10.8.26 Trivia Night; Gather Markets’ Wayne Brown on CRA-Eligible Loans; Pushing Rates

Robbie ChrismanWelcome to the Chrisman Commentary Daily Mortgage News Podcast. I'm your host, Robbie Chrisman. Topics on today's episode include some industry trivia. Remain calm and pay attention to actions out there. And my interview with Gather Markets’ Wayne Brown on recurring challenges for banks and originators in finding, matching, and efficiently processing CRA eligible loans. Here, take a listen to a little preview.Robbie ChrismanWhy are finding the right CRA eligible loans so difficult? Why is it so hard?Wayne BrownYeah. So, you know, a lot of times the banks might not have those types of relationships. They've got a lot of relationships in their area. They have business partners, they they know everybody, and let's just say you're in the mid-Atlantic. You know everybody in the mid-Atlantic. But if you're lending in 30 states, you might not have the bandwidth and the relationships across all 30 states to be hitting on your CRA goals. And then God forbid, you actually acquire somebody these days and you want to go out now and lend in those areas, same CRA requirements are still going to exist. So we come in basically, we're not saying that we're going to help you with every CRA loan that you have, but I think where we kind of come into play is the supplementing piece. So the areas where you can't already build it yourself or don't have those relationships yourself, we can be a player there and help you kind of build those.Robbie ChrismanThanks for 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. My friend is an EMT, and she's amazing on trivia night. She's usually the first responder. But um shh. The United States is full of trivia. Did you know that part of Florida is in the central time zone? Fourteen states are actually in more than one time zone. Do you know what Brad Pitt, Tom Cruise, Kiana Reeves, and Michelle Pfeiffer have in common? They can all qualify for a HECM, aka reverse mortgage. Last time I checked, about 10,000 people a day turn 62. If you don't have a HECM division or a HECM product, your company should consider one. What isn't so trivial are volumes, both in dollars and units. KBW's Bose George expects mortgage origination volume in the third quarter to be down around 10% quarter over quarter. Currently, the MBA is forecasting the third quarter down 8%, and Fannie Mae is forecasting it down about 7%. Agency's securitization volume was down 9.3%. We can expect gain on sale margins to be flat to down modestly. However, sharp increases in rates can make pipeline hedging more challenging as fallout can come in lower than expected. We're reducing our estimates for the mortgage originators to incorporate these trends, and our forward estimates are also declining to reflect industry volume estimates for 2027. Buckle up. The expansion of Vantage Score 4.0 across Fannie Mae and Freddie Mac marks a significant step in credit score modernization, but it also raises concerns that greater flexibility could encourage credit score shopping and weaken underwriting discipline. So far, however, the data show a gradual, not dramatic, increase in lower credit borrowers. Sub-700 FICO loans represent 11.4% of 2026 UMBS 30 issuance year to date, the highest share since 2023, while sub-620 loans remain only 1.2% of total volume. For investors, the key takeaway is that lower FICO borrowers remain a relatively small segment and FICO pools are not expected to flood the market. But credit quality warrants close monitoring because lower scores are strongly associated with higher severe delinquency rates, meaning the rollout of alternative scoring models should expand axes without becoming a backdoor mechanism for materially weaker underwriting. Despite politicians seeming to turn a blind eye to some of this, in the United States, fixed income securities, which include most bonds, are being impacted by a risk cocktail. That includes an unbalanced artificial intelligence boom, prolonged energy shocks from oil, and record high U.S. global debt. Despite words to the contrary, Treasury Secretary Scott Bessent has faced mounting economic policy changes since taking over as Treasury Secretary in 2025, including persistent inflation, soaring government debt, and a turbulent bond market. His signature 333 policy goals, that's cutting the deficit to 3% of GDP, achieving 3% growth, and boosting oil production by 3 million barrels daily, have largely fallen short, with growth stagnating near 2% and the deficit surpassing 6% of GDP. Unfortunately, there appears to be little help on the way. Yesterday was another roller coaster day for rates. The 10-year Treasury briefly sold off to 5.36% before recovering to finish near 5.28%. A strong 10-year auction, which drew above average foreign demand and stopped nearly two basis points through the when issued yield, despite offering the highest auction yield in almost 26 years, along with the Fed minutes, provided little resistance and weaker oil and stocks helped ease pressure. The September FOMC