Labor Trends and Feb. 2026 Market Advantage Data + Insights from The Basis Point's Julian Hebron | March 9, 2026

Jim Glennon (: 00:18

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.

Hi, welcome everybody. Today is March 9th. Great show as always for you today. In the interest of making sure you know what you should be watching, whether you're an originator, a capital markets person, or just someone interested in the mortgage industry and some great market commentary, stay tuned. We'll start out with a market update with Alex and James, and then Mike Vogue and I had the pleasure of talking with Julian Hebron, founder of the BasisPoint. So stay tuned for that interview here in a few minutes. Before we get to that,

The OBMMI 30-year conventional mortgage rate is at 6.06 coming into this week. So a little bit elevated, 10-year also elevated at 4 and an eighth, 4.125. Oil has hit $100 a barrel. really starting to see some shocks come from this conflict that's been going on in the Middle East between us and Israel and Iran for about the past week and a half. We're not expecting a ton of movement in rates in the short term, certainly not a dip lower.

If anything, a lot of the short term news and impact coming out of this war is likely going to be inflationary.

Let's go check in with Alex and James and see exactly why we feel like rates shouldn't dip here in the short term.

Jim Glennon (: 01:45

James, Alex, welcome. Thanks for being on as usual today to talk a little bit about what's going on in the market. And I think we would be remiss if we also didn't talk about what's going on in geopolitics over this past week and a half. Why don't we just start with some numbers? had the, you know, typically the biggest of the month, we had the unemployment report, which came out Friday. And we finally, well, depending on how you look at it, finally saw a negative.

So we've broken below zero. We've potentially gone into some sort of contraction. We lost, I believe 92,000 jobs versus we're expected to have a small amount of build in jobs. But also had the unemployment rate, the headline rate tick up like a 10th of a point to 4.4. So still kind of a ho-hum situation, don't you think? But mean, anything that we should be reading into this report right now, or is it kind of an isolated thing that we should just keep an eye on?

Alex Hebner (: 02:45

Yeah, no, I mean, I think you nailed the headline numbers there. We were expecting a slight gain, a kind of a normal economy, maybe slightly weakening economy, gain of couple tens of thousands of jobs for the economy. And this one was big surprise, back 92,000. First negative reading we've had in quite some time. then in addition to that, we saw revisions for the past two months also came down quite a bit.

was a little bit of fuzz on this particular reading. ⁓ Some of this was due to some strikes that were occurring in the healthcare space. so those jobs were not being counted as part of this. And as we know, healthcare has been the carrier for labor market over the past few years. But yeah, yeah, minus 92,000. We'll to see if that trend continues. Again, the strike, I believe, is over. And so that should...

lighten the effects, but yeah, no, it does seem that we got a little bit of relief there, of Q4, beginning of Q1 this year, but the weak labor market narrative has definitely come back, which was, again, this was a very surprising reading, that the private payroll's numbers, ADP's number was plus 68,000 right in the neighborhood of where the estimate for the non-farm was last week. So it really just came down to Friday. Big shock there.

James Cahill (: 04:01

And, you know, looking back at January, it was, there was an assumption that January was going to be decently weak and it came in strong, right? We had kind of been teasing out like, why is the, ⁓ market consensus on this and it's going to be high and then it was so, but even when that came out, a lot of, you know, economists came out and they're like, Ooh, this is probably going to get revised down. You know, this number is a little high. It doesn't really jive too well. So seeing it get revised down and then seeing this month kind of

of

this slam the other way. That does make some sense, but I might call it a moving average and smooth these two out a little bit. Say it's just maybe not a full actual contraction here, but a low job support for January, February, 20, 30,000, maybe that neighborhood.

Jim Glennon (: 04:50

Yeah, it wouldn't take much of a revision of this number a couple months from now to make it a positive number or closer to zero. Suppose it could go more negative. But it does, mean, the jobless claim and non-survey number, that number has been super low as well, meaning that there's not a surge in workers applying for unemployment benefits. So you got to wonder where this is coming from other than

Again, we've talked about this over and over is that the workforce is stabilizing or even shrinking. So we don't need to create a bunch of jobs to keep people gainfully employed. You're just going to have minimal people, kind of an average of 200,000 to 225,000 people applying for job benefits, unemployment benefits. Meanwhile, we don't really have to add jobs to the economy to kind of float that decent number over and over every week.

James Cahill (: 05:45

I know I've harped on this before too, a lot of the unemployment is in new grads, that kind of younger cohort. And you do have to have paid into the tax system order to be able to take out. So there's some of that going on. And if you're moving home, live with mom and dad while you're looking for a new job, maybe you don't apply for unemployment. So there might be some...

I get noise or fog in that number to me. I've just always a little surprised by how low it is given the youth unemployment is much higher.

Jim Glennon (: 06:23

Yeah, that's a super important point is sort of that ghost unemployment that's going on. Yeah, right out of college, you can't apply for unemployment benefits if you haven't actually had a real job yet.

Interesting. we'll keep you apprised there. We'll keep, you know, one week or one month does not a trend make, but certainly these numbers have been weakening for a very long time at this point over a year. So certainly something going on in that realm.

Alex Hebner (: 06:48

Yeah.

omewhere. We see it peak July: 2023

Jim Glennon (: 07:16

Mm-hmm.

Alex Hebner (: 07:19

July, September of this year again. we're seeing it start to stretch out into the fall. We saw 9.5%. It's fallen since then. So it does seem that that rate has fallen. There's a big cap in there because of the government shutdown. So a little bit in there, but there is definitely a trend there over the past two, three years to change this point on college graduate unemployment.

Jim Glennon (: 07:38

Right. A little bit of AI in there, a little bit of maybe a weakening economy.

All right. So I do want to get to, we had some inflation numbers coming up this week, but before we get to that, I want to talk about something that may very well influence those numbers already and certainly will influence them in the future. And that's the conflict in Iran. We're a week and a half in to that. We began bombing, call it two Fridays ago or early morning, Saturday, Mideast time.

