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Ingrid Ripley of the Rural Housing Service, Julie Shaffer of the U.S. Department of Housing and Urban Development, and David Sheeler of Freedom Mortgage speak May 19, 2025 in New York City at the Mortgage Bankers Association's Secondary & Capital Markets Conference. Andrew Martinez/National Mortgage News Government mortgage officials say they're tidying up operations following the Trump administration's sizable layoffs at their departments. The Federal Housing Administration's single-family workforce was cut by 36%, while the U.S. Department of Agriculture's Rural Housing Service lost at least 30% of its staff, representatives revealed Monday at the Mortgage Bankers Association's Secondary & Capital Markets Conference. "We are looking to realign and focus on consolidating," said Julie Shaffer, associate deputy assistant secretary for single-family housing at the FHA, who has been with the organization for over 36 years according to LinkedIn.Along with the layoffs, Shaffer said the FHA took down hundreds of mortgagee letters that were superseded and confusing both customers and artificial intelligence platforms gathering information.The cuts at RHS didn't significantly affect their operations, said Ingrid Ripley, executive director of the RHS single-family housing guaranteed loan program, and former chief of staff of Rural Development at the USDA."This is a great opportunity to deregulate, and we're looking at our policies to see what changes we can continue to make," said Ripley.Neither representative said whether the cuts came from the Trump Administration's cost-cutting task force. The Department of Government Efficiency also claims to have made cuts to the Department of Veterans Affairs' Loan Guaranty Program; although advertised, a representative for the VA's lending program was not in attendance. Ripley and Shaffer provided some insight into the administration's initial disruption to their programs, specifically changes to the departments' websites. Administration staffers took down many webpages and then added some back, such as a "pay off your FHA loan" button, Shaffer said. "I said no, we don't hold their loan," the FHA leader said. "We had a laundry list of stuff to put back up. They never took down our FAQs for FHA."What FHA and RHS are planningRipley referenced a slow progress of technology upgrades at the government, but hinted at progress. The RHS' long-awaited delegated authority is on the horizon, with a final rule expected in the fourth quarter, she said. With that wait, the RHS has reassigned underwriters to aid the service in different areas. The FHA is working on an artificial intelligence chatbot for its customers, and mulling modernizing appraisal reviews. The administration will also continue to use its "Drafting Table" which hasn't yet been updated under new Department of Housing and Urban Development Secretary Scott Turner. Shaffer acknowledged the FHA didn't use the drafting table for its recent update to loss mitigation. The FHA leader also responded to an audience question regarding a rumor that just 30% of partial claim recipients were successful. Shaffer said she couldn't immediately cite any data, but added that the FHA was aware of borrowers receiving multiple partial claims, and was putting guardrails back in place. "At the end of the [first] Trump administration we had 400,000 partial claims," said Shaffer. "Today we have 1.8 million. We realize we have to get back to some normalcy since COVID."

Rocket Companies and Redfin are pushing back against a lawsuit that could disrupt the closing of the mortgage giant's $1.75 billion acquisition of the real estate brokerage.Plaintiff Jason Morano, a Redfin shareholder, sued the brokerage and Rocket in early May, alleging that Redfin's disclosures to the Securities and Exchange Commission regarding the deal omitted key details for investors — specifically the relationship between Goldman Sachs, Redfin's financial advisor on the merger, and Rocket.Morano has asked a federal court in Washington to expedite discovery in the case, citing a June 4 shareholder vote on the proposed merger. On Monday, his attorney filed an additional request seeking a preliminary injunction to postpone the vote until more information is disclosed about Rocket's ties to Goldman Sachs.Rocket and Redfin, in separate filings dated May 16, argue that the plaintiff's motion to expedite the process should be denied, claiming Morano failed to show good cause. The firms called Morano's claims "meritless" and a common tactic used to "tax merger transactions."They swatted away the Redfin stockholder's assertions that there needed to be more thorough disclosures regarding Goldman Sachs's relationship with Rocket. Rocket also argued the lawsuit is designed to force a settlement.In high-stakes M&A transactions parties "are highly incentivized to settle even frivolous claims rather than entertain costly discovery or oppose an injunction request that might jeopardize or delay a premium transaction," it said in its filing.Both companies criticized the timing of the lawsuit. "Plaintiff chose to wait until scarcely three weeks prior to the June 4 Redfin stockholder vote to file," Rocket's response said. "Plaintiff's purposeful delay is designed to prejudice defendants by leaving them with an extremely short window to present their opposition and to increase the risk that the June 4 stockholder vote would be delayed."Redfin urged the federal court to allow shareholders to vote without interference or delay, noting the proposed merger was a result of "a fair and considered negotiation."In response to the two filings, Morano's attorney wrote that Rocket and Redfin are trying to pull attention away from the actual matter at hand."Rather than focus on the merits of plaintiff's request for expedited discovery, defendants seek to muddy the waters with misguided attacks on Plaintiff's motivations and his counsel's litigation strategy," Morano's attorney wrote in a May 19 filing.Morano's original complaint filed May 9 alleges that Redfin filed a "materially deficient" filing with the SEC because it does not explicitly outline the fact that Redfin's financial advisor Goldman Sachs is also affiliated with Rocket Companies.The proxy filed with the SEC "vaguely discloses without any detail that Goldman Sachs Investment Banking has an existing relationship with Rocket," the suit said, but "it is unclear the extent to which Goldman Sachs has received and continues to receive compensation from Rocket for lending services while simultaneously being compensated to serve as Redfin's financial advisor."The plaintiff is asking for the Seattle federal court to postpone the Redfin shareholder vote, unless and until the company disseminates supplemental information curing the alleged omissions in the proxy filing.

