Jan. 10: What keeps the California MBA up at night; economic news originators should know about

Have you ever heard of Lotus Bakeries? Me neither. It is a good lesson for lenders in taking one successful product, or division, and expanding it. Or for individual originators to take their skills and expand them to help clients. Lotus is responsible for Biscoff cookies, which many mortgage road warriors know as an in-flight snack from American and especially Delta Airlines, the latter of which serves 70 million packets of Biscoff cookies annually and counts it as its most popular in-flight snack. (Hey, if the flight attendants aren’t stingy, bring them home, crush them, and sprinkle on vanilla ice cream.) The company recently began a push to get the cookies into supermarkets and out of just the sky. Biscoff is a brand name for a classic cookie known as speculoos in Belgium, where it’s a traditional snack. The effort is paying off; Biscoff revenue was north of $700 million in 2024, not too shabby compared to Oreo’s $4 billion revenue as of 2022.

A look at the economy and what is driving rates

_________________________________________________

It is a fact that the those tabulating government statistics, Federal Reserve officials, and key politicians know the numbers of actual economic stats ahead of the actual release. Two days ago, In an unusual move, President Donald Trump posted a graph Thursday night on social media that reflected jobs data from December that weren’t supposed to be released until the Labor Department issued the monthly employment report Friday morning at 8:30 a.m. eastern.

Speaking of the unemployment report, MBA SVP and Chief Economist Mike Fratantoni had this to say after yesterday morning’s U.S. Bureau of Labor Statistics report on employment conditions in December. Jobs and housing drive our economy, and jobs and inflation drive bond and mortgage prices.

“The pace of employment growth slowed in December to 50,000, in line with the average pace of 49,000 for all of 2025. Employment growth was much slower than the roughly 168,000 pace in 2024. Employment numbers for October and November were revised downwards by 76,000, considerably weaker than initially reported. The economy is growing, but unevenly, and employers certainly appear to be cautious about adding additional workers, as evidenced by the still very slow hiring rate in the JOLTS data.

“Private sector job gains in December were concentrated in just a few sectors, including hospitality and health care. There was also an increase of 18,000 in local government jobs in December.

“The unemployment rate declined to 4.4% in December, with the November rate revised down to 4.5% due to the annual revisions to the seasonal adjustment factors. The participation rate dropped a tenth over the month as more individuals left the labor force. The share of workers who had been unemployed for more than six months increased to 26% in December, another sign that it is getting tougher for job seekers to find a new position.

“This report is fairly neutral with respect to its implications for the housing and mortgage markets. It reinforces the sense that the economy is slowly growing but does not increase the urgency for additional rate cuts. As we look ahead to the spring housing market, these trends are likely to support only modest improvement in the pace of activity.”

What else is going on with gauging our weak or healthy our economy is, and what is impacting it? There was speculation that the Supreme Court was going to announce its ruling on the ability of a president to establish tariffs without Congressional approval. The SCOTUS ruling was not announced, but even if the White House loses the entire case, there are several additional ways the administration can reimpose the tariffs (for now). "What is not in doubt is our ability to continue collecting tariffs at roughly the same level, in terms of overall revenues,” said Treasury Secretary Scott Bessent, who has already prepared a backup plan.

For lenders, President Donald Trump’s announcing that government-backed mortgage financiers Fannie Mae and Freddie Mac will purchase $200 billion in mortgage-backed securities in an effort to push down mortgage rates and ease the US housing affordability crisis. The purchases, to be executed without new congressional approval, echo past Federal Reserve interventions in the mortgage market and have already lifted mortgage-related stocks.

However, analysts warn the policy may have only a modest impact on rates and could exacerbate inventory shortages if supply constraints persist. Trump said that details would be forthcoming in a few weeks in a speech. But we can estimate that the MBS will not include Ginnie Mae securities (comprised of FHA & VA loans) nor non-Agency securities such as those made up of non-QM loans.

Treasury Secretary Scott Bessent said further Federal Reserve interest rate cuts are the "only ingredient missing" for stronger US economic growth, pressing the central bank to support investment as the labor market cools. His remarks come after the Fed cut rates by 0.75 percentage point in late 2025, though policymakers and markets now expect a slower pace of easing this year.