minutes reinforced a hawkish data dependent stance. All 19 officials supported the September hike. Most saw another increase as appropriate by year-end, and inflation risks remained tilted higher. However, the lack of urgency regarding October pushed implied hike odds down to 17%. With inflation and oil prices still elevated and the Fed likely to keep policy restrictive until it sees clearer progress toward 2% inflation, 30-year mortgage rates climbed to 7.49%, their highest since November 2023, adding further pressure to housing affordability. Persistent fiscal deficits, heavy issuance, elevated oil prices, and geopolitical risks are keeping pressure on longer-term rates, while the yield curve remains biased toward further steepening. The front end is relatively range-bound as the Fed shows little urgency to hike in October. MBS finished yesterday slightly weaker in the belly, with fours to five and a half underperforming, and trading volume reached roughly $140 billion. Strong demand at recent shorter and intermediate term auctions provided some reassurance. Looking ahead, today's $22 billion, 30-year reopening, and next week's CPI are key tests. Oil, European bond market volatility, auction demand, and geopolitical events represent the main risks, although strong money market demand suggests treasury supply has yet to create meaningful funding stress. For today's interview, I wanted to welcome to the show Gather Markets’ Wayne Brown to talk about recurring challenges for banks and originators in finding, matching, and efficiently processing CRA eligible loans, leading to Gather's focus on using data, technology, and compliance infrastructure to connect the right loans with the right bank buyers. Gather was conceived and built by Wayne, a career mortgage banking professional with deep roots and community lending, correspondent finance and CRA program design. He spent decades at the intersection of regulatory obligation and capital markets execution, and Gather is the platform he always needed but could never find. Every workflow, every data field, every matching rule reflects the lived experience of someone who has sat on both sides of this market.Robbie ChrismanWhen we hear the phrase CRA compliance, or even CRA eligible mortgage out, CRA, which is the Community Reinvestment Act, what should people be thinking about? What should be top of mind? Let's start from the beginning. Start with some background here on CRA.Wayne BrownYeah, and I think it's it's kind of funny if you think about it, you know, because it's not as easy as regulators are not saying, okay, you need to go out and originate 100 CRA loans. They're really looking at for each bank, you know, are you lending in your footprint? Who are you lending to, and what type of product are you lending out there? So it'd be nice if they would tell you how much, but really it's more of along the lines of are you really kind of doing your due diligence and making sure you're lending in the right areas to the right borrowers that really need the most help? And that's when we're talking about CRA. That's really what we're focused on are those loans, the low to moderate income, typically loans that really help the borrowers the most and those folks that need it the most.Robbie ChrismanSo your background is in valuation and tech. What was intriguing to you about Gather working in this space? And sure, you talk Gather origin story or how the name came about too, but just some some background on Gather and why the opportunity is intriguing.Wayne BrownYeah. So, you know, so I've been in the business for a while, uh, 25 plus years. And that goes all the way back to I was at Freddie Mac back in the late 90s, all the way through the kind of 2010. And I was working with a lot of banks back then. And it was funny because even then the need hasn't really changed that much. It's still difficult to find CRA partners out there. And so I would go out and talk to lenders. It was always an issue. And it's just something that over the years I've thought more and more about. And now finally we have the opportunity to really kind of resolve that problem. And that's, you know, see the gathered platform. It's kind of matching up those banks with the IMBs that they may not have relationships with in the past.Robbie ChrismanYou've seen originators struggle with this, you've seen banks struggle with this. Can you talk about why and and just what you're solving for here?Wayne BrownYeah, and you know, a lot of times with originators, they may not even know they have CRA loans. So you take an originator, this is just kind of historical. If you take an originator's pipeline, historically you're going to see between 20 and 25% of their loans would meet CRA goals. But if you're an IMB, you probably don't even care about that. You're all about, you know, let's make the most money off those loans. So this gives you the opportunity to tag those loans early and loans where you can make a bigger margin. So in these days, as we know, with volume shrinking, margin is everything. So from an originary