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(Bloomberg) -- KKR & Co. has a record volume of commercial-property financings lined up, and expects more deals as property prices reset and other lenders pull back amid market volatility.The investment firm's pipeline has reached an all-time high of $42 billion, the second such record set this year, according to a Tuesday note by Matt Salem, Joel Traut and Patrick Mattson in KKR's real estate credit group.Higher interest rates have weighed on market prices for many types of real estate for the last few years. Meanwhile, tariff concerns since early April have made it harder for landlords to obtain financing, increasing their demand for private credit."'Liberation Day' brought an unexpected new set of opportunities," Salem, Traut, and Mattson said in their note. The volatility pushed whole loan spreads wider and brought single-asset single-borrower commercial mortgage-backed securitization to a halt as lenders waited for clarity — creating an opportunity to step in with financing alternatives, they wrote.Property loans are generally attractive as their collateral-based cash flows and floating-rate nature make them a hedge against inflation, according to KKR. The firm usually provides loans at a ratio of 60% to 70% of the value of the real estate, which they say provides enough equity cushion to get repaid even if there are losses.Private credit commercial-property loans can offer annual returns in the 12% to 14% range, while also offering less downside risk than equities, added Salem, KKR's head of real estate credit, in an interview. However, he said KKR remains cautious about the potential effects of tariffs and high inflation.Both could impact gross domestic product or employment, which could pressure property values. Tariffs could weigh on the values of warehouses in Los Angeles, a major US port city, Salem said as an example."The biggest risk right now is in the macro," said Salem. "Inflation being number one, and then number two, recession risk."Looking ahead, KKR expects construction activity to stay muted, partly due to higher labor and materials costs in the US and Europe even before tariffs hit. That helps create a favorable supply-demand ratio that will support asset values. Property values have also become more reasonable generally, providing attractive entry points."This private real estate credit strategy is really targeting this opportunity set," Salem said. "We will be putting in billions of dollars to work over the next few years."In February, KKR said it raised more than $850 million for its Opportunistic Real Estate Credit Fund II. The vehicle will back first mortgages secured by high-quality properties in the US and Europe, and also purchase certain tranches of commercial-mortgage backed securities.With the opportunities in the space, KKR has been hiring professionals to help it evaluate more real estate loans, Salem said, declining to give specifics about staffing plans."We have been adding to our team, particularly in Europe," Salem said.(Updates last paragraph with comment on staffing. An earlier version of this story corrected the third-to-last paragraph to reflect timing of fundraising)More stories like this are available on bloomberg.com

Nondepository origination of home equity products has been growing as traditional mortgage opportunities have waned, leading to increased reliance on secondary market buyers whose interest may vary over time.And while investors' collective involvement has generally kept pace with increased production as lenders have originated more second liens, volatility in broader markets has led to some spread widening in securitizations during certain stretches this year.READ MORE: Home equity lending has strong two-year runway aheadA key way to manage this risk has been for nonbank sellers to ensure they and any aggregators they partner with have multiple outlets for home equity products that include both the securitized markets and whole loan buyers, according to Tom Davis, chief sales officer at Deephaven Mortgage."The last thing you want to do is work with an investor that has only one exit," Davis said. "If the market goes sideways, you're in a pickle, so it's always important to work with an investor that has diversified execution because you want liquidity."What investors want from home equity underwritingKey to investor interest in home-equity loans and lines of credit is whether they think the borrowers involved are likely to repay.Borrowers with lower combined loan-to-value ratios, which measure the extent to which their homes have value beyond their first- and second-lien debt, are one indicator of this. A ratio of their broader debt obligations relative to their incomes and their track record repaying the former are two others."There's definitely investor demand for second liens. They like performance. They like the collateral," Davis said.Recent performance has been strong and what little distress exists has been manageable because there is favorable secondary market demand for distressed product with a demonstrable track record and strong underwriting, said Ryan Chernis, vice president of capital markets at Achieve."Our strategy is we generally charge off loans after 120 days past due. We don't work loans to foreclosure. What we do is we generally sell those charge offs, and we're seeing charge-off pricing in the 65 to 75 cent range, so a really strong recovery profile," he said. Chernis said that isn't something that rating agencies are currently paying much consideration to but could be soon as the current iteration of the small but growing HELOC market develops more of a track record. "Right now, most rating agencies for us and our peers in the rated markets generally don't give any credit to recovery, so they're receiving 100% severity, which is just not the reality," he said. "Hopefully, as more time goes on, they see that data. We can start to get some support for those recovery numbers."Rating agency approaches to home equity securitizations varyRating agencies have a variety of strategies in their approaches to home equity securitizations. That's significant in that certain investors will only buy bonds that have particular ratings from specific companies. Some players like Fitch only rate part of the market."We've said no to a lot of product," said Court Lake, a senior director at Fitch, which has focused primarily on rating