From left: New York Fed President John Williams and MBA Chair and President of Lennar Mortgage Laura Escobar The strength of U.S. consumers has kept the economy resilient, but recent developments raise the likelihood of a slowdown in 2025, according to a leading Federal Reserve official. Frequently changing tariff policy and the threat of geopolitical disruption has consumers, businesses and investors in the U.S. mortgage market alike taking a cautious approach the rest of this year, Federal Reserve Bank of New York President John Williams said. As a result, the economy will slow relative to 2024's level, "but not anything worse than that," he told attendees at the Mortgage Bankers Association's secondary markets conference on Monday.READ MORE: Lenders feel better, not exuberant, about housing market"I think a lot of business leaders and households are kind of in a wait-and-see mode. They're going to see how this plays out, and then maybe hold off on some decisions," he said. Evidence of a slowdown has not yet shown up in hard data to start the year, though, demonstrating the course the central bank set for interest rates, which have not been lowered by the Fed since late 2024, is largely working, he said."Monetary policy, where interest rates are, is doing exactly what we want it to do.". Still, he acknowledged that the forward-looking sentiment of many businesses surveyed by the Fed is moving "from a position of optimism to concerns, especially around tariffs."During the first quarter, the threat of tariffs altered business activity in a way that made it difficult to accurately gauge the economic impacts of Trump administration moves, he said, pointing out the surge in import rates to the fastest pace in close to 75 years. "That's not because suddenly the economy changed. It was really just frontloading the imports before tariffs," he said.READ MORE: What Ginnie Mae's newest executive is planning for mortgagesUncertainty surrounding the U.S. economy is catching the attention of the foreign investment community, many of whom are buyers of Treasurys and mortgage-backed securities, but talk has not appeared to result in a total retreat from the market. Still, the potential for volatility is weighing on investors' minds. "We have heard over the last few months some rumors or concerns about — do investors want to be so heavily invested in Treasurys or U.S.-adjacent securities? And I would say that mostly I think it's people talking about talking about things," Williams said.Williams' views on housing market challengesWhile the wait-and-see sentiment of 2025 continues to make life challenging for home lenders, affordability remains probably the biggest obstacle the home finance community faces. Despite continued elevated prices and despite higher-than-historical interest rate levels, demand has not subsided, Williams pointed out. Although federal policy can help with affordability efforts, much of the work to effectively alleviate the challenges of increasing supply ought to come on the state and local level, he said. Addressing them through a return to pre-pandemic strategies might serve as an effective starting point. .   "I do think this is basically a permanent aspect of our landscape," he said regarding the housing supply shortage. "I think there's some national things that maybe could be done to help this, but I think a lot of the work is really more at the state level," he added.

