Essential Economic Insights | Sasha Hewlett Discusses the MBA's 2025 Focus | Feb. 10, 2025

: 00:00:03

Welcome to Optimal Insights, your weekly source for real time rate data and expert capital markets commentary brought to you by Optimal Blue. Let's dive in and help you maximize your profitability this week.

Jim Glennon: 00:00:18

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. Welcome, everybody. We've got a great show for you today. Today's Monday, February 10th.

We just returned from our summit. We've talked a lot about on this podcast. Great summit. Thanks again for everybody who was able to attend.

We had some great sessions, some great interviews, just a ton of great collaboration, knowledge sharing, of course, networking, just having a good time. So, yeah.

And hopefully you all saw our bonus podcast last week, which we've been calling Between Two Square Hedges, just based on the backdrop that we had. But again, you know, thanks for making a great summit today. We will, of course, talk econ and what's going on in the market.

So we'll talk to Alex here, our market expert on the desk here, in a few minutes. And then after that, we're going to talk with Sasha Hewlett from the mba.

heir, what their focus is for: 2025

So where we've, we've, we've gone under 6.8, which I think is, is a welcome, welcome number at this point, getting closer to that six and a half number. So lowest of the year. And then volume is continuing to increase incrementally week over week.

think like January, February: 2019

Thank you. Thank you.

Alex Hebner: 00:02:22

Yep, Definitely had a good one. How'd you enjoy the Super Bowl?

Jim Glennon: 00:02:25

Good, good.

No, it was, I wasn't particularly rooting for either team, but here in Denver, we're certainly not big fans of Kansas City, the Chiefs, I mean, not the, not, not the place. They had just, they had been living high on the hog here for the past couple years.

So I think it was admittedly kind of nice to see them get, get beat down a little bit in that game. It was, it was just a route.

I would have been cool to see a better, more competitive game, but if it was going to go lopsided one way, I'm kind of glad it went that way. How about you, man?

Alex Hebner: 00:02:54

Right, yeah, I, I personally don't have any ties to either of those cities, so it was not non factor for me. But I, I agree. I think that Philadelphia really put up a good defense, really shut down Mahomes and his offense. I'm in the same boat as you.

I think I like to see, I don't like to see back to, back to back super bowl winners personally. Hey, you know, I think the, the ratings executives would agree. You know, it's good for, it's good for viewership for sure.

Jim Glennon: 00:03:18

Yeah, nothing against the city of Boston or New England also, but that it kind of started smelling like the, the dynasty of, of New England y past years which got I think annoyed a lot of NFL fans after a while. All right, let's get into it. A lot to talk about in terms of econ data.

We're in kind of the sweet spot between Fed meetings, but we had, we had unemployment, we got some inflation coming up. Tell us about what happened last week and what we should look for this week.

Alex Hebner: 00:03:46

Yeah, no, it's, we're definitely in the sweet spot for, for the numbers that we care about here in the mortgage world, you know, employment and inflation. We're off of the, you know, beginning of the new year, new administration and the holiday schedule mix ups.

It really feels like we're just kind of gliding now. But yeah, last week we were saw unemployment numbers, they came in a little weak for January based on the.

I think we're like 20,000 under the expectation. But caveat that with November and December were both revised up adding about a hundred thousand.

So net we're well above the expectations for a three month look back. Unemployment continues to tick up, but it's still in the healthy range that the Fed has kind of mandated out there. 4%.

% at one point in: 2009

So nowhere near any sort of Crisis.

But, but I think with, as we see with a lot of these numbers, they're, they're not, you know, dropping off a cliff, but they're they're just kind of incrementally getting worse, you know, and that kind of brings us to this week, we're getting inflation numbers this week. CPI is expected year over year to be north of 3%, 3.1% to be exact.

You know, look back six years ago, you know, 2% was the, was the target, I think, Norm. Yeah, without, without Covid and all of the special circumstances of the past six years, I think a 3% inflation rate would be very worrisome.

Again, this is a number that they don't seem too concerned about as of the time of this recording. But yeah, again, we just continue to steadily tick up PPI, very similar neighborhood, somewhere around 3%, just north of 3%.

