Mortgage bankers are finally making money again. Home buyers gain more bargaining power as sellers face the shocking reality of price cuts. President Trump’s attempt to clean house at the CFPB hit a judicial roadblock (familiar dance). Digital transformation is sweeping through the mortgage industry after only a 25 year research period (eye roll) with nearly half of lenders now embracing automation. Meanwhile, tariff policies have Americans nervous enough to avoid big purchases like cars and homes. Let’s get you caught up and out the door in 3 minutes. Tim

Today’s newsletter was generated by our AI platform ALFReD. Know Better. Work Smarter. Be More Successful. 

Key Takeaways

• IMBs Return to Profit: Independent mortgage banks earned $443 per loan in 2024, reversing two years of losses 1
• Digital Adoption Surges: 48% of lenders now use RPA and 38% use AI/ML, more than doubling from 15% in 2023 2
• FHA Policy Tightening: COVID-19 Recovery Options ending September 30, 2025, with stricter loss mitigation limits 3
• Tariffs Impact Housing: 24% of Americans canceling home purchase plans due to tariff policies, 32% delaying 4
• Judge Blocks CFPB Firings: Federal judge issues order pausing President Trump’s attempt to fire CFPB staff, expressing “deep concern” about the administration’s actions 5
• Housing Market Shifts: Zillow revises home value forecast downward to 0.4% growth in 2024, with nearly 25% of listings seeing price cuts 6 7

Residential Real Estate Markets

Tariff Policies Affecting Home Buying Decisions

President Trump’s tariff policies are reshaping consumer behavior in the housing market. A recent Redfin survey reveals significant impacts on purchasing decisions, with political affiliation and age influencing responses. Financial preparedness remains a concern for potential homebuyers.

Key Findings:

• 24% of Americans are canceling home purchase plans due to tariff concerns
• 32% are postponing major purchases
• 55% are less likely to make a major purchase this year
• 36% of Democrats canceling major purchases vs. 15% of Republicans
• 60% of people 55+ less likely to make major purchases vs. 50% of those 35-54
• 34% of respondents lack emergency funds for monthly housing payments
• 53% of renters have no emergency fund vs. 23% of homeowners
• 56% of those with emergency funds have only 0-6 months of payments covered
• Betting markets place recession odds at >50% 4

Zillow Revises Home Value Forecast Downward

Zillow’s latest forecast indicates a cooling housing market as inventory rises and buyer demand fails to keep pace. The persistent increase in housing inventory is creating a gradual shift in favor of buyers, with homes staying on the market longer and sellers facing increased competition on price.

Market Projections:

• Home values expected to grow just 0.4% over 2024, down from previous projection of 0.6%
• Over the next twelve months, home values projected to fall 1.4%
• Existing home sales forecast at 4.12 million in 2024, indicating 0.9% growth over last year
• New for-sale listings saw a 12.6% annual increase in May compared to 8.7% in April
• Many listings staying on market longer, leading to inventory build-up
• Downward pressure on home price appreciation as buyers become more selective
• Market moving closer to balance as sellers return but buyers remain cautious 6

Housing Market Shifts Toward Buyers

The residential real estate market is experiencing a significant transformation with more homes available, fewer active buyers, and an increase in price reductions. This represents a marked change from the seller’s market that dominated in recent years, giving buyers more options and negotiating power.

Market Shift Indicators:

• Inventory is up significantly compared to last year, providing more options for buyers
• Nearly 25% of home listings saw price cuts in recent months, the highest for this time of year since 2018
• Buyers are becoming more selective, taking longer to make decisions
• Homes are staying on the market longer than during the pandemic-era frenzy
• Price cuts most common in Phoenix (33.5%), Tampa (32%), and Jacksonville (31%)
• Buyers now competing with 1-2 other offers instead of 4-8 as was common previously
• Sellers increasingly accepting contingencies and buyer-friendly terms
• Market equilibrium shifting as mortgage rates remain elevated 7

Commercial Real Estate Markets

Industrial and Multifamily Sectors Show Resilience Amid Economic Uncertainty

The commercial real estate market demonstrates mixed performance across sectors, with industrial properties and multifamily assets showing particular strength despite broader economic concerns. Recent transactions and sentiment indicators suggest investors remain confident in select property types and locations, especially those with strong fundamentals and strategic positioning.

