Why the broker channel is winning with Rob Pieklo

HousingWire

This week on Power House, Diego sits down with Robert Pieklo, the president and CEO of eLEND, formerly known as American Financial Resources. Rob is a passionate advocate for wholesale and has led eLEND in a 900% growth period in the wholesale channel.   Robert talks about why he believes the broker channel creates the ultimate competitive environment that benefits consumers, how eLEND competes with giants through nimble execution and superior capital markets strategies, and why he thinks current MSR valuations are built on unrealistic assumptions. He also shares how eLEND has managed to scale dramatically without significantly increasing their headcount.   Here’s what you’ll learn:   Why competition in the broker channel drives down prices and spurs innovation   How AFR rebuilt its culture into customer-obsessed service   Strategies for competing with wholesale behemoths   The reality behind MSR valuations and recapture rate assumptions   Scaling operations through technology, AI, and high-performance team building   AFR's approach to capital markets execution and pricing strategies   Related to this episode:⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠   ⁠Robert Pieklo | LinkedIn⁠  https://www.linkedin.com/in/robert-pieklo-26934919/  ⁠eLEND⁠  https://www.elend.com/  ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠HousingWire | YouTube⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠  https://www.youtube.com/channel/UCXDD_3y3LvU60vac7eki-6Q   The Power House podcast brings the biggest names in housing to answer hard-hitting questions about industry trends, operational and growth strategy, and leadership. Join HousingWire president Diego Sanchez every Thursday morning for candid conversations with industry leaders to learn how they’re differentiating themselves from the competition. Hosted and produced by the HousingWire Content Studio.

Transcript

00:00I'm obsessed with the experience. When I see someone having a poor experience,

00:03I want to fix it. I want to find out why. Even I don't care if the person messed up the application

00:08or messed up the upload or had the wrong documents or picked the wrong program. It doesn't matter.

00:12It's about that end user, that customer themselves was trying to get a loan through a broker and we

00:17want to make sure that's right for them. Welcome to Powerhouse, where we interview the biggest

00:28names in housing and ask them about their strategy for growth. I'm Diego Sanchez, president of Housing

00:34Wire, and my guest today is Robert Piccolo, CEO of American Financial Resources. Rob, it's so great

00:41to have you on the show. Diego, thank you so much for having me. Excited to finally make it to the

00:45Powerhouse one. We've worked our way up slowly to get to this one, so I'm excited to be here. Thank

00:51you so much. You've done the 10-minute talks. You were just on stage last week at the Mortgage

00:55Banking Summit, and here we go with Powerhouse. Exactly. Ready to rock. Good stuff. I did just

01:03interview you on stage at Housing Wire's Mortgage Banking Summit and absolutely love your enthusiasm

01:10for the broker channel. Why are you all in on wholesale? Boy, it's a great question and I love

01:19answering it because I'm passionate about it. You saw that on stage and it's really truly deep down.

01:25I believe it's the best place for a consumer to get a loan because I lived it. I went through the

01:32iterations of my career and had a small, tiny broker shop for a couple of years just recently

01:36and got to live that experience. When you have a channel that is competitive in nature, not only do

01:44you have the loan originators competing for the loans, but then have a bunch of crazy people like

01:47like me battling 200 other lenders to win that loan. It creates an environment of competition

01:55where the brokers have a really good opportunity to win and when they win, their consumers win.

02:00So for a long time, there was a brokers are better motto in terms of the battle between wholesale and

02:08retail. It sounds like you actually have some reasons for why brokers are better.

02:13Boy, you're going to catch me on this one. We'll have some clips about this. But no, I do. I believe

02:17the channel itself, it just creates competition. And whenever there's any type of opportunity to

02:23create competition, it drives down prices. It creates innovation. I think some of the biggest

02:29issues that we've seen in the mortgage industry as a whole is a lack of competition. If you look at

02:35how our technology plays out, if you look at kind of the LOS game and kind of how people were living

02:40in a 2010 technology for most of us and seeing that, it's the lack of competition that has caused

02:47the lack of innovation. And here, as you compete, I know that I have to invest in technology. I have

02:53to invest in my pricing, my capital markets, my service levels. I have to do it all to win the

02:58loan. So when there is competition, the brokers just have a better opportunity to deliver something

03:02to their customer versus someone who's just stagnant and content in how they're delivering their loans.

