Mat Ishbia on Leadership and Mortgage Lending

overall mortgage lender. And he's got a fascinating history from being a walk on at Michigan State as a point guard, to eventually being an assistant coach there, to joining his dad's twelve person firm that was doing mortgages UH, to just enjoying explosive growth because they were doing the right thing. They did not get suckered into all of the liar loans and all of the ridiculous um no income check, the ninja loans, no income, no credit rating, no job,

or all that craziness UH. United Wholesale didn't participate in. And once the financial crisis ended, they just took over and became literally the biggest UH mortgage wholesale or in the country. He's a fascinating guy. He's done some really interesting things. So enthusiastic about the business. When you see a company that approaches things in the right way to watch them go from a twelve person firm uh in two thousand and four to anson firm today. It's it's

really quite fascinating. You will see what I mean by his infectious enthusiasm and how much he is just so into running the company, and and and how enamored he is about the entire mortgage business. It's hard to listen to this and not become enthusiastic. So so, with no further ado, my conversation with United Wholesale Mortgages CEO Matt Shpia. This is mesters in Business with very renaults on Bloomberg Radio.

My special guest this week is Matt Shpia. He is the CEO of United Wholesale Mortgage, the largest wholesale lender in the country in the number two overall mortgage lender. The firm has nine thousand employees and recently went public in the biggest back ever. He is also the author of the book Running the Corporate Offense, Lessons in Effective Leadership from the Bench to the Boardroom. Matt Shpia, Welcome

to Bloomberg Now, thanks for having me. Glad to be here with you, so I got so much stuff to talk to you. About But I have to start with you were a walk on port point guard for the team that won the national championship in college basketball. Tell us a little bit about that. How did playing for coach Tom Is prepare you for the business world? Yeah? No, it was a great experience. You know, I wasn't that great at a basketball player. I was very good in

high school. Obviously, became a walk on at Michigan State for coaches. Oh, and you know, a great experience for my first three years. We went to three final fours, we won a national championship. I got in the game when we were up by a lot. So I wasn't a star player by any means. But I learned so much about team, about work ethic, about camaraderie, about building something special, about having big goals and working for him. I learned so much during my time there. And some

people asked me what translates the business? I say, I can talk for eight hours about that, because everything translates the business, um, if you're paying attention and listening and learning. And so I had a great experience playing there, um and once again winning the national championship, but just making lifelong friends and and and learning from tom Izzo for many of those years. And you know, when you talk

about you could speak for eight hours about this. I found the book fast, easy read um, and there's it's really all about how the concept of competitive sports very much translates into lessons um for the corporate world. So so let's make that shift to the corporate world. You joined the mortgage industry in four when your father offers you a job at United Wholesale Mortgage. Back then the

company was twelve people. To tell us a little bit about your first entry level job in the mortgage industry and and memories from that period of two thousand three, two thousand four. Yeah, it was a great, great thing. You know, I was coaching. I played basketball for four years and I got a chance to coach for years. So I got to be on the bench, sitting there with tom Izo, learning from him in meetings. And I got offered a college basketball job to be one of

the youngest assistants. Are the youngest assistant in college basketball Division one at the time. I turned it down because my father said, hey, maybe you can you know, and Aso said to me, actually, maybe you can take some of things you learn in basketball and turn it tip the business, maybe do something bigger than me and head coach, And my dad said, I got a little mortgage coming. Might as a lawyer. He's never actually worked here at the mortgage. I mean, he's just like an entrepreneur. He

has like seven or eight different businesses. This was a twelve person mortgage coming in two thousand three. I joined as a twelve person and it's been a great experience all the way through. What I started at though was the bottom job everything. But I I used to say that every job here. But I've got nine thousand three people, so I can't do every job now. But I back then, I took facts off the fax machine. I learned underwriting,

I learned closing. I learned everything from the bottom up and really to understand not only our clients but the consumers consumers clients and our team members and process and so it's been it was really just great going all three through that process. I had no desire, no idea, no ambition of saying, hey, let's build this to a nine thousand plus company. The number I mean, we're just trying to make it, trying to survive at that point,

and uh, and that's what we're doing. And but you know, learning the business from the ground up was there a huge advantage and I still implement that with new people at our companies to this day. M So, so let's talk a little bit about survival. Um, how did the firm weather the housing bust in the mid two thousand's Not long after you, uh, you joined, we saw the real estate market collapse. Yeah, so it was it was

definitely an interesting time to have joined. Um. What I would speak about that is this, you know, back then we were so small and we didn't really know what we're doing. We're trying to figure out things. But we didn't do a lot of those loans, subprime loans. So the whole point was back then, we were just trying

to make it, you know. I remember that I was a sales rep in two thousands, six or five for and I remember calling my father one time and saying, Hey, Dad, you know, we're doing fifty loans a month in relationship. We're gonna do sixty five thousand closing this month. So it's it's a whole different world, right during fifty loans a month back then, I remember telling my dad and go, Dad, you know, if we did these types of loans. With