securitizations of closed-end second liens underwritten based on traditional full-documentation standards as a growing number of players have diversified beyond those parameters.Fitch does not rate home equity investment involving sales of shares in future appreciation, citing risks that include uncertainty around regulatory treatment and layered risk. Other rating agencies like Morningstar DBRS and Kroll do rate HEI. Traditional mortgage lender involvement is limited but exists.Securitizations can get done without getting acceptance from the big three but having it does increase the range of investors interested in the bonds, which as Davis noted, can be helpful when interest in the secondary market can fluctuate.Todd Stevens, chief capital officer at Figure, said securitizers with that fit into a tighter credit box can differentiate themselves."There's a scarcity of quality collateral," he said.Rating agency opinions may improve as the current iteration of the home equity market matures.Figure brings prefunding to the new HELOC marketOne sign that the secondary market for home equity lines of credit is getting more established was a prefunded Figure securitization, which accommodates forward delivery of loans. The securitization included a tranche with a top AAA rating and received interest from 17 investors, including asset managers, private credit funds and insurers. It was the first of its type in over 15 years and the company could use the practice more regularly in the future, the company said."If we can presell a security, we think it opens up the investor box a bit," said Todd Stevens, chief capital officer at Figure, noting rated prefunded securitizations offer efficiencies to buyers who trust a AAA rating.The practice aims to help Figure deepen the business it does with companies that are traditionally whole loan investors such as insurers and annuity providers.Both whole loan trades and securitization active, TPO growingHome equity products have been in demand both in the securitized market and from whole loan investors, and that's helped fund nonbank originations of the product that have been expanding into a variety of loan channels."On the whole loan side, we are generally four to five times over subscribed monthly on what we're producing so we want to meet that demand," said Chernis.Achieve has been focused on direct-to-consumer and is looking at expanding into third-party origination channels in the second half of this year, he said. Deephaven has been growing in TPO channels too. For example, it recently added a product for correspondents that allows borrowers to take out a second mortgage on their investment homes to purchase a new property or make renovations on an existing one.How to weigh the secondary market risks for home equitySo long as underwriting and performance remain strong, the secondary market will likely be, too. But more jolts from developments that cause uncertainty in the broader capital markets are always possible, and there are some signs financial strain on consumers is growing, which could affect the latter. Also, softer home prices could be a concern. Fitch has recently determined home prices to be 11% overvalued and baked that into its ratings for home equity securitizations, according to Lake.However, there are some trends that help offset some of these risks. Amortization of existing first-lien loans has helped reduce CLTVs and home equity products can have an advantage compared to other types of debt when consumers experience strain due to their collateral and relatively lower rates."Unsecured consumers generally tend to be more sensitive to inflationary pressure, jobs, and I think in this particular environment, investors are attracted to the secured nature," Chernis said.

Bloomberg News For the past five years, the Treasury market has been a point of concern for financial regulators, market participants, academics and other observers. Earlier this spring, it looked to many like those fears might come to a head.On April 2, President Donald Trump rolled out new tariffs on virtually every country in the world, including prohibitively high levies against Chinese imports. Two days later, investors began shedding bonds rapidly, driving yields up and sapping liquidity from the Treasury market. While trade policy was an unlikely source of such financial volatility, it was the type of anomalous shock that stability hawks have feared since the last big Treasury market shake-up at the onset of the COVID-19 pandemic — an episode that caused the Federal Reserve to intervene to rescue the market. Anil Kashyap, an economics professor at the University of Chicago, said the ballooning federal debt, the rise of complicated Treasury trading schemes and waning intermediation capacity since 2020 have left the market vulnerable to what might otherwise be minor disruptions. "On April 1, I don't think a lot of people had Treasury chaos resulting from a tariff announcement on their bingo cards," Kashyap said. "The problem is that there are all kinds of potential triggers that we haven't thought of that we'll only recognize once they happen. That's the world we're living in now."Concerns in the Treasury market largely abated after the Trump administration placed a 90-day pause on many of the steepest tariff increases. Yields have continued to trend up, albeit less steeply than in early April, and demand has been weak for new bond issuances — developments that have been attributed to a bigger-than-expected budget bill that is poised to grow the federal deficit — but the potential destabilizing volatility has dissipated. In hindsight, Treasury markets continued to function through the distress. Unlike March 2020, primary dealers were able to absorb the excess inventory during the sell-off and hold it until demand rebounded. In early May, Treasury Secretary Scott Bessent told investors at the Milken Institute Conference that "U.S. markets are antifragile." Yet, where some see evidence of resilience in the market's ability to weather the storm, others see a close call that portends future upheaval. "It's a very good reminder that there are a lot of cracks in the system," said Phillip Basil, director of economic growth and financial stability at the consumer advocacy group Better Markets. "We're on a knife's edge, so to speak, with financial stability risks. It won't take that much more to tip us into a problem."JPMorganChase