8.5.26 M&A Activity; HomeLight’s Nick Friedman on Borrower Psychology; Mortgage Applications

Robbie ChrismanWelcome to the Chrisman Commentary, daily mortgage news podcast. I'm your host, Robbie Chrisman. Topics on today's episode include more MA activity in the mortgage industry, where we're seeing mortgage applications head lower, in my interview with HomeLight's Nick Friedman on how affordability challenges are evolving as the housing market adjusts to higher borrowing costs. Here, take a listen to a little preview. Robbie ChrismanIf you're an originator out there and you're talking to a borrower about kind of the state of the housing market, yes, it's very metro specific, but in general, how are you communicating with them about the opportunities that exist for them, especially focused on first-time home buyers? Nick FriedmanThe loan officers out there today are focused, a lot of them are focused heavily on just talking about monthly payment and just leading with that. It says it a couple times in its report as well. And it's something that we always talk about, but it it's like I think it still solves a lot of these issues. It's like, hey, what are you comfortable paying monthly? And then let me figure out how to get you there, right? Um, I think that's kind of the way that I would approach it as a loan officer right now. And then you talk through, okay, uh, I found a way to do down payment assistance because you're gonna need that. I found a way to get the seller to buy down your rate, I found a way to do X, Y, Z, right? You kind of have to solve the problem once you have that number of comfort. Um, the the flip side is LOs who I don't think do a good job, or LOs who come at you with all the different programs right off the bat, it overwhelms the buyer and it makes them feel concerned and confused. Um, there are a lot of, again, solutions to the problems out there, including our own buy before you sell solution. But if you just kind of hit the consumer with all these things right up the front, they get really scared, nervous, and end up probably not even going through with the transaction or moving to another loan officer. So I think again, like sitting down with the customer and saying, like, what are you comfortable paying? And then let me figure out what you can actually get with that, that, that thing or that number in mind. Um, that's I think the way that we work backwards and keep consumers comfortable. Um, and I think a lot of the solutions, again, they don't need to be fully explained to the customer. You, as a loan officer, can be a magician. You can figure out exactly what you think the best uh opportunity is for the customer, or or two opportunities or five opportunities, whatever it is, and then go to them with a package of, hey, here's how I think you should go and and and and buy this house. And I think the loan officers who do that are the ones that are winning in the market right now. Robbie ChrismanYeah, a customer doesn't care what FHA means or DSCR or whatever, as long as they can get in the home. Robbie ChrismanThanks to Figure for sponsoring this week's podcasts. Figure is shaking up the lending world with their five-day HELOC, offering borrower approvals in as little as five minutes, and funding in five days. Figure has hundreds of partners in the banking, credit union, home improvement, and of course, IMB space embedding their technology. To learn more, visit Figure.com. The cavalcade of MA News continues like two from yesterday. Stockton Mortgage, founded in 2001 and headquartered in Kentucky, inked a deal to take over the wholesale division of Connecticut-based lender Norwich Commercial Group TBA TPO Go. Effective August 10th of this year, TPO GO's wholesale division will join cursive lending, Stockton Mortgage's third-party origination channel. Thomas Michel, chief TPO officer at Stockton Mortgage, commented, quote, the opportunity with TPO Go is a natural fit for our long-term strategy. In terms of teams, expertise complements our comprehensive product suite and portfolio of renovation lending solutions, allowing us to provide even greater value and flexibility to our broker partners. From Ballon, there's a Balon Technologies Incorporated. The transaction marks the closing of a strategic partnership built around Balon OS, the AI native operating system. Balon is built for mortgage servicing. With this, Carrington expands its servicing portfolio by approximately 810,000 loans and using Balin, Balin, Balin, OS as its core servicing platform. Shifting gears slightly. Treasuries and agency mortgage backed securities extended the rally yesterday, as renewed optimism over a potential US Iran agreement, eased oil prices and supported bonds, while improving risk sentiment simultaneously prevailed propelled the S P five hundred to a new record high. Ahead of Friday's July payrolls report, the Bureau of Labor Statistics reported hiring picked up slightly, while job openings slowed. Available positions decreased to 7.36 million from 7.54 million in May, and his missiles were little changed. Initial jobless claims fell by 22,000 week over week to 187,000, the lowest level since 1969, underscoring a still resilient labor market that, despite soft hiring, is likely to keep the Fed focused on inflation rather than labor market weakness. Even so, volatile trade flows driven by tariffs, Middle East tensions, and AI-related