your subprime, we can get a lot more business. I remember my dad saying to me, Matt, you know, we're not in here just to make money. We're not gonna lend someone money if they can't pay it back. So letting someone two dollars in the house is worth one, We're just not gonna do it. Now. We did make a big stand because they just went somewhere else and got the loan done, but we never did the sub

prime loans. And so when those sub prime loans all started crashing in oh seven, o eight, oh nine, you know, we were, you know, taking a thing of the old movie Forrest Gump. We're like Bubba Gump. Shrimp were like one shrimp boat left standing. Like we were just doing the right type of loans, focused on fh A and conventional, and we really grew because everyone else was worried about the problems that they had all these loans and we had never done those, and so I look at it,

we didn't really struggle. That actually was the catapult to our success by doing the right thing and the do right mentality. It didn't work real right, No four or five or six, when everone has record years in mortgage and we were not having those years because we weren't doing those types of loans. But we we we it came back our way in O eight oh nine and and ever since doing the right type of loans for the right borrowers. So post financial crisis, the firm begins

to expand and thrive. When did you take over as CEO? So I was running the company probably starting in about eight oh nine. Officially you know CEO maybe two thousand twelve or thirty seen, but those years, you know, running the business, trying to build the company to the point where we went to in the final thing where we had a small retail division. And when I became the CEO in two uh early two, I think, uh, the key was I made a couple of decisions at that point,

which was we're not doing retail. Retail is when you know, is not as good for consumers, it's not as good for loan officers. So I actually cut a department and I moved them all to our wholesale channel and basically reran the wholesale business. Now we didn't let anyone go, We just moved them to reallocate them to the new teams, and we really started exploding from men. So let's fast forward a little bit till last year. Last spring of the global economy is shutting down and the Federal Reserve

comes out. Not only do they cut rates to near zero, they commit to purchasing unlimited quote unquote unlimited amounts of mortgage securities towards the end of March, and naturally, mortgage bond prices skyrocket. You guys, like a lot of other wholesales, you would hedge interest rate risk, and suddenly with these skyrocketing rates, you're facing margin calls and a cash crunch. Tell us about that early pandemic period and how the Fed impacted what you were trying to do in terms

of your balance sheet. Yeah, obviously, you know they're talking about COVID and and what happened we were with the Fed and everything. First off, there's no playbook for COVID, you know, no one had it like in the books, like what do you do with COVID comes in? How do you handle it? With the Fed? You know, it's unprecedented times, unheard of crazy things happened. But when that stuff happened, you know, really we saw for it is

we work as a team, you know, it's all. It goes back to the core of teamwork, working together, figuring out how do we solve for different issues, And a lot of those things were short term concerns, but the whole economy shot now. You know, I'm real big on our culture and our team, and we have nine thousand three people here and we all work here every day in the same location. We have about one point five million square feet and we're all working in the building together.

Spending everybody home was a big challenge because I never planned for work from home because that's not what we believe in here. And at the same time, the you know, people worry about their health, which is a scary thing. You didn't know what was going on. There's a lot of scary things going on, the FED doing what the

FED did. A lot of crazy things happened, but we came out of it stronger and we figured out, Okay, how do we band together and figure out what to how to handle the balance she concerns the the FED with rates lowering, operational concerns, then people work from home, technology concerns, and not only we managed through, we thrived, and that was a big part of our story and success. You know, is Hey, everyone can do things when things

are going well. What happens when things you kind of get sucker punched a little with COVID and how do you survive and thrive? And that's what we did and we had I'm having our best year of all time, not only from a volume perspective, but um but a margin perspective and a profit perspective. And at the same time, one of the things is key to our business is culture and team and family. And when the pandemic hit, no one knew what was gonna happen. I didn't know,

you didn't know. Nobody knew what was going on. And I told our whole team at that point, and he said, listen, guys, we will not lay off one person. Not one person will be laid off at our company. I've got your back, You've got my back. Don't worry about your job. We'll make it through this stronger. And obviously it turned up to be a record here. But the point was we

showed family first. I said, you can't lay your brother off, so we don't lay each other off with family, and I think that resonated with our team members at the point where they said at us and he's all in with me. I'm all in with him. Let's go DOMI. And that helped catapult us to a record deal last year. And and we're planning on doing more business this year. Huh.

That's quite that's quite fascinating, especially considering how much real estate transactions plummeted at least in the first half of the year, came back in the second half of the year. But I want to stay with your balance sheet. So you're you're looking at a little bit of a cash crunch, and you reach out to the bankers at Goldman Sachs and say, hey, I wanna shore up our capital reserves because we think there's opportunities coming. Tell us a little

bit about that process and and what the final resolution was. Yeah, so when when up? And then you see that you know, cash is king in any business, and so you have a couple hundred million dollars to run your business. You say, guys, we we we were competing like we're the number two overall landing. The people were competing with our you know, Rocket Mortgage, Wells, Fargo, Chase in Bank of America, that's

the top five. These are not little companies. I'm competing with and we said, gosh, what do the bandage they have. They have access to liquidity and capital that I just don't have. You know, this is I own, you know, me and my brother and dad own some percent, but there was no private equity, We had no investors in with us. It was just, you know, we built this

