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Rocket Mortgage has come out with a debt service coverage ratio product in both its wholesale and retail channels, joining a rather competitive landscape of both non-qualified mortgage specialists and more traditional lenders like its rival United Wholesale Mortgage, that already serve investors looking to finance rental properties.Another recent entrant with a suite of non-qualified loan products including DSCR is PHH Mortgage, whose parent company Onity approximately one month later announced the disposition of its reverse mortgage operations to Finance of America. Dan Sogorka, general manager at Rocket Pro TPO.Courtesy of Rocket Cos. "If you go back through the year, every quarter we added at least one new product," said Dan Sogorka, the general manager of Rocket Pro in an interview. "This was a really exciting one, because it's been a strong market for investors in terms of home buying."Why Rocket added a DSCR productWhen asked about why Rocket is jumping in at this point to a market niche others are already occupying, Sogorka replied that the company's partners asked for the offering because they want to do more with the Detroit-based lender."When you think about what really makes us stand apart, it's our best-in-class technology, operations, pricing, support, our AI suite, our Navigate product," he continued. "Our partners now want to continue to use all of these regardless of what product they're doing."Others have technology offerings specific to the DSCR market. Earlier this month, Angel Oak Mortgage Solutions launched a rental automated valuation model. The product incorporates Clear Capital's Rental AVM.It's very time consuming when an appraiser has to be hired to do a rent valuation and it does not come in as expected, said Tom Hutchens, president of Angel Oak Mortgage Solutions, in a recent interview. When that happens, the closing is likely to be delayed.This technology helps to come up with a more accurate valuation of the rent rolls which is used to underwrite a DSCR loan, helping to speed the process.Why lenders should add investor products to their menuAngel Oak is primarily a third party originator, and Hutchens was asked why mortgage lenders would want to offer investor loans."So many people in the last 10 years that have just become investors in real estate, given the lack of supply of housing, the demand for rental housing is just continuing to grow," Hutchens said. "I think that's why people, from an origination standpoint, believe, 'hey, I've got to participate in this space.'"Single-family rental is becoming a bigger part of the market and "they're just an excellent opportunity to lend upon," added Ben Fertig of Constructive Capital, another non-QM wholesaler, also in a recent interview."If you're an IMB and you want to retain and recruit loan officers, you better have products that you know are at least hitting the market," Fertig continued. "Both the DSCR rental loans and residential transitional loans do."UWM entered DSCR lending in March 2022 and expanded on its offering at a couple of points during 2023.For now, Rocket has no plans to enter the RTL market, Sogorka said.Investor mortgages growing market shareOptimal Blue, a product and pricing engine, finds non-QM lending is continuing to expand, both in terms of loan production and in the number of entities offering these loans, said Brennan O'Connell, director of data solutions."In October, the non-QM share of total rate lock volume hovered near its recent peak at 8%," O'Connell said. "DSCR loans, which represent nearly 30% of total non-QM lock activity tracked by Optimal Blue, were up more than 50% in October versus the same time last year."The category was up by 95 basis points from September, Optimal Blue's Market Advantage report said.Meanwhile bank statement loan share was just shy of 35%, while all other non-QM was 36%. Bank statement locks were 168 basis points higher than September but 216 basis points less than one year prior.At 16.6% of all locks in October, nonconforming (including jumbo as well as non-QM) was relatively flat from the prior month but up by 154 basis points from the same time in 2024. Rocket's DSCR mortgage parametersRocket is already processing applications for the DSCR loans.Its loan limits are up to $3 million for purchases and rate-and-term refinancings, along with $2.5 million for cash-out refis.If the amount is over $2 million, two appraisals will be required, with the lower valuation used to qualify the property.Most importantly, "the product's not eligible for first-time real estate investors," Sogorka warned.  Borrowers will need to have a minimum of one-year property management experience within the past 36 months and/or one year of receiving rental property income."This is an experienced investor product," Sogorka said. "You can close it in an LLC, which was another big ask from the community." UWM's DSCR offering also allows the borrower to be an LLC, according to its November 2023 announcement.Rocket has several investors for this product but it declined to name them.

