The Pulse of the Market: Interest Rates & Forum Reflections | Optimal Insights | September 15, 2025

Jim (: 00:18

Welcome to Optimal Insights, your weekly source for timely market analysis and expert commentary from Optimal Blue. I'm your host, Jim Glennon, Vice President of Hedging and Trading Client Services at Optimal Blue. Our clients and industry partners have long relied on Optimal Blue for trusted insights and commentary, and these podcasts are an evolution of our commitment to keeping the industry informed. Let's dive into today's episode. Hello, everybody. Welcome. Thanks for being here on this Monday. It is September 15th. As always, tons going on.

So will share everything we know with you today. We'll do a market update here in a couple of minutes James, Jeff and Alex. I got a Fed meeting coming up this week, a lot of headlines in the news that we want to talk through. had some inflation data last week that we'll get to as well as some revisions and some other drama around the labor market. we get to that, OBMMI, six and a quarter ish right now. So getting closer to that 6 % number that we've all been

k volume day we've seen since: 2022

Capital Markets Forum this year, have rebranded it after the podcast. So it is the Optimal Insights Capital Markets Forum. So we covered a lot of things from the market update to non-QM to just other just aspects of the business. We had a ton of good panels, a ton of good discussions, a lot of ⁓ interesting guests and speakers. So we'll kind of cover what highlights we brought home from that event here in a couple of minutes. All right, let's go check in with the team and talk about the market.

Jim (: 02:12

All right. We have a lot to talk about today, don't we? going try to cover a few things here. We're going to cover what happened last week with some of the inflation numbers. We'll cover just the general unemployment picture, which seems to change every couple of days with things like revisions and non-farm. then, obviously we have the claims numbers and then going to get into some preview of what's going on with the Fed and then a couple other interesting things in the news. So where do we start?

Everybody, Alex, maybe give us a little, a little recap of what happened with CPI and PPI last week.

Alex Hebner (: 02:48

Yeah, I just the takeaway was that they were in line with expectations. PPI was a little bit on the low side. Then CPI came in right around 2.9%, 3%, depending on if you're looking at the core numbers or not, which were in line with expectations, as I said. And it really just cleared the way. was the last hurdle to rate cuts, I think. And as we discussed last week, it would have taken a real blowout number, something like 3 and 1 half or north of that to slow down the expectation of a rate cut in September.

revision for the year, March: 2024

jobs. The revision showed about over 900,000 all else the same, the articles I was reading this would indicate some, potentially up to like a half percent of additional unemployment. There's downward pressures on that. But again, all else the same, it'd be about a half percent. But with deportations and exodus from the US, we're actually expected to...

Jim (: 03:40

Mm-hmm.

Alex Hebner (: 04:06

see a net decline in population this year. That number is probably somewhere, maybe somewhere in the middle. Call it, yeah, a quarter percent of additional unemployment. But still, when we're talking about unemployment these days and we're creeping towards that 5 % level, this did not help by any means, regardless of the that it actually was.

Jim (: 04:13

Four and half.

Mm-hmm.

Jeff (: 04:30

I saw the CBO slash their 2025 net migration forecast from 2 million to you said, Alex, I think a lot of people are seeing near zero or even negative population growth. So I mean, that part of the equation is non-trivial, but it's just, you it's going to be a while, I think, before we understand that part of the equation.

Jim (: 04:43

population growth, yeah.

Yeah, the waters have been so muddy this year, right? You've got all these different things at play that make it difficult to really see what the labor market really looks like, including the fact that like the survey participation has plummeted as well, right? And a lot of these numbers rely on people actually responding to these surveys.

Alex Hebner (: 04:57

Yeah, I think.

Yeah, the big takeaway here is I think it really paints a picture that the labor market has been in more dire straits than we thought, and it's been in more dire straits for a longer period of time than initially understood. In fact, last year potentially, the unemployment rate being where we knew it to be currently. So I think it just strengthens the Trump administration's argument that we need rate cuts to ⁓ prop up employment.

Jim (: 05:40

Yeah. I mean, it makes sense. mean, the data seemed to be defying gravity there for a while based on all anecdotes that said the job market is not in good shape. Inflation is still under control regardless of these headwinds of things like tariffs. this all makes more sense even if it is kind of a more dour picture, but as always, it's going to be positive for interest rates most likely.

James Cahill (: 05:51

is still under control.

Alex Hebner (: 06:06

Yep, and has been, think, you know, in our world, TBA and BS has been rallying pretty heavily this past week.

