In this episode of Optimal Insights, Jim Glennon is joined by Alex Hebner, Kevin Foley, and Vimi Vasudeva to discuss the latest developments shaping the mortgage industry. The team explores the implications of sparse economic data, including CPI and labor trends, and previews the upcoming Fed meeting. They also dive into the FHFA’s potential pricing reforms, including LLPA and G-fee adjustments, and recap key takeaways from the MBA Annual Conference. Vimi also shares insights from her panel on the newly passed trigger lead legislation, explaining how it could improve borrower retention and MSR value.
Key Topics Covered:
Sparse Economic Data: CPI came in at 3.0%, slightly below expectations. Government shutdown may delay future data releases.
Geopolitical Developments: Trade negotiations with China and Southeast Asian countries; implications for global markets.
Federal Reserve Outlook: Anticipated 25 bps rate cut; discussion on FOMC sentiment and statement analysis.
MBA Annual Conference Recap: Grounded optimism, tech adoption, AI skepticism, and new Optimal Blue features.
Trigger Lead Legislation: New bipartisan law banning unsolicited data sales post mortgage inquiry; expected to improve retention and MSR value.
Optimal Insights Team:
Jim Glennon, Vice President of Hedging and Trading Client Services
Alex Hebner, Hedge Account Manager
Kevin Foley, Director of Product Management
Vimi Vasudeva, Managing Director of CompassPoint
Production Team:
Executive Producer: Sara Holtz
Producers: Matt Gilhooly
Commentary included in the podcast shall not be construed as, nor is Optimal Blue providing, any legal, trading, hedging, or financial advice.
Mentioned in this episode:
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Optimal Blue Summit 2026 | February 23-25 | Scottsdale, Arizona
In case you missed it – Optimal Blue has announced the dates for its 2026 Summit! Join us February 23 – 25 at Talking Stick Resort and Conference Center in Scottsdale, Arizona, for a client-exclusive event packed with strategic insight and innovation. Attendees will gain early access to Optimal Blue’s latest generative AI and automation tools, dive into expert-led sessions on pricing, compliance and more, and experience hands-on demos of new capabilities. Plus, it’s a chance to connect with capital markets pros, integration partners, and mortgage insiders—all while gaining actionable strategies to maximize profitability and sharpen your competitive edge. The Optimal Blue Summit: where proven mortgage expertise meets modern innovation to shape what's next. Early bird registration is now open at Summit.OptimalBlue.com – space is limited, so register today!
News release: https://www2.optimalblue.com/optimal-blue-to-host-its-2026-summit-february-23-25-in-scottsdale
Registration: Summit.OptimalBlue.com
Welcome to Optimal Insights. I'm your host, Jim Glennon, Vice President of Hedging and Trading Client Services 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. Welcome everybody. Good afternoon. It is October 27th, Halloween week coming off of the MBA annual last week that many of you attended. will talk.
with Kevin and Vimy about that later. we get to that, we'll do a bit of a market update. Although there's been very little in the way of economic data being released, there's still a lot to talk about. We did have CPI that came out last week. So we'll get to that. We have a Fed meeting later on this week, which we'll get to a couple other things around geopolitics. And we're definitely going to want to address some of the social media scuttlebutt been out there around.
The FHFA and LLPAs and Bill Pulte's been tweeting about meeting with Barry Habib to address mortgage pricing. So that's a big subject that's out there right now that hopefully there will be some announcements forthcoming about. we get to any of that, just in the way of data, OBMMI, conventional 30 year, right around six and an eighth. So good progress there. Continuing to see that just drift a little bit lower every week. Ten year, about
We drifted below 4 % last week as you'll recall, a little above four right now, but by the time this podcast airs, we could be a little bit below 4 % again. And volume generally speaking is active. We're seeing 20, 30, 40 % increases over what we saw this time last year, which is saying something because we had a pretty good rally in rates this time last year as well. So let's go over and talk with Alex about what's going on in the market.
Jim Glennon (:
Okay, Alex, we've got quite a few things to cover this week, even though there's not been much data to speak of. Let's start out with the data, maybe a little bit of the data we did get last week. We actually got a Bureau of Labor Statistics report on CPI, on inflation and decent numbers there, I would say. We were a little bit lower than expectations, right? I think 3.1 was the consensus.
Alex Hebner (:
Correct.
Yeah, we got a 3 % flat CPI reading, which came in, like you said, below expectations of 3.1. This number just continues to of creep up slowly. But as we've said over the recent podcast episodes that 3 % seems to be politically sustainable and they're far more focused on getting rates down for the time being. So, you know, this was pretty much a perfect release for what they were looking for.
