10.12.26 MBA National Storylines; Saul Ewing’s Jason McElroy on the Telephone Consumer Protection Act; Bond Markets Closed

Robbie ChrismanWelcome to the Chrisman Commentary Daily Mortgage News Podcast. I'm your host, Robbie Chrisman, live from MBA Annual in Chicago. Topics on today's episode include the state of housing in America. The bond market is closed today, but there are continuing issues. And my interview with Saul Ewing's Jason McElroy on Telephone Consumer Protection Act litigation trends, compliance risks, AI-driven calling, and related legal services for the mortgage industry. Here, take a listen to a little preview. Thoughts on the overall telemarketing landscape, obviously, where it's heading with all this technology at companies' disposal these days. There's good actors, there's bad actors. Where are we going? Jason McElroyWhere are we going? God, if if I could answer that question well, I'd probably be a much richer man. Robbie ChrismanIf I knew where interest rates were going, I wouldn't be here talking to you. Jason McElroyLook, I think where it's probably going is heavy implementation and use of AI. We see it already. We see it in call centers. We see it in consumer help centers. We see a lot of companies implementing these things. Because of the high volume that companies are receiving, they're trying to implement these things in a way that are as useful as possible to consumers. And the vast majority of companies that I work with just want to make the consumer experience, the customer experience as good as possible for their customers. With respect to are these things going to be used a lot more? Yeah, I think AI is going to be used a lot more. I think it's going to be used probably a lot more for outbound calls for people who have submitted their information for initial outreach, things like that. And it's going to create some complications. It's going to create complications that are unseen right now because the plaintiff's bar are going to be very interested in the use of this under the TCPA. The regulators are going to be very interested in the use of it as well, under data privacy and other things. Robbie ChrismanThanks to today's podcast sponsor, nCino, the platform for agentic AI and mortgage lending. If you're here at MBA Annual, come find the nCino team and see how their agentic homeownership journey puts AI to work across the mortgage life cycle, helping loan teams spend less time on manual tasks and more time serving borrowers. Visit nCino.com slash mortgage slash US to learn more and schedule a meeting while you're on site. The Census Bureau tells us that there are 132.7 million occupied U.S. housing units as of 2024. And for you big forward thinkers out there, there are about 72 million U.S. children under the age of 18. Someone's got to be around in 10 or 20 years to help them finance a house. And of course, credit plays into that. Many in the housing space are speculating that FHFA director Bill Pulte will announce a move away from the tri-merge credit standard when he speaks at MBA Annual in Chicago today. Turns out apparently he's not actually attending. We'll get our virtual Pulte. Anyways, with so much conversation focused on affordability, we ran the numbers. Across 10 housing markets in every region of the country, the tri-merge credit report costs home buyers about $151 on average. That's roughly 1% of the more than $18,000 in average closing costs in those markets. Across 10 housing markets of every size and region, the typical tri-merge credit report fee averages $151, about 1% of what a buyer pays a closing. Fannie Mae groups closing costs into four categories. On average, taxes and government fees are the largest. The credit report is just one component of the standard loan origination fees, and is typically about $1 of every $100 a borrower pays or buyer pays a closing. It's obviously something to keep an eye on. What the Federal Open Market Committee watches are things that we should all be watching. The FOMC's September meeting minutes revealed united support for the central bank's tightening cycle, with officials highlighting upside risks to inflation and cementing market expectations for prolonged higher rates. The MBA's economic team provided their projections for 2026 and 2027. The bad news is that the projections are always wrong. The good news is that the MBA's team does a good job of using the information available to them, revising the numbers often, and no one else's are any better. With that in mind, the Mortgage Bankers Association announced that total single family mortgage origination volume is expected to decrease 5% to just under $2 trillion in 2027 from the $2.1 trillion expected in 2026. Purchase originations are forecast to increase 0.8% to $1.42 trillion next year, and refinance originations are expected to decrease by 17% to $571 billion. By loan count, total mortgage origination volume is expected to decrease by 5.6% to 5 million loans in 2027 from the 5.3 million loans expected in 2026. And turning to rates, U.S. Treasuries and agency mortgage-backed securities staged a modest price recovery at the end of last week after a sustained sell-off pushed 10, 20, and 30-year yields to fresh 2026 highs. Strong demand at longer dated treasury auctions and three consecutive sessions of intraday rebounds suggest that selling momentum may be moderating. However, the rally appears more opportunistic than a confirmed reversal trend as persistent inflation, geopolitical uncertainty, fiscal concerns, and a hawkish Federal Reserve continue to pressure bond prices lower. Markets have reduced the probability of an October rate hike to below 20%, despite