Jim Glennon (
00:18)
Welcome to Optimal Insights, your weekly source for timely market analysis and expert commentary from Optimal Blue. I'm your host, Jim Glennon, Vice President of Hedging and Trading Client Services Optimal Blue. Our clients and industry partners have long relied on Optimal Blue for trusted insights and commentary, and these podcasts are an evolution of our commitment to keeping the industry informed. Let's dive into today's episode.
All right, welcome everybody. Thanks for being here on this Monday. Again, in the interest of keeping you informed, we'll always strive to bring you up to the hour current events and how we should be thinking about these events and things going on in the market as originators and hedgers. got a great show coming up today. We will get into a little bit of a market update. talk a little bit more about tariffs, of course, but...
getting a little bit more grounded on what's going on with interest rates in the bond markets and how that affects us in the mortgage industry. then and I had the honor of welcoming a wonderful guest His name is Jim Paulino. He's the CEO of Loadstar and Loadstar and Jim are the mortgage closing fee experts. So we'll get into exactly what that means here in our main segment. first, a little bit of data. You've likely been watching some of the drama.
unfold not just in equity markets, which have been getting whipsawed the last couple of weeks, but that's moved into the bond market a little bit and kind of counter intuitively. seen the 10-year at 4.5%, and seen the 30-year treasury around five, which are highs for this year. And then the OBMMI is at 6.9%.
where it had been hovering around 6.5 % pre kind of tariff bomb that was dropped last week. And that slowed down volume a little bit, not surprising. So we've seen mortgage volume slow after some spikes early on in April and late March. again, bit of drama, a bit of volatility out there and where volatility is usually our friend in the mortgage industry. Lately, it's actually been sending rates a little bit higher.
the drama that's causing the volatility is sending rates a little bit higher. We'll get into that in the market update and let's go check in with Jeff and Alex and do that right now.
Jim Glennon (
02:30)
All right, so let's get right into it. Maybe start with Alex. What transpired over the weekend that's got the market excited again this morning?
Alex Hebner (
02:38)
Yeah, no markets are excited this morning over an exemption placed on computers and semiconductor chips, in regards to the tariffs. So, the, those, those items have been exempted from the tariffs. you know, these market leaders, you're, magnificent seven in the equities market world, followed by, you know, semiconductors stocks, just generally speaking have, have performed really well over the past two, three years with the, AI boom. and then they've been probably the most downbeaten.
stocks in this sell-off in regards to the tariffs. So we have peeled off over the weekend, know, more of the back and forth that we keep Most experts are thinking that these are going to end up having a sector-specific carve-out, much like autos currently have. Autos have 25 % tariff on them right now. Auto parts going to get a 25 % tariff beginning in early May.
And the expectation here is for something similar to be done with computers and semiconductor chips. Howard Lutnick over the weekend in regards to this exemption was saying how that is what they plan to do and that it's a matter of national security in their eyes to onshore production of these semiconductor chips.
Jim Glennon (
03:49)
All right. And then includes like smartphones and some other laptops and some other items that are kind of, they were being hotly debated there, especially cell phones, right? Like how's the US going to make an iPhone for a thousand bucks?
Alex Hebner (
04:03)
Right, think some of this was definitely, like I said, the semiconductors, likely a national security issue, and then really just addressing the elephant in the room, a lot of articles, you know, the iPhone issue. You how much is your iPhone going to cost when, you know, someone in America makes it for you and clips in all the pieces for you? So I think this was a little bit of, you know, working with the public and then also just to onshore those chips in the long run.
Jim Glennon (
04:11)
Mm-hmm.
Alex Hebner (
04:29)
Again, dropping them down to zero, that's gonna be a net neutral, not gonna change anything regarding how they're currently produced. Generally speaking, the majority of our chips are currently produced in Taiwan, who I wouldn't expect there to be any national security issues there, barring a hostile takeover by China. But right now, Taiwan under its current regime is extremely friendly to the US. So don't think there is really much concern there, but I understand why to ensure it.
