Insights from HW AI Summit & CMBA Western Secondary: AI, Growth & Market Strategy | 8.18.26

Jim Glennon (: 00:00

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.

Jim Glennon (: 00:34

All right, welcome everybody. Welcome to this week's installment of Optimal Insights. Thanks for being here. you know, we're here making sure you know what to watch, whether you're an originator, capital markets person, or just someone interested in the mortgage industry and some good market commentary. So we'll kick it off here in a minute with the market update. After that, we are going to recap two conferences that took place last week. Kevin Foley,

was at the Housing Wire AI Summit down in Dallas. He was on a panel or he was did a kind of a fireside chat with Sarah Wheeler there. He also attended all the sessions, so he's got some good insight as to what was being talked about there. Rihanna Bolin and I were in California at the CMBA Western Secondary Conference. A lot of really good things happening there as well. That's a a bit of a larger seven hundred plus person conference, meetings, but also sessions, just a good

good vibe there as well. So we'll tell you all about what the industry was discussing at Western Secondary. Before we get into any of that, just in the way of data, as you know, rates stubbornly high, six point six five, just for all the reasons we've discussed on this podcast over the years and we'll continue to today. Just a ton of supply out there. Just a glut of government spending, AI spending, internationally.

military spending. So just keeping government borrowing, which then influences mortgage borrowing, near some highs that we haven't seen in, you know, over a decade. The ten year four point seven percent right about now. So still solid two point spread between treasuries and and mortgages, but again, elevated stubbornly high. Yet we're continuing to see decent volume. We are, you know, roughly fifteen to twenty percent above where we were this time last year in terms of volume.

I think it certainly at the NBA Western Secondary and the AI Summit, just discussions around that in general, just the health of the mortgage industry and how we just continue to see organic growth over these past couple of years, despite the massive headwind of just rates being high. So let's get into it, gentlemen. Welcome, Alex, James, thanks for being here as always. where do we want to start

the conversation?

So we start with inflation. I mean that's that's the big numbers we saw last week, right? And that's heavily influencing what we're gonna potentially expect from the Fed.

Alex Hebner (: 03:05

Yeah, it last week's releases definitely continue to put us in kind of a flip-flop mode if you're following the CME rate futures. the CPI number was right in line with expectations, only up one point one percent, which left the year-over-year number around three point four percent, and that core number at two and a half percent. So about where we were before the war in Iran really kicked off. really I think this can be

Directly attributed to calm energy prices throughout the month, the not active hostilities in the Middle East, as the entire month was encompassed under the the memorandum of understanding. You know, little headlines here or there. But for the most part, there there was no active fighting, which led to energy prices on that CPI number declining by one and a half percent, and and gasoline that the price that you're seeing at the pump declining about two point nine percent. So that helped to keep the CPI number

entirely in check and and continue to to have the market begin to kind of push again towards the labor market picture.

Jim Glennon (: 04:08

Yeah, it's just continuing to read interesting things, interesting articles about where the war goes from here. And obviously that all affects oil prices, which then inflation and then interest rates. But it's I was reading one yesterday, I st I need to read it again 'cause I still don't fully understand it, but it had to do with the there's a chasm between

It's seemingly the expectations of Iran versus the US as far as where the war goes next. Like Iran has been gearing up for this next stage of the war that they feel is going to be even bigger than anything we've seen yet. But it feels like on the US side, we're thinking it's more of this back and forth of, you know, memorandum of understanding, relative calm.

in the strait until there's an attack and then there's a retaliation attack and it's just this kind of cat and mouse back and forth that's been going on now, you know, for over five months and but yet there's this this thought, which seems dangerous, you know, on the on the part of Iran that there's gonna be like a massive escalation at some point. So so I I think you want it's a war, right? It's expected that competitors are going to have

different ideas about what's going to happen next. And you hope that this is a chess game, not a game of checkers. You hope it doesn't devolve into something even more destructive than what we've already seen. But anyway, I I just think that it's I don't know, it feels like something will change here in the next thirty days regarding this war that could potentially be either disastrous or hopefully something that really positive that starts to move back into a direction of some sort of peace, some sort of, you know, economically

maybe better movement through the Middle East for for goods and oil and gas and all of that. Anyway, I just put that out there to to say if you haven't gone out there and if you've kind of been lulled to sleep by the the slow back and forth, it's worth reading what some strategists are thinking may happen next in the the conflict.

James Cahill (: 06:07

Jim, I I have heard the speculation on, you know, September and October are going be particularly dangerous for United States service members over in the Middle East because we are entering the election period for the midterms,

and that is not lost on Iran. They know this. they would rather be dealing with a party that would like to come to

A quick conclusion to get out of this. And currently,

like the Democratic Party is going to push back against anything that Trump has done. And so from Iran's perspective, they may prefer them. generally in politics, an October surprise is something that helps boost or pull away from a candidate. So, you know, as Alex was just saying, as this has been a little bit more calm, the memorandum of understanding over past two, three months,

Prices have come down a little bit. If things were to escalate again, or to just get a little bit riskier again, that would push energy prices. And if there was to be something catastrophic to happen for

American lives, that would be politically bad for the current incumbency. So it's it's definitely a dangerous period and it's kind of a dangerous period inflationarily.

