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Mat Ishbia on Leadership and Mortgage Lending · Masters in Business

0:00
Speaker 1: M This is Mesters in Business with very Renaults on
0:06
Speaker 1: Bluebird Radio. This weekend. On the podcast, I have an
0:11
Speaker 1: extra special guests. Drop yourself in for this one. Matt
0:15
Speaker 1: Ishbia runs United Wholesale Mortgage. Not only are they the
0:19
Speaker 1: biggest wholesaler in the country, they're also the number two
0:22
Speaker 1: overall mortgage lender. And he's got a fascinating history from
0:28
Speaker 1: being a walk on at Michigan State as a point guard,
0:31
Speaker 1: to eventually being an assistant coach there, to joining his
0:35
Speaker 1: dad's twelve person firm that was doing mortgages UH, to
0:41
Speaker 1: just enjoying explosive growth because they were doing the right thing.
0:46
Speaker 1: They did not get suckered into all of the liar
0:49
Speaker 1: loans and all of the ridiculous um no income check,
0:54
Speaker 1: the ninja loans, no income, no credit rating, no job,
0:57
Speaker 1: or all that craziness UH. United Wholesale didn't participate in.
1:02
Speaker 1: And once the financial crisis ended, they just took over
1:07
Speaker 1: and became literally the biggest UH mortgage wholesale or in
1:12
Speaker 1: the country. He's a fascinating guy. He's done some really
1:15
Speaker 1: interesting things. So enthusiastic about the business. When you see
1:21
Speaker 1: a company that approaches things in the right way to
1:24
Speaker 1: watch them go from a twelve person firm uh in
1:28
Speaker 1: two thousand and four to anson firm today. It's it's
1:33
Speaker 1: really quite fascinating. You will see what I mean by
1:37
Speaker 1: his infectious enthusiasm and how much he is just so
1:42
Speaker 1: into running the company, and and and how enamored he
1:46
Speaker 1: is about the entire mortgage business. It's hard to listen
1:49
Speaker 1: to this and not become enthusiastic. So so, with no
1:53
Speaker 1: further ado, my conversation with United Wholesale Mortgages CEO Matt Shpia.
2:02
Speaker 1: This is mesters in Business with very renaults on Bloomberg Radio.
2:09
Speaker 1: My special guest this week is Matt Shpia. He is
2:13
Speaker 1: the CEO of United Wholesale Mortgage, the largest wholesale lender
2:18
Speaker 1: in the country in the number two overall mortgage lender.
2:22
Speaker 1: The firm has nine thousand employees and recently went public
2:27
Speaker 1: in the biggest back ever. He is also the author
2:31
Speaker 1: of the book Running the Corporate Offense, Lessons in Effective
2:35
Speaker 1: Leadership from the Bench to the Boardroom. Matt Shpia, Welcome
2:40
Speaker 1: to Bloomberg Now, thanks for having me. Glad to be
2:43
Speaker 1: here with you, so I got so much stuff to
2:45
Speaker 1: talk to you. About But I have to start with
2:49
Speaker 1: you were a walk on port point guard for the
2:51
Speaker 1: team that won the national championship in college basketball. Tell
2:55
Speaker 1: us a little bit about that. How did playing for
2:58
Speaker 1: coach Tom Is prepare you for the business world? Yeah? No,
3:03
Speaker 1: it was a great experience. You know, I wasn't that
3:05
Speaker 1: great at a basketball player. I was very good in
3:06
Speaker 1: high school. Obviously, became a walk on at Michigan State
3:09
Speaker 1: for coaches. Oh, and you know, a great experience for
3:12
Speaker 1: my first three years. We went to three final fours,
3:13
Speaker 1: we won a national championship. I got in the game
3:16
Speaker 1: when we were up by a lot. So I wasn't
3:17
Speaker 1: a star player by any means. But I learned so
3:19
Speaker 1: much about team, about work ethic, about camaraderie, about building
3:24
Speaker 1: something special, about having big goals and working for him.
3:26
Speaker 1: I learned so much during my time there. And some
3:28
Speaker 1: people asked me what translates the business? I say, I
3:30
Speaker 1: can talk for eight hours about that, because everything translates
3:33
Speaker 1: the business, um, if you're paying attention and listening and learning.
3:36
Speaker 1: And so I had a great experience playing there, um
3:39
Speaker 1: and once again winning the national championship, but just making
3:42
Speaker 1: lifelong friends and and and learning from tom Izzo for
3:45
Speaker 1: many of those years. And you know, when you talk
3:48
Speaker 1: about you could speak for eight hours about this. I
3:51
Speaker 1: found the book fast, easy read um, and there's it's
3:55
Speaker 1: really all about how the concept of competitive sports very
4:00
Speaker 1: much translates into lessons um for the corporate world. So
4:05
Speaker 1: so let's make that shift to the corporate world. You
4:08
Speaker 1: joined the mortgage industry in four when your father offers
4:13
Speaker 1: you a job at United Wholesale Mortgage. Back then the
4:17
Speaker 1: company was twelve people. To tell us a little bit
4:20
Speaker 1: about your first entry level job in the mortgage industry
4:24
Speaker 1: and and memories from that period of two thousand three,
4:28
Speaker 1: two thousand four. Yeah, it was a great, great thing.
4:32
Speaker 1: You know, I was coaching. I played basketball for four
4:34
Speaker 1: years and I got a chance to coach for years.
4:36
Speaker 1: So I got to be on the bench, sitting there
4:38
Speaker 1: with tom Izo, learning from him in meetings. And I
4:40
Speaker 1: got offered a college basketball job to be one of
4:42
Speaker 1: the youngest assistants. Are the youngest assistant in college basketball
4:45
Speaker 1: Division one at the time. I turned it down because
4:48
Speaker 1: my father said, hey, maybe you can you know, and
4:50
Speaker 1: Aso said to me, actually, maybe you can take some
4:52
Speaker 1: of things you learn in basketball and turn it tip
4:53
Speaker 1: the business, maybe do something bigger than me and head coach,
4:56
Speaker 1: And my dad said, I got a little mortgage coming.
4:57
Speaker 1: Might as a lawyer. He's never actually worked here at
4:59
Speaker 1: the mortgage. I mean, he's just like an entrepreneur. He
5:01
Speaker 1: has like seven or eight different businesses. This was a
5:03
Speaker 1: twelve person mortgage coming in two thousand three. I joined
5:06
Speaker 1: as a twelve person and it's been a great experience
5:09
Speaker 1: all the way through. What I started at though was
5:12
Speaker 1: the bottom job everything. But I I used to say
5:14
Speaker 1: that every job here. But I've got nine thousand three people,
5:17
Speaker 1: so I can't do every job now. But I back then,
5:19
Speaker 1: I took facts off the fax machine. I learned underwriting,
5:22
Speaker 1: I learned closing. I learned everything from the bottom up
5:26
Speaker 1: and really to understand not only our clients but the
5:29
Speaker 1: consumers consumers clients and our team members and process and
5:33
Speaker 1: so it's been it was really just great going all
5:36
Speaker 1: three through that process. I had no desire, no idea,
5:39
Speaker 1: no ambition of saying, hey, let's build this to a
5:41
Speaker 1: nine thousand plus company. The number I mean, we're just
5:44
Speaker 1: trying to make it, trying to survive at that point,
5:47
Speaker 1: and uh, and that's what we're doing. And but you know,
5:50
Speaker 1: learning the business from the ground up was there a
5:51
Speaker 1: huge advantage and I still implement that with new people
5:54
Speaker 1: at our companies to this day. M So, so let's
5:57
Speaker 1: talk a little bit about survival. Um, how did the
6:00
Speaker 1: firm weather the housing bust in the mid two thousand's
6:03
Speaker 1: Not long after you, uh, you joined, we saw the
6:09
Speaker 1: real estate market collapse. Yeah, so it was it was
6:12
Speaker 1: definitely an interesting time to have joined. Um. What I
6:17
Speaker 1: would speak about that is this, you know, back then
6:20
Speaker 1: we were so small and we didn't really know what
6:22
Speaker 1: we're doing. We're trying to figure out things. But we
6:24
Speaker 1: didn't do a lot of those loans, subprime loans. So
6:26
Speaker 1: the whole point was back then, we were just trying
6:28
Speaker 1: to make it, you know. I remember that I was
6:30
Speaker 1: a sales rep in two thousands, six or five for
6:33
Speaker 1: and I remember calling my father one time and saying, Hey, Dad,
6:35
Speaker 1: you know, we're doing fifty loans a month in relationship.