Then PCE, which is, as we like to remind you guys, that that is the gold standard in the eyes of Federal Reserve. It continues to tick up as well. Four or five month look back to September. It's gone from 2.1% year over year up to 2.6%.

So again, we're just seeing everything move in the direction we don't want to see it move, but not at a, you know, at a velocity that is freaking anyone in Washington out.

Jim Glennon: 00:05:55

Yeah, not at a dangerous pace. Right, right.

You just have these, still these natural numbers that we seem to be gravitating towards, even if they're different than what they've been historically.

You know, just in the spirit of helping people be better consumers of economic data, like, you can think about unemployment like it never gets to zero. Zero unemployment would be bonkers. Right. There's this three and a half level. Yeah, right.

That would mean probably more inflation and probably, you know, people who shouldn't have jobs do have the wrong jobs. And so three and a half to four and a half historically has been kind of that natural level and we seem to be close to it.

Although, like you said, it's. The numbers are getting worse incrementally. It kind of, you see a slope like this, but nothing, nothing, crisis level, nothing worrisome.

And then with inflation, it feels like maybe there's a new natural number and maybe that number is 3%. There's a lot of debate out there about that, that we're certainly not at nine like we were last year. That was crisis level.

That was if your prices are going up on everything 10 a year, it takes seven years to double the prices of things that Would have been catastrophic. But now that we're down to three, we're all breathing a sigh of relief.

But it's not 2.2% is literally is the explicit number the Fed is supposed to target. But it's been a lot harder to obtain that last 1%.

Alex Hebner: 00:07:10

Exactly. And it feels like there's been a bounce. You know, the, the Fed got the number down to the mid, mid 2% level, about 2 1/2 percent.

And then since then we've bounced back up to right around 3 north of 3% now. So again, just kind of reiterating, but heading in, in the wrong direction in.

Jim Glennon: 00:07:26

Regards to inflation, especially eggs. And a couple other things right there. Just some other, other circumstances that are driving prices of certain goods north.

Alex Hebner: 00:07:35

Yep, yep, yep. Yeah, some of them are, yeah. Transitory, for sure. Eggs in that basket of goods isn't. I think it's maybe, maybe 1% of that basket.

Jim Glennon: 00:07:44

Right. And then with unemployment, I guess in the next couple of months we'll see some of the effects of the new administration, what they've been doing.

Alex Hebner: 00:07:52

Yeah, like curtailments in the federal workforce. I think that's kind of the number one out there.

And you know, for the past six months or so, we've been saying where has been the greatest number of job growth has been in federal and government employment, which, depending on who you ask, you know, is a net drag on the economy.

Granted, those are still people getting a paycheck and then they're able to go take that paycheck out to out into the economy and pay for goods and services. But I definitely think we're going to see those numbers tick up pretty massively.

There's obviously the Trump administration's voluntary resignation program just trying to get those numbers down. In addition to, you know, we're starting to see entire agencies. USAID was in the headlines last week, and then CFPB is really in the crosshairs.

That's the Consumer Financial Protection Bureau. They were told over the weekend, you know, stand down, don't.

It is illegal for you to currently do any of your job functions, so don't log in, essentially.

And then in the private, I've been reading some articles, you know, in the private, on the private side of the economy, private industry, you know, you know, some return to office mandates could be seen as soft layoffs. You know, if they, if they expect people to quit over having to go back to the office. It's not an explicit layoff.

But, you know, if you can reduce your workforce by, you know, if 1 in 10 people are like, hey, I'm not going to do that. And they quit their job over it. That's still more unemployment in the economy. So definitely, definitely a place to keep an eye on.

Jim Glennon: 00:09:09

Yeah, that's interesting. I mean, the CFPB thing is, is crazy and obviously that, that is pretty close to our industry. So we'll be, I'll ask Sasha about that later.

That's been interesting, relatively new news and yeah, the, the return to work thing, it's, it's kind of been written on the wall for a while that, you know, a lot of businesses are finally contending with. What do we do with our lease on our space?

What do we do, you know, going forward as we're recruiting new people and what has been on our experience the last five years, are we as productive as we once were, working primarily from, from home? And some of that's starting to swing back around, which I guess we figured it would.

Alex Hebner: 00:09:47

Right.