Industrial Market Activity:

• Seagis Property Group secured $184.2M in refinancing for two industrial portfolios totaling 1.5M SF in Miami-Dade and Northern New Jersey
• Both portfolios are 100% leased to diverse tenant groups across logistics, retail, pharmaceuticals, and other industries
• Northern New Jersey recorded 7.3M SF of industrial leasing in Q1 2025, outpacing Central Jersey for the first time in over a year
• Miami-Dade saw 2M SF of leases signed or renewed in Q1 2025, with rents expected to continue rising
• New industrial construction starts have slowed to just 942,536 SF in Northern New Jersey, helping maintain stable availability rates 8

Multifamily Investor Sentiment:

• Multifamily buyer sentiment improved significantly in Q1 2025, with 65% of core buyers expressing positive sentiment, up from 44% last quarter
• Core multifamily assets saw cap rate compression, with going-in cap rates falling 6 basis points to 4.83% and exit cap rates down 3 basis points to 5.00%
• Unlevered IRR targets for core assets dipped by 6 basis points to 7.58%, reaching levels not seen since mid-2023
• Value-add multifamily showed mixed results with going-in cap rates rising 7 basis points to 5.32%
• Rent growth projections remained stable at 2.7% for core and 3.1% for value-add properties over the next three years
• Seven markets, including Los Angeles, Washington D.C., and San Francisco, experienced compression in core cap rates 9

Mortgage Markets

Independent Mortgage Banks Bounce Back

The mortgage banking industry has experienced a significant turnaround after two challenging years. Data from the Mortgage Bankers Association shows improved production revenues and decreased per-loan costs as volume increased. Smaller lenders continue to face challenges despite the overall positive trend.

Industry Performance:

• $443 average profit per loan in 2024, up from $1,056 loss per loan in 2023
• 68% of companies reported pretax profits in 2024, up from 36% in 2023
• $2.1 billion average production volume in 2024, increased from $1.9 billion in 2023
• 6,259 average loans per company, up from 6,021 in 2023
• 16% refinancing activity for IMBs, up from 11% in 2023
• Smaller lenders (<$500M annual volume) experienced net production losses for third consecutive year 1

Digital Transformation Accelerates

STRATMOR Group’s 2024 Technology Insight® Study reveals rapid adoption of automation and AI across the mortgage industry. Front-end digital capabilities are now standard, while back-office automation continues to grow. Document processing has emerged as the primary application for artificial intelligence.

Technology Adoption:

• 48% of lenders now use Robotic Process Automation, up from 30% in 2020
• 38% implementing AI/ML technologies, up from 15% in 2023
• 59% of processing departments utilize RPA for tasks like ordering appraisals
• 52% rely on third-party vendors for RPA, down from 75% in 2019
• 63% use AI for document classification and indexing
• 54% use AI for document reading
• 88% have implemented online disclosures
• 85% offer borrower document uploading
• 84% provide dynamic online applications
• Income data service processing saw 22% increase in digital implementation over 2023 2

Loan Processing Time Signals Quality

A Federal Reserve Bank of Atlanta study examines the relationship between mortgage processing time, loan quality, and securitization timing. The research provides insights into how lenders use processing time as a screening mechanism and how the timing of loan sales signals loan quality to investors.

Research Findings:

• Lenders who spend more time processing loans tend to sell these loans later
• Longer processing times correlate with lower default rates
• Loans with higher observable risk had longer processing times, not shorter ones
• Loans just below 620 FICO score had longer processing times and lower default rates than those just above
• