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Treasury Secretary Scott Bessent said he would present President Donald Trump with a list of candidates to serve as the next chair of the Federal Reserve in December."Likely sometime after Thanksgiving, in December, we'll present the president with three or four candidates for him to interview," Bessent told CNBC on Wednesday. Bessent said he's culled the list of 11 candidates he interviewed to five. CNBC has previously reported those five candidates are Vice Chair for Supervision Michelle Bowman, Fed Governor Christopher Waller, National Economic Council Director Kevin Hassett, former Fed Governor Kevin Warsh and BlackRock Inc. executive Rick Rieder."At the end of the day, he'll take input like he always does, from dozens, hundreds of people, and then make a decision," Bessent said about Trump's decision-making process.The Treasury secretary said he would not be the next Fed chair, reiterating an earlier assertion that he is not part of the pool of contenders.Bessent has led the search to find the next person to serve as Fed chair when Jerome Powell's term leading the central bank expires in May 2026. The search for Powell's successor places the candidates in a precarious balancing act. They all must signal to Trump that they are keen to slash interest rates, while also demonstrating to markets that they have the economic expertise to do the job and will act independently of the White House.Trump, who has repeatedly lambasted Powell for being too slow to lower borrowing costs, has said he wants the central bank to sharply cut interest rates by three percentage points. But investors worry such a drastic move could tip the bond markets into turmoil and cause inflation to surge.Bessent didn't directly address whether a candidate needs to support lowering interest rates, saying he has two criteria for candidates."One, do you have an open mind? What's your theory of the case?," he said.  "This is also a gigantic, sprawling organization that does payments, regulation. So there also needs to be a management level here," Bessent added.The next chair is likely to be named to a 14-year Fed governor term which opens up in early 2026. Trump is also seeking to oust Fed Governor Lisa Cook over allegations of mortgage fraud. The Supreme Court has scheduled arguments for January, but has said she can stay in the job while the legal case is pending.

A government-sponsored enterprise oversight agency floated a new strategic plan on Wednesday that includes an emphasis on the supply side of the housing market in one portion of three overarching goals.US Federal Housing will be collecting comments through Nov. 5 on the new plan for its operations, two GSEs it oversees that are in conservatorship, and the Federal Home Loan Banks. (USFH is the new branding the Federal Housing Finance Agency uses.)The portion of the plan that calls for the conservatorship entities to "support efforts to expand housing supply to meet national demand" may draw particular attention given President Trump's recent directive for them to get homebuilders to produce more low-cost units.FHFA Director Bill Pulte also has indicated in posts on social media platform X that he will be asking "relevant market participants" to disclose the loans related to big builders in mortgage sales to the two GSEs, Fannie Mae and Freddie Mac.Low-income housing tax credits also are positioned as part of the supply-side goals.The strategic plan also adds "anti-fraud related reporting and information sharing," something they have begun emphasizing through a Fannie partnership with Palantir, and which has seeded some legal actions against high-profile figures at odds with President Trump.Efficiency measures that extend to regulation in line with broader Trump administration efforts are part of the plan as is technology modernization at the oversight agency itself. Technology aims include governance of artificial intelligence and other data, resiliency and cybersecurity.Goals related to affordable housing requirements that are part of the GSEs' mission, safety and soundness also are part of the strategic plan, as are actions that protect taxpayers. The Trump administration has been considering a new stock offering related to the GSEs with an eye toward seeing if there is a way to potentially monetize them to taxpayers benefit.Pulte advises investors to read up on risk factorsPulte recently emphasized the need for current Fannie and Freddie shareholders to review standard warnings.In separate X posts, he directed anyone interested in investing in each of the large government-related mortgage buyers to "please read the full risk sections" in their respective 10-K Securities and Exchange Commission filings.While reviewing risk factors is standard, stock traders have been watching social media comments from Pulte, and the new offering has drawn the attention of individual investors who may not be experienced.Shares of smaller GSE Freddie Mac fell from around $11 to $9 at one point early