Russell Vought is the acting director of the Consumer Financial Protection Bureau.Andrew Harrer/Bloomberg The Consumer Financial Protection Bureau has withdrawn guidance from the Biden administration that had expanded states' rights, allowing individual states to broadly enforce violations of federal consumer protection laws.The CFPB under former CFPB Director Rohit Chopra interpreted the Consumer Financial Protection Act of 2010 broadly, and wrote an interpretive rule that allowed states to bring claims against banks and financial institutions not only under the CFPA, but also under federal laws such as the Truth in Lending Act or the Fair Credit Reporting Act. Acting CFPB Director Russell Vought rescinded the interpretive rule last week and published his analysis in the Federal Register on Thursday, May 15. Vought called Chopra's interpretation of states' rights under the CFPA "improper," and instead claimed that "the most natural reading" of the act was to limit states from enforcing federal law."One way to think about this is the CFPB is now telling state AGs to stick to their own state laws and not federal laws," said Jonathan Pompan, a partner and chair of the financial services practice group at Venable LLP. State attorneys general particularly in California, Massachusetts and New York are expected to challenge Vought's rescission of the rule. "States from Texas to Maine and everywhere in between have used the state enforcement provisions of the CFPA to protect their residents," said Brad Lipton, senior fellow at the Consumer Federation of America. "Courts have already considered this issue and agreed with the CFPB's reasoning in 2022 — and courts, not current CFPB leadership, will ultimately decide how Congress's words should be interpreted." Interpretive rules are nonbinding clarifications of existing laws and are not intended to create new legal obligations or requirements. The CFPB under the Trump administration has eschewed using guidance because it does not comply with notice-and-comment rules under the Administrative Procedure Act. Lawyers are closely watching how courts respond to the change in interpretations given that the Trump administration has flipped substantially on policy issues. For example, last week, the CFPB under Vought rescinded 67 guidance documents, including policy statements, interpretive rules and advisory opinions — the majority of which were issued under Chopra. In addition, the CFPB has dismissed or withdrawn more than half of its pending enforcement cases as the Trump administration seeks to clear the docket of work it inherited from the Biden era. "In light of the CFPB's recent actions abandoning or modifying substantial settlements in Biden-era enforcement actions, it is possible that state attorneys general will no longer trust the CFPB to pursue enforcement litigation in good faith and that they will test this new rule by filing independent enforcement actions," said Manny Newburger, a founder of the law firm Barron & Newburger in Austin, Tex. The CFPB said the rescission of Chopra's interpretive rule does not affect the ability of states to undertake independent enforcement, but only when the CFPB has not initiated its own action against a financial firm. The Trump administration's general policy at the CFPB is "to reduce regulatory and compliance burdens, and to eliminate wasteful, duplicative, and unnecessary regulatory and enforcement activity," Vought wrote. "Interpreting section 1042 to permit states and the bureau to take parallel enforcement actions against the 'same entity' is out of step with this policy."Specifically, section 1042 of the Consumer Financial Protection Act empowers state attorneys general and other state regulators to protect consumers from "unfair, deceptive or abusive acts or practices," known as UDAAP. Banks and financial institutions have long claimed that UDAAP violations are subjective and have the potential for inconsistent interpretations. "The rescission narrows the interpretation of how broadly the Section 1042 authority can be used, not the statute itself," Pompan said. "It certainly walks back the CFPB's prior blessings for state enforcement through section 1042 of the CFPA." In the past, the CFPB relied on Chevron deference, a legal principle that dictated that federal courts should generally defer to federal agencies on the reasonable interpretations of statutes when a law's meaning is ambiguous. Last year, the conservative Supreme Court ended Chevron deference, which now makes it easier for state attorneys general to challenge rules they oppose and introduces more uncertainty for banks.Before Chopra was fired by President Trump in February, he published a blueprint for states in a report titled "Strengthening State-Level Consumer Protections." The document outlined how states could enhance consumer financial protections on their own. 

