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Mortgage companies have long tried to improve upon recapture, which is the act of retaining a borrower whose loan you already service (or originated in the past) for their next origination.That is because of the truism that it is cheaper to keep a current customer than to go out and find a new one.Some entities, including Rocket, acquire mortgage servicing rights as a mechanism to feed their loan production operations.Overall success may be evading lenders, however. ICE Mortgage Technology put out a report noting second-quarter customer retention rates were 20% for all industry lenders, a 17-year low. Nonbanks performed slightly better, at 28%. Those were down from 25% and 34% respectively three months prior.Even though mortgage rates have increased in the past few weeks, the 30-year fixed is still 131 basis points lower than it was at this time in 2023.To help entities that outsource the servicing function, subservicer Loancare has introduced Digital Recapture, which it claims will inform borrowers about potential home equity loan opportunities or lower interest rates to refinance while keeping the servicing rights owner in the picture."We're excited to introduce these retention tools as a significant enhancement to the homeowner digital experience while offering our clients a tactical way to boost engagement and loan origination as a part of their portfolio defense strategy," said Dave Worrall, president of Loancare in a press release. "By providing homeowners with direct access to refinancing options and giving our clients real-time actionable leads, this program underscores our commitment to delivering value at every stage of the mortgage lifecycle," he added.Freedom, which is in the midst of a legal battle with Loancare, has been one of the entities acquiring MSRs, Bose George of Keefe, Bruyette & Woods, said in an Oct. 3 report. He pointed out its correspondent channel, which lenders typically use to build up MSR portfolios, had a 337% increase in volume year-over-year for the first half of 2024."At the same time, meaningful capital continues to come into the market to purchase MSRs driven by companies like Freedom and Rocket that buy higher coupon MSRs in order to refinance loans through recapture," George said. "Finally, Rocket recently highlighted MSR purchases as a new pillar of growth and subsequently announced a subservicing partnership with Annaly, suggesting that Rocket might emerge as a more meaningful subservicing competitor, which could be negative for the big servicers/subservicers."Another firm that has rolled out a refinance lead generation product, albeit aimed at the origination side, is Mobility Market Intelligence.Its offering is called Refinder, and it scans a loan officer's customer database to identify opportunities based on the current note rate."Providing actionable insights from data is our mission," said Ben Teerlink, founder and CEO of MMI, in its press release. "With interest rates trending downward, we want to do everything we can to help our customers be prepared."Meanwhile Total Expert is bringing out a messaging tool that looks to keep lenders in compliance with such regulations as the Telephone Consumer Protection Act.Called Engage SMS, it allows Lenders to segment contacts and automate initial outreach through personalized bulk messages. The system can then help them step into one-on-one conversations if a customer responds."In order to meet rising consumer expectations, it's essential for financial institutions to elevate their communication with customers," Joe Welu, Total Expert CEO, said in a press release. "By infusing the dynamic capabilities of SMS into the Total Expert platform, we are enabling sales and marketing teams to create better customer experiences, deepen relationships, and ultimately win customers for life."

New York's Banking Superintendent Adrienne Harris, shared her AI regulation priorities with American Banker Editor-in-Chief Chana Schoenberger at the Most Powerful Women in Banking conference on Tuesday.Melanie Condon Adrienne Harris, New York's Superintendent of Banking, has some stern words for banks about vendor management and AI risk."It's not going to be sufficient to say the algorithm was discriminatory, it was our vendor who wrote the algorithm, we don't know how it works, so it's not our fault," Harris said in a fireside chat with American Banker Editor-in-Chief Chana Schoenberger at The Most Powerful Women in Banking Conference in New York on Tuesday.Existing third-party vendor risk management frameworks in New York and other states are well-trodden paths, she said, and they apply to newer forms of generative AI.Last week, the NYDFS added guidance to its cybersecurity regulation, 23 NYCRR Part 500, that focused on the security risks of AI. "It is obviously one of those risks that keeps everybody up at night," Harris said. "The guidance was meant to highlight best practices for our regulated entities to say, here are the new risks and threats you should be thinking about in the cybersecurity space" that are heightened by AI, such as more sophisticated social engineering attacks.Her department is also thinking about how regulated companies use AI as part of their defenses, to identify threat vectors, risks and malware before they can do damage. Her team is also trying to make sure regulated entities have the right expertise in house.When the NYDFS put the AI guidance out for comment, people complained that the required testing would be too onerous. But at a previous AI insurance company she helped lead, Harris said she did that kind of testing, with the help of a diverse team. Asked what makes her most concerned about AI, she said she's been thinking a lot lately about agentic AI – "not just AI that provides us with information, but AI that can execute on decisions, and act as an agent," she said, and automatically get a customer a refund, for instance. "We've been spending a lot of time thinking about that," Harris said. "There's an amazing set of opportunities there, but there will also be risks."

