10.26.26 Politics and Lending; Stellar Innovations’ Anish Thomas on Fulfillment; Competing Rate Forces

Chrisman Commentary Daily Mortgage News PodcastInterview: Anish Thomas, Stellar Innovations Robbie Chrisman:Welcome to the Chrisman Commentary, Daily Mortgage News Podcast. I'm your host, Robbie Chrisman. Topics on today's episode include the intersection of politics and residential lending. Will a slow housing market or slow economy help rates? In my interview with Stellar Innovations and Anish Thomas on combining deep industry expertise with AI-driven technology, human oversight, and secure customizable workflows to help lenders accelerate loan closings, improve operational efficiency, and scale flexibly without compromising compliance or data security. Here, take a listen to a little preview. If I'm a lender or title company out there, how do I choose a strategic partner? I hear of all these companies, they all say amazing things. How do I actually choose who I want to work with? Anish Thomas:Nice question. I mean, 20 years before, if you would have asked me this, Robbie, it would have been okay, everybody was looking at the cost arbitrage, their coverages, their cycle time reduction. Today, when I sit with forums, the good part is, I mean, the doors have opened. So that's the opportunity that I'm excited about. I mean, everybody wants to listen into these new buzzwords. Selection process, if you ask me from a lender or my client perspective, that they look into today is more data controls and efficiency protocols based on okay, how fast it could be done, but how accountable you are for the results too. So that's the guideline that I see in the selection process with the lender and with my title and my tax clients that they currently engage and look forward to. Cost arbitrage is still a value-added question that comes in, but I see that arbitrage just fading out and it's more value proposition. I will give you a scenario wherein I'm working with one of the lenders who has an origination to closing cycle about four weeks on their equity product. And that's when I mean I'm positioning Clara for them on a lot of their equity product closing, when I can reduce their cycle time by half 50%. I mean, so that increases their loan intake capability and closing thing, and they're willing to pay that premium. It's not that they don't because they are invested interest is to get more closings. So that's how we complement. So if you ask me today, more than the cost arbitrage, it's the value addition that any vendor partner or technology partner brings to the table, is what my client base is looking at. Robbie Chrisman:Thanks to today's podcast sponsor, FICO. As the industry's most predictive credit score, FICO Score 10T combines proven performance with deeper insight into borrower behavior to help support a stronger and more resilient housing finance system. To learn more, visit FICO.com. We have a little over a week until the election, but things have been heating up for a while. In the intersection of politics and residential lending, there was another round of Freddie Mac layoffs last week. And we also had last week's executive order, hoping to eventually help affordability. Before that, Dan Gilbert and Rocket Mortgage found themselves in the press by donating ten million dollars the trust for the national mall to the Donald J. Trump ballroom. Talk of the Department of Justice declining to investigate antitrust charges due to acquiring two competitors arose. That's Redfin and Mr. Cooper. Half of readers of the commentary or listeners of this podcast will applaud Rocket and Dan, half won't. But wish they had that kind of money. Certainly, Dan and Rocket should be lauded for improving the Detroit area. Speaking of things in the press, the alleged Baltimore mortgage fraud ring that drove hundreds of homes into foreclosure is back in the courts. Our industry has enough to deal with, what with the higher rates constricting business? Some are suggesting that our industry is going through acceptance in terms of the five stages of grief. Denial, anger, bargaining, depression, and yes, acceptance. Agency mortgage-backed securities and debt issued by the U. S. government pulled back price-wise Friday as oil prices climbed, and concerns over AI-related market risks and potential French sovereign credit downgrade kept investors cautious, intensifying inflation fears and uncertainty over central bank policy. However, the sell-off was not enough to prevent a third consecutive weekly gain for treasury prices following Thursday's rally. Bond markets faced conflicting forces. Persistent inflation, increasingly hawkish global central banks, expanding fiscal deficits, and rising government bond yields threaten to push long-term rates higher. While concerns over technology valuations and AI capital spending periodically trigger safe haven demand. Last week's rally appeared driven more by short covering, futures positioning, and safe haven demand than by a fundamental improvement in inflation or deterioration of economic conditions. For mortgage lenders and pipeline hedgers, falling rates offer borrowers some relief, but increase the risk of lock renegotiations, fallout, and hedge losses, particularly because mortgage rates have not declined as much as benchmark treasury yields might suggest. Meanwhile, the housing market continues to deteriorate, with pending home sales plunging 7.3% in September, housing starts falling 5.2%, builder confidence reaching its lowest level since 2012, and mortgage applications declining as affordability remains strained. President Trump's new executive order seeks to reduce housing costs by making the GSE title waiver program permanent and directing FHFA to consider additional refinancing relief, including appraisal and income verification waivers, potential loan-level price adjustment reductions, and proactive mortgage insurance cancellation pilots. Although these