I definitely feel like there's definitely still a day of reckoning to come in regards to the commercial real estate market and working from home and the justification for those, those office expenditures.

Jim Glennon: 00:09:58

Right.

Alex Hebner: 00:09:58

And then the last thing I want to touch on hitting the news wire this morning, it feels like this, this could be a weekly occurrence. You know, threat of new tariffs. These ones seem to be going into, to place.

The Trump administration is putting on steel and aluminum that's mainly going to be impacting Brazil, Canada and Mexico. That's where we get the majority of our steel product from. And then 80% of our imported aluminum product comes from, from Canada.

So that one is especially targeted.

This is definitely one I would keep an eye on for the next 72, 96 hours, as we saw, I guess it was two, three weeks ago now with the blanket tariffs on, on Canada and Mexico. You know, a few phone calls seem to seem to have resolved those, especially on the Mexican side.

And so, you know, see it, see if these cities back off. But, but for the moment it's, it seems to be a boon for, for American steel makers and aluminum providers.

Jim Glennon: 00:10:47

Right.

But still, like you said, something to keep an eye on in terms of inflation because between lumber from Canada, then steel from several countries, like that's a huge component of construction. It's the skeleton of any, any building you're looking to, to put up. Right.

Alex Hebner: 00:11:02

Yep.

And, and as many of these, these countries are pointing out to us, even if you're importing a raw, a raw good, those raw goods are then involved in, in American jobs and manufacturing domestically. So, you know, you know, taxing Those inputs could be putting American jobs at risk as well.

Jim Glennon: 00:11:19

Sure. Or any structure, really. Buildings, bridges, airplanes. Wild. All right, good stuff.

Alex, thank you so much for the, for the input and for the wisdom, and we'll talk to you again soon.

Alex Hebner: 00:11:33

Thank you. Sounds good. Looking forward to it.

Jim Glennon: 00:11:35

Okay. Sasha, welcome.

Sasha Hewlett: 00:11:37

Hey, how are you?

Jim Glennon: 00:11:39

I'm doing great. Thanks for joining us here. Appreciate you. Good to see you again.

Of course, as I mentioned, everybody, Sasha Hewlett is joining us today to talk to us a little bit about what the NBA is up to. We talked at our summit last week and had a nice, like, fireside chat for like, 45 minutes and just covered a lot of items. We, we'll.

We'll cover just the most pressing ones today because we only have about 10, 15 minutes to spend with Sasha.

But Sasha is the AVP of secondary marketing and capital markets for the MBA, and she heads up the Secondary Marketing and Capital Markets Committee at the mba, which I'm a member of, that many of you out there might be be members of that. But in case you're not familiar, Sasha, could you just tell us a little bit about yourself and a little bit about the committee?

Sasha Hewlett: 00:12:25

Yeah, absolutely. Jim, thank you for having me. And congrats on a great event last week.

ut me. I've been at MBA since: 2019

. I started at Freddie Mac in: 2007

I was there when they went into conservatorship, so that's, you know, pretty funny. But, yeah, I bounced around there for quite a while, and then I bounced around a little bit before landing on a policy role here at mba.

So it has been great. And as you said, I head up our Secondary Capital Markets Committee, and that really is our.

One of our important committees that we use for getting feedback for our responses to requests for information or proposed rules for really important policy changes or initiatives that impact that area. We get feedback directly from you guys. We can communicate that back to the, whether it be the GSEs, FHFA, or Ginnie Mae.

So it's really important for kind of getting our feedback and kind of our policy stance on A lot of different things and a lot of times it's the first kind of way we get informed when things are kind of cropping up that are impacting the industry. Right. So think things like the DTI LLPA that got rolled out.

We were able to touch base with this committee, you know, first and hear from them immediately to know that this was something that was unworkable. So we meet monthly, twice in person at our secondary Capital Markets conference.

Excuse me, in May in New York and then at our annual convention in October as well. So that's a bit about me and the committee.

Jim Glennon: 00:14:13

Great. Yeah. Super important committee. Yeah. As you mentioned, things like the DTI LLPA a couple years ago and just some things that are going on now.

The MBA serves a super important purpose in just being the voice of mortgage banks and technology businesses like us, like Optimal Blue. Especially if there's new rules that are coming down or a new way of doing things.