this week, but then they bounced back to $10 per share before settling down at a lower but more stable level. Freddie's stock closed the trading day at $9.56 per share.Fannie Mae's stock dropped from $12 to $10 per share earlier, and initially rebounded to $11 before stabilizing at lower levels. It closed the trading day at a level just below $10 per share. Both GSEs shares remain near their 52-week highs. Freddie's is around $15 per share and Fannie's is roughly $16. Both are up considerably from year ago levels just over $1 per share.GSE risk factors enumerated in voluminous filings include their status as entities held in government conservatorship since the Great Financial Crisis and uncertainty about their future. Typical mortgage liquidity, operations, compliance, credit and market risks also are mentioned.Fed MBS policy's implications for Fannie and Freddie"Changes in the fiscal and monetary policies of the Federal Reserve, including changes in target interest rates and in the amount of agency MBS," also are mentioned among numerous risk factors.The Fed's holdings of agency mortgage-backed securities have been in the spotlight as Chairman Jerome Powell said Tuesday he wished he'd curtailed pandemic MBS purchases earlier and said that he does plan on ending current runoff at an unspecified time.One thing Powell said he currently has no plans for is to take steps related to the MBS portfolio aimed at improving housing affordability by buying the bonds in order to lower rates.(Powell has been at odds with the Trump administration for being slow to back lower short-term rates that might help lower home financing costs, until recently. The MBS portfolio is even more closely correlated with the long-term rates most mortgages have.)"We look at overall inflation and not — we don't look at, we don't target housing prices," Powell said, adding later. "We would certainly not engage in mortgage-backed security purchases as a way of addressing mortgage rates."The statement seemed to be at odds with the Fed's pandemic MBS purchases that did lower rates under Powell's watch, albeit as a form of broader relief. Some commentators said it was more a reflection of his current policy view.Jake Krimmel, an economist at Realtor.com, said he saw the statement as "consistent" with Powell's current "narrow" take on Fed's role, which is to look to stabilize employment and inflation broadly; and his status as an independent policymaker."Powell does not view high mortgage rates as a problem for monetary policy to solve right now, especially when homeowners are sitting on record levels of home equity and inflation risks," Krimmel said in a report on his company's website.Due to an ongoing government shutdown, Powell and other monetary policymakers lost access to one key employment measure recently, but the Bureau of Labor Statistics called back staff to produce the next inflation report. The Fed and GSEs are not directly affected by the shutdown.

Adobe Stock The Trump Administration's threat to layoff federal workers if the government shutdown continued came to fruition Friday, including some housing cuts.Employees from seven departments were laid off, 442 from HUD, according to a court filing Atlanta News First obtained. In total, 4,200 employees received notices, a little over 10% of which came from the Housing and Urban Development Department."HUD is implementing a reduction in force as part of its ongoing efforts to realign its activities with its core statutory mission," a HUD spokesperson said in a statement sent to National Mortgage News Wednesday. "It is HUD's priority to serve the American people effectively."The employees, stationed in Atlanta, Baltimore, Boston, Denver, Philadelphia and more areas, were told their last day will be Dec. 9, according to BisNow.HUD plans to lay off 114 employees from the Fair Housing staff, 103 from the Public and Indian Housing office, 86 in the Office of Housing and 30 in the Office of Community Planning and Development, Bloomberg reported.The federal workforce has been plummeting since Donald Trump took office, and HUD has not been an exception. Since January, roughly 2,300 employers, 23% of the agency's staff, have voluntarily left, according to earlier Bloomberg reports.Friday marked a second wave of layoffs, with the administration gutting the Community Development Financial Institutions Fund. The Department of Treasury saw the most notices Friday with more than 1,400, followed by the Department of Health and Human Resources, Department of Education and HUD, the court filing showed.The shutdown, now more than two weeks old, has halted some federal support provided to lenders, and weakening HUD may cause additional complications in the industry."We are in the process of reviewing the notice, assessing the impact and magnitude of the agency's decision, while acquiring legal guidance from the National office," Antonio Gaines, president of the American Federation of Government Employees Council 222, representing employees of HUD, told NPR.