thing from scratch. And so we said, how do we make sure that we have the balance sheet and capital to compete with the biggest companies because we think we have the best platform and the best technology, but I have to have the cash and liquidity sources to do so. And so I met with some people and we end up going through the process of going through US back and becoming a public company, which basically made it so that we have access to the same liquidity we can

monetize some of the things we've done. But it wasn't about getting money out for me or for our company, because I still own a after the whole thing, I still own ninety four out of the company. The whole point was putting us on a platform that I have access to these bankers, access to the liquidity, access to being on a level plainfield. Put me on a level plain field, and let's compete head to head and we'll

see what happens. And that's what we're doing right now. Yeah, I see that that competitive basketball nature is very much in evidence with you. And to put put some flesh on the bone. So not only was this the biggest spack ever, you guys floated like four or five of the company, meaning you still own the vast majority of it. Uh, and so on paper, you're you've suddenly become one of

the wealthiest people in the country. That has to be kind of a shocking thing to to realize, Hey, we were nervous and wanted to shore up our balance sheet and then this happens. Tell us a little bit about what that experience was like. Yeah, you know, that was obviously something that was new to me. You know, it's not like our company. You know, our company evaluation of sixteen point one billion when Win public and and me, you know, that wasn't the company the valuation or didn't

grow when we went public. We that's what we've been the whole time. But the going public put it out there in front of everybody right that the company is worth this, and that Matt you might be worth this, and you know, I don't pay attention to those numbers. The real reality is I focused on how do I dominate my day to day, how do I help our company grow and win today? Money follows success, It's not the other way around. So I very rarely look at any money I have or money are profit are moments

like are you focused on the profits? I said, I'm focused on winning. I'm focusing on dominating our competition. I'm focused on taking care of my team members and my clients. And when you do those things, you make a lot of money. Success is the is the focus. Money follows, and so the fact that I'm worth X dollars or

whatever it may be, then it put out there. It's it's cool to see, you know, on paper for a second, then you go right back to the grind and say, you know, I'm not spending that money in my life has not changed one inch since we weren't going in public. I'm still here at four in the morning, I'm still grind neal sixth night. I still love what I do. Nothing's changed, and so therefore to me it's not a

big deal. But at the same time, I know it gets a lot of headlines and people talk about I get more people talking to me about that stuff than they used to obviously, Um, that's been a little change in my life. Let's talk a little bit about your business model and how different that is from some of the other lenders people might be more familiar with, in the sense that you don't work directly with consumers. You're

a wholesale uh mortgage on the writer. Tell us a little bit about that model and what some of the challenges are associated with that. Yeah, so we don't have a name brand recognition is the number one lender or even the number three or four or five, but we're number two overall lender. And this is how we think about it is our business is the exact same as everyone else's. The difference is were wholeshale, which means we offer lower rates and you have to get our rates

through an independent mortgage broker. Mortgage brokers offer lower rates and fees to consumers. It's it's not my opinion, it's fact. It's backed up by data after data data point that if you go alone to you know, mortgage broker at finding mortgage broker dot com or wherever you may go to find a local mortgage broker, you will get lower rates and So what we've done is we provided and that's always been the case, so you know, very the difference is it's always been the case you get lower rates.

But what's changed is we've we've enabled them with technology. So what we've done with our mortgage brokers, there's fifty loan officers about the country. You have to get a loan through a loan officer. They're either captive to one lender or they're independent. We work with the independence to say, hey, use our rates, use our technology, and we'll make us so you can compete with the biggest lenders in the world. And that's what we've done, and that's why our business

has exploded, is that we've basically democratized technology. We've enabled the mortgage brokers to succeed and thrive by giving them, of course the lowers lowest rates, but beyond the lowest rates, it's the best technology and fastest process that closes. Because you know, I'm in an interesting industry. Nobody wants my product. Nobody wants the mortgage. They want to buy the house, they have to get a mortgage to do it. They want to save the money, they gotta get a mortgage.

We're selling a product nobody wants. We've gotta make it faster, easier, cheaper, and that's what we've done with mortgage brokers. Really quite interesting. So I'm a little curious, what are the advantages of being a non bank lenser versus a banking lens. You're like Wells and Cities it the ability to work with independent um mortgage brokers. What what advantages does your structure give you? Yeah, well, being a non bank lender. A lot of people think, oh, that means you have less compliance,

less regulatory. I argue the reverse. I have more compliance, more regulatory. I mean, I gotta do with fifty individual states. When you're a federally charter bank, you gotta deal with one, right, you don't have to deal with each state level stuff.

We have more compliance and more regulatory things that I think in a lot of respects the big advantage and one of the things that I think about building wealth and building success is the reason I can beat those companies, and reason we have beat those companies is extreme focus. I'm not trying to be the best bank. I'm not trying to be the best everything. I'm trying to be

the best mortgage lender. All we do is dominate the mortgage process where a big companies, smart companies, Chase well as probably these are great companies obviously, but they gotta do the posits. They gotta do credit cards, they gotta do boat loans, they gotta do they have to do a bunch of things, and therefore they're not extremely focused.

