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United Wholesale Mortgage wants to wipe out a remaining challenge to its "All-In" mandate.The complaint is part of a lawsuit and countersuit involving America's Moneyline, a brokerage UWM sued in 2022 for violating its ultimatum. A Michigan federal judge tossed AML's countersuit for fraud in March, citing another court's decision where a judge earlier this year was unconvinced by The Okavage Group's similar arguments. Okavage suffered another blow last week as a judge was unswayed by its latest attempts to include findings from the contentious Hunterbrook Media report in its All-In complaint. UWM last week highlighted that recent ruling to the judge overseeing the AML case. Both AML and UWM declined to comment on UWM's recent filing. The lengthy proceedings with the California-based AML began when UWM sued it for allegedly working with Rocket Pro TPO, in violation of the ultimatum the brokerage signed in 2021. UWM claims its broker partner originated at least 560 loans with Rocket, accruing a $2.8 million penalty according to calculations from the agreement. The brokerage countersued for fraud, claiming UWM managers promised no repercussions for violating the mandate before reneging and suing. AML said Rocket offered more loan options for subprime borrowers, and UWM had been trying to win its business months before the lawsuit. According to the lawsuit, AML signed the All-In agreement in 2021 so it would be able to close UWM loans in its pipeline. In December, UWM asked AML to end business with Rocket or face consequences, a choice AML likened to extortion. The Hunterbrook report in April accused UWM of cheating borrowers out of billions of dollars in excessive fees, or rather paying $865 more on average versus the median lender controlling for loan type and interest rate. The story claimed over 8,600 independent brokers sent 99% or more of their loans to UWM, labeling them "corrupt."A class action racketeering suit against UWM remains pending. The company has slammed the accusations, pointing to inadequacies in the data behind the findings and accusing the media outlet and its huge fund parent of a "short-and-distort" scheme. AML suggests the Hunterbrook report adds substantial factual allegations for its case. The judge overseeing its case has not yet responded to the filings. UWM is suing three other brokerages for violating its All-In mandate, federal lawsuits which remain pending. It also reached a $40,000 settlement agreement with Mid Valley Funding in a lawsuit over its alleged breach of UWM's agreement. 

The US Consumer Financial Protection Bureau (CFPB) headquarters in Washington, DC, US, on Tuesday, Oct. 3, 2023. Thirteen years after a Democratic-controlled Congress created the CFPB to regulate mortgages and other consumer-finance products, the Supreme Court today will weigh a novel constitutional argument that the bureau's supporters say could leave it decimated. Photographer: Ting Shen/BloombergBloomberg News The National Community Reinvestment Coalition and four fintech companies are urging the Consumer Financial Protection Bureau and the Federal Housing Finance Agency to provide guidance on the use of machine learning and artificial intelligence in lending, which they claim would help eliminate discrimination. In a letter to the regulators obtained exclusively by American Banker, the consumer advocacy group and the companies — Zest AI, Upstart, Stratyfy, and FairPlay — asked for recommendations on how the agencies can implement the White House's executive order on AI that was released last year. One suggestion is for the CFPB to provide guidance on the "beneficial applications" of AI and machine learning to develop fairer underwriting models. "One of AI/machine learning's beneficial applications is to make it possible, even using traditional credit history data, to score previously excluded or unscorable consumers," the letter states. "In some cases, AI models are enabling access and inclusivity."The four fintechs are members of the NCRC's Innovation Council for Financial Inclusion, a forum that discusses and pursues policy goals in which industry and consumer groups are aligned. Machine learning and some "deep learning categories of AI" can be responsibly used to develop underwriting models to help lenders comply with anti-discrimination laws, the letter states. President Biden's order on AI directed the CFPB and FHFA to monitor for lending bias.Last year the CFPB said that consumer lenders have an affirmative duty to monitor, refine and update lending models and to search for less-discriminatory alternatives. Since then, there has been a push for the agencies to explicitly allow the use of AI and machine learning in searches for alternative lending models that are less discriminatory. Another recommendation cited in the letter is for the CFPB to identify activity that triggers fair lending oversight and what types of conditions would require a lender to engage in a search for a less discriminatory alternative that would allow credit to be extended to underserved populations. "Some of these tools