Jim (: 06:13

Yeah, approaching that 6 % number, that five handle that's been a little bit elusive this year, but we saw it in September of last year and we're kind of weirdly in that same situation now where we're hoping we get to that, you 599 number to have a pretty good fall in terms of lock volume.

All right, so what does that leave us this week for the Fed? So all bets are still on a quarter point, like 90 % chance of a quarter point. No chance of no rate cut and a slight chance of a half. Half is on the table, those bets have kind of shrunk, right? We're down to maybe a 5 % chance of half point cut.

Alex Hebner (: 06:52

Yeah, yeah, really dialed in their bets on a quarter point rate, point rate cut here. There were some folks entertaining the idea of a double 50 basis point cut at this meeting, but those bets seem to really be off the table. As of this morning, it was down to 3%, 4 % of a Last week, it was more around 10%. So fully expect 25 basis points here.

Jim (: 07:14

Mm-hmm.

Right. So those of you that are watching mortgage rates, watching treasury rates, if we get that quarter point, I wouldn't expect to see much in the way of long-term interest rate movement. It's all built in to where rates are today. If we did get a weird surprise and we get a half point cut, I think you could probably expect a little bit of a downtick in longer-term rates, maybe 10, 20 basis points, which should be fun. But again, it seems pretty remote at this point unless something happens in the next day or two, but the meeting.

meeting starts tomorrow, so it's unlikely that there's going to be any new information that's going to drive their decision.

Jeff (: 07:51

And at this point, it's going to be pretty hard for Stephen Mirren to be a part of those meetings, right? Even if he got pushed through today or tomorrow, I guess he's not actually in on the meetings. at this point, there's enough pushback and concern. It'll be a while before, if he gets confirmed from everything I see. Is that what y'all see?

James Cahill (: 07:52

And at this point, it's going to be pretty hard for Stephen Merritt to be a part of those meetings, right? Even if he got pushed through.

I think at this point there's no pushback and concern. It'll be a while before, if he gets confirmed. that what you'll

see? I think that's right. Basically, this kind of slow trickle, this slow takeover of the Fed is happening. But again, it's unlikely to have an effect on the results of the meeting this week. But the Fed board will look different at the next

Jim (: 08:13

I think that's right. Yeah, basically, you know, this kind of slow trickle, this slow takeover of the Fed is happening, but yeah, it's unlikely to have an effect on the results of the meeting this week, but the Fed board will look different at the next meeting.

Jeff (: 08:31

mean, the

process seems like a real test of that long-term. There is some pushback. think people recognize some of those ideas are maybe a little bit more radical, maybe too strong a word, but more radical. Maybe it's not too strong of word, more radical than we're willing to digest.

some interesting things that came across those confirmation hearings over the past couple of weeks. And then, know, Lisa Cook and that drama is playing out a lot slower than I'm sure Trump and Pulte would like. There's been some in that where it doesn't seem like that's going away anytime soon or going to be resolved anytime soon.

Jim (: 09:14

Right. Yeah, the courts are still moving on the Lisa Cooke thing. And yeah, I think you're right about Meera and just he's a bit more aggressive, which typically the Fed has been a little bit, I don't know, conservative, boring banker type folks who end up on that board. But you've got someone who's going to be a little more, I don't know, focused on growth rather than the core tenants of full employment and low inflation.

Jeff (: 09:37

growth and the on-shoring industrial policy that other members of the Trump administration are pushing, to bring back jobs on shore, whether it's this user fee for holding US treasuries that Marin's pushing is pretty interesting and just weakening the dollar.

Jim (: 09:54

Mm-hmm.

All right. So what else is going on this week? There's been a couple of headlines that we thought were interesting to bring up in this discussion. One was that this is kind of not really related to inflation or the Fed this week, but the administration, you know, through Donald Trump is suggesting a change to the way that public companies announce earnings, right? It's kind of been a, I don't know, an institution that every quarter if you own stock in a company, you

You read about the earnings once a quarter, but other countries don't do it the exact same way. Some countries are going to do twice a year, right? Some may even do once a year. I think we're advocating or the president right now is advocating for more of a twice a year cadence to allow the companies to focus more on internal issues, know, managing the business, growing the business rather than every quarter gearing up for these public announcements that have a lot of influence on how the stock performs and how the public perceives the business.

