MBA Secondary 2025 LIVE BLOG – State of Mortgage Markets, Rates, Regs, Lenders

The Basis Point MBA Secondary 2025 Live Blog kicks off with New York Fed chief John Williams.

Laura started with a question about the Fed’s state of economy.

Unemployment at 4.2% means full employment by most economist measures.

He called the labor market in balance.

As for growth, it’s steady, and inflation around 2.25% for measures Fed prioritizes.

But…

Uncertainty is the main theme for the Fed, businesses, and consumers.

Right now the Fed’s dual mandate is in balance, but the FOMC is holding because of the uncertainty.

Monetary policy is doing exactly what we want it to do right now.

Business surveys have shown lots of concern about tariffs.

Household confidence has come down.

KEY: Household sentiment (soft data) isn’t in the hard data yet.

Households and businesses are both in wait and see mode.

As for quantitative tightening, we’ve slowed the pace of shrinking the Treasury portfolio, and we’re letting the mortgage MBS portfolio slowly roll off.

He said both portfolio shrinking strategies are expected to remain the same.

The U.S. dollar is still the world’s reserve currency and we believe Treasuries are still a safe haven for global investors.

For foreign investors heavily invested in Treasuries, the U.S. is still a great place to invest.

The U.S. economy is still the most dynamic and high growth globally, led now by tech and AI, and remains safe and sound.

Williams acknowledged volatility from policy uncertainty, but noted that market liquidity and stability remains.

He said liquidity and stability can diminish with volatility but so far, markets are functioning well while digesting volatility.

We’re watching consumer debt delinquency rates very closely.

We’ve seen credit card and auto loan delinquencies rising, which can seem alarming.

But really, so far they’re returning to more historically normal levels.

The COVID era was an anomaly with low delinquencies because of the government relief programs that helped consumers.

Now that these programs are expiring or being rescinded, delinquency rates are returning to more normal levels.

Spending may cool this year.

As for sentiment indicators, this is the soft data that shows consumers being really uncertain.

Businesses involved in anything related to trade are all concerned.

This sentiment is all very pervasive.

We’re already into May, but we haven’t seen much change in hard data yet.

Businesses loaded up on inventory in first quarter.

Imports into U.S. in first quarter grew most in 85 years. But this isn’t a fundamental economy change, this was front loading ahead of tariffs.

KEY: The Fed’s dual mandate goals are maximum employment (low 4% unemployment) and price stability (2% CPI and especially Core PCE).

Are we going to know in June how this is looking?

Not likely.

It’ll take months for this to play out.

And we can be patient as it plays out because Fed policy is aligned with the goals of the dual mandate.

The pandemic period was a huge supply chain disruption which led to consumer uncertainty about certain products.

Supply chains got very strained and it took a long time to normalize.

As for tariff impact on supply chains, we’re still watching very closely to see if the issues are similar or not.

We’re watching how long it’s taking purchasing managers to get goods.

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On housing, we have high home prices and high demand.

So what do we do about supply?

The Fed knows housing affordability is the main issue, which ultimately comes back to supply.

We need to stay engaged with groups like MBA to address supply issues.

But a lot of supply approval bottlenecks are state and local, not Federal.

The role the Fed — and MBA — can play is convening all the stakeholders required to solve this housing supply issue.

Convene and catalyze.

This is the approach Williams said works best.

Laura said her and John should go meet with all state governors on housing supply.

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What gets us up in the morning is full employment and price stability for monetary policy. And bank stability from a supervisory standpoint.

With tariffs, we’re not part of trade and tariff policy.

But we do have great trade analysts on our team to assess today’s issues so we can try to understand how this will play out.

Him and Jay Powell also meet regularly with all their central bank leader counterparts in the rest of the world.

We all learn from each other about how each country’s policies impact each other.

They all know what happens in the U.S. impacts them in some meaningful way.

In economics studies in school, you look at one country. But in the real world, it’s global and interconnected.

We manage this very actively by meeting with our counterparts to understand each other’s economies.

