If you really think housing is in short supply, why are there “81 markets where home prices are falling”? Instead, let’s agree that there is an imbalance as all real estate is local. The Census Bureau’s 2025 Population and Housing Unit Estimates show continued U.S. population growth driven largely by strong international migration, with the national population reaching roughly 341.8 million as of July 1, 2025, up more than 3 percent from the 2020 Census base. Growth remained concentrated in the South and Mountain West, where states benefited from domestic migration, job expansion, and relatively affordable housing, while parts of the Northeast and Midwest saw slower growth or modest declines. Large metropolitan areas regained momentum after pandemic-era slowdowns, supported by immigration and renewed urban job growth. The housing unit estimates also pointed to ongoing expansion in the nation’s housing stock, particularly in fast-growing Sun Belt markets, although construction growth continued to lag long-term household formation trends in many regions, reinforcing ongoing housing supply constraints and affordability pressures across much of the country.
Non-compete and non-solicitation contracts: tread wisely
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Attorney Troy Garris discusses the Federal Trade Commission's rule banning non-compete agreements is dead. But the reports of that “death” may be greatly exaggerated. The FTC is still targeting companies that use non-competes and certain other restrictive covenants it views as anticompetitive, and a recent warning letter to a company in the industry proves it. “The warning letter makes clear that the FTC is focused more broadly on ‘noncompete agreements or other restrictive covenants.’ Non-solicitation agreements (which are common across the lending space) fall within that category.”
The California MBA and wildfire rebuilding
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The California Mortgage Bankers announced its strong support for Governor Newsom’s $100 million allocation for the Southern California Rebuild Fund included in the “May Revise” budget proposal as advancing wildfire recovery and practical financing solutions.
“The proposed funding would help expand access to construction financing for homeowners impacted by the devastating Southern California wildfires by providing lending support designed to bridge the gap between insurance payouts and the actual cost to rebuild.
“California MBA strongly supports the Governor’s proposed investment in the Southern California Rebuild Fund because wildfire survivors need more than temporary relief, they need realistic pathways to rebuild their homes and communities,” said Paul Gigliotti, CEO of the California Mortgage Bankers Association. “Many homeowners are facing a major financing gap between insurance coverage and actual reconstruction costs. This proposal recognizes that challenge and creates meaningful tools to help families access financing, move forward with rebuilding, and return to their communities.”
California MBA has been actively engaged with the Governor’s Administration, legislators, state agencies, and industry partners since late last year to help develop practical recovery solutions for wildfire survivors. The association has advocated for policies that support consumers, while aligning with federal servicing standards, investor requirements, and the practical realities of mortgage lending.
Under the proposal, the Rebuild Fund would be administered through programs intended to leverage private capital and improve access to reconstruction lending for disaster-impacted homeowners. Proposed tools include a loan loss guarantee program, interest rate buydown assistance for reconstruction loans, and potential subordinate financing and other mortgage assistance tools.
California MBA and participating industry partners have also supported development of a new consumer-facing online portal powered by Prudent AI. The portal will help connect homeowners with participating lenders and available recovery resources by collecting borrower information and comparing it against lender matrices from participating construction lending partners, including CMG Financial, and Guild Mortgage, to match consumers with the lender best suited to provide a construction loan based on their profile and rebuilding needs, with insights informed by data provided by Cotality.
“We are proud that California MBA has been engaged as a constructive and solutions-oriented partner throughout this process,” Gigliotti said. “We are committed to helping develop real-world solutions that support homeowners, enhance communities, and strengthen responsible lending practices.”
The Governor’s revised budget proposal now moves to the Legislature for consideration as part of the state budget negotiation process ahead of the June 15 constitutional budget deadline.
Home equity investments: a slice of someone’s home…
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Matt Levine had some thoughts on home equity investments. “Companies can raise money with debt, or with equity. If you use debt, you have to pay back the amount you borrowed, with interest. This is expensive for you if things go poorly: If you borrow $1 million to invest in your business, and your business doesn’t make any money, you still have to pay back, say, $1.1 million, and how will you do that? You might have to default, file for bankruptcy, etc.