A lot of times when you get up as high as the FHFA and the GSEs, there's not a, there's. There may not be an understanding, like a perfect understanding of what it really entails to implement those things.

The MBA has done a great job of, like you said, responding to those and sometimes getting them, getting them changed or pushed back or giving us time to adjust, you know, to the new normal.

Sasha Hewlett: 00:14:54

Absolutely.

Jim Glennon: 00:14:55

Great. So a lot going on in the first quarter already. Right.

New administration, lots of talk around everything, you know, and some of it touches the mortgage industry. Could you give us a kind of a high level of what the MBA is focused on this year?

Sasha Hewlett: 00:15:12

Absolutely. So quite a bit going on with the change administration. That's putting it lightly. I'll start very quickly.

I know over the weekend there was news about the cfpb. We have a new director of the. Of OMB is now the acting director of cfpb. Russell Vaught, I believe is how you pronounce his last name.

And they have paused on kind of all activity there as well. So that's kind of all examinations. Any like rules in progress, any. Anything has been paused.

And from what I understand, all employees except for maybe a handful, I'm not sure the member are working from home. So at a standstill there at NBA. Here we are watching everything closely.

I think it's important to know that and my colleague Justin Wiseman is closer to this. But this is an unprecedented.

Isn't an unprecedented thing to pause, while it is kind of an aggressive pause, pausing things when a new administration moves in is not abnormal. They want to take a look at things, etc.

So that being said, we are keeping an eye out because you know, some of the obviously the narrative around the CFPB and certain things that I've said have been a little concerning. But we're just watching and waiting for now.

We'll wait to see if there's any more action kind of taken that is a bit more concerning about the future of the CFPB because we do think it is an important agency. But for right now we're in wait and see mode.

And you know, if while I believe the homepage does have some kind of 404 situation on there, if you click around on the other, you can click anywhere else and still get to things on the website. Right. So that is good to know. So that's, that's a fresh off the kind of presses for the cfpb.

I know that's probably top of mind people since that just happened over the weekend. But other than that we have been at NBA preparing for the transition for quite a while since obviously well before the election.

For my wheelhouse, FHFA director Bill Pulte was, is the nominee. His hearing I believe should be coming up to the end, closer to the end of the month.

And he obviously comes from the family of Pulte, which is a home builder family. So somebody with knowledge of the industry, which I think is good, MBA did write a letter of support from him.

You know, he doesn't have the traditional kind of experience of somebody who's worked in housing. He was more on kind of, I think the investment, philanthropic kind of side of things.

But from everything that we have been able, our leadership has been able to connect with him and he seems to be open to kind of hear our point of views and knows, you know, how important the housing industry is. I think, you know, we're in a good spot there. We'll wait and see how the confirmation hearing goes.

And other than that, I think, you know, we have confirmation of Scott Besant for the treasury and Scott Turner for hud.

So I think this, the spots that are directly tied to housing are getting filled and the ones that are tied to our initiatives are starting to be filled out.

I think maybe a little segue here, but Scott Bessant, Treasury Secretary Bessant recently was on, I can't remember the interview, but they asked him about GSE exit and release, which is something that has been top of our list for quite some time.

And he said as, as we thought that taxes are going to be kind of his priority initially but you know, that is something that he has thought about and the thing that is going to be most important to him is any information, studies, data on the impact of exiting conservatorship on homeowners rates.

I think that's something good to take away from that, is that this doesn't seem like he has a thought that there should be something that is rushed that he's going to take into account the impact on the market, which I think is really good. So that's kind of the latest we've heard from somebody who would be a direct dance partner. Right.

In getting the GSEs out of conservatorship because you have me, someone from treasury and FHFA to kind of make get the ball rolling there. But we've been, you know, full steam ahead on GSE exit as we're calling it now. They have been reformed.

they were, you know, back in: 2008

Sixteen years is a long time for conservatorship. We didn't think it was going to go on that long. So we have our core kind of principles of what we think a responsible exit looks like.

And that's going to include an explicit guarantee, explicit paid for guarantee on the GSE MBS only and then also reforms to allow FHFA to perform as a regulator needs to. Right.