I'm extremely focused. I got nine thousand three people that focus on being the best wholesale mortgage one in the country, and we have no question on what we're trying to do every day. And so I think singular focus is a huge advantage. And if I was a bank, that's one thing that I probably wouldn't be able to do because they want you to diversify in different respects. But the thing is a mortgage. It's not like this little thing you're doing. This is a huge part of someone's

life and dominating on it. It's like it's like the way I would explain is like the Wells, Fargos and Chases. In these big companies, they have to be, you know, a general doctor, like you're you're general practitioner right there. You're not, but I'm the I'm the heart surgeon. When you when you get a hearty you don't go to your main doctor. You actually want to go to your heart the best heart person in the country. And that's what a mortgage is. You only do it once every

three or four years. Do you want to get the best in the country, And that's what mortgage brokers are and that's what you WM does. So so let's hold aside the big banks like City and Wells and JP Morgan. What what's your advantage when you're competing with firms like Rocket Mortgage or a Quicken. How do you go head to head with the folks who are similarly like you really focused on just underwriting mortgages. I just got work them. It's very simple. So I'll work them and I invest

in technology, and so I love that. I love that they have a similar set up as us because we can compete head to head and we find out who's better. And we believe in our model. We believe in doing right by brokers and consumers, and we have a different model mentality than some of those other companies. Other other companies are focused on for on profit profit profit. We're focused on winning, winning, winning, and profit follows and that's

worked year over year as we've continued to grow. You know, when I took over in two thousand thirteen, I think we did it, you know, or two dozen two took over, we did about ten billion. We did a hundred eighty billion dollars of mortgages this past year, and we're gonna do more in two thousand one, and everyone else is not going to Everyone can do well in rache Al really low. Some of those competitors you talked about, they're

extremely focused on refinance. Once again, that's great when rates are two percent two and a half percent, it's not gonna be as great one rates or four and a half percent. So our business model is much more balanced, much more focused on consumers and brokers. And at the same time, I think it's much more long standing, and you'll see that as we take over the number one spot in the coming years. So I have a ton of interest rate questions for you. We'll we'll circle back

to that in a little bit. Um. I want to ask about the speed of transactions. You guys seem to have a reputation for turning things around very very quickly. Tell us a little bit about how you were built for speed. Yeah, well, once again, mortgages, nobody wants so you gotta make it faster, easier and cheaper and so cheaper. We already are that that data and you can prove

that faster. Same thing. I you know, a couple of our competitors, obviously one of them that you talked about earlier, Rocket, they went in public and they touted their technology and they've done a very nice job. Dan Gilbert's done a good job at their business and built something very successful. But you know they talked about technology. How do you know you have the best technology, Like, what's the measurement?

It's either your cost to originate your expenses that you can you can make things more efficient, or you close loans fast. Right, Well, the industry closed loans about forty seven days. Rocket did a great job. They're closing loans in twenty n days. They're better than most. We close in sixteen seventeen days. Here, our technology has differentiated because we've built our technology from scratch. I got actually made

a little technology. People here at our company every single day grinding, working hard to make prietary technology for our clients. And so speed solves everything. You make things fast, Like if we make a mistake, we solve it fast. Right, We're trying to figure out things, and so we're always focused on speed. Nobody wants the mortgage process that you're like, what are you gonna call the underway to find out

thirty days later what's going on. It makes the process grueling and not fun when someone's trying to buy a house. And so speed is a big deal. It's tied to our technology, and that's how we've differentiated. Uh. The house I'm calling you from now because we're still working from home. We purchased in September, and I cannot begin to tell you. I'm just laughing as you're describing it. What an ordeal it was to get a mortgage for this house. And

I'm good, have Craig credit score. I'm putting a stupid amount of money down. This should have been a no brainer, and I guess it was because everybody I was dealing with apparently had no brain. It was Do you hear those sort of complaints to people tell you like horrible, So let me tell you about what a disaster in my mortgage was when they meet you personally. All the time people people have mortgage stories, and especially when talking about two four and fifteen. But the reality is this,

people don't know how to get a mortgage. They don't know where to go. They think that you see a commercial and you go there, you call your bank, you go there. That that that's the biggest problem. So consumer education is a big focus of mine. One of the reasons we went public was to help educate consumers and get myself out on a platform. Because if you go to find a mortgage broker dot com or you call brokers, you do one of those things, you will find a

broker in your community. They will shop on your behalf. It will be a fast, efficient, cheap process. Period. I have the utmost confidence in that because I see it every single day. But most consumers, they get lured into some TV ad or they hear something like they don't really know how to do it. And so part that's part of my mission right now is how do we get more people to understand how to get it broke.

