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Two mortgage competitors have apparently settled a years-old poaching and theft of trade secrets lawsuit that never approached a jury trial. An attorney for Nationwide Mortgage Bankers wrote in a filing this month the firm reached a resolution in a complaint from Paramount Residential Mortgage Group. The larger PRMG sued NMB in July 2022 in federal court, claiming the rival poached 41 employees from five states and took with it confidential company and customer information. Those departed employees were responsible for $260 million in annual loans which generated $3 million in revenue annually for PRMG, the lender contested. A dollar amount for the resolution wasn't disclosed, and an attorney for NMB this month wrote in a court filing that the parties are still working on written settlement terms. Neither attorneys nor representatives for the companies immediately responded to requests for comment Monday. PRMG recorded over $6.2 billion in origination volume in 2023 according to Home Mortgage Disclosure Act Data. It also reports to the Nationwide Multistate Licensing System 189 active branches and 768 sponsored LOs. NMB meanwhile spans 36 branches and 254 sponsored LOs, and reported more than $1.3 billion last year in production volume according to the public databases. The lawsuit was filed in the midst of numerous similar raiding complaints between home loan players during the tail end of the recent refinance boom. PRMG is also still seeking tens of millions of dollars in damages from Axia Home Loans in a 2020 poaching case whose trial has been continuously postponed in a Southern California state court.Corona, California-based PRMG accused NMB of working with two of its managers to coordinate the raid and a partial mass resignation in May 2022. The branch managers, loan officers and underwriters came from offices in Florida, Ohio, Indiana, Kentucky and Michigan, PRMG's amended complaint filed in 2023 said. Five days after the raid, PRMG said it sent a cease-and-desist letter to NMB regarding departed employees' non-solicitation and confidential information restrictive covenants. NMB allegedly ignored that letter and continued to poach more employees after the May raid. Staff moving to NMB sent confidential customer information to their personal email addresses ahead of their move, PRMG said. Nationwide Mortgage Bankers allegedly offered indemnification for the incoming employees from penalties and damage awards PRMG could garner in future litigation.The defendant firm also countersued PRMG for unfair competition, claiming the original lawsuit was an effort to stifle the firm's former employees. A New Jersey federal judge rejected those claims in May on legal grounds, dismissing them with prejudice meaning they couldn't be refiled. Amidst the dozens of raiding and trade secrets cases between lenders in recent years, companies have increasingly moved to resolve claims. Some long-simmering feuds between major players, including multiple cases between Loandepot and CrossCountry Mortgage, remain.

The upcoming election has implications for several game-changing policies that could affect companies that lend on income-producting properties and housing.At the time of this writing, the presidential race and the composition of congress were still largely a toss-up, but polling pointed consistently to a Republican Senate, David McCarthy, managing director, chief lobbyist and head of legislative affairs at the Commercial Estate Finance Council.READ MORE: Election 2024 coverage from NMNThat means outcomes where power could be divided between the parties are possible, and it's caused the council to engage in projections for a range of election scenarios that could create a need for compromise. The council plans to update its analysis over time.What's at stake for key policies in different scenarios follows, based on comments from McCarthy and an analysis he co-authored with Sairah Burki, managing director and head of regulatory affairs, and James Montfort, manager of government relations. An Oct. 7 Cook Political report informed the original study.GSE reformBased on Trump's first term, it looks like government-sponsored enterprise reform could re-emerge as a priority if he won the election, achievable through presidential appointments at the GSEs' regulator, the Federal Housing Finance Agency, and the Treasury Department.However, a release from government conservatorship is not a certainty, even with a Republican controlled Senate, McCarthy said. Roadblocks could arise if nominees' views on freeing Fannie Mae and Freddie Mac from government ties they've had since the Great Financial Crisis' housing crash are unpopular and Congress objects to them.The two GSEs could provide less support and pose more competition for the industry in privatized form, depending on how their role evolves.If released, the two enterprises will need to strike a balance between their efforts to fulfill their affordable housing mission and remaining competitive in the market as private entities, McCarthy said. However, he sees risks to the status quo too.The GSEs could be more of a housing policy tool if Harris wins and follows in President Biden's footsteps. Fannie, Freddie and their regulator have recently implemented some measures, such as mandatory tenant protections, which are a concern for companies financing income-producing real estate, according to McCarthy."They're able to dictate certain terms in terms of notice requirements for eviction or rent raises," he said. "It seems like a kind of backdoor way to regulate certain aspects of the multifamily housing market."Taxation and broader housing policyWhile some Democratic tax initiatives and other policy inventions could be unfavorable for real estate and corporations, that party's proactive interest in supporting housing could funnel more public funding toward residential properties than under a Republican administration. "Programs like the low-income housing tax credit could see additional resources and expansion," the CREFC noted in its report. "Sustainability and climate incentives, especially popular programs under the Inflation Reduction Act, could see additional funding and support."While a Republican administration may look to reduce red tape and taxes for domestic companies broadly, they might discontinue other programs that support real estate financing.There's concern that "lawmakers may look to rollback other provisions to 'pay for' other tax cuts," according to the council.A recent survey conducted by National Mortgage News parent company Arizent found that 42% of mortgage industry professionals felt a Harris presidency would have a "very negative impact" on their business, while 30% believed that about a second Trump administration. Bank capital rulesA Harris presidency could move the Basel III endgame reproposal process forward while a second Trump administration could increase the chances that the original proposal rolls back through a congressional review, particularly with a Republican-controlled Senate.The original proposal contained capital charges and other provisions that could complicate commercial real estate lending and securitization, McCarthy noted. Other industry analyses have noted it could reduce depository interest in low-downpayment single-family mortgages, warehouse lending and mortgage servicing rights.Republicans may be more apt to scrap the original proposal aimed at ensuring rules around banks' financial soundness are adequate and up to date, while Democrats would be more likely to continue looking at how they could ease the standards without compromising their intended purpose."I think that it would be very unlikely that Harris would support a wholesale repeal if that rule got finalized, even if Congress was controlled by Republicans," McCarthy said.That said, the momentum for scaling back some of the capital requirements in the original proposal could grow under some scenarios in a Harris administration, even though it currently appears to be running into opposition, according to McCarthy."While it might not be able to be repealed. I think its final form would still be somewhat up in the air, and would be tempered by a Republican Senate," he said. The Community Reinvestment ActFissures between banking advocates over the Community Reinvestment Act could be bridged if the election results in a situation where chambers of congress and the White House have to compromise."There are critics of the Community Reinvestment Act on both sides of the aisle for different reasons, so I actually think that there could be some common ground in fixing it," McCarthy said.Clarified community reinvestment goals could be an opportunity if they funnel more money toward real estate, but risks also lie in the possibility for overly prescriptive or expanded requirements under a Harris administration, McCarthy said.On the other hand, a Trump administration could take a neutral stance on CRA reform that could potentially weakening support it provides for real estate investment.The composition of Congress might become more influential at this point, as the White House could follow its lead.

Bloomberg News The Federal Housing Finance Agency has proposed substantive changes to the Federal Home Loan Banks' corporate governance rules that would allow the FHFA director to set "reasonable" board compensation. On Monday, the FHFA issued a 116-page notice of proposed rulemaking that laid out four regulatory actions the agency will take to strengthen the boards of the 11 regional Home Loan Banks. The proposal would require that each bank conduct an annual assessment of incumbent directors to determine whether each director is contributing positively to the board's ability to oversee the bank's operations. The proposal also would require that director compensation reflect performance, and would permit the board to remove a director for continuous poor performance or lack of participation that compromises a bank's operations. It would require for the first time that each bank conduct background checks for board nominees and prohibit any individual from serving on a board without first confirming their fitness to serve in a fiduciary role.On compensation, the FHFA said it will consider a variety of factors such as director compensation at other banks, the banks' status as government-sponsored enterprises and the fact that the system was created to serve a public purpose. During outreach for its "FHLBank System at 100," initiative, the FHFA said that stakeholders stressed the importance of independent voices. The proposed rule would make modest changes to increase the separation between independent directors and would prohibit former member directors from serving as an independent director until they have been off the board for at least two years.   The FHFA also plans to clarify the required qualifications for public interest independent directors and expand the list of experience for regular independent directors to include housing finance, emerging risks and complex problems. The agency also wants the banks to "evaluate potential gaps in board knowledge and pursue opportunities to address these gaps by nominating individuals with particular skills, backgrounds, and experience." The agency also wants to facilitate the nomination of individuals with technical subject matter expertise.The proposed rule would add a host of skills that would now qualify as experience for board members including artificial intelligence, climate risk, information technology and the business models of Community Development Financial Institutions. That list is on top of experience or knowledge currently required in one or more areas: auditing and accounting, derivatives, financial management, organizational management, project development, risk management practices, and the law."FHFA's vision for the future is to have an effectively governed Bank System that efficiently provides stable and reliable funding to creditworthy members and delivers innovative products and services to support the housing and community development needs of the communities its members serve, all in a safe and sound manner," FHFA said in its proposal. Each of the banks would be required to take active steps to seek independent directorship nominees and to prioritize those with knowledge and experience that has come primarily from full-time paid executive, management, or other senior positions. Banks would be able to fill a vacant public interest independent directorship by redesignating a qualifying incumbent regular independent director as a public interest independent director and vice versa.In one of only a few revisions addressing governance below the board level, the proposal would require each bank to adopt and implement a conflict of interest policy covering all bank employees. The Home Loan Banks are a private cooperative collectively owned by its 6,500 members. But the system was created by Congress in 1932 with the passage of the Federal Home Loan Bank Act, which established the system to serve the public interest through residential housing finance and community lending. Members of the system have access to low-cost secured loans and the system's Office of Finance issues bonds backed by an implicit government guarantee. Some of the FHFA's proposed changes reiterate or clarify existing policy. The Bank Act requires that at least two of a bank's independent directors qualify as "public interest" independent directors, with more than four years of experience advocating for or acting on behalf of consumers or community interests."Corporate governance of the Banks is strengthened when: the public interest is adequately represented, Bank boards have the collective knowledge and expertise to guide the Bank through new and emerging risks and complex problems [and]; independent directors represent a true independent voice," the FHFA  said in its proposal. The proposed rule is open for public comment for 90 days after it is published in the Federal Register.