03:07Yeah, I love that perspective. So how do you and your COO, Michael Brenning,

03:15split up the executive responsibilities at American Financial Resources?

03:20He is more of the execution guy. I'm the idea guy. We'll call it that. We're so aligned. And that's

03:30really important when you have an executive team. Our entire executive team is incredibly aligned of

03:34where we're going, how we're trying to do it. And we'll have our battles obviously here and there

03:38on how to do certain things, which is just, it's really healthy. And for me, it's more about driving

03:44revenue growth and making sure our capital markets execution is the best on the planet. And then his

03:52primary job functions, make sure that the loans go through the manufacturing process as smoothly and

03:57as quickly as possible. And he's also overseeing our technology group, which is amazing. And then he

04:03also does our ancillary services programs as well. So we kind of split it up that way. I get to do a

04:08little bit more of the lead singer part of the front man of the band. I get to do some of these things

04:13and get out there and speak on behalf of the company and what we're trying to accomplish. But you're

04:19going to see a lot more of Michael Brennan coming soon. Amazing. Do you enjoy that work? Sort of the

04:25lead singer role being out front and having the ideas and being the visionary?

04:31You know, yeah, I do. Sometimes I love it and sometimes I hate it. You can't hide, right? So when

04:38you're out front and you're out there speaking about the company and when you're passionate about

04:42a channel or just the business, the industry in general, it comes with the good and with it comes

04:49some bad as well. So being at events, speaking at events, going to different, you know, company

04:55events that are out there or going to different trade shows, being on podcasts, being online, being

05:01heavily on social media. I don't shy away from social. I'm envious of some of those that are not

05:06on at all, but I'm in there when you're in the weeds doing that. It's you're going to get all of it.

05:11You're going to get the good and the bad. And I truly at this growth stage, it's nice. But as we

05:17kind of, you know, go through the maturation process of a mortgage company, we know that that's

05:23going to get a little bit old being out there and getting the bad because we're fixing. You can only

05:27fix so much. You have to make sure you start delivering for your customers.

05:30Yeah, that makes sense. So you're almost two years into this new iteration of AFR.

05:37What kind of culture are you and Michael trying to build at the company?

05:45Yeah, I mean, we're I think it's just 20 months now. We have four. I think February will be two

05:48years. And it's been a seismic shift. The culture and culture is kind of I just want to create an

05:55environment where people want to come to work. Right. They want it. They want to enjoy what they

05:58do. They want to try and help as many people as possible. They want to be innovative. They want to

06:03be on the forefront of where we're going and what we're building. So we want to bring people in like

06:07that and create a culture that is incredibly grateful for the opportunity that we have when

06:14we get a loan. And we talked about it before. I think what we what was inherited when we purchased

06:18the company was a bunch of really good experienced people. But the mindset was that, you know,

06:25you're lucky that we're doing this type of loan. We're more of a niche lender. So you're lucky

06:28we're doing this loan and you'll deal with our timelines. So we have to kind of flip the script

06:33and understand how hard it is. And there's originators when you're out in the front lines

06:36of origination, a referral partner sending you a loan or a lead coming in. That might be six,

06:41you know, nine, 12 months of a cycle to get someone to get a loan and get an opportunity for

06:46even a pre-approval, let alone get a contract in. Then you get a contract and the person's ready to

06:51rock and roll and they have 200 lenders to choose from and they chose us. Like that's the mentality

06:57I want our team members to have. Not like, oh, you're lucky I do this renovation loan or this

07:01kind of one-time closed construction. You know, we'll deal with it when we get it. It's holy cow,

07:06let's drop everything. Make sure this experience is incredible because we're very lucky and grateful

07:10that after all of that work the originator put in, they chose us to fulfill. Their whole

07:16relationship's on the line. If we fail, they may never get another loan from that referral source

07:20that might have taken them years to culminate. So here, you know, to cultivate, I should say.