Alex Hebner (: 07:22

Yeah, two

things I want to take note of right now as of the recording here Monday, August seventeenth, memorandum of understanding expired last night. The 60-day period expired last night, Sunday night. and then the other thing that was really dominating the news cycle here in the US in regards to the conflict was Trump posturing that they're gonna, you know, rely less on military force and begin to really slam them with economic sanctions. Not to say that Iran

wasn't already under pretty crippling sanctions, but I think them publicly coming out

in favor of of new sanctions strengthens the case that you're making there, Jim, that, you know, from the US side, we would like to take a bit of a step back, at least through the election season, to to James' points, that that they want to keep this relatively low on the radar, keep the energy prices moving in the direction they have been, at least through, you know, October.

Jim Glennon (: 08:15

Right. I think it Secretary Bessant that came out and said that we would see economic sanctions never before attempted or seen on Earth is kind of how he put it. So I'm interested to see what that is. I don't know that there are details of that yet, but that would be I think what you're referring to and hopefully a less violent strategy. But it does feel like, as you said, James and Alex, there's a deadline at this point with the election coming up, and hopefully that doesn't mean

American lives or anybody's lives are at stake and and certainly hopefully we don't end up in another round of inflation. And that as you said, that's gonna hurt the administration in power at that time, which is obviously you know, currently the the White House and most a mostly Republican dominated picture, right? So going into the election that it's just gonna be uber sensitive, but know, escalation could make the situation worse at this point.

Okay, what else do we have out there? So as far as you know, on in terms of the Fed, the CME futures seem to bounce around quite a bit, depending on who has recently spoke, what happened at the most recent FOMC meeting, what the most recent inflation numbers look like. I think now we're leaning towards another pause in September, right? Where we potentially had a hike on the board just a few short weeks ago.

James Cahill (: 09:37

Yeah, the it's incredible how quickly things switch, right? The the job numbers coming out this month were finally looking a little worse for wear, and the inflation

actually looked a little bit more under control, quite qu quite click quickly pivoting from where we were, you know, a month ago. with those two's flips, it does

show that we were more likely to have a pause, just hold on a little bit longer, tread the water. and our new Fed head, you know, not wanting to step forward and communicate, say as much, throws questions on what people can expect. So we've been leaning that perhaps we will, you know, see the pause, stay assuming that there's gonna be a pause rather than a hike is the safer option. So we're at about 70%.

chance that we'll

see the pause with only thirty days to go. So, you know, plenty can switch in that time, but that seems to be shaping up. We're keeping where we're at.

Jim Glennon (: 10:41

Yeah. I mean, we'll

Alex Hebner (: 10:41

Yeah.

Jim Glennon (: 10:41

have another jobs number that's gonna come out in a couple weeks. And as you said, just anemic, right? Th there's not been a ton of jobs created, but the unemployment rate has stayed low. Then you've got, you know, with gas prices coming down, inflation is a little bit more in check. It's but then we've rates have been slowly creeping up. Certainly in July and the first half of August. So it's almost like the market is solving some of this. They're do it's doing the heavy lifting for the Fed. Like rates are up. That's gonna slow down.

growth, expansion, and it's that's happening, right? So it's almost as if the Fed doesn't need to act. That the market's just getting it done. So we were at four and a half on the ten year a couple of months ago and now we're close to four seven five. So we basically had a quarter point hike that's been inherently just built into the market.

Alex Hebner (: 11:28

Right. And the question remains is is how long will the market continue to believe this hawkish posturing from Walsh before it backs off? The the market wants lower rates and and if there isn't that that baseline change in the federal funds rate, it'll it'll make its way back down if I think if the Fed doesn't deliver on what the market is expecting.

Jim Glennon (: 11:49

Good call. I mean, so meanwhile, just changing gears slightly, how's the housing market holding up during all of this? You know, for first half of the year you have you know, lowest rates we had seen in a long time. We found a five handle right before the war. Volume was up. That was helping spur all sorts of lending. Refies in addition to making homes a little bit more affordable, but now we're we're up closer to six and three quarters. Refi lending has certainly slowing down.

But s continuing to see some activity in the purchase market, but it's and starting to see a very much a leveling off or even a are we even seeing deterioration in in housing prices? Like what's what's the what are the main shifts happening in the housing market right now that we should be paying attention to?

Alex Hebner (: 12:35

Yeah, I mean if you're if you're looking at Redfin's numbers, which came out last week that that I wanted to highlight today, it it seems that in most areas of the United States right now, it's more of a buyer's market. they're seeing 51% more sellers than buyers, which which indicates the the favors to the buyer. there's there's more houses on the market than there are people willing to buy them in a lot of these areas. seems to be led by by some of the COVID hotspots, you know, like the Miami market, Texas. those are some of the places with the greatest discrepancy.

between sellers and buyers. but overall there there's a little under a million buyers out there right now, nine in the nine hundred thousands. and Redfin observed close to one point four, one point five million sellers right now. So, you know.

several hundred thousands of of homes across the nation. and you really at the end of the day you gotta look at it at a in a at a metro level just because

th those are those are matching markets. but overall it does appear outside of a few suburban locations in in the Northeast that right now i if you if you're buying you you probably have a bit of leverage.

Jim Glennon (: 13:41

Mm-hmm.

it was bound to happen. We're s you know, we we needed a little bit of a breather. And it you know, to your point about more sellers than buyers, it it would appear that we're in one of those markets where sellers may have felt maybe be feeling like they're in danger of missing the boat of the just massive appreciation we've seen over the past seven years and trying to

liquidate on some of that before we start to potentially see a correction in the housing market, which we've seen in some cities, to your point, depending on what metro area you're looking at. But if if we continue to have that imbalance, you probably would expect in this type of market, especially with rates as high as they are, that we might see a bit more downside to housing prices over the next couple of years than we would see upside. Does that kind of make sense?

