6.29.26 AI in Mortgage; Clear Capital’s Jason Legare on Appraisal Modernization; Implied Volume Implications

Welcome to the Chrisman Commentary, Daily Mortgage News Podcast. I'm your host, Robbie Chrisman. Topics on today's episode include ways to think about artificial intelligence in the mortgage industry, the relationship between implied volume, option cost, prepayment risk, and wider spreads, and my interview with Clear Capital's Jason Legare on why appraisal modernization adoption remains uneven despite clear efficiency gains. Here, take a listen to a little preview. Given the demonstrable savings and cost and turntimes, what are the most significant misconceptions or operational challenges preventing broader utilization of modernized valuation approaches?

I still think we're stuck in this like perception that faster valuation process means less reliable. And I think the better point there is that modernization can improve consistency by capturing property information in a more structured way. I think one of the things that we've kind of seen through UAD36 rollout is that lenders really need to start thinking about this as like a pipeline risk and not just like a technology change. Starting now, I mean, like right now, with a controlled ramp towards UAD36, allows their teams to process through the friction, the changes. There's a smaller pipeline of 3.6 files coming through. All of these things allow them to be successful. Lenders that kind of wait until the fall when this mandate's like approaching in November, they're really compressing that timeline, right? They're not avoiding the growing pains. They're really just compressing uh all of them into a much tighter workflow.

Thanks to this week's podcast sponsor, Experian. From lenders and landlords to employers and consumers, Experian helps connect the housing ecosystem with the data and insights needed to make faster, confident decisions. Lead a smarter housing journey with Experian. To learn more, visit Experian.com slash mortgage. Does anyone know which page of the Bible explains how to turn water into wine? Asking for a friend. Are you ever suspicious of someone who never asks questions? MLOs occasionally ask about an online tool that can help potential borrowers understand the process. And I have something for new clients, especially those who are first-time home buyers. It's a short quiz to get them started on what to think about in financing a home. There's a link to that as well as some other pretty cool stuff at CrispinCommentary.com. For those of us in the industry who ask about some of the terms in our business, you can check out the MISMO Business Glossary, which delivers a curated set of standardized business definitions used across the mortgage life cycle. By providing consistent terminology, the glossary helps industry participants communicate more clearly, improve operational efficiency, and reduce misunderstandings that can lead to risk and errors. Artificial intelligence may dominate today's mortgage technology conversation, but industry executives say the biggest determinant of success remains whether borrowers actually use the tools lenders deploy. Mortgage lending has experienced successive waves of technological innovation over the past several decades, with each promising to streamline operations and improve the customer experience. Yet adoption has often lagged behind capability. Industry observers increasingly note that technical sophistication alone does not guarantee success if new processes introduce additional complexity for borrowers rather than reducing it. The dynamic has been evident in the differing adoption paths of remote online notarization and electronic promissory notes. While remote online notarization offered a full digital closing experience, borrower adoption proved uneven in many markets, particularly where access to technology or familiarity with the process varied. By contrast, eNotes generated significant operational efficiencies for lenders while remaining largely invisible to consumers, allowing institutions to modernize backend workflows without requiring borrowers to change how they complete their transactions. Many lenders are now approaching artificial intelligence through a similar lens. Rather than focusing exclusively on workforce replacement, institutions are increasingly deploying AI to automate repetitive administrative functions, including document processing, accounting workflows, and reporting. The goal is to reduce time spent on manual tasks while allowing employees to concentrate on higher value activities, such as exception management, analysis, and customer communication. Industry participants generally view AI as a tool that enhances human decision making rather than replaces it, particularly in a highly regulated environment where experience and judgment remain essential. Mortgage customers are not a uniform audience and their expectations offer differ based on experience, financial circumstances, and transaction type. First time home buyers frequently require education and regular communication throughout the lending process, while repeat borrowers often prioritize speed, convenience, and minimal interaction. Independent mortgage banks, in particular, continue to emphasize flexibility as a competitive advantage. Unlike larger financial institutions that often rely on more standardized operating models, many IMBs retain the ability to tailor process and communication to individual borrowers while incorporating new technology where it improves efficiency. As AI adoption accelerates across the industry, many executives view its long-term value not in eliminating the human element for mortgage lending, but in enabling employees to spend more time on the aspects of the process that borrowers continue to value most. Economic data released last week painted a picture of resilience. Don't confuse that with acceleration, leaving the Federal Reserve with little reason to rush toward additional monetary tightening despite stubborn inflation. First quarter growth was driven disproportionately by business investment, particularly AI infrastructure spending, while household consumption slowed, raising questions about whether private investment can continue carrying economic growth if AI-related capital spending begins to normalize. Elevated core PCE remains the primary obstacle to a sustained rally at the front end of the Treasury curve, though easing energy prices and moderating inflation expectations continue to be supportive for bonds, even as markets may be overestimating the likelihood of further rate hikes following Kevin Warsh's hawkish Fed debut. Warsh's remarks at the European Central Bank Centra conference this week will be closely watched, as will Thursday's employment report, both of which could reshape rate expectations. While markets continue to price in the possibility of another Fed rate hike, the drop in energy prices lowers the urgency for further tightening, supports consumers through lower gasoline costs, and reinforces demand for longer duration bonds, even as investors acknowledge it will take months to fully assess how the recent energy shock filters through to core inflation. For today's interview, I wanted to welcome to the show Clear Capital's Jason Laguerre to talk about why appraisal modernization adoption remains uneven despite clear efficiency gains, where alternatives such as inspection-based waivers are gaining traction, and the operational and cultural barriers slowing broader acceptance. As executive vice president of technology, he leads the engineering and information technology teams at Clear Capital, overseeing the development and deployment of Clear Capital's valuation products, data and analytics products, and collateral and appraisal review products. He's been with the company since 2011. Appraisal modernization. And if if borrowers are demanding speed, that's something where I would I would look at. And I would tell you, maybe frequent listeners of this podcast have heard me say this a couple times, but who cares if you can have an underwriting decision in two or three minutes if the appraisal is going to take seven days? And so I'm like, the appraisal process, the appraisal process, the appraisal process. That's that's where my mind feels like there's a lot of opportunities for disruption. Why do you believe adoption remains so uneven across the mortgage industry when it comes to appraisal tech? And does that reveal anything about how lenders evaluate innovation and risk?

