Protect the House: Todd Leddon on Capital Markets, AI & Execution Strategy | 8.24.26

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. Thanks for joining us again this week. deep into August now, starting to get into conference season, kind of back to school season. so I know everybody's busy, but appreciate you taking a little time out of your day to listen to the podcast. We've got a great show as always. we're here making sure that you know what to watch out for, whether you're an originator, a capital markets person, or just someone interested in the mortgage industry, and some great market commentary. we'll kick it off here in a sec with a market update.

And then we will get into an interview. We've got Todd Leddon from Leader One. He is a good friend of ours. We've worked together for a very long time. He's got some, you know, some good insights on what's going on in the industry. So we'll tap his brain a little bit to hear what he's been hearing out there and how he's been solving some of the the issues that the the lending world is dealing with today. He also wrote a book, by the way, called Protect the House, which you can find on on Amazon. So we'll check that out. just ask him a couple of questions.

On the book, but generally just chat about what's going on in the industry right now, what we should all be paying attention to. before we get to any of that, just in the way of data, you've likely seen some drama around the the the treasury rates, which we'll talk about in depth here in a moment. the 10-year right at 4.7 again, dropped a little below it last week on some interesting news, bounced back up to 4.7 today, down a little bit again, but still hovering around that 4.7 mark.

And of course, the OBMMI, which is the 30-year conventional index, is about two points higher than that, which it typically is over the past year or so. So about 6.7. So let's get into it, gentlemen. What there was some some news that I'd say got the market's attention last week. Some discussion with Scott Bessent, and there's been some some discussion since then, but originally came out and said.

We're basically going intervene in what we're seeing in long-term yields. We're going to double the amount of bonds that we're buying back on the long end of the curve. So think 10 to 30 year treasury bonds. And this is the not this is not the Fed, right? This is not QE. This is not the Fed. This is not central bank intervention. This is the t the US Treasury buying long-dated treasuries in an effort to

Basically to manage the yield curve, right? They're trying to get long term rates lower because long term rates recently hit decades long highs, right? About 20 year highs, which is a problem. but it's something that we've talked about ad nauseum on this podcast, the reasons why, right? It's not just US borrowing, it's not just it's other nations borrowing to to fund deficits and fund militaries. It's also all of the AI spending that's going on right now. You hear about Meta or Microsoft or Google.

borrowing hundreds of billions of dollars to fund data centers, AI build outs, energy, all these things are surrounding AI. And that's just this supply that needs to be taken down by investors. So investors are just demanding a higher rate for all of these long term bonds. So I don't know, I'll stop there for a second, and interested in what you two have on your minds regarding this potential like the announcement was

Going from two billion to four billion in buybacks, which is a drop in the bucket, right? It's kind of like what we talk about with with with MBS buying and trying to manage yields on on those instruments. But it could be a message that there's a longer term strategy here where the the Treasury may actually have enough ammo to get something done by buying a ton of duration out of the market and either funding it with the cash account, like the our tax dollars, or and or

issuing short term debt to fund those longer term bonds. I don't know. What what do you two think

about what's what was announced and what where maybe where we go from here?

James Cahill (: 04:24

I would say, you know, over the past week, so since we recorded last, that it's definitely the big story. And I think the way rates reacted will tell you a lot about how drop in the bucket or not this is, right? So Bessett came out and he said, Okay, we're going to double the the buybacks. So we're trying to get the long-term yield under control. We're gonna do that by issuing short year.

t the highest it's been since: 2007

everyone priced in this change, but come Friday it had it really bounced all the way back. I would say the tenure had actually moved even worse. So the market was calling a little bit of

you know it's not big enough it doesn't matter enough a calling the bluff and i would say this morning we're seeing beston is talking about how they can actually like tap into the general account that the treasury has access to and that's about a trillion dollars worth of cash that they can spend so not necessarily saying I'm going to do that but it is trying to back up set the message that we're we're doubling it

if that's not enough, we are open to what we might need to do in the future. It's to me it's it's

signaling, it's posturing for how to try and resolve this.

Alex Hebner (: 06:04

Yeah, I think my my thoughts are generally in line with with James's on the initial Treasury announcement it said that they were increasing the buybacks from two billion to at least four billion. I I clocked that at least portion there i immediately. but it seemed that the market didn't really react to that until Bessett went on TV and really highlighted that or underlined it.

and then this morning it seems with with the market action that we saw on Friday giving back all those those declines in the ten year interest rate that that they're kind of putting out the story that, you know, that they have ammunition, they're prepared to use it, sitting there to to bring down those rates. I think I think James nailed it on the head there that yeah, they're they're interested in lowering long term rates. That's no secret. And

would be ideal for them to get those rates down

Jim Glennon (: 06:49

Good, good. Yeah, I guess it it remains to be seen how this will go. It's a little bit experimental. It's been done in certain ways. I mean, the Fed has done this. The Fed has implemented what they used to call Operation Twist, right? Which was to, again, manage the yield curve by buying in one part of the curve and selling in another. I believe the Treasury's done something like this under Yellen. maybe not to this extent, but I guess we'll we'll have to see what the size of these buybacks end up being and how

How it gets financed. We can't just continue spending cash, obviously, because that's again, you run a deficit, you have to to issue debt to finance it. But the and this administration has already favored the shorter end, right?