Ginnie Mae's operations chief told the industry Monday he is pursuing data improvements and revisiting several industry suggestions for innovations that could improve operations.When asked about concepts the Mortgage Bankers Association has recommended exploring such as creating a securitization vehicle for early buyout loans, Chief Operating Officer Joseph Gormley said Ginnie is "taking a step back"  and "looking at it with a fresh lens."The government securitization guarantor also has a couple initiatives of its own in the works."We're certainly looking at and very actively thinking about two things, the first being moving from a monthly liquidation file to daily liquidation file," he told attendees at the Mortgage Bankers Association's secondary market conference in New York."I think some of the cyber attacks over the last few years really pulled the blinders away on that. It's very hard to try to rebuild what's happening if you're only getting the data once a month," Gormley added.How Ginnie Mae is looking at delinquenciesGinnie also is working on making improvements to static delinquency data it asks its issuers to manage."We certainly haven't arrived at any conclusions, but I think we do need a more dynamic way to look at the issuers and how they're looking against their peers in the broader industry," he said.There has been some upward pressure on delinquencies in the government loans in securitizations Ginnie acts as a guarantor for, but late payments have stabilized more in line with a plateau recently, Gormley said."It's something we're looking at carefully. Obviously, there are some impediments for the American consumer, particularly increasing taxes and insurance payments," he added.Gormley said Ginnie also has been examining debt not traditionally part of credit reporting such as "buy now, pay later" loans, while acknowledging there are some emerging efforts to add them to consumers' track records.While there are some trends in the market Ginnie is monitoring, Gormley said, "We feel pretty good about our issuer base today. I think most of them are in pretty good shape."A nonbank capital rule added at the end of 2024 to help manage the risk in a part of the market that has grown over the years has "incentivized some hedging," he said.Ginnie also is continuing to encourage use of electronic promissory notes by approved issuers. Issuance backed by digital collateral has grown to almost $60 billion, Gormley said. That shows marked growth since 2021 when it accounted for just over $2 billion in issuance.Ginnie Mae's plans for AI, staffingIn line with broader efforts at the Department of Housing and Urban Development, Ginnie also is looking at how artificial intelligence could be used to handle simpler tasks and free up staff to work on more complex issues.While some researchers have expressed concern about efficiency initiatives in the public sector impacting Ginnie and the Federal Housing Administration, Gormley said, "I feel good about where we are from a staffing perspective."Recent senior-level retirements could pave the way for some hiring, he added.When he was asked about international demand for Ginnie Mae's securities given some of the concerns in the broader market, Gormley said it remains strong."We're very excited about some of the possibilities globally, about some countries that had been traditionally invested in Ginnies but maybe kind of on the precipice of getting more involved," he said.

The Mortgage Bankers Association's latest forecast for 2025­ expects volume to be slightly lower than previously thought, with a 14% increase in the number of units produced. Mike Fratantoni, the group's chief economist speaking at its Secondary & Capital Markets Conference in New York on Monday, recounted discussions he had in recent days with people in the industry about the rate environment, with the consensus being it is better than last year.He noted an expectation of the share of ARMs rising within originations overall. While the MBA predicts two cuts from the Federal Reserve this year, Jeana Curro, managing director and head of agency MBS research at Bank of America Securities said the depository does not expect any reductions this year. This latest forecast captures the feeling of the industry right now, he said. What factors impacted the updated MBA forecast"A percentage increase off of a pretty low base," Fratantoni said. "Nobody's feeling exuberant about the housing market right now or about the mortgage market, but it's a little better than these last couple years, which have been truly very difficult for a lot of our members."The May forecast drops the interest rate forecast to 6.7% for the current quarter, a 6.6% average for the fourth quarter and 6.3% by the end of 2026.Fratantoni now expects dollar volume of $2.069 trillion this year, $2.386 trillion next year and $2.455 trillion for 2027.Last month, the prediction was for $2.08 trillion in 2025. The purchase outlook was increased in May to $1.4 trillion, compared with $1.38 trillion in April.Are Treasurys still considered a safe haven?During his presentation, Fratantoni noted that the normal economic situation has not played out in the markets recently. In volatile times, capital flows from investors looking for safe havens into U.S. Treasurys, driving down yields and helping mortgage rates."Well, if U.S. Treasurys aren't the safe haven that we thought they were, what is?" Fratantoni asked. "Is it gold? Is it Bitcoin? Is it some other asset? Is it real estate that's going to be more likely to hold its value?"Moody's downgrade of the U.S. on Friday added "fuel to the fire" for investors who feel those bonds are no longer a safe haven, he said.At noon Monday, the 10-year Treasury was just below 4.5%, after reaching 4.56% earlier, as a result of the Moody's announcement. It closed Friday at 4.39%.What is the range for the 10-year yield?Fratantoni thinks the 10-year will be in the 4.4%-4.5% range going forward. At the same time, the abnormally wide spread between the 10-year and mortgages should narrow a bit, helping interest rates.But he expects a steeper yield curve going forward, and that should help the continuing growth in government-guaranteed products, as well as the share of adjustable rate mortgages.In a follow up panel, Steven Abrahams, managing director and head of investment strategy at Santander U.S. Capital Markets said investors have a new sense of caution about