10.6.26 Uncertain Outlook; Polly’s Adam Carmel on PollyOS/Hedge; Rate Pressures

Robbie ChrismanWelcome to the Chrisman Commentary, Daily Mortgage News Podcast. I'm your host, Robbie Chrisman. Topics on today's episode include chatter from conferences around the nation. Are your products and marketing ready for mid seven percent rates? And my interview with Polly's Adam Carmel on where Capital Markets Tech is heading. AI Native Foundation, Unified Operating System, and the first firm built to run on it. Introducing PollyOS Hedge. Here, take a listen to a low preview. For people out there that think your capital markets provider doesn't make a difference, what do you have to say about what Polly now brings to the table? Adam CarmelAt the end of the day, what are loan officers and mortgage brokers selling? They're selling a rate or a payment. And then in order to get the loan, of course, there's a lot of fulfillment and processing, underwriting, and so forth to ensure that the and validate that the person qualifies. But at the end of the day, what is being sold is effectively the rate. And so if there is a capital market system that can optimize for the loan officer or mortgage broker the rate on that loan, and the lender is able to increase their margin per loan, or if they want to pass through some of that margin, increase their volume, that is the lever in this industry. And historically, I completely agree that these legacy vendors have had hardly any, if any, impact for a loan officer or a mortgage broker. And it kind of was a product that was good enough just to get the job done. And so we said that's why we went to First Principles Thinking and said, hey, how can we create demonstrable value in ROI for the banks and lenders, IMBs, and credit unions, so that they can optimize their margin, they can drive their costs down, and they can leverage agentic orchestration and other analytics and data to advance their profitability. Robbie ChrismanThanks to today's podcast sponsor, Floify, the mortgage industry's leading point of sale platform. Dynamic apps, which can be seen at Booth 600 during MBA annual next week, lets lenders create fully customizable loan applications for any type, including HELOCs, construction, agricultural lending, non-QM, and more without custom development. To learn more, visit Floify.com. Robbie ChrismanI like to say that I'm one good lottery scratcher away from ditching this daily podcast gig. You know, start something new. All kidding aside, where should we start today? This conference is in Iowa, Michigan, and the Carolinas where I am right now. Penny Mac is live with the Managed Score 4.0 across three production channels. If you want to learn about appraisal news, there's a 7 a.m. Pacific Fannie webinar tomorrow morning. You can find that on the industry event calendar on ChristmanCommentary.com. Fannie May's UAD 3.6 policy exception, what you need to know. Two harbors and UWM are firing shots at each other. And in terms of interest rates, oil price inflation from the war, the U.S. budget deficit, competition for investor money from AI companies issuing debt, and tariff price inflation aren't going away anytime soon. So there's little reason for rates to drop. Speaking of rates, U.S. Treasuries sold off to start the week, pushing ten-year and 30-year yields to their highest levels since 2022, and keeping 30-year agency mortgage rates firmly in the mid-7% range. While the ISM services PMI eased in September from August, the services sector remained firmly in expansion, with SP Global's final reading strengthening month over month. The bigger concern for markets was continued increases in services prices, reinforcing fears of consumer price pass-through and contributing to pressure on longer-term yields. The market could see further curves deepening and higher real yields if auctions require a meaningful concession. While developments in France, that's rising French OAT yields added to broader bond market unease, and other sovereign markets remain an important source of spillover risk for U.S. rates. Yes, the bigger driver of longer-term Treasury yields appears to be growing global fiscal concerns rather than U.S. economic data alone, with weakness in French sovereign debt reinforcing worries about government deficits, rising issuance, and higher-term premiums across developed markets. That's particularly important as the Treasury prepares to auction 10-year and 30-year debt tomorrow and Thursday, respectively, where investor demand could be challenged by already elevated yields, fiscal uncertainty, and concerns about the Fed's commitment to fighting inflation. For today's interview, I wanted to welcome back to the show Polly's Adam Carmel to talk about where Capital Markets Tech is heading. That's AI native foundations, unified operating systems, and the first firm built to run on it, introducing PollyOS Hedge. What did I actually make on that loan? For most Capital Markets teams, the honest answer arrives weeks later, after a month end, stitched together from a pricing engine in one place, a hedge platform in another, and spreadsheets in between. Today, Poly announced the launch of its next Gen Hedge system, completing PollyOS, the mortgage industry's first AI native capital markets operating system, every loan priced, hedged, and sold on one engine from one data record with every basis point of margin attributed from rate lock through settlement. Locks, status changes, cancels, and fundings hit the position intra-day, not in tomorrow's file. The number the C-suite sees at any point in the month is the same number that ties to gap reporting at close. Big news today. Exciting announcement. Maybe I'll stop there. Adam, what is the latest and greatest from poly that just came across the wire? Adam CarmelYeah, we're really, really pumped to uh formally announce and launch PollyOS, which is the first AI native mortgage capital markets operating system. So it takes we've been building this thing for years, and it's always been part of the original vision dating back to you know 2019, having a single system of record