CEO Jamie Dimon expressed a similar view last week during an onstage appearance at the Reagan National Economic Forum in California. He described a major disruption of Treasury market function as an inevitability. "You are going to see a crack in the bond market, OK?" Dimon said. "It is going to happen."Dimon said he has warned regulators about this risk and let them know that he expects they will "panic" when the time comes. His bank on the other hand, will be "fine," he said, adding "we'll probably make more money."Bessent, this week, said Dimon's forecast, while prudent for a risk-sensitive banker, was overly pessimistic for the broader economy."I have known Jamie a long time. And for his entire career, he's made predictions like this," Bessent told CBS News on Sunday. "Fortunately, none of them have come true."Still, Bessent and the Trump administration are poised to oversee several changes aimed at reforming the Treasury market, including the shift to mandatory central clearing — an initiative started by the Securities and Exchange Commission in 2023 but poised to go into effect at the end of this year — and, potentially, a rethinking of the supplemental leverage ratio that would enable primary dealer banks to hold more Treasuries without facing restrictive capital requirements.During the past five years, the amount of outstanding Treasury debt held by the public has increased by nearly 50%, from $19.2 trillion in 2020 to roughly $28.5 trillion today. During the pandemic, much of that debt was absorbed by the Federal Reserve, helping it grow its balance sheet by more than $4.5 trillion in a little more than two years. Some of those Treasuries ended up on bank balance sheets — contributing to the short-lived banking crisis in 2023 — while others were purchased by money market funds. A large portion also found their way into complex investment schemes.Just one week before Trump's so-called Liberation Day announcement, Kashyap and three other economists released a paper exploring the fragilities that have arisen in the Treasury market. They focused on something known as the cash-futures basis trade, in which hedge funds seek to profit off the price difference between cash and Treasury futures through highly leveraged derivatives. While that trade is stable in isolation — because the funds' investments are perfectly hedged — it is vulnerable to rapid unwinds if any of the handful of firms in the space suddenly need to reposition their portfolios, Kashyap said."In early April, it looked like we had such a rapid adjustment that people were going to do prudent risk management and step back; that the volatility was going to result in margin calls on the derivatives involved in the basis trade, which could set off a spiral," he said. "We didn't get there, but that doesn't mean that problem can't arise in the future."According to the minutes from the most recent Federal Open Market Committee meeting, central bank officials were tracking the cash-futures basis trade during the April stress, concluding that it "appeared to remain largely stable." Kashyap said this was likely because the trade had less reliance on long-dated bonds than other similar investment strategies, including one focused on the spread between Treasury yields and interest rate swaps.The Fed minutes note that the unwind of the Treasury-swaps trade "appeared to have been a factor in the deterioration of liquidity and the associated rise in longer-term yields." Had that trade been larger, or had the disruption impacted the securities held by the cash-futures trade, the disruption could have been more severe.Basil, a former financial policy specialist for the Federal Reserve Board, said this dynamic is emblematic of one of the core issues with the Treasury market: that a growing share of securities are held by entities that are prone to sell them at the first sign of stress. "You have a larger proportion of Treasury holders that are more liquidity-seeking, particularly in periods of stress, so it's more likely that holders of Treasury securities will be selling them when there's market turmoil," he said. "At the same time, you have intermediary balance sheets that just haven't kept up, and the stock has grown tremendously."U.S. sovereign debt is also going through something of a sea change. Along with concerns about the country's outlook for economic growth and deficit spending — both of which seem to be causing investors to demand higher returns — there are also more fundamental questions being asked about the country's ability to be a safe haven for capital. Instead of flocking to Treasuries, as they typically do during times of crisis, investors actively moved away from dollar-denominated assets in April. Derek Tang, CEO and co-founder of the Washington-based research firm Monetary Policy Analytics, said the past two months have seen a "very big" repricing of Treasury debt based on various changes to government policy and practice. Tang said short-term volatility is to be expected as investors adjust to new conditions and should not diminish the Treasury market's global standing. But, he added, more significant changes could be on the horizon as the Trump administration weighs trade policies that would disincentivize foreign investment. "These things undermine confidence in Treasury markets and might prompt a longer-term withdrawal," he said. "It might not be fast, but if it happens over time, that is going to increase the interest rates that the United States has to pay on its debt and have knock-on effects on borrowing rates for households and businesses. All these things are interconnected."These new and worsening concerns surrounding Treasuries and their market stability also create potential complications for reforms. Banks have for years argued that Treasuries should be exempt from leverage ratios because they are effectively risk-free — with the backing of the U.S. government, they will always pay out at par value if held to maturity.But, Basil said, recent years have shown that bonds carry other risks, ones that could manifest more frequently as the Treasury market continues to grow. "On one hand, we have the government and certain policymakers saying there's trouble in the Treasury markets and a lot of turmoil. And then, on the other hand, they want to exempt Treasuries from the SLR because they're risk-free. It makes no sense," Basil said. "You can't call it both ways."