Alex Hebner (: 07:32

Yeah, Treasury had by by a few single digit percentage points had increased the the number of those those shorter dated bonds that they were issuing in the two, three year range. And the way the market was interpreting that was they were waiting on longer term rates to decline. so this kind of seems like a a doubling down of the bet, you know. sell additional shorter dated ones, raise the rates on that. You're gonna be paying a higher rate for two to three years with the hope that you can refinance into ten and thirty years that are that are gonna be lower.

So in my in my mind I I do see that kind of as a as a doubling down there.

James Cahill (: 08:04

I've been thinking of it too as they're gonna have to issue, you know, two years in order to buy the thirty years. So more of those entering the market's going to push the price down the rate of the two year up a little bit. And so it's almost as it pushes that two year rate up, it's almost a little bit of a free rate hike, right? The Fed doesn't need to hike the two year rate if the Treasury just

sells enough of these things that they move the rate inherently. So that does help with the inflation side. It also, the CME is not necessarily reflecting this, but in in theory, it could give the Fed more time to pause and even eventually cut if the rate is pushed up for them.

Jim Glennon (: 08:46

Right. In essence, doing the heavy lifting for the Fed. Like it seems like that the focus has moved more and more away from what the Fed is going to do, which is exactly what the Fed wanted, what Kevin Warsh wanted. And now with this newfound idea that the Treasury may come in and actually stoke the flames of, you know, raising short term yields, we're gonna get we we already got kind of a quarter point hike out of that without the Fed funds rate having to move.

All right. What else should we be looking at this week? We also get some inflation numbers, right?

Alex Hebner (: 09:17

Yeah, coming back last week was quite very quiet. we will get a PC number this week. It'll be the only PC number before the next Federal Reserve meeting, but we will get another round of CPI and PPI in September before the next meeting. that one's really expected in the range that we've come to expect of it, probably in the range of three to three and a quarter percent or so.

And then we have three weeks until the next Fed meeting as I as I just kind of alluded to there. And right now it's it's still leaning towards a a pause in in any action on the federal funds rate.

Jim Glennon (: 09:53

And still seeing just inflation high. You know, if we are above three percent, that's the three handle. Seeing it in gas prices again. We've we've inched up a little bit, at least here in Colorado. I've seen it in a f few of the other states I've visited, so not a ton of relief there. The war basically continues, not a lot of solid developments there in terms of

resolution. So obviously you're always gonna want to watch that news for any sort of escalation or de escalation. Today it feels like a a bit of a de escalation, but again, it's it's been groundhogs day with with the situation in the Gulf.

Alex Hebner (: 10:29

Yeah, the US is definitely leaning towards using economic pressure to coerce the Iranians to coming to the table. we are waiting on the quote unquote economic D-Day that was promised last week out of the Trump administration. Bessant should be talking later today. So at the time that you're listening to this, listener, the the specifics of that deal should should already be out. The the rumor mill is is saying, I mean, you gotta keep in mind that Iran's already under immense sanctions. So there's there's not

a ton left in that chest, but from from everything that I've read so far, it feels like they're gonna really lean on secondary sanctions, which which are already in place, but really hammer on these. Secondary sanctions being if you are a business that interacts really with the Iranian economy in any way, whether you're an importer or exporter, if you do Rial to any other

currency exchange, anything like that, that that you could fall afoul of US sanctions and then get blacklisted economically by the US. so so really they're really just trying to choke off the Iranian economy through that. things that we've we've definitely seen before. tools that have been in use for for decades now.

Jim Glennon (: 11:42

Right, just doubling down on those or finding other areas where we haven't you know, put our foot down on the Iranian throat, I suppose.

All right. So we'll be looking out for news on that. Hopefully, like you said, when this podcast comes out in the morning, that'll already be done, announced, and hopefully in motion. Maybe there's again some some sort of progress towards resolution of this thing. And then Jackson Hole is this week, right? Economic symposium in Jackson Hole that happens every year. Kevin Walsh will be there. I'm sure people, even though he he'd prefer we didn't, people will be, you know, trying to figure out what he's thinking.

Alex Hebner (: 12:19

Yeah, generally speaking the Jackson Hall is is a place for Fed chairs to to kick around some ideas, maybe, you know, showcase mid year any new ideas to bring to the table. we'll be lucky if we get that from Warsh. but yes, he will be he'll he will be speaking as is kind of the the place for for Fed speakers at Jackson Hall. So keep an eye on that. That's later in the week.