Alex Hebner (: 14:30

Yeah, yeah that that that seems to jive with what we're observing right now.

Jim Glennon (: 14:35

So covered the housing market, covered the Fed, covered inflation. Yeah, I mean, what are we in for for the rest of this week? It is third week of the month, typically not the most active in terms of economic indicators, but what do we have? We have initial claims as always on Thursday.

And then that's some home sales data coming out right before this or right when this podcast drops, right?

James Cahill (: 15:03

That's right. It should be right ten a.m. Tuesday morning. We'll see pending home sales, which will be interesting just after, you know, Alex saying with the redfin data, whether the rest of the market is really fully bleeding that in. The only other item really to look for this week is the FOMC minutes will come out this Wednesday. on the last opinion there were three dissenters, so

Curious to see what they had to say, but you know, based on the inflation, the jobs numbers of the past month, they may no longer be dissenting and voting for a hike. I think probably thirty days we'll see a decent consensus to stay where we are.

Jim Glennon (: 15:41

Mm-hmm. Makes sense, yeah, for all the reasons you mentioned earlier.

All right, gentlemen. Thanks again, Alex. Thanks, James. Great podcast. Talk again next week.

James Cahill (: 15:53

Mm-hmm. Thank you.

Alex Hebner (: 15:53

Thanks, Jim.

See ya.

Jim Glennon (: 15:55

All right, everybody. Please join

me in welcoming Kevin Foley and Rihanna Bolin, my my colleagues here from Optimal Blue. How's it going, Kevin? Rihanna, thanks for being on today. Thanks for doing this this podcast

Kevin Foley (: 16:07

Yeah.

Jim Glennon (: 16:08

recording with us.

Rhiannon Bolen, AMP, CMB (: 16:09

Hey Jim. Thanks for having us.

Jim Glennon (: 16:12

great to have you. interested in in what

everyone experienced last week so we were all at conferences last week we're kind of getting into that fall season almost even though it's still ninety plus or where Kevin was a hundred and something degrees. Kevin was in Dallas at the Housing Wire AI conference and Rianan and I were at the CMBA Western Secondary in the LA area in Terranea. A beautiful beautiful venue by the way.

Kevin Foley (: 16:39

think you guys won the weather competition. Yeah.

Jim Glennon (: 16:43

It was definitely a a brave time of year to have a conference in Dallas. But it's it's a gr that's a great venue as well. I mean that that that George Bush Library is a very cool spot for

a for

a conference. Housing wire does a lot of stuff there.

Just a neat little, you know, venue, cool history there and I like the way that that bowl shaped theater is just kind of cool. It it almost feels like it feels like Ford Theater to me, which I thought was I don't know if Yeah.

Rhiannon Bolen, AMP, CMB (: 17:07

It's very intimate. It's really yeah.

Jim Glennon (: 17:10

It's it's tight.

But it you know, the way they run a conference, I feel like everything is front and center and everybody it it's they run on time, like you really can't

break out to take a call, you're gonna miss something important. they do a really

good dense dense conference. So why don't we just start with that? So Kevin, you were at at the Housing Wire AI conference, you even had a a session there, which I'd like to get to later, but what was the general vibe of that conference

and and the and like what was it about besides just a AI?

Kevin Foley (: 17:40

Yeah, great question. yeah, I think the folks at Housing Wire always do a great job of getting a ton of interesting people all in the same room. and they they have you know various conferences throughout the year. I was at the AI summit last year as well. So this was my second year. but overall I think the vibe is is is is good. I think this year in particular, there I think there are less people out there who are

in that how do I get started mode. A lot of folks have already gotten started. They've they started down their, you know, AI investment, AI implementation journey. But there's still a lot to learn from folks who have kind of gone through that that investment cycle already. talked a little bit about that, but there are also some great speakers talking about how to better educate

folks within your organization on AI, how to build, you know, your army of AI capable folks cross functionally, cross departmentally, and just a lot of good anecdotes from from the field. So overall, really great day, very, very excited to be there.

Jim Glennon (: 18:46

Great. Yeah, I mean, on that, I always have questions about adoption of AI and how fast it's really happening and how where that AI lives. So, you know, at Optimal Blue, obviously we build a ton of practical and interesting AI tools for clients to use that are, again, useful for their daily lives, making their lives simpler.

So in that way, mortgage lenders are employing AI through Optimal Blue. Are are there other tools that that they were talking about there where lenders are employing,

I don't know, building their own AI tools internally, or or is it make more sense? Is it more scalable to to utilize your, you know, your partners to get AI in the hands of your employees?

Kevin Foley (: 19:29

Yeah. So the I mean the there's there's always conversations around build versus buy when it comes to AI. And I think it the the way that I would think about it if I'm if I'm a lender is you know I'm there's no use spending or investing your own dollars to solve problems that your vendors are already out there solving for you. so it all kind of comes back to what are the problems that you're trying to solve. And

you know, there the

And this has been kind of the way that it's been with AI since the beginning, is everyone's AI, I've got to implement AI. You actually need to start with

what are the problems within your organization that you want to solve. And AI might be applicable for for a number of those. and so when you when you when you start that way, it's always helpful to understand what your vendors are working on, what capabilities they have, because you know, if your vendors are out there and

spending their dollars to solve their problems, you don't want to duplicate that effort if, you know, you can get that as part of, you know, something that you already have, a relationship you already have with that vendor. But there certainly are some

some, you know, unique use cases where vendors at, you know, in in generally speaking, I would say building that, you know, internal AI capability within your organization is going to have compounding benefits no matter what.