This story has been updated with an analyst's comments.Wells Fargo has finally broken free from the regulatory shackles that have constricted its growth for more than seven years.The Federal Reserve announced Tuesday that it has lifted the $1.95 trillion asset cap it imposed on Wells in 2018. The cap's termination is a watershed event for a megabank long plagued by scandal, as it gains newfound flexibility to expand services and products.The victory also marks the summit in a series of regulatory wins for Wells CEO Charlie Scharf, who was brought on in 2019 to get the bank's compliance on track. "The Federal Reserve's decision to lift the asset cap marks a pivotal milestone in our journey to transform Wells Fargo," Scharf said in a prepared statement. "We are a different and far stronger company today because of the work we've done."All of Wells' full-time employees will receive a $2,000 award in connection with the compliance turnaround, Scharf added. Most of the workforce will get the bonus through a restricted stock grant.The Federal Reserve Board, which voted unanimously in favor of lifting the cap, said in a statement that Wells has made "substantial progress" in addressing its corporate governance and firmwide risk management practices. It cited its own review of the bank's efforts as well as a third-party evaluation.While the most punitive part of the Fed's 2018 enforcement action has been lifted, the order itself remains in place, which means that Wells will continue to receive enhanced scrutiny over its board oversight and risk management practices. In its statement, the Fed said Wells must continue to improve those areas for the order to be terminated.Fed Gov. Michael Barr, who served as the central bank's vice chair for supervision from mid-2022 until this past January, said that Wells has made noticeable improvements, but has more work to do."Removal of the asset cap represents successful remediation to the required standard based on focused management leadership, strong board oversight, and strict supervision holding the firm accountable," Barr said. "All three will need to continue for the firm to have a sustainable approach."The Fed's sweeping lid on the bank's growth — a novel enforcement measure at the time it was imposed — came in response to a slew of compliance violations at Wells. The Fed said in its enforcement action that the cap would remain in place "until [Wells] sufficiently improves its governance and controls."Until a few months ago, it seemed like progress was slow. The bank had chipped away at a handful of enforcement actions over the years, but a switch seemed to flip in January. In 2025, Wells shed seven enforcement actions in five months as it pulled itself out of regulatory purgatory.With each step forward, the expectation that Wells would soon see the light at the end of the tunnel rose.In May, Scharf signaled that he was confident the Fed's order would be lifted in the near future."We're not done, but we're a hell of a lot closer to the end than the beginning, at this point," he said at an industry conference.Scharf added that Wells was "a completely different company" in some ways from what it was when a spate of scandals brought it under regulators' microscope. The Fed's 2018 order pointed to "widespread consumer abuses and other compliance breakdowns" at the bank.In a statement Tuesday, Steven Black, who's been chair of Wells' board since 2021, praised what he called Scharf's "inspired leadership." Black said the CEO has been "instrumental" in overseeing the company's transformation.In his own statement, Scharf said Wells has been "methodically investing in the company's future while improving our financial results and profile."Over the last 15 years, the Fed, the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corp. and the Consumer Financial Protection Bureau hit the megabank with various enforcement actions, calling out problems with its mortgage practices, student loan servicing, anti-money-laundering controls and home loss mitigation operations.But the most impactful violation was the discovery that Wells employees had opened large numbers of unauthorized credit cards and checking accounts without customers' authorization.Since 2016, when the fake-accounts scandal burst open, the bank has paid more than $5 billion in penalties, settlements and consumer redress for its compliance blunders. Scharf said in May that Wells has been spending $2 billion annually on its risk and control agenda.While Wells was operating under the asset cap, Bank of America and Citigroup both increased their total assets by 44%. JPMorgan Chase saw its assets go up by 76%.In May, Scharf said that when the asset cap eventually got lifted, Wells wouldn't suddenly start growing exponentially. But certain lines of business, like commercial deposit-taking and corporate investment banking services, would be able to burgeon."We will expand the company in a very controlled way, in a way that is within the same kind of risk tolerances that we've had, which will grow linearly over time, not exponentially," Scharf said at the time.He added that the bank would also be able to start using its balance sheet differently to drive certain offerings, like private credit.Steven Alexopoulos, an analyst at TD Securities, wrote in a note Tuesday that much of the optimism around removing the asset cap had likely already been priced into the stock.Before the Fed announced the asset cap's termination late Tuesday afternoon, shares in Wells closed at $75.65. The stock price rose 2.2% to $77.31 in after-hours trading.With Scharf "making solid progress on moving the company to offense despite the asset cap being in place, we are far more excited on what this action could mean to longer-term revenue growth," Alexopoulos wrote.He added that the onus of moving the bank's stock price to a higher premium will fall to Wells' consumer bank, which must compete with JPMorgan Chase and Bank of America."As it steps into the ring with peer mega banks, we look for signs that this sleeping giant has awoken from its slumber," Alexopoulos wrote.