07:25So with that kind of mindset, we created core values. We've enhanced the team member experience

07:32so they know that we care about them. PTO, pay, benefits, the whole thing. We've changed what

07:38we do here at AFR and made it a desirable place to work. Yeah. It sounds like you're just trying to

07:46build a customer-obsessed culture and the customer is the mortgage broker. You got to be obsessed about

07:52them. That is, you know, obsessed is a word I use a lot because I'm obsessed with it. I'm obsessed

07:57with the experience. When I see someone having a poor experience, I want to fix it. I want to find

08:02out why. Even I don't care if the person messed up the application or messed up the upload or had the

08:06wrong documents or picked the wrong program. It doesn't matter. It's about that end user.

08:10That customer themselves was trying to get a loan through a broker and we want to make sure that's

08:14right for them. So we do, we want to have, you know, when you're jumping on board here and how

08:20we're hiring now, you kind of have to be a maniac about it. You have to really care and be obsessed

08:25with what that experience is like. That's how we've been able to grow with such a little increase in

08:31headcount. There's people out there hiring thousands of people and that's like, we're doing what we're

08:36doing, closing thousands of loans a month or, you know, 1,500 loans a month. Right now we have like

08:41270 people and most of our hires are around tech. So, you know, that part of it, I'll kind of put up

08:48again, put us up against anybody when it comes to a unit per team member headcount number. So we've

08:55been delivering on that side of it and it really just goes to show who we're trying to bring in and

08:59the type of person we're hiring. Is that ability to grow volume without really growing headcount,

09:09is that, you know, the quality of the people that you're hiring? Is that technology? Is that

09:15innovation? Is that AI? Like what are all the things that are leading to that ability to,

09:20to grow your top line without growing the team? Yes, it's all of it. So we can't just do just one,

09:27but the first thing had to be a shift in what the expectations are. You know, what we did internally,

09:32and I said it to everybody, they may take it negatively to start, but they need to start to

09:36understand like having incredibly high expectations of your team members is a compliment. Like everyone

09:41walks into the mortgage industry, it's like, oh, underwriters do one and a half loans per day or

09:45two loans per day, or the system is old and clunky and doesn't work. Like that's the immediate mindset

09:51and thought process of most of the people in our industry. And you just have to kind of like flip

09:54that around and say, no, like we have the expectation. You're incredibly experienced. You know how things

10:00work. Let's find a way. How do we get our numbers to eight, nine, 10 per underwriter,

10:04per underwriter per day? How do we get our speed in closing and get the documents out quickly and

10:11correctly? And then separately, how do we get our QC processes in line? Make sure we're doing high

10:15quality loans, which we are. We've shifted the type of loans that we've done here from niche to

10:19mainstream loans. How do we do that and do it with high quality and have lower defect rates that we

10:24had before? So it's a combination of it all. But the first thing was that shift in mindset of

10:28expectations. You can't walk in with this predetermined, like, oh, this is what mortgage companies do

10:33in this type of system. We've kind of thrown that out the window. Now we do own a lot of our

10:37proprietary technology and our customer experience. So that helps, helps us, especially over the next

10:4130, 60, 90 days, you're going to see a lot of things that are being released by AFR that are

10:46very exciting. So as we do that, but the whole idea is get the right people in. When we're bringing

10:51folks in, they have to be tech savvy. They have to be tech oriented. They have to have a relationship

10:56with AI. I call it a relationship because it's ever evolving. They have to have a relationship with AI

11:00and understand how to use it to be somebody that's going to work here.

11:04So how are you thinking about growth in 2026? Are you going to focus more on going deeper with

11:12your existing broker partners? Or are you still in that phase where you just got to keep adding a lot

11:18of new broker partners? So being a niche lender to start, right? That's what we acquired a company

11:24that was heavy in one-time closed construction and renovation. That was like 70% of their business

11:29that they were doing. So we had a wide array of people who signed up with the company already.