Aaron Schwartz/Bloomberg Key Insight: Federal Reserve Gov. Stephen Miran said certain bank regulations are preventing the Fed from further shrinking its balance sheet.Expert Quote: "Trying to settle the ongoing debates on how monetary policy is best implemented before settling the regulatory framework is putting the cart before the horse." — Federal Reserve Gov. Stephen Miran.What's at stake: As the central bank moves to streamline its oversight processes, concerns are emerging that reducing proactive supervision could allow risks to build in the banking system.Federal Reserve Gov. Stephen Miran said further regulatory rollbacks could allow the central bank to continue shrinking its balance sheet in the future.Speaking Wednesday at a Bank Policy Institute event, Miran stressed that monetary policy and regulation are intertwined and that regulation can ultimately dictate policy outcomes.He argued that banks hold more reserves than necessary because regulations incentivize them to do so, leaving the Fed with a balance sheet that is larger than it needs to be."For all the talk about fiscal dominance of monetary policy, the reality is that the size of the balance sheet is a result of regulatory dominance," Miran said. "Regulations boost demand for reserves, which in turn requires us to end runoff or purchase securities for reserve management purposes."He added that debating "how monetary policy is best implemented before settling the regulatory framework is putting the cart before the horse."Miran's comments come as the Federal Reserve prepares to end its "quantitative tightening" on Dec. 1. The governor said during his BPI speech that he supported the move and had favored ending the runoff of the Fed's balance sheet "immediately" at the Federal Open Market Committee's October meeting rather than waiting until the end of the year.Miran highlighted that relaxing certain oversight measures, such as liquidity and capital requirements, would reduce banks' incentives to hold reserves and give the central bank more room to allow assets to roll off its balance sheet.Miran said banks should be encouraged to hold Treasurys instead of reserves because it would allow them to earn more."A consequence of the Fed's large balance sheet is significant payments of interest to the banking sector," he said. "Now, this is little different for banks' income than if they held Treasurys directly, as would occur in a scarce-reserves regime. In fact, an upward-sloping yield curve would suggest banks would earn more from holding Treasurys rather than reserves."He also said encouraging banks to hold Treasurys could reduce the perception that the Fed "is unfairly subsidizing the banking system with billions of dollars.""These perceptions can affect the Fed's credibility and thus its effectiveness," said Miran. "Several times now, the Senate has debated whether the Fed ought to be stripped of its statutory authority to pay [interest on reserve balances] despite its necessity as a tool for managing the federal funds rate."The regulatory arm of the Federal Reserve has already moved to loosen a number of oversight tools in recent months, including releasing the stress-testing models it uses to gauge the largest U.S. banks' resilience, as well as cutting back on bank supervision. The deprioritization of certain supervisory practices comes alongside plans to reduce the supervision and regulation division's staffing by 30% by the end of 2026.Miran expects the Fed to continue making "more progress peeling back regulations," which as a result will cause the "optimal level of reserves [to] drop below where it is now.""It is possible that in the future, it will be appropriate to resume shrinking the balance sheet; stopping runoff today does not necessarily mean stopping it forever," Miran added.