If you’ve been paying attention, you may have noticed that mortgage rates have quietly crept back up to nearly 7%.While it appeared that those 7% mortgage rates were a thing of the past, they seemed to return just as quickly as they disappeared.For reference, the 30-year fixed averaged around 8% a year ago, before beginning its descent to nearly 6% in early September.It appeared we were destined for 5% rates again, then the Fed rate cut happened. While the Fed itself didn’t “do anything,” their pivot coincided with some positive economic reports.Combined with a “sell the news” event of the Fed cut itself, rates skyrocketed. However, now might be a good time to remind you that rates do tend to fall for a while after rate cuts begin.Falling Rates Often Play Out Over Years, Not MonthsAs noted, the Fed pivoted, aka lowered its own fed funds rate, in September. They did so after increasing their rate 11 times during a period of tightening.Hence the word “pivot,” as they switch from raising rates to lowering rates.In short, the Fed determined monetary policy was sufficiently restrictive, and it was time to loosen things up. This tends to result in lower borrowing rates over time.While many falsely assumed the pivot would lead to even lower mortgage rates overnight, those “in the know” knew those cuts were mostly already baked in, at least for now.So when the Fed cut, mortgage rates actually drifted a little higher, though not by much. The real move higher post-cut came after a better-than-expected jobs report.Lately, unemployment has taken center stage, and a strong labor report tends to point to a resilient economy, which in turn increases bond yields.And since mortgage rates track the 10-year bond yield really well, we saw the 30-year fixed jump higher.After nearly hitting the high-5s in early September, it completely reversed course and is now knocking on the 7% door again.How is this possible? I thought the high rates were behind us. Well, as I wrote earlier this month, mortgage rates don’t move in a straight line up or down.They can fall while they are rising, and climb when they are falling. For example, there were times when they moved down an entire percentage point during their ascent in 2022.So why is it now surprising that they wouldn’t do the same thing when falling? It shouldn’t be if you zoom out a little, but most can’t stay the course and contain their emotions from dramatic moves like this.It Can Take Three Years for Mortgage Rates to Move Lower After a Fed PivotWisdomTree Head of Equities Jeff Weniger crafted a really interesting chart recently that looked at how long mortgage rates tend to fall after the prime rate starts falling.He graphed six instances when rates came down from 1981 through 2020 after prime was lowered. And each time, other than in 1981, it took at least two years for rates to hit their cycle bottom.If we combine all those falling mortgage rate periods and use the average, it took 38 months for them to move from peak to trough.In other words, more than three years for rates to hit their lowest point after an initial Fed cut.As it stands now, we are only a month into the prime rate falling. But it’s important to note that rates had already fallen from around 8% a year ago.They’ve now drifted back up to around 6.875%, and it’s unclear if they’ll continue to move higher before coming down again.But the takeaway for me, in agreeing with Weniger, is that we remain in a falling rate environment.Even if 30-year fixed rates hit 7% again, it’s lower highs over time as rates continue to descend.Meaning we saw 8% in October, 7.5% in April, and perhaps we’ll see 7% this month. But that’s still a .50% lower rate each time.The next stop could be 6.5% again, then 6%, then 5.5%. However, it won’t be a straight line down.Still, it’s important to pay attention to the longer-term trend, instead of getting caught up in the day-to-day movement.Mortgage Lenders Take Their Time Lowering Rates!I’ve said this before and I’ll say it again for the umpteenth time.Mortgage lenders will always take their sweet time lowering rates, but won’t hesitate at all when raising them.From their perspective, it makes perfect sense. Why would they stick their neck out unnecessarily? Might as well slow play the lower rates if they’re not sure where they’ll go next.As a lender, if you’re at all fearful rates will get worse, it’s best to price it in ahead of time to avoid getting caught out.That’s likely what is happening now. Lenders are being defensive as usual and raising their rates in an uncertain economic environment.If and when they see softer economic data and/or higher unemployment numbers, they’ll begin lowering rates again.But they’ll never be in any rush to do so. Conversely, even a single positive economic report, such as the jobs report that got us into this situation, will be enough for them to raise rates.In other words, we might need multiple soft economic reports to see mortgage rates move meaningfully lower, but just one for them to bounce higher.So if you’re waiting for lower mortgage rates, be patient. They’ll likely come, just not as quickly as you’d expect. Before creating this site, I worked as an account executive for a wholesale mortgage lender in Los Angeles. My hands-on experience in the early 2000s inspired me to begin writing about mortgages 18 years ago to help prospective (and existing) home buyers better navigate the home loan process. Follow me on Twitter for hot takes.Latest posts by Colin Robertson (see all)