Rhiannon Bolen, AMP, CMB (: 20:43

Kevin, I was gonna ask, I don't know if you saw this at the conference or not, but I feel like, when AI was sort of surfacely introduced into the mortgage industry a couple of years back, it was kind of a scary thing and people were very concerned about, you know, what it would do to jobs in our industry. And I feel like at least in the last year or so, we've kind of transitioned from being a little less fearful and more it's it's been become more about.

we know that we have to use it. It makes our lives and our jobs more efficient. It's not necessarily gonna replace the job, but it can just make us produce, you know, loans and manufacture loans more efficiently with less errors. And

I think people have just kind of collectively, in the industry at least, adopted it.

or or trying or moving towards adopting it and and have and and are not as fearful as they used to be. I don't know if that's what you're seeing at a conference like that, but that's kinda how the general perception

is these

Kevin Foley (: 21:40

Yeah.

Rhiannon Bolen, AMP, CMB (: 21:41

days, it seems like.

Kevin Foley (: 21:43

Yeah. No, I I think I think you're spot on. And I I would even argue you kind of have the fear and anxiety at both sides of the spectrum. You have fear from folks around, is this gonna, you know, take take my job or replace me in some way? And you also have, fear and anxiety around, my gosh, if we don't, you know, maybe more from your your C suite, my gosh, if we don't do something around this, we're not gonna make it. You know, we're we're not gonna be able to be competitive and

Jim Glennon (: 22:06

Behind the eight ball.

Kevin Foley (: 22:07

survive it.

Rhiannon Bolen, AMP, CMB (: 22:08

Right.

Kevin Foley (: 22:08

It

yeah, and and and I think I honestly I think a lot of the fear on both sides of the spectrum are are somewhat overblown. Like, you know, we're we're all going

to it's not like it unless if you don't invest, you know, and hire a a ton of AI, you know, specialists in-house as a lender in the first half of twenty twenty six, you're not gonna make it. That's that's not the that's that's not really how things are right now. And and and and the the other side of the spectrum is,

we've found and we've we find here at optimal blue AI works best with human in the loop where you're using it as a force multiplier for your you know existing

employees capabilities and we see that we see that every day. So but I agree. I think we're we're sort of you know converging around this area. You know, when something's new, when there, you know something seems risky and we don't really know a lot about it. It's natural I think to be fearful, skeptical

you you know, all all all those things. But any new generational technology, you know, the advancement of the internet, sooner or later it just starts to seep its way into your daily life and you almost sometimes don't even notice that it's there, particularly when it's done well.

I think that's definitely the trend that we're that we're heading towards in my opinion.

Jim Glennon (: 23:24

Yeah, I mean it's our industry has almost always been a series of booms, right? Refi booms that were kind of at the behest of interest rates or any sort of market disruption, whether it was the COVID or the great financial crisis or even some of the interim periods like when the Fed was tapering off of QE. We had a disruption there, two thousand thirteen. Th these this sort of thing came up in the session I was in.

quite a bit. And the point was just you have to be ready, right? There's there will be another event that causes volume to go up fifty percent or a hundred percent. And and back in twenty twenty we did not have AI anywhere in the industry. And we had just we had to add humans quickly to the process

as we always have for for decades. So the thought is this time around, even if it's just organic like it's happening now, we're gonna have we're likely going to have higher volume this year than we did last year. At this point in the year we definitely do.

That's gonna continue. Well, you know, we're gonna continue to increase and come out of this sort of small mortgage recession that we had. And how are you gonna scale for that? Are you gonna have to add people or is AI gonna help you just be more productive to both of your points and be more accurate?

Rhiannon Bolen, AMP, CMB (: 24:36

yeah, I think too because to your point, Jim, like we we have just been still coming out of that a pretty significant contraction in our industry. And we had a lot of people exit the industry in the first place that had been around doing, you know, whatever they were doing for a number of years and decided to retire or or whatever.

And to your point, the opportunity for us in the industry is, you know, how do we replace a resource without having to add additional people? Because quite frankly,

our industry shrinking, a lot of people are are aging out. And so there's, you know, we have to we have to pull in less experienced, younger folks and train them in our industry because they're not just coming out of the woodwork. So I think AI presents the opportunity for the industry as a whole to incorporate that. And I think a lot of us are accepting it, are getting to a place of acceptance now. and just figuring out how can we incorporate that into the the workflow

and make the you know, make it to so where so where we don't have to add as many resources as as we may otherwise have to when we start to expand a little more. So

Jim Glennon (: 25:39

Right. Totally agree. Yeah, it's like anything else. It's there's sort of sort of this natural progression of, like you said, acceptance and then s really starting to learn how can I use these tools internally? How can I make the best of them? Which ones should I be using? Like where does it make sense to implement AI

versus versus looking everywhere? So

at the

California Mortgage Bankers Conference, Western Secondary, Rihanna, you were there. It's a bit more of an industry conference in that there are sessions where there were some great sessions, some great speakers, but it was also a lot of meeting with clients, it's a bit of a longer conference than than the AI summit.

But what was Rihanna, what what was your general takeaway from C MBA, the vibe, the the general tone, but also some of the stuff that was talked about there, including AI.