Key insight: Hill's continued tenure at the FDIC isn't likely to change the agency's direction on bank policy. Forward look: His nomination now goes to the full Senate, where he's expected to be confirmed. What's at stake: Hill's policies at the FDIC have included rescinding ILC rules and pursuing policies that he has said will lower capital requirements for small banks. WASHINGTON — Travis Hill, President Donald Trump's nominee to permanently lead the Federal Deposit Insurance Corp., passed through the Senate Banking Committee on a party-line vote. Hill's nomination hit an unexpected stumbling block in his confirmation hearing, as Sen. John Kennedy, R-La., said he might withhold his vote if Hill didn't produce a report showing the progress that the agency has made on the culture scandal at the agency. Last week, Kennedy said that a report released to his office showed that 26 employees linked to verified misconduct are no longer with the FDIC. "I am satisfied with the progress the agency is making," Kennedy said. "I intend to vote to confirm Mr. Travis Hill as FDIC Chairman." Hill's nomination was reported favorably to the full Senate in a 13-11 vote. He's expected to similarly receive a party-line vote and ultimately be confirmed by the upper chamber. Hill's confirmation will bring little in the way of change to the agency, as Hill has been serving as acting chair since former FDIC Chair Martin Gruenberg stepped down in January. Since taking the helm of the agency, Hill has repealed a Biden-era rule on industrial loan companies and proposed measures that he said would lessen regulatory burdens on small banks. The FDIC under his leadership has also made it easier for private equity to bid on failed banks, and he's said that the agency is working to implement stablecoin rules pursuant to the recently passed GENIUS Act. Democratic lawmakers voted against Hill's nomination. Senate Banking Committee ranking member Sen. Elizabeth Warren, D-Mass., said that she is unsatisfied with the information that the FDIC under Hill has released about the culture issues at the agency. "I have repeatedly requested copies of the monthly assessments conducted by the FDIC independent transformation monitor, a third party who was hired to track the agency's progress on its cultural improvement efforts," Warren said at the vote. "Not only has Mr. Hill failed to provide these documents to Congress, he has also explicitly blocked the independent monitor from sharing those reports with us." Warren said that her staff was able to get copies of those reports, and that they outlined a shortage of staffing in key offices meant to address the FDIC's workplace issues. "The reports are abysmal. The independent monitor found that parts of FDIC's action plan to resolve its cultural problems had been nullified by President Trump's policies, it found that 'the manner in which the FDIC communicates progress to FDIC staff, causes confusions and is at times inaccurate,' and two of the critical new offices that the FDIC set up to address its toxic workplace, the Office of Professional Conduct and the Office of Equal Employment Opportunity, offices that Mr. Hill, himself, touted in front of this very committee as critical to the FDIC cultural improvement efforts, are understaffed." 

Consecutive weeks of mortgage rate increases suppressed refinance activity, causing a notable fall in mortgage applications, the Mortgage Bankers Association found.The MBA's Market Composite Index, a measure of mortgage loan application volume,  decreased 5.2% on a seasonally-adjusted basis from one week prior for the week ending Nov. 14. On an unadjusted basis, the Index dropped 7% compared with the previous week.The Refinance Index primarily drove the fall, declining 7% from the week before, but was still 125% higher than the same week last year.The seasonally adjusted Purchase Index decreased 2% from a week prior, while it dropped 7% on an unadjusted basis. The unadjusted Purchase Index was still up 26% from the same week a year ago."Mortgage rates increased for the third consecutive week, with the 30-year fixed rate inching higher to its highest level in four weeks at 6.37 percent," said Joel Kan, MBA's vice president and deputy chief economist, in a press release Wednesday. "Application activity over the week was lower, with potential homebuyers moving to the sidelines again, although there was a small increase in FHA purchase applications," he added. "Refinance applications decreased as borrowers remain sensitive to even small increases in rates at this level."Refinance volume surged late last month as mortgage rates hit their lowest level in more than a year, naturally resulting in slower activity as rates tick back up this month.The refinance share of total mortgage applications decreased to 55.4% from 55.6% the previous week and 57% two weeks prior. The adjustable-rate mortgage share of total activity slumped to 7.5% from 7.8%."The overall average loan size across both purchase and refinance applications dipped to its lowest level since August of this year, driven by another drop in the ARM share," Kan said.Loans backed by the Federal Housing Administration, the Department of Veterans Affairs and U.S. Department of Agriculture all saw their share of total applications increase last week. FHA loans saw a 0.5 percentage-point rise to 19.9%, VA loans climbed to 15.2% from 14.8% and USDA loans increased 0.1 percentage points to 0.3%.Three of the five types of mortgages the MBA tracks saw an incline in interest rates last week compared with the week prior, including:30-year fixed-rate mortgages with conforming loan balances, 6.37% from 6.34%;15-year fixed-rate mortgages, 5.83% from 5.70%;and five-year ARMS, 5.65% from 5.50%.The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances decreased to 6.39% from 6.46%, while 30-year fixed-rate mortgages backed by the FHA held at 6.14%.