Even if it doesn't come to u w M. Go to find a mortgage broker dot com doesn't mean he's gonna come to u w M. It goes to one of the other. But if you go there, then that that that that professional can say, Okay, Barry, what are you looking for? I'm looking to close in thirty days at a great rate. Okay, well here's the lender I'm gonna go with then, rather than well, here's what we offer. It's gonna take sixty days, and we're gonna be like

certain lenders are paying on certain things. Certain lenders are fast for certain things. Certain lenders cost more. They know these things. You have to go to the expert. You gotta go. It's like going to your general doctor and saying, who's the best heart surgeon. He'll refer you to the right place rather than just look it up online and say, oh, this guy says he does a good job with hearts.

You know, I'm not going to that guy's. It's funny because I recall using UM a mortgage broker in twenty fourteen, but a lot of my roller decks, a lot of my contact list of mortgage brokers, half these guys were out of the business. So let me circle back and ask you UM a great financial crisis question. You know, what was the lesson from that and and what did you personally learn from companies like Countrywide that had such

a successful business and then blew themselves up. What we learned is quality always wins, and so I want to be the biggest, but I'm not gonna have a sacrifice being the best. We are the best mortgage coming in America, and we were proud of that. Our technology, our service, are pricing, everything is the best. But we are not the biggest. We are number two right now, but I will never I'd rather be number thirty eight, as competitive as I am, then sacrifice the quality what we do.

So what happened in the past, and I don't know Angelo Mozillo and country wide that well, Um, all I know is I study things and see what people have done. I know that the type of loans we do is the key, and people focus on like, oh, well I could do more. I could do more loans right now, right now, I could do Maybe I could be number one if I if I opened my credit box to do loans for people that maybe are a little bit

more on the gray or Yeah. We had our company believe in long term success, not short term, and we're gonna we're playing the long game, and so we're gonna focus on doing the right things because I'm gonna be here running it. I'm gonna I still own ninety four pers And someone said oh, you're your shareholders. I go my shareholders. I have one of the have billion shares. I'm the biggest shareholder. I promise you I'm doing everything best for the shareholders all the time because I'm I'm

the biggest one. We're all on the same team. But that does not mean what's best for shareholders or best for anyone is to do something crazy in third quarter two one that will pay for in two And I think that's what happened in the past in the mortgage industry is people got a little bit focused on greedy, got maybe a little greedy, maybe got a little over the skis on certain things that's not gonna happen at you WM. Huh really quite interesting. Let's talk a little

bit about what's going on with rates today. Um, and obviously we have to look back at what took place last year. How did the pandemic impact home sales and prices? And when did you first start to see things, uh, in the mortgage market that eight things. You're getting a little low wacky out here. Yeah, you know, obviously at the pandemic or when the pandemic you know, first started back in March of last year. Um, you know, a

lot of crazy things are happening. Rage dropped because the feed is buying you know, um, a lot of mortgage backed securities. A lot of things happened that people were not expecting. Um, it all kind of settled down. It's still buying a lot of mortgage in Rates were extremely low for the second half of last year. Thirty year fixed in the twos, which is never seen before, right, and so thirty year fixed rates in the two's was what was common. And the crazy thing is it's still

common today. It's still happening, and so rage dropped and I I think they had as low as two and a half thirty year fix, two and three eights thirty year fix. So if you're getting a conmentional alone, should be getting two and a half two and three eights. But then rache went up for a little bit this year and everyone says old rates and went off, everyone's gonna slow down. Well, rates are still two point eight

seven five. You know, there's still all time lows. And so anyone that didn't take advantage of it is still can take advantage of today. People that are buying homes, which is a big deal right now because that's a

big percentage of our business. There actually taken advantage of that. Hey, that three thousand house I can actually buy with two points on five interest rate rather than three and a half or four percent, which is actually giving them a great opportunity to buy a house to maybe they couldn't buy because rache Al solo. So rates are extremely low right now. They I believe they're gonna stay low through the rest this year. Um, but they are going to take up and they have picked up a little bit

so far. So banks are known for making money on the spread, and that spread gets wider the higher rates are, which raises the question how hard is it to make money on a thirty year mortgage with rates under three? What does that do to your profit margin as an underwriter and a wholesaler? You know, it doesn't really impact it much. So you know, we're not we're not portfolios. Los loans are being securitized with Fannie May Freddie mc

Jinny May. And so whether the race two eights on five or three eight five, the difference than what we make is not is negligible, It's the same thing. And so I actually make an argument the reverse that as rates go up, you make less because there's left loans out there, so people are competitively pricing their loans or making trying to squeeze their margins to get more business

rather than make more money. And so when rates are low is actually when people make a good amount of money on on the loans, because there's so many loans out there that people don't have to be as price well. And that's why it's so important to go to a broker, because if you go to some lender, you don't know, like you're not in the business berry you don't know three and an eighth is the right rate or two

points and five you don't know. But the mortgage broker will know, and he'll say, no, you're actually two point seven five in here's the lender that we can sell it to and work with on it. And so I think that's an important thing is that as rates go up, it does not mean you make more money. It's actually, I could make an argument that's the reverse in many respects.

