6.12.26 Shrinkflation and Credit; The Disciplined Investor’s Andrew Horowitz on Asset Classes; Prepayment Trends

Today's episode includes a look how inflation at the consumer and producer levels are leading to "shrinkflation." Plus, Robbie interviews The Disciplined Investor’s Andrew Horowitz on how investors assess what assets to invest in, and a portfolio manager’s perspective on the current economic environment, and risk diversification as it pertains to MBS. And we close by going through the latest prepayment trends and performance in the mortgage sector.

Thank you to JazzX, the first true end-to-end AI platform built for mortgage. From application to underwriting, JazzX is a new operating model that helps you scale growth, boost productivity, and transform how your team performs.

The Chrisman Commentary is your go-to daily mortgage news podcast, where industry insights meet expert analysis. Hosted by Robbie Chrisman, this podcast delivers the latest updates on mortgage rates, capital markets, and the forces shaping the housing finance landscape. Whether you're a seasoned professional or just looking to stay informed, you'll get clear, concise breakdowns of market trends and economic shifts that impact the mortgage world.

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Speaker 3 0:02

Welcome to the Chrisman Commentary, Daily Mortgage News Podcast. I'm your host, Robbie Chrisman. Topics on today's episode include the credit score of the United States, who is seeing prepayments or early payoffs, and my interview with the disciplined investors Andrew Horowitz on how investors assess what assets to invest in and a portfolio manager's perspective on the current economic environment.

Speaker 2 0:29

Thanks to this week's podcast sponsor, Jazz X, the first true end-to-end AI platform built for mortgage. From application to underwriting, Jazz X is a new operating model that helps you scale growth, boost productivity, and transform how your team performs. To learn more, visit jazzx.ai.

Speaker 3 0:50

Every time I use my credit card at the supermarket, it can impact my credit score, which were invented in 1958. What might the credit score of the United States with its $1.78 trillion deficit in 2025 be? Gas stations and supermarkets are two daily places where we see inflation. Trader Joe's, with its 630 plus locations, is known for many things, not the least of which is its flowers and their prices. Shrinkflation has hit the chain, and anyone who has purchased flowers lately knows that the bunches have gone down from, say, twelve flowers to eight. Other raise prices or make portions smaller. Yes, inflation is a problem, and lenders should know that although the Fed doesn't set mortgage rates, few, if any, experts predict that the US Federal Reserve will cut rates this year. That would add fuel to the inflationary pressures being created by both another foreign war and a deep in-the-red federal budget that seemingly no one is concerned about balancing. I remember when Republicans stood for fiscal restraint, but does anyone in politics care about the flood of newly created U.S. Treasury debt or reducing spending? Speaking of government, 38-year-old Bill Poulte, President Trump's previous selection to run national intelligence and be the country's top spy chief, who oversees 18 government intelligence agencies, was widely criticized in Congress due to lack of any previous experience in intelligence gathering. And politically sensitive investigations that he opened against Trump's democratic enemies. Yesterday, the announcement was made that he's out and is expected to return to purely focusing on his FHFA duties. We also learned yesterday that producer prices rose at a much stronger than expected 1.1% in May, lifting the year-over-year PPI rate to 6.5% from 5.7%, while core PPI increased 0.4% on the month and held steady at 4.9% year over year. Yes, persistent underlying inflation pressures remain, but still with scant evidence of a broad-based acceleration beyond energy-related inputs such as gasoline. Despite the headline shock, bond markets largely looked through the print with downward revisions to prior months, and the stability of core measures revealing that this month's move was driven more by volatile goods and energy components than a lasting shift in inflation dynamics. For the Federal Reserve, the combination of a resilient labor market and relatively contained core inflation provides ample justification for patients. Policymakers are expected to maintain the current Fed funds rate range at their meeting next week while signaling a less accommodative policy stance. Debate is expected to shift from rate cuts to other additional tightening could ultimately be required if inflation remains elevated and economic activity continues to outperform expectations. Declining real wages, shrinking consumer purchasing power, and historically low savings rates suggest the economy's resilience may face more meaningful tests in the months ahead. Can consumers and businesses continue absorbing higher prices in restrictive financial conditions without a broader slowdown in growth, spending, and employment? We'll see. For today's interview, I wanted to welcome to the show the disciplined investors, Andrew Horowitz, to talk about how investors assess what assets to invest in and a portfolio manager's perspective on the current economic environment and risk diversification as it pertains to mortgage-backed securities. He's a registered investment advisor and has been managing money for individual and corporate clients since the late 1980s and has taken his disciplines derived from decades of experience at financial and investment management to create a series of investment strategies.