Rhiannon Bolen, AMP, CMB (: 26:31

Yeah. It was

great. yeah, I'd I I I will not complain about the view that we had. it was it was a spectacular

venue. and I have to commend Paul Gigliotti for, you I think this is his first CMBA as the chairman of California

Mortgage Bankers taking over from Susan Milazzo and man, what a great job. I think it was their highest attended event. I think they had over 800 people.

Rhiannon Bolen, AMP, CMB (: 26:53

Again, the you the venue doesn't hurt. but I think that it was all it almost reflected like cautious optimism.

and in the market that we're in where we've had continued volatility, we're still not, you know, back to where we we were, where it's unlikely that we're gonna get back to where we were. just sort of you know trying to figure out where we're gonna land here in sort of a what what is the new normal of the industry.

I think that the attendance reflected cautious optimism to our conversation earlier. I think, you know, there's a lot of conversation around, you know, how do I protect my margins? it's a primarily capital markets focused conference for sure, but there's a lot of C-suite individuals there,

varying types of roles that you get to interact with. And a lot of the conversations we had were about that, you know, how do you protect your margin going forward? How do you how do you incorporate

some of the resources and tools, advances in technology into your workflow so that you you can, you know, adjust your your resources accordingly going forward if if we do get to another, you know, refi boom here, which we all hope we will at some point. So real I mean, really good conversations. I know just talking from the the sales side of things, we had a lot of conversations with current and prospective clients about, you know,

How they're thinking about the future, what their growth is, tons of non-QM conversation.

It feels like there's a lot of investors because you know we're we're we're at a place where we're having to consider alternative types of products. And because the rates, you know, are not cooperating, we're we're having to kind of get a little more creative. You see this expansion in non-QM, it's over 10% now.

And so a lot of those conversations and investors in particular that are wanting to enter that space, especially on the wholesale side. and and those were interesting conversations just to hear how those companies are setting up and how they're operating. Some of them are self-funded, some of them have some kind of backing behind them and they're focused on, you know, securitizing. so a lot of really interesting conversations around non-QM and and who's buying and who's selling that product,

it was good. It was it was very interesting though, because I think it's gonna I think it's gonna be intriguing to see where the non-QM discussion takes place in the future.

Jim Glennon (: 29:11

Yeah. That's

been a thing for months now or years now, sorry, since really since the end of the great financial crisis. It's what what addresses that additional ten to fifteen to twenty percent of the market that's not covered by conventional and and government loans.

We certainly and it was kind of good timing, good location. Like Southern California's always been a great place for creativity in the mortgage industry, let's call it. Right. So you're

kind of surrounded by some of the largest non bank

lenders and a lot of those are some of these non QM investors. Was it was there much conversation at the summit, Kevin, about about non QM or w or were they kinda solely focused on AI tools?

Kevin Foley (: 29:53

Yeah, I I think I mean AI is just sort of the major theme, but it it it came up a little bit, but I I've definitely also picked up on you know, non-QM feeling like the I don't know, the the light at the end of the tunnel or you know, something that's sort of getting us through this more difficult time where we do we do have this, you know, expanding proliferation of additional options that you can fit borrowers into that are, you know, solving

you know, very specific areas where, you know, self employed borrowers where the the traditional funding routes really aren't available. And it it feels like that, you know,

ten percent, that's a new high watermark, right? Like post post

you know, financial crisis. which is which is great. I mean that that we're, you know, finding ways to serve serve borrowers. So but I'm I'm glad that it seems like that was a a a good topic

at C B A. Was it was that kind of on your your radar as well, Jim? Was that coming up a lot?

Jim Glennon (: 30:49

Yeah. I mean it you can't have a meeting with a client these days without that being at least part of the conversation, whether they're honestly some still dipping their toe into the water, running some best efforts, non QM

loans through a couple of the the specialty lenders. And then if you're talking to even the big aggregators, they're they're deliberately rolling out their products and their programs into the like the mandatory space. That was a big conversation, which was

Starting to see some bulk bids come in for for non-QM. And then it was, you know, how do you hedge it? How do you trade it? Like that's a huge topic that's has does not have a full solution to it yet. That's like best practice across the board. There's so many ways to hedge and deliver non-QM. And we talked to many very large lenders that are doing it very differently, which is what we expected to hear and what we're finding with our clients as well. But we came back with some good ideas.

how to even tweak our our own strategy around hedging and trading non QM and being able to tailor it to the the size and the kind of objectives of any sort of lender out there. But yeah, I I thought it was there's not only a bunch like several sessions on the subject, but also client meetings were not completely

focused, but quite a bit of focus on non QM. Did you see the same Rihanna?

Rhiannon Bolen, AMP, CMB (: 32:09

A lot of that talk.

yeah, and then you incorporate the credit scoring discussion into all of that and how

Jim Glennon (: 32:15

Sure.

Rhiannon Bolen, AMP, CMB (: 32:15

everything gets qualified and

Kevin Foley (: 32:16

Yeah.

Rhiannon Bolen, AMP, CMB (: 32:16

that and that becomes, you know, a more a more interesting conversation and and and how that's evolving, right? some of that conversation as well. but yeah, I mean and a lot of it just about workflow. how do you, you know, how how do you become as efficient as you can be and

To your point earlier, Kevin, you know, what are your partners doing around that and how do you leverage those tools? You know, that's always a big, a big question is, you know, technology kind of moves quickly and it and it lives and breathes. And as that happens, you know, lenders have to be aware of what's forthcoming and what enhancements, you know, they can they can take advantage of. but the adoption question is is a whole other thing because

if it's

Kevin Foley (: 33:01

Yeah.