Jim Glennon (: 12:41

Yeah, keep your eye on the the comments from the Treasury. Certainly any comments fro that come out of the symposium and in Jackson Hole and then inflation numbers later on this week. All right, gentlemen. Thank you so much for the time and the insight. Talk again soon.

Alex Hebner (: 12:56

All right. Thanks, Sean.

Jim Glennon (: 12:57

All right, everyone. We've got a treat today, as promised. We have Todd Leddon from Leader One. He is EVP and chief capital markets officer over at Leader One. So he oversees all things, capital markets, and then margins and you know down the line, just all the things that we talk about on this podcast when we're talking capital markets. He's also been in the industry for a very long time, probably longer than he cares to admit. we're having him on today just to to

kind of have him drop some wisdom on us about what's going on in the industry and what we should be paying attention to. Thanks for being here, Todd.

Todd Leddon (: 13:29

Yeah, thanks Jim and Alex. It's a it's a pleasure to be here with you guys. I am a a big fan of what you guys do over there in OB. So great opportunity.

Jim Glennon (: 13:39

Right on.

Thanks, Todd. I he's also an author, by the way. Towards the end of the pod, we'll talk a little bit about a book that he's written about capital markets, of which there are very few books, as everybody out there probably knows who's ever tried to go out there and get schooled on on capital markets literature. But let's why don't we start with just general market conditions right now, Todd? A lot going on with rates, a lot going on in the industry, a lot going on politically, just some of the policy that surrounds our industry.

I mean, what are what are you all paying attention to and and how are you generally dealing with market conditions right now?

Todd Leddon (: 14:13

Yeah, so it was an interesting start to twenty twenty six. I would say things were pretty positive, right? it looked like

Jim Glennon (: 14:20

It was so good. So good.

Todd Leddon (: 14:22

yeah, it it was great, volume was great, things were cooking. and then unfortunately, you know, we had to have a little bit of a conflict here with Iran. basically the tenure in March just decided to go to another level.

Leg up on rates. And that created volatility for the second quarter. and it's it's interesting. You're hearing about, you know, also the new Fed chair came into play. And

it was like, Well, what's what's he gonna do? Right? How's he gonna perform? Is he gonna be the same as drone? Is he gonna be his own being and you know run things differently?

In the meantime, the market decided to, you know, drive drive upward. it's interesting today they talk about interest rate hikes and I I feel like the the market's already there when it comes to how you know we're affected in the mortgage industry. And so that created some volatility in execution, which I've seen.

You know, the specified pool values, which simply it's usually lower loan balance loans that, you know, they stick around longer. They usually have a pay up to And those values got compressed and you know, they don't trade exactly like a TBA. They're attached to and they they have variation in value. that was tricky. It kinda, you know.

the rug got pulled a little bit there.

I also see, you know, servicing was had some nice valuation at the beginning of the year and it's come off a little bit.

And then there's been some changes, I would say, with the agencies on their appetite. you know the they've have decided to compete with the aggregators when it comes to our bids. And they actually, you know, they'll pay up on loans that they're after through the cash window. so that that's been brand new, which has been interesting. it's it and I'm seeing it from both sides.

Freddie and Fanny. So and then I would say one other thing that has been pretty different when it comes to execution is Best Efforts has been actually winning a a portion of our bids. So it's awesome that you guys have the ability at OB to look at all the rate sheets that we have. you know, you're like, really? Best efforts is is winning this, you know, 15%, whatever

it might be. Each book.

Each book's different, right? but that that trend's been higher. So there's been a lot of volatility. I would say on the the specified pool situation, if you you know, you you get a lot of that production and that's in your footprint.

you know, edge your guys' system. You guys created some durations specifically for those types of loans and implementing those different durations, which is just simply a different way of trying to make sure that you have a negative correlation to your your bond prices. I'm excited to give that a go and see what what happens there. But being granular I think is a big thing.

Jim Glennon (: 17:42

Yeah, just just diversity in your execution strategy, right? Like all the things you just said. We've had two different markets, two distinct different markets this year, right? We had like a five handle on a thirty year fixed at the very beginning of the year. Things were great. Executions were strong. Spec pay ups, as you said, for things like low loan balance were very hot. And then everything turned upside down in the second quarter and third quarter, and likely to go into the end of the year. But if you so

In any kind of market, you don't know what's coming, right? We didn't know this war was gonna happen. We don't know when it's gonna end. We don't know what the next event is gonna be. So just having diversity in your execution strategy is huge because you never know when best efforts is gonna stick out. You wanna execute to that. The agencies are the G S E's, as you said, are are sticking out or trying to buy volume. So you wanna be sure you have the ability to deliver to them directly and retain servicing or to do things like coissue. It's just w whether you're talking about the COVID event or the

great financial crisis or some of these small events in between like taper tantrum and just events that have caused rates to go up or go down or to cause volume to spike or to crater, you need to have that that diversity in your in your strategy.

