Mar. 7: Economic topics & trends impacting rates and borrower psychology; Compliance & regulatory snacks; AI thoughts

Talk about inflation… what’s a tooth going for these days? (No, I’m not so old that I received a beaver pelt when I lost a front tooth as a kid.) New findings from the Delta Dental 2026 Original Tooth Fairy Poll® revealed the average value of a single lost tooth during the past year increased by 17 percent from $5.01 to $5.84. This marks the first year-over-year increase in Tooth Fairy giving since 2023, ending a two-year decline. The price of oil is crazy, benefitting Russian companies refining their oil in India now, amid conflict in the Persian Gulf, and seems to go up every day: The global benchmark Brent crude is trading around $89 Friday morning, up roughly $16 since military strikes against Iran began. The cost to send a supertanker along the Middle East to China route has quadrupled since mid-February. From the United States, the cost to hire a ship from the Gulf to Asia has reached $26.9 million, which breaks down to $13 per barrel. That is the largest share of WTU crude oil costs that transit has occupied since 2020. The very large crude carriers can move two million barrels at a time, and are now going for $481,000 a day. I am glad that the United States has tremendous reserves. And that I have some oil company stock…

Random economic tidbits impacting borrowers & mortgage rates

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For a number of reasons, mortgage loan applications have been way down for the past three years, with 96 of the 100 lowest weekly index readings since 1999 occurring over that time period. Mainly, the market is cold: home builders have cut back on new construction, the pandemic-era rates were so low that nobody who got one wants to leave them behind and, most importantly, incomes have not kept pace with home prices. In 2021, a family needed an income of $79,600 to qualify for a median-priced home. As of 2024, that figure stands at $126,700. When houses do move, cash is king: the portion of all-cash purchases rose 33 percent from 2020 to 2023. In fact, cash buyers accounted for half of home sales in New York City in the first six months of 2025.

Under the category of “know your client,” a new survey from the Pew Research Center found that 93 percent of U.S. adults aged 65 and older currently live in their own home or apartment, and nine percent say someone provides care for them in the home. When that group of adults who lived alone without a caregiver were asked what they would prefer to do if there came a time when they could not care for themselves, 60 percent said they’d want to live in their own home with a caregiver, 18 percent wanted to move to an assisted living facility, 11 percent would prefer a family member’s home, one percent a nursing home, and eight percent said they had some other arrangement.

President Donald Trump's nominee for Federal Reserve chair, Kevin Warsh, is expected to still favor cutting interest rates even as the Iran war pushes oil prices higher and raises inflation concerns. Warsh has argued that inflation is driven primarily by fiscal policy and the money supply rather than by energy shocks, suggesting he may pursue lower rates once confirmed, despite rising crude prices

Separating the government from interest rates, and therefore lending, is impossible. Economist Elliot Eisenberg writes, “The US CY25 trade deficit was $901.5 billion vs. $903.5 billion in CY2024, with imports rising 5 percent to $4.334 trillion and exports rising 6 percent to $3.432 trillion. As for tariffs, which were focused exclusively on goods, the goods trade deficit rose to a record $1.241 trillion in CY25 up from $1.215 trillion in CY24. Essentially no change. Wholly unsurprising as the trade deficit has little to do with trade policy.”

His note prompted an industry vet to write to me, agreeing with Elliot and clarifying what it means to U.S. citizens. “The trade deficit is meaningless. It just means that we’re a very wealthy country, and our people are willing to spend money to get the very best of whatever they want, regardless of where it comes from.

“Donald Trump has been obsessed with this number for a long, long time, and I saw a video of him maybe 20 years ago complaining about it on a David Letterman show. There are probably people who voted for him in part because the trade deficit sounds so big, but I doubt they could tell you why it’s a bad thing.

“If we want a zero-trade deficit, we should become a third world county whose people are too poor to buy anything, domestic or foreign. I used to wonder if then-citizen Trump confused the trade deficit (irrelevant) with our budget deficit (a huge problem.)”

While credit conditions are expected to continue softening over the next six months as the labor market faces challenges, they will hold relatively steady according to the American Bankers Association’s latest Credit Conditions Index released yesterday.