Rhiannon Bolen, AMP, CMB (: 33:02

a if it's a big

enhancement or feature enhancement that that could you know potentially bring additional efficiency to the workflow, you have to incorporate that into your business. And how do you do that? And how do you roll that out to your organization, you know, from the time the loan has originated all the way to the time it gets sold in the secondary market? So that's another big conversation is as we continue to incorporate AI, as we continue to talk about to your point, Jim, hedging, you know, non-QM, what does that look like for the actual process? And how do you incorporate that?

into your business and get everyone else in that organization to say, yeah, we're gonna do it this way and we all buy in and here's the training and here's the rollout and hopefully it all goes perfectly, right? Which it always says, right.

Jim Glennon (: 33:41

All right.

Kevin Foley (: 33:41

Yeah. A

as a as a product manager, I if you're if you're a lender, I'm I'm begging you, read your release notes, please. Those emails that come out that tell you

Rhiannon Bolen, AMP, CMB (: 33:49

Right. Right.

Jim Glennon (: 33:49

Right.

Kevin Foley (: 33:51

exactly what what we've been working on. and not not just for us, but you know, across the board. those I joke about that because you know they're they're sometimes the most boring email to read through, but but once you get into it, it's all the exciting stuff and exactly how you can turn it on and

And do all those things. But

it's it's definitely important to to keep up on and and we are, you know, this year in particular feels like there's there's all of these different, you know, topics du jour, you know, with new credit scores, we have expanding non-QM, you know, we've still got the AI, know, proliferation happening. There's there's all sorts of ways for you know for lenders to to kind of dig into new things and see how that

might fold into their overall strategy. So great things for for for lenders to be aware of.

Jim Glennon (: 34:37

Yeah, it's it's it it comes back to again, we have sort of a lull on the market, even though we're gonna do better this year than last year, volume-wise, but there's a chance to be to get prepared for what's coming. So very first session, I believe it's the first session of the conference, Monday night, Chris George was up on stage with our old friend AJ, and he he started out by saying, the biggest mortgage market we've ever seen is coming. And I think

I

don't think he was rubbing his crystal ball. I think his point was it's coming. Like it may not be six months from now, it may not be 18 months from now, but it's coming. We'll either organically grow into the largest market we've ever seen, or there will be an event that will cause it.

So you gotta be ready. You have to be ready and prepared with operationally capital markets-wise, your capital funding, all of it, like your ability to grow.

so the session that I was in was the very last one of the conference. th shout out to everybody who hung out long enough to see it, by the way. Thank you.

Rhiannon Bolen, AMP, CMB (: 35:37

Ha ha

Jim Glennon (: 35:39

if you stayed at at Terranea till like midday Wednesday. But our whole session was it was called the last trade or the final trade, sorry. And it was basically our whole thesis was was be prepared for the next thing that's coming, whether it's a market event, a

Government regulation, new products, new types of of funding. Like we had a a bit of a discussion about blockchain and easy access to capital that way. I my part of it was obviously capital markets. It was each time we've had one of these events, it's sort of the event sort of favored one execution type or another, right? In twenty twenty it was

couldn't retain servicing in: 2020

having access to good data that you can use to be competitive, managing your margins more deliberately, like all these th these things that everybody kind of knows in the lexicon you're supposed to be doing. But I think I still think we tend to get busy and we procrastinate in implementing some of these things. And but we know that if it if and when this next event comes, it's gonna be too late. You're not gonna have time.

To to implement these tools, you're going to end up just having to hire FTEs, and therefore you're not going to be as successful as the more prepared lender that was able to scale without adding bodies to the organization. So I this all sounds obvious, but I I feel like as an industry, we still tend to lag in adoption of certain things and we tend to just kind of live or die by volume and we don't invest early. We just wait for stuff to happen. So and we don't

read the release notes, right? Because it

And and

Rhiannon Bolen, AMP, CMB (: 37:33

Yeah.

Jim Glennon (: 37:34

that and innovation is happening

Kevin Foley (: 37:34

Read those release notes.

Jim Glennon (: 37:35

happening so quickly, right? Even with with OB, you know, for Compass Edge we have releases every two weeks, I believe. For a PPE it's at least once a month. It's like y you have to you have to stay up with what's new or you're gonna miss it or or you're gonna wonder where it is later when you need it. So

Rhiannon Bolen, AMP, CMB (: 37:54

And you know, it's it's it's complicated, right? I mean, the you know the manufacturing of a loan is multi-step process that involves multiple divisions within an organization, and we are the most highly regulated industry almost out there. So it's a complicated endeavor. you know, not making light of any of that at all. but it is one of those things like even just in school mortgage banking, you know, we teach how

Critical

it is to really consider your process for acquiring technology, adopting technology. And in this day and age, if you're not, if you don't have an individual or a department, that that's their focus, that their whole focus is to make sure that the release notes are reviewed thoroughly and you're you're taking the enhancement in accordance with what you can accommodate in your process, or thinking in that way and considering, you know, different ways that you can that you can produce a loan.

Either using the the current partners that you have or or considering new options for technology. It's a it's a really it's a it's kind of it's new to our industry. We we didn't ever have to have that kind of a a persona or a role within our

organization, not but just a couple of years ago. So it's a complicated endeavor for sure, but it's it's really critical. And and you know, you you you can as a lender, you can lean on your partners to help.

understand what it can do for your business and and hopefully you're leveraging their expertise, as it were,

Jim Glennon (: 39:20

Yes.