describe themselves as utilizing transparent machine learning, a subfield of AI that is being used in the market today and can produce inclusive credit decisions," the letter said.The groups also recognize the potential for misuse."As these AI methods are explored, transparency is essential. Internal and external stakeholders must be able to understand how a model works and correct for biases embedded in historical data used for building these machine learning models," the letter stated.In addition, the letter asks for FHFA to build upon a 2022 advisory opinion on AI and to explore beneficial applications of AI that could replace manual underwriting and streamline the ability of Fannie Mae and Freddie Mac, in addition to private capital, to provide greater liquidity to the mortgage market. Pilot programs also are seen as a "promising approach for regulators to engage with AI," the letter states.CFPB Director Rohit Chopra has warned companies repeatedly of concerns about AI-generated decisions in lending. The CFPB is skeptical of claims that advanced algorithms are a cure-all that can eliminate bias in credit underwriting and pricing.Fintech companies that sell and use machine learning in lending decisions have long claimed the technology can and should be used to expand credit to moderate and low-income borrowers. Meanwhile, consumer advocates have spent decades trying to push lenders to lend more to protected classes. Both groups are now arguing that machine learning and AI can be used to potentially root out discrimination and bias in credit scores, appraisals and underwriting."AI tools can more comprehensively assess the risk of an applicant should be adopted earlier and favored over older models and tools," the letter stated. While much of NCRC's letter focuses on the potential financial inclusion benefits of AI and the fintechs are highlighting their ability to develop and test algorithms, other consumer advocates are less sanguine about the technology.In June, two other consumer groups—the Consumer Federation of America and Consumer Reports — urged the CFPB to hold lenders accountable by searching for less discriminatory algorithms as part of the ongoing process of fulfilling their compliance with existing fair lending laws. In general, the consumer advocates want the CFPB to be aggressive in punishing lenders that use discriminatory models while also establishing guardrails to protect any consumer whose creditworthiness is assessed by a machine.

On Thursday night Helene crashed into Florida's coast as a Category 4 hurricane. The giant storm with 140-mile-per-hour winds made landfall close to where Hurricane Debby hit in August and where Idalia struck just over a year ago. It quickly made its way inland, knocking out power for millions. And even before that, it started dumping rain — now 12 to 15 inches across a swath of Georgia and South Carolina, and a stunning 29-plus inches in Busick, North Carolina.The disaster underscores Americans' dangerously low levels of flood insurance coverage, especially away from coastal areas.Massive flooding is being reported across the South and into Appalachia, with photos and videos showing towns from Florida to North Carolina underwater.:This will be one of the most significant weather events to happen in western portions of our area," a weather service in western North Carolina said. As of Friday afternoon, the French Broad River through Asheville, had come within about a foot of its all-time record.In Atlanta, Peachtree Creek rose more than 20 feet from Wednesday to Friday, according to the National Weather Service. Across the U.S., 36 river gauges had reached major flood stage, while an additional 147 were registering water overflowing the banks of rivers. They are all in Helene's path under its torrential rains.Chuck Watson, a disaster modeler at Enki Research, said his latest estimate is that Helene will cause $25 billion to $30 billion in physical damage and losses. The majority of that won't be covered by insurance. "The ratio of insured to uninsured has been dropping" among US homeowners, he said, "and a lot of that is due to floods not being covered by the private sector."Roughly 4% of Americans have flood insurance, according to the Federal Emergency Management Agency (FEMA), with the majority of those policies issued under the government's National Flood Insurance Program. The rate in no way matches the risk posed by more frequent extreme rainfall events.This shortfall, which has been documented for years, is caused by two main factors: Many people are unaware that regular home insurance usually does not cover floods, or that they live in a flood-risk area where this extra purchase would protect them.Homeowners who live within FEMA-designated flood zones are required to buy flood insurance if they have a mortgage. However, FEMA has mapped only one-third of America's floodplains, according to the Association of State Floodplain Managers.Moreover, most FEMA maps don't consider pluvial flooding, or flooding from rain. That's likely one reason why flood-insurance takeup away from the coasts is negligible. In many inland