“If you use equity, you don’t have to pay back any fixed amount, but you give up a share of your business. This is expensive for you if things go well: If you raise $1 million by selling 10 percent of your company, and your business goes amazingly well and makes $20 million per year in profits, the person who bought 10 percent of your company gets $2 million a year, even though she only gave you $1 million to begin with.
“Companies can raise money with debt, or with equity, but most other things can only be financed with debt. You can put a sandwich on a credit card, but you can’t get a venture capitalist to give you $1 for a 5 percent stake in your sandwich. This is quite untidy, and people who work in the financial industry (where everything can be financed with debt or equity) are often bothered by it. “Shouldn’t people be able to finance _____ with equity,” they constantly muse, and then launch companies to fill the niche. We talk about this a lot. The two main versions are, ‘Shouldn’t people be able to sell stock in themselves,’ and ‘Shouldn’t people be able to sell stock in their houses?’
“[Regarding houses], Bloomberg’s Patrick Clark and Prashant Gopal report on home equity investments: It’s a rapidly growing segment that’s attracted Fortress Investment Group, Carlyle Group Inc. and Bain Capital as backers in various forms. Private credit giant Blue Owl Capital Inc. said in December it plans to deploy $2.5 billion into the contracts in the coming years, one of the largest commitments yet.
“For investors, the agreements are a lucrative way to tap into the $34 trillion that Americans have tied up in their homes, turning future price gains into a new stream of returns. For homeowners, they can mean giving up a large share of the appreciation that would otherwise build long-term wealth, and, in some cases, owing far more than they initially borrowed.
“Yes, right, the defining feature of financing something with equity is that sometimes you ‘owe more than you initially borrowed.’ Everyone understands that when a company issues stock. But when a person sells equity in her house for money, (1) she doesn’t necessarily understand that and (2) it’s not exactly equity:
“In February 2025, the Massachusetts Attorney General’s office sued Boston-based Hometap, saying that its contracts amounted to predatory loans designed ‘to strip that home equity away from vulnerable consumers.’ Hometap Chief Executive Officer Jeffrey Glass declined to comment on the specifics of the lawsuit but said that he’s aligned with regulators on some key points, including the need for consumer education and government oversight.
“Unlike a credit card with a clear interest rate, the true cost of an HEI is opaque, like a financial time bomb that only detonates years later when the homeowner realizes exactly how much of their future they sold off, said Ken Johnson, a real estate professor at the University of Mississippi.
“As HEIs proliferate, even basic questions about the products can be difficult to answer. The industry argues that they are investments, not loans, emphasizing the lack of monthly payments. But when it comes time to pay, the maturity date, lien on the home and threat of a forced sale make the distinction harder to draw.
“The National Consumer Law Center calls them ‘subprime mortgages’ with predatory rates, disguised to bypass laws designed to protect consumers. In a 2024 consumer alert, the group called the terms of the contracts confusing, and said the true cost of an HEI requires making difficult calculations about rates of real estate appreciation and inflation a decade into the future.
“Two points here. First, while it is genuinely impossible to sell stock in a person, it’s not actually that hard to sell stock in a house. You know: Form a shell company, buy the house in the company’s name, give the homeowner 80 percent of the stock of the company and the HEI investor 20 percent, give the homeowner management rights (she can sell the house, etc.) and the investor some governance rights, etc. I gather that HEIs mostly don’t work this way in part because it is administratively annoying (you have to form a company, it might be harder to get a mortgage on a house owned by the shell company, etc.) and in part because actual HEIs do have some rather credit-like features to make them easier to securitize.
“Clark and Gopal note: It’s not hard to see why the contracts would have investor appeal. Point, as one example, calculates the amount that its borrowers pay back as a percentage of the change in home value over the life of the contract. But it discounts the starting value of the home by about 15-30 percent, securitization documents show.
That feature virtually ensures that investors make money. A DBRS Morningstar analysis of 2,700 Point contracts showed that more than 98 percent generated positive returns for investors. The Urban Institute, meanwhile, found that an underlying home could decline in value by 3 percent annually for six consecutive years and a Point contract would still be in the money. Hometap offers investors even more protection, Urban Institute found.