Results from a survey by John Burns Research and Consulting and Kiavi highlights the hottest fix-and-flip markets along with several other important factors for residential transition lenders. Michael Fuller, VP of Wholesale at Constructive Capital, a wholesale lender focused on real estate investor financing, had some thoughts.

“With 73 percent of flipped homes selling below $500,000, affordability clearly remains the demand anchor in today’s market. This suggests the strongest exit liquidity is still in the entry‑level and mid‑market segments, not luxury rehabs. For flippers and lenders alike, this reinforces the importance of keeping renovation scope and ARV assumptions aligned with payment‑sensitive buyers, rather than betting on top‑end price appreciation.

“The data also highlights the importance of having multiple exit strategies. On affordable projects, investors can renovate with the option to sell into strong entry-level demand or refinance into a DSCR loan and operate the property as a rental. That flexibility can be harder to achieve at the luxury level, since there are a smaller number of tenants willing and qualified to pay rents exceeding $10,000 to $20,000 per month, and where larger loan balances make it more difficult to sustain a DSCR above 1.0 times.

“While investor sentiment is improving, pricing discipline is still key. Nationally, flippers pay about 66 percent of after-repair value, and in several regions that threshold has been declining year over year. Investors may be more active, but they’re buying with margin protection in mind and building in a cushion against shifts in pricing, labor costs, or time on market.” Thank you, Michael.

AI: hard to ignore

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Long-time contributor Mark Weber sent a note echoing things I’ve heard from others. “I use AI daily since it became a thing. I don't consider myself an AI expert, but who exactly is an expert anymore? The advancements these past 30 days with Anthropic tanking software stocks because of what its Ai can do have been significant, but I have come to realize most people are unaware.

“I think that people should be out in front of what I see as structural destruction to business norms. I'm not saying what is coming is better or worse than current market conditions. I'm saying mortgage bankers and the real estate industry have the power to define the structure whatever that may be versus allowing Ai to determine the structure. From a systemic perspective, is being a human protectionist good? Millions of people have structured their careers and lifestyles around knowledge. And their loans. And that's where I see systemic concerns.

“All good podcast discussions around structure. Hopefully, there is more urgency. ‘Whatever happens, happens’ I'm thinking is the wrong approach.” Thank you, Mark.

Compliance never goes out of style… ignore it at your own peril

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It is generally accepted that a) the CFPB has not vanished, and b) many, if not most, state regulators have picked up their pace. Here are some random going-ons out there.

Weiner Brodsky Kider, PC, reports that the Financial Crimes Enforcement Network (FinCEN) recently announced that it launched a dedicated online whistleblower portal to confidentially accept whistleblower tips on fraud, money laundering, and sanctions violations.

The American Land Title Association (ALTA), the national trade association of the land title insurance industry, the North Carolina Land Title Association (NCLTA) and AARP applaud North Carolina Attorney General Jeff Jackson for securing a court victory against MV Realty and its executives, permanently barring enforcement of the company’s predatory “Homeowner Benefit Agreements” and providing relief to thousands of North Carolina homeowners. The Superior Court of North Carolina, Wake County, granted summary judgment in favor of the North Carolina Department of Justice, prohibiting MV Realty from collecting early termination fees, recording liens or otherwise clouding homeowners’ titles, or enforcing other unfair provisions tied to decades-long real estate service agreements. The ruling delivers finality to more than 2,000 homeowners impacted by the company’s deceptive practices.

Weiner Brodsky Kider, PC, reports that an Illinois federal district court recently dismissed with prejudice a proposed class action complaint against a mortgage lender alleging disparate treatment and disparate impact discrimination in violation of ECOA, the Fair Housing Act, 42 U.S.C. § 1981 & 1982, and state law.  

The monetary risk of failing to comply with California’s restrictions on collecting per diem interest is significant, as recent enforcement actions by the California Department of Financial Protection and Innovation (DFPI) show that even limited violations can result in six-figure penalties. Under California Civil Code ?2948.5 and Financial Code ?50204(o), lenders face strict scrutiny, with recent Consent Orders including a $100,000 penalty for overcharging per diem interest on just 10 loans, another $100,000 penalty for charging interest beyond one day prior to disbursement, and a $1.8 million settlement tied in part to repeated per diem interest violations. These cases demonstrate that borrower refunds alone do not mitigate enforcement risk, underscoring the need for robust oversight, controls, and routine self-audits to ensure compliance.