counties in the Southeast and Appalachia, coverage under the federal program stands at 2.5% or lower, according to an analysis of federal data by reinsurance brokerage Guy Carpenter.Then there are cost issues: Some Americans who had flood insurance previously are now giving it up because of rising insurance prices.Christopher Graham, a senior industry analyst at AM Best, a credit rating agency that focuses on insurance, described the problem of low takeup as "a combination of people not believing the risk applies to them and not wanting to pay the price."Homeowner insurance rates in the seven states in Helene's path — namely Florida, Georgia, South Carolina, North Carolina, Kentucky, Tennessee and Virginia — went up by an average of more than 27% from 2018 to 2023, according to S&P Global Intelligence. The price hikes have also been steep for flood insurance. FEMA, which manages the National Flood Insurance Program, in 2021 rolled out Risk Rating 2.0, an update to how it sets rates that was meant to make the program actuarially sound.In the first year after the update, 75% of primary residences covered experienced an increase of 18%, the statutory limit, Benjamin Keys, a professor of real estate at the University of Pennsylvania's Wharton School, testified to Congress in 2023. Half of all policyholders will see their premiums more than double after five years, Keys predicted in his testimony. Higher costs have led some people to drop their policies.But that is a big gamble. Flooding is the most damaging of all perils. It has cost U.S. taxpayers more than $850 billion since 2000 and is responsible for two-thirds of the costs from all natural disasters, says Flood Defenders, a nonprofit flood insurance advocacy organization. FEMA estimates that a single inch of floodwater in a home can cause $25,000 in damage.Un- and under-insured homeowners typically believe they will be able to rely on help from the federal government, but FEMA provides very limited help to individuals without federal flood insurance, and even that safety net is fraying. FEMA faces a financial crisis as disasters mount, and Congress failed to replenish the federal funds used for storm aid in a government funding bill that passed this week.

On Thursday night Helene crashed into Florida's coast as a Category 4 hurricane. The giant storm with 140-mile-per-hour winds made landfall close to where Hurricane Debby hit in August and where Idalia struck just over a year ago. It quickly made its way inland, knocking out power for millions. And even before that, it started dumping rain — now 12 to 15 inches across a swath of Georgia and South Carolina, and a stunning 29-plus inches in Busick, North Carolina.  The disaster underscores Americans' dangerously low levels of flood insurance coverage, especially away from coastal areas. Massive flooding is being reported across the South and into Appalachia, with photos and videos showing towns from Florida to North Carolina underwater. "This will be one of the most significant weather events to happen in western portions of our area," a weather service in western North Carolina said. As of Friday afternoon, the French Broad River through Asheville, had come within about a foot of its all-time record. In Atlanta, Peachtree Creek rose more than 20 feet from Wednesday to Friday, according to the National Weather Service. Across the US, 36 river gauges had reached major flood stage, while an additional 147 were registering water overflowing the banks of rivers. They are all in Helene's path under its torrential rains. Chuck Watson, a disaster modeler at Enki Research, said his latest estimate is that Helene will cause $25 billion to $30 billion in physical damage and losses. The majority of that won't be covered by insurance. "The ratio of insured to uninsured has been dropping" among US homeowners, he said, "and a lot of that is due to floods not being covered by the private sector." Roughly 4% of Americans have flood insurance, according to the Federal Emergency Management Agency, with the majority of those policies issued under the government's National Flood Insurance Program. The rate in no way matches the risk posed by more frequent extreme rainfall events. This shortfall, which has been documented for years, is caused by two main factors: Many people are unaware that regular home insurance usually does not cover floods, or that they live in a flood-risk area where this extra purchase would protect them. Homeowners who live within FEMA-designated flood zones are required to buy flood insurance if they have a mortgage. However, FEMA has mapped only one-third of America's floodplains, according to the Association of State Floodplain Managers. Moreover, most FEMA maps don't consider pluvial flooding, or flooding from rain. That's likely one reason why flood-insurance takeup away from the coasts is negligible. In many inland counties in the Southeast and Appalachia, coverage under the federal program stands at 2.5% or lower, according to an analysis of federal data by reinsurance brokerage Guy Carpenter. Then there are cost issues: Some Americans who had flood