6:38
Speaker 1: We're gonna do sixty five thousand closing this month. So
6:40
Speaker 1: it's it's a whole different world, right during fifty loans
6:42
Speaker 1: a month back then, I remember telling my dad and go, Dad,
6:44
Speaker 1: you know, if we did these types of loans. With
6:47
Speaker 1: your subprime, we can get a lot more business. I
6:49
Speaker 1: remember my dad saying to me, Matt, you know, we're
6:51
Speaker 1: not in here just to make money. We're not gonna
6:53
Speaker 1: lend someone money if they can't pay it back. So
6:55
Speaker 1: letting someone two dollars in the house is worth one,
6:58
Speaker 1: We're just not gonna do it. Now. We did make
7:00
Speaker 1: a big stand because they just went somewhere else and
7:02
Speaker 1: got the loan done, but we never did the sub
7:04
Speaker 1: prime loans. And so when those sub prime loans all
7:06
Speaker 1: started crashing in oh seven, o eight, oh nine, you know,
7:09
Speaker 1: we were, you know, taking a thing of the old
7:11
Speaker 1: movie Forrest Gump. We're like Bubba Gump. Shrimp were like
7:13
Speaker 1: one shrimp boat left standing. Like we were just doing
7:15
Speaker 1: the right type of loans, focused on fh A and conventional,
7:18
Speaker 1: and we really grew because everyone else was worried about
7:20
Speaker 1: the problems that they had all these loans and we
7:23
Speaker 1: had never done those, and so I look at it,
7:25
Speaker 1: we didn't really struggle. That actually was the catapult to
7:27
Speaker 1: our success by doing the right thing and the do
7:30
Speaker 1: right mentality. It didn't work real right, No four or
7:32
Speaker 1: five or six, when everone has record years in mortgage
7:34
Speaker 1: and we were not having those years because we weren't
7:36
Speaker 1: doing those types of loans. But we we we it
7:38
Speaker 1: came back our way in O eight oh nine and
7:41
Speaker 1: and ever since doing the right type of loans for
7:43
Speaker 1: the right borrowers. So post financial crisis, the firm begins
7:47
Speaker 1: to expand and thrive. When did you take over as CEO?
7:52
Speaker 1: So I was running the company probably starting in about
7:55
Speaker 1: eight oh nine. Officially you know CEO maybe two thousand
7:59
Speaker 1: twelve or thirty seen, but those years, you know, running
8:03
Speaker 1: the business, trying to build the company to the point
8:05
Speaker 1: where we went to in the final thing where we
8:07
Speaker 1: had a small retail division. And when I became the
8:09
Speaker 1: CEO in two uh early two, I think, uh, the
8:14
Speaker 1: key was I made a couple of decisions at that point,
8:17
Speaker 1: which was we're not doing retail. Retail is when you know,
8:21
Speaker 1: is not as good for consumers, it's not as good
8:23
Speaker 1: for loan officers. So I actually cut a department and
8:25
Speaker 1: I moved them all to our wholesale channel and basically
8:28
Speaker 1: reran the wholesale business. Now we didn't let anyone go,
8:30
Speaker 1: We just moved them to reallocate them to the new teams,
8:32
Speaker 1: and we really started exploding from men. So let's fast
8:36
Speaker 1: forward a little bit till last year. Last spring of
8:40
Speaker 1: the global economy is shutting down and the Federal Reserve
8:44
Speaker 1: comes out. Not only do they cut rates to near zero,
8:47
Speaker 1: they commit to purchasing unlimited quote unquote unlimited amounts of
8:52
Speaker 1: mortgage securities towards the end of March, and naturally, mortgage
8:57
Speaker 1: bond prices skyrocket. You guys, like a lot of other wholesales,
9:02
Speaker 1: you would hedge interest rate risk, and suddenly with these
9:06
Speaker 1: skyrocketing rates, you're facing margin calls and a cash crunch.
9:11
Speaker 1: Tell us about that early pandemic period and how the
9:16
Speaker 1: Fed impacted what you were trying to do in terms
9:19
Speaker 1: of your balance sheet. Yeah, obviously, you know they're talking
9:23
Speaker 1: about COVID and and what happened we were with the
9:25
Speaker 1: Fed and everything. First off, there's no playbook for COVID,
9:28
Speaker 1: you know, no one had it like in the books,
9:29
Speaker 1: like what do you do with COVID comes in? How
9:30
Speaker 1: do you handle it? With the Fed? You know, it's
9:32
Speaker 1: unprecedented times, unheard of crazy things happened. But when that
9:36
Speaker 1: stuff happened, you know, really we saw for it is
9:39
Speaker 1: we work as a team, you know, it's all. It
9:40
Speaker 1: goes back to the core of teamwork, working together, figuring
9:43
Speaker 1: out how do we solve for different issues, And a
9:45
Speaker 1: lot of those things were short term concerns, but the
9:48
Speaker 1: whole economy shot now. You know, I'm real big on
9:50
Speaker 1: our culture and our team, and we have nine thousand
9:51
Speaker 1: three people here and we all work here every day
9:54
Speaker 1: in the same location. We have about one point five
9:56
Speaker 1: million square feet and we're all working in the building together.
9:59
Speaker 1: Spending everybody home was a big challenge because I never
10:02
Speaker 1: planned for work from home because that's not what we
10:04
Speaker 1: believe in here. And at the same time, the you know,
10:07
Speaker 1: people worry about their health, which is a scary thing.
10:09
Speaker 1: You didn't know what was going on. There's a lot
10:11
Speaker 1: of scary things going on, the FED doing what the
10:13
Speaker 1: FED did. A lot of crazy things happened, but we
10:15
Speaker 1: came out of it stronger and we figured out, Okay,
10:17
Speaker 1: how do we band together and figure out what to
10:19
Speaker 1: how to handle the balance she concerns the the FED
10:22
Speaker 1: with rates lowering, operational concerns, then people work from home,
10:26
Speaker 1: technology concerns, and not only we managed through, we thrived,
10:29
Speaker 1: and that was a big part of our story and success.
10:32
Speaker 1: You know, is Hey, everyone can do things when things
10:34
Speaker 1: are going well. What happens when things you kind of
10:36
Speaker 1: get sucker punched a little with COVID and how do
10:38
Speaker 1: you survive and thrive? And that's what we did and
10:40
Speaker 1: we had I'm having our best year of all time,
10:42
Speaker 1: not only from a volume perspective, but um but a
10:45
Speaker 1: margin perspective and a profit perspective. And at the same time,
10:49
Speaker 1: one of the things is key to our business is
10:50
Speaker 1: culture and team and family. And when the pandemic hit,
10:53
Speaker 1: no one knew what was gonna happen. I didn't know,
10:55
Speaker 1: you didn't know. Nobody knew what was going on. And
10:57
Speaker 1: I told our whole team at that point, and he said, listen, guys,
11:00
Speaker 1: we will not lay off one person. Not one person
11:02
Speaker 1: will be laid off at our company. I've got your back,
11:05
Speaker 1: You've got my back. Don't worry about your job. We'll
11:07
Speaker 1: make it through this stronger. And obviously it turned up
11:09
Speaker 1: to be a record here. But the point was we
11:11
Speaker 1: showed family first. I said, you can't lay your brother off,
11:13
Speaker 1: so we don't lay each other off with family, and
11:15
Speaker 1: I think that resonated with our team members at the
11:17
Speaker 1: point where they said at us and he's all in
11:19
Speaker 1: with me. I'm all in with him. Let's go DOMI.
11:21
Speaker 1: And that helped catapult us to a record deal last year.
11:23
Speaker 1: And and we're planning on doing more business this year. Huh.
11:27
Speaker 1: That's quite that's quite fascinating, especially considering how much real
11:31
Speaker 1: estate transactions plummeted at least in the first half of
11:35
Speaker 1: the year, came back in the second half of the year.
11:37
Speaker 1: But I want to stay with your balance sheet. So
11:40
Speaker 1: you're you're looking at a little bit of a cash crunch,
11:43
Speaker 1: and you reach out to the bankers at Goldman Sachs
11:46
Speaker 1: and say, hey, I wanna shore up our capital reserves
11:50
Speaker 1: because we think there's opportunities coming. Tell us a little
11:53
Speaker 1: bit about that process and and what the final resolution was. Yeah,
11:59
Speaker 1: so when when up? And then you see that you know,
12:01
Speaker 1: cash is king in any business, and so you have
12:03
Speaker 1: a couple hundred million dollars to run your business. You say, guys,
12:06
Speaker 1: we we we were competing like we're the number two
12:08
Speaker 1: overall landing. The people were competing with our you know,
12:10
Speaker 1: Rocket Mortgage, Wells, Fargo, Chase in Bank of America, that's
12:14
Speaker 1: the top five. These are not little companies. I'm competing
12:16
Speaker 1: with and we said, gosh, what do the bandage they have.
12:19
Speaker 1: They have access to liquidity and capital that I just
12:21
Speaker 1: don't have. You know, this is I own, you know,
12:23
Speaker 1: me and my brother and dad own some percent, but
12:25
Speaker 1: there was no private equity, We had no investors in
12:28
Speaker 1: with us. It was just, you know, we built this
12:30
Speaker 1: thing from scratch. And so we said, how do we
12:33
Speaker 1: make sure that we have the balance sheet and capital
12:36
Speaker 1: to compete with the biggest companies because we think we
12:38
Speaker 1: have the best platform and the best technology, but I
12:41
Speaker 1: have to have the cash and liquidity sources to do so.
12:43
Speaker 1: And so I met with some people and we end
12:45
Speaker 1: up going through the process of going through US back
12:47
Speaker 1: and becoming a public company, which basically made it so
12:50
Speaker 1: that we have access to the same liquidity we can
12:53
Speaker 1: monetize some of the things we've done. But it wasn't
12:55
Speaker 1: about getting money out for me or for our company,
12:57
Speaker 1: because I still own a after the whole thing, I
12:59
Speaker 1: still own ninety four out of the company. The whole
13:01
Speaker 1: point was putting us on a platform that I have
13:03
Speaker 1: access to these bankers, access to the liquidity, access to
13:06
Speaker 1: being on a level plainfield. Put me on a level
13:07
Speaker 1: plain field, and let's compete head to head and we'll
13:09
Speaker 1: see what happens. And that's what we're doing right now. Yeah,
13:11
Speaker 1: I see that that competitive basketball nature is very much
13:15
Speaker 1: in evidence with you. And to put put some flesh
13:18
Speaker 1: on the bone. So not only was this the biggest
13:21
Speaker 1: spack ever, you guys floated like four or five of
13:25
Speaker 1: the company, meaning you still own the vast majority of it. Uh,
13:30
Speaker 1: and so on paper, you're you've suddenly become one of
13:34
Speaker 1: the wealthiest people in the country. That has to be
13:36
Speaker 1: kind of a shocking thing to to realize, Hey, we
13:40
Speaker 1: were nervous and wanted to shore up our balance sheet
13:43
Speaker 1: and then this happens. Tell us a little bit about
13:46
Speaker 1: what that experience was like. Yeah, you know, that was
13:49
Speaker 1: obviously something that was new to me. You know, it's
13:53
Speaker 1: not like our company. You know, our company evaluation of
13:55
Speaker 1: sixteen point one billion when Win public and and me,
13:58
Speaker 1: you know, that wasn't the company the valuation or didn't
14:01
Speaker 1: grow when we went public. We that's what we've been
14:03
Speaker 1: the whole time. But the going public put it out
14:06
Speaker 1: there in front of everybody right that the company is
14:07
Speaker 1: worth this, and that Matt you might be worth this,
14:10
Speaker 1: and you know, I don't pay attention to those numbers.
14:11
Speaker 1: The real reality is I focused on how do I
14:14
Speaker 1: dominate my day to day, how do I help our
14:16
Speaker 1: company grow and win today? Money follows success, It's not
14:19
Speaker 1: the other way around. So I very rarely look at
14:21
Speaker 1: any money I have or money are profit are moments
14:24
Speaker 1: like are you focused on the profits? I said, I'm
14:26
Speaker 1: focused on winning. I'm focusing on dominating our competition. I'm
14:28
Speaker 1: focused on taking care of my team members and my clients.
14:30
Speaker 1: And when you do those things, you make a lot
14:32
Speaker 1: of money. Success is the is the focus. Money follows,
14:37
Speaker 1: and so the fact that I'm worth X dollars or
14:39
Speaker 1: whatever it may be, then it put out there. It's
14:41
Speaker 1: it's cool to see, you know, on paper for a second,
14:43
Speaker 1: then you go right back to the grind and say,
14:45
Speaker 1: you know, I'm not spending that money in my life
14:47
Speaker 1: has not changed one inch since we weren't going in public.
14:49
Speaker 1: I'm still here at four in the morning, I'm still
14:51
Speaker 1: grind neal sixth night. I still love what I do.
14:53
Speaker 1: Nothing's changed, and so therefore to me it's not a
14:56
Speaker 1: big deal. But at the same time, I know it
14:58
Speaker 1: gets a lot of headlines and people talk about I
15:00
Speaker 1: get more people talking to me about that stuff than
15:02
Speaker 1: they used to obviously, Um, that's been a little change
15:04
Speaker 1: in my life. Let's talk a little bit about your
15:06
Speaker 1: business model and how different that is from some of
15:10
Speaker 1: the other lenders people might be more familiar with, in
15:14
Speaker 1: the sense that you don't work directly with consumers. You're
15:17
Speaker 1: a wholesale uh mortgage on the writer. Tell us a
15:20
Speaker 1: little bit about that model and what some of the
15:23
Speaker 1: challenges are associated with that. Yeah, so we don't have
15:27
Speaker 1: a name brand recognition is the number one lender or
15:29
Speaker 1: even the number three or four or five, but we're
15:31
Speaker 1: number two overall lender. And this is how we think
15:33
Speaker 1: about it is our business is the exact same as
15:36
Speaker 1: everyone else's. The difference is were wholeshale, which means we
15:39
Speaker 1: offer lower rates and you have to get our rates
15:42
Speaker 1: through an independent mortgage broker. Mortgage brokers offer lower rates
15:46
Speaker 1: and fees to consumers. It's it's not my opinion, it's fact.
15:49
Speaker 1: It's backed up by data after data data point that
15:51
Speaker 1: if you go alone to you know, mortgage broker at
15:54
Speaker 1: finding mortgage broker dot com or wherever you may go
15:56
Speaker 1: to find a local mortgage broker, you will get lower
15:58
Speaker 1: rates and So what we've done is we provided and
16:01
Speaker 1: that's always been the case, so you know, very the
16:02
Speaker 1: difference is it's always been the case you get lower rates.
16:05
Speaker 1: But what's changed is we've we've enabled them with technology.
16:08
Speaker 1: So what we've done with our mortgage brokers, there's fifty
16:11
Speaker 1: loan officers about the country. You have to get a
16:12
Speaker 1: loan through a loan officer. They're either captive to one
16:15
Speaker 1: lender or they're independent. We work with the independence to say, hey,
16:18
Speaker 1: use our rates, use our technology, and we'll make us
16:21
Speaker 1: so you can compete with the biggest lenders in the world.
16:23
Speaker 1: And that's what we've done, and that's why our business
16:24
Speaker 1: has exploded, is that we've basically democratized technology. We've enabled
16:29
Speaker 1: the mortgage brokers to succeed and thrive by giving them,
16:32
Speaker 1: of course the lowers lowest rates, but beyond the lowest rates,
16:35
Speaker 1: it's the best technology and fastest process that closes. Because
16:38
Speaker 1: you know, I'm in an interesting industry. Nobody wants my product.
16:41
Speaker 1: Nobody wants the mortgage. They want to buy the house,
16:43
Speaker 1: they have to get a mortgage to do it. They
16:44
Speaker 1: want to save the money, they gotta get a mortgage.
16:46
Speaker 1: We're selling a product nobody wants. We've gotta make it faster, easier, cheaper,
16:49
Speaker 1: and that's what we've done with mortgage brokers. Really quite interesting.
16:54
Speaker 1: So I'm a little curious, what are the advantages of
16:57
Speaker 1: being a non bank lenser versus a banking lens. You're
17:00
Speaker 1: like Wells and Cities it the ability to work with
17:03
Speaker 1: independent um mortgage brokers. What what advantages does your structure
17:08
Speaker 1: give you? Yeah, well, being a non bank lender. A
17:11
Speaker 1: lot of people think, oh, that means you have less compliance,
17:13
Speaker 1: less regulatory. I argue the reverse. I have more compliance,
17:16
Speaker 1: more regulatory. I mean, I gotta do with fifty individual states.
17:18
Speaker 1: When you're a federally charter bank, you gotta deal with one, right,
17:20
Speaker 1: you don't have to deal with each state level stuff.
17:22
Speaker 1: We have more compliance and more regulatory things that I
17:24
Speaker 1: think in a lot of respects the big advantage and
17:27
Speaker 1: one of the things that I think about building wealth
17:29
Speaker 1: and building success is the reason I can beat those companies,
17:33
Speaker 1: and reason we have beat those companies is extreme focus.
17:36
Speaker 1: I'm not trying to be the best bank. I'm not
17:38
Speaker 1: trying to be the best everything. I'm trying to be
17:39
Speaker 1: the best mortgage lender. All we do is dominate the
17:43
Speaker 1: mortgage process where a big companies, smart companies, Chase well
17:46
Speaker 1: as probably these are great companies obviously, but they gotta
17:48
Speaker 1: do the posits. They gotta do credit cards, they gotta
17:50
Speaker 1: do boat loans, they gotta do they have to do
17:52
Speaker 1: a bunch of things, and therefore they're not extremely focused.
17:55
Speaker 1: I'm extremely focused. I got nine thousand three people that
17:58
Speaker 1: focus on being the best wholesale mortgage one in the country,
18:01
Speaker 1: and we have no question on what we're trying to
18:04
Speaker 1: do every day. And so I think singular focus is
18:06
Speaker 1: a huge advantage. And if I was a bank, that's
18:08
Speaker 1: one thing that I probably wouldn't be able to do
18:10
Speaker 1: because they want you to diversify in different respects. But
18:13
Speaker 1: the thing is a mortgage. It's not like this little
18:16
Speaker 1: thing you're doing. This is a huge part of someone's
18:18
Speaker 1: life and dominating on it. It's like it's like the
18:21
Speaker 1: way I would explain is like the Wells, Fargos and Chases.
18:23
Speaker 1: In these big companies, they have to be, you know,
18:26
Speaker 1: a general doctor, like you're you're general practitioner right there.
18:29
Speaker 1: You're not, but I'm the I'm the heart surgeon. When
18:31
Speaker 1: you when you get a hearty you don't go to
18:33
Speaker 1: your main doctor. You actually want to go to your
18:34
Speaker 1: heart the best heart person in the country. And that's
18:36
Speaker 1: what a mortgage is. You only do it once every
18:38
Speaker 1: three or four years. Do you want to get the
18:39
Speaker 1: best in the country, And that's what mortgage brokers are
18:41
Speaker 1: and that's what you WM does. So so let's hold
18:45
Speaker 1: aside the big banks like City and Wells and JP Morgan.
18:48
Speaker 1: What what's your advantage when you're competing with firms like
18:51
Speaker 1: Rocket Mortgage or a Quicken. How do you go head
18:54
Speaker 1: to head with the folks who are similarly like you
18:59
Speaker 1: really focused on just underwriting mortgages. I just got work them.
19:03
Speaker 1: It's very simple. So I'll work them and I invest
19:05
Speaker 1: in technology, and so I love that. I love that
19:07
Speaker 1: they have a similar set up as us because we
19:09
Speaker 1: can compete head to head and we find out who's better.
19:11
Speaker 1: And we believe in our model. We believe in doing
19:13
Speaker 1: right by brokers and consumers, and we have a different
19:15
Speaker 1: model mentality than some of those other companies. Other other
19:18
Speaker 1: companies are focused on for on profit profit profit. We're
19:21
Speaker 1: focused on winning, winning, winning, and profit follows and that's
19:24
Speaker 1: worked year over year as we've continued to grow. You know,
19:27
Speaker 1: when I took over in two thousand thirteen, I think
19:30
Speaker 1: we did it, you know, or two dozen two took over,
19:33
Speaker 1: we did about ten billion. We did a hundred eighty
19:35
Speaker 1: billion dollars of mortgages this past year, and we're gonna
19:37
Speaker 1: do more in two thousand one, and everyone else is
19:40
Speaker 1: not going to Everyone can do well in rache Al
19:42
Speaker 1: really low. Some of those competitors you talked about, they're
19:44
Speaker 1: extremely focused on refinance. Once again, that's great when rates
19:48
Speaker 1: are two percent two and a half percent, it's not
19:50
Speaker 1: gonna be as great one rates or four and a
19:51
Speaker 1: half percent. So our business model is much more balanced,
19:55
Speaker 1: much more focused on consumers and brokers. And at the
19:58
Speaker 1: same time, I think it's much more long standing, and
20:00
Speaker 1: you'll see that as we take over the number one
20:01
Speaker 1: spot in the coming years. So I have a ton
20:04
Speaker 1: of interest rate questions for you. We'll we'll circle back
20:07
Speaker 1: to that in a little bit. Um. I want to
20:09
Speaker 1: ask about the speed of transactions. You guys seem to
20:13
Speaker 1: have a reputation for turning things around very very quickly.
20:19
Speaker 1: Tell us a little bit about how you were built
20:22
Speaker 1: for speed. Yeah, well, once again, mortgages, nobody wants so
20:27
Speaker 1: you gotta make it faster, easier and cheaper and so cheaper.
20:30
Speaker 1: We already are that that data and you can prove
20:32
Speaker 1: that faster. Same thing. I you know, a couple of
20:35
Speaker 1: our competitors, obviously one of them that you talked about earlier, Rocket,
20:37
Speaker 1: they went in public and they touted their technology and
20:40
Speaker 1: they've done a very nice job. Dan Gilbert's done a
20:41
Speaker 1: good job at their business and built something very successful.
20:44
Speaker 1: But you know they talked about technology. How do you
20:46
Speaker 1: know you have the best technology, Like, what's the measurement?
20:48
Speaker 1: It's either your cost to originate your expenses that you
20:51
Speaker 1: can you can make things more efficient, or you close
20:53
Speaker 1: loans fast. Right, Well, the industry closed loans about forty
20:56
Speaker 1: seven days. Rocket did a great job. They're closing loans
20:59
Speaker 1: in twenty n days. They're better than most. We close
21:02
Speaker 1: in sixteen seventeen days. Here, our technology has differentiated because
21:05
Speaker 1: we've built our technology from scratch. I got actually made
21:09
Speaker 1: a little technology. People here at our company every single
21:14
Speaker 1: day grinding, working hard to make prietary technology for our clients.
21:17
Speaker 1: And so speed solves everything. You make things fast, Like
21:21
Speaker 1: if we make a mistake, we solve it fast. Right,
21:23
Speaker 1: We're trying to figure out things, and so we're always
21:25
Speaker 1: focused on speed. Nobody wants the mortgage process that you're like,
21:28
Speaker 1: what are you gonna call the underway to find out
21:29
Speaker 1: thirty days later what's going on. It makes the process
21:32
Speaker 1: grueling and not fun when someone's trying to buy a house.
21:36
Speaker 1: And so speed is a big deal. It's tied to
21:38
Speaker 1: our technology, and that's how we've differentiated. Uh. The house
21:41
Speaker 1: I'm calling you from now because we're still working from home.
21:45
Speaker 1: We purchased in September, and I cannot begin to tell you.
21:50
Speaker 1: I'm just laughing as you're describing it. What an ordeal
21:54
Speaker 1: it was to get a mortgage for this house. And
21:59
Speaker 1: I'm good, have Craig credit score. I'm putting a stupid
22:02
Speaker 1: amount of money down. This should have been a no brainer,
22:06
Speaker 1: and I guess it was because everybody I was dealing
22:09
Speaker 1: with apparently had no brain. It was Do you hear
22:14
Speaker 1: those sort of complaints to people tell you like horrible,
22:17
Speaker 1: So let me tell you about what a disaster in
22:18
Speaker 1: my mortgage was when they meet you personally. All the
22:22
Speaker 1: time people people have mortgage stories, and especially when talking
22:25
Speaker 1: about two four and fifteen. But the reality is this,
22:28
Speaker 1: people don't know how to get a mortgage. They don't
22:31
Speaker 1: know where to go. They think that you see a
22:33
Speaker 1: commercial and you go there, you call your bank, you
22:35
Speaker 1: go there. That that that's the biggest problem. So consumer
22:38
Speaker 1: education is a big focus of mine. One of the
22:39
Speaker 1: reasons we went public was to help educate consumers and
22:42
Speaker 1: get myself out on a platform. Because if you go
22:44
Speaker 1: to find a mortgage broker dot com or you call brokers,
22:47
Speaker 1: you do one of those things, you will find a
22:49
Speaker 1: broker in your community. They will shop on your behalf.