And it feels like the markets initially thought, this is either a nothing burger for markets or this is at the very least is going to be positive in the long term because there's an angle here to lower energy prices over the long term. But since then, we seem to be having the opposite reaction from markets. Oil is hitting short-term record levels on record disruption. I was reading just this morning that

20 % of the world's oil is in some stage of disruption in terms of reaching its destination. So that gets you to the point where refineries are shutting down. natural gas, not just oil, but other fuels are being choked off where they originate, which is not a very short-term problem that can create problems down the road. So oil's through the roof. Equity seemed to be selling off on a lot of this news.

Stagflation is being thrown around again, even though was already kind of lurking in the background with some of the stubborn inflation numbers we've seen and the kind of lack of movement from the Fed. Anyway, a lot to think about here, but obviously energy can drive up every other cost when it rises. Oil is an input to any product that has a destination, right? It has to get moved, it gets on a boat, it gets on a plane, a train, an 18-wheeler and so on.

Meanwhile, we're having, you know, we may be having labor market issues. So I don't know, what do you make of this, James and Alex, in the near term? What are the effects that the market seems to be finally reading into around the Iran conflict?

Alex Hebner (: 09:52

You know, I think I'm with you. think we came in little hot high on our horse last Monday, just on the back of 48 hours of very successful strikes. I we knocked out the Supreme Leader. We knocked out a number of defense ministers and generals in the process of doing that. I think the market sentiment at that moment was, ⁓ we'd knock to use the administration towards we knock the head off the snake. They'll come to the table and make concessions get what we want. That doesn't seem to have been ⁓

how things have evolved on the ground. does seem that Iran has in place a pretty decentralized structure. Their missile drone teams are able to kind of act independently and hit targets. And we're having trouble strikes to stop throughout the Middle East on Gulf states and Israel. so, yeah, I think the market is just grasping that this is going to be a more drawn out conflict. And because of that, going to see higher energy prices.

probably at least for the next six months if I had to put a number on If they declared peace right now, we were talking about this before the call, if we get off this call right now and the peace in the Middle East, it's gonna take at least four weeks to turn on a lot of these refineries back on to get things moving again. energy markets are just like everything, it's just in time delivery. To an extent, there's strategic reserves that can be tapped into, but... ⁓

We see these flows shut down for any amount of time. It's going to produce some rising prices, which we can talk I think we'll see that start to bleed in as recently as next month's CPI and PPI reports.

James Cahill (: 11:25

it takes about six weeks for the oil to actually make it out of the ground into a refinement and then into the gas pump. So all the gas pricing that's going up right now, I live right next to a gas station. It had a two handle a week ago. It's got a three handle now closing in on a four. all just preemptive because they're kind of planning ahead as to what is going to happen with prices so that they can make this work.

the administration is saying, we're gonna protect ships going through the Gulf. Well, first of all, can you is a big question. Who's going to take that risk and find out whether you're right or wrong. But even if you can protect the ships going through, they need to turn all of the infrastructure back on and start pulling things out of the ground.

Yeah, I think we'll know over the next three, four weeks if that's possible. And if we're able to keep things protected, the United States does have the trillion dollar military. I'm sure that they are going to keep at it and eventually they'll slow down strikes, but it is a ⁓ definitely a short term bump, but I would put my money on oil opening back up, but give it a month.

Jim Glennon (: 12:35

Yeah, it's wild to read about. didn't realize quite the extent of it, but the articles I've read this morning, this is the largest oil or energy disruption across the globe since the 1950s, even more so than the embargoes in the 70s and the Gulf Wars. upwards of 20 % of the world's oil has been choked off in a very short period of time. And the reserves around the world are much smaller than they have been in previous crises. So that's why we're finding ourselves in this situation of

price of oil kind of rocketing up towards and probably above $100 a barrel. So it comes at kind of a rough time as we've talked about here is you've got inflation that's almost certainly going to be stoked by this energy shock. Meanwhile, unemployment does seem to be becoming a bigger factor, but that puts the Fed in a position between two of their mandates, right? If inflation spikes and unemployment spikes at the same time, what do you do? Do you cut rates to?

to keep economic progress growing or do you have to hold your ground and keep rates where they are, even raise them, because we start to see inflation go above 3 % again. And that's something we'll see this week, I believe, right? We have CPI and PCE coming in this week.

Alex Hebner (: 13:48

PC,

Correct, yeah, yeah, we'll see. CPI, PCE, I wouldn't, these will be the last pre-Iran War numbers. These are for February January. I think some of them are actually delayed for that very short government shutdown that we had. But yeah, these are all, these will be the last benchmark before the next month's numbers. They're expected on the higher end. Looking at north of 3 % on the PCE expectation year over year and 2.5 % on the

Jim Glennon (: 13:55

Mm-hmm.

Alex Hebner (: 14:16

So we'll just have to see where those come in. probably a pretty big divergence between non-core and core numbers moving forward, just keeping in mind that energy fuel is a big component of that non-core number. But it doesn't strictly exclude the cost of fuel, because the cost of fuel is built into so many modern conveniences, and as you were pointing out, Jim, transportation. no getting away from it on the core number, so to speak.

Jim Glennon (: 14:39

All right. Yeah. We haven't seen the effects of the numbers yet, but we certainly will. think we may continue to see the markets sell off a little bit. Again, this is long-term, expansionary in terms of the military industrial complex, right? But in the short term, unless you're a defense contractor that's building weapons right now, we'll probably see a bit of a slowdown economically as we get into the second quarter of 2026.

right, James, Alex, appreciate your time.

Alex Hebner (: 15:08

good here.

Thanks, Jim.

James Cahill (: 15:12

Thank you as always.

Mike (: 15:13

Welcome everyone to the February Market Advantage. coming to you off the high highs of the Optimal Blue Summit. was an amazing time in Phoenix. were at 500 plus ⁓ OB staffers, lenders, investors, partners, other vendors in the industry. Some celebrities made appearances at the summit as well. just some interesting tailwinds here behind the industry.

prior to some of the macroeconomic events that have been happening recently. know, Brendan, I'll turn it over to you here. You guys kicked off on some of the data that we've observed this last month here.