US consumers' inflation expectations climbed to 3.4 percent in December while perceptions of job availability fell to the lowest level on record, according to a New York Fed survey. The data underscore growing concern about labor market risks alongside persistent inflation pressure, complicating the Federal Reserve's policy outlook ahead of upcoming jobs and inflation reports.

Lastly, economist Elliot Eisenberg reports that, “November job openings sank to 7.146 million, down 303K from October and are down 512,000 in the last two months. They are now at their second-lowest level since 10/20. Moreover, hiring slid 253,000, the biggest one-month decline since 6/24 and are at their second lowest level since 4/20. In other words, job openings are down 11 percent Y-o-Y and hiring is down 3.6%. The demand for labor is shrinking. Not good.”

State & national organization, and housing agency priorities

____________________________________________

The National Association of Local Housing Finance Agencies has released its 2026 National Policy Agenda, outlining policy priorities aimed at preserving and expanding the tools local housing finance agencies need to address the nation’s affordable housing crisis. The agenda emphasizes proactive engagement with Congress and federal agencies to strengthen affordable housing finance, renewed advocacy for robust staffing and capacity at the Department of Housing and Urban Development to ensure timely program delivery and compliance support, and enhanced federal investment in rural housing through USDA technology modernization, interagency coordination, and the Community Facilities Program. Distributed to lawmakers and administration officials, the agenda reinforces NALHFA’s role as a leading voice for local HFAs and its mission to equip communities with the resources needed to deliver safe, resilient, and affordable housing nationwide.

“The Mortgage Action Alliance (MAA), MBA’s free grassroots advocacy network, helped MBA secure several legislative wins in 2025, including trigger leads reforms, Veterans Affairs (VA) loss mitigation options, and major tax legislation. In 2026, the need for continued, robust industry support is crucial as MBA addresses the future of the housing GSEs, the need for fairer credit score pricing, TRIA Reauthorization, and many more issues. Make it a 2026 New Year's resolution to remain an engaged MAA member by renewing your membership or joining today to be a part of the action! Email maa@mba.org to learn more.”

With so much lending activity in California, it is good to know what the California MBA has its eyes on, legislatively, since other states pay attention. I asked California MBA CEO Paul Gigliotti, “What’s up?” Here is his report.

AUTOMATED DECISION SYSTEMS / AI (AB 1018 (Bauer-Kahan)): This bill would regulate the use of automated decision systems to address “algorithmic discrimination.” While it stalled in the Senate, the bill is eligible to be considered again in 2026. We secured amendments to narrow the bill and exempt financial service developers already subject to the federal Gramm–Leach–Bliley Act. The industry impact is that it requires new obligations related to ADS disclosures, appeals, corrections, and retention. Poorly scoped rules duplicative of federal and state regulation and supervision and would create an overly burdensome and unnecessary additional regulatory scheme. Fails to account for the many ways ADS are essential to preventing fraud and protecting consumers across the full spectrum of financial services.

Its net effect on business is to increase compliance costs, increase documentation burden, and increase potential production slowdowns. A GLBA carve-out is in place, but debate will return in 2026.

AB 130 (Budget Trailer Bill) is a RETROACTIVE SERVICER LIMITS ON “ZOMBIE SECONDS.” After California MBA opposed SB 681 (Wahab) that stalled in the Assembly, provisions from that bill were added at the last minute to AB 130 (Chapter 22, Statutes of 2025), a budget trailer bill effective June 30, 2025.

These new rules target so-called “zombie mortgages” or dormant second liens and apply retroactively. On September 5, 2025, the California Mortgage Association, California Credit Union League, United Trustees Association, and several impacted institutions filed a lawsuit to block enforcement. The lawsuit, supported by California MBA, argues that AB 130 unconstitutionally impairs existing contracts, deprives lenders and investors of property rights, violates due process and equal protection, and is preempted by federal law.

This law retroactively restricts enforcement on second liens if various notices weren’t handled to new standards. Lawsuit filed to challenge constitutionality. If passed it would increase litigation exposure, decrease recoveries on second liens, potential markdowns on MSRs and whole loans. The California MBA is supporting the litigation effort to block retroactive provisions and will be poised to engage on potential legislation in 2026 to address industry concerns.

