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The Credit Crunch and Beyond: Bold Predictions for 2026 · Leaders in Lending

• 0:00
  Speaker 1: I wish we had three percent thirty year mortgages again.
• 0:02
  Speaker 1: We may never see those again, Like this is a
• 0:05
  Speaker 1: new Normally, this type.
• 0:06
  Speaker 2: Of environment could also last for an extended period. And
• 0:09
  Speaker 2: this is what it looks like for five eight years.
• 0:13
  Speaker 1: I almost don't see that changing all that much in
• 0:15
  Speaker 1: twenty six, and then we're going to get into twenty seven,
• 0:17
  Speaker 1: and there's gonna be election in twenty eight and who knows,
• 0:19
  Speaker 1: right will.
• 0:20
  Speaker 2: AI take jobs? It will take some, but it will
• 0:21
  Speaker 2: create others. How does that impact the economy?
• 0:28
  Speaker 3: All right, welcome to another episode of leaders in Lending. Today,
• 0:31
  Speaker 3: we're going to talk about the twenty twenty five credit crunch.
• 0:34
  Speaker 3: As we all know, most institutions are tightening credit, probably
• 0:38
  Speaker 3: not for the best, but it's been something that's been
• 0:41
  Speaker 3: ongoing now for the remitt for the entire year. Barry
• 0:44
  Speaker 3: would love to get your perspective on kind of what's
• 0:47
  Speaker 3: what's driving the titan credit in twenty twenty five.
• 0:50
  Speaker 1: Overall, I think just uncertainty. Right since we've had a
• 0:55
  Speaker 1: new administration come in in January, there were threats of
• 1:00
  Speaker 1: reductions in government workforce, which some have come to pass
• 1:02
  Speaker 1: and some haven't. The regulatory environment has sort of been
• 1:05
  Speaker 1: turned a little bit upside down. The CFPB doesn't seem
• 1:10
  Speaker 1: to have as much maybe forward influence as an expectation
• 1:14
  Speaker 1: than maybe what they had in the past. But then,
• 1:17
  Speaker 1: just in the economy, we've been waiting for a recession
• 1:20
  Speaker 1: hasn't come, been waiting for rates to reduce, hasn't come,
• 1:23
  Speaker 1: been waiting for unemployment to climb, hasn't necessarily I mean,
• 1:27
  Speaker 1: it's come up a little bit, but the labor market
• 1:28
  Speaker 1: is still really strong. So all the sort of fundamental
• 1:32
  Speaker 1: economic conditions that would normally predate a credit crunch haven't
• 1:39
  Speaker 1: necessarily come to pass. So it's been more about our
• 1:43
  Speaker 1: expectation or worry that's coming. And that's actually a prudent
• 1:47
  Speaker 1: approach in the face of uncertainty. May not necessarily be
• 1:51
  Speaker 1: the time to take on a whole lot of risk,
• 1:53
  Speaker 1: Although I'll argue with myself a little bit on this.
• 1:56
  Speaker 1: The counterpoint is, if everyone else is pulling back, isn't
• 1:59
  Speaker 1: that a really good time for you to pull forward
• 2:01
  Speaker 1: in a in an aggressive but in somewhat measured fashion.
• 2:06
  Speaker 1: When I say measured meaning more about the quality of risk.
• 2:10
  Speaker 1: You know, maybe that's something that that where some credit
• 2:13
  Speaker 1: unions and banks could win on.
• 2:15
  Speaker 2: Sure, and I definitely think you know, geopolitical uncertainty as well.
• 2:19
  Speaker 2: I mean you touched on the regulatory and the economic uncertainty,
• 2:22
  Speaker 2: but you know, we continue to see turmoil in different
• 2:25
  Speaker 2: areas of the world, and you know, particularly in the
• 2:28
  Speaker 2: Middle East. And then you know tariffs on off do
• 2:31
  Speaker 2: we have tariff do we not? On what products?
• 2:33
  Speaker 3: Uh?
• 2:33
  Speaker 2: And those rollbacks and the impact of that just continues
• 2:37
  Speaker 2: to We've got uncertainty almost in every area of things
• 2:41
  Speaker 2: that normally would be kind of part of the fundamentals
• 2:43
  Speaker 2: of driving those decisions.
• 2:44
  Speaker 1: Everyone's been waiting for a rate cut, right stock market up,
• 2:48
  Speaker 1: labor market's still pretty good. Inflation is running around three
• 2:51
  Speaker 1: percent right now. I know the Fed has won it
• 2:54
  Speaker 1: at two for a while, but we haven't been there
• 2:55
  Speaker 1: for a long time. Like, there's a lot of conditions
• 2:58
  Speaker 1: that traditionally wouldn't call for a rate cut. And I
• 3:01
  Speaker 1: think as as consumers, we all want to see a
• 3:05
  Speaker 1: rate cut. Even in our business, certainly a rate cut
• 3:09
  Speaker 1: would help to create maybe more in demand. And I
• 3:13
  Speaker 1: think as a as someone who manages the balance sheet,
• 3:16
  Speaker 1: if you're a CFO today, you're thinking about, Okay, can
• 3:20
  Speaker 1: I put more of the higher rate business on my
• 3:22
  Speaker 1: books now in the face of perhaps seeing the lower
• 3:26
  Speaker 1: rates going forward, you know, maybe that's that's suprett approach to.
• 3:29
  Speaker 3: Take everything's not ebbing and flowing like it should, right,
• 3:33
  Speaker 3: So you think about there's many different reasons to tighten credit.
• 3:37
  Speaker 3: You talked about geopolitical, We're talking you know, there's delinquencies
• 3:41
  Speaker 3: that are rising. Do you think there's one honed in
• 3:44
  Speaker 3: area that is driving the crunch or is it just
• 3:47
  Speaker 3: a holistic view of all of them.
• 3:48
  Speaker 2: Do you think about the you know, financial crisis in
• 3:52
  Speaker 2: LA the GFC. Everything felt unprecedented right after, and it
• 3:58
  Speaker 2: was this idea, you know, of the new normal, like
• 4:01
  Speaker 2: the world has changed, and I think we're there's a
• 4:04
  Speaker 2: lot of conversations like this where people are saying, how
• 4:06
  Speaker 2: are we going to get back to that? Like how
• 4:08
  Speaker 2: are we going to get to less uncertainty into more
• 4:10
  Speaker 2: stability and to being able to see those you know,
• 4:14
  Speaker 2: leading and trailing indicators and use them to make decisions.
• 4:17
  Speaker 2: And it could be that we don't. And it could
• 4:20
  Speaker 2: be that this is similar to how zero interest rates
• 4:22
  Speaker 2: we thought that was a short term thing and it
• 4:24
  Speaker 2: lasted for an extended period. This type of environment could
• 4:28
  Speaker 2: also last for an extended period, and maybe this is
• 4:31
  Speaker 2: what it looks like for five eight years, and there's
• 4:36
  Speaker 2: not going to be a sudden return to the same
• 4:39
  Speaker 2: fundamentals of what we thought were fundamentals before. There are
• 4:41
  Speaker 2: now new fundamentals.
• 4:43
  Speaker 1: Right, this is a new normal basically, right. Yeah, there's
• 4:46
  Speaker 1: not been an event like COVID and the pandemic that
• 4:51
  Speaker 1: sort of caused that really brief recession we add in
• 4:53
  Speaker 1: twenty twenty. There's not been an event like the mortgage
• 4:57
  Speaker 1: backed securities and the housie market kind of floating back
• 5:01
  Speaker 1: in two thousand and eight. I laughed, because of the
• 5:04
  Speaker 1: conditions at the time, it was very apparent to while
• 5:06
  Speaker 1: you know, we were all in the business at that time,
• 5:09
  Speaker 1: and you know, certainly in California we could see if
• 5:14
  Speaker 1: as as a money mooning quarterback looking back at everything
• 5:17
  Speaker 1: that was happening around the housing markets, like, yeah, of
• 5:19
  Speaker 1: course this was unsustainable, right, But there's nothing like that
• 5:22
  Speaker 1: happening right now.
• 5:24
  Speaker 2: There's no one thing to see.
• 5:26
  Speaker 1: And so to your point, this is somewhat of the
• 5:27
  Speaker 1: new normal. You know, I hear from people saying, oh boy,
• 5:32
  Speaker 1: I wish we had three percent thirty year mortgages again.
• 5:35
  Speaker 1: We may never see those again, Like this is the
• 5:37
  Speaker 1: new normal. If you're paying six or seven percent for
• 5:40
  Speaker 1: thirty year mortgage, that's probably all as good as you're
• 5:44
  Speaker 1: going to get.
• 5:44
  Speaker 2: It's not like early eighties numbers. I mean, we're not
• 5:46
  Speaker 2: you know, we could be paying fifteen percent seventeen.
• 5:48
  Speaker 1: It's more like the nineties. You know, when I bought
• 5:50
  Speaker 1: my first house, I think, you know, at my rate
• 5:52
  Speaker 1: was somewhere around in the eighth and I was happy
• 5:54
  Speaker 1: with it and that was just just the way it was.
• 5:56
  Speaker 3: So do you think the ongoing uncertainty though, Like you
• 5:59
  Speaker 3: think about talk to lending professionals on a daily basis,
• 6:02
  Speaker 3: and they've been telling us that inflation is going to arise,
• 6:04
  Speaker 3: We're tightening credit. They've been saying it now for almost
• 6:06
  Speaker 3: three years, and we haven't really got to that that
• 6:09
  Speaker 3: it factor similar to what the GFC was. Do you
• 6:12
  Speaker 3: think that that's going to be the new Norman because
• 6:14
  Speaker 3: there's so much tightening, it's just going to keep translating
• 6:17
  Speaker 3: as is. Or do you think if we see a
• 6:20
  Speaker 3: surge of untightened that things would pop or what are
• 6:22
  Speaker 3: your thoughts there?
• 6:23
  Speaker 1: I mean, you just sort of introduced maybe a concept
• 6:26
  Speaker 1: of this arbitrary tightening across the industry, maybe that is
• 6:30
  Speaker 1: somewhat governing things today, that that's why we're not seeing
• 6:34
  Speaker 1: abundant losses. And I'll go back again to the PREGFC
• 6:38
  Speaker 1: with housing, where it was stated income applications and no
• 6:43
  Speaker 1: down payments and things like this, like all those sort
• 6:46
  Speaker 1: of risky conditions somewhat cavalier underwrite standards that went into
• 6:51
  Speaker 1: that that anyone can get a mortgage right And perhaps
• 6:54
  Speaker 1: now to your point, drew that by lenders tightening more
• 7:01
  Speaker 1: and more, that there's just less of a less of
• 7:04
  Speaker 1: a risk out there of this becoming something that would
• 7:09
  Speaker 1: be beyond the risk of what might other rest be expected.
• 7:13
  Speaker 2: Well, there's such a reaction too, I mean, there was
• 7:15
  Speaker 2: such a I guess penalization, and I mean people could
• 7:18
  Speaker 2: people have different opinions of whether there was enough penalization
• 7:21
  Speaker 2: of the financial industry after or you know, and how
• 7:24
  Speaker 2: much the ownership the consumer versus the institutions had. But
• 7:30
  Speaker 2: like there was there were certainly a lot of repercussions
• 7:32
  Speaker 2: and consequences, and like DoD frank and and a lot
• 7:35
  Speaker 2: of other regulation Federal Reserve, Triprairie repro reform came out
• 7:39
  Speaker 2: of came out of the GFC, and so it is
• 7:42
  Speaker 2: possible that a lot of those things are actually working
• 7:45
  Speaker 2: well and better than maybe we think, because maybe we're
• 7:49
  Speaker 2: all kind of waiting for that other shoot to drop
• 7:50
  Speaker 2: and maybe it's.
• 7:51
  Speaker 1: It's not Maybe there isn't another stree, it will.
• 7:53
  Speaker 2: Not drop right, or maybe it'll drop in a different
• 7:55
  Speaker 2: way next time that hasn't happened before.
• 7:58
  Speaker 1: So then maybe we put our foot on the gas again,
• 8:01
  Speaker 1: not all the way to the floor, right, but take
• 8:04
  Speaker 1: it a little bit less off the brake, a little
• 8:05
  Speaker 1: more on the gas than maybe that would be That
• 8:08
  Speaker 1: would be a.
• 8:08
  Speaker 3: Good approach right now, Yeah, I know we've talked a
• 8:10
  Speaker 3: lot about this and prior podcast of leveraging the use
• 8:14
  Speaker 3: of AI models to predict risk more effectively. Right, so
• 8:17
  Speaker 3: you think about you wanted to take your foot off
• 8:18
  Speaker 3: the brake and press the gas a little bit again,
• 8:21
  Speaker 3: And going back to a prior podcast, we're giving more
• 8:23
  Speaker 3: of a description of how to have the knowledge base
• 8:26
  Speaker 3: to explain having these types of partnerships. But in actuality,
• 8:29
  Speaker 3: about seventy percent of financial institutions do use some form
• 8:33
  Speaker 3: of AI driven modeling for decisioning credit right, So how
• 8:37
  Speaker 3: do you think financial institutions are adapting those models to
• 8:41
  Speaker 3: have less risk or even to open things up and
• 8:44
  Speaker 3: be more predictive and bringing in the types of borrowers
• 8:47
  Speaker 3: that doesn't add the risk there.
• 8:48
  Speaker 1: So models are only good as good as a data
• 8:51
  Speaker 1: that's that's in them. And so what sort of data
• 8:54
  Speaker 1: is being used to train those models? Is lending data
• 8:58
  Speaker 1: from the past, call it ten years, twelve years? Now,
• 9:01
  Speaker 1: what's been happening in the last ten to twelve years?
• 9:03
  Speaker 1: Who went from zero from ZERP into you know, a
• 9:07
  Speaker 1: little recession around COVID and you could almost sort of
• 9:10
  Speaker 1: throw out that little eighteen month period because it just
• 9:12
  Speaker 1: was unprecedented in terms of what happened with deposits and
• 9:17
  Speaker 1: then you know it's kind of dropping again. So these
• 9:20
  Speaker 1: models are trained on that data over that time period,
• 9:24
  Speaker 1: which if we are in a new normal, then wouldn't
• 9:28
  Speaker 1: that mean that the data that's in those models is
• 9:32
  Speaker 1: actually going to be maybe a better predictive value than
• 9:37
  Speaker 1: maybe data that was happening before the GFC for example.
• 9:40
  Speaker 2: Sure that, yeah, like you need to need to actually
• 9:42
  Speaker 2: look at them more like have a little bit more
• 9:44
  Speaker 2: recency bias, like intentionally in how you're thinking about training
• 9:48
  Speaker 2: a model, because I think there's a lot of times,
• 9:50
  Speaker 2: you know, like COVID's a great example that people looked
• 9:52
  Speaker 2: back at that and said, oh, well that was an
• 9:53
  Speaker 2: unusual environment. Well maybe it was, but it also happened
• 9:57
  Speaker 2: in real life. So things that are unusual environments actually occurred.
• 10:01
  Speaker 2: So you can't skip it right in your model.
• 10:04
  Speaker 1: Can't just toss that data.
• 10:05
  Speaker 2: Yeah, Like you have to understand that there were you know,
• 10:08
  Speaker 2: there were liquidity injections from the federal government and deposit
• 10:13
  Speaker 2: increases and also with a zero interest rate. So it
• 10:16
  Speaker 2: was unusual, but it wasn't but it actually occurred, And
• 10:20
  Speaker 2: so like, how do you incorporate that in thinking about
• 10:24
  Speaker 2: what could happen next and how to plan for it.
• 10:26
  Speaker 3: I think most often, too, like we've seen it over
• 10:28
  Speaker 3: the past few years, the resiliency of the American consumers
• 10:31
  Speaker 3: is there. They figure it out whether a piece of
• 10:34
  Speaker 3: paper tells us inflation has increased x percent, like, things
• 10:37
  Speaker 3: have stayed fairly stable, at least to my knowledge base,
• 10:41
  Speaker 3: to be able to be able to open up the
• 10:43
  Speaker 3: risk the risk door a little bit more so thinking
• 10:45
  Speaker 3: about you know, most institutions in some face that are
• 10:49
  Speaker 3: leveraging an AI driven model for predictive risk. Is there
• 10:53
  Speaker 3: a way that credit unions can expand their approval without
• 10:57
  Speaker 3: adding additional risk outside of leverage the use of models.