Brennan (: 15:49

Yeah, absolutely. Thanks I'll continue with the good vibes, I We'll maybe table some of the geopolitical things. think, perspective on that is obviously there's going to be impact from what's going on in the Middle East, are in no position to forecast what that impact is going to be. So we're going to keep going about our business as well, everybody else monitor the situation. I guess that's the trend.

from a lock activity perspective, February was good. So, ⁓ good vibes coming off of our, our conference in, ⁓ Phoenix. saw as we pulled the data for the end of the really a strong, strong February. So, ⁓ both on the refi and the purchase side, had mortgage rates down, OVMMI 30 year conforming rate ended the month at 5.9%. It was down 17 bips from the same time at the end of January.

% against: 2025

After a slow January for the purchase market, if you recall, we were actually down year over year in January. Had some hypotheses there around maybe just a a tough month related to weather that kept people from moving on home purchases. And we were very grateful to see that pick up and turn around in, February. So we're trending ahead of where we were at the same time last year, right? Term refi and cash out volumes were roughly in line with January growing just.

the highest month we've seen: 2022

month from a volume perspective. Interesting, some spread information here. The 10 year finished the month down below 4%, 397, down nearly 30 basis points. The 10 year to 30 year mortgage spread widened though. So the mortgage rally lagged a little bit. If you could get some tightening there in the mortgage market, the TBA is relative to treasuries. may be in an ⁓ even more advantageous position from a rate perspective here in the near future.

Arm utilization, we've been tracking a little bit, continues to hover around 10%. And I think we believe that as the curve continues to steepen, adjustable rate products are going to continue to pick up volume or the economic incentive is certainly going to be there, especially as you start to think about folks, maybe if they took out jumbo or larger loans over the last few years and are going to look to lower those payments the rate curve moves in their favor.

few other odds and ends. Average loan amounts were up above $400,000. I think we failed to mention it last month, but January was actually the first time we had tracked average loan amounts up above $400,000. mean, it's really kind of incredible that we're sitting here talking about $400,000 for the loan as just the average across the country. Probably not a good commentary for affordability, but it is what it is. Certainly good.

for our originators to continue to see that average loan amount pick So we were up I think just about $404,000 in February, up from just above $400,000 in January. Product in, conforming loans represented about 53%, non-conforming near 16%, FHA and VA combined for about a third of the market, FHA at 17%, and VA near 13%.

the, ⁓ final point here was that the non QM share remained flat in February from, from January. had kind of our peak month at just about 9%, a little bit over 9 % approaching 10 % in December of last year, and then have, ticked down a little bit. don't feel like that's any sort of, material change in course. I think the secular trend towards more non QM lending will continue. And I'm pretty comfortable that at some point this year, we're going to see.

double digit percentages there. My comment on the secondary side, what did we have in February?

Mike (: 20:26

Yeah, thanks Brendan. know, the one thing I wanted to start with was the best effort mandatory spread. So we saw this increase for loans, the conventional 30 year loan and the conventional 15 year loan. were up conventional 30 up three basis points and the 15 year up one basis point. Interestingly enough though, the government

side of the aisle. So FHA and VA loans, my best effort mandatory spread, we're actually down about five basis points, over month. So it could be a world where we're just seeing some spread tightening there between best effort and mandatory pricing. So just something to watch there. kind of the big ticket item, which I think, you know, we've heard some rumors about this happening, but this is the first month where we actually saw it in the data where we saw

the percentage of loans sold to the cash window compared to MBS securitizations quite a bit. So it from 24 % to this basically was a direct loss to the MBS securitization market. MBS securitization percentage went from 47 % to 42%. Now,

I've heard this rumor out there for a while from lenders and investors and even some folks at the agencies that they wanted to pivot folks to less securitizations, more cash window. And that was something that we actually saw in the data this month. So it's definitely something we want to keep an eye on going forward here. Loan sold to the highest decrease about 1 % in or 100 basis points this last month. So from 79 to 78 % of the loans were sold to rank one.

And then that was directly offset by loans sold to rank two. So what that's telling us is lenders are just looking at some of the softer representative mix guideline type things and they're impacting the loan sale. Another interesting trend, obviously, OBMMI was down throughout the course of the month. We're talking beginning of March now, it's kind of spiked up take away some of the gains in the previous month. But we saw MSR valuations increase. So ⁓ MSR valuations were

two basis points in February. And this is despite on average, OBMMI being down six basis points throughout the course of the month on average. That's super interesting. We're still at a really rich valuation on servicing, a little under a five multiple right now. But the big thing to kind of think about here, this is a big topic at our conference, is the impact of retention. This is where lenders are investing more more and more of their time and dollars from a technology perspective.

aw a jump in the beginning of: 2026

And this is just the amount of investors that are bidding on our loan sales on average. And so it's been super interesting to see that stay here. So it wasn't a shot in the dark. We've seen some investors stay there with some more additional buying power. And it will be interesting to see how long that sticks and if it increases or decreases here in the future. But just to wrap us up, Brendan, I'd love to hear if you had a highlight from the summit that you want to make our listeners aware of.

Brennan (: 23:50

my takeaway frankly was one of being grateful. This is going to sound a little cheesy, but to have that many people show up, we had just kicked this back into gear last year for the first time in San Diego. Did about 250 people. This year we were shooting for, you know, maybe a 30 % increase in terms of attendance and to have 500 individuals show up, as you mentioned, across the spectrum, clients, partners, vendors.

really was, ⁓ yeah, I think I'm feeling very grateful, proud of what we did at optimal blue. Very proud of our marketing team. Shout out to the same folks that are, ⁓ producing this podcast for us every week. guess the only other one that'll throw in there is the virtual economist. you know, it's, it's, pretty unique. I was talking to somebody about, LOs, there used to be a, like an 800 number you could call and get forecasts.

on economic activity was gonna be and where rates were gonna be, and this goes back maybe 20, 25 years, and now to sit there, look at artificial intelligence generated avatar sitting in front of us talking about rates over the next 12 months. live in a new world from a technology perspective, and very grateful to see that OB is taking advantage of all the new tech that's out there to deliver more value to folks in the origination community.

How about you? You can't use Virtual Economist. That's the easy one.

Mike (: 25:03

I'm going to use this to segue to our next section. We're actually have Julian Hebron on from the basis point to talk about his view of the summit and he did a fantastic job live blogging the summit. Folks should really check that out. But he's actually gonna be the guest on our next section here. And I'm gonna save some of my feedback for that one. So make sure folks keep listening. And we appreciate everybody hopping on the podcast today and giving us a give us a listen.