Questionable if this government shutdown continues into November, if we'll get a November number because this number was only released for the social security inflation calculations. So, you know, more to see there. I'm hoping we get the government back open by then as this is stretching on for quite a while now. And we're looking at two paychecks that government employees have missed. But this was perfect for the administration and their goals. Just below target, energy prices were really the only thing that dragged
metrics up, apparel was up a little bit, but that's such a small part of the equation that it's really nothing. So yeah, no, we're right at 3 % and things can continue along.
Jim Glennon (:
Yeah, interesting to think about how the government shutdown might start to feed into some of these numbers, whether it be a little bit disinflationary or don't know, weighing on interest rates. Again, I know folks who are looking at having to go get a loan right now to float their mortgage and whatnot because they're getting to the point now where they're, like you said, they're missing a second paycheck. They're into another pay cycle at this point, so it's not going to be
November before anybody gets paid. And that's assuming there's a deal here in the next week or so, because we're about to finish up month one of the government shutdown.
Alex Hebner (:
Yeah, exactly. No, and there doesn't seem to be an end in sight. These things do tend to resolve pretty quickly once they're, you know, the log jam sorts itself out. But as of right now, there doesn't seem to be an end in sight. you know, we'll be the first to let you know, but for the time being, it's a steady as she goes.
Jim Glennon (:
Yep. Okay. So no BLS employment report this month. It's looking like we're not going to see another one until...
Alex Hebner (:
Correct. Yeah, I'm expecting we'll
miss that one at the very least next week, ⁓ next Friday.
Jim Glennon (:
Right, because the folks still have to come back to work, still have to gather the stats, still have to get the number right. And there's already been criticism this year over the BLS and the large revisions that we've seen. And there's been some thought that perhaps the BLS doesn't have either the right or the right amount of staff to get some of these numbers accurate. So probably not, probably December before we see another official number. But in the meantime,
Alex Hebner (:
Probably,
I'd imagine we get some sort of revision number, but again, they've missed their windows for sampling. And then again, it does take them time to parse all the data. yeah, think the first, hopefully the first accurate and on schedule ⁓ labor number we can get will be in early December.
Jim Glennon (:
Right. But in the meantime, I think there's a lot of news that relates to employment. There's been a bunch of layoffs. You noted that a little bit earlier. Some big corporations have announced some relatively sizable layoffs here in the past few weeks.
Alex Hebner (:
Yeah, yeah, just like some big names out there have announced some layoffs, like Target was one of them, but Target, it's kind of understandable. They're kind of losing market share war with Walmart when it comes to, you know, your big box grocery store and combined with, you know, home So that one's kind of understandable. The ones that kind of, you know, just raised an eyebrow for me was applied materials laid off about 4 % of their workforce. They're a chip maker, so you'd expect them to be doing pretty well.
And then the parent company of Facebook, laid off 600 people specifically in their AI division, which they said was for streamlining. And none of the people that they paid big money for this summer were involved in those layoffs. It was, like I said, just like a streamlining of their systems. it does raise the question of, three months ago, you were on a hiring spree spending, I think, north of a billion dollars on labor talent. I guess at the very least, it raises the question of
Jim Glennon (:
Mm-hmm.
Alex Hebner (:
who's making the calls on hiring if you're gonna be doing such quick turnarounds or something like that. those were the two that raised the eyebrow for me. GM was also one that was showing that they'd be laying some people off, but we're gonna see some consolidations, I think, the American automakers just because of rid of their EV programs as we've seen those tax credits go away.
Jim Glennon (:
Yeah, yeah. think in reading more and more about that across the world that just, because of the American tax credit that was out there for so many years to give incentives for folks to buy EVs, electric vehicles, that's going away at the end of this year. it's expected that's going have a substantial drag on demand for electric vehicles. So that's an interesting thing that's playing out. And like you said, the folks that are
that are attached to that part of the organization or, you know, lot of them are likely to lose their jobs if they can't find something else within the organization to use their skills.
Alex Hebner (:
Yeah. Yeah. So, so nothing so far, you know, overall that seems to be screaming fire to know, perhaps just a little bit of consolidation. We know the economy isn't in the strongest of, of straights. again, and in the, these, these layoffs compromise, maybe like 5 % of corporate workforces, which no one ever wants to see, you know, far, far less than, you know, like a 25 % cut across the board or something like that. Really, really drastic measures.
Jim Glennon (:
We are not an emergency situation. I think this happens a lot, especially when we saw the kind of rampant hiring coming out of the pandemic still. think we're still feeling some of the effects of that. And then you kind of have to right size here and there because you've hired too much or too little in certain areas. So you'll announce a layoff, but like you said, it amounts to single digit percentage of these enormous, you know, 20, 30, 50,000 people organizations.
Alex Hebner (:
Right.
oing over hiring as we saw in:
Jim Glennon (:
Mm-hmm.
Mm-hmm.
Right. Yeah, we're kind of starving at this point for any kind of data we can get. But that is pretty interesting, don't know, public information coming out from some of these big corporations. So speaking of, I don't know, hiring and firing, a couple of things going on with the GSEs that are worth everybody hearing about today if they haven't already read it in the news. So, I don't know, news affecting Fannie Mae specifically, the CEO.