Todd Leddon (: 18:54

Yeah, that is like such a big piece of capital markets. You know, a lot of demand of understanding capital markets seems to be outside of the actual strategy. They always think, what's the newest hot product, the newest hot rate? And from my perspective, I'm like, Do I have everything covered? That is like huge. Like in twenty twenty, having

Your tickets with the agencies was it was a lifesaver. And then yes.

Jim Glennon (: 19:28

it was black and white between the successful companies

and the non. So yeah, having the ability to retain at that time meant either you were able to actually make a few bucks on a loan or actually sell it for a loss if you were unable to deliver because there were so many the aggregators were just over capacity at that point, right?

Todd Leddon (: 19:48

They put yeah, they they they're

our capacity, they put way too much margin and and you know no MSR value, even negative to the TBA, I remember. And I'm like, whoa, we are lucky we have all these executions. And so you don't ever really know what the market's gonna bring. And you need options and not derivative options, I'm I'm talking options for execution. So

Jim Glennon (: 20:15

just talking diversity in general, right? And a system that can support that, as you said. You use Compass

Todd Leddon (: 20:19

Yes.

Jim Glennon (: 20:19

Edge. There's there's other fine you know, hedging software out there, but you have to have the ability to look at all of these executions, which there's when you start to multiply them by the type of execution and then the investors behind them, there's l literally could be thousands. There's at least many hundreds.

Todd Leddon (: 20:34

Y yes.

The matrix is huge, you know. We got like twenty-seven investors and they have different executions. It's like so some investors have five different ways of selling to them, you know. And you just you wanna make sure that you have the ability to do that. And in your system it's it's it's it's nice because you guys consolidate everything and you know, you have a history of the data.

that's key. Making simplifying something that's very complex from the optionality. That's that's key, in my opinion. And then you know, i when you're in my position, you're kind of like looking at the top and you're all trying to figure out why is this moving the way this is moving. And being able to zero in and target, okay, we need we need to change this, we need to change that. That

is huge and then having, you know, a team be able to work with you. Because I I don't have all the answers. I just know when something doesn't look right, right? And then I have to make

Jim Glennon (: 21:38

Absolutely.

Todd Leddon (: 21:39

I then I have to go and go, hey, what do you guys think? And then I have to okay, I think we should probably do X, Y, and Z. How what do you you know? I'm humble enough in this industry to know that you gotta listen to opinions and on on how to solve some of this stuff. And so

I do really appreciate that piece of O B and the team that we work with.

Jim Glennon (: 22:02

Yeah, man. It's not always easy to get market intel from your neighbors, you know. They're gonna be your neighbors meaning your competitors in your MSAs, you're gonna you know, there's a little bit of standoffishness there typically, as you would think with any business. You don't wanna give away the the market intel, you know.

Todd Leddon (: 22:14

Yeah, and they're trying to figure it out, right?

And and and they their advantage is just one angle, right? Where you guys see multiple angles. So having that view of multiple angles coming in, it helps you. It's just you just need to simplify the data. So you can you can get something out of it and and take action and then monitor. Did that work? That's gonna be the exciting piece of the new, you know, edge durations on spec values.

Hey, does it seem like it's working? And when you implement them, for us, it it it didn't change the position that dramatically. It just like it fine-tuned it.

Alex Hebner (: 22:53

Yeah. It's only one one to two percent is what we're generally seeing when it comes to the

Todd Leddon (: 22:56

Yeah, yeah.

Alex Hebner (: 22:58

spec durations. But you know, on a hundred million dollar pipeline that's additional one million in T B A, give or take, and and that can be the difference between a you know, a red or a black month.

Todd Leddon (: 23:09

Yeah, in this tight margin environment.

Jim Glennon (: 23:13

Yeah, I mean speak

Todd Leddon (: 23:13

For sure.

Jim Glennon (: 23:13

speaking of margins, like has this volatility this year presented a lot of challenges there? Just how you manage margin on the front end to your to your loan officers and to your borrowers?

Todd Leddon (: 23:25

Well, our we're pretty transparent model with our margins and we don't modify them a lot, basically at all. It's it it's an interesting position from where I'm at. but you know, they have the ability on their side to to adjust margins. And then you you have margin management, right? They're just trying to they're not necessarily looking at it from a depletion of margin and the total execution, the whole loan.

