Apr. 12: CFPB's shift; abusive trigger lead news; Vendor M&A and product news; Recessions usually mean lower rates, but maybe in this case...
Consumer sentiment was first quantified in 1952. Last month it hit its second lowest level in 73 years. As one headline said, “From ‘anxious’ to ‘petrified.’” Great, but is the economy really that bad? There's always been demand for our securities, but if that fades, we will, whether it is the U.S. Government or mortgage-backed securities, will have to offer higher yields to attract investors. It doesn’t help, as one person wrote to me, that “We’re in a math contest with the Chinese” over tariffs. The United States has long maintained a close trade relationship with China, one that is poised for upheaval given new tariffs. The $438.9 billion in imports is assiduously catalogued by the United States International Trade Commission, and a new analysis of that data reveals which goods we do not get from anywhere else in the world. For instance, given China’s extensive printing industry, 93 percent of all Children’s books ($505 million worth of product) imported to the U.S. come from China, as do 97 percent of baby carriages and parts ($380 million in goods). China also dominates fireworks imports (95 percent), umbrellas (96 percent) and vacuum flasks (96 percent).
Yes, President Trump’s tariff pronouncements impact lenders
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No one cares for increased levels of uncertainty and volatility, unless you’re a day trader. We’ve had more than our share given tariffs being announced, changed, or removed. Investors in bonds have reacted accordingly, and rates have been all over the map, increasing hedging costs. Rates have moved higher due to concerns about securities or currency from the United States seeing less demand. Recessions mean lower rates… Are we heading for one? Will everyone reduce spending?
UCLA Anderson Forecast Adjunct Assistant Professor of Global Economics and Management Clement Bohr analyzes the potential recessionary impacts of Trump Administration policies and actions.
“Recessions are typically the result of a confluence of multiple events, whether disparate or intertwined, that lead to simultaneous contractions in multiple sectors of the economy. Often these involve the financial sector, though that is not necessary. For instance, there were many factors that contributed to the severity of the Great Depression, including a financial crash, an agricultural drought, restrictive monetary policy, and a trade war.
“More recently, the 1990 recession came about from a contraction in manufacturing, government, and residential construction, which were induced by a shock to oil prices, restrictive monetary policy, and a reduction in defense spending following the Cold War. A single sector that contracts does not usually suffice in triggering a recession, as evidenced by manufacturing in 1995.
“As 2025 begins to unfold, there are no signs of an imminent recession. The U.S. added 151,000 jobs in the month of February, and 228k jobs in March, and the unemployment rate and unemployment claims remain low at 4.1 percent and 220,000, respectively. The future also looks bright due to the promises of Artificial Intelligence, smart deregulation, as well as recent public and private investments in infrastructure and technology.
“However, the stated aim of the Trump Administration is to dramatically transform the U.S. economy in its first 100 days and that begs the question: If fully or nearly fully enacted, could these initiatives cause enough sectors of the economy to contract at the same time and trigger a recession?
“The answer appears to be yes, that a downturn could result over the coming year or two, and that we should now be on a Recession Watch. The administration’s purportedly desired policies would impose, each in their own way, a significant contraction on different sectors of the economy. Weaknesses are beginning to emerge in households’ spending patterns. And the financial sector, with elevated asset valuations and newly introduced areas of risk, is primed to amplify any downturn. What’s more, the recession could end up being stagflationary. The main areas of concern are as follows.
“The tariff policy and ensuing trade wars will likely lead to a contraction in the manufacturing sector. If fully implemented, the effective tariff rate will rise to similar levels as the Smoot-Hawley tariffs during the Great Depression. These will make it much more costly for American manufacturers to produce, and because of the highly integrated cross-border supply chains, make current operations in some industries uneconomical. The CEO of Ford Motor Company bluntly stated that incoming tariffs would blow a hole in the U.S. car industry. Downstream and upstream sectors, such as retail and agriculture, will likely also contract. During the first Trump administration, parts of the U.S. agricultural industry needed a bailout because of the trade war with China. The size of that trade war looks like pennies relative to what’s currently contemplated.
“Under the directive of Elon Musk-led DOGE, the public sector, its contractors, and its grant recipients are undergoing a reduction in their workforce that is intended to reach 10 to 15%. Given that the size of the extended government is around 10 million people, it will amount to the largest single layoff event in U.S. history of up to a million people. And this contraction will take place in a sector that usually serves as a macroeconomic stabilizer, buffering against any decline in economic activity in the private sector.