Key Insight: Bank of America's revised-up guidance for net interest income comes partly thanks to an improving macroeconomic environment.Supporting Data: BofA's NII guidance for the fourth quarter is now $15.6 billion to $15.7 billion, up from $15.5 billion to $15.7 billion.Expert Quote: "As we've seen more certainty now around trade and tariffs … it's allowed our client base to make longer-term decisions, and that's reflected in our investment banking activity," said CFO Alastair Borthwick.UPDATE: This article now contains quotes from Bank of America's earnings call and commentary from analysts.After a quarter that beat Wall Street's expectations, Bank of America set its near-term sights for net interest income slightly higher.In the quarter that ended on Sept. 30, America's second-largest bank saw its NII reach $15.2 billion, a 9% climb from the same period in 2024. BofA expects that growth to continue — enough so that it revised its guidance modestly upward."Given this performance, we expect fourth-quarter NII between $15.6 and $15.7 billion, at the higher end of our previously shared guidance earlier in the year," Alastair Borthwick, the bank's chief financial officer, said during a call with reporters on Wednesday. The previous guidance range had set the lower end at $15.5 billion.The revision comes on the heels of a solid quarter for BofA. From July through September, the Charlotte, North Carolina-based bank reported a 23% jump in net income to $8.5 billion — well above analysts' consensus estimate of $7.08 billion, according to S&P. Earnings per share came out to $1.06, beating forecasts of $0.95."Bank of America delivered a strong third quarter with good growth, both in the top line revenue and bottom line EPS, all driven by strong operating leverage," CEO Brian Moynihan said during a call with analysts.BofA attributed the NII improvement to a number of factors, including higher loan and deposit balances. Average loans reached $1.15 trillion in the third quarter, up 9% from the prior year, while average deposits rose to $1.99 trillion, a 9% year-over-year increase.Another contributor: Over the course of the quarter, some of the uncertainty around U.S. trade policy died down, BofA's executives said. This allowed more of the bank's commercial clients to resume investing for the future, opening up more lending opportunities for BofA."As we've seen more certainty now around trade and tariffs, and around taxes as well, it's allowed our client base to make longer-term decisions, and that's reflected in our investment banking activity," Borthwick said. "So we feel good about the pipeline and the way it's developing."A number of analysts praised the bank's third-quarter performance as steady and reliable, if unspectacular. Glenn Schorr of Evercore ISI called it a "clean" print. Steven Alexopoulos of TD Cowen called it "a solid across-the-board quarter."Total revenue rose to $28.1 billion in the quarter, surpassing analysts' forecasts of $27.46 billion and marking an 11% increase from the same period last year.One contributor to the higher revenue was rising fee income. Investment banking fees rose to $2.01 billion, up 43% from the same period in 2024. And asset management fees swelled to $3.97 billion, up 12% from the prior year."This quarter's results provide good momentum as we finish 2025 and head into 2026," Moynihan said. "We have been demonstrating consistent organic growth for many quarters."Organic growth has been an important part of BofA's business strategy over the past decade. Since 2016, the bank has spent more than $5 billion on its 3,600-plus branch network, opening locations in new markets and renovating offices in existing markets.The company has pledged to open 165 new branches by the end of 2026, including 40 expected to open this year. BofA said Wednesday that it has opened 22 new branches so far in 2025, and is still "on track" to reach its goals for this year and next year."We're investing in renovations and we're investing in openings," Borthwick said. "The team goes through it month by month, quarter by quarter, local market by local market, making sure that we position our financial center assets where we think they'll be best deployed for our customers."There are legal reasons for this focus on branch openings. Like other big banks, the $2.4 trillion-asset BofA is constrained by a law that bars it from making bank acquisitions once it already controls more than 10% of the nation's total deposits. So it's been opening branches in certain U.S. markets, such as Atlanta, Milwaukee, Nashville and Boise, Idaho, as a way to grow its deposit base."Organic growth is the reality," Moynihan said during BofA's second quarter earnings call in July. "We're continuing that push — the 'expansion markets,' we call them — and we're seeing success there."