As part of its continuing shift away from being an investor in reperforming and nonperforming residential and commercial mortgages, Great Ajax Corp. will be rebranding to match its ties with Rithm Capital.The new name will be Rithm Property Trust, effective at an undisclosed date in the current quarter subject to customary notices.On June 11, several months after Great Ajax' deal to merge with Ellington Financial collapsed, the company completed an agreement announced in March with Rithm where an affiliate of the latter company would become the external manager of the real estate investment trust.As part of that transaction, Michael Nierenberg, CEO, chairman and president at Rithm, took on the additional duties of Great Ajax' interim CEO. The new business model envisioned for Great Ajax involves becoming what Rithm management has called making "opportunistic investments," primarily in commercial real estate.On the second quarter Great Ajax earnings call shortly after the transaction took place, Nierenberg compared the situation at the REIT with what Fortress Investment saw in 2013 regarding the dislocation in the mortgage servicing market that led to the creation of what is now called Rithm.On June 11, Great Ajax issued $14 million of its stock to Rithm at $4.87 per share; it also granted warrants for up to five years for Rithm to purchase an additional $35 million of shares at $5.36 each. Those prices are below the $6.60 per share agreement for Ellington to purchase 1.67 million shares of Great Ajax stock following the termination of their merger.Currently Rithm owns 2.9 million shares of Great Ajax, while Ellington holds 1.9 million, making them the fourth and five largest institutional owners, according to CNBC."When we completed the strategic transaction with Great Ajax, we were clear about our mission: to transform the company from a legacy residential mortgage vehicle into an opportunistic real estate platform," Nierenberg (cited as Rithm's CEO) said in Great Ajax' third quarter results press release. "During the third quarter, we made significant progress towards doing so by selling down $148 million [unpaid principal balance] of legacy assets and growing our commercial real estate debt portfolio to over $100 million UPB."The deal for Great Ajax was just one of several undertaken by Rithm to expand its business, including the contentious purchase of Sculptor Capital Management and the acquisition of Specialized Loan Servicing.For the period ended Sept. 30, on a GAAP basis, Great Ajax lost $8 million, compared with a loss of $12.7 million in the second quarter and a $6.1 million loss for the third quarter of 2023.

Federal Reserve Bank of Dallas President Lorie Logan repeated her call for the U.S. central bank to lower interest rates at a careful pace as the economic environment remains uncertain.Logan, speaking Monday in prepared remarks for the Securities Industry and Financial Markets Association's annual meeting in New York, said less restrictive monetary policy will help the Fed balance risks to both the inflation and labor market sides of its dual mandate. "If the economy evolves as I currently expect, a strategy of gradually lowering the policy rate toward a more normal or neutral level can help manage the risks and achieve our goals," Logan said. "However, any number of shocks could influence what that path to normal will look like, how fast policy should move and where rates should settle."RELATED: How lenders are talking with clients about the Fed cutPolicymakers began lowering interest rates for the first time since the onset of the pandemic at their meeting last month. They cut by a half percentage point, to a range of 4.75% to 5%, as concern mounted that the labor market was deteriorating and as inflation cooled close to the Fed's 2% goal. Economic data since then has shown that hiring over the past three months was stronger than initially expected, and market participants now anticipate a smaller, quarter-point cut at the Fed's Nov. 6-7 meeting."The FOMC will need to remain nimble and willing to adjust if appropriate," Logan said.During a Q&A following her speech, she said businesses in the Dallas Fed district, which encompasses southern New Mexico, northern Louisiana and all of Texas, say they are optimistic and see solid growth over the next six months, but also a lot of uncertainties. Logan, who spent the bulk of her career in the New York Fed's markets group, ultimately managing the Fed's System Open Market Account, also spoke about the central bank's balance sheet and funding market dynamics."They'll be taking time to make sure they understand those risks as they plan for future investment," Logan said in a question-and-answer session following her speech. Balance SheetLogan said liquidity in the market remains "more than ample." While use of the Fed's overnight reverse repurchase facility has been declining over the past two years, the current balance remains well above the pre-pandemic level. "For now, the remaining ON RRP balances provide a buffer of additional excess liquidity," Logan said, adding that in the long run, ON RRP balances should be negligible. If balances in the facility don't decline as repo rates rise closer to the interest rate on reserve balances, it may be appropriate to reduce the ON RRP's interest rate, she said. Logan also added that recent pressures in money markets appear to be temporary and that policymakers should tolerate such small pressures in order to reach an efficient balance sheet size. Officials have been reducing the size of the balance sheet, which grew to nearly $9 trillion during the pandemic as the Fed bought Treasuries and mortgage-backed securities to lower market rates and support the economy. It has slowed the pace of that runoff this year. Logan noted that mortgage-backed securities remain a substantial part of the balance sheet and are projected to remain so for years to come, though the Fed intends to ultimately hold mostly Treasuries. The Dallas Fed chief repeated a call for all banks to be signed up for and ready to use the Fed's emergency liquidity tool, the discount window, should they need to do so. She also suggested the Federal Open Market Committee might at some point consider central clearing for its Standing Repo Facility, as the Securities and Exchange Commission has done for the broader Treasury market."The risk-management improvements that will come from central clearing are significant," Logan said. "Better transparency, and perhaps enhanced intermediation, that come from central clearing will further support the market, not so much in just normal times, but important in periods of stress."