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Great session with Williams.

Very useful to hear a steady and deliberate policy approach from the source.

The MBA Secondary 2025 live blog continues with all the latest mortgage market outlook from MBA chief economist Mike Fratantoni.

Markets recovering after April shock.

But dollar is weaker.

Tariff shock, then relief, then repeat.

We may end up with 10-15% floor.

This means tariffs don’t rise 10-fold but they rise 4-fold.

Will this hurt flight to safety trade where global investors buy Treasuries during rough times?

If not Treasuries, is it gold, real estate, something else?

The Moody’s downgrade doesn’t help this sentiment.

We think GDP slows from 2.5% of last 3 years to more like 1.2%.

Job market outlook from 4.2% now to 4.75% unemployment.

Not terrible, but up from full employment level of 4.2%.

The student loan debt delinquency rate spike is notable, but also the result of pandemic moratoriums expiring.

Consumers strongly expect inflation to rise.

This can become self-fulfilling. That’s what gives central bankers pause — literally, that’s why the Fed is on pause right now.

On the Federal budget, the deficit is 6-7% of GDP and actual debt is 100% of GDP.

We’re spending more on interest on debt than defense.

New tax bill will add $3 trillion to debt.

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We predict 2 cuts this year from Fed, then a hold.

4.5% is average level for 10yr Note for this year.

Yield curve is steepening.

In 2023 the mortgage and Treasury spread was 300 basis points.

We were in 220 range before liberation day, then a spike, now back to 220 basis points.

For awhile, jumbo rates were lower than conforming loans. Now they’re about the same.

Banks putting jumbos on balance sheet is why these loans are cheaper — they don’t have the Fannie Mae and Freddie Mac G-fees.

ARM volume is rising relative to fixed.

ARMs about 10% of new loans by units and 20% by volume, suggesting jumbos ARMs are driving this.

Refinance opportunities are emerging and disappearing quickly with rate volatility.

If we get to 6.5% from 7% now, we’ll see refi surges.

As for purchase mortgages, they’re rising a bit this month.

New home inventory has risen 30%.

Half million new homes for sale now.

Home price appreciation moderating from about 4.5% last year to 1.4% this year.

This is a national figure.

It’s a lot different state by state.

Property tax and insurance costs are creating tougher affordability.

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MBA predicts $2.07 trillion in new mortgage fundings this year.

Growing to $2.4 trillion next year.

This is 5.7 million units for this year and 6.6 million units next year.

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For lender profitability, the middle 2 quarters of last year went profitable after 8 quarters of negative income, and last 2 quarters back to negative (through 1Q25).

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Mortgage delinquency rate 4.04%.

This is really low and tracks with the 4.2% unemployment rate.

FHA delinquency rates are much higher.

Foreclosure starts are very low.

The recent spike in VA foreclosure starts are more a function of moratoriums expiring.

Steve at Santander agrees with Fed stance Williams noted above.

Jeana said Bank of America expects no rate cuts from Fed this year.

Is U.S. still a safe haven?

Steve noted U.S. rates rising after liberation day as bonds sold.

In foreign exchange markets, it would’ve been normal to expect the dollar rally as rates rose, but it did the opposite.

This fuels the ‘sell America’ trade sentiment.

There’s a new sense of caution about the U.S., but it’s more a crack in the armor than it is a fundamental shift.

We must watch closely to see if more cracks appear.

Fiscal concerns about U.S. have been out there for years, and it remains to be seen if/when that gets priced into the market.

Debt to GDP at 100% goes to 117% with new tax bill.

This will create more concern about U.S. safe haven.

Jeana said BofA is generally warm on mortgage bonds.

But demand is sporadic because of U.S. policy concerns.

We don’t think there’s a major shedding of U.S. assets, including mortgage bonds.

Foreign holders are asking lots of questions but not selling MBS.

We are overweight MBS.

NY Fed chief Williams confirmed no change to slow roll off of MBS, which will prevent rate spike.