• 11:01
  Speaker 2: So outside of using models, like, how else can they
• 11:04
  Speaker 2: kind of expand their approval? I mean, I certainly think
• 11:06
  Speaker 2: you know, a key theme automation and it doesn't have
• 11:10
  Speaker 2: to be predictive AI. Right, Like we talk a lot
• 11:12
  Speaker 2: about underwriting, which is more of a predictive AI, but
• 11:16
  Speaker 2: you know, thinking about using generative AI agent AI chat
• 11:20
  Speaker 2: agents to improve their customer member experience, improve the digital process.
• 11:27
  Speaker 2: I think a lot of those things can also drive
• 11:29
  Speaker 2: improval because they reduce friction in the flow, They increase
• 11:32
  Speaker 2: the chance of that new member being you know, satisfied
• 11:36
  Speaker 2: and getting the product that they need. And that's not
• 11:39
  Speaker 2: taking on any additional risk. It's actually reducing operational risk
• 11:44
  Speaker 2: while increasing the likelihood of approvals.
• 11:47
  Speaker 3: All right, So going back to the whole theme of
• 11:49
  Speaker 3: different levers, So we talked about non model type of
• 11:52
  Speaker 3: approvals leveraging models, which seems to be the kind of
• 11:55
  Speaker 3: the new norm. Credit unions have their fingertips at a
• 11:58
  Speaker 3: bulk of different ways of leveraging risk through participations through
• 12:02
  Speaker 3: whole lowned purchases, through many different areas. So what are
• 12:06
  Speaker 3: the smartest levers you think current state that credit unions
• 12:10
  Speaker 3: can kind of pull to expand their access without adding
• 12:13
  Speaker 3: that risk.
• 12:14
  Speaker 1: Yeah, I've I've always been an advocate for participation loans
• 12:17
  Speaker 1: as a way of changing risk on your balance sheet.
• 12:21
  Speaker 1: You know, you may be over index and certain asset
• 12:23
  Speaker 1: classes and under in others, so it's it's a smart
• 12:26
  Speaker 1: way to manage risk. It's also a smart way to
• 12:28
  Speaker 1: sort of manage any sort of pre payment risk you
• 12:30
  Speaker 1: may have duration of your portfolio, and also just to
• 12:35
  Speaker 1: to expand your balance sheet, you know, your it was
• 12:39
  Speaker 1: always sort of the dilemma between the CFO and and
• 12:42
  Speaker 1: and the lending professional ads to well, are we going
• 12:44
  Speaker 1: to put investments, We're going to put in participations, but
• 12:48
  Speaker 1: sort of looking at at the at the mathemats of it,
• 12:51
  Speaker 1: participations usually one out, depending on of course the ASCID
• 12:56
  Speaker 1: class you're looking at. But I've just always felt that
• 12:59
  Speaker 1: that's an underused lever in a lot of creditings. It's
• 13:04
  Speaker 1: easier to go out and buy treasuries. It's easier, you know,
• 13:07
  Speaker 1: your brokers are always sort of offering those sorts of things.
• 13:09
  Speaker 1: Not every broker is offering participation loan pools at the
• 13:12
  Speaker 1: same rate and level as they.
• 13:14
  Speaker 2: Are other investments, and probably allows smaller institutions access to
• 13:18
  Speaker 2: a market that they may not be able to direct
• 13:20
  Speaker 2: originate it. Right that they may not be of the
• 13:23
  Speaker 2: size to set up a full partnership or whether a
• 13:25
  Speaker 2: director and direct origination of a product, but they can
• 13:27
  Speaker 2: access certain types areas of the credit market.
• 13:30
  Speaker 1: With only commercial loans. For example, right, the small crediting
• 13:34
  Speaker 1: that I ran years ago, we didn't have a small
• 13:36
  Speaker 1: business platform, we didn't have the we didn't even have
• 13:38
  Speaker 1: commercial loan experience, but we could certainly go out and
• 13:43
  Speaker 1: participate in a loan or or a piece of an
• 13:45
  Speaker 1: apartment building or a piece of an office building in
• 13:47
  Speaker 1: the case may be, and you know not just give
• 13:50
  Speaker 1: bair diversity to the balance sheet and diverse find that
• 13:53
  Speaker 1: risk a little bit, but take a little bit of
• 13:55
  Speaker 1: a return.
• 13:55
  Speaker 3: We could also use it like a geographic segmentation for
• 13:58
  Speaker 3: risk as well. I mean, just because certain stats come
• 14:02
  Speaker 3: out that the holistic view of the output inflation or
• 14:05
  Speaker 3: employment as X, y Z, it may be more or
• 14:08
  Speaker 3: less in different areas of the US.
• 14:09
  Speaker 1: So you can there are still regional differences in this
• 14:12
  Speaker 1: country right, may.
• 14:13
  Speaker 3: Can even dial down to the state county level as well.
• 14:16
  Speaker 2: Sure well, I think particularly as you mentioned commercial real estate.
• 14:18
  Speaker 2: I mean that's a very different market depending on what
• 14:20
  Speaker 2: region you're in. Like Austin, for an example, is getting
• 14:22
  Speaker 2: getting hit hard, but an area like Columbus actually isn't
• 14:25
  Speaker 2: having the same impact. You know, return to office is
• 14:29
  Speaker 2: pretty entrenched, like companies are are, you know, back at work,
• 14:33
  Speaker 2: so the office office space is pretty full here compared
• 14:37
  Speaker 2: to certain markets.
• 14:37
  Speaker 1: Definitely.
• 14:38
  Speaker 2: Yeah.
• 14:39
  Speaker 3: Another area that credit unions are very in depth with
• 14:42
  Speaker 3: our credit builders or shared secure types of loans. I
• 14:46
  Speaker 3: know that's not a large portion of the balance sheet,
• 14:49
  Speaker 3: but you think about from a d risk perspective, Let's
• 14:52
  Speaker 3: say a credit union was to pull back significantly in
• 14:55
  Speaker 3: their unsecured business to d risk and take on more
• 14:57
  Speaker 3: collateralized types of loans. How do you think I think
• 15:00
  Speaker 3: the credit builder system or the share secured system would
• 15:04
  Speaker 3: drive a risk reduction. Do you think the consumer just
• 15:08
  Speaker 3: doesn't understand that product. Is it not as appealing as
• 15:12
  Speaker 3: being able to get an unsecured personal loan or what
• 15:14
  Speaker 3: are your thoughts there on de risking and using that
• 15:16
  Speaker 3: as leverage, even though it's not as much of a
• 15:19
  Speaker 3: growth parameter.
• 15:21
  Speaker 1: Yeah, and a fair point. I think access to credit
• 15:23
  Speaker 1: is so much more abundant now than it was maybe
• 15:27
  Speaker 1: a generation ago. Do I need to have a secured
• 15:31
  Speaker 1: do I need to put security down for a personal loan? Now?
• 15:35
  Speaker 1: There's just between FinTechs such as upstart and others out there,
• 15:39
  Speaker 1: and then the products that banks and credit unies have themselves.
• 15:43
  Speaker 1: There's just far more access for consumers to find affordable
• 15:47
  Speaker 1: credit for them now where they don't necessarily need to
• 15:50
  Speaker 1: tie up their own security on it.
• 15:52
  Speaker 2: And I also think in new products that earned wage
• 15:55
  Speaker 2: access products where people get kind of a you know,
• 15:57
  Speaker 2: can tap their paid check in a more modern way,
• 16:02
  Speaker 2: a digital way. And then also as you think about
• 16:05
  Speaker 2: the you know, buy now, pay later, like point of
• 16:08
  Speaker 2: sale transactions, you can take those kind of things that
• 16:11
  Speaker 2: maybe somebody who would be using like a secured credit
• 16:14
  Speaker 2: card for can now take out that sort of product
• 16:16
  Speaker 2: and it's doing a more of a fixed installment loan
• 16:18
  Speaker 2: today and those products didn't exist.