Andy Balmert thought he had checked all the boxes for home ownership. He has a college degree, built up solid credit and works as a special-effects operator for a luxury hotel casino on the Las Vegas Strip.The market didn't agree. Balmert's search stretched for eight months as he spent countless hours on real estate apps and visited a dozen Las Vegas homes in a day. It ended in August after he received a $50,000 grant from a new program targeting middle-class households, another sign the affordability crisis has spread far beyond low-income Americans.Balmert counts himself as lucky. Elevated interest rates, along with record-high home prices fueled by a severe supply shortage, have squeezed many middle-class households out of the market. A growing share of mid-income households were willing to thrust their debt into riskier territory last year to make the leap to ownership, according to a Bloomberg analysis of 10 million federal home-loan records from 2018 to 2023.Many lenders and consumer advocates prefer that borrowers' debt-to-income ratios don't exceed 36% because, above that, higher rates and fees on mortgages are more likely and the risk of default rises. But last year, 58% of mid-income households approved for mortgages had debt-to-income of 40% or more — a share that's the largest since at least 2018.Housing is typically a local issue. But the affordability crisis has moved to the center of national politics, posing complicated challenges for both Democratic nominee Kamala Harris and Republican Donald Trump as they try to woo voters in battleground states with promises to address housing costs. In several areas of swing states, the pain is especially acute for new and aspiring middle-class buyers.In Las Vegas, almost three-quarters of mid-income households approved for mortgages last year had debt-to-income above 40%. That's one of the highest shares in the country.Montgomery, Chester and Bucks counties — suburbs of Philadelphia where working-class homes were once plentiful — had the biggest drop in for-sale inventory, to just under 3,000 from 10,800 listings two elections ago.About 41% of the moderately priced homes in Atlanta were snapped up by cash buyers last year — a whopping 22-percentage-point jump from 2018 despite growing attention to that trend.Years of PainEven though the Federal Reserve has started cutting interest rates, it could take years to make homeownership affordable.According to Fannie Mae calculations, it would take one of three things, or a combination of them, for affordability to return to 2016-2019 levels: The median price of a single-family home would need to fall 38% to $257,000 from September's $414,340; median household income would have to rise more than 60% to $134,500; or the mortgage rate would need to fall to 2.35% from roughly 6.5%.Harris said she would tackle the costs by expanding the housing supply. In the runup to the Nov. 5 elections, she has pledged to increase the number of affordable homes for sale or rent by 3 million by the end of her first term. Her plan includes tax credits for builders that construct entry-level homes and $25,000 in downpayment assistance for 4 million first-time buyers.Trump has promised to attack the problem by cutting regulations that raise housing costs and by opening up federal land for housing development.Some housing and economic experts caution that federal policy might not make much of a difference."I really think the focus has to be on the supply side," said Mark Fleming, chief economist at First American Financial Corp., the parent of the largest U.S. title-insurance company. "The challenge is that there's not a lot that the federal government can do. A lot of it is sort of local zoning, local regulatory hurdles."Vegas Debt StretchBalmert, 34, started with a self-imposed cap of $250,000 for a starter home with a reasonable commute to his job in Las Vegas. He wasn't even in the ballpark. The median price in the area is $426,000, up 50% from $288,000 five years ago.He had preapproval from a lender to spend more, but he didn't want to feel overextended.Other middle-class households in the Vegas area stretched. Last year, 72% of new mid-income borrowers had monthly debt payments that ate up 40% or more of their incomes, compared with 53% just two years earlier.The number of originations has plummeted since late 2021, partly because owners are reluctant to give up mortgages locked in at low rates. That means millions of Americans have gained wealth from the combination of rising home prices and cheap loans.Still, the growing share of borrowers taking on higher levels of debt sheds light on the struggles of aspiring middle-class homeowners, particularly younger generations without wealth or parents able to help foot the bill. "We have a younger generation who simply are not able to buy a house, period," said Justin Jones, a commissioner of Clark County, which includes Las Vegas. "Not as many are wanting to buy houses. But even those who want to simply can't without some sort of assistance" unless they're in the highest income brackets.Balmert didn't qualify for most downpayment assistance due to income that he describes as "middle high." A grant from a government-sponsored Federal Home Loan Bank helped him close on a two-bedroom, Spanish-style condo in the suburb of Lone Mountain for just over $300,000 — and a debt-to-income ratio well under 36%.But his monthly payment is two times what he paid in rent. Balmert hasn't taken any extended time off from work in the past few years and can't afford a gap between jobs. "Not until I'm debt-free again," he said.READ MORE:Housing affordability initiatives launched this springThe FHLBank San Francisco, which has a region that includes Nevada, California and Arizona, last year launched a $10 million pilot program specifically for mid-income homebuyers. The $20 million in funds added this year were quickly snatched up due to strong demand. Most of the participating lenders were credit unions.Some experts say grants could make the affordability crisis worse."If you're boosting the demand side of the equation