11:34We had 3,000 brokers that were signed up. So the initial part of this was like,

11:40we didn't really need new acquisition from a broker perspective because we had so many people

11:44already approved. We just need them to send us a loan. And some of those folks maybe didn't have

11:49a great experience when they sent the normal loan or they would never even think to send you a normal

11:53loan. I say normal, but like a regular conventional loan or regular FHA loan versus these niche

11:58products. So we had that base already. But what we found is we've kind of deepened the relationships

12:03with a segment of our approved customers that, you know, loan originators leave. They'll go to

12:10another company and they want to sign up with you because they used us at the first company

12:14or originators starting their own broker shop. And they would like to have us on the slate as a

12:20lender at that new broker shop. So we're expanding that way. It's kind of, it's both. So because we've

12:25deepened the relationship with our current approved brokers, just like it's natural tendency was people

12:30leave or start their own companies and grow. You know, they want to sign up with us and we've been

12:36bringing those folks on as well. It sounds like it's also moving beyond the kind of specialty product

12:43provider to also being a good source of what's conventional. It is. And it's funny because,

12:51you know, the experience is getting better with the, with the, you know, say less, I don't know

12:57what the term would be, but tough, like just, just tougher loans, right? It's hard to have a

13:01manufacturing process that's scalable when you have tough loans. There's plenty of companies that

13:04take in, you know, some of the lower FICO stuff or stuff with more hair on it, a lot of manual

13:08underwrites. Like we do those as well. But it's just difficult to have a scalable process where people

13:13are going to have expectations met. So by bringing in these loans, our specialty products have actually

13:18declined slightly since we took over and the, you know, the big percentage growth, especially in

13:22wholesale that I throw it out around the 900% growth number a lot. But, you know, of that 900%,

13:29majority of it is just standard conventional loans and, and government loans because our capital

13:34markets team has done an incredible job of being really, really competitive out in the market and

13:39people want to use us for it. And it's been a lot easier to help, you know, build and grow the

13:43operations part of this with cleaner loans that just move through the process more quickly. So

13:49it's a little bit more of a scalable opportunity out there. It's difficult. You see some, some of

13:54the big lenders out there tout like how fast they can get a clear to close. And, and when you're

13:59trying to break into certain broker shops, like the first loan, I promise, isn't the one they were

14:03going to send there. You know, that first loan you get, it's still that, you know, tough loan,

14:07tough deal that maybe someone else couldn't do. And you have to try and win over somebody with

14:12that. But once you do that, you then tend to get some of the higher quality stuff that can move

14:16through the process faster. So again, I really love your enthusiasm for the channel. But, you know,

14:2420 months ago, when, when you, when you were, when you were thinking about this opportunity and moving

14:30into the early stages of this, of this opportunity AFR, how did you think about your ability to compete

14:38with these behemoths and wholesale who have almost unlimited tech and client service budgets?

14:45How do you differentiate from, from, from them?

14:50Experience. And, and from, I say it all the time on stage and I, and I, and I don't discount it.

14:58I think there's a huge disconnect with some of the larger companies of what it's like to be on the

15:03front lines anymore. It's that they're just simply not that company anymore. They have levels and

15:07levels and levels and hierarchy, a significant amount of people that are in between who makes

15:12a decision or not and what we're going to build for who a lot of people, especially the larger

15:18entities feel like they know what's best for the brokers. And, and we don't feel that way. We feel

15:23like we're in the trenches right now, building some stuff that nobody else is building. We are taking

15:28a pathway that others are not. And how we build our portal, how we build the experience,

15:33how we're building our use of, you know, AI in terms of how it's going to be in the system.

15:36These things that we're doing are because we're in the trenches with the brokers. We're getting

15:40feedback real time. And we're not this huge company that when I make a change, you know,

15:46I'm affecting, you know, 3000 loans in the pipeline, not, you know, 40,000. So it's a big

15:51difference when we make these changes and implement technology that, that for us, we're a little bit

15:55more nimble. We definitely punch well above our weight class when it comes to battling these guys out

16:01there. And we do think we have a better approach when it comes to the relationship side. And then

16:06also on the capital market side, we feel we have the best capital markets team on the planet.