So so let's say rates go over four percent at some point in the future, and right now, where are we fift of people have mortgages with rates under four percent? What does that mean for the volume of new originations And what does that mean for refinancings. Yeah, it's gonna slow it down substantially. And that's actually gonna be the part that helps you w M my company become the number one overall lender because we are not dependent the number one lender right now. It does about their business

is refinance. So yeah, it's great when rache a two, eight and five. What happens when there's three and five, Well, there's me a lot less reefinance. It already slowed a lot of people down if you foul you know, our earnings call and in the number one lender rocket there they guided to do fifteen less business than the second quarter, that is the first quarter, because rates went up just from two and a half to two points then five. I guided the reverse. I said, we're gonna do more

business in the second quarter than the first quarter. And so the point is when you're doing purchases and you're like, our business is not a cyclical and so rates. A lot of Organs shompanies are strictly refinance shops. Well that's great in a two thousand twenty boom year, but what about a two thousand twenty two rising rate year. How are you gonna live, How you gonna survive, how you gonna succeed? And that's why we're excited about the opportunities. So when rates do go up, well we'll win in

the low rate environment. When rates go up, that's actually when the power of our business really shines. M That's that's really interesting. So in terms of those refinancings, how aggressively are people tapping the equity in their homes compared to I don't know, mid two thousands of five oh six? Is this really that large a driver? Someone says of their business is refies that seems to be really cyclical and and rate sensitive. It is, you got it here

exactly right. There is something that's cash out and people tapping that with the house is probably a little less rate sensitive, but it's still rate sensitive. You know, no one's gonna people, you know, and obviously housing values have gone up, so there is a little equity and pupil's houses. But the reality is this, if your business is nine percent anything, you're probably going to be in a tougher position, especially if it's something you don't control, which is the rates.

Nobody controls the rates. I can't keep rates low and then there can the other lenders. You know, you gotta you gotta live with whatever rates are, and you gotta make the best out of it. So if your business is to one one focused on we really win when low rates happen. What happens when high rates happen, right, and and that's gonna happen right even to the point

that you made earlier. Even if races don't go high from what you and I would think of as high, which is five six seven percent relatively, they just go to three and a half, it will stop the refinances because that means almost everyone there's no reason to refinance if you have a three and a quarter per cent rate or two point eight five. So many people have a thirty year fixed in the twos right now that they're not going to be refinancing into a three and

a half. So therefore, the only time you really need to revorce a refinances a divorce or a cash out. And people aren't gonna cash out and pay a higher interest rate unless they really need the cash out of their house. Huh. Interesting you mentioned home prices ticking up. I keep reading lots and lots of people claiming it's a bubble. What are your thoughts on these increased to home prices. Is it just limited supply, limited inventory or

is there something else going on here? Yeah, so it's limited inventory, but partially because remember we're still finishing up this pandemic or getting through a pandemic where you know, there's over a million consumers right now that aren't making payments on their mortgage, so they're in four earrants. Well what does that mean. Well, if I'm not making a payment on my mortgage, I'm not not settling in my house.

It's pretty good deal I got going right now, right, And so people aren't selling at the pace that they should be. When that changes, I think there will be a lot more inventory hitting the market. Now. Is it a bubble? No, it's not a bubble. It's not. Well, don how you to find a bubble? So I think housing value should be going up ten percent a year. Absolutely not. I think they go up one to three percent a year, and that would be more normalized. It's

not like two thousand eight. Someone said to me, it's just like two thousand day. Is that it's not like two thousand eight? You don't know if you're talking about It's nothing like two thousand and eight two thousand and eight was a bubble bigger than this one, but it was built on a a horrible cracked foundation in the

mortgage industry. The mortgage ry is not like that. People were getting loans when they didn't even qualify for back then, so when and they're also doing adjustment rape, so then there rate went up, you had to sell, and the whole thing collapsed. That's not happening right now, I'm sure of that. What is happening is that there house today that maybe should only be worth three twenty because it's kind of went up faster than you expected. Should you

still buy it at three thirty? You probably should, because you know, unless you're only be there for a less than a year or two, because housing values is not gonna go from three nine, maybe three thirty and three thirty two next year and three four the following you doesn't go fast, but you're still getting in at a two point seven five interest rate. So people thinking that this whole thing is gonna collapse, they just don't know

what they're talking about. They're just not right. Right. You gotta focus on the cost to carry, not what you are actually paying, but but that raises the interesting question. You mentioned adjustable rate mortgages. I'm kind of surprised to see a lot of ads for arms when rates are this low. What what are your thoughts on on people who are underwriting a ton of adjustable mortgages these days. Yeah, so adjust for rate mortgages these days are much different

than back then. Now, we don't do very many at all. Actually, I could almost say we had do zero because it's it's not even a uh point one of a percent of what we do, but we'll call it. We don't really do them. We have it on the rate sheet, it's available. Well, here's what I think about arms. Arms are different today than back then. Back then it was two year arms with pre payment penalties, and the rates went up like a half percent I mean extumely or

multiple percent per year or per adjustment period. These arms today are done through Fannie Mae, Freddie Mac. It's it's with the CFTDE what they've done. They are much safer arms. However, thirty year fixed in the twos unless you're selling in the next two or three years, how are you not taking a third year fix at two points and five? Right? And so people, you know, most people are doing a

fixed rate. Um. I think sometimes people are market arms, and that's part of the problem with why people don't go They go to these big commercials you see some one time about arms or jumper rate more. You see a teaser rate of two and a quarter. Oh, I want two in a quarter. When you call them, you find out it's an army, find out it's a three year arm or five year. I'm not really what you want.