Consumer financial health is on the wane and that likely is affecting forborne mortgage loan performance, particularly for government-guaranteed loans that are typically used for smaller loan sizes, the Mortgage Bankers Association said.While the share of mortgages in forbearance during September increased 3 basis points from August, to 0.34% from 0.31%, the gain was driven by a 10-basis-point rise in Ginnie Mae-securitized loans entering that status.It was the fourth consecutive month the share of mortgages in forbearance increased, noted Marina Walsh, the MBA's vice president of industry analysis.In September, Ginnie Mae loans in forbearance made up a 0.76% share of all loans, while conforming securitized mortgages were unchanged at 0.13%. Private-label securities and portfolio loans had a 2 basis point increase to 0.37%."Since May 2024, Ginnie Mae loans in forbearance increased by almost 40 basis points, compared to six basis points for portfolio and PLS loans and three basis points for Fannie and Freddie loans," Walsh said in a press release.The September data does not include the full impact from Hurricane Helene, which occurred late in the month, and of course leaves out October's Hurricane Milton.The natural disaster share of mortgages as the reason for forbearance has been constant since July. That month the share was 26.7%, after ending May at 16.7%. This was followed by 25.9% in August and 25.8% in September, the MBA data showed.Still the economy and the environment are having an effect on borrowers, especially those who took a government product. They are already most likely to need the relief a forbearance provides if their circumstances change. The performance for those mortgages reached a new low for the year in September."In addition, the share of government post-forbearance workouts that are current dropped considerably over the past four months," Walsh said. "These trends indicate that some homeowners are exhibiting signs of distress — whether because of economic hardships, natural disasters, or other reasons." The percentage of total completed workouts since 2020 that are still current at the end of the reporting period slipped to 68.76% in September from 75.78% in May.In August, 73% of completed workouts were still current, while in September it was almost 72%.While that falloff is broad-based across all investor types, the largest decline is in Federal Housing Administration-insured mortgages, nearly 10 full percentage points, to 62.6% in September from 72.39% in May.

CFPB Director Rohit Chopra speaks Tuesday.American Banker The Consumer Financial Protection Bureau's open banking rule provided no additional liability protection for banks, putting the financial institutions on the hook for potential fraud and data breaches of third-party fintechs and setting up a clash with the bureau. JPMorgan Chase, the American Bankers Association, the Bank Policy Institute and the Consumer Bankers Association all issued terse statements criticizing the rule, which is named after section 1033 in the Dodd-Frank Act that gave the CFPB the authority in 2010 to implement personal financial data rights. "This isn't open banking — it's open season for more fraud and scams," said Trish Wexler, a spokeswoman for JPMorgan Chase. "By mandating banks must hand over sensitive customer account data to any third party that got someone to click 'I accept' on their app, this rule handcuffs banks' ability to demand high security standards from third parties."The CFPB's final open banking rule requires that banks safely share financial data on checking accounts, prepaid cards, credit cards, mobile wallets, payment apps and other financial products at the request of a customer. The bureau made several major changes to the rule from its proposal a year ago. It exempted community banks with under $850 million in assets from compliance, extended the compliance date for the largest banks by 10 months to early 2026, and allowed only a sliver of secondary uses of data, excluding uses for research. Instead, the bureau drew a line in the sand by defining a primary use of data to include third parties improving an existing product but not developing new ones. Banks had asked for a liability regime due to concerns about fraud and scams and what they perceive as inadequate security measures in the final rule. The CFPB changed language from the proposal that described how banks could deny access to a third party based on risk-management concerns."The CFPB provided a little less wiggle room for when banks can refuse data requests, but it's still not open-and-shut by any means," said David Silberman, senior adviser at the Financial Health Network and the Center for Responsible Lending and a former acting deputy director at the CFPB.In an appearance on CNBC Tuesday morning, CFPB Director Rohit Chopra was asked about the potential for fraud. "Well, that will happen in any circumstance in a digital economy," Chopra said. "We have to make sure that there's some degree of rules. And at the end of the day, we should be embracing competition. We should use digital technologies to allow people to switch more easily."Bankers said Chopra's comments did little to inspire confidence in the CFPB's commitment to its core purpose of protecting consumers. Comments by bank trade groups suggest they are likely to sue the CFPB to stop the rule from taking effect, claiming the bureau exceeded its authority.Trade groups also have noted that the CFPB created a complicated 594-page rule even though the statute authorizing consumer data rights is only 335 words long. Lindsey Johnson, president and CEO of the Consumer Bankers Association, said the CFPB "has contorted this very clear and limited statute into enabling thousands of third parties to access consumers' data. In doing so, the CFPB far exceeds its statutory authority."All companies involved in data access — not just banks — must comply with the data security requirements of the Gramm-Leach-Bliley Act. Banks are concerned that much of the control and oversight of third parties will be pushed to banks and other data providers. But big banks are particularly concerned about scammers being able to work their way around the 1033 rule.Large banks have negotiated bilateral agreements with data aggregators and expect the aggregators to police third parties. But moving to a world of consumer rights creates additional exposure. Banks still are permitted to deny access to any entity that has not been certified as having adequate data security standards."The CFPB abdicates any responsibility for oversight of these third parties to ensure they are adhering to any security standards," said Wexler at JPM. "It is unconscionable that the CFPB would have 'hope' as an oversight strategy for the thousands of third parties that will now have access to sensitive financial account information." Rob Nichols, president and CEO of the American Bankers Association, called the rule disappointing and said the CFPB failed to address banks' concerns about liability and costs. "Unfortunately, what began two administrations ago as a collaborative exercise in securing consumers' personal financial data has devolved into a press-release-driven, political exercise based on the false premise that consumers lack choices and a misunderstanding of whether Dodd-Frank grants CFPB the authority to radically reshape the financial services marketplace," Nichols said.Greg Baer, president and CEO of the Bank Policy Institute, said the rule retains many of the "deficiencies and omissions that plagued" the bureau's proposal issued a year ago. "Banks have worked for years to establish secure ways to share customer data whenever the customer asks," Baer said in a press release. "The CFPB's rule disrupts this established process, requiring banks to share financial data with any third party without adequate safeguards to ensure the data is protected from fraud, misuse and abuse."Chopra has said banks are standing in the way of consumers switching accounts though the friction created with pre-programmed auto debits or direct deposits."It can be a real pain to switch your bank account or credit card and what these new rules will do is make it easier to switch and to fire that bank or financial company that is not serving you well," he said on CNBC on Tuesday. "Banks are responsible for securing data, and so are fintechs. Banks and nonbanks alike are required to have data security standards."Chopra said the rule provides strong privacy protections allowing consumers to control their financial data. He reiterated that the rule addresses the barriers involved in switching banks."The market is rife with monopolistic practices that enrich incumbent networks at the expense of consumers, businesses and creators, the results of this are that you pay more for loans and you earn less on your deposits," Chopra said in remarks Tuesday at a fintech conference hosted by the Federal Reserve Bank of Philadelphia. "Incumbents just don't want to lose their captive customer base. And like in other sectors of the economy, large firms often have little incentive to make it easy for you to port and share your data. One of the ways to best support a vibrant market is to eliminate roadblocks to competition."Jim Nussle, president and CEO of America's Credit Unions, said the CFPB has turned open banking into a grab for financial institutions' most valuable asset.   "From a few lines of text concerning consumer data portability in Dodd-Frank, the CFPB has spun a weighty rule intended to reengineer financial sector competition," Nussle said in a statement. "The rule demands that credit unions share, at no cost, information with fintechs and other third parties who receive permission from consumers. In doing so, the CFPB reduces one of the most valuable assets of a financial institution — its data — to a commodity, which will likely put even greater competitive pressure on credit unions to merge."With the proliferation of online companies, some experts see the rule as an invitation for criminals disguised as third-party companies to persuade naive consumers to appoint them as their representative to access data. "I think a large band of consumers are going to suffer as a result of this rule," said Joe Lynyak, a partner at Dorsey & Whitney. "It's going to be third parties that are misusing the data and every scam artist is going to be sending a thank-you note to the CFPB."

Stocks saw their first back-to-back drop in six weeks as traders weighed prospects of a slower pace of Federal Reserve rate cuts. Treasury 10-year yields topped 4.2%.Wall Street are paring back bets on aggressive policy easing as the U.S. economy remains robust and Fed officials have sounded a cautious tone over the pace of future rate decreases. Rising oil prices and the prospect of bigger fiscal deficits after the upcoming presidential election are only compounding the market's concerns. Since the end of last week, traders have trimmed the extent of expected Fed cuts through September 2025 by more than 10 basis points.The stock market has rallied this year thanks to a resilient economy, strong corporate profits and speculation about artificial-intelligence breakthroughs — sending the S&P 500 up over 20%. Yet risks keep surfacing: from a tight U.S. election to war in the Middle East and uncertainty around the trajectory of Fed easing."While recent data indicate a more resilient U.S. economy than previously thought, the broad disinflation trend is still intact, and downside risks — albeit lower — to the labor market remain," said Solita Marcelli at UBS Global Wealth Management. "We continue to expect a further 50 basis points of rate cuts in 2024 and 100 basis points of cuts in 2025. This should bring Treasury yields lower."A string of stronger-than-estimated data points sent the U.S. version of Citigroup's Economic Surprise Index to the highest since April. The gauge measures the difference between actual releases and analyst expectations."On the back of September's strong economic data, markets have already priced a slower pace of cuts," said Lauren Goodwin at New York Life Investments. "If the Fed is able to move towards a 4% policy rate — still above the levels most believe represent the 'neutral' rate — then the equity market rally can continue. Disruptions to that view make equity market volatility more likely."Most Fed officials speaking earlier this week signaled they favor a slower tempo of rate reductions. Policymakers at their meeting last month began lowering rates for the first time since the onset of the pandemic. They cut their benchmark 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. "We can point to a few reasons for the rise in global long rates but one possibility is that markets are giving a big thumbs down to central banks easing policy before we've seen a sustainable drop in inflation." said Peter Boockvar author of The Boock Report. "I remain bearish on the long end and bullish on the short end."The last time U.S. government bonds sold off this much as the Fed started cutting interest rates, Alan Greenspan was orchestrating a rare soft landing.Two-year yields have climbed 34 basis points since the Fed reduced interest rates on Sept. 18 for the first time since 2020. Yields rose similarly in 1995, when the Fed — led by Greenspan — managed to cool the economy without causing a recession. In prior rate cutting cycles going back to 1989, two-year yields on average fell 15 basis points one month after the Fed started slashing rates.Meantime, the International Monetary Fund said the U.S. election is creating "high uncertainty" for markets and policymakers, given the sharply divergent trade priorities of the candidates. That gap creates the risk of another potential round of volatility on global markets similar to the rattling August selloff."Presidents don't control markets," said Callie Cox at Ritholtz Wealth Management. "Over time, the stock market's common thread has been the economy and earnings, not who's in the Oval Office. Be prepared for mood swings in markets as we get closer to Election Day. But remember that election-fueled storms often dissipate quickly."As the earnings season rolls in, U.S. companies are reaping the best stock-market reward in five years for beating profit expectations that were lowered in the run-up to the reporting season.S&P 500 firms that posted better-than-estimated third-quarter earnings have outperformed the benchmark by a median of 1.74% on the day of reporting results, according to data compiled by Bloomberg Intelligence. That's the strongest rate in BI's records going back to 2019.At the same time, companies missing estimates trailed the S&P 500 by a median of 1.5%, a less severe underperformance than the 1.7% experienced in the second quarter, the data showed."This earnings season we are watching what companies are saying about inflation and the economy," said Megan Horneman at Verdence Capital Advisors. "In addition, their view on interest rates, especially if the Fed cannot be as aggressive as the market is pricing in at this point. It is good to see analysts getting realistic about 2025 earnings growth. However, at 15% earnings growth, we believe it is still too optimistic given the expectation for slower economic growth in 2025." 