22:51
Speaker 1: It will be a fast, efficient, cheap process. Period. I
22:55
Speaker 1: have the utmost confidence in that because I see it
22:58
Speaker 1: every single day. But most consumers, they get lured into
23:01
Speaker 1: some TV ad or they hear something like they don't
23:03
Speaker 1: really know how to do it. And so part that's
23:06
Speaker 1: part of my mission right now is how do we
23:08
Speaker 1: get more people to understand how to get it broke.
23:10
Speaker 1: Even if it doesn't come to u w M. Go
23:11
Speaker 1: to find a mortgage broker dot com doesn't mean he's
23:13
Speaker 1: gonna come to u w M. It goes to one
23:14
Speaker 1: of the other. But if you go there, then that
23:16
Speaker 1: that that that professional can say, Okay, Barry, what are
23:19
Speaker 1: you looking for? I'm looking to close in thirty days
23:21
Speaker 1: at a great rate. Okay, well here's the lender I'm
23:23
Speaker 1: gonna go with then, rather than well, here's what we offer.
23:26
Speaker 1: It's gonna take sixty days, and we're gonna be like
23:28
Speaker 1: certain lenders are paying on certain things. Certain lenders are
23:31
Speaker 1: fast for certain things. Certain lenders cost more. They know
23:34
Speaker 1: these things. You have to go to the expert. You
23:36
Speaker 1: gotta go. It's like going to your general doctor and saying,
23:39
Speaker 1: who's the best heart surgeon. He'll refer you to the
23:42
Speaker 1: right place rather than just look it up online and say, oh,
23:44
Speaker 1: this guy says he does a good job with hearts.
23:46
Speaker 1: You know, I'm not going to that guy's. It's funny
23:48
Speaker 1: because I recall using UM a mortgage broker in twenty fourteen,
23:55
Speaker 1: but a lot of my roller decks, a lot of
23:57
Speaker 1: my contact list of mortgage brokers, half these guys were
24:01
Speaker 1: out of the business. So let me circle back and
24:03
Speaker 1: ask you UM a great financial crisis question. You know,
24:09
Speaker 1: what was the lesson from that and and what did
24:11
Speaker 1: you personally learn from companies like Countrywide that had such
24:15
Speaker 1: a successful business and then blew themselves up. What we
24:20
Speaker 1: learned is quality always wins, and so I want to
24:23
Speaker 1: be the biggest, but I'm not gonna have a sacrifice
24:25
Speaker 1: being the best. We are the best mortgage coming in America,
24:28
Speaker 1: and we were proud of that. Our technology, our service,
24:31
Speaker 1: are pricing, everything is the best. But we are not
24:33
Speaker 1: the biggest. We are number two right now, but I
24:34
Speaker 1: will never I'd rather be number thirty eight, as competitive
24:37
Speaker 1: as I am, then sacrifice the quality what we do.
24:40
Speaker 1: So what happened in the past, and I don't know
24:42
Speaker 1: Angelo Mozillo and country wide that well, Um, all I
24:44
Speaker 1: know is I study things and see what people have done.
24:47
Speaker 1: I know that the type of loans we do is
24:49
Speaker 1: the key, and people focus on like, oh, well I
24:52
Speaker 1: could do more. I could do more loans right now,
24:53
Speaker 1: right now, I could do Maybe I could be number
24:55
Speaker 1: one if I if I opened my credit box to
24:57
Speaker 1: do loans for people that maybe are a little bit
24:59
Speaker 1: more on the gray or Yeah. We had our company
25:01
Speaker 1: believe in long term success, not short term, and we're
25:04
Speaker 1: gonna we're playing the long game, and so we're gonna
25:05
Speaker 1: focus on doing the right things because I'm gonna be
25:08
Speaker 1: here running it. I'm gonna I still own ninety four
25:10
Speaker 1: pers And someone said oh, you're your shareholders. I go
25:12
Speaker 1: my shareholders. I have one of the have billion shares.
25:15
Speaker 1: I'm the biggest shareholder. I promise you I'm doing everything
25:17
Speaker 1: best for the shareholders all the time because I'm I'm
25:20
Speaker 1: the biggest one. We're all on the same team. But
25:21
Speaker 1: that does not mean what's best for shareholders or best
25:24
Speaker 1: for anyone is to do something crazy in third quarter
25:26
Speaker 1: two one that will pay for in two And I
25:30
Speaker 1: think that's what happened in the past in the mortgage
25:32
Speaker 1: industry is people got a little bit focused on greedy,
25:34
Speaker 1: got maybe a little greedy, maybe got a little over
25:36
Speaker 1: the skis on certain things that's not gonna happen at
25:38
Speaker 1: you WM. Huh really quite interesting. Let's talk a little
25:42
Speaker 1: bit about what's going on with rates today. Um, and
25:45
Speaker 1: obviously we have to look back at what took place
25:49
Speaker 1: last year. How did the pandemic impact home sales and prices?
25:54
Speaker 1: And when did you first start to see things, uh,
25:58
Speaker 1: in the mortgage market that eight things. You're getting a
26:00
Speaker 1: little low wacky out here. Yeah, you know, obviously at
26:04
Speaker 1: the pandemic or when the pandemic you know, first started
26:07
Speaker 1: back in March of last year. Um, you know, a
26:09
Speaker 1: lot of crazy things are happening. Rage dropped because the
26:12
Speaker 1: feed is buying you know, um, a lot of mortgage
26:15
Speaker 1: backed securities. A lot of things happened that people were
26:17
Speaker 1: not expecting. Um, it all kind of settled down. It's
26:20
Speaker 1: still buying a lot of mortgage in Rates were extremely
26:22
Speaker 1: low for the second half of last year. Thirty year
26:25
Speaker 1: fixed in the twos, which is never seen before, right,
26:28
Speaker 1: and so thirty year fixed rates in the two's was
26:30
Speaker 1: what was common. And the crazy thing is it's still
26:33
Speaker 1: common today. It's still happening, and so rage dropped and
26:36
Speaker 1: I I think they had as low as two and
26:37
Speaker 1: a half thirty year fix, two and three eights thirty
26:39
Speaker 1: year fix. So if you're getting a conmentional alone, should
26:41
Speaker 1: be getting two and a half two and three eights.
26:43
Speaker 1: But then rache went up for a little bit this
26:45
Speaker 1: year and everyone says old rates and went off, everyone's
26:48
Speaker 1: gonna slow down. Well, rates are still two point eight
26:49
Speaker 1: seven five. You know, there's still all time lows. And
26:52
Speaker 1: so anyone that didn't take advantage of it is still
26:54
Speaker 1: can take advantage of today. People that are buying homes,
26:56
Speaker 1: which is a big deal right now because that's a
26:58
Speaker 1: big percentage of our business. There actually taken advantage of that. Hey,
27:01
Speaker 1: that three thousand house I can actually buy with two
27:04
Speaker 1: points on five interest rate rather than three and a
27:06
Speaker 1: half or four percent, which is actually giving them a
27:08
Speaker 1: great opportunity to buy a house to maybe they couldn't
27:11
Speaker 1: buy because rache Al solo. So rates are extremely low
27:14
Speaker 1: right now. They I believe they're gonna stay low through
27:16
Speaker 1: the rest this year. Um, but they are going to
27:19
Speaker 1: take up and they have picked up a little bit
27:21
Speaker 1: so far. So banks are known for making money on
27:25
Speaker 1: the spread, and that spread gets wider the higher rates are,
27:28
Speaker 1: which raises the question how hard is it to make
27:31
Speaker 1: money on a thirty year mortgage with rates under three?
27:35
Speaker 1: What does that do to your profit margin as an
27:38
Speaker 1: underwriter and a wholesaler? You know, it doesn't really impact
27:42
Speaker 1: it much. So you know, we're not we're not portfolios.
27:45
Speaker 1: Los loans are being securitized with Fannie May Freddie mc
27:48
Speaker 1: Jinny May. And so whether the race two eights on
27:50
Speaker 1: five or three eight five, the difference than what we
27:53
Speaker 1: make is not is negligible, It's the same thing. And
27:56
Speaker 1: so I actually make an argument the reverse that as
27:58
Speaker 1: rates go up, you make less because there's left loans
28:00
Speaker 1: out there, so people are competitively pricing their loans or
28:03
Speaker 1: making trying to squeeze their margins to get more business
28:06
Speaker 1: rather than make more money. And so when rates are
28:09
Speaker 1: low is actually when people make a good amount of
28:11
Speaker 1: money on on the loans, because there's so many loans
28:13
Speaker 1: out there that people don't have to be as price well.