They're looking at it from a competitive standpoint. so, you know, cost is a a big thing to look at with margins. And this year AI, I mean, we you can't stop hearing about AI. Like I I just think I think it's a tool that's gonna be advantageous. I think the tool's gonna evolve and I think there's gonna be tons of different ways to use it. So right now it's kind of hard, like

It's like you know, back in the day where there's a time period in culture, the Renaissance. It's like a renaissance, that's the term I'm looking for. you know, just so much going on, like trying to figure that out. So I think I think from a margin position, you know, you wanna stay competitive because the rates are where they are, right? And so adjusting a lot of front end, I mean we're

We pass through a lot of the just the best efforts rate sheets that we get. And that's pretty transparent. so the key for me is, you know, we're always looking at costs of things and AI. How how can that help? But on the back end, I have that's really where my control is on the margin, is basically making sure we sell to the highest bid.

and they purchase it fast.

Right? And they don't come back and do the smell test a thousand times on you. Does this pass?

Jim Glennon (: 25:16

Yeah.

Alex Hebner (: 25:17

think in the last three or four years I've taught anyone in this industry anything it's you know control what you can because yeah as you just alluded to there Todd you know the rates are gonna be where the rates are at. So you know yeah control your margins. Make sure you're not leaking dollars anywhere. just control the things that that you can. if I could ask I I think everyone in the industry right now is seeing where they can plug AI into their portion of the production process. Is there any one spot in the

timeline of a loan that you've been like, wow, like AI is really gonna just really nailing this on the head.

Todd Leddon (: 25:52

I think you know that from an operational standpoint, there there's gonna be a big pickup there, whether it's underwriting or you know, any of the day-to-day stuff that can be automated, any kind of data automation. that's key. in our world, you know, like looking at the position changing, you get an idea with

AI, you guys 'cause most most of the AI is being already implemented with your your vendors on a lot of the technology. So I can't say that there's one place that just completely dominates you know, I think it's a bunch of small it's like an accumulation of little wins that in

all sorts of different workflows. That's what I think it is. I don't think it's necessarily like, this is the magic bullet to make, you know, drop cost 20%. I think it's more like, all right, well we got this process. Let's see how we can apply. And the other thing is is you gotta be pretty selective with folks that you talk to about AI, because they just come after you. Like I guess so many people in LinkedIn

Saying they can change the world and make you know make it sunshine and and flowers and everything at your organization. And then you go talk to them and they're like, okay, well, this is the money that you're gonna have to you put down. You're like, okay, well, wow, this is supposed to be a net gain when it comes to costs. And so I still think a lot of that needs to be sorted out. And there's so much competition. So I couldn't give you a specific

One single answer, Alex. I would say it's just

Alex Hebner (: 27:43

Okay, yeah.

No, that's a totally fair answer and I I think it's one that I've I've definitely read about myself that maybe I think those that are maybe keeping their expectations on AI a little more in check are saying in five to ten years it's just gonna be another tool in the toolbox, which I think you were almost there saying, Todd. Like, you know, you Yeah. Mm-hmm. Yeah.

Todd Leddon (: 28:00

That that's how I feel. I do. I mean I

I we're still humans and having to to interact with technology, right? That

relationship with technology hasn't changed. It's just different technology.

Jim Glennon (: 28:13

Yeah, it makes sense too that there like you said, there's not a magic bullet. It's it's we don't hear a lot of lenders that are implementing like single a la carte like AI solutions. It's it's the partners they're already working with, whether it's Optimal Blue or your LOS or your POS or anything along the assembly line of capital markets or creating a loan. You you kind of expect at this point for your your partners to be implementing AI tools within

their technology and you're either paying more for that or you're getting it for free or whatever it is, but you're not having to invest multiples into creating your own AI that could potentially be used by other lenders as well. Right. So unless you really truly create something proprietary, it's expected that you're going to be able to get, you know, increasingly so, these AI tools from your from your partners.

Todd Leddon (: 29:01

Right. And I I think that's where the big value pickup is a lot of the vendors using it on in their processes. I mean, I I'll be looking for products and you know, I'll I'll use the basic chat GPT sometimes when I can't find investors. I mean like I I didn't have that tool before, right? that's you know, you you go to your your network and then if you just can't get anywhere, I'll I'll ask the magic AI. But that's not like gonna be a huge cost savings.

You know, it's gonna be like a time savings for me and and then I have to still continue to go down the rabbit hole and try to contact them and figure out if the story's real. And then you you ask your network, what do you think about this? It just gives lots of times AI to me gives you a more questions to to ask that are appropriate. Like, I didn't think of that. But you know, when it comes to workflow, automation is the king of AI. Like that's what it fixed. So if you have something to automate, that's where I think you pick up.

Jim Glennon (: 30:00

Right. Practical application of AI versus some of these pie in the sky ideas that will come to fruition at some point. We're working on some of them ourselves. But the first thing we did was we attacked like what's repeatable, what is everybody spending time on every single day in their capital markets processes, whether it's reconciliation for gain loss or you know, at a PPE, for instance, just going out and being able to more easily find the right product for a borrower when you're running scenarios, anything along those

Todd Leddon (: 30:27

Yeah.