that prices alone, hedges alone, and sells alone, delivering low-level attribution and profitability analysis. And so we're we're really, really, really fired up about it. Robbie Chrisman2019 until now, that's seven years of hard work. So I would obviously assume this is super comprehensive. You didn't want to release it until it was fully right. Why did it take so long? And maybe take us through some of the features that are so comprehensive and robust and why, you know, why what um what it brings to the market. Adam CarmelWe started off for the first few years, obviously, hyper focused on building the industry's first cloud native pricing engine and delivering all of the value and ROI to the market around that. And we really wanted to dial that in and ensure that we kind of moved both fast and slow on that product before we started to really make the investment and the commitment into this product. But in the last few years, we've just recognized, or a couple of years, we've just recognized that to really transform, to really revolutionize how the capital markets function, and then as a result, the broader mortgage industry operates. We just said we're putting a stake in the ground and we're gonna get after this. Now, in terms of differentiated features and capabilities, you know, obviously we built this thing from ground up. As I mentioned, it's completely AI native. It is something that we evaluated everything on a first principles basis, and we just said, okay, no company, no vendor out there has a single integrated solution. Either they've purchased different disparate parts and operate different systems, or no one has it all. And so we said, okay, if we're gonna do this, we've got to do it using first principles. So, for example, as I mentioned, the key thing is low-level attribution and profitability in real time. That facilitates things like having the mark updated constantly, overlaying both the accounting and hedge entries, able to forecast margin calls in the moment rather than having to wait, not having batch processing and reporting at the end of the day, not having to wait until the end of the month and using end-of-month cutoffs for the IRL seeing the fair market value of hedge to understand what the revenue is. We've built out in an agentic orchestration layer to evaluate how our customers are able to optimize their profitability and margin, optimize pull-through, things like that. So this is just a complete game changer for the industry. Robbie ChrismanYou take us inside designing the technology, because obviously there is a utopian use case for technology, and there's a practical use case, like the intersection of where technology meets people actually using it. So incorporating feedback from your clients, just take us take us under the hood a little bit for how this actually got to market. Adam CarmelThe vision had had been there or has been there forever. Of course, as you're working with very valued advisors, it evolves and it gets even better. And then, of course, layering in real customer feedback and understanding not only where all the pain points are in the industry, but also just learning how has the industry been conditioned to operate over the last two decades? And then taking those few things and saying, okay, white canvas going forward for the next 10 or 15 years, what would we, how do we, what do we want to build that can truly be transformational? And then lead poly and the industry to the next phase for the industry. And so, you know, we've been so fortunate to be able to work with valued, valued advisors such as Rob Kessel and Gary Malice. And then, of course, we've there's a large list of existing poly customer partners and then hopefully prospective customer partners that have provided a ton of feedback. And so you're constantly pressure testing can we execute on the original vision? And then layering in all of the feedback is part of that. And I think that, and that's also why this thing is take this system has taken quite a bit of time to get out because what we didn't want to do is release something that wasn't fully there. And we are so confident and convicted in how this is going to improve performance and improve profitability, give visibility to the executive team. We're really, really pumped to be able to have this thing finally in the market. Robbie ChrismanOver the last seven years, what have you learned about yourself? What have you learned about the industry? And what have you learned about Polly? Adam CarmelYeah, boy, that's a whole different session. Uh, with maybe a couple bottles of wine. Um, there's a time to go really, really fast, and then there's a time to go slow. And in some cases, you've got to do both, but just depending on where you are. And so I think that that has been a great, great lesson for me uh in the company. We've always, always valued, deeply valued the feedback we get from our customer partners and in the industry at large. Um, and I think now, in particular, as we're trying to execute on like the very frontier of technology, that becomes even more important and those feedback loops are even more important. And so I think right now we're in a mode of like we're ready to go really, really fast. Whereas the last you know, year or so, we've said, okay, let's just really dial everything in, listen, learn, and execute. Robbie ChrismanYeah, that's hard when you're almost all the way there and you just want to get it to market. So, so props to you. You mentioned Rob Kessel as an advisor. He, for people that might not know, has basically built the system that lenders still largely use today in the capital market space, but he wanted to partner with Polly, which is huge credibility to Polly. Congratulations on that. Thoughts on working with him, what he brought to the table, what it ultimately allowed for with this product. Adam CarmelInvaluable. I've learned so much. It's been humbling. We always joke that if all of the available tooling and technology, AI, and so forth was available when he built Compass, you know, where would the industry be today? And so here we are