Jim Glennon (
04:55)
Sure. And some of it is, they said it's temporary, whatever that means, right? The exemption is temporary pending further discussion with some of these other countries, right? That's fair.
Alex Hebner (
05:04)
I mean, what isn't temporary about all these? you know, you
know, they've been saying the tariffs are temporary from the beginning. We currently have a temporary exemption. But yeah, like I said, the expectation is to see tariffs put back on these. it'll, it'll just be a code essentially at the port of entry. You know, if the laptop laptops are a certain code when they're brought into the U S and if you have those in your shipping container, you'll be paying, you know, X, Y, Z on the.
on the tariff, that's to be announced still.
Jim Glennon (
05:33)
Mm-hmm.
Meanwhile, there's still the 90-day pause on reciprocal tariffs in general, which would bring us to roughly July.
Alex Hebner (
05:43)
Early July. Yep.
I July 7th is 90 days out from when they exempted them. So yeah, I think we'll be in this boat again in two to three months, barring major headway on a lot of trade deals. I think a lot of articles were saying 90 plus countries need to get a trade deal done with the US in 90 days. That's a steep task even for negotiation teams the size that the US can put together.
Jim Glennon (
06:13)
So.
Jeff McCarty (
06:12)
So
tied it back to rates, saw the 10 year peak at around 4.56, 4.57, midday Friday, conventional 30 year OBMMI ended the day at 6.895 Friday. years down a decent bit today so far. So that is certainly good for rates overall. that was another.
mini peak there on Friday and we start the downward turn again. that, mean, that was a pretty good pop obviously over, you know, a little over a week. We, the OBMMI jumped almost a half point.
Alex Hebner (
06:53)
Hopefully, hopefully so. Yeah. Hopefully this was the peak and temporary. I think the way to think about these, these pops that we're seeing in rates are especially, you know, in regards to treasuries and treasuries bleed through to two of the mortgage rates that we see, but anytime the, the tariff regime gets too extreme in the eyes of the market, you're going to see from, it could be anyone from, you know, our, our, our, you know, geopolitical partners around the world.
Jim Glennon (
07:11)
Mm-hmm.
Alex Hebner (
07:18)
It could be China or it could be domestic banks. know, there's a lot of finger pointing right now on who was dumping treasuries, weren't a lot of fans of tariffs domestically or internationally. so in regards to those that are major holders of treasuries. so, you know, if we see another aggressive push on tariffs, you we could see another pop in July.
Jim Glennon (
07:39)
Yeah, that's interesting. think there's some fundamental dynamics that are working against the bond market as well. I've been reading more and more articles about that where, again, you would expect with volatility, there'd be a flight to quality rates would go down, but we're seeing rates stay the same or go up. And some of that is, some of it's the deficits that we're running up. Some folks are a little bit squeamish about the prospects of the US, you know, being the place to put money.
when things get a little sketchy, right? Which is, and the more this kind of protectionism takes hold and more that we're kind of throwing our weight around the world and trying to rebuild and restructure the trade map. It feels like bonds fall a little bit out of favor, US bonds anyway, in that discussion. And we're seeing countries like Germany, folks are investing more in the European bonds and this sort of thing. it slowly maybe erodes or threatens the...
the dominance of the dollar as the reserve currencies. in our interview last week, talked a little bit about that. It's just that we're maybe not playing as nice as we have in the past. Again, our reputation as just the dominant economic player in the world is being questioned ever so slightly, which it doesn't take much to move. The treasury yields up a little bit.
Jeff McCarty (
08:59)
to state the obvious that doesn't bode well for mortgage rates.
just looking at the CME rate watch futures, no meaningful change there. some people expect a cut in May, you know, kind of quarter people, 20 % of people expecting a cut in May, but, then majority thinking a cut in June. that, that has been through all this instability. There's been some.
Jim Glennon (
09:12)
Mm-hmm.
June.
Jeff McCarty (
09:22)
Some ups and downs, but no meaningful change in that outlook over the past couple months, honestly.