Figure filed for a proposed offering of its new Blockchain Stock Monday, with hopes of disrupting the vertical equity stack.The Blockchain Stock will be a blockchain-native class of equity securities, trade on Figure's alternative trading system and will be convertible one-for-one into shares of Figure's Class A Common Stock, the company said in a press release."This is a new capital markets infrastructure moment for efficiency and risk management — a huge leap forward from the legacy securities market infrastructure, and the start of a world that no longer needs it," said Mike Cagney, executive chairman and co-founder of Figure, in the release.Traditionally, equities move through a stack of intermediaries, from custodians and clearing firms to prime brokers and introducing brokers. Figure's blockchain structure aims to cut out third parties, improving efficiency, security and cost savings, representatives said."This is a direct, competitive attack to the current equity stack," Cagney said in a conference call Tuesday.The proposed offering, which Figure calls the first blockchain-native public equity security issuance, would allow investors to hold, transfer and collateralize Figure stock on the Provenance Blockchain with four key advantages: faster settlement, 24/7 trading, cross collateralization of the security to other assets and the ability to lend or borrow the stock transparently, the company said on the call.While many of the advantages are investor-focused, the infrastructure also provides benefits for issuers who want to engage more with individual investors, as they can use a listing to further market their company, CEO Micahel Tannenbaum said on the call. The blockchain nature of the security also allows for broader access to investors who struggle with a traditional brokerage account."You don't want to discount the buy side's ability to push this," Cagney said. "You look at [BlackRock CEO] Larry Fink, for example, he talks repeatedly about the tokenization of everything ... We expect the buy side is going to play an important role here in driving this because of how much utility it accrues back to the investor."Figure is currently selling issuers on the idea of the blockchain, but doesn't expect to see material results this quarter.The number of shares of Blockchain Stock to be offered and the price range have not been determined yet. Figure also does not expect it to go live until next year.Figure went public in September, opening at $36 per share. It hit a high of $49.17 in October, but stumbled on Tuesday, falling 7.22% to $39.19.The offering will be non-dilutive to current shareholders of Figure, as existing investors will sell Class A shares to underwriters, and then Figure will repurchase and hold those shares in treasury."It is a very ambitious undertaking," Tannenbaum said on the call. "It's hard to do new things, but there's valor and economics in doing so."

The nation’s second largest mortgage lender has begun offering DSCR loans for its customers.The loans, which are reserved for real estate investors, have exploded in popularity in recent years because they allow borrowers to qualify based on the property’s cash flow.This means borrowers don’t need to provide personal income documentation or tax returns to qualify.As such, they can get approved simply by showing that the rental income from the subject property is sufficient to cover the monthly housing expense.The new loan product will be available via both the retail channel and through Rocket Pro, the company’s wholesale arm for mortgage brokers.How DSCR Loans WorkThe DSCR loan, which stands for Debt Service Coverage Ratio, allows a real estate investor to utilize the property’s cash flow instead of personal income.They are available on non-owner occupied properties, such as an investment property or a short-term rental (STR) offered via platforms like Airbnb.This means the borrower doesn’t need to supply income documentation and calculate a debt-to-income ratio (DTI). In other words, “simple qualifying.”Aside from being less cumbersome for the borrower, it might also mean it’s easier to qualify for the loan.Many real estate investors have complicated taxes and uneven earnings throughout the year (or across multiple years).The DSCR loan puts the emphasis on the property itself and reduces scrutiny on the borrower.However, lenders do often impose minimum ratios to ensure the loans are sound and likely to perform.When it comes to Rocket Mortgage, they are imposing a minimum DSCR of 1.0. this means the property cash flow must be at least as high as the monthly housing payment.Typically, this includes the principal, interest, taxes, insurance, and HOA dues if applicable.For example, say you want to buy a condo in a ski town and rent it out on Airbnb and VRBO.If the PITIA comes out to $4,000 per month, the unit must rent for at least $4,000 per month as well to ensure it passes underwriting.But imagine the PITIA is $5,000 and the cash flow is only $4,000. Then you would have a DSCR of just 0.80.Some lenders may not approve the loan if the DSCR is that low, or they