Alex Hebner (:
Yeah.
Jim Glennon (:
There is out, they have an interim CEO at this point who was the acting COO previously, but presumably we'll get a new CEO there that will be appointed by the FHFA or Bill Poulty himself, right?
Alex Hebner (:
Right, yeah, this just seems a great opportunity for them to put in someone. I think it'll really show the direction they want to take. Fannie Mae and Freddie Mac, think there's kind of with the agencies right now, the big question is.
idea of them quote unquote going public again, what's that IPO gonna look like that Bill Pulte keeps teasing? And I think their selection of the CEO for Fannie Mae will be really telling on what that's actually gonna look like. But as you said, yeah, it's up to the FHFA and Bill Pulte himself to make a decision on that new CEO, the former one, she was a Biden-era appointee. So makes sense. I'd expect that we see, just to continue filling other ranks that are aligned with the
agenda.
Jim Glennon (:
Yeah, no doubt. We will see someone come in that is a friend of the administration. Speaking of friends of the administration, some potentially big news developing regarding loan pricing. If you're an originator, you're a borrower, anybody listening to this podcast, definitely listen up on this one if you haven't already seen it because much of it has played out on social media, which not everybody is in tune with. I'm certainly not until something like this comes up and then I'm checking out X and-
Alex Hebner (:
Mm-hmm.
Jim Glennon (:
and Twitter, if you will, to see what's happening. Bill Pulte and the FHAFA have brought in some mortgage experts, including Barry Habib, who many of you likely know, to discuss. At first, was discuss LLPAs was kind of what, like the nomenclature that was used. But then Bill Pulte keeps referring to it as pricing, you know, all capital letters, meaning maybe there's discussion
not just around LLPAs, but around just how do we affect affordability through loan pricing, which is like, of course. I I think all of us in the industry have contemplated that every single day as we try to figure out ways to make loans work for borrowers. But now you have the full kind of attention of the FHFA, Bill Pulte, now you have Barry in there. I don't know, kind of interesting to think about what could come out of that and hopefully something material, something meaningful, right? Besides just another
reconfiguration of LLPAs. We've seen that take place over the years and it's, sometimes it comes out better, sometimes it comes out worse, sometimes it depends on what type of where you are, what kind of credit profile you have, LTV and things like that. I don't know, could the FHFA come up with something really significant right now? Could they influence the G-fee? Could they move that lower to lower rates across the board? Could they increase some sort of incentive on the LLPA side?
to really put a dent in loans, right? Can they bring rates down that extra quarter that we've been looking for to get it down to that five handle? I don't know. What are your thoughts on this Alex? It's right now it is just kind of rumors, but it does feel like they're building up to something that will be announced here pretty shortly, I would think.
Alex Hebner (:
Yeah, I feel like they would, I these aren't like leaks or press leaks of any sort. This is Bill Pulte openly tweeting. So, you you have to take him at his word that something's coming down the pipeline. I think everything you said there are good avenues addressing the guarantee fees. And then, yeah, just in the world of LPAs, you know, that's several grand on the average loan there in costs. I think they will, there's two kind of side of the same coin argument that I've seen presented with.
for folks have been commenting on Bill Pulte's tweets here. ⁓ know, LLPAs are there as a credit risk metric, essentially. And if you're a more risky borrower, you're going to be paying more in LLPAs. The glass half full argument, I would say, that I've seen out there is that, you know, these LLPAs are based on the pre-Global financial crisis underwriting standards, and they were implemented post-GFC, but based on those...
pretty bad underwriting standards that we saw in the run up to the global financial crisis. but in the post GFC world, underwriting standards have been so improved. kind of covered our bases twice by instituting LPAs on one hand, then also just improving the underwriting standards period for your conforming loan product. So the glass half full argument is, hey, well, the underwriting standards are so much improved that you don't need to be paying up. You'll just be denied the loan essentially if you're, if you're a bad credit quality.
glass half empty ⁓ argument here is if they get rid of LPAs, know, we're taking out a pillar safety on credit risk. like I said, it's kind of two sides of the same coin, I kind of the avenues I'm with you on, G fees, we'll see what they do there. I could see them lowering them. The agencies make so much money on those. could see them maybe, you know, know, trying to narrow that margin they're making there. then in addition to that, I could see them rolling back some of the
what they'll probably, know, kind of like woke Biden era LPAs out there. Those, you know, mission scores and such.
Jim Glennon (:
Yeah, it's a tough puzzle to put together and be careful what you wish for, guess too, right? So the agencies have been making money hand over fist for the last 15 plus years, you never know when you're going to need it. That's why all PAs exist and why the G-fee is there. We've not had a major delinquency issue since the great financial crisis in Stockholm Wood.