16:11We think that we're going to continue to have the best capital markets team on the planet,

16:14creating different markets and creating different ways to execute, then pass that through to the

16:18broker channel and the originators that use our services. So like, we feel like we do have

16:23ample opportunity. And to be honest, the broker channel is tired of hearing that there's just two

16:27lenders. The channel was built on choice. It was built on opportunity and competition. It isn't a

16:33two horse race. And one, you can't use the other. That's not how the channel was created. And it's

16:40not what made the channel so competitive in the heyday. It's right now, there are hundreds of

16:45lenders. We were on stage with a great lender in PennyMac that's devoting a ton of resources to the

16:51channel as well. And there's other people that are vying for these loans. So we think it's a great time

16:55to be in it. And we think we can, with our approach, we think we have a significant advantage

17:00because we know the broker channels, a lot of the brokers are tired of hearing that there's only

17:04one or two people they can work with. Great answer. I appreciate that very much. So let's dig

17:11in on capital markets a little bit. We've seen UWM, one of the behemoths, offer significant rate

17:19incentives as they try to stay number one in wholesale. How do those rate incentives impact

17:27your business at AFR? You could feel it right away. When you do a refi incentive and allow for

17:34people to change comp plans and make it much less on refinances and bring stuff in, we don't allow for

17:39that. You feel it. We wore it when they got aggressive on their refi incentive that just rolled

17:44out and rates did move down a little bit. We certainly saw refinances, not that it was a big

17:49piece of our business, but go from 18% to 14%. They do have an effect. But listen, we know that

17:55there are short-term things that these guys are going to try and do and win business over. Longer

18:01term, they're going to widen. They have incredible amounts of expenses. They have shareholders to report

18:04to. We understand how margins work. We stare at it every single day. I could have told you where

18:08their margins were going to be at the last quarter. We knew exactly where they were going to be.

18:11We knew they were going to have to widen at a certain point. So when you look at these larger

18:15companies and doing gimmicks and make you do this or do that, we think there's an opportunity simply

18:20to offer really, really good pricing. That's it. Don't have to do these certain things or accomplish

18:27certain levels. We're just going to offer this pricing out. Yeah, we have certain tiers for people

18:31that send us a certain amount of loans or have a higher quality of loans. Sure. There's math behind

18:38that behind pull through and some other things, but we're not going to make brokers go through a lot

18:42to get the best pricing. We want to provide that out there because we know that if we provide a

18:47really good price, we're going to get the best loans and it's going to be more scalable for our

18:50business. So we think that as they continue to run different things and incentives, and this is a

18:55bunch of companies, not just the one, but as they do that, we think we still can compete. We know

19:00where margins are. We know our execution, which is, again, our execution is incredible right now of what

19:06we're getting out in the market. So we think we can compete with the big guys at all times,

19:11even if they go super low on margins. We do know they have earnings calls. They have to meet certain

19:16things. So we're out there and we're monitoring that and making sure that we're in a place that

19:21we can be incredibly competitive. But when they do these drops, we have to wear it and just live

19:25through it over the week or two as these things are super low on margin and battle to win our share

19:32and then expand when we can't expand. All right. Flipping to the other behemoth,

19:38you had a fairly provocative comment when I posted recently about Rocket Pro's new broker manifesto.

19:47What do you think about what Rocket is building at Rocket Pro? I've been vocal on Rocket itself and I

19:56don't think I'm wrong. Please, if anybody thinks I'm way off base on this, message me and give me the

20:01reasoning behind it. But Rocket got into the channel or started pushing the channel a ton holding

20:07their nose. And that's the way it was. They tried every which way to get business outside of the

20:14broker channel. They couldn't break purchase share. They tried to do it through call centers. They

20:18tried to pay state farm agents. They tried to pay realtors. They tried distributive retail. They

20:23tried anything that they possibly could to get purchase market. And when rates went up,

20:28they didn't get the purchase market, right? UWM storm. That's how United Wholesale Mortgage became

20:33the number one lender in America was because purchase. And there wasn't a lot of refi, right?

20:37That's fact. So they've tried every which way. And then they came to the realization that the last

20:43mile of origination is very hard. I came to that same realization. I'm not saying people can't change.