may require compensating factors such as a higher FICO score, larger down payment, smaller loan amount, etc.Rocket Mortgage DSCR Loan RequirementsAs noted, Rocket Mortgage’s requirement on this new product is a DSCR of at least 1.0.So the cash flow must meet or exceed the monthly housing obligation in order to get approved.In addition, Rocket is imposing a minimum credit score of 680 and a maximum combined loan-to-value ratio (CLTV) of 80%.That means real investors need to come in with at least a 20% down payment, which is common to provide a safety buffer.Because the borrower’s income isn’t necessarily documented, having a sizable amount of skin in the game is important.This is kind of the saving grace of these loans relative to the questionable stated income loans offered in the early 2000s before the massive mortgage crisis took place.It makes me feel better about these types of loans knowing the homeowners have something to lose if things go sideways.Back then, you could get an investment property with zero down and a low credit score, all while stating your income or providing no income at all!Rocket will allow loan amounts as large as $3 million and their DSCR loan is available on 1-4 unit investment properties, condos (both warrantable and non-warrantable), along with long-term rentals (LTRs) and short-term rentals (STRs).They also permit closing DSCR loans in an LLC for tax advantages, asset protection, and streamlined property management.Their crosstown rival United Wholesale Mortgage (UWM) began offering DSCR loans back in 2023.They have even more aggressive lending guidelines, including a minimum debt service coverage ratio of 0.00 (no ratio) and credit scores down to 640. 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)

High prices, tight affordability and general uncertainty continue to hold back would-be buyers. Redfin estimates that there approximately 500,000 more sellers are active in the market than buyers, giving the few active buyers more leverage on price and concessions. "Homebuying activity has stabilized at below-normal levels," said Asad Khan, Redfin senior economist. "Many would-be homebuyers and sellers are paralyzed by high prices and economic uncertainty."Zillow also reported that affordability, while improved, still strains budgets. The median earning household would have to spend nearly one-third of its income on a mortgage for a typical home bought with 20% down. It is the smallest share of income needed since August 2022, but higher than the level in which housing is considered a financial burden.Inventory growth slows, nudging prices higherEven with sluggish demand, prices are inching up as new supply slows. Redfin's data shows home prices rising 0.3% from September to October, a  pace quicker than the 0.2% rise between September and August from the prior month. Redfin's Chen Zhao said slowing inventory growth is pushing prices higher even as demand stays "historically low." Fourteen of the 50 most populous U.S. cities had price declines in October, versus 20 in September and 30 in August, suggesting some stabilization rather than a pickup in activity.First American echoed this. Its home price index posted a 0.8% annual gain — the first since late 2024 — but changes to prices month over month slipped 0.2%. Chief economist Mark Fleming called the trend "price stabilization," not a sign of renewed momentum.Sales show pockets of strength despite broader stagnationWhile much of the market remains stuck, some sales indicators are moving in the right direction. Remax recorded a 3.2% gain in home sales year-over-year, the fifth month in 2025 where this metric grew on an annual basis. Sales also rose 1.7% from September, bucking the normal seasonal trend."Sales are up compared to last year, prices are steady and inventory is giving buyers more options," said Remax CEO Erik Carlson.Zillow saw similar signs of activity. October brought the strongest combined buyer-and-seller participation in three years for what is normally a quiet month. Listings and accepted offers were both up 5% annually and held steady from September — another break from typical seasonal patterns.Homes are taking longer to sellOne of the clearest signs of a slow-moving market is time on market. Homes tracked by Remax took an average of 50 days to sell in October, up from 48 in September and 43 a year earlier. This longer selling window may create room for negotiation, but it also reflects buyers' hesitation and the wider affordability squeeze.Uncertainty clouds the outlookLower mortgage rates have unlocked some activity, but economists warn not to read too much into a single month. Zillow's Kara Ng said the softer rates gave the market "badly needed relief," but cautioned that winter could bring new rate volatility. "This warm-up is not guaranteed to last," she said.Redfin, which expects 2025 existing home sales to be flat with 2024 — the weakest year since 1995 — also sees little reason to anticipate a sharp rebound. Sluggish demand, stretched budgets and uneven inventory trends continue to define the market heading into the new year.