able to leverage the most cutting-edge technology and building something that we believe is really transformative. I can't say enough about him, and um, we've all just been students of him. Robbie ChrismanFrom what you said during this interview, it's a no-brainer that people should, at the very least, get a demo, see what's going on. Other features that are coming out as part of this, release just I mean, drive it home a little bit with like, how could you how could you people not want to pop on the poly train? Adam CarmelI certainly want to believe that that's true. And so we definitely would love to show this to as many folks as possible. We've seen the companies that have seen this, banks, credit unions, IMBs, name it of any size that have seen it, they're all moving over. And so I and I think what they're starting to realize is wow, this really gives them a real competitive advantage. And so we would love to demo it for as many people as possible and and share all the features and capabilities. And then from there, now that we've got this full operating system, what we're able to build on top of it and around it is really where it gets quite exciting. Robbie ChrismanWell, I wanted to ask that. What how does capital markets technology evolve from here? This was the end game. You've now shifted the goalpost. What is the new end game now that this is out there? Adam CarmelI think that that's something we'll I'm so excited to be able to do another one of these sessions with you once we release those new things. And they'll be coming fast and furious over the next year. Robbie ChrismanVery cool, very excited for that. For people that want more info, best next steps. Obviously, y'all will be at MBA annual. You have a booth, people should swing by the booth, but best ways to connect. Adam CarmelShoot me a note, DM me on LinkedIn. We certainly have a large group of our team attending National MBA. We have our website, you name it. We're available. We just want to talk to as many people as we possibly can. Robbie ChrismanAnd you and I are on video here. I can see how proud you are of this and how happy you are and how big of a deal is. Can you explain just on a personal level what it means to you to be able to have this release bring to market? Adam CarmelIt's been a dream. You know, honestly, when Polly got started, I I never, you know, you want to believe it can one day become something that is special. And I don't mean special necessarily just that we've we're able to partner with the industry. I also mean special in terms of our team, our culture, and everything we've built. And here we are. And now to finally be able to realize that that vision on the product side, which is really, we are a product-led company. We always focus on the product. That is the most important thing by far. It really for the team and I, it's like such an exciting moment. But on the other hand, it's just a milestone. And we are just scratching the surface of what we think is cap what we're capable of doing. And really, our goal is to drive industry profitability up, drive costs down, help improve margin management, and really help to over time reduce the cost of originating alone. Robbie ChrismanYeah. It's really an exciting time in the mortgage industry because we've been talking about the cost to originate for so long. I believe we're finally at the precipice of being able to materially drive it down. It sounds like you're on that same bandwagon as well. I always appreciate the time. This is phenomenal, man. Really enjoyed it and uh looking forward to seeing you at annual. Adam CarmelThanks. You too, Robbie. Appreciate it. Robbie ChrismanThe weaker than expected September payrolls report has reduced expectations for an October Fed hike, with markets now placing a roughly 20% probability on another 25 basis point increase as the Fed weighs softer labor market momentum against its ongoing concern about inflation. While the jobs data raises the bar for September inflation readings to justify another hike, policymakers may still view labor conditions as broadly stable, given the modest rise in unemployment and continued positive job growth. Today's economic calendar includes the August trade balance, Red Book same store sales, Fed remarks from Governor Bowman, Boston President Logan, and New York Fed President Williams, and a Treasury auction of $58 billion of three-year notes. We begin the day with agency MBS prices better than Monday's close by about an eighth, the two-year yielding 4.80 after closing yesterday at 4.83, and the 10-year yielding 5.27 after closing yesterday at 5.31%. Let's wrap up with a joke and some housekeeping. Three contractors are bidding to fix a broken fence at the White House. One is from Chicago, another's from Tennessee, the third is from Minnesota. All three go with a White House official to examine the fence. The Minnesota contractor takes out a tape measure and he does some measuring, then works some figures with a pencil. Well, I figure the job will run about $900. $400 for materials, $400 for my crew, and $100 profit for me. The Tennessee contractor also does some measuring and figuring and says, I can do this job for $700. $300 for materials, $300 for my crew, and $100 for me. The Chicago contractor doesn't measure a figure, but leans over to the White House official and whispers, $2,700. The official incredulous says, You didn't even measure like the other guys. How'd you come up with such a high figure? The Chicago contractor whispers back, $1,000 for me, $1,000 for you, and we hire a guy from Tennessee to fix the fence. Done, replies the government official. And that, my friends, is how government plan works. Robbie ChrismanThanks again to Floify for sponsoring this week's podcasts. Floify is the mortgage industry's leading point of sale platform and dynamic apps, which can be seen at Booth 600 during MBA annual next week. Let lenders create fully customizable loan applications for any loan type, including HELOCs, construction, agricultural lending, non QM, and more without custom development. To learn more, visit Floify.com.