market where you're not gonna make it up with volume. You know, finding volume right now is is even more difficult than trying to deliberately scrape together basis points. So we talked about just a ton of ideas of how you can better fine tune your operations, your strategy, your execution to bring in that that next basis point. So that's kind of the lay of the land. A lot went on, a lot we had a lot of panels

We had a great economic macro discussion with with Kevin Jackson as as we've done for the last couple years. We had some guests our clients come in and talk about how they use our technology on a daily basis. Vimy hosted an MSR panel. We had the MSR brokers come in and discuss what's going on in that market. We had a dealer panel as well where we talked to broker dealers and so on, but just want to try to cover just maybe a couple teasers of what we what we discussed.

at the event and then or you know, over this next few minutes, but then, you know, all eyes are now looking towards our summit, which will take place in February, which will be three day event. Seven times as many people, five times as many sessions and so on. Anyway, welcome Vimy. Thank you for being here. Thank you for helping us put on the event. I mean just starting off, what was I'll put you on the spot. What was the what was the best part?

of last week. And you can't say your panel. You have to

The best purple.

say some something else.

that's unfortunate. All right. Well, to my fellow panelists, thank you for joining. I would have called our session out as my favorite, but I'm no longer allowed to. I will get to our panel though at a certain point, because I do think there was some really valuable information that I'd like to relay to our audience. But if I had to pick one, I would probably pick the session on non-QM that we had done. And we had done this collaboratively with Cam from RJO. And I think this was a really interesting one because

It just everyone's ears perked up. I could just see people taking notes on their notepads and really trying to absorb all the information. And of course, this is just because of the not the the popularity of the non QM product right now. We've chatted about it a lot on the podcast, but it really has become sort of the the product that's getting the most attention just because it has allowed for originators to increase volume. And

I just thought there were a lot of really interesting statistics. And of course, a lot of the statistics are backed up by our own data that we see at Optimal Blue. For example, how we're starting to see non-QM origination as 11% of total originations. And where was just a few years ago, it was about four to five percent. So obviously tremendous growth when you're talking about the as a si an industry this size that we have. So I think there were some great strategies discussed with respect to hedging.

just even like el eligibility, delivery and so on. So I I thought that was really well done.

Agreed. Yeah, I I loved that session. We've we've done it the last few years, but this year felt more like rubber meeting the road. Like how can I actually progress in my ambitions to originate price and hedge and deliver non QM? And and I mean, for every lender out there, it's gonna be a different story for them, right? But we know that that pressure is out there right now to

learn more about non QM for lenders to have an answer for it. So we were I think we were very happy to be part of that solution and just have some of that information for folks. But I think that's yeah, why you we saw the pens moving more swiftly during that session is everybody walked in thinking there's gonna be a session on non QM. We know that and I know whether it's your originators or your bosses or just the industry is kind of I I feel like applying that pressure to say you need to figure this out. So we've we've definitely made some good strides, I think, over the past year in helping coach clients.

in that endeavor. So that yeah, that w I b agree that was a great session and and a kind of a to be continued discussion. To so reach out to us if you want to learn more and talk about how your specific organization can progress in non QM lending. That was kind of the message we gave at the end of that session. I thought it was the right place to do it.

Yeah, absolutely. And I would like to call out another session that I really enjoyed as well. Very close second would have been Kevin Jackson from Wells. He did a fantastic job speaking on the general state of the economy during our our lunch hour. And I had commented on this to a few people. We were all we were all in agreement that it's really hard to pay attention to a speaker during lunch with the utensils clanking and and trying to get the food in.

but it takes someone, a personality like KJ, to really hold the audience's attention. And I thought that he just had some really interesting things to say and some anecdotes that were really remarkable.

Yes. No, love KJ. He's worked with us in the past as well. And he really does just get up there and captivate the whole audience. And he just has some really practical ways of looking at things and and just breaks it down so that you can understand what kind of some of the more complicated dynamics of what's going on across the globe in terms of whether it's macro effects of the war in Iran or it's

related to what's actually happening in the debt markets, what's happening with the AI trade. He had some really just practical takes on things that were really hard to argue with, even though some of them were non-conventional or didn't necessarily go along with some of the narrative that you'll see in the mass media. I think he just he just has that knowledge that trumps what no pun intended that that trumps the the kind of conventional wisdom that's out there in the in the mainstream news.