Key Insight: The nomination allows Acting Director Russell Vought to bypass the Federal Vacancies Reform Act. What's at Stake: Vought has three weeks left before he reaches the 210-day limit to remain at the agency. With the nomination, he gets another 210 days.Forward Look: The nomination is part of a larger effort by the Trump administration to shutter the CFPB after Vought claimed he could not legally request funding for the bureau. President Trump has nominated Stuart Levenbach, an associate director at the Office of Management and Budget, to be the director of the Consumer Financial Protection Bureau, though many observers say Levenbach is likely a placeholder nominee that allows Acting CFPB Director Russell Vought to remain at the helm of the agency. Vought said last week that he thinks the CFPB will be closed by year-end, claiming he cannot seek funding from the Federal Reserve. The funding dispute is part of a larger, ongoing political and legal battle by the Trump administration to shutter the CFPB. Under the Federal Vacancies Reform Act, agency directors typically can serve for only 210 days.That time is extended if another person is nominated for the permanent position. By nominating Levenbach, Vought can serve for at least another 210 days while the Senate considers the nomination. A new 210-day period begins if the nominee is rejected or withdrawn.Sen. Elizabeth Warren, D-Mass., the ranking member of the Senate Banking Committee, said in a press release that the nomination "looks like nothing more than a front for Russ Vought to stay on as Acting Director indefinitely as he tries to illegally close down the agency.""Instead of doing everything in their power to lower costs for Americans, Trump and Vought want to make it easier for giant corporations to scam families out of their money," she added.Levenbach made waves as a political appointee serving as chief of staff at the National Oceanic and Atmospheric  Administration, where he tried to tone down the conclusions of the National Climate Assessment, a congressionally-mandated climate report, which alarmed scientists. He also has served as a senior advisor at the White House National Economic Council. He was tapped by OMB in March to be associate director of natural resources, energy, science, and water.A confirmation hearing date has not been scheduled and many experts think Republicans will simply sit on the nomination, allowing Vought to complete his policy objectives at the CFPB. Last week, the Department of Justice's Office of Legal Counsel issued an opinion stating that the CFPB cannot legally request funding from the Federal Reserve System, leaving the CFPB's future in limbo after December 31. The DOJ sent a notice to two federal courts involved in the union's dispute that the CFPB cannot legally request funding from the Fed because the central bank technically has no profits. Vought was sued in February by the National Treasury Employees Union, which claimed he was seeking to fire 90% of the CFPB's employees through a reduction-in-force. A district judge granted the NTEU an injunction that kept Vought from firing staff, but an appeals court ruled in August that the reductions in force were legal. That opinion is now being appealed. Vought also notified Congress that the CFPB only has enough money to continue operating through Dec. 31, leaving its future in limbo, according to the notice filed with the U.S. District Court for the District of Columbia and the U.S. Court of Appeals for the D.C. Circuit.Vought claims that the agency may be forced to lay off employees and that without appropriations from Congress, the CFPB will no longer function.