And then you end up staying with them and getting a thirty year fix at three and three eights and you don't even know the difference that you should have got two point seven five. And that's part of the the the issue with going to a mortgage broker rather than going to these big lenders. So let's talk a little bit about the state of the national housing market. What are your thoughts here. It seems like the underwriting has become much more it's called it's circumspect or conservative

than it was a decade or two ago. Yeah. Absolutely, I mean I think a decade or two ago it wasn't it wasn't responsible ending. There's some things that happen back then that we're not the right way. I think there's a lot of rules in place now. It's a very strong foundation of the mortgage industry. Right now. There is not these shake shakier loans being given, like the way you want to help everyone get a house, if they want a house, but you've got to make sure

that they meet all the criteria. They have the income, they have a job, the house is worth what they say it's worth. Right, there's a lot of things you have to do and back then there's a lot Uh, I don't the right word is flimsier rules, crazier rules, rules that were not responsible ending right now responsible ending. It's not hard to get a mortgage right now. If you qualify, if you have if you pay your bills on time, and you have a job and you make income,

mortgages are easy to get. You've got to, you know, find the right person to help you get it. But it's not if you you know, you're self employed and you don't show any income, well it's a little different now. You actually gotta prove that you make the income. Everyone wants to proof that you can pay your mortgage right so I just want to make sure I'm checking the

right boxes. If you want to mortgage, you have to have a job, you have to have a credit history, and the house has to be worth what you're paying for it. These are like crazy restrictive rules. I mean, who could buy the house into those? What? What's so amazing because what you're saying is so obvious and self evident. But how on earth did we ever go off the rails in the mid two thousand's where uh, you don't need a job, you don't need a credit history, and

who cares what the house is worth? That seems just absolutely insane. Yeah, well that that agreed gotten the way people started, you know, one upping each other, trying to think, and they didn't understand the constant the whole American world are really the whole world weren't And so now everyone understands it and respects that housing drives the economy in such a way to do and to mess up or break housing, Um, it's not it's not a way that's

gonna win long term. And that's what happened. People got greedy, people got were trying to make money. Things weren't working. Well, they're kind of one upping each other on products and nuances, and the whole thing kind of fell apart. And I don't think that. I don't think i'll see that happen again in my lifetime. Does it mean that there won't be some gray area stuff going on. I'm sure there will be, but it's not gonna be at that extreme.

So you mentioned earlier, you're gonna see volume drop when rates run up. For some of the other mortgage underwriters are what happens to their underrunning standards when they see their their revenue drop in their volume drop. Do they start to get stupid again or or have they learned their lesson from you know two thousand eight oh nine. Well, so good, great question, and yes they will start to get I don't know if we're a stupid or riskier

or a little bit more. But because of the what the CFU needed a guy named Richard Cordans, they put in some rules that basically restrict your ability ever doing it to the extremes. I'm not saying people can't get in some of the gray areas, but on a mass scale, the extreme teams such as back to our Roger joke or comment about no income, no job, here's a loan like that that that can't be done anymore? Right, that

can't be done anymore? And so therefore there are some rules in place that it's just really not gonna be on a mass scale that you can get those things done. And so I'm not concerned. Do lenders lower their standards, Absolutely, I'm sure they do um when rache go up, But at the same time, it's not gonna be able to be lowered to put the American economy at risk. I ad last time. So I know the g s C as a government sponsored entities like Fannie Mae and Freddie

Mac focus mostly on the conforming world traditional mortgages. What about what's become a very big segment, the jumbo mortgage market. How do you see that developing? Do you guys play in that space? Um, tell us a little bit about because I know the real estate it's been growing very rapidly. What do you guys do in terms of jumbo more mortgages and how do you see that space? Yeah, so it's it's definitely a space we do a lot of, isn't that We do billions of dollars a month of it.

So we're doing a lot of business and jump. But that's those loans are put down good credit score people. Once again, the principles that we talked about where they have to have a job to show their income it to prove it. A lot of these two are sell employted and they actually have to show it on their tax returns in order to qualify for one of these loans.