And that's going to include things like ensuring they can enforce a level playing field for all lenders of different sizes of business models, enforcing the bright line between the primary and the secondary market, making sure they can monitor and enforce things like market conduct, pricing and then ensuring things that are there now, like affordable housing. Mission goals do deserve things like that.

So that's kind of our, in a nutshell, our 32nd step stance on where we see what we see for a responsible GSE exit.

Jim Glennon: 00:19:59

Okay.

Yeah, it's, I, I watched that inter read that interview as well with Bessant and it was hard to tell whether he was kind of punting the question and saying there's just a lot going on right now and that's not at the top of our list of priorities, which is, you know, understandable given the barrage of, of executive orders that have come down that don't include anything to do with conservatorship.

Sasha Hewlett: 00:20:20

So yeah, I think that's what we prepared, we've been prepared for that. Right. We always thought Tax would take a front seat.

And if this was going to be something, would second administrator, second half of the administration thing. That being said, a lot of things need to kind of get going to kind of start the process to exiting conservatorship.

Big part of that is just educating people. Most of the folks on the Hill were not around last time. This was discussed in like a meaningful way where there was real kind of like traction.

So we're already laying the groundwork.

We had a Hill briefing two weeks ago, and I think, you know, even though it may not be priority, we've got plenty of time to prep everyone, get everybody up to speed, hit the learning curve so that everybody is ready to go when it is a priority.

Jim Glennon: 00:21:01

That's great. And as you said, it's good that the administration is focused on an orderly exit and not disrupting the markets.

I think that's the biggest fear is that if it's not orderly, if there's any question of the explicit guarantee of the GSEs by the government, there could be a gap, a widening of spreads between Treasuries and mortgages, which would just send rates in our industry higher, even if prevailing rates in other areas do not go up.

Sasha Hewlett: 00:21:26

Absolutely. I think that that's key. And a big part of that is ensuring that liquidity is not jeopardized. Right.

That kind of global capital required to buy our MBS is essential. And everything that we've heard from the investment side is that an implicit guarantee is not going to be good enough anymore.

You need that explicit guarantee that outlines that government backstop. So we think that is essential to a safe exit. Yeah, that's. That's number one for us.

Jim Glennon: 00:21:56

Okay. Yeah. And then the cfpb, as you said, still don't know what's going on there.

I've read recently within the past day or so that folks have not only been told to stop enforcement, but like, don't work, don't touch anything there. Isn't this very, like you said, it's aggressive, it's not unprecedented.

Sasha Hewlett: 00:22:10

Seems very hands off everything. So again, we're going to wait and see what happens because I guess it's only been, what, a day or so since it's officially happened. Yeah.

Interesting times for sure.

Jim Glennon: 00:22:25

Okay. And just some, you know, some odds and ends in, you know, that the.

I think the MBA is focused on and our industry is focused on, and we certainly are as a technology provider, credit. So credit and some of the competition now and some of the replacement kind of products that are going to be.

That are being discussed and are potentially going to be implemented. What do you know about, you know, whether it's FICO 10T or just the new discussions about. About credit scoring.

Sasha Hewlett: 00:22:53

Absolutely. So I actually run our credit scoring working group as well.

So we've been working on this initiative since it was announced, you know, two years ago now, maybe a little bit over two years ago. So the latest on that actually initiative is that FHFA paused, that didn't, excuse me, pause it. They changed the implementation date.

,: 2025

And I think FHFA recognized that, which is why they pushed the date to tbd. So I think this is good because it gives us a chance with a new administration to pause, take a step back and look at the initiative.

Because I think there are a lot of things that need to happen in order for you to have a viable implementation plan.

So MBA along with some other trades have kind of put our heads together to get a list of things that we think need to happen in order to just get implementation plan that works.

That's going to be things like coordinating with other agencies, the OCC or the cfpb, if there's one still, you know, to make sure that everybody's on the same page with regard to what is going to be required for these new scores, especially our bank members.

They have to provide certain risk assessments to their prudential regulators and if they're not able to do that, they're going to be, you know, in a lot of trouble.

A couple of other things we think need to happen are things like a cost benefit analysis and an operational analysis, especially for things like the buy merge portion of this. So let me quickly. Sorry, let me back up two steps just in case anybody is unfamiliar with this.