The pairing of exchange-traded funds to residential mortgage-backed securities is no new concept, but 2025 looks like it is turning into a renaissance year for RMBS ETFs, based on recent trends. Since November 2024, the bond market has seen at least four new issuances from investment banks, including the likes of JPMorganChase, Charles Schwab, Regan Capital and Morgan Stanley's Eaton Vance unit. While the mechanism for MBS ETF creation has been in place for close to 20 years, the convergence of a wide variety of factors, including soundness of the assets, investors' search for diversification and a maturing segment, has banks taking a look at bringing the funds to bond markets. The decision to introduce an agency-backed MBS fund by Schwab Asset Management "came from the combination of where we had an existing gap in our product suite, despite the fact that we already had existing expertise," and consideration of "how we could round out our offerings," said Rizwan Hussain, director and investment portfolio strategist at the firm. Some of the appeal of MBS ETFs lies in the backing the vast majority of mortgage originations in the U.S. receive, which offers some protection against volatility that makes other bond segments more volatile. "Securities from Fannie Mae, Freddie Mac, Ginnie Mae have either explicit or implicit guarantees from the US sovereign, whereas corporates obviously do not," Hussain continued. "That makes agency mortgage-backed securities more attractive."Elevated spread levels in mortgage-backed securities compared to Treasurys since the end of 2022 are also contributing to recent interest, added Ward Bortz, ETF portfolio manager and head of distribution for US wealth at Angel Oak Capital Advisors."Spreads are really wide. Because spreads are wide, that means the yields available are high," Bortz said. A brief history of the mortgage ETF marketWhile they appear to be an increasingly popular investment opportunity today, interest in such products wasn't always near current levels. The first MBS ETF came from Barclays Global Investors in 2007, as cracks from the subprime crisis began to emerge, likely putting a chill on any initial momentum for mortgage-backed assets it might have brought. Trading of the first ETFs, which give investors options to take advantage of the performance of securities without holding ownership of the underlying assets themselves, only began in the early 1990s themselves in U.S. markets. The investment banks, called authorized participants, responsible for facilitating and redeeming MBS funds were entering new territory at the time in what was still a nascent industry. "They didn't know how to situate themselves between the buyers and the sellers because ETFs in general were new. And MBS ETFs — they just started dabbling," said Seddik Meziani, professor of finance at Montclair State University."But now they are more sophisticated, and there's liquidity in there that did not exist at that time. The structure of the market itself changed. The market is deeper." Meziani continued, describing the latest newfound sentiment. Also contributing to the recent uptick in investor interest is evidence of strong historical performance, experts said. Net assets of the MBS ETF portfolio belonging to Blackrock, which acquired the original Barclays fund, have grown from approximately $7 billion in 2015 to over $40 billion today. A similar Vanguard ETF also increased almost tenfold to $15 billion over the same period. What about nonagency mortgages?"The problem with this is all you can do is buy agency mortgage-backed securities," noted Bortz. Most mortgage ETFs available are almost entirely, if not exclusively, comprised of agency holdings with their performance benchmarked to indexes tracking securities backed by the federal government.It's a hole that firms like Angel Oak have tried to fill in recent years as they recognized the potential value in nonagency residential securitizations.Angel Oak Capital is among the issuers with a split between both agency and nonagency holdings after its early 2024 launch of a residential MBS fund, which includes both prime jumbo and non-qualified securities. (The company is prohibited from including securitizations of originations coming from affiliated Angel Oak non-QM lending businesses to avoid potential conflicts of interest). While JPMorganChase's offering is dominated by agency MBS, it also includes a slice of non-qualified mortgage securities along with commercial securities.The reasoning behind Angel Oak's ETF launch was to create "more sophisticated" investment opportunities that introduced value beyond the readings of a single index, even if they held more risk. As with all mortgage securities, issuers run stress tests of the holdings to address potential risks, including prepayments and default."We ought to manage more money, so we think 'What can we do that's better?'" Bortz said. "And hopefully people want to buy into that." The role of retail trading todayThe rise of MBS ETFs coincides with developments in recent years that have broadly led more consumers to take a hands-on approach in financial trading, experts said.While headlines surrounding an influx of retail investors focus on how they've piled on to stock purchases, recent trends show some spillover into bond trading, including in MBF ETFs, Meziani noted. "Institutional investors are still dominating the market, but you have more and more retail investors that are coming in," he added. "Retail investors are being brought into the market more and more by their advisors."Although stock indexes have performed strongly in 2025, "they remember the word 'diversification,'" he added.  "You shouldn't have only equity instruments. You should also have debt instruments in our portfolios."The growing availability of trading information and education in recent years has changed markets in such a way that some investors are comfortable jumping into the ETF space of their own accord and finding value for their portfolios, Hussain also remarked. "What has happened over the last five years, in particular with ETFs, is that the launch and growth of the ETF space has really democratized the investment landscape and allowed investors to gain access to parts of the financial markets they maybe didn't have as much access to historically in a liquid, transparent, tax-efficient way," he said. 