Brennan (: 25:29

Thanks everyone, see you next month.

Jim Glennon (: 25:31

Okay, Mike and I are here with Julian Hebron from The Basis Point. He's the founder of The Basis Point. Basis Point is a sales and strategy consultancy. They work with banks, lenders, and fintechs like us. Julian's organization helps top companies cut through the consumer finance, real estate, and fintech clutter to deliver sharp insights that consumers get and pros respect. Welcome, Julian. Welcome to the podcast.

Julian Hebron (: 25:58

Hey, thanks, Jim. Hey, Mike. It's good to see you both.

Jim Glennon (: 26:02

So, I mean, first off, Julian, for anybody who doesn't know, doesn't follow you, doesn't read your blog, just give us a real description. What is the basis point? What do you guys do?

Julian Hebron (: 26:12

Sure. Yeah. Well, first of all, you you summarize like in the intro notes pretty well the the core theme of how we try to communicate about market topics and everything. But yeah, we were operationally involved with mortgage banks, lenders and fintechs, and we help predominantly with sales and growth. That's what I've spent my entire career first in the money management business before the mortgage business. But since 2003,

as a mortgage banker in the spending time was, you know, mostly production up until close to eight years ago when I started working on the basis point as a full-time endeavor. But even in these last couple of years, we've gotten much, much closer again to the mortgage banking production trenches, because that's just how we operate and we like to stay.

low to the ground on what's happening with banks and lenders and of course then the markets which I'm excited to talk about with you all today.

Jim Glennon (: 27:14

Great. I appreciate that. That's good synopsis. Glad to have you here where we were happy to have you at the summit, which we'll talk about here in a minute. But we just talked about the Optimal Blue Market Advantage Report with Brendan and Mike. And I know you and your team have talked about how you follow that report every month. Were there any themes in the Market Advantage Report that stuck with you this week?

Julian Hebron (: 27:39

Yeah, I hope what I'm about to say isn't a repeat of what y'all have already covered, but there's two key things that I noticed, at least from the basis point sensibility, which we view our job out there in the world as being the bridge between all the stuff that the industry knows and talks about with each other. But then because of my deep production roots, I like to communicate about what does this mean for consumers, right? And so there's a couple of things I noticed first.

that the average loan amount that you all just reported in the advantage 395 to 405, right? So for me, this, this reconciles almost exactly with some of the affordability calcs that we do on a national level on an ongoing basis. do it every week. example, there's a really strong case for spring home buying building where you've got rates at six and an eight. That's a 1 % lower than a year ago. You've got.

New home prices, median 414, that's 4 % lower than a year ago. So you got median of new and existing, existing and new respectively, excuse me, between 397 and 414. Pretty close to that average loan amount, but critically, what we like to do is a very realistic assessment that we put out into the media all the time because generally the media doesn't ever do this, but at these accessible kind of current median.

price points household could buy homes with 5 % down at today's rates at six and an eighth, if they'd made between 118 and 122 annually for the household. And that is a true, that's based on a 43 % DTI that lenders obviously on. And that is also including a thousand in non-housing costs that we do. So it's a true lender calculation. And it just so happens to.

reconcile almost exactly with that average loan amount. And then furthermore, the second stat I noticed for you all in the advantage was that you just reported that, and you guys gotta help me if I was reading this right, but that purchase DTIs down 1 % for all loan types in January and the share of first timers, first time buyers rose to 45 % of conforming loans and 70 % of FHA loans, which again, reconciles with this math that we do.

every week using lender calculations. So I just thought that it was a confluence of events to say all the data, not the message points or the propaganda, but real data points to a very positive spring home buying season for folks.

Mike Vough (: 30:11

Hallelujah. ⁓ Like this is this is what we've been like observing. And but I think there's some interesting things to kind of unpack in there as well. Jim and I were both shooting off like fireworks when OBMMI got below six a couple of weeks ago. You know, it's jumped up a little bit here. The start march. regardless, like if you think about where if you buy if you buy down the rate, if you think about arm production, we saw arm production hit about 10 percent of originations.

Jim Glennon (: 30:12

Yup.

Mike Vough (: 30:39

In February, you're in a world where there's even some more rate relief there. If arms take up more of the origination percentage share, you can see people in that five to five and a quarter range, at least for the teaser period there. And I think folks are a lot more education on that product now today. you're getting to the point where there's a lot of power there for the consumer, is really exciting.

Julian Hebron (: 31:06

And the reason I like to hammer it is because it doesn't make big headlines. You know, the headline is, gee whiz, we're back above six now. We're at six and an eighth. Rates came up, you know, an eighth. They came up 12 and a half basis points. We're good. And again, we like to use those calcs. How much money do I need to make if I'm putting 5 % down with today's rates? I need to make between 118 and 122.

Jim Glennon (: 31:20

Right.

Julian Hebron (: 31:34

There's millions of folks that can do that out there.

Jim Glennon (: 31:38

But the creativity continues regardless, your rates can go up a little bit, down a little bit, but I feel like some of this incremental increase in affordability can come from just lenders getting smarter about how they're structuring deals. Of course, have home builders who are buying down the rate and a little bit of that becomes artificial, the true, even in the refi world and the purchase world, you're getting more creativity that I think is just incrementally lowering that DTI or raising that affordability scale.

Julian Hebron (: 32:04

And for what it's worth, would just not to jump in on a ⁓ OB product plug, but near miss scenario functionality, I think is absolutely critical for this because near miss scenario means that if you're busy, you're taking in customers every day, you're going through and you're like, the DTI is off, but at least it's now going, you know, with this new

tech that you're rolling out. least now it's going to show me, wait, if I just tweak, so Jim to your point, if I maybe talk about it in a slightly different way, I can kind of get there. And it's just helpful, I think, to have that OB reminder stuff on the screen.

Jim Glennon (: 32:45

Absolutely.