Yeah, and exactly to your point about how he's able to break it down into a digestible way, some of the things that he mentioned, for example, how his son still lives with him, I I thought that was a really good call out for just speaking to the different generations and how they view housing and affordability and generational trends. And that that one definitely got a chuckle out of everyone in the room.

Yeah, it and it came up during a you know very practical discussion about where the next home buyer is gonna come from. Who are they gonna be? And and his his contention is it has to be has to be Gen Z. Right? Gen X already owns homes. The millennials have had their chance and and th they they bought homes at an older age, but are generally speaking homeowners. But Gen Z, what where are they gonna where are they going to land? And and his point was that, you know, if you

rewind five, ten, fifteen years ago, it was just a lot more easy. It was a lot easier to own a home, period. Right? Like now it's a luxury item is how he put it. Like owning a home is a luxury item. That kind of that twisted my brain a little bit to think about it differently. Like what's a luxury item versus something you have to have? And you don't have to own a home. It's always been part of the American dream and it's been, you know, I do believe that it is

an advantage of our economy and kind of drives our economy in some ways, but you don't have to own a house. If if if the payment to own a house is twice as much as what you could rent a house for, a lot of people are just going to k continue renting. It it's got its flexibilities, it's got its downsides as well, but there's a lot of upside to it. And it's still, I think, difficult for people to fully understand unless you're in this industry that housing prices have gone up thirty, forty, fifty percent in the last five years. And that's a lot on its own. But when you include

What interest rates have done over that same period of time, the payment to own a home has more than doubled. And insurance and taxes and all of it, right? It's just it had maybe it's become a luxury item. Maybe it is much less so for everybody than it was five plus years ago. And I and that's that's happened in history. There's bit it ebbs and flows, right? I remember in two thousand five, two thousand six, I couldn't believe that people could afford homes. W my wife and I didn't own a home at that time. And obviously we know what happened at

Two thousand seven and eight that made homes more affordable. We'd like for that not to happen again. But sometimes throughout history, something happens that that causes homes to be more affordable. You hope that it's wage growth. That would be a nice, I think a better solution. And maybe that's what we see over this next decade with you know increases in productivity from things like AI. But anyway, I'm digressing back to the point. Kevin made some really good points about the housing industry and where we are today and why.

Yeah, maybe just a ton more supply might not be the answer and that answer may already be playing itself out and isn't make making many improvements in home ownership.

Yeah, agreed. It really was very hard for me to wrap my head around that too, the idea that owning a home could be a luxury. I thought the exact same thing as you, like, but this is part of the American dream. This is what we've always sold people on is part of the American dream. But what he says makes a lot of sense. And I think Jim, you and I had talked about this too, but in a lot of other countries, this is very much a common thing. It's very hard to own homes in much of Europe. And so it's not it wouldn't be as much of a surprise to think about people renting vr more versus owning.

And then to your point about the luxury item, I mean I I'm kind of looking at it like, so are we gonna have the different levels of luxury items for homes, like the Gucci, the Chanel? Like is it are we gonna gonna go

Right.

down that path? You know, my mind would go there.

Of course. Of course. No, but it it's but there are parallels there to to certain kind of items that are just either not attainable or aren't worth spending the money at certain stages of your life. And maybe owning a home is is become that. And as you as you pointed out, that's not unusual in other parts of the world. We're the US is the exception, if anything, with how many people own homes as a percentage of the population and how young we end up buying those homes, at least historically. So maybe it it does make more sense to

to set those rout later in your life when you've become a little more established, have a little bit more savings, or just have higher income to float that kind of that kind of interest. Or maybe p folks want to move around more now or more of a we are a bit more flexible in that regard since COVID. You don't have to go into the office every day for certain jobs. I know on the on our desk we go in a couple of days a week, fairly flexible. But if we were fully remote, I think people would probably choose maybe to move from state to state.

Maybe a little bit more often. In that case it doesn't always make sense to buy a home when you get there.

Yeah, very much agree.

Okay. We certainly don't have time to recap the entire forum. but just, you know, let's throw a couple things out there. Starting with the MSR panel. I I love that panel every year. We do every year. We do it at the s at the summit as well. I think it bears a an update or discussion at least twice a year on what's going on in the MSR market. What what were the some of the takeaways for you from that panel?