insurance previously are now giving it up because of rising insurance prices. Christopher Graham, a senior industry analyst at AM Best, a credit rating agency that focuses on insurance, described the problem of low takeup as "a combination of people not believing the risk applies to them and not wanting to pay the price." Homeowner insurance rates in the seven states in Helene's path — namely Florida, Georgia, South Carolina, North Carolina, Kentucky, Tennessee and Virginia — went up by an average of more than 27% from 2018 to 2023, according to S&P Global Intelligence. The price hikes have also been steep for flood insurance. FEMA, which manages the National Flood Insurance Program, in 2021 rolled out Risk Rating 2.0, an update to how it sets rates that was meant to make the program actuarially sound. In the first year after the update, 75% of primary residences covered experienced an increase of 18%, the statutory limit, Benjamin Keys, a professor of real estate at the University of Pennsylvania's Wharton School, testified to Congress in 2023. Half of all policyholders will see their premiums more than double after five years, Keys predicted in his testimony. Higher costs have led some people to drop their policies. But that is a big gamble. Flooding is the most damaging of all perils. It has cost US taxpayers more than $850 billion since 2000 and is responsible for two-thirds of the costs from all natural disasters, says Flood Defenders, a nonprofit flood insurance advocacy organization. FEMA estimates that a single inch of floodwater in a home can cause $25,000 in damage. Un- and under-insured homeowners typically believe they will be able to rely on help from the federal government, but FEMA provides very limited help to individuals without federal flood insurance, and even that safety net is fraying. FEMA faces a financial crisis as disasters mount, and Congress failed to replenish the federal funds used for storm aid in a government funding bill that passed this week.

The Federal Reserve's cut in the fed funds rate will be a catalyst for state housing finance agencies to build on a resurgent fiscal year 2023, Fitch Ratings said.Overall expectations of such actions now and for the rest of the year also could result in borrowers on existing loans backed by SHFAs electing to prepay and refinance with many probably qualifying for a conventional product.But the Fed rate cut lowers the yield on housing bonds issued by the SHFAs, reducing their cost to raise capital, the authors of the report, Karen Fitzgerald and Kasia Reed, said in response to a question."In turn, the HFAs are able to offer lower mortgage rates to their borrowers and still achieve a spread to the bond rate," the authors said. "It should be noted that the Fed rate cut also impacts the rate on mortgages in the conventional market, meaning HFAs may face more rate competition with conventional lenders."Yet that might not address the overarching affordability issues affecting the housing market.In aggregate, the 51 SHFAs reported total loans rising by an average of 10.4% in fiscal 2023 following three years of minimal growth, averaging just 0.2%, the report said.For that year, their total assets increased by 7.8% and total debt rose 9.8%. An earlier Moody's report noted trends happening in 2023 would lead to a good year for SHFAs in 2024."Despite pressures from heightened operating expenses and bond rates, HFAs maintained stable net operating revenues and leveraged their strong financial positions to support ongoing affordable housing needs," Fitzgerald, a Fitch senior director, said in a press release. "The trend towards fixed-rate debt issuance over variable-rate debt further highlights their prudent financial management, demonstrating stability and profitability in a fluctuating economic landscape."Their financial well-being will also benefit from the increased activity last year."The return to higher levels of bond financing in FY 2023 should positively affect longer-term equity growth as HFAs hold revenue-producing mortgages on their balance sheets at a spread over bond rates," the report said.The SHFAs also benefited from an increase in demand for their services for homebuyers as banks tightened their underwriting standards last year in the wake of the troubles seen at Silicon Valley Bank and Signature Bank, as well as the potential implementation of Basel III capital rules that are now going through a reproposal process.HFAs are able to work borrowers who may not currently qualify for loans from conventional lenders, Reed, a director at Fitch, said in the release. They can also offer down payment assistance funds. However, this increase in demand is somewhat tempered as home prices, especially at the low-end of the market, continued to rise."While lower rates make home purchases more affordable, supply remains an issue and constrains the demand unless more sellers enter the market in a lower rate environment," said Reed. "Additionally, lower rates may begin to increase prepayment speeds under more recent HFA bond programs as homeowners with higher mortgage rates look to refinance at lower rates."