Key Insight: Cash loans made by the Federal Home Loan Banks dipped in the third quarter versus a year ago. What's at Stake: Experts looking for insight into the economy cautioned against interpreting the dip as a sign of abundant liquidity. Expert Quote: "I don't think this is a sign that the financial system is awash in liquidity." — Kathryn Judge, Columbia Law SchoolMarket uncertainty and a dearth of financial data spurred by the recently concluded government shutdown has led to renewed interest in data from the Federal Home Loan Banks to gain insight into the strength of the banking system. Cash loans to commercial banks and other members dipped 6% in the third quarter to $693.5 million, from $736.1 million a year earlier, the Federal Home Loan Banks said in an earnings report Friday. The system's third quarter net income was relatively flat at $1.5 billion compared with a year ago. The 11 regional FHLB banks provide loans — known as "advances" — to financial institutions that pledge collateral in exchange, typically single and multifamily mortgage loans, commercial real estate loans, U.S. Treasuries and agency securities.Lower advances generally mean that money is cheaper elsewhere or that banks are flush with cash — or both. But Kathryn Judge, the Harvey J. Goldschmid Professor of Law at Columbia Law School, cautioned against reading too much into the FHLBs' earnings and the volume of advances, which she said can vary "quite significantly" over time. "I don't think this is a sign that the financial system is awash in liquidity," said Judge.She noted that the Federal Reserve has said it will end quantitative tightening on Dec. 1, a significant softening of its balance sheet reduction program. "The Fed's decision to end QT, for example, suggests that liquidity is becoming more scarce than it has been in quite a while," Judge said.  The dip in FHLB advances comes amid a dearth of financial data due to the government shutdown. The Bureau of Labor Statistics has not been able to collect hard data in September and October, which has caused significant delays in the official jobs reports, at a time when the Trump administration is pushing for further interest rate cuts in December. Ryan Donovan, president and CEO of the Council of Federal Home Loan Banks, the FHLBs' trade group, said advances expand or contract based on banks' needs. "The Federal Home Loan Banks were established to be a reliable source of affordable liquidity for their members when they need it," Ryan said. "This is the fundamental nature of the FHLBank System, and quarter over quarter, year over year, the FHLBanks have demonstrated their dependability, providing their members with liquidity that anchors communities nationwide."FHLB borrowing has been a topic of interest since the early 2023 regional bank crisis, when Silvergate Bank, Silicon Valley Bank, First Republic Bank and Signature Bank each tapped the FHLBs for liquidity just ahead of their eventual demise. Fears of a broader contagion did not ultimately materialize. Before that, when the pandemic hit in March 2020, member institutions tapped the FHLBs in droves, with advances spiking to $807 billion. But when federal stimulus programs kicked in, financial institutions were themselves flooded with deposits and advances tanked. The 11 FHLBs are member-owned cooperatives, but have been chartered by Congress to provide liquidity to the financial system as a means of supporting home development. The FLB system issues debt with an implied guarantee, making the FHLBs a lesser-known Government-Sponsored Enterprise than its cousins, Fannie Mae and Freddie Mac. That dual mission of providing liquidity and supporting housing came under intense scrutiny during the Biden administration, when the former FHFA Director Sandra Thompson proposed important changes to the system following a 100-year review report. Last month, FHFA Director Bill Pulte withdrew two proposed Biden-era rules issued pursuant to that report. One rule addressed corporate governance issues including director compensation, while the other would have provided more flexibility for the banks short-term liquidity needs.The Council of Federal Home Loan Banks maintains that the system's primary mission is providing liquidity to members, while 10% of FHLB profits go to affordable housing and community development programs. Last year, the FHLBs contributed a record $1.2 billion to affordable housing and community development. Some critics of the system have claimed the federal government subsidizes the FHLBs, which also pay large dividends to members, through its implied guarantee.Last week, the Urban Institute released a study, funded by the FHLBs, that found advances provide stability to the banking system. Last year, a study by the Congressional Budget Office found the net subsidy to FHLB-members was $6.9 billion in fiscal 2024.