Fed minutes signaling broad support for restrictive policy and the possibility of another increase in 2026. Particularly given technically overbought conditions in the 10-year treasury market and improving momentum indicators that suggest room for some near-term relief. For today's interview, I wanted to welcome to the show Saul Ewing, Jason McElroy to talk about Telephone Consumer Protection Act or TCPA litigation trends, compliance risks, AI-driven calling, and related legal services for the mortgage industry. He's the Washington, D.C. office managing partner at the firm and co-chair of the financial services practice. He's also a trial lawyer with nearly 20 years of experience handling FCA, unfair trade practice, trade secret, and consumer financial services. We're here to talk about TCPA litigation, which for people that might not be familiar is the Telephone Consumer Protection Act. Jason, let's start with a little background on TCPA. When it went into effect, what it was originally intended for, how it's evolved into the modern times, and just kind of currently where it is. Jason McElroySure. Thanks, Robbie. So, you know, the TCPA was passed originally in 1991, back when those of us who are old enough to remember rotary dial phones were still around on, you know, push-button phones still around too. But the idea is this statute was really passed to deal with what a lot of us remember as our fathers picking up the phone during dinner time and saying, stop interrupting my meal, to deal with people calling and trying to sell people stuff on their home phones, either inconvenient times or just the general inconvenience of receiving a ton of phone calls. It's really transformed into a massive consumer litigation statute because the implementation of or the adoption really of cell phones by everyone has changed the landscape of the TCPA because now so many people use their cell phones, they give out their cell phone numbers for a variety of purposes, that receiving phone calls on cell phones has become a huge driver of consumer litigation. Robbie ChrismanSo I want to ask if text messages count as calls. And normally that would be a yes or no question, but because I'm talking to a lawyer, there's a ton of nuance here. So are text messages calls at this point? Jason McElroyIt's always it depends with lawyers, right? Yeah. So here it depends on where you are. The statute itself doesn't really address text messages. There's one section uh that addresses text messages in a very narrow format, but the section of the statute that addresses liability for calls, specifically with respect to the do not call list, doesn't address text messages. And that's partially because what we just talked about, it was passed in 1991. Text messages weren't a thing back then. So, you know, you couldn't pick up your rotary Dow phone, your push button phone, and really send a text message to folks. So the implementation or the onset of text message litigation is a relatively recent phenomenon. And in the last two years, this issue has come to a head in federal courts across the country because of a couple of Supreme Court cases. One is the Loper Bright case from 2024 that did away with Chevron deference. And the other is a more specific case to TCPA McKesson, which specifically addressed the Hobbes Act. Long story short, the Supreme Court said that FCC determinations do not bind district courts on the TCPA. So a lot of people have now started fighting this question of whether or not text messages apply as phone calls under the TCPA. And we have a pretty, pretty equal split now among cases, among district courts across the country. It started out a lot of cases from the West Coast were coming out and saying, yes, text messages are calls under the TCPA. But we've had a strong contingent of cases from the Southeast and some from the Midwest that have come out and said, no, text messages are not calls under the TCPA. And the strongest case on this is a Seventh Circuit decision from earlier this year, which is the most direct and highest authority we have on it addressing the specific argument that is being made these days as to whether text messages are phone calls. So, you know, it depends, but the momentum is really behind the text messages are not phone calls right now. Robbie ChrismanWell, it would seem that there's a growing circuit split regarding text-based do not call. And that plays into the larger CFPB defanging. Well, are we going to have state by state litigation? And so I guess from your perspective, are we seeing that as well here where things are fracturing into state-by-state factions and not just is going to ultimately make it harder for compliance departments and lenders around the nation? Jason McElroyThat's certainly the case. You know, because we have about half of the cases that have decided this, half of the district courts that have decided this to date have said yes, they are calls, and half have said no, they aren't calls. We do technically have a circuit split because the Ninth Circuit has a decision out there that predates the two Supreme Court opinions that says specifically text messages are calls under the TCPA. So you'll see a lot of the Ninth Circuit cases, the states in the Ninth Circuit, which you know, Montana, Washington, Idaho, Oregon, California, Arizona, Nevada, these states coming out in district courts following the Ninth Circuit Authority because they are bound by that Ninth Circuit Authority that predates the Supreme Court cases. But you even have a couple cases. There's a case from the Southern District of California, I believe it was, where the judge went through the entire analysis and