investment continue to weigh on second quarter economic growth. Of note, in bond markets, investors are increasingly favoring European debt over U.S. treasuries. While higher mortgage rates have sharply reduced refinancing's share of issuance since the first quarter, refinance volumes remain above year-ago levels. Purchase landing is held relatively steady, and total loan production increased 5.6% from last July. Driven primarily by strong growth in Ginnie Mae loans. Issuance continued to migrate toward higher coupon pools as mortgage rates climbed, reinforcing expectations that purchase activity, rather than refinancing, will be the primary driver of agency MBS supply if issuance is to remain above the hundred billion dollar threshold in the months ahead. Known for his entrepreneurial leadership and focus on innovation, he's become a leading voice in modernizing the home buying process through technology and creative financing solutions. Robbie ChrismanHome light put out this lender insights report. You put out some great reports. There's there's a certain cadence to these. Can you tell us about maybe the report at a high level briefly, but then kind of late takeaways uh from the most recent one? Nick FriedmanYeah, absolutely. I think uh kind of the biggest high-level things that were talked about um that I thought were interesting were one, uh people talked a lot about uh not how rates need to get lower, but uh how home prices are just basically impossible for first-time home buyers to get into. Um, the idea of a starter home doesn't really exist as much anymore, um, with inventory being so tight. Uh, when new homes do come on the market, they're typically not the kind of starter homes that exist. So a lot of a lot of loan officers uh were talking about solutions around building more inventory that's helpful for or affordable for first-time homebuyers or home buyers who are maybe right now in a $200,000 to $300,000 home and need to get into another one, right? So that's kind of been the overall theme. Um I think a second kind of overall theme is just uh high debts for first-time buyers right now, even buyers who who have existing equity in their house. Um, we're seeing car payments being one of the biggest issues right now to get people to qualify for their next property. Um, that was a really big uh kind of highlight um in here as well. Um and then the last piece uh was really just uh around the property itself, um, which I found interesting. So we've been seeing a lot more cancellations due to property issues. People aren't taking care of their homes and they're selling them, trying to offload them, and there's foundation damage, there's mold, there's inspection issues, um, there's a lot of uh of transactions that are actually terminating due to the home itself. Uh so even if you find a way to be able to afford it and you work super hard, you get a down payment assistance program lined up, you get a rate buy down, you get all these things, you find the home that you want, you go in there, and it's a piece of crap. Um, and a lot of times that will terminate the deal, and loan officers are very frustrated by that as well. So um that's kind of the overall, I'd say, top three themes that we saw um throughout the the report here, among among a few others. And uh that was kind of the uh the summary. Robbie ChrismanWell, it's good to hear that loan officers, since they're frustrated, they're going to get into the building business apparently and and solve our our building crisis. Exactly. Yeah, that's good. Is this a doom and gloom sort of thing, or are there silver linings or opportunities that kind of abound or in the cracks out there, in your estimation? Nick FriedmanYeah, I don't think it's doom and gloom. I mean, I think that again, like loan officers are not going to uh be vocal or frust or or or you know, I guess be vocal about deals that are going well. So there are still transactions that are going smoothly and there are still people that can afford. The general consensus for people who are more vocal on the on the client side are just people who are in these types of situations. So I don't think it's doom and gloom. I think there's still a large percentage of people who are just in a lot of debt right now. And that's really the biggest issue that I see. Um, and that can change with the change in interest rates, but it also, again, it reduces that affordability for homes. And so what I do find interesting is they talk about, you know, oh, they need starter homes, blah, blah, blah, whatever. Um, it's not a rate problem, but technically it's also a rate problem because if rates went down, then you can afford a higher priced home, even if you're in the debt you're in now. So I think it's kind of like we're all talking about the same things. They're just providing different, you know, solutions to each. And the starter home concept, again, is just it's kind of it kind of goes hand in hand with the right thing. I don't think it's a doomed situation. I just think that people need to keep searching and finding more solutions and being educated about those solutions in the market. Robbie ChrismanBut I would argue that even if rates decline, that means that there's probably going to be bidding wars all over again and home prices will go up. So it's not like overall affordability is going to markedly improve. There's some chatter out there and to be