with the downpayment assistance, are you really helping those people?" asked First American's Fleming. "Because if there's nothing for them to buy, all you're doing is adding more people and then bidding up the prices."For Balmert at least, the grant made buying a home possible. As for Harris and Trump, he's not convinced that either has a plan to help his millennial friends become homeowners.In the last election, Balmert voted for Joe Biden. This time, he is undecided."I want to hear everyone out," he said.Few New Homes Under $600,000Residents in suburban Philadelphia know what it's like to have a shortage of affordable homes.Xavier Wylie, a 35-year-old from West Chester, had a good job making $72,000 a year, which allowed him to save for a house after outgrowing the two-bedroom apartment he was renting with his girlfriend and kids, ages 13, 9 and 7.But after searching for a house since before the pandemic, he wasn't finding anything close to what he needed that he could afford."It was completely demoralizing," Wylie said. "You see your kids getting older, you realize the need for more space, you have the want, you have the desire, you have the will, you work hard every day. And it just feels like you just keep hitting a brick wall and there's nothing, nothing, nothing."Wylie, who is an exterminator, was finally able to buy a three-bedroom home in Coatesville in April, but only with the help of a $20,000 downpayment grant and credit counseling from the nonprofit Housing Partnership of Chester County. He paid $185,000 for a 1905 row house that sold for $94,900 in 2019.Wylie's experience is all too common in Montgomery, Bucks and Chester counties. Since 2016, the area saw the biggest drop in new and existing homes for sale among large US metropolitan divisions, according to a Bloomberg analysis of Redfin data.Inventory has declined because homeowners with low mortgage rates are staying put, and developers aren't building many sub-$600,000 homes because of the high cost of land, said Michael Maerten, chairman of the board at Tri-County Suburban Realtors.Chester and Montgomery counties saw more population growth between 2020 and 2023 than anywhere else in Pennsylvania, and efforts to preserve green space, especially in Bucks and Chester counties, have exacerbated the shortage, said Kevin Gillen, a senior research fellow at Drexel University in Philadelphia."Where do these young people live coming out of college, coming out of the military, people who are starting their careers, starting young families and teachers and nurses and cops and electricians, where are they going?" Bucks County Commissioner Robert Harvie said. "There's no place to go for them here."Both campaigns see Pennsylvania as critical to winning the presidency, and the vote in Philadelphia and its collar counties — Bucks, Montgomery, Chester and Delaware — may help determine who wins the commonwealth.Wylie is on the fence about who to vote for and doesn't think either candidate would be better than the other on the economy or housing."I'm just not sold on either one of them, honestly," Wylie said. "I don't believe either one of them are for the people."All-Cash BuyersIn the Atlanta area, investors eager to snap up rental houses pepper real estate broker Kim Owens with "30 calls a day looking for me to sell a house to them before I even put it on the market."Too often, investors and other cash buyers are the only ones who can afford to buy.Metro Atlanta jumped onto the radar of private equity firms and real estate investment trusts in a big way after the Great Recession. The firms gobbled up foreclosed homes in the area at a discount of up to 11% compared with owner-occupant buyers, according to research cited by Brian An, an assistant professor at Georgia Institute of Technology, in a 2023 paper.Atlanta has stayed at or near the top of cash buyers' wish lists ever since. More than four in 10 homes sold between $300,000 and $500,000 in the area last year went to cash buyers of all types, from individuals to large institutions, according to a Bloomberg analysis of real estate data from Attom. Investors that purchased at least 10 properties in a year — often denoting an institution — snapped up 9% of those homes in 2023, a sharp decline from the pandemic, but still more than twice the 2018 level.The trend was more pronounced in some areas inside the city of Atlanta, An's research shows. In majority Black neighborhoods, for example, corporations including small investors were involved in 70% of single-family transactions between 2010 and 2021. That's about twice the rate of other neighborhoods.Owens, who is Black, said many of her owner-occupant homebuyers are so loaded down with student debt that their school loan payments sometimes exceed their mortgage payments. Those who can't afford to buy, especially Generation Z, are instead renting new homes so they can at least enjoy new amenities, she said.Faced with the choice between selling to cash-strapped individuals or to investors, homeowners often can't resist the cash. "Anyone who's looking to buy for under $400,000 is going to be competing with investors," Owens said.If she's elected, Harris said she would get Congress to remove tax benefits for large institutional investors that buy up owner-occupied homes and turn them into rentals."Some corporate landlords buy dozens, if not hundreds of houses and apartments, then they turn around and rent them out at extremely high prices," Harris said last month at a campaign rally in Raleigh, North Carolina. "And it can make it impossible then for regular people to be able to buy or even rent a home."Taffy Carruth, a 41-year-old apartment complex manager who lives in the Atlanta area, has been house-hunting since January. She has been encouraged in recent months as more moderately priced houses hit the market, but says there's still a lack of newer, spacious homes in her price range. At times, Carruth has wondered whether her roughly $60,000 income could pay the bills."This is what I make. Will I be able to maintain a home on my own?" she'd think. "Well, let's log off."