Alex Hebner (
09:27)
Mm-hmm.
Jim Glennon (
09:28)
Yeah, still remains to be seen when and if the Fed will feel compelled to act. Obviously, we talk a lot about inflation and employment back to fundamentals of the economy right now. last week's inflation number, for instance, almost got swept under the rug, but it was actually really good economically speaking.
Alex Hebner (
09:48)
Yeah.
Yeah. We got a really positive inflation readings for March last week. CPI and PPI both came in under expectations. Consumer prices were up 0.1 % month over month for I think it was 2.4 % year over year. really positive. You know, we've been seeing those numbers up above two and a half percent. I've kind of been calling that, you know, if we approach 3 % that's going to be put the Fed in a tough position regarding both unemployment and higher inflation. And the PPI, which
Generally speaking lead CPI was actually back point four percent highly positive in that in that regard again these numbers are for March This is pre tariff talk and everything we could see And I would expect to see you know the tariffs that remain in place the the 10 % that we have across the board right now Those will bleed into the inflation numbers My best bet would probably be in the June release for May
just because we're really not going to see those tariffs start to hit until for a few weeks yet. A fun fact I actually found out recently was that anything that's currently on the water, good that is on a ship right now not be tariffed, so long as it left the port of exit from the country of origin before the tariff date.
Jim Glennon (
11:07)
That's interesting. Yeah. I didn't, did not know that until you mentioned that earlier. The way they talk about it, it's, you know, customs officials at the border. You picture at the border goods come over, you know, the, the, the buyer of those goods then pays the tariff through a bank transfer, but it's actually, they would probably argue, Hey, we were, we set sail two weeks ago. Yeah.
Alex Hebner (
11:15)
Mm-hmm.
Right. The ship manifest shows this was on the, this was in international
waters. wasn't, it didn't originate in China. It originated in international waters when the tariffs, I guess could be the argument or something like that. but again,
Jim Glennon (
11:34)
Right. The technicality, but that means there's a ton of goods
out there right now that are going to get exempt from the new tariffs.
Alex Hebner (
11:42)
Yep,
major technicality, but thing to keep on is that there's long lead times with these things and we will be seeing tariffs bleed through to inflation in the latter half of the year.
Jim Glennon (
11:53)
And as we know, you know, the, the labor situation continues to be super strong. So that's another area where it seems unlikely, unless there's a major change there, it seems unlikely that the fed would, would need to focus on that anytime soon. But again, we've talked about, have Doge where we lost a lot of jobs in the, you know, the U S government and also just a general feel that we may be in recession, that the cycle may be.
Coming back around, we may have already been a little bit fragile before some of the tariff discussions. So we will see. We'll get unemployment here the first week of May to see how we're doing here in April.
But...
Jeff McCarty (
12:29)
So what
do we got coming up this week? What else are we looking for this week?
Alex Hebner (
12:33)
It's a relatively quiet week comparatively. We'll see what kind of news comes out of the White House and DC generally speaking. in regards to economic releases, we have a bunch of business inventories, capacity, those likes, they're very kind of tertiary data releases in the grand scheme of things. They're no inflation reading. then we have housing starts and building permits for our industry.
on Thursday, so just keep an eye on as we kind of highlighted in the early part of this year, a lot of the time, those are drops in the bucket and permits are not houses that are built quite yet. and, I also wouldn't expect there to be some, there's, there's no catalyst for a blowout in either direction really in regards to housing builds. those will be released Thursday. Always good to just keep an eye on it know what it but I wouldn't expect there to be major data points that shift the rates market. I think we're very much so in a, in a news driven environment right now.
Jim Glennon (
13:26)
Mm-hmm.
Makes sense, it's a short week also.