Alex Hebner (:
Right. And
have them making money hand over fist because of LPA is keeping, you know, you know, the credit profiles of a certain standard.
Jim Glennon (:
Right. I I don't know, I look at it and I try to do the math and I look at certain profiles in the LLPA grid. But a lot of the profiles that I feel or one could argue are expensive, right? Those are kind of maybe FHA borrowers, maybe. And then that's sort of the way that the credit box is designed as well as if you fall into a certain realm and you're, especially if you're a first time home buyer, you're likely going to get an FHA or a VA loan versus conventional. You know, if you're at 90 % LTV and you have
you know, below a 680 credit score. Uh, but I don't know. So it's hard to imagine that, that even deleting all of the LLPAs would make a major dent in what we're seeing today. Cause the majority of your borrowers are 80 % LTV. If you're looking for a refi and you've got it, you know, 740 plus credit score, you need, uh, you need a different, a lower G fee for your rate to be that much lower for us to get into the fives versus the three eighths or whatever of, of LLPAs that you're seeing.
Alex Hebner (:
Yeah, and I think this would be a fix at the margins overall. When the average home in America is half a million few grand here or there is, I think, to be a deciding factor population than they might expect.
Jim Glennon (:
Right. Okay. So more to come on that. We'll certainly be talking through it, but also if, you know, if you're like me and you only look at X when something's happening, like this is a good time to be following Bill Pulte, but also just an eye on the news. Cause when this, if, if and when something comes out of this Barry Habib and others meeting with the FHFA, that'll be pretty big news in our industry. And certainly it'll be, you know, work for everybody to reconfigure to these new adjustments. If that's the route that they go anyway, we'll continue talking through that.
Alex Hebner (:
Absolutely.
Jim Glennon (:
What else is going on? What's going on in the world? Geopolitics certainly reacting even this morning to a possible trade deal with China, which would be pretty big news.
Alex Hebner (:
Yeah, sounds like they've definitely cooled the tensions from two weeks ago. There was quite a flare up in the trade tensions over critical rare earth minerals that China kind of has global monopoly on the current reserves of. Trump threatening to throw an additional 100 % tariff, an effective embargo on Chinese imports. have cooled quite a bit since then. Besant was front running the US delegations to Asia. There was an Aishan meeting that's Southeast Asian countries.
Then Trump is meeting with Xi Jinping, I believe, in Seoul ⁓ today or tomorrow, sometime this week, where they're expected both put on a smile and show that things are doing all right. With right now, the Chinese concession has been that they will ⁓ not institute those rare earth mineral export licenses that they said they were going to, in addition to they're saying that they will buy US soybean exports, which have been.
completely embargoed up to this point. It's been a really big pain point for Trump administration because ⁓ the Chinese eat something like 90 % of our soybeans. So it's been a really big pain point for lot of farmers in the In addition to that, smaller news kind of flew under the radar with all the China news, but Thailand, and Cambodia all agreed to US trade frameworks where they will eliminate all tariffs and other non-tariff barriers.
Jim Glennon (:
Mm-hmm.
Alex Hebner (:
⁓ So definitely some wins there for the Trump administration in regards on the trade front and it sounds like there will be some additional wins with the China meeting but things tend to flip on a dime. So I will stay away from saying that there's a deal until there's a deal with wet ink on it.
Jim Glennon (:
Good call. Good call. China does seem more positive this week, but those other ones that where the deals got done, Malaysia, Cambodia, like we either do a lot of trade with those folks, know, a lot of textiles and things and clothing, shoes and apparel come out of those countries. So that's pretty interesting news there. I don't know, I guess that does that sort of thing put more pressure on China when we start making deals with other countries where we can get low cost goods?
Alex Hebner (:
Mm-hmm.
Jim Glennon (:
China becomes less and less of an emphasis. Are they too big to fail? Right? Too big to, to, to overlook.
Alex Hebner (:
I still think they're too big to overlook. think it definitely puts pressure on their economies in that these Aishan countries, the Aishan organization is set up as really a of containment organization around, it's a military organization, but it's kind of a containment around China and Southeast Asia. A lot of those countries have pain points with the Chinese themselves, whether it's military conflict or otherwise, they also have friends in the region as And I think, you know,
lowering US trade barriers. These countries also import a lot from China, a lot of Chinese steel, a lot of their concrete comes from them, a lot of building supplies. In addition to, you know, your cheap electronics and your apparel and such, there's a lot of trade there. They share large land and sea borders. So think, you know, getting rid of US tariffs on all those things, it just makes us a more competitive trade partner in the region. And yeah, we'll at the end of the day, put some degree of pressure on the Chinese pocketbook.
Jim Glennon (:
Mm-hmm.