what is happening in this country's economy."I don't think that this suddenly means the end of the U.S. status as a safe haven, or the end of the dollar as a global store of value," Abrahams said. "But we definitely saw a crack in the armor."Investors expected a lot of change after the U.S. elections, given what now-President Trump campaigned on, said Curro of Bank of America Securities.But the change has happened faster than expected and that kept markets volatile, she added.Why people are interested in ARMsBuilding on Fratantoni's earlier comments about ARM spreads, Curro noted an investor client she met with Monday morning asked about these securities. "I do think it makes sense given the curve steepening," she said. "I do think from an investor standpoint, given that it doesn't feel like anyone wants to really extend the duration meaningfully just yet, it feels like the right product."Tactically for 2025, mortgage lenders need to focus on their purchase channel, but be ready for quick blips if rates go down, said Scott Buchta, senior managing director, Brean Capital.Buchta noted that in this competitive landscape, some individual lenders reduced rates, with some banks in the low 6% range when everyone else was in the mid-to-high 6% area.Points and other ways to cut rates"Discount points right now are a big part of the game, especially on the purchase side," Buchta said. "What you're seeing is a lot of these below market rates and it's not just one or two points, a lot of them are seller finance and builder finance.Buyers are now more used to headline rates, so they are paying points. "A year ago, it was buy now, refi later," he continued. "I think people are looking a little bit more longer-term."But to improve affordability, lenders have got to expand their offerings, he said and this involves understanding a lot of the different programs that are available from investors. Buchta gave the personal example of his son purchasing a home with a lower interest rate due to the fact that it was in an opportunity zone.

Mortgage brokers are tired of the dialogue around elevated interest rates. "It is what it is," some say, emphasizing that other factors – such as changes in policy at the Federal Housing Administration — are having a more notable impact on their business and the consumers they serve.At UWM's Live! event last week, more than a dozen mortgage brokers said their greatest concerns centered around a lack of housing inventory nationwide, rising property taxes and changing policies at the federal level. The ebb and flow of interest rates is subjective, they said. Some originators who have worked in the industry for decades recall double-digit rates and believe there is still plenty of opportunity to originate loans."We brokers cry a lot, we complain a lot — 'Rates are bad, people aren't buying homes,' etc. — but there are such big missed opportunities when we're just crying over things that aren't ideal situations," said Ashlin Endter, a Miami-based mortgage broker. "And the thing is, what is a high rate? That's such a subjective thing.""It's always a good time to buy," echoed Florida-based mortgage broker Paulo De Silva, who has been in the industry for two decades.How FHA changes have impacted businessThe political landscape and its potential impact are top of mind for most brokers interviewed."There's a lack of stability in the real estate market economy right now, " said Vadim Shlangman, loan officer at Innovative Mortgage Solutions, pointing to tariffs. "Younger generations are uncertain whether they should buy or rent because right now they don't believe in the future of the country."Some changes made by Trump's administration, specifically the Federal Housing Administration, had brokers abuzz.Updates, which among other things rescinded the ability for non-residents to qualify for an FHA-backed loan come May 25, have pushed many brokers to change course and seek out conventional or non-QM loans for clients."The FHA changes that are going into effect now mean we have to pivot to other options," said Tammar Hernandez, a Nevada-based mortgage broker. "Now you can say, 'Hey, I still have a solution for you, but it's just going to cost a little more.' There are still solutions out there; we just really have to find a way to target them.""Things are changing daily," added Hernandez. "We need to constantly be on the lookout and see how these things will affect our business."Endter also noted changes to the FHA eligibility requirements "put a dent" in some of her deals. "You can still go conventional or non-QM and I think we'll see a big shift to it, ITIN loans specifically," she added.Virginia-based broker Kelvin Oliver pointed out that some of his clients who were ready to buy a property have opted not to because they lost government employment."Some of my clients decided not to move forward with buying homes in the Virginia and Maryland area because of their political leanings," he added, resulting in loss of some business opportunities.Low housing inventory and high property taxesBrokers at the UWM event spoke of a lack of available homes in their local markets as a key factor stalling business.  Dante Rosa, a Michigan-based broker, says homeowners have started to overcome the mental block of holding on to their 3% mortgages and want to move, but options are limited."I have received dozens of inquiries from clients looking to move and even let go of their super low rate, but there is very limited inventory," he said.Oliver also highlighted inventory challenges in his area. Chris Sbonek, another Michigan-based broker who runs Mitten Mortgage Lending, worries about the inventory crunch, but thinks the increase in property taxes is a far more concerning topic.Property taxes nationwide have grown by an average of 10.4% from 2021 to 2023, a recent analysis by LendingTree found. That equates to an annual payment of $2,969, or $247 a month.Sbonek says he is actively having conversations with clients regarding how property tax hikes may impact his clients financial wherewithal."Property taxes are a big issue, so I am constantly preparing borrowers that they may see a spike," he said. "I don't want someone to call us next year and say that I didn't warn them."Some of Sbonek's clients have opted to narrow their budget for buying a home solely based on worries that their yearly taxes will be high, pushing finances into the zone of unaffordability. 