Jim Glennon (: 30:27

lines, right?

Todd Leddon (: 30:28

And that's not like game changing, but it it sure helps, right? Those add up. Those tools add up.

Jim Glennon (: 30:34

Absolutely.

Todd Leddon (: 30:35

They get you to the end game quicker.

So that's hard to compute.

Alex Hebner (: 30:39

Yeah, yeah, yeah. It's hard it's hard to to add up all the mm-hmm.

Todd Leddon (: 30:42

It's not like a basis point that you can measure, right? I bought

here, I sold here. Like it's it's

Jim Glennon (: 30:47

Right.

Todd Leddon (: 30:47

like

Jim Glennon (: 30:49

It starts to add up to FTEs at some point. Like we've we've certainly done s or we've actually hired a third party to do some calculations. we did basically a you know, an ROI study that said, you know, went out and asked all of our clients, based on the tools that you use, what sort of time savings or dollar savings do you think that you've you've accumulated? And it it ends up being, you know, over a thousand dollars a loan, which is significant when you've got loans that cost between, I don't know, I don't know.

guys are Todd but eight to twelve thousand dollars to produce, you know, a thousand dollars is is double digit percentage or over a thousand, it would be double digit percentage of what it of what it costs, and that ultimately flows down to the borrower.

Todd Leddon (: 31:30

Yeah. Cause you can be more competitive with your pricing. And that that's what the flow, that's with the natural flow. The waterfall is to get the pricing even better for borrowers to bring them in. So I I I want to flip that question on if you don't mind. What have you guys seen been the biggest pickup as a vendor with using AI?

Jim Glennon (: 31:50

Yeah. I mean it's everything we've put out there has produced results on the desk, but also for our clients. Whether it's, you know, something as simple it's not simple. It's simple to understand, but it's difficult to create. we have a a GL recon tool, for instance, that every single morning we know that every you know, every good capital markets person is out there spending time potentially in the morning explaining or digging into why their PL has changed day over day or week over week.

And we certainly do that on the desk when we see changes to a client's gain loss or a change to their position. And these gain loss recon assistants and the position assistant do that work for you. That would take potentially 30 minutes to a couple hours in the morning, depending on how deep you have to go. It does that work for you and sends an email out. It's also in the interface. Just kind of a again, if you could shave an hour off of every day, you're talking five hours a week. That's that's significant. And then you have another tool.

Todd Leddon (: 32:46

Yeah, and I know

that that's been a big deal for a lot of other OB users. I I I love it. Like you know, we look at it too and so that has been huge for everybody else too, that you're saying.

Jim Glennon (: 32:57

Yeah, it's again, it's it's minutes and then it turns into hours. And when we have either this organic growth that we're seeing now in the industry, where we're gonna probably be double digit percentage over last year in terms of volume, hopefully continue to see that, or we have an event of some kind that causes volume to spike. You wanna be able to encounter that volume and handle that volume without adding bodies like we always have in the past as an industry, right? So some of these tools and automation is what's gonna get us

to be able to do that without having these massive gyrations and in head count.

Todd Leddon (: 33:31

Yeah, I th I think in the capital markets area we can be pretty lean these days. I I it's you know, with your automat automatic locks and all that technology.

Jim Glennon (: 33:43

Yes.

Todd Leddon (: 33:44

It's been fantastic. Like, you know, if we doubled our business maybe we'd need another lock person, but it's like other than that, all these tools have been helpful for that, in my opinion.

Jim Glennon (: 33:57

Yeah, autolock's a huge one. That's not even AI. It's just automation, right? Which kind of go hand in hand. But just allowing your lock desk to sort of run itself. And then when you do have a question, you can ask OB. That's another little bit of a plug there, which is a feature

Todd Leddon (: 34:10

Yeah.

Jim Glennon (: 34:11

a feature where you can say, You don't necessarily need an analyst to go out and chop up data for you or find what your volume was in, you know, July. You can just ask OB, what was my you know, what was our volume in July?

Todd Leddon (: 34:21

Yeah. AI's

kinda like just an analyst, right? And you just, you know, hey, can you get me this? You know?

Jim Glennon (: 34:29

Right.

Ask a simple question in English and get or I guess any language really, but plain words and get and get an answer.

Todd Leddon (: 34:36

Yeah.

and they don't get annoyed with you, right? If you ask in multiple times.

Jim Glennon (: 34:39

Yeah, that's right. That's right.

You just asked me this last week, Todd. Answer's the same.

Todd Leddon (: 34:45

Yeah, they're like, dude, come

on, Todd. Come on. No, the AI doesn't do that. well that's a great idea. Let's look at this.

Alex Hebner (: 34:52

Yeah.

Jim Glennon (: 34:52

Yes.

It's sometimes almost too accommodating and too cheesy, but it gets the job done.