I think monetization, you know, is rarely just a technology change. It requires a lot of coordination. You think about coordination across, you know, lenders, appraisal management companies, appraisers, their appraiser software, the order fulfillment platforms, the integration between all of them, like this becomes much more complex than many may think on adopting newer technologies or new approaches to appraisals. As we think about how lenders like evaluate innovation and risk, changing the status quo really can feel risky, especially in this market, right? We're seeing higher interest rates, uh, lower volume. Every loan really matters to real estate agents and loan officers. Newer technology can always feel like an immediate operational risk. While at the same time, conversely, not modernizing can show up as you know, slower inefficiencies, you know, weaker competitiveness, definitely missed opportunity over time.

Where are you seeing the greatest traction for alternatives, uh such as inspection-based waivers? I think I saw something like either a quarter or a third of agency loans in the first quarter had those inspection-based waivers, which I find to be very good news. What distinguishes organizations that are embracing them from those that are not?

Yeah, I think the lenders seeing the most success here are really treating modernization as like a transition, operational transition. They're testing phased rollouts rather than simply turning on a new process. They're not flipping a switch. They're taking iterative adoption to the process to be as successful. The organizations kind of leading this charge typically are ones that are focused mainly on, you know, creating smoother, more cost-effective customer experiences. I think we're also seeing adoption in non-bank lenders more quickly than traditional bank lenders. And I think that's largely because they operate in a different regulatory and risk structure that can allow them to move more quickly.

What's the latest and greatest from Clear Capital? How are y'all working toward a modern valuation approach? Rather than me telling people pause this podcast and work on your ramp to UAD 3.6. Let's talk about what clear capital is doing.