Speaker 2 4:22

When we think about portfolio management, what does that mean generally speaking? And if you could tie that into how mortgages fit into that equation, that might be helpful as well.

unknown 4:33

Yeah.

Speaker 1 4:33

So I mean the whole idea of portfolio management, the idea of diversification, right? You know, it's a little bit different than investing, because investing could be, I don't know, it could be, you know, crypto, it could be equities, it could be uh, you know, just simply uh uh, you know, fixer uppers, it could be uh a whole host of things that are differentiated from each other. But when I talk about, you know, the whole idea of portfolio management, it's kind of the the idea of how do we get maybe disparate areas of the markets together to give us the greatest bang for the buck when it comes to investing. So what I mean by that is you want to have things that are working. Everybody wants to make money. We don't want to have anything that's like a dog. We're not who's interested, who's interested in putting money in a money market or even talking about it, right? But the fact of the matter is that there's different areas of the market that we want to invest in that kind of work together. It's kind of like a recipe for a great meal, right? Eating salt by itself is kind of disgusting. But when you throw a little bit in there, it kind of adds to the whole entire flavor profile. So I think that's an important thing. And then when you wrap that into what fits, what doesn't, it's all about the time. There were times when, you know, mortgage-backed securities, mortgages fit. Sometimes they don't. Um, it's all about what can I get out of the investment for the risk that I'm put, you know, that I'm assuming. And it's kind of like with any investment. When you then put that together and you build a portfolio and you manage that, hopefully what you're getting is, as I call it, a portfolio that's like a flower garden, that there's something blooming in any season. We don't want to have just one flower that can get some kind of weird disease and just drop off, and all we have is dirt and stems for the rest of our lives in there. We want to have impatience and heliconias, we want to have um evergreens in there, we want to have roses, annuals, perennials, all that. That's what portfolio management's all about.

Speaker 2 6:20

Mortgage generally, as an asset class. Where does it fit into investors' calculations, wants, desires, appetite? How do they view it in terms of risk profile and those sorts of things? Because there is an inherent prepayment risk to it, but there's also a lot of benefits to investing in mortgages, obviously. It's a huge asset class in America.

Speaker 1 6:39

Yeah, I don't see the prepayment risk as a real true risk because that's just the risk that, you know, it's like inflation risk. You know, it's there and you have to focus on that when you're dealing with certain things. Like, for example, when you have a bond with a fixed interest rate and that's all you have is your investment, there's an inflation component risk there. That's important. Prepayment risk is one of the lower ones on my risk profiles. I'm more concerned about failure. That that's a risk that's a big issue. Non, you know, it's about return of my principal, not necessarily of uh on my principal, right? I want to get the principal back uh as well as my interest on it. But the the fact of the matter is that the the risk factors and where it fits into is it's it's in the fixed income bucket. There's no question about that. Fixed income bucket is going to be uh small or a large component of your portfolio, depending on your risk factor, your age, your time horizon. And the other thing you have to look at is what mortgages, right? Where are we? When we package them up and we look at mortgages from an investment, where are they on the risk spectrum? Uh what's the rating? Um, you know, what is the the type and quality of them? Where are they located? You know, those kinds of things are the big issues when we look at the the big picture of mortgages, not not each one individually, but the the package of it and the the broad-based uh uh risk factors are there.

Speaker 2 7:58

When we think historically with mortgages, what sort of risk profile do they fit? I guess is what I'm getting at. How are they viewed in general amongst money managers?