Todd Leddon (: 34:56

Yeah, and you're like,

Whoa, you're being a little too nice to me here, buddy.

Jim Glennon (: 35:03

man. All right. Well, yeah, AI certainly is it is a re it's a revolution or it's a renaissance, as you said. It you know, many have compared it to the industrial revolution, or at the very least, the internet kind of proliferation throughout the the world that happened in the late nineties, early two thousands.

Todd Leddon (: 35:21

Yeah, it's really like an extension

of the internet, right? Like we just ever since the internet was, you know, created, all this different stuff technologically has been building on top of it.

Jim Glennon (: 35:33

It's a steep curve and it just keeps getting steeper. So it is it will be very interesting to see where we go from here.

Todd Leddon (: 35:39

Yeah, definitely eye opening.

And you gotta learn a lot, you know.

Jim Glennon (: 35:46

Yes. Well, that I think we're all still learning, like you said, that some of us are just using Chat GPT on our phones or copilot at work or using features of products we already use. But it's hard to be in front of the ball. Like I th I feel like we're all chasing it at this point. It there there will be a time when the human brain probably can't keep up with the innovation that's happening. And that's really where people's brains start to bend a little bit when they think about what the future looks like at you know.

Utopian versus dystopian. Anyway.

Todd Leddon (: 36:13

Yeah. Yeah, and whether

you're a positive person or a negative person, you'll you take it to conspiracy places or you take it to Utopia and Nirvana and like it's everything's amazing. Yeah, or Terminator

Jim Glennon (: 36:25

Or Terminator two. Yeah, it depends depends on what you're into.

Todd Leddon (: 36:29

Two. But nothing's changed about, you know, good versus evil AI, you know.

Jim Glennon (: 36:35

Agreed.

All right, Todd. Well before we sign off, I'd love to hear a little bit more about your book. We've all either read it or at least skimmed it and we kind of you know, we understand the content generally speaking, but you've definitely put it together in a way that I feel like is is approachable by anybody, whether you're in our industry or not. If you're just interested in what how capital markets works and where a mortgage comes from and what you know, how you protect interest rate risk and all this sort of thing. What's your what's your plug for for the book?

Protect the house.

Todd Leddon (: 37:06

Yeah, so I I appreciate you mentioning that. And whenever I was first starting out in this this industry, it was really hard to get like the full scope of the whole it's it's circular, right? Everything's circular and I would sit in, you know, pricing or something and just one section of the whole book in

everybody always seemed to be it was like mystical when it came to capital markets,

right? It's like behind the curtain kind of thing. And really it's just a discipline. We just in you know, the capital markets is just a way for us to have money to fund loans. And a big portion of capital markets is making sure that you don't lose margin because it's a financial instrument. Financial instruments move so fast, right? When it comes

know, if you're making a pair of shoes, I don't know if the goods that, you know, the products that create the shoes move as quickly as something like a financial instrument. And so I wanted to I I just thought about me as a young person coming into the industry.

how would I have wanted to understand this? And so I was very like methodical on the different

you know, areas and chapters. I but I I also wanted to, you know, have a professional capital markets person potentially look at it and go, yeah, he summarized that up quite right. And that's what we are kind of trying to do. And there's a section in there with like margin management. That that is like the most complex part of when it comes to capital markets and managing margins. Like to me,

It's part art form, it's part testing and and gosh, the markets move around so fast. You think you have it and then y you you don't. So I just wanted to create framework like a handbook where you could read a portion of the book, set it down, and then go, yeah. let me let me just freshen up on that. And so that's that's why I put together because I felt like a lot of, you know, I'm very important people and

the mortgage process didn't quite understand it the way they could understand it. Because to me it's a discipline. It's not it's not something that you can't understand without putting a little bit of effort into it. Like I w kind of want to know excuses, right? From people to go, I don't understand hedging. I want to be like, all you're trying to do is offset the movement of the loan. So whatever you thought you're gonna make on it, you're gonna make. So that's that's kind of how I wrote it.

Then I I was lucky to work with guy who was kind of like reading the book behind me as I was writing it. And he was a real estate broker. So he's like, this is interesting. I he's like, that c doesn't make any sense, Todd. You have to rewrite that. So it was nice to be to have that structure behind it. And he helped me with like I didn't ever would have thought of this, but adding definitions in the beginning of the book each chapter.

Like so you don't have

to keep to because what I was doing is I was talking about something and then I'm like, are they gonna understand what that is? And then I would define it in the story. And then you you would you'd go off defining something, and then you'd be like, I can get back to the thing that I was actually gonna be talking about, the concept I was gonna talk about. that's why it's kind of handbook like. And I do, you're right, I do. I start off like, hey, America's innovative, man. We created a capital markets for the mortgage industry. this is how it started.

So

Jim Glennon (: 40:40

Right. And it's like no other country in the world too. So it's it's the even

Todd Leddon (: 40:44

Yeah.