draconian. They call it the death of the starter home. Do you feel like the starter home is is dead? And maybe the the cop-out there would be in its current form, it is, but but you're encouraged that there are going to be new types of starter homes or ways to get people into affordable housing. Yes? Nick FriedmanYes, yeah. I I think I think the yeah, the starter home as we as we used to know it is dead. Um, but I think there's other ways to do it. I also think that people are now thinking of starter homes as not just a single person buying a starter home. They're thinking about it as I'm gonna buy with my friends, I'm gonna, it's gonna be multi-generate generational, I'm gonna, you know, live with my my sister, my brother, my my mom, my dad, whatever it might be. Um, people are kind of working together to buy homes now. Um, and that's a way to think about, hey, I can, you know, if I split this home with somebody, then it becomes a starter home for me in theory. Um, and that's something that we're seeing a lot of as well. So people, again, this concept of uh, hey, I need to buy a $200,000 house for you know myself. And uh I just gotta, it's gonna have three bedrooms and two baths and be perfect location. That just doesn't exist anymore. Um and that's that's the reality of it. Robbie ChrismanThoughts on creative financing things we're seeing out there that that are neat from a product perspective, getting people into homes, or maybe even within like the buy before you sell space ways that we're seeing uh underwriting guidelines evolve. Nick FriedmanYeah, absolutely. Um I think the buy before you sell product in particular has so many so many use cases. When you can play with equity all of a sudden, um you have a lever that you didn't really have before as a loan officer. Um you had to wait until the home sold in order to move forward with the transaction. You're not associated with that home sale at all. So the loan officer has to depend on an outside agent to go sell a home in order for that deal to even go through in the first place. So with Buy Before You Sell, you now have this pool of equity. And you think about it and you're like, okay, great, now I have money to go use as a down payment. But what's cool about buy before you sell is you also can remove your existing mortgage liability. So you can reduce the customer's debt to income. You can allow them to buy a larger house. You can also use that money not just for the down payment, but to buy down debts. So again, talking about the auto loan car payments, um, there was a quote in here that I thought was really funny. It was uh, for the love of all things holy, there is nothing sexier than a paid-off car. Uh that's uh Stephanie Sanger Robinson in St. Augustine, Florida. I like I like that. Um, it is nice, very, very nice to have a paid-off car. It's very nice when you're a loan officer and someone pumps to you and tells you they have a paid off car, especially in today's world. If they don't, you can use the buy before you sell funds, use your own equity to pay off the car, and all of a sudden they can afford a much bigger home. You're using money at a much lower interest rate to pay off money that's that you're getting at a much higher interest rate. And that's a great, great tool that you can use. Um, we also see people use it for rate buy downs. So all of a sudden, hey, I've got this extra $10,000 in equity. I'm gonna use it to buy down my rate so I can again afford a larger home. And so there are ways that you can use that. I think it's a it's a super unfair advantage that you have when you have an existing house and you have equity in that existing house. Um, people just haven't been able to tap into it and use it before. And so that's where I think um equity solutions like buy before you sell come into play in the market. Robbie ChrismanI will second what Stephanie said. There is nothing less sexy than my 15.79% APR and the exotic foreign coupe. So good there. Yeah, and and I would say too, from some of the discussions I've had with top originators recently, millennials are not just in it to buy their first home. A lot of millennials are at the point where they're looking to buy their next home. And so equity is certainly a solution out there. However, it's it's faced kind of a PR polemic crisis, malaise. I I don't know how you want to phrase it, but people get a little touchy when thinking about tapping into their equity or these uh some of these programs or products that seem maybe a little too good to be true on the surface. Thoughts on uh common reluctance you're seeing out there with some of these products and and how you get borrowers past those hurdles that they've kind of self-imposed. Nick FriedmanAbsolutely. Yeah, I think the biggest self-imposed hurdle that they that they place on themselves is is these companies are going to take a bunch of my equity in this process and I'm not gonna get it. Right. I think that's the big thing. And and that's you know, nothing against the iBuyers of the world, open door offer pad. They they paved the way for a lot of the businesses in the prop tech space today, and they just took a bat to mystery and said, I'm just gonna buy the house. Um, but the cons the misconception that that people have about other equity products is that, okay, they're gonna try to flip my house and sell it. They're gonna buy it at a discount and give me a low ball