Rob Zimmer

We need new ideas to lower mortgage costs for young families. Here's one: have the GSEs provide a targeted backstop bid for MBS to lower the 30/10 spread, which is costing young Americans extra cash. Community lenders think it will work. $fnma $fmcc @pulte @FHFA @FannieMae @FreddieMac communitylender.org/chla-icba-urge…

While we’re at it here, roll back that Internet thing. And electricity too—bring back those many tens of thousands lamplighter jobs. wsj.com/tech/ai/the-am…

@Microinteracti1 @tyillc Ukraine is now the West, so your statement makes no sense. It’s Russia that has been left behind.

The West Has Already Lost the Drone War. It Just Hasn’t Noticed Yet. Here is something that should ruin your Monday. A Ukrainian AI drone engineer has gone on record to explain, calmly and with considerable evidence, that Western military planning is not behind the times. It is not lagging. It is not in need of reform. It is dead. Obsolete. A relic propped up by expensive acronyms and men in uniforms who still think the tank is the apex predator of land warfare. Yaroslav Azhnyuk, founder of AI drone company The Fourth Law, has done the maths. FPV drones now account for somewhere between 70 and 80 percent of frontline casualties in Ukraine. Not artillery. Not missiles. Not the armoured columns that NATO has spent forty years and several fortunes preparing to counter. Small, cheap, autonomous flying machines that cost about as much as a decent restaurant dinner and kill with the precision of a surgeon. But here is where it gets genuinely terrifying. China can produce four billion FPV drones per year. Ukraine, a country that has been at war for three years and is building faster than anyone in the West, manages four million. That is the kind of number that makes you want to lie down on the floor and stare at the ceiling for a while. The West is not losing the AI arms race because it lacks the technology. It is losing because it is still arguing about procurement frameworks while the future arrives, uninvited, at four hundred kilometres per hour with a shaped charge attached. Latest 👇 gandalv.substack.com/p/ukraine-the-…

@EchoesofWarYT @JMichaelWaller Philadelphia was the largest city in the American colonies then. But what a story.

251 years ago this week, a 6'2" Vermont moonshiner with no military experience and no authorization from anyone captured the most strategically important fort in North America at dawn, and accidentally won the Revolutionary War before it had really started. It's May 1775. Lexington and Concord happened three weeks ago. The colonies have muskets but almost no cannon. The British, sitting in Boston, have plenty. Everyone knows that without artillery, the rebellion is over by autumn. Everyone also knows where to get artillery: Fort Ticonderoga. A stone star-fort on Lake Champlain, bristling with roughly 80 heavy guns. The British call it "the Gibraltar of America." It's the bottleneck of the entire continent. Whoever holds it controls the invasion route between Canada and New York. ​What the rebels don't know, but Ethan Allen has heard, is that "the Gibraltar of America" is, by 1775, mostly held together by moss. The walls are crumbling. The garrison is 48 men, many of them invalids and pensioners. The commander hasn't even been told a war started. Allen is not a soldier. He's a frontier land speculator who runs an armed militia called the Green Mountain Boys, originally formed not to fight the British, but to beat up New York surveyors trying to seize Vermont farms. New York has literally put a bounty on his head. He decides to go take the fort anyway. Halfway there, a man named Benedict Arnold shows up on horseback with a Massachusetts colonel's commission, waving paperwork, demanding command of the expedition. The Green Mountain Boys threaten to go home if Arnold is in charge. Allen and Arnold agree to "joint command," which mostly means walking next to each other in furious silence. They reach the lake at midnight. Problem: they have 200 men and exactly two leaky boats. By 3 AM only 83 have made it across. Dawn is coming. Allen decides to attack with what he has, meaning roughly 1 American for every half-cannon inside the fort. ​A lone British sentry sees them coming through the wicket gate, levels his musket at Allen's chest, and pulls the trigger. The musket misfires. He runs. The Americans pour in. Total resistance to the capture of British North America's most important inland fortress: one wet flintlock. Allen pounds on the officers' quarters with the flat of his sword. Lt. Jocelyn Feltham stumbles out half-dressed, asking by what authority Allen is there. Allen, by his own later account, roars: "In the name of the Great Jehovah and the Continental Congress!" (Other witnesses remembered the wording as substantially more profane. The Continental Congress, for its part, had no idea any of this was happening.) Captain Delaplace, the actual commander, emerges still buttoning his trousers and surrenders the fort, its 78 cannons, its garrison, and roughly 30,000 musket flints without a shot fired by either side. Casualties: zero. Time elapsed: about ten minutes. But here's the part that actually changed history. Those cannons sat at Ticonderoga for six months until a 25-year-old, 280-pound Boston bookseller named Henry Knox, who had learned artillery from books in his own shop, volunteered to go get them. In the dead of winter, Knox and his men dragged 59 cannons weighing 60 tons across 300 miles of frozen rivers, the Berkshires, and unbroken snow, on 42 ox-drawn sleds. One gun fell through the ice of the Hudson. They fished it out and kept going. It took 56 days. On the night of March 4, 1776, those cannons were hauled silently up Dorchester Heights overlooking Boston Harbor. The British woke up on March 5 to find every ship in the harbor and every redcoat in the city under the muzzles of guns that, six months earlier, had belonged to them. Eleven days later, the British evacuated Boston. They would never hold it again. An unauthorized raid by 83 backwoodsmen, led by a wanted man and a future traitor, against a fort defended by a captain in his pajamas, became the artillery that drove the British army out of the largest city in the American colonies. Easiest W in American history. Possibly the most consequential ten minutes of the 18th century.