20:47I changed. I wrote a whole piece about distributed retail dying. And I discounted the last mile of

20:52origination. It's so important. You know, in early in my career and later in my career, I found that

20:57out. I think they're doing the same thing. They've brought in some people, different people that have

21:02different mindset, different thought process. There's still some folks that are running the show

21:05behind the scenes that have the same mentality. But I think this time around, they finally said

21:10the only way they can break into the purchase market without distributive retail is to go through

21:15the wholesale channel. And they're investing in that. Now, Dan and team, like I said, they've built a great

21:22team around it. I think we can compete. I know they're huge and people will laugh at me. I think

21:27I'm nuts when I say I can compete with UWM and Rocket. I think the more and more these companies

21:33bring in folks that have never originated alone and never been on the front lines, the better

21:38opportunity we're going to have to build something that differentiates ourselves from them. And that's

21:43something that we're seeing. And I think that's resonating with the broker community for us.

21:48Well, I've seen it at HousingWire. Obviously, we're in a different space, but there's real power

21:54in sticking to your knitting and staying nimble. So I wouldn't bet against you for sure. And again,

22:03I love the enthusiasm. And you're showing results, right? You're scaling quickly at AFR.

22:11And I know you have plans to scale even more. Is M&A, again, because like you said, there's a lot

22:21of other wholesale lenders, some of which are going to be competitive like you have been able

22:27to be competitive and some of which are not. Could M&A be part of your strategy in order to scale up

22:34more quickly at AFR? I'll never say no, but it's not part of our plan, right? We're not looking for

22:40anything like that right now. What we're looking for is capital, use of capital, how we determine

22:46whether we're going to keep MSRs or not, and how we're going to play in the game. So the growth

22:51cycle has been extraordinary. We're doing it. I said it on stage with Clayton and saying that

22:55we've done it. We've done it profitably, which I'm incredibly proud of because it's really hard to

23:00scale, grow volume, meet your covenances and all the fun stuff that you do and make money, right?

23:06That's something that is very, it's discounted. I feel like it's like cooler if I just, if I said

23:10we raised 30 million bucks and I burnt it all, everyone would be like, oh, you know, they're

23:14cheering you on. Here I'm like, we raised money just to buy the company, have kept all the company,

23:19all the money in the company, have grown the way we've grown and have been profitable for a

23:24significant portion of that. We did catch a falling knife. I will be open to admit that, but we turned it

23:28around quickly and have excelled there. But for us right now, you know, M&A isn't in the cards.

23:34What we are looking to do is just determine how we're going to use capital, potentially raise

23:39capital and how do we deploy it to grow faster? Because right now we're, we're bumping up against

23:44every leverage covenants and capital ratio covenant that we have because we're growing so quickly.

23:51And that's something I know that we have to manage through. It's been a really good problem to have

23:55and manage through. Liquidity is not an issue. So like we're in a good place, but we do are looking

24:01to grow even faster and would look to take on potential capital partners if that helps us get

24:05to where we want to be faster. You brought up PennyMac before you shared the stage with Kim

24:12Nichols, who's their head of their wholesale efforts. How do you think about servicing? Because

24:20you have a lot of mortgage companies like PennyMac, you know, like Rocket, Rocket just bought Mr. Cooper

24:29and closing that deal. You know, where the, where the main strategy is they're going to build this

24:34massive book and they're going to originate from that book. So how do you think about servicing as

24:40somebody that wants to be really competitive in wholesale origination at AFR?

24:45Yeah, I think, um, this is going to be a bit controversial, I guess, but I think servicing

24:51value and the kind of lifelong customer that a lot of these companies are taking the approach

24:59of is, um, is incredibly overstated. Um, I think a lot of the customers, a majority of the customers

25:06are setting an ACH and other communications are just annoying. You know, you're, they're setting

25:11this up. This isn't this life. A lot of the recapture numbers you're seeing now are,

25:15are deemed by practices that are waking the dead, meaning that somebody who really wouldn't have

25:19done anything anyway, but you've pummeled them with so much marketing and advertising that

25:23they make a decision to do something. Uh, and it's because of what you've, you've advertised,

25:27you may have spent thousands to get that person to say, you know what, maybe I will take a cash out

25:31now. Um, but in reality, when rates move down, we'll see the true indication on what's going to

25:38happen with the servicing portfolio. Cause we know that they've priced and valued, um, a lot of,

25:43uh, opportunity and recapture and the revenue that comes from it, from what we're seeing and how

25:49when they do try and battle and win alone, uh, I guarantee you that the margins that they said