offer and they're gonna keep the equity, right? Those are that's kind of the main thing. Um, so if with buy before you sell, we don't do that. We let you sell the home on the open market. If the home doesn't sell in time, then we do buy the house, but we still give all the upside to the customer once the home does sell. So they have the opportunity to still sell the home, get the full market value for their property, um, get all the equity that they need minus our fee, and they can move forward from there. And our fee is 2.4%. We're very transparent about that. We think it's worth all of the costs that go into a transaction that you would have to do without it. Um, they're gonna be way more than the 2.4% that we charge. And so I do think that, again, the biggest misconception is we're gonna steal all of your equity. And if we created a company that did that, then we wouldn't be doing the amount of business we're doing now. Our goal is to basically give the customer the ability to access it before anything else. And it's a non-recourse loan for them. So if we say, hey, like you're gonna unlock $100,000, uh, we're putting our money on the line there. Because if we give them $100,000 and the home doesn't sell for enough to cover it, we take the loss, not them. Um and that doesn't really exist uh in in most places, right? And so I think, again, it's a very consumer-friendly product uh in in our case and in other cases with other Bible free sale products as well, but especially in our case. Um, and I think again, people think we're out to out to steal and take their equity. Um, and and that's not that's not the case. Robbie ChrismanWell, it seems like there's a lot of newfound home shopping market experts because it's it's come to and I'm saying that as as buyers on Main Street now are self-proclaimed experts because it dominates a lot more of their thought process, the affordability of homes, so they're more tuned in. However, there's there people are sitting on the sidelines because of economic uncertainty. And I would venture to say that it's always better to kind of plant your stake in the ground and get into home ownership when you can versus trying to time the market. What did the survey reveal about kind of the concern? Maybe it's maybe it's lenders' concern more than borrowers' concerns about the uncertain economic environment we're in. What's the Fed going to do, especially with less communication? What's going to happen in the Middle East? Are our is the labor market going to remain robust? Those sorts of things. Nick FriedmanYeah, absolutely. Um, so we actually we asked we we asked them a question, and it was what do you believe will be the biggest housing market story for the rest of 2026 and the reason why people aren't you know shopping? Um and economic uncertainty was the number one answer. Affordability challenges in second, mortgage rate changes in third. And so I do think that it is something that a lot of people are thinking about. Um, that is the biggest hesitancy right now um to buy. Um, I think another hesitancy and reluctance just overall, and this again is is just macroeconomic as well, but people have historically low interest rates and they're not really willing and able to give that up. They don't want to. Um, I certainly don't want to right now, right? I have a 3% mortgage, a lot of us do, and we don't want to we don't want to sell the house. And so there's a lot of people who are kind of just you know locked up and they don't want to do anything with it at the time. Um, so I think that's happening as well. Um, when you combine that with the economic uncertainty, it gets even worse because it's like, hey, I don't know what's gonna happen, I don't know where to go, blah, blah, blah. Um, I think the the flip side to that, the loan officers talk about, though, is we know what the conditions are like now, and we know that you can buy a house now and you can get into it. Um, it may just become harder and harder, depending on what happens next. If you lead with that monthly payment, hey, if you can afford $2,000 a month or $3,000 a month, that's what you want to pay. And I can get you into a home you want to get into, now's still a good time to do it. Um, and Robbie, you mentioned this earlier, right? You still might see a scenario where rates do go down drastically all of a sudden, the economic uncertainty becomes maybe good for some people, but then you have those bidding wars and you have home prices that go up all of a sudden, and now people are again cut out. So I think it just really depends on the type of buyer that you're talking to. And so if if their concern is economic uncertainty, I think you need to think about okay, well, what are we certain of now, right? And what can we get you now that may actually play in your favor doing this today rather than later from now? And then that's what every loan officer will say. The best time to buy is always now because loan officers want to do deals now, right? Um, and a lot of times that's that's what they're gonna say in the market, and that's what I think good loan officers are doing. Robbie ChrismanI always go back to, yeah, we all want lower rates, but what do you want what it's going to take to get us to lower rates? Whether that's you know, economic uh I don't want to say collapse. Well, what's it going to take to get us to lower rates? The economy starting to falter, another