• 16:21
  Speaker 1: Ten fifteen, ten years ago.
• 16:24
  Speaker 2: Yeah, that is that is a very common which is
• 16:27
  Speaker 2: an entirely different topic of you know, are those on
• 16:30
  Speaker 2: balance sheet? Do we see those on credit reports? I
• 16:33
  Speaker 2: think there's a lot of industry changes coming to how
• 16:35
  Speaker 2: those are reported. But but you know, you think about
• 16:39
  Speaker 2: you know, we've talked about CASHL underwriting and and CASHL
• 16:43
  Speaker 2: underwriting can help you see some of those things that
• 16:44
  Speaker 2: may not be present on a credit report. So as
• 16:46
  Speaker 2: you think about managing risk, do you are you actually
• 16:49
  Speaker 2: looking for those new products in a credit report versus
• 16:53
  Speaker 2: just looking at or in the information data you have
• 16:57
  Speaker 2: versus what is just on on kind.
• 16:59
  Speaker 3: Of the balance That's a great point leveraging cash flow
• 17:02
  Speaker 3: modeling through a depository product. To see that you're making
• 17:05
  Speaker 3: four installment payments to Amazon for a one hundred dollars purchase,
• 17:08
  Speaker 3: like that's probably going to be baked into your risk
• 17:11
  Speaker 3: assessment from undwriting as well too.
• 17:13
  Speaker 1: By now pay later on my brito right, four payments
• 17:16
  Speaker 1: of six dollars? Yeah sure, yeah exactly?
• 17:21
  Speaker 3: Did this episode shift how you think about the credit
• 17:23
  Speaker 3: landscape in twenty twenty five? Subscribe to us on YouTube
• 17:26
  Speaker 3: for full video uploads and helpful bonus clips to share
• 17:29
  Speaker 3: with your team. So we talked a lot about the
• 17:31
  Speaker 3: credit crunch in twenty twenty five. I want to end
• 17:33
  Speaker 3: the end the podcast here with what are your thoughts
• 17:36
  Speaker 3: or bold predictions as it relates to what's coming in
• 17:38
  Speaker 3: twenty twenty six?
• 17:40
  Speaker 2: Sure, so I think we talked a lot about like
• 17:42
  Speaker 2: the idea of this is this another yet another new normal?
• 17:46
  Speaker 2: And is it the world kind of fundamentally changing in
• 17:49
  Speaker 2: a new way. I do think a lot of the
• 17:52
  Speaker 2: uncertainty is driven by AI, and what will the impact
• 17:55
  Speaker 2: of AI be, whether that's predictive, AI, generative, AIG to AI.
• 18:01
  Speaker 2: I think most people don't even know the difference between
• 18:03
  Speaker 2: the types of AI today they have chat, GPT on
• 18:05
  Speaker 2: their phone or perplexity. But I suspect that that type
• 18:10
  Speaker 2: of just rapid industry change is going to have such
• 18:15
  Speaker 2: an impact that it's unknown. We can predict all we want,
• 18:19
  Speaker 2: but will AI take jobs? It will take some, but
• 18:22
  Speaker 2: it will create others. So how does that impact the economy.
• 18:26
  Speaker 2: I think the shift is going to look more something
• 18:28
  Speaker 2: like how the creation of the computer chip looked than
• 18:32
  Speaker 2: it will just another kind of economic cycle. So I
• 18:36
  Speaker 2: think it's you know, anybody's guest really of what that happens.
• 18:39
  Speaker 2: But I think that will be the primary driver of
• 18:42
  Speaker 2: continued uncertainty until we reset on some new set of fundamentals.