Mortgage software provider Dark Matter Technologies is making electronic closing capabilities available on another of its loan-origination systems through a new agreement with Wolters Kluwer.The technology firm will offer e-closings on the Nova LOS platform, a system it added to its product suite alongside its primary Empower origination system in the latter half of 2024. Touted as a plug-and-play offering better suited for small to mid-sized financial institutions and independent mortgage banks, Nova formerly belonged to an affiliated business of Dark Matter's parent company, Constellation Software."With this capability, lenders can deliver an entirely new level of convenience and efficiency," said Sean Dugan, the chief executive officer of Dark Matter Technologies, in a press release."This saves time and money for lenders while allowing them to engage in secondary market activities and gives homebuyers the convenience of faster closings at the time and place of their choosing."What the new integration bringsE-close functions will be provided through technology belonging to Wolters Kluwer. The addition gives lenders and other parties in mortgage originations the opportunity to take advantage of hybrid closing processes as well as participate in both in-person and remote online notarizations. Nova users will also be able to sign and submit e-notes to investor platforms safely and compliantly through the LOS, Dark Matter said. Industry players see the pace of e-note adoption picking up, with use set to triple from current levels by 2028."By adding flexible, modern e-closing options to Nova LOS, Dark Matter is putting lenders on a fast track to a fully digital future," added Shreya Shankar, vice president of partnerships at Wolters Kluwer financial and corporate compliance.While borrowers have long complained about the length of time it takes to close a mortgage, 2025 research by Snapdocs and National Mortgage News showed lenders rapidly ramping up their pace of adoption of digital tools to help expedite the process. Almost half of all lenders indicated they would like to further boost the number of hybrid loan closings in their pipeline. Wolters Kluwer's new integration with Nova is similar to an arrangement to serve clients using Empower, Dark Matter said. The new upgrade, though, marks another strategy move by Dark Matter towards developing and growing the market for the Nova LOS in 2025. Earlier this year, the Jacksonville, Florida-based technology firm added a servicing platform, which also previously belonged to the Constellation Software affiliate, to work alongside the Nova system. Already integrated with Nova, Dark Matter said it also intends to align it to work with Empower.

Rocket Cos. is offering a combined $4 billion in senior notes to pay some of Mr. Cooper's ten-figure debt in anticipation of the major acquisition.The Detroit-based fintech said Tuesday it wants to sell $2 billion of senior notes due 2030 and an additional $2 billion of senior notes due 2033, unconditionally guaranteed by Rocket Mortgage. The notes will also be guaranteed on an unsecured basis by Mr. Cooper and Redfin, pending Rocket's acquisition of the public companies. The megalender said it intends to pay Mr. Cooper's senior notes due in 2026, 2027 and 2028, according to a press release. Rocket will also have the option to pay the Coppell, Texas-based servicer's senior notes due from 2029 to 2032.The bonds won't be registered with the Securities and Exchange Commission and instead will be offered to institutional investors. The offering also isn't contingent on the consummation of either the Redfin or Mr. Cooper acquisitions, although the announcement includes other stipulations. Spokespersons for both Rocket and Mr. Cooper declined to comment Tuesday.What debts does Mr. Cooper owe?In all, Mr. Cooper has just over $4.8 billion in combined unsecured senior notes due between 2026 and 2032, according to its 2024 annual filing. Rocket intends to pay the principal and interest on 5% senior notes due 2026, an offering listed by Mr. Cooper at $500 million; 6% senior notes due 2027, listed at $600 million; and 5.5% senior notes due 2028, listed at $850 million.The Mr. Cooper debts Rocket could pay or amend at its discretion include 6.5% senior notes due 2029, an offering listed by the servicer at $750 million; 5.125% senior notes due 2030, listed at $650 million; 5.750% senior notes due 2030 at $650 million; and 7.125% senior notes due in 2032, which Mr. Cooper listed at $1 billion. In all, the servicer reported a $4.95 billion principal amount of total unsecured senior notes, minus $59 million in purchase discount and unamortized debt issuance costs. Rocket also must redeem the notes if it doesn't complete its Mr. Cooper acquisition by Sept. 30, 2026. Additionally if Rocket doesn't use bond money for Mr. Cooper debt within 45 days of the closing, it must return any unused funds to investors. The move comes a month after Rocket secured a $1.15 billion revolving credit agreement with JPMorgan Chase, which can increase to $2.25 billion pending its Mr. Cooper purchase. That agreement replaced a similar $1.15 billion credit line, and the new agreement lasts through 2028. Rocket rocked the mortgage industry in March with its $1.75 billion acquisition of Redfin and $9.4 billion purchase of Mr. Cooper a few weeks later. Those acquisitions are expected to close in the second half of 2025.The lender posted a $212 million net loss in the recent first quarter, but remains well-capitalized, with $8.1 billion in total liquidity.

Loandepot announced a new source of funding collateralized by certain cashflows from mortgage servicing rights that will allow it to redeem other similar financing due this October.The private offering of term notes secured by MSRs has an aggregate principal balance of $200 million and is somewhat similar to other financing vehicles other large nonbanks have utilized. The rights involved are from securitized loans government corporation Ginnie Mae guarantees.Loandepot's new notes don't mature until May 16, 2030 and can be extended to May 17, 2032, demonstrating another way it's been resolving a broader concern with near-term maturities that analysts say nonbanks have taken steps to address when it comes to unsecured debt.Chief Financial Officer David Hayes said in a press release that the transaction "highlights the strength and breadth of Loandepot's financing strategy and attractive capital raising alternatives."How Loandepot's latest MSR funding is structuredThe Loandepot financing is "mainly secured by a participation certificate representing a participation interest in the portfolio excess spread and, in certain circumstances, other assets of the issuer, relating to Ginnie Mae mortgage servicing rights," according to a filing.The variable rate notes are based on the secured offered financing rate plus a margin per annum.The manager and initial purchaser was Nomura Securities International and Alston & Bird served as counsel.How some analysts have viewed MSR financingWhile the notes in question are secured and still bear certain risks that include being subject to potential margin calls in the event of an extreme interest rate move, the redemption of the older notes at least relieves the near-term pressure from a 2025 maturity.Rating analysts have favored some aspects of unsecured debt and nonbanks returned to the market for it last year for that reason, but large players like Pennymac have said they plan to still utilize MSR financing and other forms of funding too.The risk in funding secured by servicing rights is mitigated by the many outstanding loans with low rates, Fitch analysts have said. Analysts also typically recognize the value of diversified funding sources in risk management.Other MSR structures at large nonbanksIn addition to Pennymac and Loandepot, other large mortgage companies that have utilized and renewed MSR funding facilities in recent years include United Wholesale Mortgage and Freedom, a sizable private company. Also, the publicly traded Rithm — which is considering spinning off its mortgage banking unit — launched a nonrecourse structured-finance vehicle backed by Freddie Mac MSRs this year in an effort to diversify funding. Rithm said this was the largest deal of this type at the time.