Jeff McCarty (
13:27)
Well,
as Chris Maloney said, which if you haven't listened to that podcast, I really enjoyed the podcast you all did at the end of last week with Chris, some really good information in there, kind of medium and long-term outlooks. Thoughts Chris ended with were, stay calm, don't do anything drastic. We've been through this before, certainly in the mortgage industry and from a rates perspective, we've been through.
much more volatility and larger market moves. You we are getting whipsawed a little bit, but you know, stay calm, stay the course. Chris was very upbeat at the end. said, we're lucky to be doing this. You know, we're lucky to be doing what we do. So certainly appreciated that sentiment. Got me jazzed up this morning. Yeah.
Jim Glennon (
14:12)
Yeah. Well said. Well said. Yeah.
That was a great interview and yeah. Wise words.
Alex Hebner (
14:19)
Always be thankful for what you have.
Jim Glennon (
14:21)
Definitely. All right, team. Let's wrap this thing up.
Jeff McCarty (
14:23)
Picture.
Alex Hebner (
14:25)
Thanks, Jim. Appreciate it. Have a good one.
Jim Glennon (
14:27)
Okay, as promised, Kevin and I have the honor of welcoming a wonderful guest today. We have Jim Paulino, CEO of Loadstar. you're not familiar, Loadstar and Jim are the mortgage closing cost experts. Welcome, Jim.
Jim Paolino (
14:40)
Thanks, Jim. Thanks, Kevin. Appreciate you having me. I know about interesting guests. A lot to live up to today.
Jim Glennon (
14:42)
Yeah, thanks for being here.
Kevin Foley (
14:48)
I mean, Jim, you know, we're super excited to have you on. know, you, also invited me on, your podcast, uh, recently. And, and, we wanted to, to have you on because you guys are just doing some really interesting things in the space. But before we, jump into I'm wondering if maybe you could, for our audience, just start off with a little bit about your background, how you started load star and how you got to where you are today.
Jim Paolino (
14:55)
Mm-hmm.
Sure.
Yeah, absolutely. I feel like everyone either gets born into this industry or stumbles into it. And I was in that first group where I grew up in a family-owned title company up in New England, grew up in Rhode Island. And as a kid, I was climbing on filing cabinets on the weekends. I remember when they had typewriters to type up policies. My high school and college job for them was moving filing cabinets and the storage legal boxes because they had to keep paper files.
for five years. they basically, like I got a U-Haul truck and recruited a couple of friends that would just load up boxes and try to not to ding up the office in the process, which didn't always succeed And then things changed around 2009. I was studying engineering at the of Dodd-Frank was coming into effect. And for those who've been around the industry, there were a lot of impacts of that that was coming through, one being the good faith estimate.
which really wasn't a thing before of the idea of title companies, lenders having to actually disclose their fees. in 2009, I got a call from my dad saying, hey, do think you could do this for us? And like some way they were basically using the spreadsheet like a lot of people were at the time. I knew enough coding to be dangerous. I put together a web app for them over a semester break. And that January 1st, 2010 was live. They were one of the few companies that were.
They grew from being in three states to 33. me, it was a side job for a few years, which was nice. graduated college, worked in New York. It was a good second income. And then right around 2013, I kind of saw what was happening with Trid. It seemed like, okay, there's another regulation. So let's figure out a way of complying to this now. And I had always been really interested in being entrepreneur. A lot of folks in my family have been, my dad, obviously, but...
And one of these walls behind me, you can see all the kind of family entrepreneurs. So it's something I've been really fortunate to have just a lot of background in. Yeah, this is the pop culture wall over here. And then this is the family sentimental construction. So all four of my great grandfathers ran, yeah, a little bit of both. Well, you can make the argument that Darth Vader was an effective entrepreneur as well. So building a Death Star is not easy. But.
Kevin Foley (
17:07)
yeah, I see Darth Vader right there. Yep.
Not to be confused.
Jim Glennon (
17:20)
Earth.
Kevin Foley (
17:23)
Yeah.
Jim Paolino (
17:27)
You can tell it's a Friday podcast right now, right? So, if Guy got stuff done, you might have to question his methods.
Kevin Foley (
17:29)
Absolutely.
man, good stuff, good stuff.