The biggest takeaway I had was just about the new capital that's been entering the servicing space. We've discussed a lot about how there's still a lot of demand for MSR out there. but there again, there's always this dilemma of well, do I do I sell my servicing and give up that borrower relationship? or do I do I forego the cash but keep the potential of a refi or new purchase opportunity? And it was interesting to hear that there's actually there's been some new investments or investors in this space.

through the ESS structure, which really is just the excess servicing spread. And so the idea behind this is that a servicer or a lender could retain the base servicing so that they keep the relationship and they perform all the servicing, but they can sell the excess strip to an investor so that they get the best of both worlds. They get the liquidity, but they also get to keep the relationship. And I don't think I had realized just how prevalent that's becoming and that's that's been a really

big change for the industry. I think that it'll really again it kind of allows for liquidity, the borough relationship and just I think this is really interesting in a higher rate environment like we have been, you can use the you can exp expect to receive those cash flows for a longer period of time, which makes it an important an important asset.

Yes. So that is exactly the highlight I took from it as well. So just and I'll I'll just kind of paraphrase it to make sure I understand this, but also so that the listeners can can get the the highlight of this. So we're talking MSRs, mortgage servicing rights. Many originators, many lenders retain a fee, which is basically a portion of the interest rate that a borrower pays.

And they get cash that comes in the door every month, every year from that bit of cash for owning the servicing. And they also, you know, in exchange for that, they have to service the loan. They have to take payments. They have to take action if there's any payments missed or late payments or that sort of thing. But that's there's a like tremendous amount of cash that's tied up in that asset. So you own own the servicing, you get to service the borrower. There's some pros to that, like going out and

refinancing that borrower at some point or when they move into a new home, you can do that loan, you can make more money on on that transaction. But again, you're you're kind of tying up cash in that asset. So sounds like what a lot of lenders are doing now, which is kind of best of both worlds, is you can monetize part of that asset, you can sell part of it to somebody else. They can get a little bit of that cash flow and they'll pay you today for what that's worth to them. But you get to still own that relationship with the borrower. Meaning you get to

Call that borrower when rates go down and try to, you know, get a refinance done, or if they need cash to pay off other types of debt, you can help them out with that. Or when they move, you can kind of own that relationship. So I thought that was a just a really creative way to try to maintain some cash liquidity, but also maintain that relationship with the borrower because that relationship seems to be more and more valuable ev every single year as technology gets smarter, as there's just less loans out there because of interest rates are so high. It's just that

To me, that relationship, especially with AI coming in and probably being a big part of retention strategies, I think it's just gonna be difficult to to survive without having some of those relationships, especially if rates go down, you know, here within the next five to seven years.

What were some other highlights for you? Any any final thoughts on I don't know, takeaways that you're gonna bring back with you or that you're gonna kinda repeat to other clients as you have discussions over the coming weeks and months?

Covered the the highlights, and I also think that there's something to be said about the teaser. As you mentioned, as we started this episode, that a lot we have our summit coming up, and all of our focus at Optimal Blue will be on making that a successful event, as always. And we expect to cover similar topics as we as Jim and I just discussed, and quite a few more. So if this little recap enticed any of you, we encourage you all to register and attend our summit.

Yes. Yeah, the summit, much bigger event, tons more people. Three days. It's in Scottsdale, Arizona. Definitely register now because there's there's discounts out there for the next few weeks. So if you're planning on going, you should definitely register now. We will have, you know, all of the same types of sessions that we had at the forum, plus five times that. So just a as far as capital markets.

Focused events. I don't think there isn't a bigger one in the industry. Of course, there's the MBA events, but those tend to be broader in scope and a little bit more meeting centric, you know, meeting with investors, meeting with with vendors, meeting with other lenders, versus the summit is just all getting down to business, you know, just learning, collaborating, just having.

open discussions about best practices, not just of how people are using optimal blue technology, but generally how they're approaching the strategy and the execution of their secondary marketing activities in the mortgage industry. So just a ton of good information there. And then if you missed the I'll leave you with this. If you happen to miss the press release last week, we now know who our celebrity speaker is going to be. It's going to be Super Bowl quarterback Troy Aikman. we've had some

Huge names. We've had Tony Hawk. We had we had Michael Phelps last year. So we did not we didn't back down this time. Troy Hickman is another huge huge celebrity that we'll have speaking at the Wednesday session at the summit. So join us there.

All right, Baby. Thank you so much as always. Great discussion and talk to you again soon.

Yeah, thank you, Jim.