global pandemic. Like it's not necessarily good things that like get you to lower rates. Before I let you go, anything else from the report you found interesting? Any anything that's been on your mind when it comes to uh the housing market recently? Any any tidings of wisdom for our listeners today? Nick FriedmanOne of the things that I saw in the report that I thought was kind of funny is people still believe that 20% down payments are the ways it's the only way to buy a house, um, which is like so shocking to me. And again, like I'm in the industry, so maybe I just like you know, I hear I know I know I know too much. Uh, but it's still the prevailing thing that loan officers say a lot. And there's a there's a couple quotes in here that I thought was interesting. It's like people aren't even approaching the home buying problem because they don't have the 20% saved up, and there are so many other ways right now to buy. And so I think combine that with the ability to unlock some equity, with the ability to just use some of these programs out there, down payment assistance, um, do multi-generational homes. There's so many ways to get in a home right now. So I think the general knowledge for me, the general wisdom for me is just like it is very, very, very much possible for most people to buy a house right now. I think that people are, again, uh just a little bit unsure of what the options are that exist. And so I would highly recommend as a loan officer, like everyone has a shot, right, uh, of buying, um, unless there's like a pure, hey, like, you know, credit score is too low to afford anything or like to have any program that that works for them or whatever it might be, right? If there's just some hard cutoff, fine. But if not, there's probably some way to get these guys in a house. There's so many programs out there today. Um, and so I would just say be educated on those programs. Don't necessarily lead with them, lead with the customer with, hey, what are you willing and able to pay? Um, and then we'll work backwards to find a solution that makes sense. So I think that's the best way to approach this market right now. Robbie ChrismanI just wonder how we get awareness because if people think they need to put 20% down, they're not even going to speak to a loan officer. It's like, do we put billboards on the side of the road, but then they think it's a gimmick? It's it'll be interesting to see how how awareness of some of this stuff evolves as uh people chase homeownership because it's certainly still part of the American dream. Nick FriedmanYeah, I you know, one thing that I think would be interesting, and maybe it's on like search portals or something like that. Um, and Zillow has done this on some search on some uh search, which I think is cool um with their own mortgage side, but obviously, you know, it's not necessarily helpful for for loan officers who aren't with Zillow. Uh, I don't know if they're doing this still, but like they would have like, hey, like 5% down financing available or something, right? If you have that like on your listing, or if you say that on your listing, um, people, people look at homes all the time, even if they're not buying, and all of a sudden it might trigger something in their head. So I think it's actually up to listing agents potentially to actually put information in their in their listings to help basically use listings as billboards, essentially. That may be one way that we can do it. And if we can institutionalize that somehow, I thought that I think that could be a really cool way to at least start the conversation, right? Robbie ChrismanYeah, it's almost like you can't have your cake you need it too. If you want home ownership that bad, you can't poo-poo some of these creative solutions to help get you into a home. So uh you know I love having you on the podcast. Always a pleasure, and uh, we'll do this again soon. Sounds great. Thank you, Robbie. Robbie ChrismanToday's economic calendar kicked off with mortgage applications declining 2.9% last week, as higher borrowing costs continued to weigh on housing activity, with purchase applications falling four percent and refinancing activity slipping two percent. Compared with the year ago, refinance applications were down nine percent, and purchase applications were three percent lower, highlighting the persistent impact of elevated mortgage rates on both home buying and refinancing demand. We've also received July ADP employment change of only forty-four thousand, and later today brings final July S&P Global U.S. Services PMI, July ISM non-manufacturing index, weekly crude oil inventories, and remarks from Fed Governor Cook. We begin the day with agency MBS prices that had better than Tuesday's closed, with the two-year yielding 4.20, and the ten-year yielding four point six one after closing yesterday at four point six three percent. Let's wrap up with a joke and some housekeeping. Did you know that coffee spelled backwards is eFoc? Just know I don't give eFock until I've had my coffee. Thanks to Figure for sponsoring this week's podcast. Figure is shaking up the lending world with their five-day HELOC, offering borrower approvals in as little as five minutes and funding in five days. Figure has hundreds of partners in the banking, credit union, home improvement, and of course IMB space embedding their technology. To learn more, visit Figure.com.