Jim Glennon (
17:37)
That's amazing.
Jim Paolino (
17:39)
In either case, so 2013, trend was coming to effect. They said, let's start a business. How hard could this be? Right, recruited a couple of friends from college, made every small business mistake imaginable, not bringing in kind of the right skill sets, not knowing how to price, not having a scalable product. So it took a long time to kind of iterate and figure it out and a lot of kind of pain along that way. luckily we had enough support and enough stubbornness, quite frankly, to get there.
And we were able to find our niche really with lenders through their LOS quoting those fees that need to be on the loan estimate. So those third party closing cost fees from the recorder of deeds offices, there's about 3,600 throughout the country that we aggregate. Title related fees, we actually recently opened our own title company in the last couple of years as well. So we've been able to grow in that niche. We have about 23, 24 employees right over 250.
clients that we support. So we've been able to find our niche and we're actually the only independently owned cost company kind of in this space. So because this is all we do, we're the closing cost experts. always kind of compare us to our competitors. It's like getting sushi at a gas station. Like we're the sushi bar. This is all we do. And you might pay a little bit extra, but you're not going to get sick.
Jim Glennon (
18:43)
R-
Right. Now that is amazing. That's just
Kevin Foley (
18:51)
Haha.
Jim Glennon (
18:52)
such a classic entrepreneur story, right? You saw out of the great financial crisis came an opportunity, a ton of different types of opportunities, but the fee piece, I don't know that everybody would have thought of that. Obviously, no one else did. You jumped into that.
Jim Paolino (
18:54)
Mm-hmm.
Well, felt
and I didn't write it fell into my lap. Right. You just like you find, you know, everyone gives advice entrepreneurs and set find something you're passionate about. No, find a problem that someone will pay you to solve that you could fix. And that's it. Like that's what you have to do. And I was lucky for one to fall on my lap and able to figure it out. So not necessarily passionate about closing costs as much I am about running an organization, being an entrepreneur. I coach other entrepreneurs. know, it's something that I.
Jim Glennon (
19:14)
Yeah.
Yeah, you clearly have that spirit in your family and that's what brought you into the mortgage business and then into fees and like you said, you're kind of carrying that on and sharing it with other people. I think that's just fantastic.
Jim Paolino (
19:36)
Yeah
Mm-hmm.
Kevin Foley (
19:48)
it's a really impressive story, I think in the spirit of finding your niche, are doing, how you're helping lenders is so important because obviously if you don't get fees right upfront, there's a lot of issues that you're going to run into downstream. How do you approach those conversations with lenders around the importance of getting fees right upfront?
Jim Paolino (
19:46)
Appreciate that.
Mm-hmm.
Kevin Foley (
20:12)
and how you guys play a role in that process.
Jim Paolino (
20:15)
Sure. Yeah, I think there are a of components to it to the cost of the fees and cures. I just put out a report in the last year that per loan, the cost of cures is something around $1,200. that's not only the cost of the cure itself, but the time you have to pay folks to fix it, whether it be compliance people, attorneys, all of your staff. cures that we're responsible for wind up being about 300 and change per loan. So that's a number that we can get down pretty significantly.
So it's not just getting the number wrong and having to pay a small fee for something that's $5 off, right? There's the time it takes everyone to do that. So that's what happens when under disclosing. And then what a lot of lenders do to avoid that, especially early on in the process is, hey, let's just over disclose, right? So now it's tougher to measure, but you've basically made yourself less competitive. If you've gone and said like, every time the seller needs to pay a deed tax, we're gonna put it on the buyer just to cover ourselves whenever pay a cure.
Jim Glennon (
20:52)
Mm-hmm.
Mm-hmm.
Jim Paolino (
21:10)
Yeah, but you also might lose out on a couple loans because your pricing is three grand higher than the other person. If someone actually shops, you're going to look off because of that. it's something that you have to, it's really important to kind of thread the needle there be accurate and not under and not over because there's real costs on both sides.