Office of Management and Budget Director Russell Vought.Bloomberg News (Bloomberg) — A federal judge ordered the Trump administration to pause plans to fire thousands of federal workers during the government shutdown, just moments after White House Budget Director Russell Vought said he expects layoffs to exceed more than 10,000 people. The ruling on Wednesday from US District Judge Susan Illston in San Francisco follows layoff notices that have gone out to more than 4,100 federal employees since last week.The order isn't a final decision on the merits of the case. It means that more than two dozen federal agencies cannot send out new layoff notices if they involve programs that include labor union members who sued. The decision also means the government must halt action on notices that already went out while the judge weighs whether to impose a longer-term block.More than 4,000 federal workers have so far lost their jobs — a number Vought called "just a snapshot, and I think it'll get much higher." "I think we'll probably end up being north of 10,000," Vought said before the ruling. The White House budget office on Tuesday vowed to continue reductions in force — the government's term for layoffs of federal workers. The administration has not detailed which agencies or jobs could be affected in future rounds of layoffs."We're going to keep those RIFs rolling throughout this shutdown, because we think it's important to stay on offense for the American taxpayer," Vought told the Charlie Kirk show.The White House has escalated the standoff with Democrats over federal spending by moving to terminate some federal workers, instead of just furloughing them as the shutdown continues. Republicans say the layoffs are necessary, an assertion that budget experts and Democrats dispute because workers aren't paid during the shutdown.Democrats have argued that the administration cannot spend resources during a shutdown to fire people because it isn't essential government work. "We believe that these firings are illegal, violate the law and will be reversed, either congressionally or by the courts," House Democratic leader Hakeem Jeffries told reporters. Trump also said he plans to release a list of "Democrat" programs he intends to cut as the shutdown — now in its 15th day — continues. The White House has seized the federal budget as a tool to make the shutdown as painful as possible for Democrats. Republicans in Congress have largely ceded their power of the purse to the executive branch, allowing Trump to go much further than any other modern president during a shutdown.The mass firings are broadly unpopular with voters, who continue to hold Trump and Republicans more responsible for the shutdown than Democrats. An Economist/YouGov poll conducted Oct. 10-13 found 54% opposed the layoffs, compared to 29% in support.Vought also used the interview to criticize the Consumer Financial Protection Bureau, where he serves as the acting head. The consumer protection agency, which is the brainchild of Democratic Senator Elizabeth Warren, was largely dismantled earlier this year as part of Elon Musk's Department of Government Efficiency effort."This agency, all they want to do is weaponize the tools of financial laws against, basically, small mom and pop lenders and other small financial institutions," Vought said.

Loandepot is raising serious accusations against West Capital Lending, accusing the brokerage of raiding its workforce, stealing its leads and skirting labor laws in California. The Irvine, California-based giant sued its city neighbor last week in state court, seeking unspecified damages for bad behavior allegedly involving hundreds of loan officers. The complaint stems from Loandepot's discovery last year that the competitor was in possession of a swath of its customer data. Amid numerous allegations, the suit's major claim suggests WCL has misclassified over 600 originators as independent contractors, violating lending laws, skirting taxes and giving it a competitive advantage in lower overhead costs. "A fair and balanced playing field is the cornerstone of the free enterprise system," a spokesperson for Loandepot said in a statement. "As our complaint alleges in detail, West Capital Lending has manipulated fair lending, privacy and tax laws and regulations to create an unfair competitive advantage. We plan to pursue every legal remedy available to demand accountability and fairness."The Irvine-based brokerage's co-founders, named as defendants, didn't respond to messages seeking comment Wednesday. The lawsuit also mentions up to 50 unidentified individuals, who allegedly profited off stolen customer information. Although the companies operate in different channels, they're among the industry's most competitive. Loandepot is a retail and direct-to-consumer leader, whereas WCL is a high-volume brokerage. The smaller firm, founded in 2016, is also a top broker partner to Rocket Cos., according to the lawsuit and a recent news article. Rocket, which was mentioned as WCL's partner several times throughout the lawsuit, was not accused of wrongdoing and didn't return a request for comment Wednesday. How a customer list sparked the larger lawsuitThe complaint originates from a WCL employee, James Williams, who notified Loandepot last June that the brokerage came into possession of Loandepot customers' nonpublic personal information. That sensitive data came via What's a Mortgage, a lead generation company Loandepot previously worked with. WCL came upon the Loandepot customer lists in question when it partnered with WAM. Williams' outreach began a correspondence between the lenders, in which Iskander and WCL co-founder Eric Hines allegedly told Loandepot the client lists were not uploaded to WCL servers. The brokerage returned a thumb drive of information to Loandepot earlier this month, but Loandepot claims WCL didn't take further requested steps to confirm it did not retain the information. Loandepot raises poaching, labor, LO Comp claims against the rivalThe 27-page lawsuit lays out a laundry list of WCL's alleged wrongdoings, including WCL's poaching of Loandepot originators with active leads. Those loans are quickly closed at the competitor, and WCL obscures the theft by having a different LO sign off on them, Loandepot claims. The lender and servicer estimates 178 of its originators have been poached, costing it billions of dollars in revenue. Loandepot also suggests WCL is misclassifying 625 of its California-based originators as independent contractors. Such action gives the brokerage a competitive advantage as it skirts labor laws and lowers overhead costs by shifting benefits, reimbursements and millions of dollars of total expenses onto its originators, the lawsuit states. The complaint explains at length licensing requirements in California, in which WCL's originators are registered with the Department of Real Estate as salespersons with MLO endorsements. Loandepot claims its LOs who have departed to the competitor shed their MLO licenses with California's Department of Financial Protection and Innovation to adhere to WCL's structure. Loandepot points to evidence that the originators should be classified as employees, including WCL classifying its non-California-based LOs as employees; and the brokerage selling leads to its originators for a profit, inconsistent with their supposed unaffiliated status. Loandepot in shorter language further accuses WCL of paying LOs based on a "lucrative split" of revenue, violating the loan officer compensation rule. More litigation for LoandepotA summons was issued to the defendants Friday, and a case management conference is scheduled for next March, according to the docket in the Superior Court of California in Orange County. The Irvine-based Loandepot is facing its own accusations of violating LO comp rules, in a lawsuit from borrowers who say they were steered to higher rates. The company has denied those accusations as the sides have traded filings in recent weeks.