Jeana also said Ginnie Mae securities are attractive.

KEY: ARM mortgages and securitizations are ramping up as the yield curve is steepening.

She said prepayments of mortgages are pretty benign.

They look at daily rate lock data to make decisions.

Rate drops are short lived so refis (leading to payoffs) are fast and sporadic.

Scott at Brean said 6.5% rates doubles the rate of refi opportunity.

But he said you need a 4% or below 10yr Note yield for this to happen and that’s not in their forecast.

He also said more consumers are getting more used to higher rates.

And builders are subsidizing rates. This is key.

They think the 10yr Note is in a range of 4.2% to 4.7%.

KEY: This means mortgage rates in the upper 6s and low 7s for the foreseeable future.

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Closing remarks…

Steve said as we’re getting further into trade war, we’ve learned the White House cares what the market thinks.

This is important.

Scott said embrace technology to navigate markets.

Jeana said to remember that there is opportunity in volatility.

Next on the MBA Secondary 2025 Live Blog is Ginnie Mae chief Joe Gormley.

Joe has been part of FINRA, HUD, and is organizing Ginnie Mae around 3 main principles:

Stability – We’re only as good as our last pass-through payment. Making sure our operations provide stable markets.

Adaptability – We need to react fast to data security and realtime data. Managing to delinquency ratios and rapid response. This is also related to data.

Efficiency – Cybersecurity is a top priority for us and our program participants. Also digital collateral project is really important — issuers can save $300-400 per transaction with eNotes.

A word on DOGE you don’t hear in headlines is bringing better technology to government and Gormley said they’re looking forward to getting help with tech upgrades.

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Related to DOGE, Pete asked about staffing reductions.

Gormley said current staff levels are sufficient to meet operational obligations.

But he’s also hiring in key roles.

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Ginnie brings investment opportunity to global investors.

We’re seeing lots of interest from global investors in Ginnie MBS issuance.

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On rising delinquency topic, Gormley said they’re watching this closely, especially since delinquency rates have risen as the economy is still strong.

They’re watching 2 key issues related to this to avoid blind spots:

1. Student loan delinquencies rising.

2. Debt not often on credit reports like buy now pay later.

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Does Ginnie Mae want to bring in new issuers?

The new issuer process is rigorous and most don’t make it the first time.

But we don’t want to shrink our issuer base, and we welcome issuers of all sizes.

This dispenses the myth that they don’t want more issuers.

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There are $60 billion in outstanding eNotes and we want to grow this.

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How are HUD, Ginnie, Fannie, and Freddie coordinating?

Gormley is closely in touch with all these teams given his previous experience, he’s got relationships with all these folks.

He talks to these teams weekly.

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What can originators and servicers do to help?

We need information, data, and feedback on what’s going on in the market.

We also encourage lenders to raise up hot topics through MBA.

Pete commended Ginnie for really knowing the business.

The next installment of The Basis Point MBA Secondary 2025 Live Blog is on the state of the Non-Qualified (Non-QM) mortgage loan market.

Non-QM loans are for borrowers who don’t fit agency guidelines.

These borrowers don’t show income traditionally, so non-QM uses bank statements to look at cash flow and reserves.

Non-QM will also look at debt service coverage ratios (DSCR) to qualify borrowers.

You need both securitization and insurance take outs for non-QM loans because securitization appetite can be impacted by market factors.

Underwriting Non-QM loans is science and art.

The science part is accepting Agency (Fannie, Freddie, Ginnie) AUS (automated underwriting system) findings as a starting point then doing exceptions — the exceptions are the art.

This is because Agency AUS systems don’t approve bank statement or DSCR loans.

The self-employed and gig worker segments who need non-QM loans are growing.

Anytime Agency guidelines tighten, Non-QM grows because these borrowers need to be taken care of.

The spread between QM and Non-QM loans was 150-200 basis points but not that has tightened.

Non-QM securitizations have been happening since 2014.

There are hiccups as market volatility plays out.