The National Association of Realtors says its U.S. Supreme Court petition over a federal probe carries profound weight for businesses and private citizens. The massive trade group followed through last week on its promise to take its fight with the Department of Justice to the nation's highest court. The petition for writ of certiorari focuses on feds walking back their promise in 2021 to end an investigation into NAR's practices.The Supreme Court must still decide to hear the case, and may dismiss the petition with no reason given. It also has no deadline to make its decision. A federal court sided with NAR's challenge to the DOJ's reneging, but an appeals court changed course this spring in allowing feds to proceed. The case has no relation to NAR's monumental Sitzer/Burnett settlement this year in which it changed some rules the DOJ had scrutinized. "A rule that the government receives special treatment permitting it to easily escape its contractual commitments would create profound instability, along with basic unfairness," wrote attorneys for NAR. Counsel argues the majority ruling in the U.S. Circuit Court for the District of Columbia's 2-1 decision in April breaks case precedent and allows feds to move in a way they would never allow a private citizen to do so. The trade group did not respond to a request for comment this week, but previously said it wanted to ensure the DOJ sticks to its 2020 agreement. The appeals court ruling, it said, would jeopardize the government's agreement to countless civil and criminal settlements, and with state and local governments. The DOJ began its probe in 2019, focusing on NAR's Participation Rule and Clear Cooperation Policy. The Participation Rule, which requires a broker who participates in a Multiple Listing Service to make an offer of compensation to a buyer broker, was axed this year in the Sitzer/Burnett resolution.The Clear Cooperation Policy, which requires immediate listings, meanwhile was not affected. In the DOJ's official 2020 settlement, it agreed to four other NAR policy changes unrelated to the two regulations in question. Federal investigators in January 2021, at the onset of the Biden Administration, decided to resume their "closed" investigation,  NAR contends. The DOJ argued it never promised to not reopen the investigation despite the agreed-to settlement. "Without intervention from this Court, the position adopted by the panel majority will expose businesses and private citizens to perpetual uncertainty regarding the government's commitments or representations when settling investigations," NAR argued. Final approval for the $418 million Sitzer/Burnett settlement is scheduled for November 26. The association implemented rule changes around agent compensation in August, and fallout predicted by industry veterans may yet be materializing.

Fair Isaac Corp. (FICO) will once again raise the cost of credit scores, several investment firm reports predict.Recent notes from Jeffries and Wells Fargo forecast that credit scores could see close to a 50% hike in 2025. The current cost of a mortgage credit score is $3.25 but could reach the $5 range, which would increase the cost of tri-merge reports issued by the three credit bureaus.Will Lansing, CEO of FICO, in the company's third quarter earnings call, foreshadowed that prices may rise in the foreseeable future."What we charge for the FICO score is so much less than the value that we provide…," Lansing said. "Our thought process is that over time, we're going to close some of that gap"FICO declined to comment Friday.Last year, FICO announced a significant 400% price hike for all lenders, which sparked backlash from the mortgage industry. Trade groups and industry professionals are now expressing similar concerns regarding how potential hikes in price will impact consumers.Jeffries, an investment banking and capital markets firm, wrote that investors believe the cost of mortgage credit scores will be raised to $5.25 in 2025. This would equate to additional revenue for the company of over $180 million. But the investment firm was cautious with predictions, noting FICO "is poised to benefit from volume improvement as well and does not need to be as aggressive as it has in the past."A report by Wells Fargo, published in early October, said it sees "a long runway for FICO to continue increasing its prices in mortgage and other verticals."Mortgage trade groups, industry stakeholders and members of Congress expressed worry over how this will impact housing and consumers.Bob Broeksmit, CEO of the Mortgage Bankers Association, pointed out that over the past two years the trade group has "voiced frustration with the lack of transparency behind the ongoing price hikes for tri-merge credit reports and other credit reporting products.""While FICO and the credit reporting agencies are private companies free to set their prices as they wish, raising prices once again would hurt consumers at a time of continued affordability challenges," he wrote in a statement Friday. "Lenders are required to obtain FICO scores and three credit reports to make most loans to prospective homebuyers and homeowners looking to refinance.""Charging more every year for a long-established product underlines the lack of competition in this space," Broeksmit added.The CHLA dubbed FICO raising costs "a runaway train." "We're astounded, but unfortunately, not surprised that Fair Isaac Corp. is continuing to use its raw monopoly power to extract more money from the pockets of first-time homebuyers. That's an oversimplification, but that's what's going on," said Rob Zimmer, director of external affairs at CHLA, Friday.The topic is also getting attention from members of Congress. Earlier this week, a group of 34 Senate and House members called on the Department of Justice and the Consumer Financial Protection Bureau to investigate FICO's alleged anti-competitive behavior."The DOJ should investigate whether FICO and others are engaging in behavior that violates federal antitrust law," members of Congress wrote to the Biden Administration. "And the CFPB should explore potential remedies to exploding credit reporting costs, including a cap on fees that credit reporting agencies can charge and interoperability requirements that would allow consumers to move their credit scores without new fees."