Jim Glennon (
21:29)
it's an efficiency exercise, right? So load start, whichever side of that scenario you're on, you're either helping the client be more efficient by not having these delays and maybe reputational risk of under disclosing and having to fix it later or cure. like you said, on the other side, you're allowing them to be more price competitive, which is as important now as it's ever been.
Jim Paolino (
21:31)
Mm-hmm. Yeah.
Mm-hmm.
Mm-hmm. Yeah.
Yeah.
Yep. Yeah.
And like anything else, mean, like pricing on your end, If a matter of complexity, if someone's doing loans in one county and that's it, they don't need our product. They can template it. I'm sure they probably still need Optimal Blue, but like it looks a lot different than a consumer direct office, a 30 state lender, someone a lot bigger. they're always, you know, people come to us usually when they've had a poor experience with how they're supporting things currently, they're adding a bunch of states.
Jim Glennon (
22:08)
Mm-hmm.
Jim Paolino (
22:19)
or they got slapped on a risk with a $4,000 cure and they realized they can't handle this themselves anymore. So that's usually when that complexity gets to be overbearing is when we step in and can really provide that lift.
Jim Glennon (
22:31)
Are you seeing expansion right now in your client base? Because everyone right now, everyone's trying to reach out into more areas, right? We're in kind of an expansionary mode and we've seen some consolidation. We've seen some mortgage lenders go out of business. So folks are probably venturing into maybe states where they haven't done business before and are even more in need of someone to help them learn that.
Kevin Foley (
22:32)
Yes.
Jim Paolino (
22:38)
Yeah.
Mm-hmm.
Yeah, I
think there's that. think people are just more, one, they're more comfortable with automation and realizing that they need to bring in vendors to solve these problems. And quite frankly, they have a little more time to do it than they've had in the past. We've kind of normalized in the market now where things probably aren't really changing, hopefully, knock on wood, right? It's hour by hour right now, but, mortgage rates probably aren't dropping like crazy, but here's hoping they're not going up like crazy either. like,
You know, kind of have to figure out how to be profitable in this market and automation and focus on efficiency is the way of doing that. So we've been growing throughout the past couple of years, but this year, especially we're seeing.
Kevin Foley (
23:27)
Yeah, that's awesome. I definitely feel the parallels with what you're talking about with what we do day in and day out, particularly with the PPE and maybe even more so with hedging and trading in terms of the importance of accuracy upfront, the difficulty that you have in doing it yourself, really the infrastructure that lenders need in order make the most of these areas, whether it's fees or whether it's pricing.
Jim Paolino (
23:46)
Mm-hmm.
Yeah.
Kevin Foley (
23:56)
I
think is just really important overall to underscore.
Jim Paolino (
23:58)
Yeah. Well,
to that point, I was recently at the National Advocacy Show in folks tell me like, I don't know how to price these loans right now. I don't know how like, interest rates are changing so much, like how are we going to sell these? Right. So the, their, their ears are kind of smoking from that. Just because of all of the changes right now, even when someone spoke about the, the economic session, they said, well, I haven't checked the news in the last 90 seconds. So like this, this information might be out of date. Yeah. Seriously. Yeah.
Kevin Foley (
24:22)
That might be too long. That might be too long this week.
Jim Paolino (
24:27)
Mm-hmm.
Kevin Foley (
24:28)
Yeah, it's definitely, and I think it's a changing environment. It's something that both lenders and vendors need to stay on top of and need to make sure that they're in the know on. else interesting come out of the advocacy conference related to the work that you guys are doing or anything else?