Rhiannon Bolen, AMP, CMB (: 39:21

to to adopt it because they that they are the ones that know that technology inside and out. and so I think a lot of times what happens too is you you have this opportunity to take this this feature enhancement and and you decide you're going to go about doing it in such a way because this is the way that you as a lender always have done things and then it inevitably

Has some challenges when it gets rolled out. So just having a really good partnership with your technology providers and relying on their expertise to help you gain adoption within your organization, I think, is also a really critical component of how I think we're gonna all perform collectively going forward, especially when the wave does come back.

Jim Glennon (: 40:01

Good gr those are both great points. And I I think, you know, to paraphrase, you know, as partners, we and other partners are obviously going to do our best to help you understand new features and new enhancements in the technology, and we will suggest best practices on how you should implement them.

But within your own or with within the lender organization, it is also, I think, well worth the FTE to have at least one expert, if not more, on many of the products that you are using so that you understand exactly how you wanna implement it within your organization. You're gonna know your organization better.

than anyone. We strive as partners to understand it inside and out. But having someone internally that can actually move the the wheels and say, okay, this is a tool that we're definitely going to be using. Here's why. Here's the people, the stakeholders I need to bring into the room and explain it to them and make sure that they're using it the way that I, you know, Optimal Blue, whoever tell you know, explains to me that it should be done.

Kevin Foley (: 40:58

think great points all around. I I was gonna kind of s segue into like talking about your your topic, Jim, staying on the the cutting edge and you know understanding preparing yourself for the next environment, kind of a lot of crossover with what I spoke a little bit about at the AI summit with Sarah Wheeler, which was all about

you know, that's sort of s similar frame of reference, but, you know, on AI and what are what what is the latest that's happening in the AI frontier. How does that impact the our industry? How can lenders be better prepared to take advantage of that of that? I think some of the major points that I wanted to to make is I think that the models themselves, AI models themselves, are good enough to solve

all the problems that we're trying to solve and really have been now for I would say since maybe around the beginning of the year is when I think that the quality of the models really became excellent and solving

more complex problems. And now a lot of the value in in the mortgage industry, in my opinion, is moving away from the models and the frontier and

You know, the things that are happening with Claude Mythos and Fable and whatnot, because a lot of those frontier models, if you have access to them, are kind of pricing themselves out of the equation. And instead using more budget friendly models and constructing a harness, which is really a scaffolding that you put around the model to help it perform very specific tasks to solve specific problems, that's where the value is living.

You've got the brain power already, but it but the models themselves are generalist. They don't understand your specific business,

the specific systems that you're using. But

you c you don't need a powerful frontier model with a huge budget to solve those problems. You really need a cheaper model with a really good harness. And those harnesses, that's your proprietary infrastructure. That's your proprietary.

technology and you know you can build a really fantastic harness for your specific business and that can become a moat for for you. That's

where that's where the motes in AI I think live, much more so now. And there's you know all sorts of ways I think that the moats around you know certain businesses or technologies are changing with AI, but it's it really gives lenders a great way to prepare for for the future.

by you know, focusing much more on the harness, which is where the value is now, compared to trying to chase what the latest model or model provider is doing.

Jim Glennon (: 43:44

Right.

Rhiannon Bolen, AMP, CMB (: 43:45

It's interesting. It's almost like the companies, low lenders, need to have a a a a harness or a moat administrator now.

Jim Glennon (: 43:51

Yeah.

Kevin Foley (: 43:52

Yeah.

That would be yep. It's

Jim Glennon (: 43:53

I mean that's a big part of the a

big part of the strategy, right?

Kevin Foley (: 43:58

Yeah, yeah, absolutely. So the the more that you can focus on providing your own institutional context, your alpha, your competitive, what makes you

a competitive company in a competitive market, the more that you can serve that up for AI, that just amplifies your capability and your competitive edge, in in my opinion. and so that's you certainly that's the foc th that was the the topic of the conversation.

of the main points I wanted to to get across, but also just things that I'm focusing on as part of you know my role. And you know, we also we also talked about the launch of the Virtual Economist, our AI and machine learning powered forecasting tool for interest rates and lock volume. that went to general availability last week, which we're really excited about. We launched our new AI labs here at Optimal Blue, which I'm very excited to be helping stand up and and

Jim Glennon (: 44:51

Yeah.

Kevin Foley (: 44:52

get off the ground.

Yeah, which is is gonna be yeah,

Rhiannon Bolen, AMP, CMB (: 44:53

It's great. It's awesome.

Kevin Foley (: 44:55

a very exciting, exciting new adventure for me and and for optimal blue. but yeah, it's it's really exciting time to be in the space for sure. know, there's there's always there's there's always exciting things to be focused on in our industry. something that I've learned during my time for sure.

Jim Glennon (: 45:15

Very

good. Yeah. No, thanks for bringing that up, Kevin. I definitely wanted to get to the the session. It sounds like, you know, great thesis on your part around around the the other moat strategy, but also sounds like you all covered a quite a few topics around AI with Sarah as well. So sorry to have missed it, but sounds like you were you as always represented Optimal Blue very well. Appreciate you doing that.

Kevin Foley (: 45:38

Yeah, likewise.