@qualtrim $FICO is seeing major regulatory changes that will alter future growth prospects.

6. $ADBE - Adobe

Peter Lynch said: "There is 100% correlation between a company's earnings and what happens to the stock.” If stock price follows EPS, here are 6 stocks that look like opportunity. 1. $MSFT - Microsoft

@0xtechquity Growth is ONLY coming from mortgage credit score price hikes and they can’t keep raising these bc too many in Washington DC are deeply unhappy about it.

I am about to make an important decision for my portfolio 🧐 I’m thinking about swapping $FICO for $BRK.B I still think FICO is a great business, but I don’t like the current regulatory environment. What concerns me most is that growth is mainly coming from price increases (especially in the Scores segment), and I find it difficult to fully understand the moat of the SaaS business. My choice is focused on the durability of the business. The most important for me. Berkshire would be also a great diversification. What do you think?

@_Housing_Guy_ @BarrySchwartzBW Bingo @_Housing_Guy_ Lenders are tired of the annual monopoly price hikes & are eager for more choices here.

This reads like mortgage folks are not rational actors. You’re talking about $200 a loan in scores cost in Q1 from $FICO for folks hopefully making 20-30 bps on a 400k transaction according to MBA. If investors pay for vantage lenders will go to what’s cheaper. 5 bps sounds small per deal until you remember that could be more like 20-25% of the profit today for lenders after years of taking on losses post boom. We need to see what the secondary market thinks. Once they can price other scores they will take them just like auto and credit cards. Not sure why mortgage would be different? Should get easier not harder. This is classic regulatory capture hopefully being broken up.

RBC expects minimal market share losses for $FICO "FICO maintains its foundational position in mortgage lending because credit scores serve multiple critical functions: determining product placement (conventional, FHA, VA, or jumbo loans), establishing interest rates, and setting mortgage insurance premiums and down payment requirements. Lenders typically pull FICO Score first in their decisioning process, as the vast majority of loan outcomes either require or prefer FICO scores. The non-conforming market in particular continues to demand the most predictive score available. As a result, we believe VS adoption appears likely to remain incremental and specific to certain lending scenarios rather than becoming a wholesale replacement"

@tonitrades_ @WallStRollup Lenders have a choice now, you need to pay attention.

@WallStRollup Prices up 500% + every lender hates them + nobody switched = that's the real thesis Angry customers who keep paying anyway = unbreakable moat, not a reason to short.

Steve Eisman is short $FICO “I think FICO very arrogantly raised prices about over 500%…” “Has ticked off literally everybody in the lending world.”

@Thomastnt33 @WallStRollup Yup.

@WallStRollup Vantage is about to eat their mortgage moat. Fannie and Freddie are taking it now.

@MoMoMacro @WallStRollup They have a choice now they never did before. Change is coming.

@WallStRollup Eisman is brave shorting it. Lenders have hated FICO pricing forever and none of them ever actually leave.

@unciacapital Change is coming. Americans hate monopolies. So do lenders & their customers. Defend a monopoly—that’s pissing off a lot of people—at your own peril.

So this morning on CNBC (I caught a replay) Steve Eisman disclosed he's short $FICO. Rationale: "they've pissed off everyone with the price increases". A couple things: 1) When you take prices up from $0.01 ANY percentage increase you quote will seem "very large"; that's just math. Steve should know better to look at the total costs of the score vs. the cost of the credit file & total closing costs. But whatever. I did NOT find him particularly informative. 2) the FICO score costs $2000 and $99 for VS4.0, because, he's not taking into account FICO 10T pricing (i.e. comparing like-for-like models). So a bit weird to just highlight this compare. It is TRUE that FICO 10T has NOT been adopted yet by GSEs, and the risk is they just delay that so you have classic FICO vs. VS4.0, but I don't think he went into that kind of detail. Additionally I found this interesting: on the $UWMC website, they now are advertising that you can rate shop. Here comes the adverse selection folks. Magically, if you qualify with FICO but have a higher VS, you can get better pricing due to "favorable LLPAs"... but in the same breath, they will reduce your VS by 20 points to determine eligibility... huh? You can see the link here: uwm.com/trending/vanta… As I said when FICO printed numbers and before, numbers were good, but expect MORE tape bombs until we actually go live on VS4.0 and FICO's DLP. I don't see a true bottoming of the stock until we see the real "market share" shifts.