And so that's those are good solid loans, and those are good solid borrowers, and those are people you want to be able to serve so that they can buy a house. Really really really intriguing. Um. So, a recent Wall Street Journal edition had a column, real estate shows tech is no Holy Grail. What are your thoughts on on these so called I buyers, these tech companies that offered almost like a used car, Hey, we'll buy your house um directly from you. You don't have to list

it for sale. Do you have any thoughts on on that growing industry? Yeah, no, it's interesting. I like that people were trying to innovate in the residential mortgage space, residential housing space. The reality is this, you gotta always follow the money, right, Why is someone doing that they're buying your house today because they're probably buying it below what it actually should be selling for, right, And is that the best for you? Is it? Is it that

hard to sell a house these days, you know. So I guess my perspective is I'm not gonna call them gimmicks, because I'm sure there's obviously some substantiated strong businesses, But the reality is, you know, those things aren't gonna become the mass right there there. There's there's different reasons they're

doing it. Everyone's trying to make money in there, and if there's a gap, there's an arbitrage there that hey, you want to stall your house with three hundred, I'll buy it for two ninety to day so you don't have to worry about it and go buy another house, and I'll try to sell it for three or five. They're trying to make an arbitrage right there. Anyways. And so do I think they're long standing maybe? Do I think they're gimmicks, Yes? Do I think that they're gonna

be mass scale? No, m That's that's really kind of interesting. And and I want to just touch on on the fact that you guys when public via a spack, tell us a little bit about what that process was, like, what why did you decide that was the right way to go public? Yeah, so we obviously are large enough and successful. I mean a lot of people think SPAC SPAC must be a questionable company, and that's not anything like I mean we we we we made three point

three billion dollars in profit last year. So we went public through a SPECT because we chose that instead of an I p O. We chose that because we felt that was a better process for us for numerous reasons. We also got partnered with Alec Goers and the Goers group, and Alec did a great job and his team. You know what I think about it is I'm going public. I'm not I'm not going public again. So how do you go public in the most efficient way possible while

having someone right shotgun and kind of advise you. And that's what Alec Gore's and his team did. And so we felt that the going public through a spect was a better option for us than an I p O. And I would do it again the same way. Now, you know, certain every compy's kind of differ and obviously real the largest back of all time, and but I don't look at it based on evaluation. As I look at is what's the best way to do this? And

I looked at both options. And although everyone in the world tells you that I PO seems like a better option, cause that's what everyone's always done. But I don't live that way. I don't live on whatever one's always done it. What's the best way, And we found that this is the best way, and I think I chose correctly. So what sort of guns have you gotten in terms of how to handle suddenly you're the CEO of a public company? Have you gotten any good advice about that? Or or

who have you been speaking to about it? No? You know, I haven't, you know, focused my time on like what I say. And there's a staying in business like what got you here won't get you there? And my perspective is what got me here will get me there. I'm gonna stay in the weeds of my business. I'm not gonna change what I do. I'm gonna continue to take care of running our company for our team members, are clients. Shareholders are always ran it, for sure. It was the

difference was sholders were only me back then. But now I got everybody in my company's a shareholder, along with a lot of people in the public, which we're excited about as well. But take care of your team members, take care of clients, take care of your you know, the end consumer and at the same time take care of your shareholders. And so nothing has really changed in

my business running daily. We obviously have more people on investor relations, and we've got people on financial side that are doing things, but running a business day to day, I have not changed what I'm doing. Uh, And a lot of investors back when we when we're doing this back and the people were in our road show, we're investing us, they wanted me to keep doing what I'm

doing because that's what they were buying into. They're buying into our success and how we got to where we're at and how we're gonna get to where we're going. So what are the plans for all that capital that you raised? How do you want to deploy that? The big focus is one technology, continue to invest in technology. We have done that and we're continue to innovate with that. Second thing is we're investing in servicing. Right we we we were Cuite. We we create this servicing asset that's

very um profitable and successful. I used to have to sell it to bring in cash. Now I don't have to sell it. I still can sell it if the right opportunities there, but I don't need to sell, and now I can want to sell. It's different. Huh. Well, Matt, thank you so much for being so generous with your time. This has been really fascinating stuff we have been speaking with Matt shpa He is the CEO of United Wholesale Mortgage. They are the country's largest wholesale lender and number two

overall mortgage lender. UM. I wish we could have done this in person. I get the sense that you are just a very animated, excited individual, and I get the sense your enthusiasm is totally infectious, and I could see why you've been so successful running the company. Well, thank you. I really enjoyed being part of it. Appreciate you, and uh hope to talk to you again soon. Absolutely, Thanks so much, Matt. Thank you. Thanks to Matt SHPF for

being so generous with his time. If you enjoy this conversation, well, be sure and check out any of the previous four hundred discussions we've done over the past six years, seven years. Oh my god, time time disappears. UM. You can find those at iTunes, Spotify, Bloomberg dot com, wherever you listen to your favorite podcasts. We love your comments, feedback and suggestions right to us at M I B Podcast at Bloomberg dot net. Give us a review over at Apple iTunes.

You can sign up for my daily reading list that's at rid Halts dot com. Check out my weekly column that's at Bloomberg dot com slash Opinion. Follow me on Twitter at rit Halts. I would be remiss if I did not thank the crack staff that helps put these conversations together each week. Attika val Brunn is my project manager, Paris Wald is my producer. Michael Batnick is my head of research. I'm Barry Ridhults. You've been listening to Masters in Business on Bloomberg Radio.