Ting Shen/Bloomberg The Federal Home Loan Banks must assess the financial condition and creditworthiness of its members before advancing funds, the system's regulator said Friday.The Federal Housing Finance Agency said in a 10-page advisory bulletin that the Home Loan Banks must establish processes to regularly monitor the financial health and industry conditions of its members, including changes in borrowing behavior, enforcement actions and unstable funding sources. That includes concentrations of brokered deposits and uninsured deposits.FHFA also said the system needs to coordinate better with primary regulators when lending to troubled institutions in a way that contributes to "positive outcomes in the most difficult situations."During recent exams, the FHFA's supervisory staff found weaknesses in the Home Loan Banks' credit risk management along with "misconceptions about the role an FHLBank should play in lending to members in a distressed financial condition," the regulator said. FHFA Director Sandra Thompson, who launched a review of the system last year, has said that it's not enough for the 11 regional Federal Home Loan Banks to engage in collateral-based lending, they also must assess the financial condition of their members. "This guidance provides clarity for the FHLBanks' effective management of credit risk and coordination with other financial regulators so that member institutions can maintain the ability to access liquidity when needed," Thompson said in a press release. The FHFA's guidance encourages banks, particularly large depositories, to be prepared to borrow from the Federal Reserve's discount window. The system must have procedures in place for subordinating liens and for releasing collateral to the Federal Reserve Banks. When a Home Loan Bank continues to provide funding to a troubled institution, it must get written confirmation from the appropriate prudential regulator or deposit insurer, or both, to continue providing funding, the FHFA said. Ryan Donovan, president and CEO of the Council of Federal Home Loan Banks, the system's trade group, said he hopes the FHFA's goal is for the 6,500 banks, insurance companies and credit unions that are members of the system to continue to have access to the system's reliable source of low-cost liquidity through all economic cycles. "It's too early to determine whether this is going to be a heavy lift," Donovan said. "This advisory bulletin clarifies what the expectations are in respect to determining the credit risk of a member."The Government Accountability Office issued a report in April that examined the role of the Federal Home Loan Banks in providing liquidity during the spring 2023 regional banking crisis. The report provided a granular view of loans, known as advances, that were made to Silicon Valley Bank, Signature Bank and First Republic Bank before their collapse as well as to embattled crypto-friendly Silvergate Bank, the parent of which filed for Chapter 11 bankruptcy last week.The Home Loan Bank System, a government-sponsored enterprise, has so-called "super lien" priority that protects the system from losses, which instead are borne by the Federal Deposit Insurance Corp.'s Deposit Insurance Fund. Critics of the system have claimed the super lien provides a perverse incentive for the 11 regional banks to lend to institutions right up until they fail. The FHFA said that each Home Loan Bank can limit or deny a member's application for a loan if there is evidence of "financial or managerial deficiencies." The guidance clarifies FHFA's expectations that safe and sound underwriting and credit decisions should not hinge solely on the quality of the pledged collateral for advance lending, but should take into consideration the credit worthiness of the member "at that time" they are borrowing. Further, each Home Loan Bank must have agreements in place with its members to request and obtain nonpublic financial information from members, including between reporting periods, in case there are "material adverse financial changes" that a member may not have disclosed at the time of a request to borrow. 

