Any lender or mortgage loan originator hoping for lower rates to spur business is learning that hope is not a strategy. “Rob, you’re always talking about inflation, so here’s an example of wage inflation: In the Bay Area we just paid a plumber $212/hour to install a kitchen faucet. Granted, he has decades of experience, but still…” The markets are “tariff-ied”: inflation is expected to increase, shipping is down, and growth has slowed… after all, someone has to pay for the increased cost of goods (although who knows what will happen given the back and forth in the courts). In addition, I have not heard a single person suggest that privatizing Freddie and Fannie would result in lower mortgage rates. Many believe that once released from conservatorship, Fannie Mae and Freddie Mac could need to hold more capital to absorb losses, the capital coming from increased guarantee fees charged to lenders. In addition, upon release, unless there’s an “explicit guarantee” or backstop from Congress, investors may demand higher returns to account for increased risk. But Treasury Secretary Scott Bessent said that Freddie Mac and Fannie Mae wouldn’t be released from conservatorship if doing so puts upward pressure on mortgage rates/mortgage spreads. Investment manager Pimco, and others, await. (Today’s podcast can be found here and this week’s is sponsored by CreditXpert, the credit optimization platform that helps today’s top mortgage originators and more than 60,000 mortgage professionals qualify more applicants, make more competitive offers, reduce LLPA premiums, and close more loans. Hear an interview with CHLA’s Scott Olson on the rising costs of credit scores, the monopoly power of FICO, and how increased competition, from VantageScore to new credit scoring models, could reshape the mortgage lending landscape.)