@Larryjamieson_ This guy, as usual, gets it. “Eisman said he is short FICO, the company best known for its widely used credit scores, arguing that its pricing strategy has alienated customers and opened the door to competitors.”

People like to dunk on $FICO for their “outrageous” price hikes preceding the current round of regulatory chaos. This is the 15 IQ interpretation of events. Their mistake was in not being in DC and not lobbying. Likewise, they should have renamed the score to the TrumpScore.

Steve Eisman likes the market overall here, but: “Eisman said he is short FICO, the company best known for its widely used credit scores, arguing that its pricing strategy has alienated customers and opened the door to competitors.” Yep. $fico $fnma stocks.apple.com/A2jZI1ChESnKHX…

You are missing the Big Picture. Americans hate monopolies. And with any monopoly, there is no price discovery, which incents abusive pricing. Also—basic economics tells you that monopolies by their nature inhibit innovation. Which is why the US mortgage market has been using an outdated product. Even the FICO ceo admits the current product is inferior.

@em013L Wrong. Change is coming. MBS investors will easily incorporate VantageScore 4.0. And lenders want more options here for their customers bc a monopoly is naturally abusive.

$FICO The FICO collapse has been fabricated from the start, it never should have traded down. History: - May 21: FHFA Director Pulte writes on X that he is disappointed in FICO, that cost increases are hitting lenders and consumers Result: FICO is down 33% that week - July 8: Pulte takes his first regulatory action against FICO's monopoly. Fannie Mae and Freddie Mac will begin accepting VS 4.0 Result: FICO down another 22% over 2 weeks - Dec 5: Pulte erases FICO from Fannie Mae's selling guide, and the FICO requirement from Fannie Mae's DU system Result: Down 43% to date More recently, Senator Hawley raised similar concerns in a letter to FICO, citing that FICO's pricing power is hurting the consumer. 1. These actions imply FICO's gold standard monopoly will be regulated 2. Forced competition with VS4.0 will eat away at FICO's market share But the reality is different. - Data shows that the total production expense began increasing before FICO started increasing prices (not correlated). Even after FICO increased prices by 725%, TPE/loan remained static, with no difference (Score pulls make up 0.04% of TPE). - Markup from bureaus and resellers was 1844%(!!) before FICO started increasing prices. Why should a FICO pull have a markup of 1844%? - After a 725% increase in cost per pull, FICO is still by far the minority in terms of overall costs for a score pull (14%), and bureaus still take a 641% markup! VantageScore volumes are a farce, as the bureaus send it along for free with each FICO pull. Despite being FREE, no one is switching over. "Vantage has touted big volume numbers for quite a long time, years, years, and years. I think the big question is who's paying for it, because the answer is hardly anyone. The VantageScores get sent along for free. When a lender inquires at a bureau for a credit file and a FICO Score, they get the credit file and a FICO Score, and they get a VantageScore that they didn't ask for. And so that's the genesis of the big volume numbers that Vantage reports. We're not seeing any share loss at all." - CEO William Lansing, 08 May, 2024 Reiterated in yesterday's earnings call: "You know, when you see the big VantageScore score volumes that VantageScore talks about, you should know that they're largely unpaid for. You know, are they? Is anyone using them? Don't know. Is anyone paying for them? Our sense is not much." FICO remaing the gold standard, with an implied 99% market share. Replacing FICO would mean re-rating of risk portfolios, leading to re-underwriting of millions of historica loans. Get the risk profile wrong, and it could mean billions in unexpected defaults. In addition, the securitization market is built on FICO. Try selling a security with an attached VS, you'll find it quite challenging as no one speaks VS - everyone speaks FICO. The systemic moat is intact, and FICO continues to power on. The price increases are not hurting the consumers and lenders, it's making the line item of pulling a FICO score more transparent, and cutting out insane markups from bureaus. Yesterday's 60% Score growth proved that forcing in VS doesn't affect FICO at all, as no one is switching over to VS even though it's free.

@QuasiVentures True & they saved a young America in the early days, which was basically… insolvent. Dutch were financial wizards then.

@RobTVDC Waste of a great legacy

Can’t be real?

Yup.

@QuasiVentures Yikes. Do they not teach economics there?

@RobTVDC It is

@RAMCOCAPITAL LLPAs will adjust, forcing additional system adjustments incl VS models. Not like a monopoly market, where adjustments aren’t needed bc..you know why.

@RobTVDC Shopping credit scores seems like a good long term risk framework for the GSEs.

A reminder

@DividendDynasty Markets look (well) ahead. And are not blind to the changes coming.

Hard not to be bullish $FICO There is no competing. FICO scores are the gold standard.