Jim Paolino (
24:46)
I think well one I actually Felt better and worse in some ways about about trade. I don't think it's going anywhere I think the you know, the law is the law with some of these and I don't think that's actually gonna get repealed I think generally speaking Lenders, especially depositories are a cautious bunch and they're pretty regulated outside of the CFPB the state by other Entities so I don't think anyone's going to
really change a ton of what's going on because there's just not that much incentive to when things could change again in a few years and there's a statute of limitations that's still floating around there. So I felt better about our piece, which was kind of why I was going to suss out. I think uncertainty is just the name of the game right now. In that same economic session, they were showing origination forecast for the year. The NBA updates it every month. They said, yeah, we're still at 2.1 because at some point we had to put a number on paper. It was like pretty much what their chief of cannabis said.
of like, I don't know, like you can kind of, there's so many things that affect housing and there's so many pressures on both sides going on right now. And it's one of the things I love about talking about this because it affects everyone. You can have a conversation about when anytime I tell someone I'm in was telling you, I'm going to my chiropractor after this, the guy who does the therapeutic massages was asked what I did and we were talking about mortgages and his house and how it feels like you'll never move.
and all of that and like, know, everyone needs a place to live. So there's, there's always something and so many things affected. He actually, sorry, he had asked me what's going on in mortgages and I just said a lot. Yeah. Yeah. Yeah.
Jim Glennon (
26:16)
I think.
Yeah. Always, which is nice. It's been, you know, it has been
Kevin Foley (
26:21)
Hahaha.
Jim Glennon (
26:24)
a couple of years of relative stability, right? But after this year, the new administration, this last week, it's almost like the projections that, you know, Fannie puts out, MBA puts out. Like, I'm almost feeling like the least likely scenario is for those projections to play out. It's going to be something wildly to one side or the other by the end of this year. There's no way rates stick at six and a half. There's no way we're right at 2.1. It's, you know.
Jim Paolino (
26:26)
Yeah.
Yeah.
Yeah, well... No.
Jim Glennon (
26:48)
Volume's probably up because we're kind of unfreezing out of being paralyzed for a couple of years and it's not expected that rates will be four and a half, I'm sure rates could be anywhere by the end of this year between four and eight.
Jim Paolino (
27:00)
And I,
yep, yeah, exactly. had a client say, no, three to 10, somewhere in between, right, at some point. So, and I think the bigger concern just to put a budget on the conference isn't necessarily deregulation opening things up as much as some effects of some of these changes hurting the market, the liquidity in the market, especially GSE reform. know, folks are very much for that happening, but the way in which it happens is going to have a huge effect on the markets, and that's uncertain. So it's just what...
What will the changes be on volume and overall liquidity? I think it's the bigger concern than necessarily deregulation.
Kevin Foley (
27:35)
Makes sense. And so I guess to pivot to another topic, Jim, guys work with lenders. You have lender fees within your system. You might have some interesting insights into how lenders are evolving their fee practices in the current market. Do you have any insights in terms of are they getting?
Jim Paolino (
27:50)
Mm-hmm.
Mm-hmm.
Kevin Foley (
28:00)
bigger or compressing or, you know, how's that all working out?
Jim Paolino (
28:04)
think all of the above. And the lender fees or ancillary fees, as we call them sometimes, is a slightly newer area for us. But because there's a lot of pressure on quoting fees earlier and earlier in the process and across different systems, a lot more need for us to be that single source for lender fees, for all these other fees. For a while, they were in the LOS. You didn't need them anywhere else. They were set by the lender. So we didn't really have to deal with them. Same with an integration with a pricing engine.
It happens in the LOS. That's the single source of truth. We'll just pull everything into there. That's changing now because people want to have more of that information upfront. So we're seeing that with lender fees. Some are incredibly simple and some are incredibly complex. Some lenders refuse to even pay us to manage lender fees because they feel like it's not worth it because they're so straightforward. Others, it's literally a 20 sheet spreadsheet that has to get set up.
There's no correlation with the size of the lender or the things that you think would affect complexity, in my opinion. other trend I saw when I was at the mortgage collaborative show is obviously credit scores and the cost of is a huge pain point and issue in the industry. It seems like folks are starting to charge that to the borrower. Here and there, I think you've gotten some early adopters that have pulled it out. I wouldn't be surprised if that's going to happen more and more, which is...