FHFA's initiative was to switch transition from FICO classic to FICO 10T and VantageScore 4.0. So they would require two scores to be delivered to the GSEs and they would implement a BI merge option.

So instead of doing the traditional trimerge, you could do a BI merge and just get Two reports for each score that was intended to kind of lower costs and hopefully introduce some competition. But it's hard to see how that would work when they're not really competing if you require both. Right.

So maybe you're completely competing at the report level on some way.

But from everything that we've heard, folks are just really not convinced that the buy merge is something that people would want to even take on right now. You know, all the reports aren't created equal, from what I've heard, and folks are concerned about, well, which two do I pick?

And is that going to be best for the borrower and, you know, all that kind of stuff. So just to backtrack a little bit, I just wanted to set the stage of what the initiative was, but back to the implementation plan.

In addition to coordinating with agencies, doing cost benefit, benefit analysis, operational analysis, also coordinating with the government agencies. Right. Because you have FHA, USDA, VA loan programs, and lenders offer all of them. Right.

So if we're kind of going in a direction where you have two processes for each, you're going to have to bifurcate that process and that's going to be very challenging for lenders and not workable as well. Right. So you want to kind of make sure everyone in transitions at the same time.

So just a few things that we think you need to be hammered out prior to even just to get an implementation plan that works.

That's our hope that we can present some clear steps to progress and then, you know, help FHFA and the industry kind of move forward with the initiative.

Aside from that, I think it's also important to take a look at, like you said, other things people are looking at these days with regards to how people view credit. You've seen the GSEs look at things like rental payment history, things of that nature.

We have learned a lot about people looking at residual income as a way to kind of evaluate a borrower as well.

So, you know, I think there's a lot of changes happening in this arena and I think as we kind of move through the next year or two, we'll just have to see, weigh the options and see what's best for the industry. But right now I think it's good that we have a pause on the initiative so we can kind of take a fresh look.

Jim Glennon: 00:26:58

Agreed.

I think it's another area where the MBA stepped in exactly the right place, where obviously there should be changes here, there should be modernization of how we look at credit. It just has.

Sasha Hewlett: 00:27:09

Absolutely.

Jim Glennon: 00:27:09

Let's do it. The Right way. Let's not try to implement it several times. Right. Let's be ready.

Because I think, yeah, I don't know how everybody would have been ready at the end of last year for that to kick in like right now.

Sasha Hewlett: 00:27:20

And not only that, not to bring in a touchy subject, but I know how difficult the credit score pricing is for lenders right now.

You know, MBA has definitely done all we can under what is what we legally can as far as advocating for competition in the credit scoring space, because we understand that our lenders are in a spot where they don't have a choice. They have to use the score.

The prices have gone up kind of exponentially, not just on from the score itself, but from the credit reporting viewers as well. That report cost has gone up. So you've got layers and layers of cost and it's gone up and they have no options you had if you got to use it.

And it's tough, especially when pull through rates are maybe not what they were and you're eating a lot of that cost. So we see this initiative as a way and maybe a way forward for real competition.

But again, we've got to look at the initiative and the future of credit scoring kind of, and see, well, how can we get real competition in. I don't know if it is requiring both. I don't see how you really get true competition that way.

But again, glad we were able to pause, take a look, not just to reevaluate the initiative, but to see how we can look at competition in a real way to kind of maybe help ease what lenders are going through with regards to pricing.

Jim Glennon: 00:28:34

Of course, yeah.

I mean, everything seems to cost more and more every year in this, this industry when we're trying to make affordability better and we're rolling out technology as quickly as we can to make businesses more efficient.

And over the past year, most measures would say that mortgage banks have become more efficient, but some of that has been because they've had to and they've implemented what they can. But you know, the cost of pulling credit has not gone down. So competition there is only going to be a good thing.

Sasha Hewlett: 00:28:59

Exactly. Yep.

Jim Glennon: 00:29:00

Let's see. Last thing I wanted to bring up, this is something that I, I don't know, at the conference I, I called it what Took them so Long?

A little segment called what Took them so Long.

And it's, you know, when I was a mortgage banker, one of the really scary things that could happen is to repurchase a loan, you know, for an independent mortgage bank especially to buy, buy back a 3, 4, 5, six hundred thousand dollar loan with, you know, that would be a large percentage of the cash you have on hand to do that. It was pretty daunting.