Speaker 1 8:09

So they're they're usually, there's been times that this is not the case, and we could we could name those dates, you know them well. Uh we know them well. Uh but but his generally speaking, they're there are close to their cousin of the risk-free or the fixed income safety component of your portfolio. So when we look at a risk-free rate of return, we're looking for um that as a benchmark of where we are. Uh mortgages, uh, and and again, we can look at first seconds, we can look at you know commercial, residential, all that. But generally speaking, generally speaking, mortgage related investments are our top tier, right? They're the top tier of uh least risk factors of the entire portfolio itself. Above, of course, treasuries, above um munis, above let's call it cash. But then the next stage you get into is mortgage-backed securities, mortgage securities.

Speaker 2 9:04

When we talk risk profile and and those those characteristics you mentioned, what sort of investors do they appeal to? Is there a specific subset or it's just broad that people like having that little pinch of salt in their portfolio to make it blossom anytime in the year, as you said?

Speaker 1 9:19

Right. So I think there's two types, right? One is your risk averse. That's your uh your older people towards retirement where they can't recoup their money. You know, it's one thing where you and I have years in our careers left, and what happens is uh, you know, we lose money, we can recoup it, right? We can kind of put it back into the bucket. You have someone 75, 80 years old, they really can't have the up, they don't have the opportunity to do so. So what happens is every bit of their money needs to be accounted for and properly allocated in a way that if they lose, it's gotta be light. It's gotta be very light. So, therefore, when you have a fixed income that has a backing, right? Not just, let's say, uh a corporate backing. Corporate backing, what is that? So it's a full faith and promise of XYZ corporation that they're gonna do really well and they're gonna pay you off. Now, that may be good, that may be highly rated on one of the rating services, but with a mortgage back or an asset backed security, you actually could theoretically grab that piece of property, right? If something goes wrong. That is a lot more of that's even in a weird way, that's better than the full taxing power of something. You know, the in God we trust and the full faith and credit of, which is what our money and what our bonds of the United States are backed with. If you think about it for a second, that's great. But that's only based on the taxing power of the United States government. In a way, mortgage-backed or asset-backed securities, whatever they're backed by, are backed by something we can actually get our hands on. Like, okay, it all else fails. What do I got? I'll take the tractor. Okay, give me the tractor, I'll take the tractor. You know, that's I don't have to worry about it versus the promise of something. So it it fits to the component of um balance sheets of companies to a degree that need that safety protocol or need that backdrop of having that uh security. It fits to elderly, but not only elderly, this um, you know, this there's a good one. It fits to the elderly or the retiree that that wants that security, but it also fits as a component because they're oftentimes higher yielding with safety than some of the other uh non-asset backed bonds of corporations and bonds of uh of governments. And you get that with uh, I would say a relatively reasonable amount of risk, depending on where you are in the spectrum of uh maturity and and duration on that.

Speaker 2 11:43

The the full faith and credit backing of the U.S. government on agency mortgage backed security sounds really good until you look at how many trillion dollars were in debt, and it's like, ah, that's that might be a shifting picture of the creditworthiness there. Regardless. So when we think about mortgages, there's obviously the mortgage backed security, but there's also the servicing strip. And a huge part of mortgage companies' strategies recently has been how do I value the servicing, the collection of payments? How do I value uh you know this this loan versus that loan or this pool versus that pool? And and historically there's been, well, maybe I have appetite for loans in Florida or Texas or California or New York, or I want borrowers with a certain LT loan to value band or a certain FICO band, whatever it might be. You talk about getting into the like the nitty-gritty a little bit of how to pick what risk profile and yield suits what you want, kind of break, you know, when you get really granular with how decisions are made between I want I want this sort of risk at this yield versus maybe a little less yield, but a little less risk or a little more yield, a little more risk. Obviously, that that sounds like it could be a very generic way of phrasing things, but but I'm hoping you can kind of take us inside the the deliberations when it comes to actually purchasing.