28:15
Speaker 1: And that's why it's so important to go to a broker,
28:17
Speaker 1: because if you go to some lender, you don't know,
28:18
Speaker 1: like you're not in the business berry you don't know
28:20
Speaker 1: three and an eighth is the right rate or two
28:22
Speaker 1: points and five you don't know. But the mortgage broker
28:25
Speaker 1: will know, and he'll say, no, you're actually two point
28:27
Speaker 1: seven five in here's the lender that we can sell
28:28
Speaker 1: it to and work with on it. And so I
28:30
Speaker 1: think that's an important thing is that as rates go up,
28:32
Speaker 1: it does not mean you make more money. It's actually,
28:35
Speaker 1: I could make an argument that's the reverse in many respects.
28:38
Speaker 1: So so let's say rates go over four percent at
28:42
Speaker 1: some point in the future, and right now, where are
28:44
Speaker 1: we fift of people have mortgages with rates under four percent?
28:48
Speaker 1: What does that mean for the volume of new originations
28:52
Speaker 1: And what does that mean for refinancings. Yeah, it's gonna
28:56
Speaker 1: slow it down substantially. And that's actually gonna be the
28:58
Speaker 1: part that helps you w M my company become the
29:00
Speaker 1: number one overall lender because we are not dependent the
29:03
Speaker 1: number one lender right now. It does about their business
29:06
Speaker 1: is refinance. So yeah, it's great when rache a two,
29:08
Speaker 1: eight and five. What happens when there's three and five, Well,
29:11
Speaker 1: there's me a lot less reefinance. It already slowed a
29:13
Speaker 1: lot of people down if you foul you know, our
29:16
Speaker 1: earnings call and in the number one lender rocket there
29:19
Speaker 1: they guided to do fifteen less business than the second quarter,
29:22
Speaker 1: that is the first quarter, because rates went up just
29:25
Speaker 1: from two and a half to two points then five.
29:27
Speaker 1: I guided the reverse. I said, we're gonna do more
29:29
Speaker 1: business in the second quarter than the first quarter. And
29:31
Speaker 1: so the point is when you're doing purchases and you're like,
29:34
Speaker 1: our business is not a cyclical and so rates. A
29:37
Speaker 1: lot of Organs shompanies are strictly refinance shops. Well that's
29:40
Speaker 1: great in a two thousand twenty boom year, but what
29:42
Speaker 1: about a two thousand twenty two rising rate year. How
29:45
Speaker 1: are you gonna live, How you gonna survive, how you
29:47
Speaker 1: gonna succeed? And that's why we're excited about the opportunities.
29:50
Speaker 1: So when rates do go up, well we'll win in
29:52
Speaker 1: the low rate environment. When rates go up, that's actually
29:54
Speaker 1: when the power of our business really shines. M That's
29:58
Speaker 1: that's really interesting. So in terms of those refinancings, how
30:03
Speaker 1: aggressively are people tapping the equity in their homes compared
30:06
Speaker 1: to I don't know, mid two thousands of five oh six?
30:10
Speaker 1: Is this really that large a driver? Someone says of
30:14
Speaker 1: their business is refies that seems to be really cyclical
30:18
Speaker 1: and and rate sensitive. It is, you got it here
30:22
Speaker 1: exactly right. There is something that's cash out and people
30:25
Speaker 1: tapping that with the house is probably a little less
30:27
Speaker 1: rate sensitive, but it's still rate sensitive. You know, no
30:31
Speaker 1: one's gonna people, you know, and obviously housing values have
30:34
Speaker 1: gone up, so there is a little equity and pupil's houses.
30:36
Speaker 1: But the reality is this, if your business is nine
30:38
Speaker 1: percent anything, you're probably going to be in a tougher position,
30:43
Speaker 1: especially if it's something you don't control, which is the rates.
30:45
Speaker 1: Nobody controls the rates. I can't keep rates low and
30:47
Speaker 1: then there can the other lenders. You know, you gotta
30:49
Speaker 1: you gotta live with whatever rates are, and you gotta
30:51
Speaker 1: make the best out of it. So if your business
30:53
Speaker 1: is to one one focused on we really win when
30:56
Speaker 1: low rates happen. What happens when high rates happen, right,
30:59
Speaker 1: and and that's gonna happen right even to the point
31:02
Speaker 1: that you made earlier. Even if races don't go high
31:04
Speaker 1: from what you and I would think of as high,
31:06
Speaker 1: which is five six seven percent relatively, they just go
31:09
Speaker 1: to three and a half, it will stop the refinances
31:12
Speaker 1: because that means almost everyone there's no reason to refinance
31:14
Speaker 1: if you have a three and a quarter per cent
31:16
Speaker 1: rate or two point eight five. So many people have
31:18
Speaker 1: a thirty year fixed in the twos right now that
31:20
Speaker 1: they're not going to be refinancing into a three and
31:22
Speaker 1: a half. So therefore, the only time you really need
31:24
Speaker 1: to revorce a refinances a divorce or a cash out.
31:27
Speaker 1: And people aren't gonna cash out and pay a higher
31:28
Speaker 1: interest rate unless they really need the cash out of
31:31
Speaker 1: their house. Huh. Interesting you mentioned home prices ticking up.
31:36
Speaker 1: I keep reading lots and lots of people claiming it's
31:39
Speaker 1: a bubble. What are your thoughts on these increased to
31:41
Speaker 1: home prices. Is it just limited supply, limited inventory or
31:46
Speaker 1: is there something else going on here? Yeah, so it's
31:49
Speaker 1: limited inventory, but partially because remember we're still finishing up
31:53
Speaker 1: this pandemic or getting through a pandemic where you know,
31:55
Speaker 1: there's over a million consumers right now that aren't making
31:58
Speaker 1: payments on their mortgage, so they're in four earrants. Well
32:00
Speaker 1: what does that mean. Well, if I'm not making a
32:02
Speaker 1: payment on my mortgage, I'm not not settling in my house.
32:04
Speaker 1: It's pretty good deal I got going right now, right,
32:06
Speaker 1: And so people aren't selling at the pace that they
32:08
Speaker 1: should be. When that changes, I think there will be
32:10
Speaker 1: a lot more inventory hitting the market. Now. Is it
32:13
Speaker 1: a bubble? No, it's not a bubble. It's not. Well,
32:15
Speaker 1: don how you to find a bubble? So I think
32:17
Speaker 1: housing value should be going up ten percent a year.
32:19
Speaker 1: Absolutely not. I think they go up one to three
32:21
Speaker 1: percent a year, and that would be more normalized. It's
32:24
Speaker 1: not like two thousand eight. Someone said to me, it's
32:25
Speaker 1: just like two thousand day. Is that it's not like
32:27
Speaker 1: two thousand eight? You don't know if you're talking about
32:29
Speaker 1: It's nothing like two thousand and eight two thousand and
32:30
Speaker 1: eight was a bubble bigger than this one, but it
32:33
Speaker 1: was built on a a horrible cracked foundation in the
32:36
Speaker 1: mortgage industry. The mortgage ry is not like that. People
32:39
Speaker 1: were getting loans when they didn't even qualify for back then,
32:42
Speaker 1: so when and they're also doing adjustment rape, so then
32:44
Speaker 1: there rate went up, you had to sell, and the
32:45
Speaker 1: whole thing collapsed. That's not happening right now, I'm sure
32:48
Speaker 1: of that. What is happening is that there house today
32:52
Speaker 1: that maybe should only be worth three twenty because it's
32:54
Speaker 1: kind of went up faster than you expected. Should you
32:57
Speaker 1: still buy it at three thirty? You probably should, because
32:59
Speaker 1: you know, unless you're only be there for a less
33:00
Speaker 1: than a year or two, because housing values is not
33:02
Speaker 1: gonna go from three nine, maybe three thirty and three
33:05
Speaker 1: thirty two next year and three four the following you
33:07
Speaker 1: doesn't go fast, but you're still getting in at a
33:09
Speaker 1: two point seven five interest rate. So people thinking that
33:12
Speaker 1: this whole thing is gonna collapse, they just don't know
33:13
Speaker 1: what they're talking about. They're just not right. Right. You
33:15
Speaker 1: gotta focus on the cost to carry, not what you
33:18
Speaker 1: are actually paying, but but that raises the interesting question.