Figure Technology Solutions has introduced a new platform for debt-service coverage ratio originations aimed to support growth of nonqualified mortgages as well as the company's own blockchain-based marketplace. The fintech's lending platform aims to provide quicker access to capital for real estate investors, utilizing artificial intelligence and blockchain technologies to streamline underwriting and funding for mortgages based off of property cash flow. Along with the rollout, Figure also announced the DSCR platform's first two embedded broker lending partners, West Capital Lending and Axen Mortgage. "This launch shows the power of combining AI automation with blockchain standardization to eliminate the friction that has slowed DSCR lending for years," said Anthony Stratis, vice president, lending partnerships at Figure, in a press release. The New York-based fintech claimed the new platform has the ability to shorten processing times for DSCR originations between application and funding to as few as five days — a reduction of 80% of more from the current 21-to-30 day average — thanks to proprietary technology that can replace manual underwriting review. AI-backed automation will also lower costs of origination by as much as 80%, it said. The company also designed the platform that will serve brokers, lenders and investors to provide fraud prevention and achieve savings through scale, Stratis said.Along with artificial intelligence-assisted underwriting, the DSCR platform also employs optical character recognition for document review, automated valuation models for refinance loans below the $400,000 threshold and proprietary rental income verification technology. Figure's existing lending partners can add DSCR lending through application programing interfaces, it added.  Eric Hines, co-founder of West Capital Lending, said that his company signed on to the platform because Figure's automated approach fit in with its practice of backing companies "that are reshaping financial services with technology."Growth of the non-QM marketThe new launch comes as the segment of the market where DSCR loans fall under enters an expected expansion period, industry leaders have frequently said. Securitization data from Morningstar DBRS showed non-QM activity ahead of 2024's pace through the first half of the year, with growth likely to continue through the final two quarters. Potential changes on the regulatory front could also provide momentum going forward. Along with DSCR transactions, the non-QM sector also includes bank statement loans and other financing for borrowers with nontraditional incomes, lending to consumers with little or troubled financial histories, and several other types of non-standard mortgages.Between 2019 and 2022, the share of DSCR loans grew from 22% to 50% of total non-QM mortgage-backed securities, according to private lending platform Baseline Financial Technologies. Such loans are based on the projected income from a rental property relative to the debt incurred. They may be used to finance investment units turned into traditional single-family rentals, and the mortgages also attract interest from business owners looking to offer them as short-term vacation properties.Figure, which went public in the third quarter this year, has long been an advocate of blockchain technology and employs it in private credit trading. The company is behind the development of DART, or Digital Asset Registration Technologies, the platform that allows companies to file their loans on the system and expedite electronic promissory note sales in the secondary market. 