Speaker 1 12:55

So when you look at when you look at uh pools of assets in particular that are mortgage related and and in a couple things that come to mind, right? So obviously we have um, as you talk about the strip, the yield uh on that and and and the the payment process on that and the rating of who's behind all that, right? So you want to look at something that, in my opinion, I always want to go to the highest level. I'm just not really interested in going to the lower side. I don't need a hard money. That's that's not how we do things here, right? It it's it's most portfolio managers are looking at two things, and it's a combination of yield, of course, but but that combination that goes with yield maturity and payment, prepayment, and when's the funding gonna happen? Is it a sinking? Uh is there a sinking fund involved? Where are we on that realm? So that's the payment process. Then we get the strip and the payment, then you look at the maturity, and what you get is a calculation called duration, right? Duration is really the calculation of technically what's the amount of time it's gonna take to pay this deal off, considering the fact that I'm getting back interest on it as well, right? So the duration compared to maturity is something we look at a lot. The duration we want to have usually, depending on where we have in the in the um the yield curve. Right now, with the normalized yield curve with uh with with that we're seeing finally after years of being obnoxiously inverted, it is something you want to see if we like in the five to seven year duration of uh required time to get my money out of this deal, usually in the area of mortgage-backed, and even some of the uh corporate bonds. I mean, we just don't like to go a lot further than that. The risk spectrum, if what happens is your risk profile starts really enhancing because different from someone who owns that property, owns the the the the uh mortgage on that property, you're kind of like, okay, I like the yield, I want to get the yield, I'm in it for the long haul, as long as it takes, that's what I'm satisfied of getting, right? The problem is that it's not necessarily marked to market on a regular basis, right? If you're not doing it from an investment standpoint. Now, what I mean by that is if you're not doing it from a portfolio standpoint where you're looking at this stuff on a monthly basis and you have to then report back to your clients what it's all worth, if you're doing it on a standalone basis, the value of the of the bond doesn't change, right? It doesn't really necessarily have to change. It's like, look, I got a hundred thousand dollar deal, it's paying me 5%, I'm getting the 5%. There's no late, there's been no late payments on this thing, everything is quality, everything is great, the property behind it is going, my loan to value is this and that. That's kind of how the way you look at that in a way. I'm looking at it, what's my raw value of this deal, right? What's the duration? But all the time is okay, that bond, considering the duration where it is now, the maturity, the rating on it, all of a sudden interest rates ticked up very dramatically, and all of a sudden I'm gonna have a reaction on my valuation of that bond because what happens is there's a you know, you know the old uh seesaw, as as yields go up, bond values go down, right? Back and forth. Well, that's all I'm seeing. That that's what I'm seeing from an investment standpoint is what my value is. Now, all of a sudden I have yields that go up by, I don't know, pick some crazy number, five percent overnight or something like that. All of a sudden I'm gonna take a 20% loss on paper, but that paper is what's shown to clients, and what I have to report as my performance number to clients, that's not a pleasant uh situation. So you want to make sure you have a reasonable ability to project where are interest rates going. Do you think they are? Whether you're right or wrong, it's not the point, but you need to make a projection of where it's gonna be. And then what you're gonna do is you're gonna say, okay, on this tranche, how much could I make or lose on this dependent on uh yields going in the direction I think they're going and if I'm wrong, how much is that gonna be? So that's kind of the way a portfolio manager will look at the mortgage business or the mortgage uh investment.

Speaker 2 16:42

Well, I like that you brought up the five to seven year duration because that is roughly the duration of most mortgages. And yes, people say, well, I track the 10-year US Treasury. Well, that that moves kind of in tandem with mortgage rates, but a lot of bond traders, mortgage backed security traders, are looking at the five-year or seven-year US Treasury to get a better sense of what's going on out there. And and I would add to that too, the the two-year U.S. Treasury is a good predictor of like where you know, where the Fed funds futures rate is going to be a year from today. That's a good that's a good way of tracking it. So when it comes to discrepancies in valuations, I guess people can value different instruments differently. And and maybe that gets into almost the realm of what people would consider arbitrage. I'm talking unofficial arbitrage, where it's like, I don't think this is valued properly. Where do we see differences or discrepancies in the opinion of certain valuations of assets? Why, why is, and obviously what's uniform is the the price at the end of the day, because everyone will have to pay. But in terms of I think this is undervalued versus I think this is overvalued, how does that come about for someone to calculate that?