25:54that they were going to make in that recapture theory and analysis, isn't what they're going

25:59to end, isn't what they're going to end up with. So, um, it's an interesting, uh, take on it now for

26:04us. I think when re when MSR values come back to like a reasonable, like number, we do want to

26:10participate. We'd love to keep servicing. We'd love to have an opportunity to do what they're

26:13doing. Obviously I'm not saying it's a horrible strategy. I'm just saying how it's currently

26:16priced and how they currently book it. There's a lot of value that is being taken into account,

26:21um, whether if they're not booking it because of gap rules, but if they're, if they're pricing

26:25the opportunity for recaptures, a lot of numbers that are being put in there and thrown out there

26:29that give these higher multiples that, um, I can't compete with right now. Right. We, I don't have

26:33the liquidity to do it. I don't have the cash. It's incredibly cash intensive. If your margins are,

26:38you know, 25 or 45 basis points of net margin and the MSRs are worth 200 basis points, you can see

26:44you're underwater a significant amount in terms of liquidity and cash. So, um, but that part of it,

26:49we, we do think longer term, the things come back to reality and there's opportunity. We do want to

26:54keep them on the books. It's great for the broker channel. I don't like selling MSRs. Um, I know

26:59everybody does it, but it's not the best when it comes to, um, the, uh, kind of the sentiment from

27:05the broker channel and their customers going to somewhere that might refinance them. So like that

27:09part of it is, uh, is, is tough. So we'd love to be able to do that. But right now it doesn't make

27:13a lot of sense with the bids that are out there. Yeah. So, I mean, if I were to summarize that,

27:19um, the MSR values are, are so rich right now that it would almost be foolish to, to hang on to,

27:28to, to, uh, to a lot of them. Um, because there's so many folks that are willing to pay up

27:33right now. Um, and to the, to the point where you think they may not earn that, that value back,

27:41uh, over time in terms of their ability to recapture. Yeah, I would say that. And like

27:45there's internal modeling, you can do internal modeling, not valued as much. Um, you know,

27:49and that's not like overstating anything. I'm not saying there's any weird accounting practices

27:53happening. I'm simply saying that the way people are pricing, um, is as if there's going to be

27:58one, two, three turns at a recapture. Um, and I just don't see that. I just don't believe deep down,

28:04especially when you're purchasing from another channel, that there's this incredible loyalty

28:08to who you set up your ACH for and with, I just don't see it. They're not, they're not in the portals.

28:14They're not in there all day long, getting the marketing material, they're getting email,

28:18going into spam. I just don't think there's that, that relationship, that relationship still

28:22resides with the originator. Uh, and I think that's going to come to without significant sales and

28:27outreach, meaning that, you know, other people are going to be fighting for that customer as well

28:31and lowering the margin expectation. I just, I just don't see it. I think the values, uh, right now

28:35and what people are putting into those values are a little high for us to be able to compete. Um,

28:40and, uh, when things normalize and we see our first wave and see where prepayments are and what

28:44the MSR numbers come in at, uh, then we'll probably be able to compete once that first cycle happens.

28:49Rob, this has been a really interesting conversation. I love chatting with you about,

28:56about the wholesale channel and about, uh, mortgage origination and servicing in general.

29:01Um, so appreciate you taking the time today to, to join me on powerhouse.

29:05Thank you so much. And listen, big shout out to, to, to housing wire, to you, to Clayton and including,

29:11um, little guys like us. Um, and I know we're growing, but without the stage, getting to,

29:16to meet the people we get to meet with, getting to go to some of these events, getting to speak

29:21and share our story. Um, it is, you know, I can't say I couldn't be more grateful for the

29:26opportunity to have with you guys. You guys have been great to me, been great to AFR and our team.

29:30So I just want to say thank you. Uh, and we'll keep, uh, you know, I'm a paying subscriber.

29:34Just, you know, I, I do full freight on my subscription and that's where I go for all my,

29:38uh, all my news and real estate and mortgage. So thank you.

29:40Well, we'll have to clip that, uh, that, that, that line right there. Uh, really amazing stuff,

29:45Rob. Thanks so much. Awesome. Thank you, Diego.

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