Feds have terminated a consent order against a mortgage lender feds accused of "systemic racism" in the Philadelphia region.A federal judge Monday approved the government's request to terminate its deal with Trident Mortgage, just over two years before it was set to expire. Attorneys with both the Consumer Financial Protection Bureau and the Department of Justice told a Pennsylvania court the long-defunct lender was in compliance with its $22.4 million settlement terms.The case was filed in 2022 in a spate of redlining enforcement by the Biden administration. The Trump administration has sought to reverse those actions, asking courts in recent weeks to end at least two additional redlining consent orders against bank lenders.Trident did not oppose the motion, according to the feds' request filed May 23. The company's obligations were overseen by affiliate HomeServices of America, which is a subsidiary of the Berkshire Hathaway conglomerate. An attorney for Trident deferred comment to the company, and representatives and attorneys for the parties didn't respond to immediate requests for comment Tuesday morning. Officials slammed Trident Mortgage as a "very, very bad actor"Trident was accused of violating fair lending laws between 2015 to 2019 in majority-minority neighborhoods across Philadelphia, Camden, New Jersey and Wilmington, Delaware. The company had 53 loan officers in the Philadelphia metropolitan area, but just 2 in majority-minority neighborhoods, according to the prosecutors' complaint. The company conducted over a dozen email marketing campaigns in which all customers appeared to be white, and overwhelmingly advertised in majority-white neighborhoods. Feds highlighted emails shared by mortgage employees chiding properties in "ghetto" neighborhoods, and sharing racial slurs and pejorative language against minorities. Then-state attorney general and current Pennsylvania Governor Josh Shapiro called Trident's activity "systemic racism, pure and simple," while former CFPB director Rohit Chopra called the subject of the four-year investigation a "very, very bad actor."The firm was subject to one of the larger redlining settlements of the Biden administration, including implementing an $18.4 million mortgage loan subsidy fund in minority neighborhoods. The company, which went out of business in 2020, also paid a $4 million penalty to the CFPB. Feds including the DOJ and CFPB prosecutors behind the original settlement told the court last week Trident was substantially in compliance with other terms of the consent order.Feds are winding down other redlining punishmentsThe DOJ last week asked a judge to end a consent order with New Jersey-based Lakeland Bank two years early, a move opposed by fair housing advocacy groups. The lender agreed in 2022 to fund a $12 million loan subsidy for residents of neighborhoods it allegedly excluded between 2015 and 2021.Separately, a federal judge last month agreed to wrap up early a $5 million consent order with Trustmark National Bank, which was accused of discriminating against Black and Hispanic borrowers in Memphis between 2014 and 2018.In a more unprecedented move, the CFPB has asked a federal judge in Chicago to reverse an already-agreed-upon $105,000 settlement with Townstone Financial, over longstanding accusations against that brokerage. The court has yet to rule on that motion.

Lately, the best single word to sum up mortgage rates has been “stuck.”Ever since early April when they jumped higher as the trade war escalated, they’ve basically gone nowhere fast.Sure, they ebb and flow every day, similar to the stock market, but they’ve been in very tight range.Basically hovering between 6.875% and 7.125%, or just one quarter of one percent, but at a crucial time during the home buying season.If you’re looking for rate relief, like the tariff situation, you might just need to be patient.Is the TACO Trade Keeping Mortgage Rates Higher for Longer?In case you haven’t heard, there’s a new acronym known as TACO, or Trump Always Chickens Out.Simply put, it refers to the President’s waffling (sorry for a different food analogy) on the tariffs, but often capitulating when there’s any whiff of a bad day on the stock market.One day, he wakes up and says the tariffs are on. The next day, they’re off. Then they’re back on again.This has also led to Karate Kid memes that say Tariff on, Tariff off.The stock market seems to cheer this, but bonds seem a little less enthused, and mortgage rates might be suffering as a result.Just check out the MND chart above, which shows mortgage rates jumped in early April when tariffs ratcheted up, and have been stuck higher ever since.My theory is that the longer this back-and-forth goes on, the longer it will take for anything to change.As such, the Federal Reserve won’t be able to lower its own interest rate, even though Trump himself and FHFA director Pulte have explicitly asked chair Powell to do so.Call it ironic, but you can’t create massive levels of uncertainty while also asking for more accommodative monetary policy.This isn’t political, it’s just common sense. The Fed needs clarity to make any interest rate decisions, otherwise they’ll just stand pat.Funnily enough, if there wasn’t a trade war, we’d probably be seeing the Fed’s first rate cut (since last year) in a couple weeks.Instead, the Fed is taking a wait-and-see approach and even said as much in its last FOMC statement, as “the risks of higher unemployment and higher inflation have risen.”At the same time, bond traders are also taking a cautious approach, meaning the bond yields that dictate long-term mortgages rates are also staying stubbornly high.The Promise of Lower Mortgage Rates Keep Getting Pushed Further OutMany expected the 30-year fixed to begin improving in the second half of 2025, including myself.In fact, I predicted that mortgage rates would start with a 5 by the