33:21
Speaker 1: You mentioned adjustable rate mortgages. I'm kind of surprised to
33:25
Speaker 1: see a lot of ads for arms when rates are
33:28
Speaker 1: this low. What what are your thoughts on on people
33:31
Speaker 1: who are underwriting a ton of adjustable mortgages these days. Yeah,
33:36
Speaker 1: so adjust for rate mortgages these days are much different
33:39
Speaker 1: than back then. Now, we don't do very many at all. Actually,
33:42
Speaker 1: I could almost say we had do zero because it's
33:43
Speaker 1: it's not even a uh point one of a percent
33:46
Speaker 1: of what we do, but we'll call it. We don't
33:48
Speaker 1: really do them. We have it on the rate sheet,
33:49
Speaker 1: it's available. Well, here's what I think about arms. Arms
33:52
Speaker 1: are different today than back then. Back then it was
33:54
Speaker 1: two year arms with pre payment penalties, and the rates
33:58
Speaker 1: went up like a half percent I mean extumely or
34:00
Speaker 1: multiple percent per year or per adjustment period. These arms
34:04
Speaker 1: today are done through Fannie Mae, Freddie Mac. It's it's
34:06
Speaker 1: with the CFTDE what they've done. They are much safer arms. However,
34:11
Speaker 1: thirty year fixed in the twos unless you're selling in
34:13
Speaker 1: the next two or three years, how are you not
34:15
Speaker 1: taking a third year fix at two points and five? Right?
34:18
Speaker 1: And so people, you know, most people are doing a
34:21
Speaker 1: fixed rate. Um. I think sometimes people are market arms,
34:25
Speaker 1: and that's part of the problem with why people don't
34:26
Speaker 1: go They go to these big commercials you see some
34:28
Speaker 1: one time about arms or jumper rate more. You see
34:30
Speaker 1: a teaser rate of two and a quarter. Oh, I
34:32
Speaker 1: want two in a quarter. When you call them, you
34:34
Speaker 1: find out it's an army, find out it's a three
34:35
Speaker 1: year arm or five year. I'm not really what you want.
34:37
Speaker 1: And then you end up staying with them and getting
34:39
Speaker 1: a thirty year fix at three and three eights and
34:41
Speaker 1: you don't even know the difference that you should have
34:42
Speaker 1: got two point seven five. And that's part of the
34:44
Speaker 1: the the issue with going to a mortgage broker rather
34:47
Speaker 1: than going to these big lenders. So let's talk a
34:49
Speaker 1: little bit about the state of the national housing market.
34:53
Speaker 1: What are your thoughts here. It seems like the underwriting
34:57
Speaker 1: has become much more it's called it's circumspect or conservative
35:02
Speaker 1: than it was a decade or two ago. Yeah. Absolutely,
35:06
Speaker 1: I mean I think a decade or two ago it
35:08
Speaker 1: wasn't it wasn't responsible ending. There's some things that happen
35:12
Speaker 1: back then that we're not the right way. I think
35:14
Speaker 1: there's a lot of rules in place now. It's a
35:17
Speaker 1: very strong foundation of the mortgage industry. Right now. There
35:19
Speaker 1: is not these shake shakier loans being given, like the
35:22
Speaker 1: way you want to help everyone get a house, if
35:24
Speaker 1: they want a house, but you've got to make sure
35:26
Speaker 1: that they meet all the criteria. They have the income,
35:28
Speaker 1: they have a job, the house is worth what they
35:31
Speaker 1: say it's worth. Right, there's a lot of things you
35:32
Speaker 1: have to do and back then there's a lot Uh,
35:35
Speaker 1: I don't the right word is flimsier rules, crazier rules,
35:38
Speaker 1: rules that were not responsible ending right now responsible ending.
35:41
Speaker 1: It's not hard to get a mortgage right now. If
35:43
Speaker 1: you qualify, if you have if you pay your bills
35:46
Speaker 1: on time, and you have a job and you make income,
35:48
Speaker 1: mortgages are easy to get. You've got to, you know,
35:50
Speaker 1: find the right person to help you get it. But
35:51
Speaker 1: it's not if you you know, you're self employed and
35:55
Speaker 1: you don't show any income, well it's a little different now.
35:57
Speaker 1: You actually gotta prove that you make the income. Everyone
35:59
Speaker 1: wants to proof that you can pay your mortgage right
36:01
Speaker 1: so I just want to make sure I'm checking the
36:03
Speaker 1: right boxes. If you want to mortgage, you have to
36:06
Speaker 1: have a job, you have to have a credit history,
36:09
Speaker 1: and the house has to be worth what you're paying
36:12
Speaker 1: for it. These are like crazy restrictive rules. I mean,
36:16
Speaker 1: who could buy the house into those? What? What's so
36:19
Speaker 1: amazing because what you're saying is so obvious and self evident.
36:23
Speaker 1: But how on earth did we ever go off the
36:26
Speaker 1: rails in the mid two thousand's where uh, you don't
36:30
Speaker 1: need a job, you don't need a credit history, and
36:32
Speaker 1: who cares what the house is worth? That seems just
36:35
Speaker 1: absolutely insane. Yeah, well that that agreed gotten the way
36:40
Speaker 1: people started, you know, one upping each other, trying to think,
36:43
Speaker 1: and they didn't understand the constant the whole American world
36:47
Speaker 1: are really the whole world weren't And so now everyone
36:50
Speaker 1: understands it and respects that housing drives the economy in
36:53
Speaker 1: such a way to do and to mess up or
36:56
Speaker 1: break housing, Um, it's not it's not a way that's
36:59
Speaker 1: gonna win long term. And that's what happened. People got greedy,
37:02
Speaker 1: people got were trying to make money. Things weren't working. Well,
37:04
Speaker 1: they're kind of one upping each other on products and nuances,
37:07
Speaker 1: and the whole thing kind of fell apart. And I
37:09
Speaker 1: don't think that. I don't think i'll see that happen
37:10
Speaker 1: again in my lifetime. Does it mean that there won't
37:13
Speaker 1: be some gray area stuff going on. I'm sure there
37:15
Speaker 1: will be, but it's not gonna be at that extreme.
37:17
Speaker 1: So you mentioned earlier, you're gonna see volume drop when
37:22
Speaker 1: rates run up. For some of the other mortgage underwriters
37:26
Speaker 1: are what happens to their underrunning standards when they see
37:30
Speaker 1: their their revenue drop in their volume drop. Do they
37:33
Speaker 1: start to get stupid again or or have they learned
37:35
Speaker 1: their lesson from you know two thousand eight oh nine. Well,
37:39
Speaker 1: so good, great question, and yes they will start to
37:42
Speaker 1: get I don't know if we're a stupid or riskier
37:45
Speaker 1: or a little bit more. But because of the what
37:48
Speaker 1: the CFU needed a guy named Richard Cordans, they put
37:50
Speaker 1: in some rules that basically restrict your ability ever doing
37:54
Speaker 1: it to the extremes. I'm not saying people can't get
37:56
Speaker 1: in some of the gray areas, but on a mass scale,
37:59
Speaker 1: the extreme teams such as back to our Roger joke
38:02
Speaker 1: or comment about no income, no job, here's a loan
38:06
Speaker 1: like that that that can't be done anymore? Right, that
38:09
Speaker 1: can't be done anymore? And so therefore there are some
38:11
Speaker 1: rules in place that it's just really not gonna be
38:13
Speaker 1: on a mass scale that you can get those things done.
38:15
Speaker 1: And so I'm not concerned. Do lenders lower their standards, Absolutely,
38:19
Speaker 1: I'm sure they do um when rache go up, But
38:21
Speaker 1: at the same time, it's not gonna be able to
38:23
Speaker 1: be lowered to put the American economy at risk. I
38:25
Speaker 1: ad last time. So I know the g s C
38:29
Speaker 1: as a government sponsored entities like Fannie Mae and Freddie
38:32
Speaker 1: Mac focus mostly on the conforming world traditional mortgages. What
38:38
Speaker 1: about what's become a very big segment, the jumbo mortgage market.
38:43
Speaker 1: How do you see that developing? Do you guys play
38:45
Speaker 1: in that space? Um, tell us a little bit about
38:48
Speaker 1: because I know the real estate it's been growing very rapidly.
38:51
Speaker 1: What do you guys do in terms of jumbo more
38:54
Speaker 1: mortgages and how do you see that space? Yeah, so
38:58
Speaker 1: it's it's definitely a space we do a lot of,
39:00
Speaker 1: isn't that We do billions of dollars a month of it.
39:02
Speaker 1: So we're doing a lot of business and jump. But
39:04
Speaker 1: that's those loans are put down good credit score people.
39:10
Speaker 1: Once again, the principles that we talked about where they
39:13
Speaker 1: have to have a job to show their income it
39:15
Speaker 1: to prove it. A lot of these two are sell
39:17
Speaker 1: employted and they actually have to show it on their
39:18
Speaker 1: tax returns in order to qualify for one of these loans.