Non-QM securitizers need to be pretty big and have enough capital to withstand these market strains.

KEY: Non-QM issuance of 2025 may surpass the biggest year ever.

This is a reflection of the economy changing and more borrowers being self-employed and doing gig work.

All of this makes it harder to qualify for traditional Agency QM loans or even private label jumbo loans.

Hence the Non-QM growth.

Beyond securitizers, insurance companies get favorable treatment for Non-QM loans so they make for a good backstop and take out for Non-QM originations.

Insurance companies aren’t as concerned with market liquidity if they believe in the fundamentals of how the loans were underwritten.

This means they’re more likely to have favorable pricing even when there are market disruptions.

As for pricing, everything over 80% loan-to-value ratio (LTV) will have substantially higher rates.

This means there’s not as much of this in securitization market.

It’s also worth noting this means Non-QM is systemically safe because the majority of it is 70% LTV or below.

KEY: This goes back to the borrower quality.

Just because they don’t have perfect W2s, they’ve got money in the bank and mostly make down payments of 30% or above.

These borrowers know they’re paying higher rates than QM loans.

They get the benefit of tax advantages and underwriting methodologies that understand their more complex/sophisticated profiles.

So the borrowers win.

And investors in Non-QM securitizations win because the yields are higher.

Investors are being compensated for this risk because of higher delinquencies than Agency/QM loans.

The reasons for delinquency are mostly attributed to lower credit scores or higher LTVs.

But it’s worth noting that this isn’t innate to Non-QM. These are the same main reasons for higher delinquencies in Agency/QM.

Also, the charge-offs for distressed borrowers are close to zero because there’s real equity in these properties.

One thing the Non-QM sector has done well is maintaining discipline on not loosening approval guidelines.

This is a function of good market structure with investors and ratings agencies not expressing any appetite for looser guidelines at the loan approval/origination level.

Bank statement loans used to dominate Non-QM and debt service coverage ratio (DSCR) was less and now it’s about even because the borrower profiles are pretty balanced.

DSCR is used more for property investors.

75% of DSCR loans have prepayment penalties, up from 50% four years ago.

You can do this because DSCR are non-owner loans.

You can’t put prepayment penalties on owner-occupied loans, which are most of the bank statement loans.

The MBA Secondary 2025 Live Blog continues with new Federal Housing Finance Agency (FHFA) chief Bill Pulte.

Pulte said he was settling into Washington and trying to reconcile the move-fast and take people at their word practices of private sector with government.

As for FHFA main goals he said a clear guiding principle:

If it’s not in the statute it’s not going to continue.

This is an important position because it means a lot of the affordability initiatives at Fannie Mae and Freddie Mac which are regulated by FHFA may change.

Pulte is moving fast and is going to continue to push out his decisions in real time on X/twitter.

He said the mortgage industry has been under-represented in Washington.

He said he’s helping with this because of his resume, and he’s slowly renaming FHFA to the U.S. Federal Housing Agency.

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It can’t be appreciated enough how much inflation hurt the housing market.

So we want to focus on supply, and make mortgages more accessible in a responsible way.

He’s working closely with HUD chief Scott Turner on all initiatives and they talk regularly and are now meeting with mortgage CEOs together to get feedback on housing priorities.

How can GSEs help housing supply?

He said tackling inflation (in the administration broadly, not in FHFA) will help mitigate the lock-in effect and get existing homeowners more comfortable with selling and being able to buy again with reasonable rates.

He didn’t address new construction.

On Fannie and Freddie existing conservatorship:

Pulte said he and Treasury Secretary Scott Bessent talk about this regularly but that president Trump will make the decision.

He was asked about loan level price adjustments, and he said they should be priced for risk.

This was a big debate in the last administration because the LLPA adjustments were more geared to creating affordability.

If LLPAs are priced for risk, does that mean borrowers with less credit history, etc. are considered riskier?

This is the root of the debate that will emerge again when LLPAs are revisited.

That’s the end of day 1 of the MBA Secondary 2025 Live Blog. Will return tomorrow with more.