Alex Hebner (: 10:54

Yeah, I think you summed it up really well there, Jim. Yeah, Trump was announcing this, saying, some of you may have heard China. In China, they're much more focused, the management of a company is looked at on a far broader time horizon. We're talking decades, if not upwards of towards a century. I think that might be a slight overstatement, but it does vastly contrast with the American model of, like you said, it's semi-performative.

Every quarter to put out your sure they're audited make sure that all the t's are crossed all the dies eyes are dotted And that you know, there some efficiency gain that could be you know? Brought about the you know moving, you know from having to do this every three months to every six months you know on the one hand, I think some people are saying this is just another you know degradation America's, know kind of world-class reporting

be a very major transition for global markets, I think. But on the other hand, this is how the EU does things. As he pointed out, is how China looks at things, generally more so on a semiannual basis. it's not unheard of. And in fact, we're probably the outlier in doing it every quarter.

Jeff (: 12:05

As Jim and I can attest for a couple of people that have been very, very, very tangentially involved in some quarterly earnings I'm not sure I would be against only having to do some of those things a couple times a year.

Jim (: 12:17

Yeah,

there's definitely pros and cons. mean, in this industry, the mortgage industry too, we all know that you're only as good as your last month, right? It feels like we're reporting every month in this industry. then certainly, know, having worked for a couple of large corporations, we're used to gearing up for a quarterly review. I mean, I could see some pros and just being able to focus on the business every six months rather than, yeah, just kind of gearing up for the next announcement.

Jeff (: 12:38

Yeah

Yeah, practically that sounds alright, but

I think you'd definitely lose lot of transparency there.

Jim (: 12:48

Yeah, that's the con, right?

Alex Hebner (: 12:48

Yeah, from a practical

standpoint, I think it'd be pretty easy for the SEC to amend their policies or for Congress to pass something. market as a whole, like I said, this would be a very major transition for markets as a whole to, like you said, less transparency. And in addition, think the American business very much more short-term focused. I think it would take a reevaluation of how we look at business in general.

Jim (: 13:11

All right, anything else we wanted to cover on that?

Alex Hebner (: 13:14

Not directly related to that. think this is, as he quoted, China is looking at things on this longer term basis. And I think it's a continued effort by the Trump administration. I'm open to counterpoints for sure. But I think that there is a certain degree of emulation that they want to do of the Chinese model of looking at things on a longer term basis and not just quarter to quarter.

You see it with tariffs. say, hey, there might be little bit of pain this quarter, but if things go as we perceive that they will, this in the long run will work out better. We've seen greater public-private partnerships, especially in the rare earth metals and semiconductor areas with the US Defense Department taking a 50 % stake in the NP materials. And I think it was a 10 % stake in Intel. So just trying to bring under the roof of the government an entire supply chain.

that region. So I think it's interesting that China is the number one enemy by this administration's standards, but at the same time, we do seem to be emulating some of the ways that they go about business, which I just find interesting from a historical and economic context.

Jeff (: 14:29

And we see headlines this morning too about China facing economic headwinds. Their debt burden remains very heavy. Their youth unemployment is super high and a driver in the economy. They're not hitting their GDP growth if we can pick kind of the best pieces of maybe some of those ⁓ things to emulate in the Chinese economy, sure, but it's not like China is blowing.

James Cahill (: 14:29

And we see headlines this morning too about China facing economic

If we can pick the best pieces of those things to emulate in the Chinese economy, sure, it's not like China is

Jeff (: 14:53

rest of the world out of the model. mean, the US still, in my view, taking all these things into account, the US still remains the strongest economy in the world.

James Cahill (: 14:54

rest of the world out of the model. In my view, taking all these things into account, the US still remains the strongest economy.

Jeff (: 15:01

We're doing much better than Europe. China faces its own struggles. We're still the leading world economy. I feel like, right. So much of this rhetoric across the board does feel somewhat overblown.

Alex Hebner (: 15:09

Still a talent magnet as well.

Jim (: 15:19

Yeah, I think that's right. If you could take the good things and try to emulate them, it could be kind of refreshing to get some kind of improvement in the long-term view. think we've always had a problem. Maybe we've always had the issue in this country of term limits, Where administration after administration tries to make changes that are just going to affect kind of the short-term, right? And there's not a real focus on the long-term view because it's going to be someone else's problem in two to four to eight years. So it could be interesting to see how this plays out.