Right. Okay. So look for more news to develop this week on that. And then, again, no real data this week, but we do have a Fed meeting that will happen. That's going to start tomorrow and is going to end within an announcement on Wednesday, likely have a quarter point cut. It's almost it's 99 % baked in at this point, according to the CME. So we would expect that to happen. A surprise, don't know, double cut of 50 basis points would be super surprising.
likely not going to happen. It would be very unusual, especially given the dearth of data that we're getting right now. And I think for the Fed not to cut would be a weird gesture as well, wouldn't it?
Alex Hebner (:
Yeah.
Yeah, no, I would be highly surprised if we don't get 25 basis points. What I'm looking for out of this meeting is more so if we see any members swing towards Myron's arguments for a double cut of some sort, any even show openness to his ideas. I'd also be surprised if anyone is to the other side saying, hey, let's pause. They're seeing something in inflation data that we're not. ⁓ That indicates that it could spike or will remain at elevated levels.
Jim Glennon (:
Mm-hmm.
Alex Hebner (:
But as we said at top of show, the elevated quote unquote levels that we're currently seeing don't seem to be a pain point for any member of the FOMC. So it's all just a degree of how much they'll cut and how well the arguments that are going on in these closed door sessions are landing with different folks. from everything we've heard from all the governors this past month, they as of yet don't sound convinced that we need a 50 base point cut.
Jim Glennon (:
Right. But all are still in favor of two cuts before the end of the year. Right. Two more. Okay. Good. All right. So be watching for that on Wednesday. And as Alex said, not just what's the cut, what's the decision, but what does the text look like? Read into some of that, read into some of the testimony afterwards and see, we'll see if Myron has come in and swayed some folks away from the kind of cautious approach we've been taking.
Alex Hebner (:
Yes, yeah. Yeah.
Mm hmm. Yep, yeah, the FOMC statements are always very generic. If you Google maybe like 10, 15 minutes after the release of just a statement, FOMC statement comparison, there's tools out there that will compare this statement and the last statement and it'll highlight areas that change just because they use very consistent to wording statement to statement. But when there is a change in wording or they add or subtract sentences, are the things to keep an eye on.
Jim Glennon (:
for the past year or so.
It's important.
Yeah, it's wild. And I'm sure AI is used for it at this point. It's wild how they go word for word and compare one statement to the other. And you can read into that when they make those changes, as you said. I'm sure they use the boilerplate up front. And then where do we need to tweak this language to kind of cover ourselves going into the next meeting?
All right. Thank you, Alex.
Jim Glennon (:
All right. Welcome Vimi and Kevin. Welcome back from Las Vegas, sunny desert Las Vegas. I unfortunately missed it this year. Got a little bit of FOMO hearing all the stories coming back from the MBA annual this year last week, but wanted to touch base with you to get some info on, you know, the general, I don't know, vibe of the conference this time around. That's always interesting to hear, you know,
We run through different market cycles and we talk about how people are generally feeling about business, but also some of the highlights. then before we leave, definitely want to talk about Vimi's panel. Vimi was on a panel got pretty deep into discussing refinance recapture. Trigger leads was a big concept there. You the MBA organization or at least having some influence there. They talked quite a bit about that bill and
What's some of the ramifications of it are and why it exists in the first place, why trigger leads have been effectively banned very recently. So Vimi will talk through that with us and we'll ask her a couple of questions just about how all that is working and what the effects could be across the industry. So something very interesting if you're an originator or even a borrower and are interested in what is a trigger lead and how did they get banned very recently? Anyway, so highlights. mean, Kevin, you've been
dozens of these things.
What were the highlights and what was the general vibe in your opinion of NBA annual?
Kevin Foley (:
general vibe, think was grounded optimism. think we've gone through a few years of feeling like we're almost there, we're almost there, we just need to round the corner. this year, think there is some of that, there's also dealing with the reality as it is and we're planning for more volume.
Jim Glennon (:
Mm-hmm.
Kevin Foley (:
optimism would be how I would characterize had a lot of really great meetings optimal blue, lenders, and, just a really great way to, to kind of recap some of the things that, the, teams have rolled out this year, some of the new features, including ASCO be a reginator assistant or AI powered, tools on the PPE side. as well some of the things that, that we're working on, including our most recent press release about.
pipeline monitoring and all that's just on the PPE side, nevermind the hedge side, which you all are very familiar with, Definitely hearing a lot more about more folks dipping into non QM. I think that's just continuing to grow. And the other takeaway, I mentioned this on the
Matter podcast with Wes
seeing a lot more banks and credit unions specifically getting much more in the weeds and more sophisticated with their data strategy. their existing data that they have to identify potential new customers, new business opportunities that are out there.
Those are a few takeaways on my side.
Jim Glennon (:
Right on. So nothing terribly new except for new optimal blue features that are out there, including the trade blotter on the hedging side of the house. But yeah, it sounds like some of these things are like, finally, like we're back to a $2 trillion market. Finally, banks and credit unions are starting to embrace technology. Finally. Right. But folks are kind of being forced to gear up for this next
rs past where you have like a:
the levels they're at without having to add humans.