The Federal Reserve's preferred measure of underlying U.S. inflation and household spending rose modestly in August, underscoring a cooling economy.The so-called core personal consumption expenditures price index, which excludes volatile food and energy items, increased 0.1% from July, according to Bureau of Economic Analysis data out Friday. On a three-month annualized basis, the measure rose 2.1%, in line with the central bank's target.Spending also rose 0.1% after adjusting for inflation. Nominal personal income increased 0.2% and the saving rate eased to 4.8%.Treasury yields and the dollar fell on expectations the figures will keep the Fed on track for more rate cuts in the coming months while fueling ongoing debate over how big the reductions should be. The central bank opted for an outsize half-point cut this month to kick off its easing cycle, and investors are split over whether it will take a similar step or opt for a smaller move in November, according to futures."The modest rise in consumer inflation in August on its own provides strong reason for the Fed to continue easing the still restrictive monetary policy stance," Kathy Bostjancic, chief economist at Nationwide, said in a note. "The tepid 0.1% rise in real consumer spending in August underscores that consumers are becoming more frugal in their spending and that the momentum in spending is slowing."Details of the August inflation numbers showed a broad cooling. Services prices excluding housing and energy rose 0.2% for a second month. Goods prices minus food and energy declined 0.2%, the most in three months.The spending data also points to an economy that's gradually slowing this year. Overall services spending, which makes up the bulk of household consumption, rose 0.2% in August, marking the smallest three-month gain since October 2023. Goods spending was unchanged following a solid advance in July.What Bloomberg Economics Says..."The downside surprise in August's personal income, spending and inflation data validate the Fed's decision earlier this month to cut policy rates by 50 basis points. Income growth is cooling, helping to make consumers more discerning in their spending habits. As underlying inflation pressures wane, we think the Fed increasingly will emphasize the full-employment side of its dual mandate." —Stuart Paul, Eliza Winger and Estelle OuWages and salaries rose by the most since May. Still, growth in overall disposable income slowed, restrained by declines in proprietors' income, interest income and dividend income.Separate data published Friday by the Census Bureau showed the advance goods trade deficit narrowed in August to $94.3 billion — the least since March — while growth in wholesale and retail inventories moderated. Results of a Bloomberg survey showed forecasters expect inflation to return to the Fed's 2% target by early next year.Friday's data follow annual revisions to gross domestic product data published Thursday by the BEA, which showed faster economic growth and more saving — fueled by higher incomes — than previously reported in 2022 and 2023.The Bureau of Labor Statistics will provide a monthly update on hiring and unemployment for September on Oct. 4.

The U.S, Department of Housing and Urban Development announced new investments in housing counseling for homebuyers, providing $48 million in grants.The funding, announced at a housing and redevelopment conference this week, aims to augment educational resources geared toward underserved communities to help support wealth generation and financial inclusion that comes with homeownership. These awards will further efforts at 160 HUD-approved organizations that provide housing counseling services or train professionals to assist previously disadvantaged consumers, who may have little limited knowledge of the home-purchase process."Buying a home and keeping a home can be an overwhelming experience, particularly for first-time home buyers," said HUD Acting Secretary Adrianne Todman, in a press release. "HUD-certified housing counselors are available to help every step of the way. They provide vital information about available resources, such as down payment assistance."  Among the grantees are 14 service providers working with historically Black colleges and universities. The full list of recipients supported by HUD includes counseling agencies, state housing finance groups, educational institutions and nonprofits working in specific geographic designations. Educational topics covered in counseling and training include pre-purchase planning and financial literacy, along with foreclosure and rental eviction prevention. "For so many individuals and families, finding safe and affordable housing options may seem out of reach," said HUD assistant secretary and Federal Housing Administration Commissioner Julia Gordon. "Unbiased housing counseling helps to turn the aspiration of obtaining [a] safe and affordable place to call home into reality."While efforts are often geared toward the first-time buyer, approved counseling agencies also provide resources to help existing homeowners address appraisal bias, disaster recovery, heirs' property management and reverse mortgages. HUD's efforts are among numerous initiatives rolled out by banks and housing agencies across the country to encourage wealth building and shrink the U.S. minority homeownership gap. In 2022, the Black homeownership rate in the U.S. sat at 44.1%, considerably smaller than the White share of  72%, according to the National Association of Realtors. While the gap narrowed marginally from the previous year, it had grown by 1% over the previous decade. The share of Black homeowners also lags other minority groups, with Hispanics and Asians seeing their rates grow to record highs of 51.1% and 63%, respectively.HUD's latest announcement comes after it awarded $10 million in housing couseling grants to 23 organizations in June. Earlier in September, the federal agency also entered into an agreement with Zillow to expand promotion of counseling services available through its "Let's Make Home the Goal" program, which targets previously underserved communities. Ads now appearing on the real estate brokerage's platform allows HUD to increase the campaign's reach from 5 million to 8 million consumers in 52 media markets.  