Jim Glennon (: 40:44

smaller universe. Like you have a very unique instrument and product and ecosystem. And then in our part of the world, capital markets, there's very few of us. There's no there's very few college courses on this. And if you if you're lucky, you maybe you get a you know, a a a day or two in class to talk about mortgage backed securities and you're likely not gonna get too much into hedging and trading. Yeah.

Todd Leddon (: 41:04

Yeah. And they just talk about it from a bond cash flow perspective.

That's that's all they're talking about is how bonds work, you know.

Jim Glennon (: 41:11

From the investment

side versus actually how do you where do the loans come from? How are they produced? Right. So yeah, we we

Todd Leddon (: 41:18

Yeah.

Jim Glennon (: 41:19

certainly have we have a few copies of your book on the desk just kind of floating around. And we've you know, we have newer people especially read it because as you said, there's very few books on this subject. There's a couple, but they're starting to get fairly old. yours is relatively new and it does I like the structure how it does generally simplify each of these topics. It

It's got a little bit of a glossary at the beginning of each chapter that explains what certain words mean. So you see, like you said, you don't have to go back and explain yourself as you're explaining the process or the flow or the concept that you're trying to convey. Yeah. I think it's, you know, I I think it should be required reading for folks entering our world, but also just trying to get a refresher on what it's all about or whether you're overseeing

Todd Leddon (: 41:58

Right.

Jim Glennon (: 41:59

capital markets people, you're becoming one, or you've been one, and you just really want to again just try to get gain intel from outside of your own organization.

Todd Leddon (: 42:08

Yeah, and I think one thing that's a little bit different is I because I have been in this position, I know that building relationships is huge on your success. But that is not interest rate driven, right? So I wanted to put a humanity component inside there because I'm a human doing it, right? And so it it's important to build relationships. Like I've known you guys for a while and like you're huge to our success. So

Yeah, I I I appreciate and I think that you're viewing it how I tried to you know, write it. So I I'm glad to hear that feedback. Humbly.

Alex Hebner (: 42:44

Yeah.

Jim Glennon (: 42:45

Agreed.

Alex Hebner (: 42:45

I think it's I think it's a great

reading for someone in the first one to three years probably in the mortgage industry,

Todd Leddon (: 42:50

Yep.

Alex Hebner (: 42:50

or I think it's also great and I'm sure both of you would agree for for friends, family and significant others who are like, What do you do? What do you do all day? And you've explained

Todd Leddon (: 42:57

that is a good one.

Alex Hebner (: 42:58

it ten times, but you know, maybe maybe putting it on paper might help them as well.

Todd Leddon (: 43:04

And then if

they're having a problem sleeping insomnia, you know they can use it for that too at night. So

Alex Hebner (: 43:09

Hehehehe

Jim Glennon (: 43:10

Yes.

Well, totally agree. I appreciate you saying that about us too, Todd. And again, love the book. Would recommend it to everybody we just talked about, which is pretty much anybody out there who's who's curious about capital markets or wants to brush up or wants to know what their significant other does for a living in our small corner of the world. that's same. Same. I've been doing it for too

Todd Leddon (: 43:28

Yeah.

Jim Glennon (: 43:35

too long, and my wife still doesn't know exactly what I do. Nobody really does unless they're sitting in the room with us.

In Denver, DC or or San Francisco. but yeah, thank you so much for doing this, Todd. This has been an awesome conversation. Todd Ledon, leader one. The book is called Protect the House. You can get it. I believe you can get it on Amazon or wherever, right? Like it's it's out there.

Todd Leddon (: 43:55

Yeah, Amazon, yeah. Yeah.

Jim Glennon (: 43:57

Amazon is, I think, I don't know where you even buy books anymore. There it is.

Todd Leddon (: 44:00

Yep.

Jim Glennon (: 44:01

Looking good. Swords and Shield, protecting the house. Right on.

Todd Leddon (: 44:04

Yeah. Protected it man. All

right, Jim and Alex, I I I appreciate it as well. great chit chat, man. Let's let's

Jim Glennon (: 44:12

Same.

Todd Leddon (: 44:14

let's protect our houses. You guys gotta protect multiple houses. I just have to protect one.

Alex Hebner (: 44:14

Thanks Todd. Let's do it again sometime. Let's protect our house.

Jim Glennon (: 44:20

That's true. We protect three hundred houses every single day. And

Todd Leddon (: 44:22

There you go.

Jim Glennon (: 44:23

yours is one of

All right, Todd. Thanks again, sir. Thanks, Alex. We should we should do this this again soon. Take care,

Todd Leddon (: 44:32

Yeah.

Jim Glennon (: 44:32

guys.

Todd Leddon (: 44:33

Take care. Bye.

Alex Hebner (: 44:34

So

Jim Glennon (: 44:35

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.