said, I don't think this would qualify as a text message, but I'm bound by this Ninth Circuit Authority. So there are some sympathetic courts out west, but primarily those Western states are going to say, yes, text messages are calls. And this creates a difficult position for compliance officials, obviously, because we don't have one standard. The FCC tried to do that through effectively an executive order, administrative regulation or administrative interpretation. It wasn't even a regulation. But that's part of what is being fought after the Supreme Court killed Chevron deference and killed the Hobbs Act deference that courts used to use. Robbie ChrismanHow does the litigation landscape proceed from here? Will we see another Supreme Court case on this matter in your estimation? What do you expect coming on the horizon? Jason McElroyI expect that one day we probably will because there is a it's not a hundred percent clear circuit split because there is an argument that that Ninth Circuit case is potentially damaged by the recent Supreme Court authority. But I would expect to see the Supreme Court take this up at some point in the future. I mean, I I'm not aware of a case that is on its way there right now. Any one of these cases that have been decided in the last 12 months could potentially end up in front of the Supreme Court. That Seventh Circuit case is probably the most likely that would potentially get there early, but I don't believe that uh a Supreme Court cert petition was filed in that case. Robbie ChrismanI have to ask, how does artificial intelligence and the use of agents, automatic dialers, all these things? How does that impact this? How does it play into it? It seems like, and it's not just limited to this space, it's the wild west right now. And it there could be some heavy-handed rulings that come down putting the kibosh on things out there, but people just don't have a lot of clarity one way or another currently. Jason McElroyYeah, I think you're absolutely right, Robbie. I mean, it is kind of the Wild West out there with the AI agents, and I think that a lot of this is going to end up determined by how the AI software ends up acting. So I think there's a probably a strong argument, although it hasn't been tested yet, there's probably a strong argument out there that some AI bots making the calls qualify as an ATTS. I think the plaintiff's bar is certainly going to be making that argument. And those are going to be expensive cases to defend. Not that there aren't defenses, but they're going to be expensive cases to defend. So I think the more you see companies implement AI as part of their sales machine and their telephone calling apparatus, you're going to see the plaintiff's bar increase their cases filed on this theory. And that theory is probably going to end up making the plaintiff's bar a lot of money because these cases are so difficult to defend. And they know that. And everyone who deals with these cases knows of the difficulty and the expense associated with defending these cases. So I think it's going to be a while. I mean, I think you're going to see a few years go by before you see any real clarity with respect to how AI calling agents are going to be handled under the TCPA. Robbie ChrismanSo we're not here to give legal advice, but I do want to ask you about the conversations you've been having with your residential lending clients. What's top of mind for them? What are some worries for them? How what how are they navigating all this? Jason McElroyWith respect to TCPA specifically, everyone wants to know the best way to gain consent and the best way to avoid calling people that are potentially on the DNC list. For the most part, the ATDS, the automatic telephone dialing system question has died down a little bit. I think it is going to come back with the AI agents, but it hasn't quite yet. So most of the questions come around how do I ensure that my consent is valid and strong? And that comes down to making sure that the processes through which you're getting the consent, mostly on the internet, are strong. So do you have a strong consent process? Do you have disclosures appropriately placed? Are they easily visible to the consumers who are agreeing to the terms? So a big issue that we see now, particularly on consent for not just TCPA, but for California Invasion of Privacy Act and other similar uh invasion of privacy and wiretapping statutes that a lot of claims are being filed under now, are how are those consents being obtained before these products are being implemented? And that happens on the website. You have to make sure that on the website you're not hiding those disclosures and you're not hiding those terms and conditions that they're agreeing to. The best way to do it, honestly, that the courts have approved almost 100% of the time is the straight sort of the contract or the terms appear on your screen and you have to scroll through them before you can move forward. That's the best way to do it. Most marketing folks don't like that for somewhat obvious reasons, because it breaks up the flow of the process for the consumer, but that's typically the sort of the belt suspenders way. Otherwise, you got to make sure that you're disclaiming it or disclosing the terms really clearly, and it's really clear to the consumer that they're agreeing to these things. Yeah. Robbie ChrismanSo I have a voicemail here on my phone. This is Jeff. I wanted to give you some financial updates. I saw you're looking for a personal loan. I may be able to get us approved for you. If you go with this, it's this amount, it's this payable. I never applied for a personal loan. I think we all get