Speaker 1 17:42

I mean, I think you're gonna look at a variety of things. It could be uh location-based, right? It could be issues uh related to, for example, uh, you know, where where when it comes to properties, where people are going to, where's the migration habits of where they're going, right? The the you know, the rust belt versus the sun belt, uh, how that's happened. All of a sudden you're gonna see uh, you know, and these days, by the way, there's even political um overlays that you could put on this, right? That people want to move out of blue slash red to blue slash red wherever they're going to. Um, you look at taxation issues, you know, if you look at that and valuations underlying the properties and what's gonna happen there. Then you see things like, you know, what's going on in New York with their taxing the rich on the second properties and all that, the pediteer, what are they pediteer? Uh, whatever. Pianatere. Pianater, the Pieter uh attacks they're doing there. Those things can come into play as well. You know, where is that going to go and where are we gonna see that? Then you look at also the the general um focus of businesses, where businesses are moving, where they're moving away from. All of a sudden you have a situation where you're seeing a lot of people are moving out of California or the highly taxable areas too, of Florida, too, of Texas. And all of a sudden you think about that, and then housing prices theoretically could move lower. Then you put an overlay of what if housing prices really do move lower, and then you say, well, maybe that isn't as valuable as somewhere else. And you can kind of put that into the the mixing uh process, if you will, to see um on what valuations could be there. So I think what you were saying before is the art and the science behind the process, right? You know, how do you get to there? And I think it has a lot to do with the projections of what you see the economy doing, but then when it comes to real estate, location-based, that's a big issue as well. So I think that that that is a big part of um you know how we how we look at it because you look at like a Texas where huge amounts of of business are moving, and they're there that means a lot of houses are coming up and it's gonna they're gonna be there for a long time. And then you can say, well, what's the business? Is it a long-term business or a short-term business? What's happening with AI versus farming? And again, farming is not a uh there's obviously less. Well, the mortgage is on the farmland, I guess. So you can look at that as well and say, well, what's happening with our farmland? That's kind of like drying up pretty well. Um, so the art is all about what your internal team, when you're in a mortgage house, which we're not, but in a mortgage house, what we talk to all the time, uh, or or buyers in that area of, you know, the big players out there are looking for and what their projections are to see how they can overlay all of that onto valuations and and find those ARB kind of plays or discrepancies or inefficiencies. That's the right word, inefficiencies in the markets.

Speaker 2 20:26

Well, let's meld the art and the science into the divine, I guess, here and let's talk about the current environment because it's been one that's been characterized by a lot of uncertainty out there, and and maybe assets haven't performed in ways you would traditionally think. We didn't see a big flight to safety with with the war in the Middle East that you what you might expect historically. There's there's been volatility spikes, it's come down, there's talk of a peace deal. We haven't seen one yet. Thoughts on on the current environment, what it means when when uncertainty is elevated for money managers. Maybe they run towards the yield, or maybe they run towards safety. I guess it depends on on your preference, but just kind of what's attractive out there currently, and what do you make of the current market?