“Point cofounder Eoin Matthews said the investor protections built into the contracts are a prerequisite for lining up the capital that funds homeowner advances. That's especially true for money flowing into HEIs through securitizations that have been vetted by ratings companies, where memories of the subprime mortgage crisis are still fresh. Right, if you are getting money from investors in an investment-grade-rated securitization, it’s not exactly equity, is it?
“Second, I do think that people here are genuinely talking past each other. I am convinced that everyone who has ever started a ‘sell stock in your house’ company (or a ‘sell stock in yourself’ company) was motivated by a genuine, possibly slightly naive belief that people should be able to sell stock in their houses. And then life intervened and they ended up building a product with a preferred return and a maturity date that they could sell into a rated securitization, fine fine fine, but in their hearts they all believe that they’re buying equity in people’s houses. And then when the homeowners say, ‘We have to pay you far more than you initially gave us,’ they are reply, ‘Right, yes, that is how equity works, what is the problem?’” Thank you, Matt.
Opinion on False Claims, HUD, and what may be in store
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A while back I received a note about how HUD may allow the return of the False Claims Act “Monster.” “Rumors suggest multiple new sealed FCA lawsuits against FHA lenders are emerging, potentially violating the 2019 HUD-DOJ Memorandum of Understanding by punishing lenders for technical/ immaterial non-compliance via FCA liability rather than HUD's normal administrative remedies.
“The 2019 Agreement reserved FCA liability for egregious fraud, calling for HUD to instead use its normal administrative enforcement powers to enforce compliance with its rules. As a reminder, whistleblower FCA lawsuits in the mortgage are predatory tort litigation in its most dangerous form. With unlimited treble damages and penalties for technical violations, sleazy law firms see FCA lawsuits against mortgage lenders as a career-ending lottery ticket. Before the 2019 Agreement sent them into hiding, such firms had significant success in weaponizing it, turning good-faith underwriting errors into taxpayer-funded windfalls.
“Secretary Ben Carson declared the post-2008 FCA ‘monster’ ‘slayed’ after it drove major banks from FHA lending (depository share fell from ~50 percent in 2010 to <14 percent). JPMorgan CEO Jamie Dimon noted a major FCA settlement ‘wiped out a decade of FHA profitability,’ making it ‘risky and cost prohibitive for many banks.’
“If these sealed cases are real, HUD may be quietly retreating from previously agreed upon protections, potentially chilling FHA lending and harming low-income/first-time buyers. This trend could undermine the FHA program and further restrict access to credit for low-income/ first-time buyers… See Atlanta Fed's 2024 paper on past FCA litigation: "Government Litigation Risk and the Decline in Low-Income Mortgage Lending".
I received this note from a retired industry vet who had worked for a large, well-known correspondent investor. “I appreciate the walk down memory lane on the FCA issue. I remember when the MOU came out and the 15-minute discussion I had at the time about whether we should reenter FHA lending. Good times!
“I also remember the first edition of that FED paper. The conclusion at the time was that the MOU was not worth the paper that it was written upon and that, yes, bank lending was restricted by the pursuit of FCA claims. I don’t imagine the current administration will be pursuing anything in the space given the contradiction it would create with current housing policies, and their inability to focus on hard problems. Also, I think the DOJ, which is where these matters need to be pursued, is somewhat tied up right now with the Epstein files.
“I think the main jurisdiction for FCA is SDNY because the lending contracts are based in New York law, but I could be wrong about that understanding. We were sued by SDNY, as you might remember, to the tune of $2.1 billion dollars and yes this represented in excess of 10 years’ worth of profit on our FHA production. Hedge performance on the FHA MSR book was our savior. In my experience the HUD team was not very interested in the false claims’ issues given that they understood how things actually work in practice. Now I think the investigative team has been gutted, so I am not sure there is anyone looking at the fraud issues much these days. I have not seen many enforcement actions coming out from HUD.
“All this being said, the FCA machine can get turned on in a moment’s notice given a high motivated DOJ prosecutor since there is not really a statute of limitations when they use the FIRREA provisions. (Not sure how FIRREA applies to non-banks; it might be worth a discussion with a good mortgage attorney.) I personally like the view from the cheap seats better than the one I had in the fire.”
AI… it’s being discussed everywhere, even on Saturday Night Live.
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