Kevin Foley (:
Yeah, and
this whole potential LLPA reform snippet that was just sort of like at the tail end of NBA, where Pulte came out and tweeted that he's working with Barry Habee potentially on reforming LLPAs, I think is one of the biggest takeaways, kind of leaving the conference is what's going to happen here. Still hearing a lot about the potential IPO, but I think this LLPA reform is definitely something to watch because there really is no
Jim Glennon (:
Mm-hmm.
Kevin Foley (:
No way to juice the interest rate environment other than just taking a half a a full percent potentially in some scenarios the interest rate just based on LLPA reform or just reducing those LLPAs. So see what happens there, but that was definitely an interesting takeaway as well.
Jim Glennon (:
Yeah, we talked a little bit about that with Alex a few minutes ago and agreed. I hope it's more than just LLPAs honestly. I still haven't figured out a way to rationalize that readdressing LLPAs, which has been done a dozen times since the great financial crisis, I'm not convinced that's going to affect rates enough for the right kind of borrowers. But if they were to go deeper into things like the G-fee and so on, or maybe even allowing the GSEs to build a portfolio again.
you know, to affect the spread between treasuries and mortgages. Maybe we do get something where we were down on the fives like we've been hoping for and like we've been kind of, I don't know, tiptoeing around for the past few months. Vimi, any, I don't know, I assume you felt the same kind of mood coming out of the conference, witnessed some of the same concepts that have been around here for a bit, folks getting into non-QM, embracing, you new technologies. What else do you think was worth noting from MBA annual?
Vimi Vasudeva (:
I would like to take a step back to the opening session. I think it's worth noting that the opening session started with a performance of Viva Las Vegas.
Jim Glennon (:
⁓
that's a highlight. ⁓ Who was singing it? Or was it a dance?
Vimi Vasudeva (:
Gosh, good question.
It was a dance. It was a whole production. And I think it was great because I think it really set the tone for the whole conference. mean, it got everyone energized. And it kind of speaks to Kevin's earlier point about the conference just generally being more positive than we've seen over the last few years. So that was certainly a huge takeaway. also to Kevin's point, the use of technology. Kevin, you had touched upon some of the tech that we announced here at Optimal Blue.
Jim Glennon (:
Nice.
Vimi Vasudeva (:
of course, there were many, many vendors in the space that attended the conference that I think really tried to speak to solving lender problems through technology, right? So hopefully general vendors out there are listening to their clients and seeing what are the pain points and how do we resolve for them? I think that made for some really productive meetings all around the space, a lot of energy around that too, because as...
lenders are hoping for a lower rate environment. mean, as you pointed out, Jim, everyone wants to be prepared for that. And what better way to be prepared than implementing technology ahead of time?
Jim Glennon (:
Right. Right. Being able to scale without throwing bodies at the problem. We're getting kind of a golden opportunity it feels to do that with this gradual ramp up in volume over the past couple of years. So we will see how that goes. Historically, we just seem to see costs to produce go up every year, whether it's the regulations or LLPAs or what have you. Right. So again, hopefully a mixture of things.
Golden opportunity mixed with hopefully the FHFA directly addressing affordability and interest rates right now. And then, you know, some of this tech adoption solve folks problems and a little bit AI too. AI is a big piece of that, that puzzle, right?
Vimi Vasudeva (:
Yeah, but I think that a lot of clients are that last point. think people really want to see like with vendors, are you using AI as a buzzword or are you actually going to deliver on it? Right. And I think that's what sets certain folks apart from others.
Jim Glennon (:
Yeah.
Yeah, there's a lot of noise out there around that for sure. We've talked quite a bit. talked with Sean, if you go way back on this podcast, we talked with Seaver and we've talked with our gang here about AI and how we've taken a very practical approach to it because it makes all the sense in the world right now. How can we use AI to do some of the kind of maybe mundane boring things that people have to do every day manually so we can automate some of these processes through smart technology versus buzzwords and kind of never getting...
The technology off the ground, which is what you see generally out there in the ether, Is some of these companies just saying, do AI and then from there you have to actually pick apart, like what are they actually doing across any industry, right?
Kevin Foley (:
Yeah,
I don't think you'd be hard pressed to convince too many people in the mortgage industry that AI is in a bubble right now. think a lot of folks can feel it by the way sort of thrown around from a marketing perspective and it makes it really difficult for lenders who are out there really looking to get into it to understand what direction should they go? Where is the opportunity?
Where are the challenges with it? yeah, I know Jim and Vimi, we've talked about this on this podcast, but definitely recommend talk to your vendors, your existing vendors who are out there in the AI space who have sort been through the challenges. of, that's the ideal roadmap, I think, if you're out there and you're looking to get your feet wet. just try and chart a new course with a lot of the uncertainty that's out there.
there are folks in the industry who are proven who are able to help guide you through that transition.