Well, it’s been over a week since the Fed cut rates and mortgage rates went up.While this may have come as a surprise to some, seasoned mortgage industry peeps didn’t bat an eye.It’s pretty common for the Fed to do one thing and mortgage rates to do another.Without getting too convoluted, the Fed adjusts short-term rates while mortgages are long-term rates, aka the 30-year fixed.In other words, the cut (and future cuts too) were already priced in to mortgage rates. So much so that they actually increased over the past week in a sort of “sell the news” correction.Are Mortgage Rates Still Dropping?Fitch Ratings recently came out and said the 50-basis point Fed rate cut was already priced in to both the 10-year Treasury yield and 30-year fixed mortgage rates.In addition, they argued that the 10-year yield, which tracks mortgage rates historically, has “less room to decline” because of that.It basically already came down in anticipation and might be difficult to drop much lower. In fact, we’ve seen it rise since the Fed cut last week.The 10-year yield was as low as 3.61% and now sits around 3.77%, putting some mild upward pressure on mortgage rates since then.Rates actually looked destined for the high-5% range before pulling back and inching their way back toward 6.25%.And with little economic data out this week, there’s been no reason for them to rally.But next week we get the employment report, which could help rates resume their downward path if it comes in soft.Maybe Low 5% Mortgage Rates By 2026If the 10-year yield isn’t expected to get much better from here, mortgage rates will only be able to move lower with better spreads.Currently, mortgage spreads are wide because of high prepayment risk, volatility, and general uncertainty.Investors demand a premium to buy mortgage-backed securities (MBS) versus government bonds and recently they’ve asked for a lot more than usual.Fitch puts the typical spread at about 1.80%, while I’ve long said it’s about 170 basis points. Either way, it’s markedly higher today.It was nearly 300 bps at its worst in 2022. It has since shrunk to about 240 basis points, meaning it’s about halfway back to normal.So if bond yields do indeed stay sticky where they’re at, you’ll need some spread normalization to get mortgage rates to move lower.It’s certainly possible, and as I wrote a couple weeks ago, could result in mortgage rates falling about .50% from current levels.That would put the 30-year fixed in the high-5% range, and even lower if a borrower is willing to pay discount points.Mortgage Rates Unlikely to Fall Below 5% Before 2027The rating agency also proclaimed that mortgage rates are unlikely to fall below the big 5% threshold before the year 2027.That means at least another two years of “high rates” before mortgage rates are no longer a concern.Again, that’s because the 10-year yield is expected to stay mostly level and only drop to around 3.50% by the end of 2026.If the spreads are back to mostly normal by then, you can do the math and come up with a rate of around 5.30% (3.5+1.8).Of course, this is all just a forecast and many of these forecasts have been wrong in the past. In fact, they’re rarely right. Most were wrong on the way down to 3% and the way up to 8%!So who is to say they’ll be right this time around either?I’m a bit more optimistic on mortgage rates because I think there are a lot of Fed rate cuts projected over the next 12 months, which haven’t all been baked in.Similar to the ride up for mortgage rates, from sub-3% to 8%, the market was caught off-guard. This could happen on the way down too.I can envision a 10-year yield dropping to the lower 3% range next year, when combined with some spread compression puts the 30-year fixed in the mid-5% range potentially.And once you factor in points, lots of rate quotes in the high 4% range. For most home buyers, that would be acceptable.But I’ve long argued rates are no longer the main sticking point. We’ve got home prices that are perhaps too expensive in many markets, along with sticker shock on insurance, taxes, and everyday goods.Without a little home price easing, it’ll still be a tough sell for those looking to buy into the market, especially if the wider economy deteriorates. 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)