measures could eventually lower refinancing costs, their discretionary nature and uncertain implementation timelines introduce additional prepayment and negative convexity risk for mortgage-backed security investors. Despite elevated mortgage rates making traditional refinancing unattractive for most homeowners, cash-out refinances should continue to see volume as financially pressured borrowers tap into record high home equity to meet expenses. U. S. homeowners hold approximately $36 trillion in equity, $12 trillion of which is tappable. And although refinance sourced mortgage issuance has recently declined, cash-out loans accounted for 57% of refinance issuance in September. With projected 2027 net issuance of $200 to $225 billion, cash-out refinancing is expected to remain a meaningful contributor. For agency mortgage-backed securities investors, this creates potential prepayment risk, even in discount pools, as borrowers facing financial pressure may refinance despite unfavorable rates. Identifying pools with elevated cash-out propensity involves focusing on loans at least 12 months old, current loan-to-value ratios comfortably below 80%, and lower borrower FICO scores. Lower FICO, lower LTV borrowers are more likely to execute cash-out refinances and may prepay faster than comparable borrowers who do not extract equity. Remember that prepayment behavior is driven not only by interest rate incentives, but also by borrowers' liquidity needs, making borrower characteristics and financial pressure important factors when assessing prepayment speeds and mortgage-backed security valuation. For today's interview, we wanted to welcome to the show Stellar Innovations and Anish Thomas to talk about combining deep industry expertise with AI-driven technology, human oversight, and secure customizable workflows to help lenders accelerate loan closings, improve operational efficiency, and scale flexibly without compromising compliance or data security. Stellar Innovations provides technology services for mortgage title and tax delivering and then technology service from automation to AI to application modernization and enterprise platforms. Purpose-built to fit your systems. Frequent readers of the Chrisman commentary have seen Stellar Innovations all over now. And you've kind of hit the scene with a splash. You just talk about what Stellar does, the opportunity you saw, and what's so compelling about the space? Anish Thomas:Robbie, I mean, Stellar Innovations, I would treat myself as a very young company. We are 10 years old in the business existence, but our play field has always been the real estate financial services sector, and a lot to do with mortgage, title, and tax. when we started, yeah, I mean, our it was a humble beginning with 50 people, one client. Today we are at 1800 resources spread out with two delivery centers in India, one in Dubai, that's where I am right now. And we have our corporate office in Maitland, Florida, that's where my home base is. what is exciting about this domain and this thing is the constant pitch and the constant need to innovate and execute. And right now, Robbie, is the perfect time wherein I'm not nervous, I'm more excited about the disruption that is happening, just not in the market sector. I mean, in every sector attribute that you look at it, right? So that is where which is more exciting for us. And that's where Robbie to take pictures, pick your word. I mean, the splashes are happening. We have some really great initiatives coming under Stellar, which is tech-driven, which is AI-driven, and that's what I'm super motivated about. Robbie Chrisman:So it's not only tech and AI, but there's deep expertise. And at a lot of the discussions that I have, yeah, there's these really smart kids coming out of Princeton or Stanford, and they think they can disrupt mortgage. Obviously, this is a mortgage podcast. They think they can disrupt mortgage banking. And I'm going, well, you don't have the expertise of people that have been in the industry for a while. Can you talk about the marriage of this rapid tech, but also with people that really know what they're doing? Anish Thomas:And that's where the niche is, Robbie. Exactly, right? I mean, everybody can talk about the tech, but it also needs to be wrapped around the expertise, right? The expertise of the domain and expertise of the sector. And that's where Stellar comes as a niche provider with our background of understanding of the mortgage expertise, I mean, the underwriting guidelines, okay, and just the spread of knowledge base that we have carried so far and wrapping that around technology is where Stellar's fit and success has been for the last two, three years, Robbie, to be very honest, because I have been part of a lot of champion challenge across some leading technology companies. Very humbly, I mean, from a size perspective, like yeah, I couldn't compete with them. It was overwhelming. But when it came to the domain expertise, I mean, we excelled because just of the sheer knowledge, and that's where I see the capital or that return would be, right? How much close are you to the domain and how quickly that you can wrap this technology and business expertise together? Robbie Chrisman:There are a lot of buzzwords out there when it comes to automation or efficiency, whatever might be. I feel like we are we hear so much of it that it none of it really registers. For you, I've I saw 30 to 40 percent efficiency gains with 24/5 operational coverage. You talk about just the meaningful return on investment that clients see. Anish Thomas:So, right now, I mean, as you said, Robbie, I mean, we drive our efficiencies through tech product, but we also are truthful in saying that the technology cannot do 100%. That's where you need to have your guardrails up, wherein you have to have a human loop to make that decision making, because we have got to know about numerous instances and scenarios wherein you