Good. All right. So, definitely we've talked a lot about the summit on this podcast the last couple of weeks, but I wanted to get to it here as well. Cause obviously we think the summit is super cool. But you were, you were at the summit. You wrote a fantastic, thoughtful blog throughout the summit, which I thought was excellent. Everybody should go out there and check it out. I was reading it all during the summit and afterwards. as an attendee and an industry expert,

Can we just get into a couple of things, just your overall impression of the event, but also like pieces that you thought were particularly valuable. And Mike, I would invite you to do the same obviously as an attendee, but as an OB person.

Julian Hebron (: 33:31

Sure, Mike, do you want to go or do you want me to go?

Mike Vough (: 33:34

A guest first, Julian. You go first and then I'll jump in after.

Jim Glennon (: 33:37

Yes.

Julian Hebron (: 33:37

All right.

Okay. So let me start with this. couple of things. One, customer summits that also have an industry summit kind of feel are very, very hard to pull off. The basis point is fortunate to be in a, have a perspective where we get to see a lot of these different kinds of things going on for y'all to make your customers feel completely comfortable and not totally sold to while also providing real thought leadership.

And this broader industry networking something that struck me. I'll give an example of that, which is I often like to call the, you know, with the basis points, public remarks, we will always call OB an ecosystem company. Why? Because similar to systems of records in both originations and servicing,

We believe that everything from product and pricing engine all the way through hedging and trading is operate. It's the lifeblood. That's what we said a couple of times in the blog last week. That's just the light, know, gain on sale is the reason our industry is here. Right. And so critical operational infrastructure from Main Street lenders to Wall Street traders. That's the ecosystem company, part of the software and the technology and the company.

But to have that, to see that come to life at the live event was really notable for me this time because it did cross over to my point from being say more customer summit to customer plus industry summit because it doubled in size, right? I think that I have this right, but it was approximately 250 last year and it doubled till about 500 this year, correct?

Jim Glennon (: 35:25

Yep.

Yep.

Julian Hebron (: 35:27

And it felt like that and it had an entire exhibit hall, but all the exhibitors, again, they're part of the ecosystem. think your team may be more so, or at least equally to the, LOS and the servicing systems of record integrate. Just as many, if not more companies. So everybody who's there, you're all that software.

at first quote to consumer all the way through the hedging and trading is all integrated to you. So for everybody to be in that same ecosystem live was very, very meaningful. You all do a good job marketing, but there's nothing that can replace the feel of getting everyone together. And some folks complain that a lot of events can look and feel the same, but this one just didn't.

look or feel the same. just, had that deeper dive because it is a customer summit. So the sessions are very weedy and important and technical, but the networking and everything else had that industry feel to it.

Jim Glennon (: 36:38

Well said. Go ahead, Mike.

Mike Vough (: 36:39

double down

on that, like the energy in the room was just very different, I felt like. And there's a video that OB posted on LinkedIn where I'm talking about the energy of the sub. And I think that was real because you covered these different bases of in the weeds, like segments where.

Julian Hebron (: 36:44

Yeah.

Mike Vough (: 36:56

We're talking about non QM, we're talking about retention, we're talking about margin configuration, loan sale strategies. But then you could pick your head up and you're at the product reveal. You're you're hearing Bob Brooksmith talk about policy, you're hearing Mike Frantone talking about the MBA stats, you're talking to Michael Phelps, CEOs of the industry. So it was that well roundedness, I think made it really special. I'm a sucker for the product enhancements for my previous lives and product and

There were a couple there that was dreaming about for years, like the profit center, for example, and renegotiations flowing back and forth between the PPE and the hedging and trading systems. So I was geeking out in the audience for that. But then conversely, my ⁓ session with the CEOs on stage, I got kick out of some of the things that they were sharing. The feedback from Michael Phelps on taking bite-sized chunks of big goals was something that's still rattling around.

Julian Hebron (: 37:31

Yes.

Mike Vough (: 37:55

So it kind of hit all those different, you know, mile deep niches, but also kept people involved at this higher level that everyone can understand as well.

Julian Hebron (: 38:05

Well, let's do a quick Michael Phelps hit and then we'll come back to some of those technicals because I'd like to at least hit maybe one, which is like renegotiations. But I happened to just be nearby after the Phelps session and you and I were talking to your CEO Joe and I made a note to him, as you might recall, when we were just huddling there that it's not about

Great interviewing is not about a great plan. When I do interviews and panels, I am an over-preparer and I have a plan, but plans do change. And Phelps is so dynamic, it ended up that Joe had most of the questions that he had planned maybe answered in Michael Phelps' answer.

But the best part was that Joe didn't feel compelled to be like following a script. He adapted in real time and that was just such a dynamic session. Don't worry if we're not just sitting here talking about a session. If you weren't there, the BasisPoint Optimal Blue Summit Live blog documents it pretty painstakingly. So if you just go to thebasispoint.com and scroll a little bit, you'll find the Optimal Blue Summit blog.

You got to read this Michael Phelps segment because sports person or not, some of the stuff he said when he's speaking to a sales industry, everyone in our industry is, has got this mindset of trying to push harder and figure out how to wake up every day and fight. I just encourage everybody to read it, man. Phelps was incredible. And Joe, as an interviewer adapted so well to it. was great.

Jim Glennon (: 39:53

100%. It was, I was honored to be there, honestly. And you're right. was Joe kicked it off and then Michael ran with it as kind of a monologue. just, it just evolved throughout the thing, but it felt, it still felt so natural. And it was.

Julian Hebron (: 40:02

Yeah. Yeah.

It did, yeah.

So, if I may just one more thing, just, just yes, like this, getting your entire, getting the entire optimal blue stack tighter, including, as you said, negotiate renegotiations being now completely just threaded back and forth. Couldn't come soon enough. I would just like to offer as we get into these radical.

mini-refi booms that happened that much faster and pricing is changing and then customers are coming back and they want to change and you have to change or else you're going to lose them anyway and risk EPO issues and all these other things. So the ability to get all that done faster, it was very palpable to see how this entire, again, ecosystem company stack is really getting tighter each time we take a close look at it at the basis point.

Mike Vough (: 41:05

Yeah, and I think like friction points is a big thing that we're looking at. you know, the loan officers on average are in, we clock that somewhere in that 11 to 12 different screens a day to get their job done. And we've talked to some of the owners of companies. And if you're an omnichannel lender, you might be working with upwards of 20 to 30 different vendors to run your business. So every time you're logging into something else, every time you

Julian Hebron (: 41:09

Yeah.