When the housing market crashed in the early 2000s, new mortgage rules emerged to prevent a similar crisis in the future.The Dodd-Frank Act gave us both the Ability-to-Repay Rule and the Qualified Mortgage Rule (ATR/QM Rule).ATR requires creditors “to make a reasonable, good faith determination of a consumer’s ability to repay a residential mortgage loan according to its terms.”While the QM rule affords lenders “certain protections from liability” if they originate loans that meet that definition.If lenders make loans that don’t include risky features like interest-only, negative amortization, or balloon payments, they receive certain protections if the loans happen to go bad.This led to most mortgages complying with the QM rule, and so-called non-QM loans with those outlawed features becoming much more fringe.Another common feature in the early 2000s mortgage market that wasn’t outlawed, but became more restricted, was the prepayment penalty.Given prepayment risk today, perhaps it could be reintroduced responsibly as an option to save homeowners money.A Lot of Mortgages Used to Have Prepayment PenaltiesIn the early 2000s, it was very common to see a prepayment penalty attached to a home loan.As the name suggests, homeowners were penalized if they paid off their loans ahead of schedule.In the case of a hard prepay, they couldn’t refinance the mortgage or even sell the property during a certain timeframe, typically three years.In the case of a soft prepay, they couldn’t refinance, but could openly sell whenever they wished without penalty.This protected lenders from an early payoff, and ostensibly allowed them to offer a slightly lower mortgage rate to the consumer.After all, there were some assurances that the borrower would likely keep the loan for a minimum period of time to avoid paying the penalty.Speaking of, the penalty was often pretty steep, such as 80% of six months interest.For example, a $400,000 loan amount with a 4.5% rate would result in about $9,000 in interest in six months, so 80% of that would be $7,200.To avoid this steep penalty, homeowners would likely hang on to the loans until they were permitted to refinance/sell without incurring the charge.The problem was prepays were often attached to adjustable-rate mortgages, some that adjusted as soon as six months after origination.So you’d have a situation where a homeowner’s mortgage rate reset much higher and they were essentially stuck in the loan.Long story short, lenders abused the prepayment penalty and made it a non-starter post-mortgage crisis.New Rules for Prepayment PenaltiesToday, it’s still possible for banks and mortgage lenders to attach prepayment penalties to mortgages, but there are strict rules in place.As such, most lenders don’t bother applying them. First off, the loans must be Qualified Mortgages (QMs). So no risky features are permitted.In addition, the loans must also be fixed-rate mortgages (no ARMs allowed) and they can’t be higher-priced loans (1.5 percentage points or more than the Average Prime Offer Rate).The new rules also limit prepays to the first three years of the loan, and limits the fee to two percent of the outstanding balance prepaid during the first two years.Or one percent of the outstanding balance prepaid during the third year of the loan.Finally, the lender must also present the borrower with an alternative loan that doesn’t have a prepayment penalty so they can compare their options.After all, if the difference were minimal, a consumer might not want that prepay attached to their loan to ensure maximum flexibility.Simply put, this laundry list of rules has basically made prepayment penalties a thing of the past.But now that mortgage rates have surged from their record lows, and could pull back a decent amount, an argument could be made to bring them back, in a responsible manner.Could a Prepayment Penalty Save Borrowers Money Today?Lately, mortgage rate spreads have been a big talking point because they’ve widened considerably.Historically, they’ve hovered around 170 basis points above the 10-year bond yield. So if you wanted to track mortgage rates, you’d add the current 10-year yield plus 1.70%.For example, today’s yield of around 4.20 added to 1.70% would equate to a 30-year fixed around 6%.But because of recent volatility and uncertainty in the mortgage world, spreads are nearly 100 basis points (bps) higher.In other words, that 6% rate might be closer to 7%, to account for things like mortgages being