The Basis Point MBA Secondary 2025 Live Blog Day 2 begins…

MBA CEO Bob Broeksmit makes the case for optimism in housing.

Washington is now focused on deregulation that helps housing.

Pushing HUD to rescind floodplain rule and reduce costs (link here, see page 3)

Also working with Mark Calabria to fix broken policies at CFPB.

KEY: Not everything needs to go and administration is listening to mortgage industry on keeping common sense regs.

At MBA we agree with reverting housing regulation agencies to statutory mandates and no more ancillary add-on regs.

GSEs in conservatorship is on radar of administration but not a top priority right now.

But we will stay in sync with them on this topic to make sure that when private market emphasis comes, it does so without increasing costs for consumers.

We believe a flourishing private mortgage market alongside government-backed market is achievable in a way that lowers consumer costs.

Sonu at Freddie Mac:

50% of 224k borrowers helped by Freddie in 1Q were first time buyers.

Did so by helping 1000 lenders who sell to Freddie Mac.

Main goals are helping borrowers.

Malloy at Fannie Mae:

We provide

194k buyers in 1Q and 50% were first time buyers.

We want to support homeowners long term, not just getting them into the market.

Goal is to help as many borrowers as we can responsibly and in a systemically safe way.

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How can GSEs help lenders?

We are trying to use technology to help make more people homeowners.

Fannie Mae DU automated underwriting engine just turned 30 years old in April!

This is a huge milestone.

$11.4 trillion of volume.

DU 12 was just released with more risk control and is able to help more borrowers.

This includes allowing rental income and cash flow underwriting methodologies.

Condos are another area Fannie Mae is improving.

If a condo is approved in Condo Project Manager, it doesn’t need to be underwritten again.

And critically, this will be integrated into DU so it’s one step.

DU Early Assessment is a way to use soft credit oil to pre-approve leads for viability with an official Fannie Mae screening.

Much higher pull-through with Early Assessment.

Freddie LPA automated underwriting system also has all the things noted about DU above.

They also just launched income calculator for salaried and self-employed borrowers last week.

This will give rep and warrant relief to lenders who use it.

Increasing use of ACE appraisal waivers without compromising systemic safety.

LPA messaging system is helping give advice to lenders on how to get tougher qualifications to qualify.

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Housing Affordability and How GSEs Help

At Freddie Mac:

Products, tools, automation.

Celebrating 20 years of 3% down on Home Possible.

This program stays.

Down Payment Assistance program used by 8000 loan officers to assess down payment programs their borrowers qualify for.

Also working on income, asset, and appraisal tools to help increase loan approvals without creating systemic risk.

At Fannie Mae:

Credit visibility and money at closing table are 2 main issues we’re solving for.

The cash flow underwriting and allowing for rental
Income to qualify factors noted above are key.

Home Ready 3% down program helps with cash at table.

We also allow for $2500 closing cost credit.

We’ve also been on a multi-year journey to modernize appraisals.

Saved consumers $2.9 billion since 2020 with automated appraisals that allow for waivers.

Also trying to do the same with title verifications which would save borrowers $1000 per deal.

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The competition between Fannie and Freddie leads to more innovation.

Fannie Mae income analysis tool has been out since 2023, and this led to Freddie income calculator announcement last week.

This reduces complexity of non-W2 borrowers and allows for more income sources that don’t show up on the 4506-T tax transcripts.

This leads to more qualified borrowers. And it gives rep and warrant relief to borrowers.

Efficiency is a key FHFA mandate for both GSEs, and lenders can save up to $1500 per loan at Freddie with use of their tools.

Another key focus is progress on post-closing issues like reduced buybacks.

Competition is good and helps us serve industries.

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What’s most top of mind?

It’s very apparent from both Sonu and Malloy that Freddie and Fannie are listening closely to lenders.

And it can’t be understated how key MBA is for facilitating interaction between GSEs and lenders.