Speaker 1 21:05

It's kind of insane, actually. Uh, you know, you you look at this, I've been doing this for a very long period of time, and you look at the realities of headwinds and issues going on, geopolitical concerns, crazy people running various countries around the world. The fact that consumer confidence on one level is at the historic literally the historic low that's ever been in ever. University of Michigan hit its 74-year anniversary low. You see that consumers are problem, it's problematic. You see inflation ticking up because of the price of oil, et cetera. Then you see that the stock market is like moving higher, and everybody's like, what's going on? But okay, let's go and join the party. The reality is that we have an incredible amount right now, without getting into the weeds here, but incredible amount of capital, capital expenditures, capex going on with technology companies. Essentially, what they did was they took money that was sitting on their balance sheets and they Turned it into income for themselves by doing circular financing. Nvidia goes and buys huge amounts of space on XYZ cloud. That cloud company goes and buys all sorts of chips from NVIDIA, right? And it basically took trillions of dollars and moved it into the cash flow or or off of the balance sheet, right? The income statement, if you will. So that has created earnings that have been just unbelievable. And that has satisfied. The timing is fascinating. It looks like we went from war to potential ceasefire. That's what made the markets all excited. It was totally coincidental. The fact is, the Strait of Hormuz is still closed, oil prices still what they are. If you've looked at the actual amount of oil that is being held and that we have available on a worldwide basis, it is frightening. The potential for an all-out, another oil scare is about to potentially happen if we don't get the Strait of Hormuz open. The agricultural price, have you seen the price of I literally it was $9 for a cauliflower the other day when I was in the store? And that's insane. It wasn't even organic. It's insane. Urea passing through the Strait of Hormuz, 40% of the urea fertilizer in the world passes through there. We had a big freeze in Florida in the beginning of the year. We have a problem with beef prices being all-time highs. This is not just an isolated event of what's going on. So to kind of talk about where we are now and what we've been looking for is yeah, people look for fixed income. There's an insatiable appetite, if you probably haven't noticed, I'm sure, for anything that has a yield, anything that has opportunity. And it's because that there is so much money that has been pushed into the system, we still have the remnants of the inflation reduction act. Remember that one? That ridiculous. That was a stipulus bill. Then we have uh the CHIPS Act, another we still saw the the uh the government just spent a few billion dollars on quantum computing thanks to and to to the CHIPS Act. It was all put into IBM and into uh um I on Q and all these other companies in the quantum space. That was that. Then we have the OBBBA or whatever, Oba, the one big beautiful Bill Act. That was stimulus, by the way. Just to be clear, it was a lot of stimulus. And that's still flowing. People are getting a lot more money um in their paychecks because of how withholding was done. They got a lot more money back for their tax charts. So there is not not now, put that aside. Then you have governments, right? You have things like stablecoin that are being utilized um and buying tons of treasuries. You have governments and uh with their with their um sovereign wealth funds, just insatiable appetite for anything that has yield. And it's like we're just creating money out of thin air right now. So that's why things are so good right now. And that's why uh this whole war and all the things that we thought of and the concerns we had are really not affecting things. That that will change, the winds and the sales will change, but right now that's what it is.

Speaker 2 25:18

Calling a stimulus plan a inflation re the inflation reduction act is crazy work, as the kids would say. You just you just outlined a variety of factors there. Anything you feel like you're paying attention to that maybe the the general public or broader markets aren't yet at this point, things that are kind of making you know some some uh warning signs go off in your brain.

Speaker 1 25:40

Yeah, I got I got the beanie cap uh fan flying fast on oil prices. Um I really am not understanding the relationship with Brent and WTI right now, considering that we just took the second largest uh withdrawal from the strategic petroleum reserves, and there's like a 10 per we're at 10% capacity. In other words, not 90%, we're 90% everything's full, 10%. We're 10% on a worldwide basis of oil.

Speaker 26:08

And you look at things like South Korea, which basically has no oil. We have we have places around the world like Philippines, they're they're like they're on they're on shortages.

Speaker 1 26:16

There's nothing not only on on gas, like for your car, but like heating and gas, propane for cooking, your cooking fuels that people are not allowed, they're they're rationing. That's a bad thing. We don't see it here because it's like, oh, okay, whatever, you know, let them eat cake over there, who cares? But we have a real problem. We're talking about international Tanzas canceled 20,000 flights this summer, and international flights because the jet fuel problem they have in in Europe. So it seems to me that we're not pricing this in. And one of the reasons is the constant rhetoric. The PR machine in Washington is working not only overtime, like double and triple overtime, to try to make everything sound like one, it's not true, to whatever you believe is not what you believe, to a point that you don't want to even listen to it anymore. And and that that the facts are something, I think, as uh was said by Kellyanne uh once upon a time. We have alternative facts, what's going on right now. And all of that is really obscuring what's really happening in the commodities market. Uh we have it in the agricultural markets, but we don't have it in the in the oil or the we'll call it energy-related fuels market. So that's something that's really concerning me. The second thing I think is some of the fancy financial engineering that's going on with many of these technology companies right now. That uh some of it broke down a little bit with Oracle that we saw, and we had some concern things, and then uh we'll have to see how this plays out. You know, we need to have an exceptional amount of spending that keeps on going on before we can actually haul for success in the whole AI. It's fun AI, it's great, does a lot of great things for us right now. There's there's still a lot more spending that has to happen. And uh the question is where's it going? So there's kind of like a question of what the valuations are right now, what they should be. SpaceX is probably gonna suck the life out of uh markets right now, $1.75 trillion market cap on it, but only uh about five percent of uh actual float. There's not gonna be a lot of float going on, so that's gonna probably boost that up and all the funny things they're doing then. Then we got anthropic coming out. So the valuation machine has got to keep on going before it is, or things are gonna get a little dicey. Yeah, breathe, Andrew. Breathe. Yeah, we could have a whole different conversation about headlines versus You got me started, man.