standpoint, it solves for, hey, how can I increase my margins, get a better price by bulking these CRA loans up and selling them? The flip side of that is the banks. The banks are gonna go out there and they're gonna know which areas they tend to struggle in, and whether it's something maybe where they just opened up a new location and they don't have a bricks and mortar shop there, they don't have retail folks there. This allows them now to say, okay, working with Gather, we need 50 loans in St. Louis, and we need another 25 loans in Los Angeles to help us meet our CRA goals. It's thinking very refined and working with us and what they need, and we'll go out and find it through the seller population.Robbie ChrismanI don't want to belabor the point too much here, but why do banks and originators struggle to find each other, even in this technological age that we're in?Wayne BrownAnd when you say find, it could be I think it's twofold. So it's find, and then it's also go through the compliance and vendor management that happens at banks to in order to be approved to do business with another lender, right? So one of the nice things with gather is it's just a one-to-one relationship between the seller and gather, and then gather and the bank. And so you don't have to go out, you don't have to go out and find 20 different banks across the nation, or 20 different IMBs across the nation who are lending in the footprint you need. It's a one-stop shop. So I think it really not only eliminates a lot of that time that you've put in in the past into kind of the vendor management and compliance piece, um, it really allows you to be much more tactical in what you're buying, right? You can get down to the zip code, census track level by letting us know where your requirements are. We'll map those within our technology and then just show you the loans that are available.Robbie ChrismanAnd you also have IMBs as customers, is that correct?Wayne BrownWe do. Yeah, the IMBs are the sellers, so they probably don't care as much about CRA. A lot of them are originating it, just de facto, these are the loans they're doing. And then turning around and selling them to the agencies or maybe selling them to the correspondent world. Now we're just coming in and saying, you know what, that's still great. Before you do that, let us take a look and see what if your population would be considered CRA eligible and which one of those loans would actually target some of the bank axes that we've seen on our system.Robbie ChrismanWhen we think about this from a secondary marketing perspective, what problems does it solve with secondary? And I guess since probably people listening to this are on the ops side of things, what ops problem does Gather help solve?Wayne BrownYeah, so on the secondary side, the way the transaction works is very much like a mini bulk sale. So in these world, you know, if you've been in capital markets for a while, you're familiar with, you know, sending out a file or sending out a tape, having somebody take a look at it and put a price on it. Gather works the exact same way. In this case, what we're gonna do is we're gonna say, okay, you sent us 100 loans. We're seeing 20 of those loans CRA eligible or wanted or requested by certain banks. Those banks will then put a price on it, we'll send it back, and you can hit it or not. So basically, it works almost like a mini bulk today if you're familiar with selling to the correspondence.Robbie ChrismanYou talk about matching and what happens once a match is found.Wayne BrownYeah, so it basically speed dating. Right. We the nice thing is we've we've put all of the bank axes in previously. So as we approve banks, we're gonna work with them and say, okay, provide your you know, 10 zip codes that you're looking for business in. We'll go ahead and map those out. So it makes it much very seamless. So as loans run through our model, the technology is constantly just paying it and saying, okay, we have a CRA loan. This CRA loan is eligible for ABC Bank. Hey, we've got another one. This one hits the criteria for you know whoever it is. So it really does kind of streamline that process from an IMB standpoint. You're just showing us a file from a bank standpoint. They're just seeing the loans that hit on the axes they provided us. And those axes may change over time. So we have lenders that have come in and say, okay, help us fill for the southeast. That's where we are, and we're short right now. Help them fill that. And now we've opened up a branch in LA County. So we need some help out there. So it could, those axes could change over time, and we can adjust pretty quickly. So that helps us kind of stay, you know, relevant and helping both the banks and the IMBs.Robbie ChrismanThis reminds me of like the IRS, where the IRS is like, we know how much you owe us, but you have to get it correct and then submit it, and then we'll see if you get it right. Like CRA to me seems kind of similar of like, yeah, maybe it's right. We'll see, you know, that sort of thing. Are you doing the right loans? Well, time