But yeah, absolutely. think when you look at the dynamics of all of it, we are still the largest and most prosperous economy in the world. But how do we keep that going with some of the headwinds that we're seeing today with, you know, the employment situation is a problem and that is, you know, tends to be a harbinger of being less dynamic, less, seeing less growth in an economy when you don't have people even changing jobs because there's a bad job ⁓ market, right?

We're facing that right now and that's that's going to be a problem for the administration for the next couple of years and certainly a puzzle for the Fed to try to figure out here in the medium term.

All right, good stuff. Maybe we end it with a take on again, news this morning coming out of the trade discussions between the US and China. Besant anyway is saying that a deal has been made or framework for a deal for TikTok to be acquired, which is pretty huge news, pretty big deal. And the news of who buys them and what the terms are should be out within the week, ⁓ says Scott Besant. So I don't know, what do you?

We were talking about this before we started recording. What do you all think? What do you think TikTok ends up here in the next few months? James had a hot, what was your prediction there, James Cahill?

James Cahill (: 17:06

I it's got to end up with one of the social media companies already. I would put my money on Meta. I know that Zuckerberg had said that he had missed out with Instagram. He had missed out with Snapchat. He wasn't missing out with TikTok. So he had been trying to put people on Instagram reels and all that sort of development. So if he has the opportunity to buy this, think that that is

right up his alley.

Jim (: 17:28

Makes logical sense. What do you think, Jeff McCarty?

Jeff (: 17:32

I don't have a good guess, but I know Howard Lutnick is gonna be heavily involved somehow.

Jim (: 17:38

Good point. We'll see how that pans out and Alex Hebner.

Alex Hebner (: 17:42

⁓ I think we already knew this. think I know Steven Mnuchin will also have his name on the deal somewhere. ⁓ He was the original architect, I think, of this deal back a year and a half ago. ⁓ I won't get on my soapbox about TikTok, but I hope it just stays with the Chinese company. I hope it gets banned, man. It just rots your brain.

Jim (: 18:02

All right. It does rot brains. I've witnessed

it myself. Yeah. I think I'll go with something. don't know. was thinking about it logically the way James is, is maybe something like Google, which is a company that I still don't totally understand how they make money, but I feel like the world may be passing them by. Maybe they wanted to step up and get into the game, the social media game a little heavier than just, you know, the search engine advertising. So, but yeah, I think it's got to be a company with very deep pockets and the right.

architecture and infrastructure to be able to build on something that has become a worldwide phenomenon,

discussion today, guys. Appreciate the time. Keep your eyes peeled for the Fed announcement on Wednesday. Thanks everybody.

Jeff (: 18:45

Thanks.

Alex Hebner (: 18:46

Thank you.

Jim (: 18:47

Okay, this should be a fun little segment. So we had our Optimal Insights Capital Markets Forum last week in Nashville, Tennessee. Super fun event. It was just a jam packed day. We started at like eight and went until after five this time around, which I think was great. Just people, you know, had a lot of information to share and it was super engaging. And we just got a lot of information, know, a lot of collaboration between

All of our guests and our speakers and just a really good mood. thought with, you know, I think the market being weirdly similar to what it was last September, give or take, you know, some economic issues that we're we mentioned in the previous segment, but anyway, really good event. Thanks for everybody who was, who was there. We will definitely do it again, ⁓ next year, but we wanted to share just some of the highlights with you all today. And we all hosted panels at some level or hosted sessions and

So I was just going to go through and ask all three of you what your highlights were from your sessions that you think would be good to share with our listeners, but also just highlight of the event. And there were a lot of them that went all the way till the wee hours of the evening, though I missed a little bit of that. There may have been a celebrity appearance or two even, which has been known to happen down there on Broadway. Anyhow, maybe we'll start with Vimy. Vimy hosted the MSR session, which is a...

Always something that we do at these events. We have some great brokers, broker partners that actually live here in Denver sit on a panel and they just talk about what's going on in the MSR market. I think it's a cool session to have and a cool one to talk about on this podcast because MSR values are so important to mortgage pricing. Many of us that listen to this podcast are mortgage people, but we don't always understand exactly where these prices.

And rates come from, but MSR being one of the biggest components, right? That value of the servicing asset that trades on a, not a super transparent market, but I think that session that you hosted helped create a little bit of transparency for me and a lot of our guests. But yeah, what were some of the highlights you took away, Bimmy?