Speaker 28:39

You got me started.

Speaker 2 28:40

Yeah, I know. All right, well, let's AI's fun and it created a nice little avatar for your podcast. Let's let's close like a fun question here. You you have a podcast called The Disciplined Investor. Things you've learned about yourself or about podcasting over time, what the audiences enjoy, will you enjoy about it? Kind of open end podcaster to podcaster here.

Speaker 1 29:01

So I I really think it's really I really I've been doing this since 07, right? I think it's really important to be authentic. That's kind of a you know big thing, you know, throwing out a word, but really be authentic, be yourself and things that don't work, things that do work, where you're making your mistakes, whatever people like to know who you are and feel the humanity. And I know that sometimes I have guests on that are frankly boring, and I'm like, we don't ask them back. But uh what happens is that I admit to it, like you know, and I and I'm um try to be as as uh upfront as possible. And and the other thing is uh it's a it's a it's funny because it's it's kind of a one-way discussion with the audience, right? We're talking, they're listening, but somehow trying to feel who they are and understand who they are and what they need and what they require at that very moment in time. I mean, with investing where things are, where things are happening. Uh, I I think there's a lot of people with a lot of jargon out there. They try to prove that they're great at what they do constantly. And their podcast is all about a promotional process. And I think the educational and and understanding what people need and want is is is the most important thing that I try to impart.

Speaker 2 30:18

I was always a very curious child. And so for me, it's enjoyable being able to ask people questions and and listen and not feel like I need to project my own thoughts out there onto the audience, which is very neat. Frequent listeners of this podcast will have heard me say, like I will close the podcast with, you know, thank you very much for your time, whatever. Or I'll add, hope to have you back soon. And I think frequent listeners can tell when I enjoy the interview versus enjoy it less. I certainly hope to have you back soon. I really appreciate the time. Thank you very much, Andrew. Thanks.

Speaker 3 30:48

No investor in mortgages wants to buy a pool at 104 only to have a payoffs later at 100. The latest prepayment data points to a mortgage market continuing to be constrained by limited refinance incentives and higher borrowing costs, with aggregate Fannie Mae 30-year prepayment speeds declining 11% month over month to an 8.2% CPR, marking a second consecutive monthly slowdown. Rising mortgage rates reduced the share of borrowers with a meaningful refinance incentive from 11.5% to under 8% of the outstanding balances, the lowest level since at least late last year, and reinforcing expectations that prepayment activity will remain subdued in the near term. Servicing performance continues to be a key differentiator with firms such as Rocket Mortgage, Freedom Mortgage, Penny Mac, and America Home consistently generating faster speeds, while Bank of America, Citigroup, New Res, and several housing finance agencies remaining among the slowest. Your takeaway? In a market where refinance opportunities are increasingly scarce, servicer behavior and portfolio composition are becoming even more important drivers of mortgage-backed security performance than general prepayment trends alone. Today's economic calendar is light, with the sole release of note being the preliminary June University of Michigan consumer sentiment, which is expected to tick up from a horrendous prior reading when it is released later this morning. We begin the day with agency MBS prices a touch better than Thursday's close, the two-year yielding 4.05, and the ten-year yielding 4.45 after closing yesterday at 4.46%. Let's wrap up with a joke and some housekeeping. A politician is visiting the local mental asylum and asks, How do you decide whether someone should be admitted here? Well, replied the director, we fill up a bath with water, then give the patient a teaspoon, a mug, and a bucket, and ask them to empty the bath as quickly as possible. I see, counter the politician. And if he's got any sense, he'll choose the bucket. No, says the director. If he's got any sense, he'll pull the plug out. Would you like a room with a view?

Speaker 2 32:51

Thanks again to Jazz X, the first true end-to-end AI platform built for mortgage. From application underwriting, Jazz X is a new operating model that helps you scale broke Jazz X is a new operating model that helps you scale growth, boost productivity, and transform how your team performs. To learn more, visit jazzx.ai.