will tell. So which is frustrating, but I mean it's how the government works. You talk about why data and the compliance record matter so much.Wayne BrownYeah, it's funny because that's actually one piece that I think a lot of folks miss the compliance piece. So when you're selling a loan CRA, not only are you, you know, wanting to get the credit for it, but you need to document that that transaction to show, to your point, that it was a low or moderate income borrower. So the gather technology will do all that for you. So that's an important distinction. And I think it's something that some banks have missed in the past. They've been so focused on let's just hit the loans we need to buy, that maybe haven't spent the time to have that audit trail in place to say, hey, when a regulator does come in, or when someone comes in and I need to show them how I've been lending in my area, how I've done it.Robbie ChrismanSo you'll have to forgive me for making another crude analogy here, but you mentioned kind of this matching service. I think of dating apps where it used to be like, all right, they just show you people and you're like, no, no, no. It's gotten to the point where like if you're wearing a uh, you know, I don't want to say Confederate hat. If you are if you are wearing a Dale Earnhardt shirt, there we go, they're probably gonna match you with a girl in a you know a Dixie bikini or something like that. Algorithms have gotten a lot better. And so I want to ask you in this case, how much of what we're talking about here is about the technology?Wayne BrownA lot of it is. So, really, if we can't do multiple trades a day, we're not successful. You know, if we can't meet that bank's criteria, if it's gonna take us a month just to match it up with a seller, we failed. And so it's all about the technology. So the nice thing in partnering with Black Lake is that they have the technology in place where we can just take a data file, quickly crack it. So even if it's our first file from a seller, we can crack it within minutes. And then going forward, it's seconds. And then as far as the bank axes and different gyrations of what they want to buy, that would take us maybe about 10 minutes, 15 minutes to get everything built into the system. And from there, it just runs itself. So the nice thing is it really is an auction platform that's kind of self-contained, what you have the seller and the bank set up.Robbie ChrismanI don't want to gloss over Black Lake too much. Obviously, they're your partner, Black Lake Investments. What do they bring from your perspective?Wayne BrownYeah, so Black Lake basically brings all the technology. So we have two partners in this. We have Black Lake on the technology side, and then we have Texas Capital Bank. And Texas Capital is basically the counterparty that both the IMB and the bank will be facing when they sell those loans. So IMB sells to Texas Capital, Texas Capital, straight to the bank. And that's where earlier I had mentioned that one-to-one relationship. That's what allows us to do that. Behind the scenes, the Black Lake technology is doing all that workforce, it's doing all the tape cracking, which, as you know, from the capital markets world, can really be a heavy lift. It's doing all of the auction and bid processing, it's taking all the pricing algorithms that we have, looking at all the axes for the banks, and then showing the banks the available population, handling the commitment piece all the way down through the servicing transfer at the end. So, really, it is a fully automated process and platform.Robbie ChrismanPeople can learn more at gathermarkets.net. It is the first end-to-end institutional platform for sourcing, pricing, trading, transferring, and settling CRA eligible mortgage assets from the originator to the bank balance sheet. Final words, thoughts on what this journey's been like, what lies ahead? I'll give you the last say here.Wayne BrownYeah, no, so it's been exciting. You know, so so we we've launched and we'll be in Chicago, first of all. So any banks out there that want to meet up, that have CRA needs, let me know. Would love to meet up with them in person. But you know, we're looking forward to 2027 when we really get this thing fully kind of rolling along and just excited to be here today.Robbie ChrismanVery cool. Wayne, well, I look forward to seeing you at MBA Annual in Chicago. Best of luck with Gather, and I'm sure we'll talk again soon.Wayne BrownGreat. Thanks, Robbie.Robbie ChrismanToday's economic calendar includes updates on weekly jobless claims, August wholesale inventories, remarks from Fed Governor Waller, and a treasury auction of $22 billion of 30-year bonds. We begin the day with agency MBS prices worse than Wednesday's close by an eighth to a quarter, the two-year yielding 4.81, and the 10-year yielding 5.34 after closing yesterday at 5.28%. Let's wrap up with a joke and some housekeeping. Light travels faster than sound. That's why some people appear bright until you hear them speak. Thanks 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.