Mike Vough (: 41:33

to transfer data from one system to another. That's a friction point. That stuff adds up. One of the integrations that we announced that I was ⁓ geeking out ⁓ in the audience about as well was our integration with TradeWeb. That was something that our traders had to go into something else and do this. And now within a single UI that you're in all day anyway, you're able to go out, execute trades, not have to write them down. similar to the renegotiation workflow. It's straight through.

towards the end of the capital markets life cycle, but it's straight through this process. And we're just looking at different friction points to get away here. So very excited about some of these things that are that come in the market here.

Julian Hebron (: 42:14

Mike, it's funny because you all have been very gracious when I come on the pod and sometimes let us flip it and I ask you a couple questions and I had TradeWeb as one of my questions for you. So you did just cover it, have a pretty broad because again, you've got like the wholesale side of the industry and then you have the whole cap market side of the industry listening to your pod. The cap market side of the industry knows what you just said.

But for the sales side of the industry that's less familiar with it, like if you would, because this is a breakthrough, this is a big deal. So could you just tell them what TradeWeb is and why it's so important?

Mike Vough (: 42:52

Yeah.

So TradeWeb actually originated from an inter-broker dealer system. So if you were at Citi or Bank of America or Goldman Sachs and you needed to trade mortgage-backed securities, you would go on TradeWeb and you would trade it. It's an electronic trading platform and it became dealer to dealer. Eventually, that got spun out, became its own company, and it became an interface for your capital markets desk at a lender.

to trade with Wall Street broker dealers. So typically, hey, you know, a million dollars of production comes into Mike Vogue mortgage. Well, I now need to go out there and I need to sell a million dollars of a mortgage-backed security to hedge my interest rate risk. That means I'm logging out of a system or I'm calling the Opmo Blue trading desk and they're going and doing it for me. And at that point, that trade that needs to be entered by a human, right? So the human then

the executes to trade in a different system. They're looking down at it. They type it up. Maybe they put 15 instead of 50. Maybe they put the wrong coupon in the wrong settlement. And then that flows into your system. And then you're making risk decisions based upon that. So there was always like a human error piece there. And we have a, we have a robust operations process to check that. But with this integration now it's straight through.

And Compass Edge, our hedging and trading platform is a mobile application. So theoretically you could be on your phone and be doing this. And we're just really excited about this integration. Jim, I'm not sure if there's anything you want to add there on this subject as I run in the desk.

Jim Glennon (: 44:31

Yeah, I mean, love it on the desk, obviously, as you mentioned, transcription errors. Like we have an entire back office that they do a lot of things in our back office. They monitor wholesale loan traffic. They interact with our system and upload pricing. But a big part of what they do too is just confirming every single trade that we do on the platform every day, which could be 500 to a thousand individual trades where they have to hand check like eight pieces of information for each of those trades. can kind of do the math in your head on how long that could take a human.

But we are, by integrating with TradeWeb, along with some other AI features that we're building in the background for confirmations, we're kind of eliminating the need to have that human interaction those trades. obviously, if you're doing the trade directly in the system, there can be no transcription errors. So you kind of balance that out. And then you have the AI features that look for things like anomalies or trades that were hand-keyed in from other types of dealers that may not be on TradeWeb. So a huge pickup for our desk.

way more efficient without having to have three screens set up in a row and spend that time. And then eventually, I see us integrating with other systems is another thing, right? Some of the broker dealers have their own trading APIs that we would connect with. I see us approaching this project the way we would on our PPE, which is if you're a POS, LOS, like we want to integrate with you. Whatever our client needs, whatever our client brings us, we want to...

have a back and forth automated integration with that product.

Mike Vough (: 46:03

And I think this talks to the larger problem we're trying to solve too, where the mortgage industry is an accordion model of staffing, right? It widens out when rates go down, it tightens when rates go up. This is a way where, you know, when we observe what happened in 2022 when rates jumped all of a sudden, we do see people unfortunately lose their jobs. And it could be that secondary or tertiary person, like in a cap markets desk and

That's really unfortunate, but we're hoping that the software can help people get a little more stability there because we have the Confirm Assistant who's checking out trades. We have this integration that's saving friction and time. And we're hoping to do that just across the whole OB stack. But it goes back to that whole accordion model of staffing that the mortgage industry is just captured by.

Julian Hebron (: 46:49

And something I learned while doing this very, very deep dive with the live blog and everything that I just want to underline for your audience, Optimal Blue supports 40 % of loans, Hedge and Sold into the mortgage secondary market. So needless to say that connectivity just makes it that much cleaner. So yeah, the trade web thing was a big deal just because that's, Jim, to your point, yes, integrating with other systems, but that's kind of like

The gold standard. Yeah. Yep. Yep. So ⁓ if it's okay, I wanted to ask it. Can I ask a couple of other questions? Because there's there's and it's related, Jim and Mike, to the to some of the stuff that we observed at the summit. But virtual economist is something that you all rolled out.

Jim Glennon (: 47:18

Absolutely. Yeah. The blue screen.

Of course.

Mike Vough (: 47:31

Go right ahead.

Julian Hebron (: 47:43

And in short, it's an AI economist. if lots of shops don't have those types of resources or their cap markets desk folks are the market experts, but they get busy and they can't talk to every single loan team about what's going on in the markets. So two things we noticed. One, super reliable.

and nimble like with real scenarios and also very much talking about it like like talking about the virtual economists could talk about scenarios in much the way a responsible human economist would, which is all if then scenario stuff. but the other thing that I just really liked about it was that the real life scenarios like so example

As we go into the week here, we're coming off of a jobs report for February that was a surprise on the downside. We've got the war in Iran, which is creating inflationary concerns. On the one hand, have maybe jobs, lower jobs and higher gas basically should

there are two different sides of the mandate almost exactly and the good news is for now that means sort of steady rates but everyone wants to know what might happen. This virtual economist can handle these scenarios in real time. That was the thing that kind of blew me away secondly the other thing and this is kind of a question that I have

is you all spent a lot of time about the methodology of accuracy and what's going into it. And I wonder if you want to maybe make some quick remarks. We, again, the live blog, we covered a lot of the core methodologies for how you're getting at the accuracy, but would you mind explaining that? Cause when people hear that, they're like, I don't know about that, but the accuracy methodology I was, I was frankly blown away by.