just leave it to an agent, a digital agent, and at times it just competes with itself, hallucination happens, and that's where it gets tweaked out. And that's where a customized technology like Clara, which understands with enough guardrails on the compliances, so we got MISMO-certified, so it has its guardrails on that, it follows follows Fannie and Freddie guidelines. So we're kind of wrapping this technology around this guard lanes, and then we also have our expertise of the human in the loop. And I give that leverage to my clients that human in the loop could be the stellar expertise, or you amplify these efficiencies within your ecosystem of your resources as well. So that's how Robbie we complement this together. Yes, technology is good, but I also feel that there should be compliance, regulatory guardrails up to just keep a spot check on it. And the additional cushion is the human in the loop, which I believe would exist for sure in terms of any technology initiatives or disruptions that are going to happen. You need a traffic controller. Robbie Chrisman:How do we actually help lenders reduce loan cycle times? Anish Thomas:So there are various milestones and cycle times wherein it gets into the additional attributes. So if you talk about stellar and the various functions that we do in the origination, in the service space, in the default space, okay, we have been able to reduce those cycle times by at least 50%. And that is because of my two levers. One is my technology lever, and the other technology lever is what my human capital that I carry. And the other important attribute is also leveraging the time difference that I've got as a value addition. Now, if you look at Dubai, where I'm currently with my operations team here, I mean that's a big leverage. So that's where my 24/5 operations come into existence. And I candidly tell my people that even though if you go to sleep, your work is not stopping. So you have those kind of business continuity in place. Okay, imagine someone, an underwriter, sends some file before closing of the work, and then you have a Dubai operations or an India operation helping you out with technology, and then you're handling just the exceptions the next day when coming. So you have just multiplied your efficiency right there. In a natural cycle, that file would have been touched upon the next day. Now, the next day, when it comes in, you already have your 50% or 70% of the work done. So that's where we amplify with this closing and this efficiency thing in place, Robbie. Robbie Chrisman:There's a phrase out there: fulfillment. Fulfillment partner. What does fulfillment mean? And what does being a good fulfillment partner mean? Anish Thomas:It's in the word itself, fulfillment, right? I mean, the fulfillment of my client expectation, my fulfillment of my client's client's expectation when it comes with accuracy, it comes with brand recognition and the value addition which is brought to the table. Because today, also we need to understand that we are in one of the tough cycles down market, right? The interest rates and everything. So everybody wants to retain what they have, everybody wants to bring to the table an extra value addition and a differentiator to the table. And talking to my diff, I have got about 100 plus clients that I cater to. Everybody's value proposition is different. Somebody pushes for aggressive turn times, somebody is really pushing towards their quality product with having additional days' time. So that is where we are able to fulfill the client's requirements. So I don't my clients' personality and deliver what they want. So if it is speed, you've got speed. If you go on delivery, you want a 24/5 operations, we got you that. You just need your technology enhancers and you want your team, in-house team to operate out of it. That's what we have. So we have a very clean slate model and a customizable solution, Robbie, that we actually integrate with the client's requirements. And that could be a scope understanding, just leveraging my technology, getting into their integrated systems, that also is available. So that's for me is what fulfillment is fulfilling my client's requirement and getting value addition to my client and the end user of my client. Robbie Chrisman:So you are an extension of a company's operations, but you are one team all together. And I want your opinion on what it takes to become one true integrated team with your client. Anish Thomas:And I always say that. Integration is very key, right? I mean, how can we make these file transfers seamless, minimize the touches, is where we bring to the table. And that's where I will go back to all my modules that Stellar has built, be it the automated tax product, our automated title search product, Clara, which is a module which does underwriting, indexing, data extraction, everything. These are standalone modules, but also has API plugins into LOS. So you're not disturbing your own ecosystem. This is just an accelerator which is going to blend into your existing workflow management system and then enhance your workflows. So that's how we actually complement our client because that's the consultative approach that we get in. I mean, we are not here to break something that my clients have made. We look at their workflows and enable them more by integrating into their existing workflows. So that has been the key success for Stellar, Robbie. Robbie Chrisman:You brought it up earlier. The mortgage industry is always going through market cycles, and we're in a tough one right now. Things are always scaling up, scaling down. You speak to scaling with your partners. Anish Thomas:So scaling with partners, that's where I tell my clients, leave that tough answer to me, wherein okay, scalability and everything remains my responsibility. And with such kind of a huge diversification of Stellar's presence, right, across geographic locations and just the strength of 1800 