Vimi Vasudeva (: 20:58

Yeah, I'm glad to hear that Jim that you found it useful because that was really the hope of the session was that to help everyone in the audience understand how critical understanding MSR pricing is because it's not just related to those that have an MSR portfolio, but having an accurate value is really important all the way from the beginning of the loan life cycle, given that.

the MSR price is going to go on the rate sheet and then how you're marketing the loans to market and determining your best execution and how to sell the loans. I that MSR value is such a critical piece of that. So it was really helpful to have four different perspectives join our panel. We had two brokers, like you mentioned, Jim, we had a buyer and we had a seller. So interesting feedback from across the panel.

And I would say that some of the key points are that supply is still trailing demand. seen that be the case for quite a while now, actually. so MSR values are still incredibly high. so high that many of us are kind of questioning what are the values that the models are producing. Because right now, just given the rate environment, prepays are generally pretty low. And there's still a lot of value that's coming from float.

And so it was interesting to hear from the modeler's perspective how they're treating that because of course there's the fair value of the asset that we have to consider, but then there's the market value. And so if the market value is really indicating that people can sell servicing for really high multiples, how do you scale that back for fair value and how do you defend that, right?

Jim (: 22:35

Yeah, I think I really enjoyed the candor in that session, I think, where there was discussion about, you know, kind of putting artificial caps on values and how some people, lenders in the industry or servicers are frustrated with some of the outlandish multiples that they're seeing. But I think, you know, the general, maybe consensus of the group was get over it. Like it's worth that much to somebody because someone's willing to buy it. So you just have to.

either chase that and compete with that, or you're not going to win those kind deals because there's some of the largest servicers and lenders in the industry are crazy seven, eight multiples on loans. And if you're artificially capping, you're just kind of arbitrarily missing out.

Vimi Vasudeva (: 23:20

Absolutely. Yeah, you don't want to miss that mark for sure.

Jeff (: 23:24

I was talking to some folks after that session. they kind of have a retained, you know, mix of retained release strategy. they're just talking about, there's no way I can chase these multiples to try to retain more. You know, have my recapture refi machine is fine, but it's not like great, like some of these, you know, bigger corporations that really, you know, know, focus on, refine their existing book and it's going to take me a while to build up.

my servicing ⁓ in a way where I can do bulk deals too. So I'm just going to let these other people value the servicing crazy high and I'm going to sell it to them and take advantage of that bid.

Jim (: 24:04

The cash upfront, right? mean, that's the thing is the economies of scale, not everybody has that most don't. So you see these, you start seeing these mega deals get put together like Rocket and Mr. And it's kind of no wonder that they can put these super high multiples on these loans. And then you intertwine that with their, as you said, the recapture machine, just the ability to take those loans then, and whenever rates dip a little bit, as soon as that borrower starts searching for a home online, they get triggered.

to go then talk to that borrower about that next loan, right? And someone like Rocket, especially, who has all this technology involved, they can boast that ability to recapture loans very easily and then thus pay extra one or two or two and a half multiple on that. then if I'm a mid-sized independent mortgage banker, I'd be crazy not to just sell them that loan right now, because otherwise I have to try to match that multiple to retain it. And then I have to count on my own ability to do.

that refinance down the road.

Vimi Vasudeva (: 25:05

Yeah, and to that point, was actually, there was 100 % consensus across all the panelists that we will absolutely see more ⁓ &A in the industry. And so it will continue to exacerbate the situation that you guys just described.

then you had also mentioned, Jim, the point about technology. So of course, we are all in on AI at Optimal Blue. And I had to ask the panelists how they thought AI would impact the servicing industry specifically. And not surprisingly, of course, the first comment is that AI will reduce the average servicing costs. And actually, one panelist even commented that

Jim (: 25:18

right.

You

Vimi Vasudeva (: 25:40

there are rumors of headcount already being cut at certain subservicers just because a lot of that sort of repetitive data or the outreach to borrowers can now be done by AI.

Jim (: 25:51

It makes total sense. mean, it's one of those very kind of cut and dry customer service type of roles, right? There's only a certain amount of questions that get asked and only a certain amount of correct responses. So it's the sort of thing that's I think been offshored for a very long time. And also seems ripe for something like AI to just step in and for a chat bot, you know, a large language model just to take over that whole, at least the initial pieces of like a phone call from a borrower or

initial steps in the collection process or whatever that looks like, right?

Vimi Vasudeva (: 26:25

Yep. And it'll be interesting to see if those models are programmed to be empathetic to borrowers, right? Like I missed my payment. Can you please waive this late fee for me? certain that will end up being the case.

Jim (: 26:29

Yeah.