Jim Glennon (:
Good stuff. All right. Thanks again for going to the conference. Thanks for bringing back good color. thank you for representing us on stage at the conference. And I definitely want to get to this because I think it's important and it's something that I think the general public probably does not understand on average. But in our industry, I think it's a pretty sensitive subject. So recently there was a law passed that essentially outlawed trigger leads.
What's the trigger lead to me? Let's start with that.
Vimi Vasudeva (:
Yeah,
that's a great question, Jim.
to take a quick step back and just mention that I think that it was really timely of the NBA to host a panel on this. It was called Honing in on Your Recapture Strategies. And to your point, Jim, very timely right now because of the trigger lead legislation, as well as the hope and the idea that rates are going to decrease. essentially, the trigger lead bill refers to the official title as the homebuyers
Privacy Protection Act and it was actually just signed into law last month and it's set to go into effect in March and This was interesting to hear that this was actually a bipartisan legislation and what it's doing is it's amending the fair credit report act and that's also known as FICRA that's an acronym used widely in the industry and what it does is it Prohibits the credit reporting agencies from selling a consumers personal information
So is the trigger lead to other mortgage lenders without consent after a borrower has made a mortgage inquiry. And this new law aims to protect prospective home buyers from unsolicited contact from lenders that they didn't actually authorize to contact them. So the original proposal for a complete ban on trigger leads, but it faced opposition.
Jim Glennon (:
Mm-hmm.
Vimi Vasudeva (:
especially from Republicans, due to concerns about market competition, which is fair, right? Competition, of course, is healthy in any industry. But the Markets Bankers Association works with stakeholders to craft targeted exemptions. that's still the idea is to still preserve consumer protections while allowing for a limited amount of data sharing.
Jim Glennon (:
Mm-hmm.
Right. So basically, see if I can get this right. prior to like right now and prior to this law, if you were a borrower and you went to your bank or whatever, you answered an ad on bankrate.com and started the process of getting a new mortgage, the credit agencies were then triggered to sell your data potentially to other lenders who might want to try to snag that business before you actually close that loan.
That's basically what was happening, right? And some of it does include personal information, which made it a little bit easier, I think, to argue that this should be outlawed as a practice, but also it's, I don't know, borderline seems a little sketchy just the way it, the way it operates in general, right? So starting in March, you cannot do that, right? So it kind of keeps it to where, I don't know, it's going to allow recapture to remain a little bit more tight to the servicer of the loan, right? It's going to make loans tougher to steal, if you will. ⁓
Vimi Vasudeva (:
Yeah,
for sure. So exactly to your point, I mean, it seems a little sketchy, right? I figured out there was a legislate that the VP of Legislative Affairs from the NBA was on the panel with me. And so she's the one who, of course, provided this history and helped clarify things for the audience. But she provided a really, I think, important anecdote where one of the reasons this even came about was because an NBA member was going through the home buying process and she had received two hundred and twenty one.
text messages and or calls. And it like, what is this and what do we do to stop it? So I mean, it is quite abusive, right? And I think what happened before was that you had, could, a consumer could opt out, but I don't know that many consumers know to even do that or how to do that. And so
Kevin Foley (:
Yeah.
Vimi Vasudeva (:
this that was passed does is it definitely restricts the credit bureaus from selling your data.
It allows for a few specific use cases where they can, again, in the spirit of competition. now if borrowers, for whatever reason, wanted to opt in to have their data sold and be contacted by hundreds of people, they can certainly do that.
Jim Glennon (:
Okay, so it's an opt-in situation now. everybody's cut off, but if you want to, for whatever reason, opt into being harassed with 200 text messages when you decide to refinance your house, you can do that.
Vimi Vasudeva (:
Yep. Yep. Again, don't know why you would, but the options are good, right?
Jim Glennon (:
Okay. Yes.
Yes.
Kevin Foley (:
Yeah,
I mean, beyond even being sketchy. I mean, what a terrible experience. a way to, you know, poison, you know, poison the wall with with anyone who's just looking to buy a home or refi, you know, create a negative perception of our industry, you know, it's you want to go a home and then you know, immediately you're spammed like that. So yeah, it seems like kudos to you.
to the NBA and other folks who push this through. I don't even know what I would do if I received over 200 phone calls.
Jim Glennon (:
Well,
then who do you decide to call back? Like who's making money on that deal anyway? I don't know. It feels like AI has probably made this even worse and more chaotic in these situations. It was probably the right time to address it. So yeah, kudos to the NBA and their political activism in this case. I think it really paid off. yeah, the fact that it was bipartisan, I think is a win no matter what kind of bill you're talking about, because it's super difficult more than ever to get both sides of the aisle to agree on anything right now.
Kevin Foley (:
Yeah, yeah, exactly.