Jim Glennon (: 45:40

let's see, why don't maybe we wrap it up with anything that surprised you too at these conferences that you attended? So start with Rihanna, just off the cuff, anything that was either a highlight for you or just something that you were a little bit surprised by that you heard or saw or or witnessed at the at the C MBA?

Rhiannon Bolen, AMP, CMB (: 46:01

Yeah, I think I I mean I I kind of mentioned it when I when I started talking about the conference, but I think just the attent the sheer number of attendees in in what is still sort of a volatile market and with with still some lingering uncertainty about where this is headed and you know, rates kind of being uncooperative. I think that the number of attendees there really showed that.

as an industry collectively we're all focused on trying to, you know, progress forward and and figure out how we we do that the the most efficiently and and you know with the you know protecting you know our pro profitability along the way as well as you know just what can we do to provide products to consumers that you know fit the needs of of the modern home buyer these days. So I think that's a the it maybe not surprising, but

enlightening a little bit about

where our industry is going and and that people are you know really invested and wanting to learn new new and different ways of of of doing things.

Jim Glennon (: 47:03

Agreed on the attendance piece and that kind of dovetails into the the I don't know, the the curiosity and the collaboration as well. People show up to these conferences to get value out of it. Right. So yeah, I think it was s seven hundred plus that attended, which post COVID that's it's impressive that at this point we're finally back to

Better numbers than we saw pre-COVID. It felt like there for

a while and still feels like it sometimes that some folks have become unwilling to travel or just travel less, whether it's because of budget or just the ability to be remote has just increased and the ability to access content like this podcast and others. But people still see value in in-person conferences like this, whether it's to visit

face to face, which I think will always be important in in business, especially w with AI and other things that are not quite reality. but also to learn, you know, from the sessions and to to take part in in some of the those sort of learning activities I think is is it's encouraging.

Rhiannon Bolen, AMP, CMB (: 48:07

That's a good point.

Yeah, face to face I think people are craving that to honestly these days. I think people

Jim Glennon (: 48:12

Yes.

Rhiannon Bolen, AMP, CMB (: 48:12

want to sit down, you know, and and talk to someone, look in the eye. I think that's but I think that's great. I agree with you. I think it's the way we we make more progress that way.

Jim Glennon (: 48:21

Yes. So you you build a little bit more trust there, right? And you let

the guard down a little bit more. It's just there's something

about it. Mm-hmm.

Rhiannon Bolen, AMP, CMB (: 48:27

We're relationship business. We still are relationship

business. That's not gonna change.

Jim Glennon (: 48:32

Right. How about you, Kevin? What surprised you or what was enlightening or what was the highlight of the AI summit?

Kevin Foley (: 48:39

Yeah. I

I might take the same answer and say I think one of the surprising things about AI and you know, some of the insights are that it's it's really a people focused conversation. And some of the most interesting anecdotes that I listened to were about people and about know building your you know, your internal employees capabilities.

sourcing ideas from your people on you know what to what to build to solve specific problem listening to your customers listening to your employees you know the the folks who are you know if if there are are problems to be solved with tools like talking to the the people who are using those tools every day that is still where you start with ai that is

that is the the most important place to start

And is it it was a good reminder listening to some anecdotes that you know this isn't really a technology, I think. know, the way that the way that we use it that that's going to be taking people out of the equation. and you still they're it's so fundamental to to what you're doing. So I'm gonna piggyback off of the same answer. It's really, I think, a great enlightening way to

Kind remind yourself where where you are and what r is really important in your business. And it's all about the people.

Jim Glennon (: 50:02

Good. Yeah, I'll I'll stay in that same realm as well 'cause I think it's it's a bit of a broad brush that I'll paint it with, but very similar. It's it's the amount of people that were there, the the the generally positive mood that everyone was in, the sort of there's no more hoping and waiting for rates to drop. It's it's strategies that are around what's going on today and what hopefully will happen as

the industry continues to recover in the future. It was

You a lot of it's curiosity. I think a lot of people showed up 'cause they were curious what are people going to be talking about? What are the new features that are out there that I'm not aware of 'cause things are moving so quickly at this point with things like technology and the development of new products in the spaces of of non agency and the new scoring models for credit, like all of it that's just you don't want to miss anything, right? You get a little bit of FOMO, I think,

if you miss too many of these conferences in a row. So people are they're coming back in in droves. So that was I think really exciting to see. And it wasn't

You know, twenty twenty three, twenty twenty four was a little bit of a little bit of freak out or a little bit of just a a negative tone because there were still layoffs happening and and you know, lenders were still on average not making money, but now we're in a much better spot where everybody's brought back the right scale. They're implementing the right tools right now and they're getting ready for the the market to continue to grow incrementally and just

being prepared for that that scale that's currently happening and could happen at an an accelerated rate in the future.

All right, anything we missed, Kevin Rihann?

Rhiannon Bolen, AMP, CMB (: 51:35

That was great.

Kevin Foley (: 51:35

That's good.

Rhiannon Bolen, AMP, CMB (: 51:36

Great conversation. Thanks for having us.

Jim Glennon (: 51:37

All

right. Yeah, thank you two

Kevin Foley (: 51:38

Yeah.

Jim Glennon (: 51:39

so much for representing us out there and thank you for being on the podcast and talking through it this morning with us and we will talk again soon. Thanks again.

Rhiannon Bolen, AMP, CMB (: 51:48

Thanks, Jim.

Kevin Foley (: 51:48

Sounds good, thanks.

Jim Glennon (: 51:50

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.