“The construction sector, which tends to be a powerful propagator of the business cycle, is particularly vulnerable to mass deportations on the scale of many millions of people. Together with agriculture, this sector relies heavily on immigrant labor and already experiences a labor shortage. One consistent empirical finding across deportation events, going as far back as the Chinese Exclusion Act of 1882 and as recently as the Secure Communities program of 2008, is that deportations lead to a loss of jobs for non-immigrants as well. Immigrants occupy distinct occupations from much of the rest of the population, and once deported, they stop spending, paying rent and taxes here.
“The exceptional degree of uncertainty surrounding these policies is in and of itself damaging to the economy. The ad-hoc and fitful tariff policy paralyzes firms’ investment and hiring decisions as they prefer to wait until there is more clarity surrounding future economic conditions. The threat of deportations paralyzes economic activity in immigrant communities as both workers and consumers choose to stay home in fear of capture. DOGE’s activities are creating a heightened level of job insecurity for most federal workers. Such income uncertainty, even for those who maintain their jobs, leads to a pullback in spending and a build-up in precautionary savings. As a result, many measures of consumer and business sentiment have turned negative over the last month.
“If contractions in manufacturing, government, construction, and their adjacent sectors were to occur at the same time, it would likely spill over to the rest of the economy, broadening the downturn. The extent of this amplification depends on the underlying conditions of the economy, which as it turns out might be primed to be severe.”
Abusive trigger lead legislation back in the news
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This Commentary, through the help of our reader network, has reported on the states that have taken trigger lead laws into their own hands. But it is back at the Federal level.
Pete Mills and the MBA reported that Reps. John Rose (R-TN) and Ritchie Torres (D-NY) and Senators Bill Hagerty (R-TN) and Jack Reed (D-RI) reintroduced a revised version of the Homebuyers Privacy Protection Act for the 119th Congress (H.R. 2808 and S. 1467). MBA’s President and CEO, Bob Broeksmit, CMB, issued a statement of strong support upon the formal enrollment of the two bills on Thursday.
“The reintroduction of the two bills reignites the debate to curb the abusive use of mortgage credit trigger leads, other than in appropriately limited circumstances (such as existing customer relationships). Consumers remain vulnerable to trigger leads abuses and MBA has continued its efforts to work with coalition partners and our congressional allies to advance this needed legislative fix.
“The MBA will continue to work with the bill’s authors to help build additional support for the proposal in both chambers of Congress, including appropriate consideration of the bills (in the near term) by the House Financial Services and Senate Banking Committees, respectively.”
The CFPB, still somewhat functioning, shifts gears slightly
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The Consumer Financial Protection Bureau announced that it is offering regulatory relief to “covered nonbanks” by not prioritizing enforcement or supervision actions with regard to entities that do not satisfy future deadlines under its Nonbank Registration Regulation, finalized in 2024.
Ready for some details? The CFPB stated that the “policy applies to, but is not limited to, the upcoming April 14, 2025, registration deadline for entities subject to 12 CFR 1092.206(a)(2) and July 14, 2025, registration deadline for entities subject to 12 CFR 1092.206(a)(3).”
The CFPB will “instead continue to focus its enforcement and supervision activities on pressing threats to consumers,” and is “further considering issuing a notice of proposed rulemaking (NPR) to rescind the regulation or narrow its scope.”
Our MBA has repeatedly voiced its concerns regarding the regulation’s costly and duplicative reporting framework and appreciates the CFPB’s announcement. The MBA also urged the Trump administration to delay the upcoming reporting deadlines to provide the CFPB with adequate time to reconsider the costs and statutory basis for the database. “We have stressed that the CFPB could have instead added its enforcement information on mortgage companies to the already comprehensive consumer-facing database maintained by the Conference of State Bank Supervisors’ NMLS Consumer Access portal.”
Vendor tidbits
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It’s always good to know who’s doing what with mergers, acquisitions, money raises, and new products in the third-party, vendor arena.
Class Valuation, a leading national real estate appraisal management company (AMC), announced the strategic acquisition of Appraisal Nation, a Cary, North Carolina-based AMC specializing in comprehensive valuation solutions for the private lending market. "By combining Appraisal Nation's specialized expertise with our own technology and resources, we are better poised to deliver exceptional value for private lenders.” Appraisal Nation's team will continue to focus on specialty lending products while seamlessly integrating into the Class Valuation family. Appraisal Nation's customers will gain immediate access to Class Valuation's industry-leading technology and extensive network of highly qualified valuation analysts.