these calls. I'm on the do not call list. I selfishly want to ask how is this happening? But I think a better question for the sake of this podcast would be does the legal rule do they actually protect the consumer? Like how much more work do we have to do to get to a point where people are protected from this crap for lack of a better term? Jason McElroyWell, you know, we've been trying to protect people from this stuff for decades. Um, you know, I mean, this statute came out in 1991 before, you know, the internet was prevalent before cell phones. All the new technologies just add layers of difficulty into protecting people from these types of calls. Unwanted calls, obviously. There are, as in any industry, there are going to be, I don't want to say malicious actors, but bad faith actors, maybe, that are out there using methods that shouldn't be used or not condoned in order to obtain information. Uh, there are bad lead generators out there, bad lead generators who aren't giving the appropriate disclosures and whatnot. So you got to make sure you're working with good ones on that from the business end. But from the consumer end, it's really about protecting where you give out your information and how you give it out. There's only so much we can keep confidential these days now with the ways that we're connected between social media, media, between the various accounts that we have with different companies. A lot of times we may be signing up to agree to provide our information to third-party affiliates without even knowing it. Robbie ChrismanI want to ask about what you've been working on in regards to this, why people should choose Sal Ewing. It's a nationwide law firm. There's 450 attorneys. So I guess I would I would hope you can speak more to what you've been working on and what as it pertains to the mortgage space, why y'all are the right choice for people considering their legal options. Jason McElroyWell, so we have a deep experience in the industry. I've worked in the consumer finance industry and the mortgage industry and other consumer finance companies for nearly 20 years now. Uh, one of my partners, Tripp Riley, has done it for more than 30 years. You know, we have a big base of partners and colleagues across the country. We can reach out to any state effectively at this point. And our knowledge and our strength in this area is in mortgage litigation and consumer finance litigation. So we've done this in states all across the country. Our ability is really deep because we have transactional capability, we have litigation capability, we have regulatory capability across not just the specific consumer finance statutes, but also on the back end on the corporate side, on the transactional side, on the labor and employment side, all things that touch the mortgage industry. Uh, we have a lot of great experience with. And, you know, one other thing I just want to note is that uh we do an annual consumer financial services webinar for Saul Ewing for not just our clients, but also our friends and anyone else who wants to join. That's going to be November 12th this year. We have some really great content. We've got a great uh round table with mortgage industry titans that I will be uh moderating. Um we also are going to be discussing the switch from federal regulatory enforcement and the lack of federal regulatory enforcement these days to the heavy state regulatory enforcement that we've seen. And we saw a lot in the last Trump administration as well, as well as just an update on the alphabet soup of regulatory statutes that everyone in this industry has to deal with. So if you're interested in that, the registration link for our webinar is in the show notes. But if you want the link emailed directly to you, send an email to register at Saul.com. That's R-E-G-I-S-T-E-R at S S N SAMA-U-L dot com. If you do that, you'll receive an email with a registration link. And if it doesn't come directly to your inbox, just check your spam folder and the link will allow you to register directly. Robbie ChrismanI really enjoyed this interview, man. Ton of good stuff here. Hopefully we'll have you back on. I know we didn't talk UDAP, we didn't talk REST, but we can do that for a future podcast episode for sure. In the meantime, uh, really appreciate the insights today. Jason McElroyYeah. Thank you for having me. This has been great. Robbie ChrismanThis is a daily commentary about residential lending and agency mortgage-backed securities continue to face greater challenges than treasuries, with elevated rate volatility, limited buyer demand, and widening spreads weighing on valuations and mortgage origination margins. Conventional 30-year MBS underperformed last week, with the Fannie current coupon spread widening to 124 basis points over the five-year/10-year Treasury blend, while 15-year securities outperformed as their spread tightened to 66 basis points. Mortgage rates rose to 7.40%, the primary-secondary spread widened to 92 basis points, and total mortgage applications declined 4.2% week over week, reflecting continued affordability and demand pressures. Let's wrap up with a joke and some housekeeping. The peekaboo virus. Now I may have to go to the ICU. Thanks again to nCino for sponsoring this week's podcasts. Helping mortgage lenders deliver a faster, simpler path to homeownership. If you're here at MBA Annual, come find the nCino team and see how their agentic homeownership journey puts AI to work across the mortgage lifecycle. Helping loan teams spend less time on manual tasks and more time serving borrowers. Visit nCino.com/slash mortgage slash US to learn more and schedule a meeting while you're on site.