Laura did a great job asking questions that directly address how Fannie and Freddie are helping lenders help consumers be successful homebuyers and homeowners.

How important is it to have a government backed mortgage market?

More ambiguity is not ideal for markets, and government backed mortgages remove ambiguity.

But government backing doesn’t mean conservatorship. That said, ending conservatorship “isn’t something that’ll happen with a lot of alacrity.”

KEY QUESTION: is it easier to shrink government role in mortgage market while Fannie and Freddie are in conservatorship?

This is a good question PIMCO is getting from customers.

If you release Fannie and Freddie without explicit government backing, they can’t do as much business or be as stable.

PIMCO believes explicit backing of UMBS would need to come with release from conservatorship.

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NOTE: Had to pause MBA Secondary 2025 Live Blog midway through this panel because my panel shown here started right after this one.

I’ll come back and add my session with Rocket and CMG Financial to this live blog.

The next session in The Basis Point MBA Secondary 2025 Live Blog is a panel I’m actually hosting.

The subject matter is teased in the image above.

I’ll come back later and add to the Live Blog.

Or I’ll do a separate post on it next week.

Come back to The Basis Point and check it out!

mPower is MBA’ women’s advocacy operation founded and run by MBA COO Marcia Davies.

Today’s program with Dr. Elizabeth Comen is Marcia’s guest today, and a breast oncologist.

Women tend to outlive men but life expectancy hasn’t moved in decades.

This isn’t a health issue, it’s a policy issue.

QUOTABLE:

Comen opened by saying that “women’s health is men’s wealth.”

She said this because the room today is mostly women, and a lot of men left after the last session.

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She said her cancer patients often don’t ask questions about their own bodies because of societal shame they may feel.

She told a story of a patient who was within hours of passing, and she hugged her, and the patient apologized for sweating.

This prompted her to start asking why women feel this way — even in their dying breaths.

Women’s health history is a key culprit.

It wasn’t even until 1993 that women were included in clinical trials.

It wasn’t until 2016 you had to disclose if lab tests were conducted on male vs. female mice.

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Marcia told a story saying her daughter had a lot of pain and she was at first told she had a low pain threshold.

After too long it turns out she had endometriosis and her doctor said — after the fact — that he should have caught it sooner.

This is a common problem and the health system takes 8 years to diagnose it.

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Myth Debunking

1. Heart disease is less common in women. FALSE.

This is a top killer of women.

2. Women need less sex than men. FALSE.

This myth has permeated medical establishment for generations. Example: pros and cons of women riding bicycles topics being covered in prominent medical journals and tech books.

This is total nonsense that perpetuates myths like this.

3. You only need a gynecologist when you’re of reproductive age. FALSE.

4. Menopause is only for old women. FALSE.

This is about a lack of knowledge about hormonal activity in women. If estrogen is low, which can happen without menopause, you can get help regulating this.

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The medial community and society overall also falsely associate testosterone with men being vital and sharp, and women being temperamental.

Helping cut through this and getting the right advice for women is critical.

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One section in Comen’s book talks about the history of plastic surgery originating in the battlefield.

War fighters who were disfigured were returned to being productive and accepted in society.

Then they realized they (men doctors) could “make women more suitable for marriage.”

This perception — and the pressure to look good — has only been exasperated by media and social media over the decades.

It’s especially tough with the increase of social media selling endless beauty related “snake oils” to women.

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On the topic of alcohol…

2-3 drinks PER WEEK is healthy.

1-2 per day does pose risks.

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Advice to men…

Focus on recognizing women’s health.

Honor the humanity of healthcare for the women in your life.

Know that women often feel like they have to hold in their health concerns, and create safe and open dialog to know they’re supported.

LOL (but seriously) she said that men’s colds are generally worse than women’s.

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How long do you let a doctor tell you you’re fine if you’re not?

In short, both men and women MUST advocate for themselves.

Too often the medical community will try to mitigate or delay rather than treat.

Also critical: you need a friend or family member to help advocate for you, ESPECIALLY when you’re anxious — which you usually are when you’re suffering.