In general, I like to play contrarian because it’s nice to consider alternative viewpoints.Instead of simply regurgitating the same take, sometimes going against the grain can pay off.In fact, the consensus often gets it wrong, whether it’s the trajectory of home prices or the direction of mortgage rates.The latest expected headwind for mortgage rates dropped late Friday when Moody’s downgraded the United States’ credit rating.But if we zoom out a tad, this could end of helping mortgage rates. Allow me to explain.Initial Reaction Isn’t Great, Mortgage Rates Back Above 7%The 30-year fixed is back above 7%, again (again!), per the latest daily reading from Mortgage News Daily.It has been seesawing around these levels for a while now, and it’s yet another gut punch for prospective home buyers.Again, no huge difference between a rate of 6.875% and 7% in terms of monthly payment, but the psychology can be brutal.Seeing a 7 instead of a 6 while also possibly being stretched to begin with isn’t good for borrowers or the wider housing market.As such, mortgage applications might face even more of an uphill battle as the spring home buying market begins to fizzle.I should also note that the 30-year fixed is now only five bps below its year-ago levels. So lower mortgage rates are no longer a feature of the 2025 spring home buying season.Mortgage Rate Spreads Got Worse on the Downgrade NewsWhat’s interesting is the 10-year bond yields that dictate mortgage rates barely increased since the Moody’s news was announced.Yields on the bellwether bond were up less than five basis points (bps) today, which would indicate relatively flat mortgage rates.Instead, the 30-year fixed was up a sizable 12 bps to 7.04%, per MND. In other words, mortgage spreads widened fairly aggressively on the news.The spread between the 30-year fixed and the 10-year bond yield has historically been around 170 bps.This is the premium investors demand for taking a risk on a borrower’s home mortgage versus a guaranteed government bond.In recent years this spread widened as the Fed stopped buying mortgages and volatility increased.Spreads got really wide (over 300 bps) before coming down to the lower 200 range, but jumped back above 250 bps again.So investors are demanding more premium above Treasuries to buy mortgage-backed securities (MBS), though this could moderate as time goes on.But the fact that it was mostly spreads, and less so yields rising, is a positive sign regarding the credit downgrade, at least in my mind.What Does Moody’s Downgrade Mean for Mortgage Rates?As you can see, the early reaction wasn’t positive for mortgage rates, but as I pointed out, it’s mostly worsened spreads.After the dust settled, 10-year Treasuries have come down quite a bit, reaching 4.56% before settling around 4.49%.It arguably helped that Moody’s announced the United States downgrade late on Friday.That gave the market time to digest the news without having to make any kneejerk reactions.Had they announced the move in the morning, or midweek, chances are markets would have been pretty rattled.Instead, traders (and the media) were given a couple days to make sense of it all and draw their own conclusions.And at last glance the stock market was holding up pretty well, with the Dow up on the day and the S&P 500 about flat.That’s pretty good considering all the doom and gloom that was swirling a couple days ago when the news was announced.Ultimately, Moody’s simply matched other rating agencies who had already cut the U.S. rating years ago.Standard & Poor’s downgraded the U.S. rating from its top tier AAA to AA+ all the way back in August 2011.And Fitch Ratings did the same in August 2023. So Moody’s was merely catching up with the others.As for why, Moody’s said “large fiscal deficits will drive the government’s debt and interest burden higher.”In short, too much government spending, too much debt, and rising interest payments on said debt.But here’s why that could wind up being a good thing for mortgage rates. The ratings agency is basically telling the government to get its act together.They held out as long as they could, but finally downgraded the U.S., perhaps as a warning to do better. To make changes before things get even worse.So in my mind, while everyone is reporting that the 30-year fixed is back above 7%, I’m optimistic that it may force lawmakers to rein it in.This development could actually push politicians to make more concessions on the “big, beautiful bill” so spending and Treasury issuance doesn’t spiral out of control.And in the process, that could actually help ease bond yields and in turn lead to lower mortgage rates.Just note that it might not be immediate, so this could present yet another near-term headwind. 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)