The DOJ and the State of Texas entered into a consent order to resolve pending enforcement actions against a land developer and its affiliated lender over an alleged predatory land sales and mortgage financing scheme directed at Hispanic borrowers.

Yes, a mortgage lender needs to monitor their employees to ensure accurate HMDA data collection and reporting of demographic information (race, ethnicity, and sex). MQMR reminds us that Federal regulators stress the importance of collecting accurate data to help detect and prevent mortgage lending discrimination. Often mortgage lenders rely upon their employees to collect demographic information and other HMDA data. In 2023, the CFPB fined a lender in the millions of dollars because its loan officers failed to ask mortgage applicants certain demographic questions and, instead, falsely reported that the loan applicants chose not to provide the information. The CFPB indicated that the lender had a responsibility to oversee its loan officers in the collection of this data in order to prevent inaccurate and false reports. Lenders consistently struggle with HMDA data errors, particularly with regard to demographic information. Lenders must train their loan officers in the questions they must ask when taking an application. Such training should be ongoing. Mortgage lenders should also ensure that their online application systems properly request and record demographic information. In addition to overseeing and training loan officers, mortgage lenders must review and audit their HMDA data regularly to ensure accuracy. High percentages of “I do not wish to provide this information” from a particular loan officer when reviewing demographic information should trigger further investigation.

In December 2025, Freddie Mac issued Bulletin 2025-16 announcing updates to its Single-Family Seller/Servicer Guide (Sections 1302.2 and 1302.8) that require approved sellers and servicers to implement a comprehensive governance framework for the responsible development, deployment, and oversight of artificial intelligence (AI) and machine learning (ML) systems, with the requirements taking effect on March 3, 2026. The guidance expands operational expectations by requiring institutions to incorporate AI-related threats (i.e., deep fakes, targeted phishing, model inversion, data poisoning, and prompt injection) into annual information security awareness training, while also establishing formal policies and codes of conduct that embed principles of trustworthy AI and align risk management activities with each organization’s risk tolerance and governance priorities. In addition, firms must implement robust oversight mechanisms, including regular internal and external audits aligned with recognized standards such as NIST 800-53 and ISO 27001, ongoing monitoring of AI systems for performance, security vulnerabilities, and bias, and clearly defined roles, review cycles, and segregation of duties to ensure transparency, accountability, and effective risk control across AI-related activities.

Thinking about strengthening your Quality Control (QC) process? MQMR argues that Reinforcing QC helps mortgage lenders avoid potential issues and protects against potential indemnification and repurchase demands. Fannie Mae’s Quality Insider webpage provides valuable resources and useful tips to strengthen QC. Fannie Mae has highlighted the following most common collateral-related issues: Ineligible property – safety, soundness, and structural integrity. Subject Physical Features Reported Inaccurately – Condition/Quality of Construction (property condition and quality ratings). Fannie Mae also highlighted best practices and risk controls to prevent or mitigate these issues and strengthen the appraisal review process. Risk controls included, but were not limited to, (i) verifying the appraiser’s work to identify any blatant mistakes, (ii) reviewing appraisal notes for structural concerns, such as infestations, dampness, or settlement issues, and (iii) inspecting photos closely, particularly of exterior shots and basements.

In this Orrick Insight, partners John Coleman, Sasha Leonhardt, and Kathryn Ryan, along with counsel Lauren Frank, analyze the New York State Department of Financial Services’ recently proposed regulations implementing the state's Buy-Now-Pay-Later Act. If adopted, the regulations would establish licensing, fee limits, disclosure, dispute resolution, and privacy requirements for BNPL providers.

On February 13, 2026, the governor of New York signed into law clarifications to a previous amendment of the state’s procedures for accepting payoff payments and discharging mortgages.  

I learned to skydive when I was 24, without being strapped to someone. But at least I had a parachute. Unlike this fellow in this dramatic and somewhat suspenseful video.

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, “Helping Borrowers in a Market Defined by Complexity and Change.” The Commentary’s podcast is available on all major platforms, including Apple and Spotify.

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