39:21
Speaker 1: And so that's those are good solid loans, and those
39:24
Speaker 1: are good solid borrowers, and those are people you want
39:26
Speaker 1: to be able to serve so that they can buy
39:28
Speaker 1: a house. Really really really intriguing. Um. So, a recent
39:33
Speaker 1: Wall Street Journal edition had a column, real estate shows
39:38
Speaker 1: tech is no Holy Grail. What are your thoughts on
39:41
Speaker 1: on these so called I buyers, these tech companies that
39:46
Speaker 1: offered almost like a used car, Hey, we'll buy your
39:49
Speaker 1: house um directly from you. You don't have to list
39:53
Speaker 1: it for sale. Do you have any thoughts on on
39:55
Speaker 1: that growing industry? Yeah, no, it's interesting. I like that
40:00
Speaker 1: people were trying to innovate in the residential mortgage space,
40:02
Speaker 1: residential housing space. The reality is this, you gotta always
40:06
Speaker 1: follow the money, right, Why is someone doing that they're
40:08
Speaker 1: buying your house today because they're probably buying it below
40:11
Speaker 1: what it actually should be selling for, right, And is
40:13
Speaker 1: that the best for you? Is it? Is it that
40:15
Speaker 1: hard to sell a house these days, you know. So
40:18
Speaker 1: I guess my perspective is I'm not gonna call them gimmicks,
40:21
Speaker 1: because I'm sure there's obviously some substantiated strong businesses, But
40:24
Speaker 1: the reality is, you know, those things aren't gonna become
40:27
Speaker 1: the mass right there there. There's there's different reasons they're
40:30
Speaker 1: doing it. Everyone's trying to make money in there, and
40:32
Speaker 1: if there's a gap, there's an arbitrage there that hey,
40:35
Speaker 1: you want to stall your house with three hundred, I'll
40:36
Speaker 1: buy it for two ninety to day so you don't
40:37
Speaker 1: have to worry about it and go buy another house,
40:39
Speaker 1: and I'll try to sell it for three or five.
40:41
Speaker 1: They're trying to make an arbitrage right there. Anyways. And
40:43
Speaker 1: so do I think they're long standing maybe? Do I
40:47
Speaker 1: think they're gimmicks, Yes? Do I think that they're gonna
40:49
Speaker 1: be mass scale? No, m That's that's really kind of interesting.
40:54
Speaker 1: And and I want to just touch on on the
40:57
Speaker 1: fact that you guys when public via a spack, tell
41:02
Speaker 1: us a little bit about what that process was, like,
41:04
Speaker 1: what why did you decide that was the right way
41:07
Speaker 1: to go public? Yeah, so we obviously are large enough
41:12
Speaker 1: and successful. I mean a lot of people think SPAC
41:14
Speaker 1: SPAC must be a questionable company, and that's not anything
41:18
Speaker 1: like I mean we we we we made three point
41:20
Speaker 1: three billion dollars in profit last year. So we went
41:22
Speaker 1: public through a SPECT because we chose that instead of
41:25
Speaker 1: an I p O. We chose that because we felt
41:27
Speaker 1: that was a better process for us for numerous reasons.
41:31
Speaker 1: We also got partnered with Alec Goers and the Goers group,
41:34
Speaker 1: and Alec did a great job and his team. You
41:36
Speaker 1: know what I think about it is I'm going public.
41:39
Speaker 1: I'm not I'm not going public again. So how do
41:42
Speaker 1: you go public in the most efficient way possible while
41:46
Speaker 1: having someone right shotgun and kind of advise you. And
41:48
Speaker 1: that's what Alec Gore's and his team did. And so
41:50
Speaker 1: we felt that the going public through a spect was
41:52
Speaker 1: a better option for us than an I p O.
41:55
Speaker 1: And I would do it again the same way. Now,
41:58
Speaker 1: you know, certain every compy's kind of differ and obviously
42:00
Speaker 1: real the largest back of all time, and but I
42:04
Speaker 1: don't look at it based on evaluation. As I look
42:06
Speaker 1: at is what's the best way to do this? And
42:08
Speaker 1: I looked at both options. And although everyone in the
42:10
Speaker 1: world tells you that I PO seems like a better option,
42:13
Speaker 1: cause that's what everyone's always done. But I don't live
42:14
Speaker 1: that way. I don't live on whatever one's always done it.
42:16
Speaker 1: What's the best way, And we found that this is
42:19
Speaker 1: the best way, and I think I chose correctly. So
42:21
Speaker 1: what sort of guns have you gotten in terms of
42:24
Speaker 1: how to handle suddenly you're the CEO of a public company?
42:28
Speaker 1: Have you gotten any good advice about that? Or or
42:31
Speaker 1: who have you been speaking to about it? No? You know,
42:35
Speaker 1: I haven't, you know, focused my time on like what
42:38
Speaker 1: I say. And there's a staying in business like what
42:39
Speaker 1: got you here won't get you there? And my perspective
42:43
Speaker 1: is what got me here will get me there. I'm
42:45
Speaker 1: gonna stay in the weeds of my business. I'm not
42:47
Speaker 1: gonna change what I do. I'm gonna continue to take
42:49
Speaker 1: care of running our company for our team members, are clients.
42:53
Speaker 1: Shareholders are always ran it, for sure. It was the
42:54
Speaker 1: difference was sholders were only me back then. But now
42:56
Speaker 1: I got everybody in my company's a shareholder, along with
42:59
Speaker 1: a lot of people in the public, which we're excited
43:00
Speaker 1: about as well. But take care of your team members,
43:03
Speaker 1: take care of clients, take care of your you know,
43:05
Speaker 1: the end consumer and at the same time take care
43:07
Speaker 1: of your shareholders. And so nothing has really changed in
43:10
Speaker 1: my business running daily. We obviously have more people on
43:13
Speaker 1: investor relations, and we've got people on financial side that
43:16
Speaker 1: are doing things, but running a business day to day,
43:18
Speaker 1: I have not changed what I'm doing. Uh, And a
43:20
Speaker 1: lot of investors back when we when we're doing this
43:22
Speaker 1: back and the people were in our road show, we're
43:24
Speaker 1: investing us, they wanted me to keep doing what I'm
43:26
Speaker 1: doing because that's what they were buying into. They're buying
43:28
Speaker 1: into our success and how we got to where we're
43:30
Speaker 1: at and how we're gonna get to where we're going.
43:32
Speaker 1: So what are the plans for all that capital that
43:35
Speaker 1: you raised? How do you want to deploy that? The
43:38
Speaker 1: big focus is one technology, continue to invest in technology.
43:43
Speaker 1: We have done that and we're continue to innovate with that.
43:45
Speaker 1: Second thing is we're investing in servicing. Right we we
43:48
Speaker 1: we were Cuite. We we create this servicing asset that's
43:50
Speaker 1: very um profitable and successful. I used to have to
43:53
Speaker 1: sell it to bring in cash. Now I don't have
43:55
Speaker 1: to sell it. I still can sell it if the
43:57
Speaker 1: right opportunities there, but I don't need to sell, and
43:58
Speaker 1: now I can want to sell. It's different. Huh. Well, Matt,
44:02
Speaker 1: thank you so much for being so generous with your time.
44:05
Speaker 1: This has been really fascinating stuff we have been speaking
44:09
Speaker 1: with Matt shpa He is the CEO of United Wholesale Mortgage.
44:14
Speaker 1: They are the country's largest wholesale lender and number two
44:17
Speaker 1: overall mortgage lender. UM. I wish we could have done
44:21
Speaker 1: this in person. I get the sense that you are
44:23
Speaker 1: just a very animated, excited individual, and I get the
44:28
Speaker 1: sense your enthusiasm is totally infectious, and I could see
44:32
Speaker 1: why you've been so successful running the company. Well, thank you.
44:36
Speaker 1: I really enjoyed being part of it. Appreciate you, and
44:38
Speaker 1: uh hope to talk to you again soon. Absolutely, Thanks
44:42
Speaker 1: so much, Matt. Thank you. Thanks to Matt SHPF for
44:46
Speaker 1: being so generous with his time. If you enjoy this conversation, well,
44:51
Speaker 1: be sure and check out any of the previous four
44:53
Speaker 1: hundred discussions we've done over the past six years, seven years.
44:59
Speaker 1: Oh my god, time time disappears. UM. You can find
45:03
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45:07
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45:47
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45:51
Speaker 1: in Business on Bloomberg Radio.