For second lien products, there are market players that enable fast underwriting and approvals.

Are we headed for 2005 “fog a mirror, get a loan” underwriting?

The answer is no, but there is a secondary market appetite for these products.

The supply shortage of housing keeps values up, which makes the collateral WAY better than 2005.

As a proof point to this, U.S. tappable equity is at $11 trillion.

“The situation is completely different” now vs. 2005 because there are no loans with no docs.

Not only is American home equity, the market for high CLTV (combined loan to value ratio) lending is minimal.

Also people aren’t using homes like piggy banks.

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Most common second loan types.

Second lien HELOCs are still most common.

The most common structure is 10 year draw with interest only and 20-year amortization.

And this sits on bank balance sheets.

A 3 year draw product is emerging slowly and will be interesting to see if this gets traction.

First lien HELOOCs are emerging.

Shared equity is another emerging trend.

50% of closed-end second mortgages are 30 year rates. This gives stability for borrowers and lenders alike.

On servicing best practices for second liens:

You live and die by the contract and loan terms.

Why? Because it’s challenging to foreclose on a second lien (compared to a first lien agency product).

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On appraisals vs. automated valuations (AVMs):

There’s only one way to value a property: an arms length transaction between a seller and buyer.

Everything else is just an estimate.

That said, AVMs can mostly perform similarly to appraisals.

There are appropriate times for appraisals vs. AVMs.

In geographies with few comps, one of a kind properties, etc., it’s better to have an appraisal.

And for markets with a lot of like for like inventory, AVMs matter.

Another advantage of AVMs is removing certain human bias.

As technology gets better, AVMs provide more information.

Appraisals are more common and useful for higher loan amounts or lower credit scores.

Also to compete on convenience and speed, you must have AVMs as part of your underwriting mix.

Depositories are 40 days on HELOCs and more innovative players are way faster.

But speed can have rate premium for consumers. However no appraisal fees.

And the higher rates on loan amounts up to $100k don’t change payments that much.

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Health of the consumer…

Higher delinquency rates aren’t necessarily outsized consumer strain, and may be more delinquencies reverting to historical averages as mortgage and student loan debt moratoriums and relief expire.

Related: personal unsecured loans are on the rise. Are they using these for home improvement?

Consumers are very pessimistic given low unemployment rate, and this could be because of inflation they’re experiencing day to day.

QUOTABLE: “I love my mortgage but I hate my house.”

This was said in reference to people who have 4% or below first mortgages, but want to make home improvements.

They have 2 main borrowing choices:

Second lien on their home.

Or unsecured personal loan.

On servicing, the more frequent borrowers take draws on HELOCs, the more expensive they are to service.

Also re-drawers are often a risk factor to watch for in servicing.

Example: people take out funds to do a remodel and then pay it down. Then later they start taking draws and not paying it down.

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This market is different from 5 years ago.

It’s very fragmented and competitive.

An example of the fragmentation is that fintechs that started by doing shared equity programs are now getting into traditional second liens.

And they have all the data, including AVMs, to go fast.

You need speed, process, and price to compete.

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A word on shared equity…

Borrower gets X of cash with no payment and they share in roughly half the home’s appreciation.

Contracts are typically 10 years.

There is about $10 billion in unpaid principal balances in the marketplace.

Regulators have started to study this more closely to determine if it’s safe.

It becomes a regulatory focus when Wall Street is involved, which they are in this case with securitizations.

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NOTABLE: Second liens are more attractive on a blended rate (with first lien) basis than first lien cash out deals.

But when first liens get to 5.5%, they start to become more viable than second liens.

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3 main hot lending themes for 2025-26:

Second liens

Non-QM

Non-Agency

It’s understood that the topic of this panel was second liens, but the other 2 topics go to different trends.

Non-QM is hot as discussed here, from a panel yesterday.

And Non-Agency in general will keep getting more important as the end of Fannie Mae conservatorship becomes more viable — which is likely in the next couple years of the Trump administration.