Jeff (: 26:37

I don't know if you saw there was just a big study about using AI as interviewers for initial job interviews. And the folks applying for jobs rated the AI interviewers much higher. So it feels like something would be a similar type application here ⁓ in the word servicing world. So maybe there is, ⁓ yeah.

Jim (: 26:57

Interesting.

Higher. Yeah, I guess you tell the bot to be very patient and very empathetic and it's likely going to have more, I don't know, more patience and more style than a human.

James Cahill (: 27:10

It's probably good at kind of parroting back what you've said and asking for you to expound upon it. So right, like it actually, sounds like it's listening to you really deeply.

Jim (: 27:14

Mm-hmm.

True, people like to be listened to and that's going to give you higher scores on a customer service survey.

I'll come back in a minute here to get kind of your, I don't know, maybe social highlights of the event, but anything else just, technically or from some of the sessions that you hosted or sat and witnessed.

Vimi Vasudeva (: 27:29

you

Yeah, actually, one of the sessions that I really enjoyed was our broker dealer panel that is always a part of our forums. And one thing that really stood out to me that I thought would be really interesting to share with our audience, because I assume that we've got not just finance subscribers for our podcast, we all have family and friends who are trying to support us as well. And I'm sure you guys can relate, but I do often have family and friends approach me, even just last week asking, is now the time for me? Is now the time for me? It looks like the Fed's cutting rates.

And I think that there is such a lesson to share that mortgage rates don't track Fed rates one to one, right? And so just because we generally are going to see Fed rate cuts, it doesn't mean we're going to see decrease in mortgage rates. And I think that's important to highlight to many people. And it seems like a lot of the dealers were mentioning that in order to really see some substantial mortgage rate cuts, we really have to see banks.

stepping back in to buy MBS or Fannie and Freddie buying. was comments about in the Ginny space particularly that we would need to see Asia who's generally been a very big buyer in the Ginny space. There would really need to be a consorted effort from there.

Jim (: 28:49

Good call. Yeah, we mentioned it on the market update a few minutes ago that yeah, if the Fed does cut a quarter point this week, it's unlikely you're going to see much movement in mortgage rates or treasury rates. But if we get that half point surprise, which is unlikely, then we might get a little bit of a dip. But yes, there's very little correlation, at least immediately between a 30 year and the overnight rate for the Fed. to your point, Vimy, it came up in several sessions, just the spread.

that mortgages have over other types of assets, right? The mortgage rate is always however many basis points above a treasury or whatever kind of alternative investment might be out there. And that came up in your session too, James, right? We were talking Jackson from Wells Fargo Securities. We basically asked, is it going to take? Who are the buyers of MBS right now? And how can we shrink that spread so that treasury rates don't need to plummet a point?

James Cahill (: 29:43

Again, we shrink that spread so that treasury rates don't even limit the

ere really the buyers back in: 2008

Jim (: 29:46

for mortgage rates to get down into the low fives.

James Cahill (: 30:11

So there's been a lot of money managers, many markets have been buying this, but they just don't have the same appetite. So the hope is that as we kind of go on here, the banks will continue to step back, come on in, but even as we see the Fed lower rates over the next few months here, demand isn't necessarily there. So the rates may stay higher in order to actually get these mortgages out the door and into some sort of buyer.

So it's an interesting kind of position it's put us in. thought another good point that he kind of touched on was we're talking about how some of the data that's been coming over the past month or so can look pretty frightening, right? It's a little daunting to look at that jobs revision. But he was pointing like, you no, the economy is in a pretty good place. You know, that unemployment number, even with this is not too high. Inflation, we'd all like to get it back, you know, tap down, but it's not going crazy. And maybe with that,

like slightly higher unemployment, it will actually cool it off. We do have room to cut rates to see some energy come back into the economy. And from there, we should, you know, might actually springboard back.

Jim (: 31:23

Yeah, both really good points. think Kevin has a good way of just looking at things in kind of a worldview. He's a world traveler. He spends time banks across the world, including Asia and the US, and he kind of has this good, I don't know, macro view on the whole world economy. And there is something to be said about the US economy, again, being the largest and strongest in the world and leading by example that way. And yeah, like just...

These recent numbers that have come out don't necessarily mean that we've been looking at the picture completely wrong, right? Even if we do feel like we've been a little bit off on some of the jobs numbers. take on rates, know, it's obviously we've talked about a lot on this podcast, the demand, like we were all pretty hooked on the Fed buying mortgage bonds for the past, you know, 15 plus years. it's, who is the next buyer

James Cahill (: 32:02

obviously we've talked about a lot of this podcast, the demand, we were all pretty hooked.