I think if you look at like modern evaluation, modern modern valuation in general, if you were to take center line, the further left you go is gonna be more of the straight appraisal waivers, purely data driven. Um, as you start to come closer to that center line on the left side, you're you're you're gonna get like your IBWs, your inspection-based waivers, where property data collectors are out there collecting that data and the GSCs are basically saying, hey, with that information, we'll we'll we'll issue a waiver. As you start to move to the right of that center line, you start to get involved more with the appraisal process, where maybe you have a desktop appraisal where the appraiser is simply at their desk using public information to do an assessment of value. And then as you kind of move further right towards like the full traditional appraisal, you get into this hybrid space where data collectors, or we can we can kind of bifurcate the process and you can send data collectors to the property to do the data collection. You know, they're grabbing photos, they're doing floor scans, they're collecting all of the information that the appraiser actually needs to be able to do that assessment of value. And then that's kind of like a handoff point where the appraiser is actually doing what they're very good at, assessing value. And so now you start to bifurcate that process, get the people doing the right pieces at the right time with the right expertise. But then as you kind of move further away from that center line, you're moving all the way down towards traditional appraisals live. And that's kind of like the more non-modernized process where the the appraisers are still doing all of that themselves. And from an efficiency standpoint, uh, we see things become more costly and take longer.

I'm glad you brought up the data side of things because from all my conversations, it's very apparent to me that valuation technology is becoming increasingly data driven. And probably in a way that other parts of the origination process can take note of. How should mortgage professionals think about balancing efficiency gains with the industry's long-standing emphasis on accuracy, transparency, borrower protection?

Yeah, I think the way that we see this is that uh our goal of leveraging technology is to give people making the the property decisions better information to work with. We're not looking to disintermediate or or remove human judgment or replace human judgment. Appraisers, lenders, real estate professionals, they all need to continue to apply their expertise. Um, I think what changes is the quality and the completeness of that data that helps them support do their work. I think one way to think about that is you know, better inputs lead to more consistent and confident outcomes. Yeah. As I think about, you know, Clear Capital's growth over the past, I've been with Clear Capital for 15 years, I've seen a lot of change. It's really like more recently, even with our acquisition of REST B.ai, we've got three different companies. Think about Clear Capital, Kuba Casa, and and now REST B.ai, each solving these distinct problems for our customer. KubaCasa helps agents, lenders, real estate professionals in general, capture and digitize um accurate property information quickly and at scale. Like REST B helps give those same customers the ability to unlock meaningful insights and data from that imagery that would otherwise require a lot of manual gray matter to suss out the information that's in that imagery. ClearCapital starts to bring together through valuation technology and analytics that professionals across the real estate and mortgage industry can actually use to make faster, more confident decisions. You know, each company has built something like valuable independently, but together, this lets us offer our customers more complete and more useful solutions than any of us could ever do on our own.

So I was going to ask you about if you feel like we're approaching this more kind of like a fundamental redefinition of how residential collateral risk is assessed and managed. I would I would assume the answer from you would be yes. I'd love to hear a little more thoughts on that. But also, what does the valuation process of the future look like for the mortgage industry?

I think you're gonna see two parallel tracks here. I think you're gonna see a track where appraisal modernization continues on this incremental improvement uh to the traditional process, right? I think that is gonna be a path that continues parallel to that track, like with most technology advances. Like we look back to to when the internet first started, and and and you would have never thought the advancements that took place in the internet would we would be where we are today. You look back at like cell phones when the bricks first came out, and you're like, how am I when when is that ever gonna convert into like this the small computer that lives in my pocket? I think we're there at this point with AI. And when we think about it, when structured data combined with rapidly advancing AI capabilities creates automated systems where we can process so much more information than humans could alone, we're gonna see new capabilities unlocked. I think that really only works if AI is governed responsibly, specifically in this space. I think we need to ground ourselves in a single truth that if this parallel tract is to become viable for how residential collateral and risk is assessed and managed, we need to know that AI can be explainable, that it can be auditable, that it's transparent and reliable. And if we can ground ourselves in that truth, then the capability of us being able to be successful in this space, I think really starts to get unlocked.

So when we think about the appraisal space, what role or type of company is ripe for disruption? Is it appraisers should be looking over their shoulder? Is it the AMCs that are going to get squeezed out here? Is it the actual valuation company? Where how do you see the space shifting?

Yeah, again, I think the way that we think about this really is we're not trying to disintermediate anyone at this point. We want to be able to provide more clear, concise, accurate information. We want to basically have a complete, consistent picture of the property to allow industry professionals to do what they do. And I think that's where our space really is, is is trying to drive things forward.

You mentioned kind of splitting into to three uh different ventures, if you will. But what's the roadmap that y'all are working towards?

I'd love to get into some like really specific details, but uh Kenan's.

I know I was supposed to speak with Dwayne last year, and he's like, ah, I can't really. Then you guys, yeah, you made a huge purchase. So yeah, yeah.