• 18:48
  Speaker 1: Yeah, I mean, isn't AI really if you think about
• 18:51
  Speaker 1: the Internet age, right, which only came about thirty years
• 18:53
  Speaker 1: ago roughly right where you know, and then twenty years ago,
• 18:56
  Speaker 1: well fifteen years ago, we started to have it in
• 18:58
  Speaker 1: our pockets, right, isn't AI just taking that to a
• 19:01
  Speaker 1: different level altogether, which will again result in the brand
• 19:06
  Speaker 1: new new normal. Right, here's my bold prediction, and all
• 19:10
  Speaker 1: predictions are free or your money back. In twenty twenty six,
• 19:15
  Speaker 1: much the same. I mean, like I think there's again
• 19:18
  Speaker 1: we talked a little bit about tariffs and so on,
• 19:20
  Speaker 1: and the regulatory environment, and there's been so much uncertainty
• 19:24
  Speaker 1: with the direction of this administration. I almost don't see
• 19:28
  Speaker 1: that changing all that much in twenty six, And then
• 19:30
  Speaker 1: we're gonna get into twenty seven, and there's gonna be
• 19:32
  Speaker 1: election in twenty eight and who knows, right, But so
• 19:34
  Speaker 1: I think with all that uncertainty, there's gonna be a
• 19:36
  Speaker 1: lot of inertia. We're just gonna sort of stay where
• 19:40
  Speaker 1: we are. Maybe rates go down a little bit, maybe
• 19:43
  Speaker 1: they don't. But even if they do go down, I
• 19:45
  Speaker 1: don't see them going down all that much. It's still
• 19:48
  Speaker 1: sort of perplexing to me that despite all this uncertainty,
• 19:52
  Speaker 1: despite the inertia and so on, the stock market keeps
• 19:55
  Speaker 1: going up. Now, why is that? You know, earnings have
• 19:58
  Speaker 1: been pretty good so far twenty twenty five, and there's
• 20:02
  Speaker 1: really nothing on the horizon sort of a geopolitical event
• 20:06
  Speaker 1: or something, you know, another COVID pandemic sort of thing.
• 20:10
  Speaker 1: There's it doesn't feel like there's anything that's going to
• 20:12
  Speaker 1: be sort of changing that momentum all that much. So
• 20:17
  Speaker 1: if I'm sitting in a CFO chair or a CEO
• 20:19
  Speaker 1: chair or a lenders chair, you know, I am maybe
• 20:22
  Speaker 1: putting my foot on the gas a little bit more
• 20:24
  Speaker 1: now as rates are still a little bit higher, I
• 20:27
  Speaker 1: can maybe pull a little more yield. And if rates
• 20:31
  Speaker 1: do drop, then maybe that just helps me from a
• 20:33
  Speaker 1: boring costs down the road for that higher rate stuff
• 20:36
  Speaker 1: that I've I've kept my books knowing that there's a
• 20:38
  Speaker 1: pre payment risk with that. But nonetheless, you know that
• 20:42
  Speaker 1: old adage of you know, the farmer makes hey while
• 20:44
  Speaker 1: the sun shines, I mean the sun shining from a
• 20:46
  Speaker 1: high yield perspective, So why not take advantage of that
• 20:49
  Speaker 1: as much as you can right now? It's done a
• 20:51
  Speaker 1: smart way, right, you know, in a without taking on
• 20:54
  Speaker 1: a whole lot more credit risk. But you could maybe
• 20:56
  Speaker 1: look to other asset classes that you're not participating in now,
• 21:00
  Speaker 1: or other unique ways of looking at underwriting so that
• 21:05
  Speaker 1: you are sort of either increasing approval rates or or
• 21:09
  Speaker 1: improving the wide array of borders that you may have today.
• 21:13
  Speaker 2: A little bit of a traditional asset allocation dollar cost
• 21:17
  Speaker 2: averaging you a little bit of everything, and go in
• 21:21
  Speaker 2: step wise over time.
• 21:22
  Speaker 1: And I mean it's tried and true from an investment strategy.
• 21:25
  Speaker 3: So put your foot on the gas, but stay in
• 21:28
  Speaker 3: the school section where you can't go above twenty miles
• 21:31
  Speaker 3: an hour.
• 21:31
  Speaker 1: Test it out right, I mean you maybe, yeah, you've
• 21:34
  Speaker 1: covered your your your speed, but but yeah, I think
• 21:39
  Speaker 1: faster rather than slower.
• 21:41
  Speaker 3: Well, thank you for listening to another episode of Leaders
• 21:43
  Speaker 3: in Lending. We'll see you next time.