Jim (: 32:15

of mortgage bonds, that was his point, is there's no clear leader in that realm. We have to depend on other countries to come in and buy those bonds. American banks are buying some to get some yield, but there's a lot of competition there with things like corporates and treasuries. What's going to make that spread smaller? There's maybe some extreme measures like getting the GSEs to come back in, as you said. The GSEs pre-Great Financial Crisis actually used to have a

portfolio of mortgages and they would buy and sell to kind of keep that spread tight or predictable. Right now it's a free market basically in mortgages and that has led to rates being a bit higher than they have been historically compared to other assets like ⁓ US Treasuries.

James Cahill (: 32:59

And ⁓ we spoke on that and as well as are the GSEs, you know, going to come out of conservatorship? And if they do, are they more likely to start purchasing? And I thought that was an interesting take, just that, that might make them more likely to purchase, that might make them more likely to step in. But once they step away from the government, if they don't at least have that implicit guarantee, where is the G-fee coming from, which is where they get their money to purchase these assets. So, you know, it's definitely an interesting

Time to be watching those

Jim (: 33:30

Yeah, the dynamic is so much different now than it was 20 years ago. 20 years ago, it was proven that the model didn't work quite right. the reason they're in conservatorship in the first place.

All right. How about Jeff? Jeff hosted the investor and GSE panel. Speaking of the GSEs, we had Freddie and a couple of our ⁓ investor partners there. How'd that panel go?

Jeff (: 33:53

Yeah, really good. mean, we had some of the largest the country up there as well as Freddie, as you Good insight.

theme for the day across all sessions was how non QM and arm production is really starting to grow. we talked about the liquidity, we talked about different ways to hedge. But just, the general theme was again, you know, both those markets are coming back.

So how do we kind of reeducate ourselves on how to produce those who's buying them? So that was kind of interesting across the board. I don't know if there's any specific, anybody has any specific takeaways from those conversations other than, ⁓ people are feeling better about both of those markets.

Vimi Vasudeva (: 34:33

I think with respect to arms, was interesting to hear someone comment about originators should really be actually trying to push borrowers into arms. I right now, I think the five one arm is sitting about half a point below conforming 30 year. So, and presumably with a curve steepening, that DALSA is just going to increase.

Jeff (: 34:54

Yeah, well said. That is a good point. You know, it's probably maybe even underutilized at this point because there is a decent enough spread where a lot of these borrowers are not going to be, you know, good chance they're not going to be in that house or, you know, rates are going to be low enough they can refine five or seven years.

Vimi Vasudeva (: 35:10

And it'll be interesting to see if the agencies try to offer time home buyers some type of arm product as well, since that has been a big focus of the GSEs.

Jeff (: 35:21

Yeah, that's a good segue into my other, my main takeaway from the investor panel that I, that I hosted was just thinking about, what, what are the GSC is going to push? You know, what, where does affordability come into play as we remember over the past couple of years in the previous administration, you know, we had a big affordability push, whether it was, low income borrowers or by, you know, effectively subsidizing.

with an increase in non-owner one of the good observations was that with this new administration, obviously they are gonna do things differently. They may be focusing on what they call affordability, but they may go about it in completely different ways. And so I think that was more of just like expect to see changes.

and how home affordability is addressed. Don't know exactly what that is, but I would expect in the coming months we'll see some changes from the GSEs and how affordability is addressed.

Jim (: 36:20

Yeah, good point. There was a lot of talk about it during the campaigning on both candidates and thus far, Bill Pulte, I feel like he's been highlighted more so for the rhetoric about the Fed versus plans that are almost certainly being made behind the scenes on what comes of affordable housing because that's really the FHFA's stated mission, right?

Jeff (: 36:41

Mm-hmm.

Yeah, so again, no specifics on what that might look like, but just more of a teaser that we should expect some things. And yeah, we really haven't seen much so far over the past eight or nine months with this administration. So how will that play out?

Jim (: 36:59

Yeah, good point. That's exciting. think, you know, if they take an aggressive stance on this as they have in some other areas, we could see something interesting that might, and something kind of stateside, you know, that might bolster home building or real estate in general. I mean, it's going to be exciting for our industry almost without a doubt.