Bloomberg News Key insight: Fed Governor Stephan Miran, one of the chief architects of President Donald Trump's trade policies, said China's move last week to limit rare earth exports, changed his "sanguine" outlook on economic growth.Expert quote: "It's about where the balance of risks has moved and risks exist now that didn't exist a week ago or a month ago," said Fed Gov. Miran.What's at stake: Previous concerns about how tariffs might affect inflation led the Federal Open Market Committee to hesitate in cutting short-term interest rates. Federal Reserve Governor Stephan Miran said Wednesday that rising trade tensions with China strengthen the case for the central bank to move more quickly toward a neutral policy stance.Speaking at the CNBC Invest in America Forum, Miran said China's decision last week to curb rare earth exports has shifted his economic outlook."Deals have been made for most of our large trading partners and then last week China decided that the deals that had been made earlier in the year … no longer bound to them," he said. "I had been operating on the assumption that the uncertainty had dissipated, and therefore I felt more sanguine about some aspects of the growth outlook and now potentially this is back."Miran, who is one of the chief architects of President Donald Trump's trade policies, said potential downside risks to economic growth necessitate policy adjustments."It is early to conclude that things are actually changing right," said Miran. "But it's about where the balance of risks is moved, right, and risks exist now that didn't exist a week ago, that didn't exist a month ago."The Chinese government announced Oct. 9 that it would restrict rare earth exports, specifically targeting their use in foreign militaries. In response, Trump threatened to impose a 100% tariff on Chinese imports.Miran said the shift in risks makes it "even more urgent that we get to a more neutral place in policy quickly, as opposed to waiting for downside data to materialize."He added that the Fed's current policy stance is "quite restrictive," making the economy more vulnerable to shocks. "If you hit the economy with a shock when policy is very restrictive, the economy will react differently than it would if policy was not as restrictive," Miran said. "It's even more important now than a week ago, that we move quickly to a more neutral stance."In earlier remarks, Miran argued that monetary policy is significantly tighter than widely assumed, a view that supports a course change he has previously advocated. In a past speech, he suggested that the federal funds rate should be near 2%, about half its current level.Previous concerns about how tariffs might affect inflation led the Federal Open Market Committee to hesitate in cutting short-term interest rates. It moved to slash rates by 25 basis points in September following signs of a cooling labor market. During the CNBC interview Wednesday, Miran said monetary policy should be forward-looking, which he believes is not currently the case."Monetary policy has to be forecast dependent and not data dependent," said Miran. "I think that the data can be quite backward looking. You want to be making policy where you think prices are going to be a year from now."He added that in his forecast, inflation is likely to ease next year, particularly due to disinflation in housing services, pointing to lags in market rent data."Shelter inflation, which is the largest component of inflation, it's about 45% of core CPI … I see a lot of disinflation coming from there," he said.Miran also noted that a decrease in migration could increase the available housing supply."If you took 10 million people out of the country and air dropped them somewhere else, you wouldn't magically have 10 million fewer houses," Miran said. "The supply is relatively fixed, and so there's a really strong feed through into inflation from there."In a separate appearance later Wednesday, Miran said he supports ending quantitative tightening in the near future."I don't know what the marginal benefit of additional reductions from here are," commented Miran, speaking at a Nomura Research Forum. "I also think that the size of the balance sheet is downstream of the regulatory environment, and what we should do is concentrate on getting the regulatory environment right, and then we should figure out what the right size of balance sheet is."A day prior, Federal Reserve Chair Jerome Powell said the central bank's "long-stated plan" is to stop balance sheet runoff, which is something that might be reached in the coming months.Since June 2022, the Fed has reduced its balance sheet by $2.2 trillion, from 35% to just under 22% of GDP.

