Technology was, of course, a part of the conference. “Will AI take my job? How should the human element play into the process, whether that is client-facing with the borrower, or on the back end in the secondary markets?” The borrowers are looking for trust, control, price, and ease of use, and they are given almost the exact opposite. 

There was also exploration of an evolution that’s underway in terms of information and data security. So many people in the residential lending business text for business purposes, which can lead to compliance and regulatory problems. Lenders and personnel often need to be reminded of the compliance-heavy nature of mortgage processing; while regulations can be restrictive, taking shortcuts is not wise, and until regulations actually change, they exist for a reason. The conference in New York, or any conference, is a good place to see what third-party providers are doing in terms of chipping away at the friction of processing loans. 

Technology is evolving rapidly, as are consumer expectations. Securing a mortgage is no longer like having a root canal, but the industry is not at the point of having a totally seamless process. Borrowers and lenders want to be able to upload documents quickly and “breeze through” the process at whatever speed they want. At the same time, though, borrowers seek personal, in addition to technological, hand-holding from their lenders.

Although the focus at the conference was on the secondary markets, one discussion topic was how the way we live our lives has changed, and how, as a result, the options around owning real estate need to change too. Clients want to buy homes with partners, groups, friends, and family members. They’re also interested in having business partners.

But for lenders and investors — especially Freddie Mac and Fannie Mae — it's still an owner-occupied, primary occupant, one-borrower business. Yet we want to own homes for a greater variety of purposes: a single-family residence is now an investment, an office, a hotel, a gateway, a family compound. Given income and asset underwriting and how many borrowers are self-employed, however, there is little wonder why LOs are embracing non-Agency products. There is consensus that “common sense” solutions to modern home ownership must begin to happen, because we have to reshape home finance for modern buyers — or we're going to lose them. 

The way people actually earn an income has changed, and we have careers that didn’t exist ten years ago. Borrowers now include entrepreneurs, freelancers, teachers, students, influencers, day traders, digital workers, ADU owners, and even those using cryptocurrency or non-fungible tokens. How will lender and investor underwriters handle these? How does an investor view income from renting out a garage to someone who wants to store a specialty vehicle?

To wrap up the talk about the primary markets, the cost of originating a loan continues to be dissected. If a loan costs $12,000, roughly, and a lender makes 400 basis points per loan, there is a good chance that the lender is still not earning a profit. Lenders need to become more operationally efficient, even more so if mortgage loan originators are only doing one or two loans a month. Perhaps the same factors that can help borrower affordability can help lender profitability: common sense underwriting, expansions to asset and income, allowing passive income. The goal is to allow the process to fit the modern borrower. Some say that the key to underwriting is customizing the guidelines so that the borrower sees themselves in the guidelines.

Given that the conference was about the secondary markets, there was a lot of focus on interest rates, fees, and loan level price adjustment on Agency loans — all of which have gone up, impacting affordability. Meanwhile, non-Agency rates have been coming down on a relative basis, making those products more attractive. The increase in interest in non-QM is a clue that the Agencies and QM investors must modernize income underwriting.

John Williams, President of the New York Federal Reserve, spoke about fiscal policy, trade policy, and geopolitical events. One of Williams’ central assertions: “Rates are right where they need to be.” The Fed sees inflation creeping down, but some of the forward surveys are concerning. Business surveys, especially those impacted by trade, are worsening — and so much of how we act is psychological. Tariff-influenced numbers aren’t in the hard data yet, surprisingly. Imports during the 1st quarter jumped, not because the economy was doing well, but because of front-loading. 

Consumer spending is a huge question mark. All the surveys are showing more uncertainty, and there are more thoughts about downsizing, nationwide. Sometimes that translates into action. For example, the housing market, as always, is impacted by supply and demand factors. Supply is a multi-decade problem, regardless of segment. Affordability is a current issue hitting the demand side of the equation. The Fed is seeing stakeholders at the community level coming together to help address affordability problems, which in turn is caused by high demand. Pragmatic solutions are not easy to find, and Mr. Williams reminded the audience that the Federal Reserve doesn’t set housing policy. 

One final issue brought up at the conference that readers should pay attention to: events and conditions that would have lowered rates in the past haven’t been doing so. For example, unemployment is expected to move higher. The U.S. economy is expected to slow. Yet these negative expectations have not yet pushed rates down. Time will tell, as it always does, but originators can bet on this: If rates do move down, there are plenty of companies “chomping at the bit” to refi those borrowers.

Overall, the National Secondary was a good mix of session information and informal banter about jobs, inflation, and the economy — all overriding areas of focus of the Fed.