Jim Glennon (: 49:45

Sure. I could touch a little bit on that. mean, the virtual economist is so it's in its nascent stages right now in terms of where it gets its information and it's all, it's as if you went out there somehow and someone asked you a question, you were able to read every single book that was ever written about it, right? And decipher that information and then not only explain what you just read, but then forecast out the possibilities of what could change in the market given

tweaking one of those books or changing the ending of one of those books. So the example that was used at the summit was, give us a projection of the OBMMI, which is our conventional 30-year fixed index that we talk about a lot on this podcast. What's the projection of that number going out the next 12 months? And that was relatively easy for the economists to do. And then you could say, okay, what if the Fed cuts

rates four times this year instead of the expected two right now. What would that do to that projection going out 12 months and vice versa? In fact, we were playing with it the other day. You mentioned Iran. We asked the economist, what now are the possible effects on the economy and therefore on interest rates now that we know that we're at war with Iran and there's an estimated period of time that this war will continue and what oil prices have done so far? What is your best guess on?

what happens with the OBMMI going forward, given that information. So it's basically like a co-pilot or other types of AI applications. It's going out into the web and scouring every bit of piece of information and sort of deciphering what kind of fits the trend, what makes sense to use in its analysis. I think you would add to that, Mike. I mean, I'm not the AI guru by any means, but that's how I understand it.

Mike Vough (: 51:35

Well, a couple of things I'll add. I was sitting in the front row next to one of our lender clients. And as the economist was speaking, I was just pulling up minor things to fact check the economist, because if you can't if you can't prove these like building block things, like a simple one, which I was half joking when I did this was the economist said what day it was. And I took my phone and I showed it to the client say next to me just to make sure he said the right date. I've got the OBMMI app on my phone.

Jim Glennon (: 51:46

You

Mike Vough (: 52:04

I pulled up OBMMI and he started quoting OBMMI to virtual economists. And I showed the client next to me that he was nailing those facts, right? And those building blocks, making sure you get those right, help folks understand the projections later, right? If it's garbage in, you're gonna get garbage out. And it was nailing the garbage in, right? It was hitting these points that are these building blocks that are really, really important. The part that stuck out to me as well was when we gave it, we asked for the projection.

Jim Glennon (: 52:24

Mm-hmm.

Mike Vough (: 52:32

It also spit out some other key assumptions that went into projection. It told us what OBMI was the last couple of days. It told us different spreads that make up OBMMI, what the 10 year treasury was at. And so it was working through not just the projection, but also these building blocks that get you to the projection, which I thought was really powerful. Another thing, and then I'll pause on this subject is,

It's not just a virtual interface as well. There's also this, there's a machine learning model behind this that is accessible via API and we're hitting it in different parts of the product. So in our profit center, which is where we're going to have the landing page where you can hit every, every OB product and you can get that bird's eye view of the whole ecosystem. There is a projection of your individual lenders lock volume that's coming from your virtual economist.

So you could be in there talking to your economist, your projection could be going up or down, your profitability, your loan volume projections are also changing. So this thing is living and breathing and feeding other parts of the ecosystem, which I think is super powerful. It's not just some widget that's like over to the side. It's interconnected everywhere in the platform, which I think is very powerful.

Julian Hebron (: 53:50

I agree. And that's, that's the part that I went in talking to some of your customers after everybody saw and getting these real time reactions. The fact that it, you know, cause something else ask OB is, is the, is the, is the product that you all rolled out. If I, if I have this right, was last year because we actually hosted you all on a couple of demo stages when you were rolling it out and it's, and, the types of questions I'm just going to rattle some off really, really fast that cat markets pros are asked.

already before the virtual economists were asking OB how much was my average margin percent by loan type for August? Who are my top five originators in lock volume in the past two years? I mean the granularity, how many 5-1 arm locks were last week? How many 30-year commitments with Fannie Mae do I currently have? Granular, granular, and then this, if I have this right, and this is a key question I have for you too.

That then also, the virtual economist is also then, I think what you were just saying, also knows the data of the team that's asking for it. So it's not just broad macro stuff. It's also about their world as well, correct? Yeah.

Mike Vough (: 55:05

Correct. So yes,

it might answer where OBMI is going to be or maybe where total MBA originations might be. But if you want to ask about your volume, it will tell you. It won't tell you your peers volume, but it will go through your individual lending ecosystem as well and give.

dialed in projection. So what I mentioned earlier, we have this the profitability center now one of the one of the pages or screens on it is your trailing lock volume plotted against OBMMI and then X stays in the future showing the OBMMI projection and then your volume and your expected margin as well. So that's gonna be dialed in based upon your economics and how your your company has basically dealt with these types of rate moves in the past.

But if it wanted to go and do these macro projections, it could too. So it's a little bit of the best of both worlds in my opinion.

Julian Hebron (: 55:57

I asked this question on the live blog, now I'm going to ask it live live, which is, it a good idea or are you already doing it to roll it out? All the virtual economists to loan officers too. Cause I'll cast my vote for that. I like, I like that idea, but I understand the risk. So what's the sentiment there?

Jim Glennon (: 56:19

I think sky's the limit with something like this. I don't know why we would hold it back. I don't know that we have specific explicit plans on any sort of restriction there. So I would probably vote the way you're voting. mean, it is, it is again, to get back to your accuracy kind of question or theme, it's based on real data. It's data that you can get to anyway through things like ask OB, or even if you were to query your own data, it's just a faster, more efficient way to do it that includes the machine learning element that then.

allows you to project forward, which I think is valuable information for anybody, maybe even more so for an originator who's looking to plan out their business over the coming months.

Julian Hebron (: 56:57

And frankly, field questions from borrowers every day about, I just read this article about, know, Raid said this and you locked me at this. The ability to have the virtual economist provide quick, intelligent and accurate market Intel is why I like it so much. the optimal blue virtual economist does not hallucinate. think humans hallucinate more about macro market outlook than the optimal blue virtual economist.

Jim Glennon (: 57:16

Yeah.