Al Drago/Bloomberg Banks could soon be able to position assets as collateral to both the Federal Reserve's discount window and the Federal Home Loan Bank System. Fed Vice Chair Philip Jefferson, speaking Monday morning at the Federal Reserve Bank of Atlanta's annual Financial Markets Conference, said closer collaboration between the two emergency lending programs was one of several developments likely to emerge from the central bank's ongoing effort to modernize its discount window."The Federal Home Loan banks and the Fed … have been looking at issues of interoperability with regard to the pledging of collateral," Jefferson said. "That work is in its early stages and I look forward to advancements in that area."The comments came during an onstage keynote conversation with Atlanta Fed President Raphael Bostic. During the discussion, Jefferson said the Fed is studying a wide range of changes, including potentially allowing intraday credits — also known as daylight overdrafts — to be automatically converted into discount window loans.Banks use intraday credit to process large transfers that exceed their reserves held at the Fed. Typically, banks settle these overdrafts before the close of business, sometimes by borrowing from their local Federal Home Loan bank or from other banks, so they can close the operating day with a positive balance. Currently, if they wish to obtain overnight credit from the Fed to settle their books, they must go through the discount window application process.Jefferson declined to say whether a change to this arrangement is in the offing, but noted that it is being examined closely."I don't want to make any pronouncements about what Fed policy is going to be going forward for this very important issue — and so I appreciate the question — but I will say that such issues and questions are under study," he said. Jefferson noted that the Fed has already made a handful of key changes to the discount window with an eye toward making it easier for banks to use. This includes the creation of an online portal for taking out discount window loans and allowing electronic signatures for borrowing documents. Last September, the Federal Reserve Board issued a request for information on how banks think about and use the discount window, as well as areas in need of improvement.While discount window policies are determined by the Fed board of governors in Washington, the actual operations of the facilities are handled by the 12 regional reserve banks throughout the country. During Monday's conversation, Bostic said the Atlanta Fed has also taken steps to improve the effectiveness of emergency lending, including by fostering a better relationship with the Federal Home Loan Bank of Atlanta."We've actually tried to strengthen our relationship with our Federal Home Loan bank in our area, so we actually know each other and can gain comfort in actually picking up the phone and calling when there are issues, because we don't operate exactly the same but we have a lot of overlap," he said.Bostic said these efforts have been "very fruitful" and he expects the improved dialogue would prove useful in a crisis. Similarly, he said the reserve bank has taken steps to ensure more banks in its district have taken the steps necessary to borrow from the discount window in a pinch. After the failure of Silicon Valley Bank in March 2023 — an episode in which the Santa Clara, California, bank struggled to borrow from the Fed amid a run on deposits — Bostic said he made readiness a priority."After SVB, I called my team and I said call every bank in the district that should have a relation and find out if they're ready. And we found that not everybody was ready," Bostic said. "So we got on them, and the coverage of people who are ready to use it if necessary is way up."Jefferson said a similar dynamic has played out throughout the Federal Reserve System, resulting in a "significant" uptick in banks that have pledged collateral and tested their borrowing capabilities. Along with the discount window, Jefferson said the Fed is reviewing its other liquidity facilities, including the Standing Repo Facility, which was established in July 2021 to support the function of money markets. "I am hopeful that over time we will be able to make more institutions comfortable with it," he said. "It's an important backstop for us right now and something that we're thinking about — different design features with respect to the Standing Repo Facility that can be looked at going forward."Jefferson declined to weigh in on how the Fed might respond to the growing presence of nonbanks in financial markets, including stablecoin issuers, which could be poised to take on a greater role in payments and investment in the near future. "I agree with the point that a lot of financing has sort of migrated out of the banking sector toward the nonbank financial sector," he said, but added that whether these groups are given access to the discount window or other issues is a "legal issue" to which he could not speak.Bostic said how the Fed ultimately interacts with stablecoins remains to be determined, adding that the Fed should let lawmakers take the lead on this issue."We will follow their direction," he said. "This is not stuff we're going to do unilaterally, it will be part of a much broader conversation."