Prudent AI, a leading innovator in AI-powered lending solutions announced that lenders are experiencing significant operational efficiencies and growth with its cutting-edge income intelligence tool. Prudent AI empowers lenders to evaluate borrower repayment ability in minutes, unlocking deep financial insights while dramatically reducing processing time. With qualified income computed from all types of income documents in a fraction of the time of traditional methods, innovative non-QM lenders are gaining competitive advantages while closing more loans. Angel Oak Mortgage Solutions reports doubling their loan application processing capacity within months of implementation. Bank statement processing time plummeted from several hours to under 5 minutes.
Join the Mortgage Industry Standards Maintenance Organization® (MISMO®) Servicing Transfers Development Workgroup (ST DWG) and help shape the future of loan boarding. Review the new Loan Boarding Data Segment (LBDS), share your feedback with MISMO, and explore how to integrate this standard into your process. Access the MISMO Loan Boarding Data Segment. Attend the ST DWG twice monthly working sessions.
AssetVal, a valuation industry leader known for delivering high-quality Broker Price Opinions (BPOs), is partnering with Restb.ai, a trusted innovator in computer vision AI for the mortgage industry, today announced the integration of Restb.ai’s advanced computer vision technology to elevate the consistency and accuracy of its residential BPO offerings. This AI-driven enhancement enables AssetVal to validate the condition and quality of both subject properties and comparables, helping reduce valuation drift and deliver more consistent price opinions at scale.
Optimal Blue broadened access to its direct-source mortgage origination and pricing data through a strategic alliance with Cotality (formerly CoreLogic). Through this partnership, Cotality will offer Optimal Blue’s data to a broader audience, including hedge funds, capital markets participants, and investment firms seeking insights into the mortgage markets.
This collaboration gives financial institutions a more holistic view of housing market dynamics for better forecasting, market share analysis, and investment decision-making.
Loan Officer Autopilot introduced a software solution automating mortgage refinance engagement for loan officers and enhancing client retention, Refi-Autopilot. In a competitive refinance market, loan officers need efficient tools. Refi-Autopilot predicts borrower behavior, enabling timely outreach. Pilot users report up to an 80% client retention rate, a 400% increase, demonstrating stronger client relationships.
MortgageFlex Servicing announced the addition of numerous enhancements and integrations to the MortgageFlexONE Servicing software application. Striving to make its software application the most powerful and user-friendly solution in the mortgage servicing and default space, MortgageFlex Servicing welcome feedback from its customers and the industry on how to improve its products.
We’ll leave the light on for you
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Remember when Tom Bodette was the spokesperson for Motel 6? For some interesting non-mortgage news, but interesting from a business adaptability perspective, one interesting niche in the hotel business is dominated by Extended Stay America, a company that offers rooms at substantially cheaper prices than a typical hotel of their size, including kitchenettes for people working temporary jobs in new locations or undergoing life changes. Many rivals are very envious of its success and are trying to replicate it. ESA’s 700 hotels require way less overhead than your typical hotel due to the longer stays, rarer check-ins, higher occupancy, and ability to cut down turn-down service to a weekly basis: a standard 120-room location only needs 6 to 10 employees to operate compared to hundreds at a comparably-sized full-service hotel.
(Rated PG: Parental discretion heavily advised. Don’t read if easily offended and don’t complain that you weren’t warned.)
John O’Reilly hoisted his beer and said, “Here’s to spending the rest of me life, between the legs of me wife!”
That won him the top prize at the pub for the best toast of the night!
He went home and told his wife, Mary, “I won the prize for the best toast of the night.”
She said, “Aye, did ye now. And what was your toast? ”
John, thinking quickly, replied, “Here’s to spending the rest of me life, sitting in church beside me wife.”
“Oh, that is very nice indeed, John!” Mary purred.
The next day, Mary ran into one of John’s drinking buddies on the street corner. The man chuckled leeringly and said, “John won the prize the other night at the pub with a toast about you, Mary.”
She said, “Aye, he told me, and I was a bit surprised myself. You know, he’s only been in there twice in the last four years. Once I had to pull him by the ears, to get him there, and the other time he fell asleep.”
Visit www.robchrisman.com for more information on our industry partners, access archived commentaries, or to subscribe to the Daily Mortgage News and Commentary. If you're interested, visit my periodic blog at the STRATMOR Group web site. This month’s piece is titled, “Mergers and Acquisitions Aren’t Going Away, and In Fact…” The Commentary’s podcast is live and at any place you obtain your podcasts (like Apple or Spotify).
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