fourth quarter of this year.It’s still possible, but with all the trade drama, it just feels like those forecasts are being pushed further and further out.The same basic outlook exists, it’s just that we can’t get there until we get clarity on the trade situation.In other words, it’s like having a set destination, but stopping multiple times or taking whatever is the opposite of a shortcut for no apparent reason.Most don’t expect the tariffs to bear any major fruit, or even stick at this point, so it’s really just a sideshow that’s delaying the inevitable.That inevitable is a cooling economy, rising unemployment, and likely lower bond yields (and mortgage rates).It’s just that the timing keeps changing because we don’t know what to expect each day.The funny thing is the stock market seems to cheer any semblance of good news on trade, whereas the bond market can’t catch a break either way.If tariffs roll back, it’s bad for bonds. If tariffs ratchet up, it’s bad for bonds. And this all seems to be driven by uncertainty.Remember, mortgage rates like bad economic news, but they don’t like not knowing where we’re headed.Ever Heard of StagDeflation?Most of us have heard of stagflation, which is slow or no growth mixed with higher prices and high unemployment.But what about so-called “stagdeflation,” which is apparently slow growth, high unemployment, and lower prices?Some believe the tariffs will have a one-time impact on inflation and shouldn’t be considered when determining monetary policy.Along these same lines, there’s the thought that the economic data related to employment supersedes the tariffs anyway.As stated, the trade war and tariffs are a sideshow, while the economic data that continues to take center stage is unemployment. Inflation is old news anyway, right?Many still expect layoffs to rise as the year goes on, and if prices don’t, we could have a situation where bond yields come down and the Fed starts cutting again.There remains a strong case for 10-year bond yields already being at the top of their range, around 4.50%, with the lower end around 3.75%.If and when the economy shows signs that it’s cooling, perhaps as the trade stuff continues to fester, bond yields might make their way lower regardless.Assuming a 3.75% yield and a spread of around 225 basis points (bps), we could see a 30-year fixed right around 6%.That would certainly lead to a lot more rate and term refinance applications, but it’s unclear if home buyers would bite.After all, they still need to be gainfully employed and optimistic about the future to move forward with a home purchase.Read on: Mortgage rates are still expected to come down by the end of 2025.(photo: lorenz.markus97) 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 19 years ago to help prospective (and existing) home buyers better navigate the home loan process. Follow me on X for hot takes.Latest posts by Colin Robertson (see all)

Acting Comptroller of the Currency Rodney HoodBloomberg News WASHINGTON — Acting Comptroller of the Currency Rodney Hood confirmed that the Trump administration plans to revise capital requirements for banks, aiming to ease what he described as excessive regulations that could constrain credit. The remarks, delivered to a crowd at the U.S. Chamber of Commerce's Capital Markets Forum, signaled a deregulatory shift focused on loosening constraints in any new rules while preserving financial stability."Regulations must be effective, not excessive," Hood said at the forum on Tuesday. "As we continue interagency deliberations, I will remain committed to a capital framework that supports resilience but does not constrain growth.He pointed to a recent meeting of the Basel Committee on Banking Supervision in Switzerland, established in 1974 to strengthen international banking oversight. Hood said there was general agreement among international counterparts that U.S. capital proposals released under the Biden administration had gone too far."I conveyed that sentiment directly," he said. "I was heartened to see consensus from the international community that the U.S. proposal had gone beyond what was necessary."Hood's comments come as the Trump administration has expressed a more skeptical view of international standard-setting organizations than prior administrations. Treasury Secretary Scott Bessent told lawmakers in April that the U.S. should not "outsource" financial regulation to global bodies like Basel, evoking President Donald Trump's "America First" sensibility.Hood's speech is broadly in line with the Trump administration's efforts to "right-size" oversight and reduce what regulators see as friction in the banking system — especially for smaller institutions seeking to grow.Hood said the OCC is working to modernize capital standards and reviewing the supplementary leverage ratio — a simple capital standard that represents the ratio of total assets to total liabilities — to ensure it serves as a capital backstop rather than a binding constraint on banks. While he emphasized that U.S. banks remain the "gold standard" globally, he rejected the idea of "gold-plating" capital rules — adding more stringent layers than international norms explicitly require.Some Trump appointees have expressed a desire to roll back the SLR, including proposals to exempt U.S. Treasury securities from the enhanced SLR calculation for the largest banks. Supporters of the idea argue that the move would reduce strain on Treasury markets and allow banks to engage more fully in government debt trading without hitting capital constraints. But critics warn the change could inflate bank balance sheets with low-risk assets, weaken hard-fought reforms from Dodd Frank Act after the financial crisis and enable a kind of "shadow" monetary policy, whereby the Treasury could stimulate the economy outside the Fed's control if it chose to coerce large banks to buy Treasuries.