WILDFIRE FORBEARANCE: California MBA engaged on AB 238 (Harabedian, Chapter 128, Statutes of 2025), a bill that took effect immediately upon signature by the Governor on September 22, 2025. The bill requires mortgage servicers to provide up to 12 months of forbearance to a borrower experiencing financial hardship due to the January 2025 Los Angeles wildfire disaster. Through negotiations, California MBA and other industry trade groups worked to re-structure the bill to address liability concerns, added a safe harbor when following servicing guidelines, and resolved implementation issues.

What is the industry impact? It requires up to 12 months of forbearance for borrowers in declared wildfire disaster zones; prohibits fees/default interest. It increases the servicing/admin cost in impacted areas; but clarity and safe harbor tied to investor guides reduces litigation risk.

AB 493 (Harabedian) HAZARD INSURANCE PROCEEDS – 2 PERCENT INTEREST. AB 493 (Chapter 103, Statutes of 2025) was an urgency measure effective June 29, 2025. It requires mortgage lenders that make loans for family residences to pay two percent interest on any insurance proceeds following property damage or loss that is held by the mortgage lender. California MBA secured amendments to align requirements with CRMLA so mortgage banks can deposit loss draft proceeds in an interest-bearing account.

Servicers must pay 2% interest on held loss-draft proceeds for 1–4 family properties. Aligns with CRMLA but requires new accounting and IT updates. It increases operating costs and accounting complexity; borrower expectation management is needed.

SB 825 (Limon & Grayson): DFPI INDEPENDENT UDAAP AUTHORITY. SB 825 (Limon & Grayson), pending Governor’s action, grants the DFPI independent enforcement authority for unfair, deceptive, and abusive acts and practices by licensees otherwise exempt from the CCFPL. Despite industry engagement, amendments to limit remedies were rejected.

The Bill expands DFPI’s authority to pursue unfair/deceptive acts independently of federal regulators. It increases compliance and audit costs as well as enforcement exposure for advertising, fees, servicing, and complaints. Partnering with compliance officers to surface “pain points” most likely to trigger UDAAP scrutiny.

AB 226 (Calderon & Alvarez): INSURANCE MARKET REFORM. California MBA supported AB 226 (Calderon & Alvarez), pending Governor’s action. The bill authorizes the FAIR Plan to issue bonds through IBank to increase liquidity and claims-paying capacity, ensuring resilience after major wildfire events. It improves liquidity in the FAIR Plan and begins to stabilize insurance availability in high fire-risk areas, increases the ability to close loans in fire-prone ZIPs, and decreases the fallout and property value deterioration.

AB 801 (Bonta): CALIFORNIA CRA. AB 801 (Bonta) would have created a California Community Reinvestment Act overseen by DFPI. It would impose obligations on IMBs, banks, CUs, and money transmitters. The bill stalled in the Senate but is a two-year bill likely to return in 2026. Co-sponsored by Rise Economy, SEIU California, California Housing Partnership, and Inclusive Action for the City.

It would impose a California-specific Community Reinvestment Act on IMBs, duplicating federal

requirements. It stalled in 2025 but is expected to return this year. It would increase reporting and compliance costs, especially for IMBs already meeting federal CRA-like obligations.

The California MBA is working with the author on potential alternatives to address her concerns in the next legislative session.

Phew! That’s a lot!

Instead of the usual humor or trivia for this Saturday’s edition, here’s something very pleasant, and unusual, for both animal and music lovers.

Visit www.ChrismanCommentary.com for more information on our industry partners, access archived commentaries, or subscribe to the Daily Mortgage News and Commentary. You can also explore the Chrisman Marketplace, a centralized hub connecting mortgage professionals with trusted vendors and solutions. If you’re interested, check out my periodic blog on the STRATMOR Group website. This month’s piece is titled, “Artificial Intelligence in Mortgage Lending.” The Commentary’s podcast is available on all major platforms, including Apple and Spotify.

qoɹ

(Market data provided in partnership with MBS Live. For free job postings and to view candidate resumes, visit the Chrisman Job Board. This newsletter is intended for sophisticated mortgage professionals only. There are no paid endorsements by me. For the latest mortgage news, visit Mortgage News Daily. For archived commentaries, or to subscribe, go to www.ChrismanCommentary.com. Copyright 2026 Chrisman LLC. All rights reserved. Paid job & product listings do appear. This report or any portion hereof may not be reprinted, sold, or redistributed without the written consent of Rob Chrisman. The views and opinions in this newsletter are mine alone unless otherwise specifically stated herein.)