But there's been some changes recently in a pilot program through Freddie Mac, right, where lenders can now have options that involve not repurchasing the entire loan, but paying some fees to then have some skin in that game but not have to buy, you know, whole loans back. Can you just walk through real quick what that program looks like and maybe what the pilot, how well the pilot's been going?

Sasha Hewlett: 00:29:56

Yeah, absolutely. So repurchases have been something we've been working on kind of chipping away at for quite some time.

And again, this is back testament to our members and the committee. Right. Because the first time we heard about, hey, we're getting repurchases for things we never did before.

We're not getting indemnifications or other options and we think that's what we should be getting. We don't know if the spirit of the record warrant framework is being adhered to. We heard that first from my committee and other members. Right.

And we're able to kind of dive in and say, okay, what's going on here? And we've gotten to a place where we had real change.

So as you mentioned, Freddie Mac has rolled out a pilot program for performing loans with defects.

And with this pilot, which is now open to all seller services, you have the option to use a fee based approach instead of the traditional kind of repurchase approach. So if you have the go buyer NAQ level, which is not acceptable quality, if your NAQ percentage is below 2%, then you will not have a fee.

And as it goes up in tiers from that as to what your fee is, right. So I think it does two things.

It allows you to kind of better manage your repurchase risk because you're kind of dealing with a fee rather than, I don't know how many loans I'm gonna have to repurchase. Right.

And from what we've heard, engagement has kind of been better because folks are really diving into, okay, well why is my NAQ rate this, how can I get it lower?

And they're really able to kind of tap in more and get more engaged with Freddie and as a result they're getting a better, better NAQ rate and obviously a lower fee. So we've been really pleased with the fact that Freddie kind of looked outside the box and was like, okay, how can we do this differently. And.

And we've heard good feedback that, you know, folks have really thought this is a good program.

And I think the fact that they, when they just expanded it, it is an option, was also very good because we have heard from some folks that this doesn't work for my business model or for whatever reason, this may not be the best for you. You can go the traditional route. Right. So I think it's good that they provided some optionality. So overall, we're hearing good things.

It's still in the pilot program. Pilot phase. Excuse me.

Although it is open to all sellers, so we'll keep our communication, obviously, with Freddie open on that and continue to get feedback. But I think it's just. It's good. It shows that there's progress. On the Fannie Mae side. We saw them implement some things on the front end.

Their whole thing was we want to prevent, you know, the repurchase from even happening in the first place. So they implemented some things like notice of potential defect. So you'll kind of get a flag that, hey, something might be wrong here.

You might want to give us another look. And some other things that they implemented on the front end as well. So we'll have to see kind of what impact those are having.

But overall, I think it's.

It's good that we've been able to make progress on repurchases, and that's something that we want to make sure the new incoming FHFA director knows so that we don't lose any steam or any progress that we've made on repurchases.

Jim Glennon: 00:32:39

Great. That sounds like that's going really well. And I would think that, you know, a lot of mortgage banks, again, would take that option.

I certainly would have when I was in that seat.

Sasha Hewlett: 00:32:49

Absolutely. Yeah.

Jim Glennon: 00:32:50

Okay. Wonderful. Did we have. We covered it. We covered a lot. Anything else we wanted to cover today?

Sasha Hewlett: 00:32:56

No, I think we got it all.

Jim Glennon: 00:32:58

Good, good. All right. The MBA Secondary marketing and Capital Markets committee, please do join us on the committee and shoot me an email. Yes, yes.

If you're interested, shoot Sasha an email. And yes, big thanks to Sasha for being here today. Thank you again for attending our conference last week. And big thank you to the NBA, of course.

And yeah, appreciate everything you do for our industry and that you've done for us here today.

Sasha Hewlett: 00:33:26

Awesome. Thank you, Jim. My pleasure.

Jim Glennon: 00:33:28

All right, thanks. Take care.

Sasha Hewlett: 00:33:30

Have a good one.

Jim Glennon: 00:33:31

All right, let's wrap this thing up. Thanks so much, everyone for watching and listening. Big thanks to Alex and huge thanks to Sasha and the NBA and That's it for today.

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