paid off early.A lot of that comes down to prepayment risk, as seen in the chart above from Rick Palacios Jr., Director of Research at John Burns Consulting.Long story short, a lot of homeowners (and lenders and MBS investors) expect rates to come down, despite being relatively high at the moment.This means the mortgages originated today won’t last long and paying a premium for them doesn’t make sense if they get paid off months later.To alleviate this concern, lenders could reintroduce prepayment penalties and lower their mortgage rates in the process. Perhaps that rate could be 6.5% instead of 7%.In the end, a borrower would receive a lower interest rate and that would also reduce the likelihood of early repayment.Both because of the penalty imposed and because they’d have a lower interest rate, making a refinance less likely unless rates dropped even further.Of course, they’d need to be implemented responsibly, and perhaps only offered for the first year of the loan, maybe two, to avoid becoming traps for homeowners again.But this could be one way to give lenders and MBS investors some assurances and borrowers a slightly better rate. 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)

A federal judge's opinion and order ends Texas Capital Bank's effort to get partial summary judgment in litigation involving a government securitization guarantor, claims to collateral and failed issuer Reverse Mortgage Funding.Judge Matthew Kacsmaryk in the Northern District of Texas' Amarillo division ruled that Texas Capital Bank failed to prove it was entitled to judgment as a matter of law in its claim the guarantor, Ginnie Mae, had violated the Administrative Procedures Act.This decision ends an effort to speed a ruling on the APA claim in the case involving the bank's alleged right to certain securitized Home Equity Conversion Mortgage collateral, something other lenders working with Ginnie and a watchdog agency have been eyeing.Kacsmaryk emphasized Ginnie "can only extinguish an issuer's rights, pursuant to a contract, in mortgages constituting an HMBS pool," separating those from "TCB's lien in RMF's interests in the tails," and confirmed court interest in hearing remaining claims."TCB retains its other claims for relief. But summary judgment is not appropriate on its APA claim," Kacsmaryk ruled.Kacsmaryk previously had denied a Ginnie Mae request for a venue change based on a "related" agreement TCB had with an issuer, rejecting arguments that the pact the Department of Housing and Development affiliated cited was applicable.While that order acknowledged the point that forum selection clauses in agreements can apply to a "closely related" party like Ginnie, he said a pact between the bank and RMF cited in the case did not meet the requirements due to a restrictive clause."Defendants did not establish the factors to satisfy the closely related test to permit nonsignatory enforcement," he said in an opinion and order filed in the case on Sept. 3.The agreement Ginnie cited "explicitly states that no others may invoke or rely on the terms," Kacsmaryk said.Ginnie and its representatives had argued that the venue should be Dallas not only because it was specified in the agreement between the bank and RMF, but also because TCB is headquartered there and travel from Washington is more convenient.The circumstances in the TCB-Ginnie Mae case are linked closely to a key role the latter plays in the mortgage market when a bankruptcy of one of its securities issuers occurs.Ginnie guarantees securitizations of mortgages that other agencies back at the loan level and may act to seize a bankrupt issuer in order to ensure that payments and cash-flows related to the bonds get to MBS investors.In this case, when Ginnie terminated the issuer from its reverse mortgage securitization program and took on responsibility for direct servicing of the loans and bonds involved, it also extinguished the disputed tails, which are ongoing borrower draws.The bank has alleged that the tails were collateral for debtor-in-possession financing it agreed to provide in the RMF bankruptcy.HUD's inspector general launched an inquiry into Ginnie Mae's handling of Reverse Mortgage Funding's bankruptcy last year."The OIG's inquiry will include interviews, data gathering, and analysis of compliance with laws, regulations, policies and procedures related to Ginnie Mae's oversight of RMF," Inspector General Rae Oliver Davis in a press release issued at that time.