Bank OZK reported strong third-quarter loan growth.Adobe Stock Bank OZK may have shifted its growth emphasis away from commercial real estate amid investor worries, but it remains a lending juggernaut at a time when many of its peers are struggling to expand.The Little Rock, Arkansas-based bank this week said it grew its third-quarter loans by 2% from the prior quarter and by 10% from the start of the year to $29.2 billion. It marked a ninth consecutive quarterly record for the company. For all U.S. banks over the four quarters that ended June 30, loans inched up just 1%, according to S&P Global Market Intelligence."We feel confident; we have great pipelines," Chairman and CEO George Gleason said during a call with analysts Friday after Bank OZK posted results.The $37.4 billion-asset bank reported net income of $181.2 million, an increase from $173.8 million a year earlier. It posted earnings per share of $1.56, up from $1.50. Bank OZK said its pretax, pre-provision net revenue totaled $282.6 million for the third quarter, a 7% increase from a year earlier.Earlier this year, Gleason said Bank OZK would diversify its CRE-heavy loan book, given concerns about vulnerabilities in office, multifamily and retail properties following the rise of remote-work trends and population losses in the urban cores of several big cities after the pandemic. The changes, along with inflation and higher interest rates over the past two years, devalued many properties and stressed some borrowers. Bank OZK is a national lender."We're focused on more diversification in the portfolio and less concentration risk," Gleason said.Bank CRE mortgage delinquencies steadily climbed from the final quarter of 2022 through the second quarter of this year, more than doubling during that period to 2%, according to real estate data firm Trepp.That sparked calls from investors for Bank OZK to diversify, and the company responded. Its Real Estate Specialties Group, which had made up more than 70% of the bank's loan portfolio at the start of this year, finished the third quarter accounting for 64%. Gleason expects that figure to decline to the upper-50s by year-end 2025 and further the following year as the bank grows its recreational vehicle and marine, corporate and institutional banking, and community lending divisions. Those units collectively accounted for about two-thirds of the bank's third-quarter loan growth.Still, Bank OZK's real estate lending continued to expand and accounted for the remainder of its loan growth. Gleason expects the portfolio to grow more over the next couple years and remain the bank's most prominent division. He is bullish on CRE now and long term.He said the real estate division has "outstanding long-term history" for low credit losses while steadily growing. "It is a great track record."Bank OZK said its loan charge-offs rose in the third quarter but remained low. It reported net charge-offs of $26 million, up from $9.4 million a year earlier. Its annualized ratio of net charge-offs to average total loans was 0.36%, up from 0.15%. Historically, the industry considered a ratio below 1% as healthy."We view the quarter as a very positive quarter for asset quality," Gleason said. He said the bank has high levels of collateral and low loan-to-value levels on its credits.The bank's provision for credit losses increased to $46.4 million from $44 million in the third quarter last year.Gleason expects credit quality to remain strong. Expectations for continued low levels of overall loan losses proved an early theme this earnings season.The American Bankers Association's latest Credit Conditions Index for the current quarter, released this week and based on assessments from bank economists, increased 28.2 points from the prior quarter to 56.9. It marked the highest reading since 2022 and the fourth consecutive quarter of improvement. The above-50 reading indicates that overall credit conditions are expected to strengthen over the next six months, driven by improved readings for both consumer and business credit.The Federal Reserve cut its benchmark interest rate by 50 basis points last month and signaled further reductions were likely this year and in 2025. The Fed's shift is expected to support both the economy and credit quality, ABA Chief Economist Sayee Srinivasan said.Rate reductions "should benefit consumers and businesses by lowering borrowing costs and improving credit availability," Srinivasan said. "Although the economy may slow in this year's fourth quarter due to heightened uncertainty regarding geopolitical risk and the upcoming election, bank economists are generally optimistic about economic conditions in 2025."For the third quarter, Bank OZK said its net interest income rose 6% from a year earlier to $389.4 million, bolstered by lending advances. It expects more loan growth in the fourth quarter, and it projected it would expand its portfolio in the mid- to upper-single-digit percentage range next year.There are "lots of opportunities to grow out there," Gleason said.