Vimi Vasudeva (:
Yep. Yeah, that's definitely a big win. And I think that the MBA representative did a great job of clarifying some of the use cases like I had noted earlier. So just to spell that out for our audience. can now contact a borrower? So it would be a potential borrower, should Insured depository institutions, so banks, credit unions, where the consumer already has an account. That's one clear use case. The other one is the originator of the current mortgage loan.
the current servicer of the mortgage. there was still some room for interpretation by FICRA because think of the use case of a broker, like who in that case kind of has the ability, who owns that relationship, who is the one who would be required. So there's definitely still some room for interpretation, but I think that the idea is we're not trying to get this to just like one specific entity that can contact a consumer. It's going from 221.
Jim Glennon (:
Mm-hmm.
Vimi Vasudeva (:
two, three or four.
Jim Glennon (:
It's
kind of a need to know basis, right? The servicer is going to need that credit information. The holder of the loan or the originator of the loan probably could use that information, but narrowing it down to kind of take some of the anarchy out of it.
Vimi Vasudeva (:
Yeah. And then Jim, you had also made the point earlier about what does this do for servicing with respect to recapture or retention? And that was of course a big part of our discussion. We also had on the panel with me was Chris King from
Mr. Cooper, now Rocket. And so he and I were able to really bring some of the capital markets perspective to the panel. And we had just talked about how, course, this going to be this ⁓ idea behind this bill.
is to, it's still spirited for competition, but in practice, I think it will still be a little challenging for those that have to sell the MSR because the ideas on that under this current bill, they might not have direct access to the consumer. And so it's just another consideration. And of course, there are a lot of smaller independent mortgage banks that don't have the option to keep servicing for a variety of reasons. Cash being one of them.
there's, this is certainly a broader topic, which I know Jim, you and I have discussed many times on the podcast, but so to really hone in on some of the immediate effects of this bill being passed and from a retention standpoint is I've heard that anecdotally that this bill could actually help those servicers increase retention by about 20%, which is huge.
Jim Glennon (:
That's
valuable, yeah.
Vimi Vasudeva (:
Very valuable. And then what does that translate to in terms of dollars? And so using our own MSR cashflow engine, which allows you to model out recapture, I plugged in at a curiosity and increased retention of 20%, you all other variables held equal. And what this resulted in was an increase of five basis points to MSR value, which ideally one would be passing down onto their front end pricing, right? Which means that that borrower then has
five basis points better pricing. ⁓
Jim Glennon (:
That's great. Yeah. Presumably that's, that's real value. Five basis points. not, you know, you're talking about not a penny, but a nickel. that's that overall makes affordability better and maybe you start having an actual effect on, on what borrowers are paying.
should also be cheaper, cheaper to operate, right?
Kevin Foley (:
Yeah, it seems like there. Right. Yeah.
And it seems like there's still a lot of room to improve, recapture numbers across the board. saw stat recently that like the overall recapture rates are, know, are still like sub 50 % like across the industry. that that means more than half of the borrowers that you work with are going to go somewhere else for their next loan.
Jim Glennon (:
You lose.
Kevin Foley (:
there's a lot of greenfield there sure. And this, you know, sounds like it'll it'll definitely help for lenders who are trying to hone in on their recapture strategy. So, Bimmy, I'm so sorry, I missed the talk. had a meeting during the time, but now I'm jealous listening to you talk about it here that I wasn't actually there in the room.
Vimi Vasudeva (:
Well, I felt your support anyway Kevin and this support of many other optimal blue employees who came to represent so
Jim Glennon (:
Very good. Yeah. Thanks again for doing that, Vimi, and for talking through with us here. think this again, super valuable, interesting aspect of our business that has changed significantly and hopefully leads to just lower costs overall. So you mentioned how prices will get better like theoretically immediately because of this change, but also just there's so much spending on some of this marketing stuff, right? Those 200 lenders all paid something for those.
trigger leads and now they're not going to be paying for that anymore. Somehow that should reduce the overall expenses in the industry that leads to higher rates.
Vimi Vasudeva (:
Yeah, that's a great point.
Jim Glennon (:
All right, good stuff, Kevin, Vimi, thank you so much. Awesome discussion. Talk again soon.
Vimi Vasudeva (:
Thanks, Jim.
Kevin Foley (:
Sounds great. Thanks, guys.
Jim Glennon (:
All right, great discussions today, folks. Let's wrap this thing up. Thank you, Alex, Vimy, Kevin. Great discussion about all things market conditions, some of the drama going on potentially with the FHFA, and then all the great things that came out of MBA annual last week. So thanks for talking us through that. And that's it for today. Join us next week for another episode of Optimal Insights, where we'll continue to provide you with the latest market analysis and insights to help you stay ahead.
Check out our full videos on YouTube. You can also find each episode on all major podcast platforms. Thanks again for tuning into Optimal Insights.