All right. Let's see. Why don't we talk about, I mean, for me socially and just, you know, general highlights of the event, I just thought that our, this might be a but our party that we had that evening, right? So we went till about five, five 15, and then everybody, you know, went back and got their cowboy boots and their jeans on. And we met at Old Red, which is Blake Shelton's bar there on Broadway and had a really nice party on their, on their rooftop. Good event, really good food in that town.

a couple of drinks and just again, good conversation, good feedback from what had happened during the day. So that would be my highlight. What do you think, Vimy? What was your highlight of the whole week?

Vimi Vasudeva (: 38:00

Well, of course, seeing clients and industry partners was terrific, but it might've been a little overshadowed by a surprise appearance by Ludacris at very unexpected post the party that you were referring to, Jim. Some of us went to a different place across the street and it was actually Jimmy Aldean's bar, who is a very famous country singer. So you would not.

Jim (: 38:12

Yeah.

Jeff (: 38:27

Jason Aldean.

Vimi Vasudeva (: 38:28

Sorry, yes, sorry, Jason Alde. Clearly not a country music girl. ⁓ And so very surprised to see Ludacris show up and he was there to celebrate his birthday.

Jim (: 38:29

Yeah.

You

Yeah, that was, I just missed that. was in my hotel room helping my oldest daughter out with algebra homework. And yeah, next morning I come to find out on LinkedIn that there's a selfie going around of Luda and several of our coworkers and guests on stage. That was, that is pretty cool. That's one of those towns where I think that can just happen wherever people show up at these bars on a weeknight and perform. That's super exciting. That's pretty, that's pretty funny.

Jeff (: 39:10

Yeah, still.

Vimi Vasudeva (: 39:10

Well, Jim, if

you were going to miss out on Ludacris, helping your daughter with her algebra homework is a really good reason too.

Jim (: 39:14

Yes, I'm not crying too hard about it.

Yes.

Vimi Vasudeva (: 39:20

You

James Cahill (: 39:22

I thought Ludacris was potentially a new client. I thought it was Luda Mortgage that we were trying to talk to. I didn't realize he was just there by accident. That's incredible.

Jeff (: 39:24

You

Jim (: 39:24

Yeah.

Vimi Vasudeva (: 39:31

Yeah.

Jim (: 39:33

You never know when you're hanging out with Optimal Blue what might happen.

Jeff (: 39:35

Yeah, exactly. That's still Erin Wester's line that she posted on LinkedIn that the chances of seeing Ludacris at an optimal blue event are low, but they're not zero. Yep.

Jim (: 39:46

Yeah, it did happen.

close and personal it looks like. That's very cool.

How about you, Jeffrey? Was that, is it hard to

ludicrous thing?

Jeff (: 39:55

well, yeah,

I missed it by five minutes, so very disappointed. I think my general theme is this is a complicated industry. There's a lot going on, and it takes all of us kind of working together to solve problems to make the entire process more efficient, whether it's AI or better integrations and better communication between counterparties. It's not one company or one business.

you know, that takes entire process from beginning to end. takes us all working together to make the process more efficient and hopefully, you know, pass those savings and efficiencies on to the, you know, the homeowner.

Jim (: 40:35

Yeah. So collaboration, right? That was a huge, I think a huge component of this event and a huge highlight of it from, from start to finish. Right on. James Cahill highlighted the evening.

James Cahill (: 40:45

I think I

kind of piggyback that too. I've been talking to clients for five, six years now and it's nice to do it over Zoom. It's lovely to see everyone's face, but when you actually get to shake a hand and meet someone, hang out with them, it really is a different relationship. And it's funny that there's so many different pieces that you know about, whether it's banks, credit union, servicing, but when you get to mix them all together and hear them talk and kind of, ⁓ you're this side of the mortgage industry and...

like put it all together and you also get to do it with them. It really is a great experience.

Jim (: 41:19

Here, here, absolutely. Yeah, in person, collaborating, learning stuff. It's a good note to end on James. Appreciate you giving insights in general at the event, but also this would be, I believe, your first forum. So thanks for hosting that session with KJ as well. It was super informative. Yeah, let's end it there. Thanks to you three. Good discussion and yeah, we'll talk again soon.

James Cahill (: 41:46

Thank

you much.

Vimi Vasudeva (: 41:47

Thanks, guys.

Jim (: 41:49

All right. That was a good one. A lot of really good content today. Big thanks to Alex, Jeff, Vimy, James. Great discussion. Great insights. Thank you. Thank you. Thank you. And thanks everybody for being here. 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.