Yeah, we,

I certainly do. Yeah. think that's the second point, as you said, is, to be knowledgeable when they have those conversations with borrowers. know, you only have so many hours in your day to read so many articles. The economist is out there reading them right now.

Julian Hebron (: 57:39

Agree. Yep,

agree.

Mike Vough (: 57:41

One

of the pieces of feedback that a lender came up to me about after seeing that was like, can we customize the avatar? They wanted their head of cap markets to look like them so that they could kind of get like that scale because the guys at these lenders who are like, uh, head of cap markets, they're kind of the master of this like dark art and they're really busy and they're jumping between this and that. And the ability to kind of take that persona and scale it.

Jim Glennon (: 57:49

Yeah, it make it look like them.

Julian Hebron (: 57:51

Yep.

Right.

Mike Vough (: 58:09

to the hundreds of loan officers that they deal with and give them that insight is really valuable. It helps move that loan officer, more of that advisor that we've been hearing in the industry for a number of years now. How do we coach our loan officers to go from not just that deal to that advisor type? think a tool like this could be really helpful to assist those folks as they try and transition there.

Julian Hebron (: 58:32

Agree, agree. there is one more question I promised on the blog that I was going to ask on the pod is do we have time for one more?

Jim Glennon (: 58:41

Absolutely. Let's do it.

Mike Vough (: 58:42

⁓ Let's get one more

in.

Julian Hebron (: 58:44

All right. So Mike, you hosted this great panel ⁓ of lender executives and part of that panel included a comment from Kevin Peronio at PRMG and it was, he said that one of the biggest issues that we need to solve in our industry is shortening the time it takes to settle a security. And, you know, he kind of made some notes about like, this has helped

by end-to-end systems like Optimal Blue, but market structure, let's say market tools can only reduce it so much. So when I was live blogging this, my question that I said I want to hear Mike sound off on was, is blockchain the answer? I know that blockchain is not the greatest

It's more complicated than everybody had hoped that it would be in terms of reducing basis points in the system overall and getting to T plus zero on trades. I believe sometimes, you know, the vision of T plus zero that blockchain can maybe bring. Should I believe it or is it not blockchain that's going to solve it?

Mike Vough (: 1:00:03

Yeah, I think there are things that blockchain can solve. I'm unsure if this is the one where my focus goes with blockchain is servicing transfers, title insurance. I think those are the ones that are screaming for something like blockchain to help. I'll let Jim opine here in a second, but I kind of think the market structure of, hey, TBA settle on a given day and there's a lot, there's a

a couple of days before that you have to stop trading them. I don't know necessarily if blockchain would help with that. I think you would need to see a larger kind of change in the industry in terms of how people actually sell their loans out there. And there's so much that goes into them. If you look at private label deals, for example, which were a lot of the non QM loans go, you know, it's almost a million dollars in legal fees for a single securitization. Blockchain, I don't know if helps with that. So there's just a lot of these other things that have to have to

stop that. But in general, think title and servicing transfers ripe for something like blockchain unsure if t plus zero is impacted on TBA securitization.

Jim Glennon (: 1:01:11

Yeah, I generally agree that I don't know if we're focused there yet, although we've all had that vision of better, just better commoditizing the mortgage loan, right? I mean, you can go out and trade a Nvidia stock on any platform on the internet and get immediate execution. It's obviously very different for a mortgage loan, but it generally works. like, you know, it's the second largest debt market in the world outside of US treasuries and they all seem to

have very good liquidity and just huge mass of volume. So I feel like it's something in the middle there, like getting from the borrower to getting it into the security, even before it settles, like that piece seems like it continued to get smaller and it is getting more granular, right? We talk about specs on this podcast a lot, specified pools, just the granularity to which we're going to get tighter pricing so that we can bring in more borrowers. And so we can get certain types of borrowers and certain types of loans a better rate.

That's going to continue to evolve and get better and better. The settlement process, I think, going to be up to the capital markets, folks, for at least the foreseeable future. It may not be where we focus. But blockchain is on the short list of things that could solve it. Just, and I don't know, more about blockchain than maybe how to spell it. So it's possible that there's other options out there that are simpler.

Julian Hebron (: 1:02:31

Well, it sounds like it comes back to the part of the question of the setup, which is that it's mostly helped by end-to-end systems like Optimal Blue, Like, because it's just there's so much nuance in it all.

Jim Glennon (: 1:02:40

Yes.

Mike Vough (: 1:02:43

Yeah, if I could, I'm gonna get my soapbox for a second on servicing. So if you could get the end to end servicing trade figured out and make it in a way where it doesn't take years to process a large servicing transaction, I do think there's a lot of untapped value there, not just, you know, to further commoditize it, but also to give value back to like upfront pricing, it would help with, you know, providing more liquidity into that space.

Jim Glennon (: 1:02:44

Yes.

Mike Vough (: 1:03:08

trading in smaller blocks right now, you really can't trade a servicing transaction less than a billion dollars of UPB. You might see a a couple hundred million ones out there, but very far and few between. So if there was a way to kind of come further commoditize that I think there could be a lot of value untapped there. And I'm actually going to mill over refi right now. Don't get me started on title insurance. But the fact that we're still we still have to pay insurance because somebody might ride over the mountain on a horse and claim your property is

preposterous to me. those are my two soapbox moments.

Jim Glennon (: 1:03:38

Amazing.

That's great. Yeah, that's, I would say for sure. The servicing transfer process is one of the most archaic things in our industry, probably in the title, the little, I don't know, gaps in the title insurance process are a bit spooky and you almost don't believe them when you hear them. So I'm sure we could do, do better there. All right, gentlemen, we have talked about a lot. I'm blown away by how successful the summit was.

with what you did with the blog, Julian, with what we've talked about here today. Hopefully everybody is still listening and got a lot out of this podcast. Thank you so much, gentlemen, Julian, for joining us and Mike, as always, for being a regular guest on the show. And I wish you guys a wonderful weekend.

Julian Hebron (: 1:04:25

You as well.

Mike Vough (: 1:04:27

Thanks, Jim.

Jim Glennon (: 1:04:28

All right, let's close this thing out. Thanks so much, Alex and James. Thank you, Mike. And of course, thank you, Julian, for joining us on the podcast today. And that's it. 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.