Specialized Loan Servicing, a mortgage servicer acquired by Newrez in May, allegedly upcharged borrowers for processing mortgage payments over the phone, a recent suit claims.Prior to being bought by Newrez, SLS required borrowers to pay $7.50 for processing mortgage payments made by phone, representing a significantly higher amount than what other servicers charge, litigation filed Sept. 24 in Texas federal court purports. The suit, lodged by borrower Eugenio Alvarez, says that most servicers have all together stopped charging for this service. Companies including Freedom Mortgage, Caliber Home Loans, Rocket Mortgage and Roundpoint Mortgage Servicing have either axed the fee or did not charge it all together.According to the suit, which is seeking class action certification, processing mortgage payments costs servicers less than 50 cents per transaction, which is why this service is usually offered for free. SLS's fee for this action "materially exceeded the costs incurred by SLS…generating millions of dollars in unlawful profits for SLS," the suit said.Litigation accuses SLS of violating the Federal Debt Collection Practices Act , the Texas Fair Debt Collection Act and the laws of six other states, including Maryland, California, and West Virginia. All of the mentioned states have fee-prohibiting statutes in place.Newrez highlighted that since its acquisition of SLS "no fees are charged to SLS homeowners who make a payment on their accounts.""Additionally, Newrez does not charge pay-to-pay fees," the company stressed Thursday.An attorney representing the plaintiff declined to comment.The plaintiff's mortgage was serviced by SLS from 2017 to 2024, during this time Alvarez made payments over the phone and was charged a pay-to-pay fee.Per the suit, the charge was illegal because fee-prohibiting statutes restrict debt collectors from assessing any charge unless it is authorized in their loan agreements. The fee charged by SLS was allegedly not outlined to borrowers, constituting unfair debt collection practices. "SLS knew that these pay-to-pay fees were not expressly set out in the uniform mortgages held by plaintiff and members of the fee-prohibiting state class…yet it collected them anyway," the suit said. "In doing so, SLS collected amounts not authorized by plaintiff's and class members' uniform mortgages or by law." Furthermore, the plaintiff claims that SLS engaged in double-charging borrowers by imposing pay-to-pay fees, while also receiving a servicing fee of 0.5% from lenders, regardless of payment method."Out of the $86.67 it received each month out of the loan payment being made by the borrower, it could incur as much as $4 in costs to process check payments, leaving $82.67 to cover other overhead costs and for its profit," the suit said. "SLS double charged borrowers by charging additional pay-to pay fees, up to $7.50 for each phone payment, over and above its negotiated servicing fees agreed with the  lender, government-sponsored enterprises or primary servicer."Borrowers do not have a choice in who services their loans and had to ultimately pay these fees, the suit reads.Pay-to-pay fees have been a hot button issue for both state and federal regulators. The Consumer Financial Protection Bureau, specifically, has upped its rhetoric concerning servicers charging pay-to-pay fees.Most recently, the consumer watchdog put its support behind plaintiffs who accused mega servicer Mr. Cooper of charging illegal junk fees. The CFPB said the company violated the Federal Debt Collection Practices Act by charging customers with a fee that they were not previously aware of, in an amicus brief filed with a Washington federal court August 8. The FDCPA, which the CFPB has purview over, prohibits debt collectors from charging borrowers fees unless there is a law allowing them or the amount is authorized by the borrower. "While these contract terms may sound innocent, they allow companies to silence or buy-off anyone who complains and sidestep broader accountability or the need to fix problems company-wide," the CFPB said in a blog addressing the matter. "Allowing companies to make consumers give up fundamental protections in this manner would interfere with the law, which is supposed to let consumers hold debt collectors accountable for their actions and protect consumers from unauthorized charges."