Keenan's the best to speak to, honestly, from a from a strategy perspective, really trying to figure out how and and and what the best opportunities are for us to improve the appraisal monetization space, approve the lending space, create abilities for our customers and and consumers to be able to do their jobs in a more efficient um productive manner.

And when it comes to PR, obviously Chrisman can operate as a media platform to get the word out. What do you feel like there are misconceptions about when it comes to the appraisal space or clear capital? You know, things that that I guess you have a PR firm and she's listening to us speak about this. So let's not let's not speak ill will of them. But but in terms of getting the word out, what are things you hope to get the word out about?

Some of the things that we really want to make sure that we focus on is you know, data without like ground truth is just a well-formatted opinion. And that that sound bite is is is essentially like unless we can actually understand all of the information that is available of a given property, it's it's really hard to make these types of decisions. And so with the capabilities through Clear Capital, Kuba Casa, REST B, we want to be able to unlock that so that downstream consumers of that can actually make valuable decisions in the lending space.

Very well put. Jason, I really appreciate the time, and I thoroughly enjoy this. Wish you and Clear Capital the best of luck, and hopefully we'll speak again soon. Absolutely appreciate the opportunity. Trading was relatively quiet to close last week with investors shrugging off volatility in global technology stocks, ultimately leading to bonds ending the week with a mixed performance, with two-year, five-year, and ten-year treasuries all gaining in price, which means their yields fell, while the 30-year treasury actually lost a little value, so its yield ticked slightly higher. Investor sentiment shifted meaningfully last week as easing geopolitical tensions and a sharp decline in oil prices reduced fears of a renewed inflation shock, prompting a rally in treasury markets and improving confidence that inflation expectations remain anchored. The 10-year yield now sits at its lowest level in nearly eight weeks, and the two-year yield sits at its lowest level in over a week, extending the market's recent rally. Many traders are thankful that implied volume has not jumped despite the flatter yield curve. If there was higher implied volume, that would lead to higher MBS option costs, higher prepayment risk, and wider spreads. Agency MBS also held up better than expected in the face of falling rates and a flatter yield curve, reflecting stable volatility and disciplined investor demand. The lenders likely saw margin pressure as a primary secondary as primary secondary spreads widened without a corresponding pickup in loan production. Highlights from this week's four business days include the April FHFA and SPK Schiller Housing Price Indices, June Chicago PMI, and June Consumer Confidence tomorrow, June ADP employment, June SP Global US Manufacturing PMI, May Construction Spending and June ISM Manufacturing Index on Wednesday, and with bond and equity markets closed and observance of Independence Day on Friday. Thursday brings June non-farm payrolls and May factory orders before the Treasury market closes early at 2 p.m. The June non-farm payrolls report will be the marquee economic event this week, and economists expect the U.S. economy added 115,000 jobs during the month, down from 172,000 in May, while the unemployment rate is forecast to remain unchanged at 4.3%. With nothing of note on today's economic calendar, we began the week with agents CMBS prices roughly unchanged from Friday's close, the two-year yielding 4.09%, and the 10-year yielding 4.37% after closing last week at 4.37%, which was down eight basis points over the course of last week. Let's wrap up with a joke and some housekeeping. Here's how to sing the blues of primer, part one of four. Most blues begin with woke up this morning. I got a good woman is a bad way to begin the blues. Unless you stick to something nasty in the next line, like I got a good woman with the meanest face in town. The blues is simple. After you get the first line right, repeat it. Then find something that rhymes. Sort of. Yes, I got a good woman with the meanest face in town. Teeth like Margaret Thatcher and she weighs 500 pounds. The blues is not about choice. You stuck in a ditch, you stuck in a ditch. Ain't no way out. Blues cars are Chevies, Folds, Cadillacs, and broken down trucks. Blues don't travel in Vovos, BMWs or support utility vehicles. Most blues transportation is a greyhound bus or a southbound train. Jet aircraft and state sponsored motor pools ain't even in the running. Walking plays a major part in the blues lifestyle. So does fixin' to die. More on this tomorrow. Thanks again to Experian for sponsoring today's podcast. From lenders and landlords to employers and consumers, Experian helps connect the housing ecosystem with the data and insights needed to make faster, confident decisions. To learn more, visit Experian.com/slash mortgage and lead a smarter housing journey with Experian.