During a National Association for Business Economics (NABE) conference in Philadelphia, Fed Chair Jerome Powell admitted they maybe went too far buying up mortgage-backed securities a few years ago.The Fed’s controversial purchases of MBS led to the lowest mortgage rates on record, with the 30-year fixed falling to 2.65% in early 2021.While the move was apparently intended to “ease broader financial conditions” we all know it led to a massive home buying frenzy.And it came at a time when housing affordability was already at a tipping point.But instead of easing conditions, it led to home prices roughly 50% higher in many markets nationwide, creating an even bigger housing crisis.Should the Fed Have Stopped MBS Purchases Earlier?Powell told attendees at the NABE conference yesterday that they maybe shouldn’t have carried out that final round of Quantitative Easing (QE) during the pandemic years.“With the clarity of hindsight, we could have and perhaps should have stopped asset purchases sooner,” he said.Adding that “Our real-time decisions were intended to serve as insurance against downside risks.”Now it would be unfair to go after Powell here because the pandemic was an unprecedented time and extreme measures were taken.But it does seem painfully obvious that we didn’t need record low mortgage rates during that time.The 30-year fixed was already quite low in early 2020, averaging around 3.75%. Speaking of hindsight, I’m sure anyone would jump at a rate that low today.In March 2020, the Fed announced its final round of QE, pledging to increase “its holdings of agency mortgage-backed securities by at least $200 billion.”The argument at the time was that agency MBS were “central to the flow of credit to households and businesses.”Sure, we should always have a functioning mortgage market, but did we need the 30-year fixed to go from 3.75% down to nearly 2.50%?Probably not, and with the benefit of hindsight, we know it created even bigger problems for the housing market.Aside from it arguably leading to significantly higher home prices (some markets went up another 50% or so), there’s also the matter of mortgage rate lock-in.Pandemic-Era Mortgage Savings Are Locked In for Another 25 YearsThe problem with artificially suppressing mortgage rates is that it’s not just temporary.The most common mortgage type in the United States is far and away the 30-year fixed-rate mortgage.As the name implies, you get a fixed interest rate for a full 30 years (the entire loan term).So the Fed’s purchases of MBS during 2020 that pushed rates to all-time lows by 2021 will remain until the year 2050, assuming the borrower keeps the mortgage.While it perhaps should have been temporary relief for homeowners (and home buyers), the Fed provided relief for the next 30 years.It’s great for the haves, but awful for the have nots.We now have a weird dynamic known as the mortgage rate lock-in effect, where the gap between outstanding rates and today’s market rates is huge.For example, a homeowner with a 2.75% 30-year fixed now faces a rate of say 6.25% or higher if they were to move.This locks them into their property, thereby exacerbating the housing market’s problems even more.There’s even fewer available homes for sale because there’s a lot less willingness to sell and face massive payment shock.Powell also said, “We would certainly not engage in mortgage-backed security purchases as a way of addressing, uh, mortgage rates or housing directly, that’s not what we do.”While also saying, “We do have, as I mentioned, a very large amount of mortgage-backed securities…”So he’s basically acknowledging that it’s not in their toolbox moving forward, even though it was in the past.They will NO LONGER buy MBS as it seems to have exacerbated problems already present in the housing market.In other words, don’t expect the Fed to help lower mortgage rates again. Look at typical market dynamics instead, like economic data for future rate movement.If you want lower mortgage rates, root for a slowing economy, not another Fed “bailout.”Just one caveat though. While Powell admitted it was a tool used in the past, though apparently not to lower mortgage rates, it probably won’t be in the future, at least with him at the helmThough that’s kind of the rub…would a new look Fed run back QE and let the housing market “cook” again?(photo: Kevin Dooley) 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)

The financial-technology firm Plaid Inc. is launching a credit-score service to provide banks and fintechs more detailed and timely information on consumers' financial health.Plaid — whose services connect banks and fintechs — is launching LendScore, a rating that will range from 1-99 with a particular focus on helping lenders serving subprime and near-prime consumers, according to a statement Wednesday. Real-time cash-flow data will be used to generate the ratings, unlike other scores that may present a delayed assessment of a consumer's creditworthiness. Traditional scores typically take into account factors such as payment history and age, as well as varieties of credit already utilized and to what extent. Cash-flow data is different, given its timeliness."If you get a new job and you have more income, yet your expenses stay the same, then you should qualify for a better loan rate," Plaid Chief Executive Officer Zach Perret said in an interview.Fair Isaac Corp. has until now faced virtually no competition for its well-known FICO scores. But VantageScore Solutions, a venture by the three major credit-reporting firms, recently gained a government stamp of approval to expand in the mortgage space, edging in on FICO's territory. Plaid said LendScore should be viewed as complementary to FICO scores and other traditional players in the space, but there could be room for disruption in the future.Plaid's advantage in introducing LendScore is the extensive consumer data the company already has access to, given its network connections with financial-services firms. At least half of all US consumers have encountered Plaid's technology in some way. Through those connections, Plaid's score can provide lenders with real-time insights about would-be borrowers, such as cash flow into and out of bank accounts.Revenue from Plaid's new lending, payments and anti-fraud products has doubled in the past year, according to a person familiar with the company's financials.LendScore can be used in tandem with traditional scores, and ratings can also be combined to come up with a weighted composite, according to the statement.Plaid also has a tie-up with Experian Plc, a company well-known for creating consumer credit reports. "Our view is that the cash-flow underwriting space is so nascent right now that there is value in working together," said Rich Franks, Plaid's head of credit.