Tough, right? I think they wait till later in the process so it doesn't necessarily affect their But there's no way for a lot of these changes not to make buying a home more expensive, unfortunately. And I think that's the fee, right? If it gets more expensive for the lender, it's going to get more expensive for the borrower. There's really no way of avoiding that. So that's one trend that I've noticed in lender fees that would predict you're going to see more of. Because any time someone mentioned that
a person at their company was doing it successfully. Everyone else like perked up. They're like, can you tell me more about it? What's your name? Can we talk to them working? Is it hurting their productivity, their production? Like it's, I think we're gonna see.
Jim Glennon (
29:57)
for it.
Kevin Foley (
30:04)
Yeah, I mean, that makes a lot of sense. There's really only two ways to handle an increase in costs is absorb it or pass it back on. with margins just as tight as they are right now, makes a lot of sense.
Jim Paolino (
30:13)
Mm-hmm.
Yeah.
Kevin Foley (
30:19)
this show, we like to speak to originators directly and also break things down, our backgrounds in secondary markets, but most of our user base here at Optimal Blue is originators. As it relates to fees, if you could provide guidance or coaching or education to originators related to fees, what are some of the common traps or missteps that originators
can run into as it relates to fees, how would you go about educating them?
Jim Paolino (
30:47)
Yeah, that's a great question. think don't leave it up to your loan officers in many ways just because not that they're not capable of it. think originators very, very much are, especially if they're in a market that they are super familiar with, but it's just not something that should be put on them at the end of the day. It's something that makes sense to offload and going back to my kind of thread the needle comment of too high is almost worse than being too low is important of getting that middle, getting that accurate fees.
We have free solutions for originators as well on many LOS platforms. So check us out. I think we're going to provide a lift no matter what your size is. I think the more accurate you can get it, more it's going to help your business overall.
Jim Glennon (
31:31)
Yeah, and more standardized across branches and LOs, right? You would think that if you send it down to the production level, then you could have different LOs in different regions with different ways of managing fees and that would, A, that's a risk and B, there's probably no reason for that. It seems obvious to centralize that.
Jim Paolino (
31:34)
Yeah. Yeah.
Yeah,
I mean, it's like many things. It's it's penny wise, but pound foolish, right? So like if you have $10 differences in origination fees, but it takes hours to manage it, you're kind of blowing out any competitive advantage and just creating more costs for yourself.
Jim Glennon (
31:51)
Mm-hmm.
Kevin Foley (
32:00)
Makes a lot of sense. Well, cool. So Jim, where can folks find more info about you, about Loadstar, you guys are working on?
Jim Paolino (
32:10)
sure, you can see me on LinkedIn, Jim Pailino. to post a little bit, getting a little bit better about it, but always tough. then loadstarss.com, a Loadstar site where you can find out a lot about what we're doing. There's links to sign up for the free versions I mentioned. There's a lot of content we create on our end that's on the website as well. So please come check us out at loadstarss.com and thank you both for having me.
Jim Glennon (
32:31)
Same. No, thank you so much, Jim. This has been a great discussion and informative for me for sure. I think there's a lot of folks out there that didn't know. This is another one of those niches of the industry that a lot of people don't know exists.
Jim Paolino (
32:43)
enough to fall into it. Yep. Right.
Jim Glennon (
32:44)
That's right. Appreciate the time. Jim Paolino, everybody. Thanks, Jim. Have a good day. Have a good weekend.
Jim Paolino (
32:50)
Thanks guys.
Kevin Foley (
32:51)
Awesome. Thanks, Jim.
Jim Glennon (
32:52)
Okay, let's wrap this thing up. Thanks so much, Alex and Jeff, and of course, Jim Paulino for the interview. That's it for today. Join us next week for another episode of Optimal Insights, where we'll continue to provide you with the latest market analysis and insights to help you stay ahead. Don't forget to follow us on LinkedIn for more updates and to access our latest video episodes. You can also find each episode on all major podcast platforms. Thank you for tuning in to Optimal Insights.