resources across the diversification, that's where scalability becomes more rewarding for Stellar than anybody else on the lender side of the things. So that's where our strength has been scale and also just the arm of availability of 24/5 operations and also working over the weekends for any batch workers or any ancillary function has been a great value addition for my clients. Robbie Chrisman:Trust is integral in everything that we've been talking about today. Can you talk about how you put infrastructure in place, policies, practices that protect your clients? Anish Thomas:A good question in today's era, Robbie, because we are dealing with a lot of data, a lot of NPI data when it comes to mortgage verticals, right? And I'm we are highly, highly responsible and accountable for this data management. And that's where our compliances, our SOC 2 certifications, our ISO certifications, and everything helps us out. And we are all always on a constant lookout of how do I empower my guardrails further. And that's when I did touch upon my MISMO certifications, working with the GSEs, okay. How are they looking at the data and what are the guardrails I need to put up there? So highly, highly responsible and sensitive towards my data and my servers. And Robbie, that's one of the reasons all my servers, I mean, our US, so none of the data is leaving the US soil, and we are pretty we are very open about that. And we take this data confidentiality and NPI information to the highest order of responsibility. Robbie Chrisman:Technology is evolving so rapidly. How do you stay at the forefront and make sure that you're offering the cutting edge to clients? Anish Thomas:So that is where I have a huge research and development team, Robbie, and it's a cost, right? But if you have to have that first mover advantage, you need to know what is happening. And that's where my research and development team is on a constant lookout, okay, what are which are the new things coming up so that we can actually amplify and test it out in our own ecosystem. So any technology that we bring to the market, it's actually tried and tested really well because of the ecosystem that we have built in-house. The feedback mechanism that is given by my operations people on this technology really makes my technology proven and has a track record rather than relying on my client for a feedback mechanism. And yeah, it's very exciting. I mean, what we see today, just these models, I mean, referring to everybody, the new buzzwords of AI, what an AI model could do three months before. Today, if I look at those models, the level of maturity is insane. I mean, it is just producing such an amazing results to just complement the nature of work, just not in the mortgage vertical, any vertical that we are looking at. So it is going to be an accelerator, but going back to the point, there should be one person who understands the business to curate this, to lead it to the way where it has to behave and react to a closure, which is the subject matter expert, the business acumen that we have to feed into these models. Robbie Chrisman:The website is StellarIPL.com. Ton of good information on there. Ton of good information from you today, Anish. Really appreciate the time. Thank you. Anish Thomas:Thank you, Robbie. Appreciate it. Robbie Chrisman:In terms of economic news, last week closed with U. S. consumer sentiment deteriorating further due to persistent inflation, weak hiring, and elevated mortgage rates continuing to strain household finances and reduce purchasing power. This week is jam-packed with noteworthy economic data, including the release of advanced Q3 GDP, durable goods orders, consumer confidence, new home sales, PCE price index, personal income and spending, and the employment cost index. Additionally, there are three note auctions, including a $69 billion two-year treasury note auction today, and the market will receive an updated FOMC statement on Wednesday. Though a rate hike is not widely expected, markets currently price into roughly 90% probability of a 25 basis point Fed rate hike in December, but weakening consumer momentum, labor market softness, deteriorating housing conditions, and financial market stress could alter that outlook. Chicago Fed National Activity Index for September and the Dallas Fed Manufacturing Business Index for October are both due out later this morning. We begin the week with agency MBS prices, little change from Friday's close, the two-year yielding 4.70, and the ten-year yielding 4.99 after closing Friday at 4.99%, down 11 basis points over the course of last week. Let's wrap up with a joke and some housekeeping. A Chinese spy goes undercover in America and tries to infiltrate the political ranks. To get into the right career path, he has to pass an oral exam. So he was asked when the USA gained independence. July 4th, 1776, he says. Good, says the examiner. How many continents are there? Easy peasy. Seven. Dang, you're good. Which continent is Turkey in? asks the supervisor. Technically, Turkey is in two continents, Asia and Europe, since some parts of the examiner cuts him off. Whoa, you know your geography. Let's use some history now. Who first discovered America? To which the spy says, most people think Christopher Columbus did. But actually Leif Erickson first discovered the land of our blessed country America. And who was the first president of the United States? asked the examiner. Peyton Randolph. Georgia was the first elected president, but he was by no means the country's first president. At this point, the examiner realized this guy was a spy. Because an actual American doesn't know Jack. Thanks again to FICO for sponsoring this week's podcasts. As the industry's most predictive credit score, the FICO Score 10T combines proven performance with deeper insight into borrower behavior to help support a stronger and more resilient housing finance system. To learn more, visit FICO.com.