The Department of Justice lodged a suit against Rocket Mortgage and two other parties for alleged racial bias three years prior.According to the litigation, a Black homeowner had her Denver home undervalued because of her race and Rocket Mortgage "retaliated against the homeowner" by canceling her refinance application once she reported this alleged discrimination to the company.Shortly after, Francesca Cheroutes, the homeowner, reported the situation to the Department of Housing and Urban Development, which concluded that there was reasonable cause to believe the parties violated the Fair Housing Act.The parties accused are Rocket Mortgage, Solidifi US Inc, Maverick Appraisal Group and Maksym Mykhailyna, the appraiser that valued the property.Rocket Mortgage in a statement distanced itself from the AMC and appraiser, noting it was included in the case "to score headlines based on our strong brand and prominent position in the industry.""Under federal law, mortgage lenders are required to work at arm's length during the appraisal process, partnering with independent appraisal management companies who assign the work to state-licensed professional appraisers," Rocket said in an email Tuesday. "The law's intent is to determine the home's value without any input or bias from the lender or any other party with interest in the transaction.""We look forward to exposing the government's massive overreach in this matter," the lender added.Solidifi in a statement pointed out this filing is not a new complaint and is "simply the next procedural step in the existing matter.""Our position has not changed. While we cannot comment on ongoing investigatory, administrative, or litigation proceedings, Solidifi intends to vigorously defend any allegations regarding failure to detect or correct any alleged bias in an appraisal," the AMC wrote in a statement.The appraiser could not immediately be reached Tuesday.The homeowner that flagged her refinance application being unfairly denied claimed the appraiser, Mykhailyna, issued an insupportably low appraisal of her duplex in a predominantly white area of Denver.Specifically, the borrower claimed the appraiser used improper metrics to discern the cost of her house, such as sales from properties in further-away Denver neighborhoods with large Black populations instead of closer neighborhoods that are predominantly white. Because of this, the property was valued 25% less — or $200,000 lower — than an appraisal on the same property completed a year prior, the DOJ's suit claims.The suit says the appraisal was then sent to Solidifi, which reviewed it and forwarded it to Rocket and Cheroutes. Once Cheroutes saw the appraisal she flagged it as discriminatory, and she says Rocket then canceled her refi application.The homeowner reported this to the Department of Housing and Urban Development. The department, after conducting an investigation, determined that there was reasonable cause to conclude the defendants violated the Fair Housing Act and forwarded the case to the DOJ.The DOJ signaled that it will continue to hold the appraisal industry accountable for instances of bias in a statement Monday."This lawsuit is part of our ongoing efforts to bring an end to appraisal bias which prevent Black communities and other consumers of color from accessing credit and benefitting from homeownership," said Assistant Attorney General Kristen Clarke of the Justice Department's Civil Rights Division. "Appraisal bias exacerbates the racial wealth gap, and runs contrary to the principles of fairness, transparency and equity that we need in our housing market today"Meanwhile, HUD issued a statement underlining its commitment to work with the law enforcement agency to uphold fair housing laws."It has been over 56 years since the passage of the Fair Housing Act, and it is unconscionable that Black and Brown families still face discrimination during housing transactions," said Principal Deputy Assistant Secretary Diane M. Shelley of HUD's Office of Fair Housing and Equal Opportunity.Per the suit, the DOJ is seeking undisclosed monetary damages for Cheroutes.

Two servicing technology firms will work together to provide artificial intelligence-powered voice agents for mortgage borrowers. Haven, a platform which embeds servicing functions into a lender's brand, will partner with Kastle, the AI startup, the companies announced Tuesday. The collaboration, which the partners say will reduce costs in servicing operations, will go live in the first quarter next year for Haven's customers."Our partnership with Kastle is a significant step towards our mission of eliminating complexity from the mortgage experience and providing a comprehensive hub for homeowners," said Jonathan Chao, co-founder and chief product officer of Haven, in a press release. Kastle and Haven finished first and second last month at National Mortgage News' Innovation Challenge among a field of 20 industry technology providers. Kastle demonstrated its AI voice agent on a live phone call, and judges then lauded the software's natural-sounding conversation with an AI agent sounding like Federal Reserve Chairman Jerome Powell. Haven Wallet allows borrowers to pay their mortgage and purchase other home services on a single platform, no matter who owns their mortgage servicing rights. The platform folds services under the original lender's branding, and the partnership will allow a single phone contact for mortgage-related inquiries. Haven, founded in 2020, says it has already generated a twofold increase in recapture rate for its mortgage partners. Servicers this summer retained just 20% of homeowners seeking to refinance, and experts have emphasized the competition for a prospective refi wave will be fiercer than yesteryear.Kastle offers both AI voice and text agents for servicers, along with editable sales scripts. The startup says it can track call intent, where live agents may not always define why consumers called. Co-founders Rishi Choudhary and Nitish Poddar said the platform can manage call volume fluctuations and is available around the clock.The AI-powered offering next year will be in compliance with real estate regulations and cybersecurity standards, and the firms will encrypt customers' personally identifiable information, they said Tuesday.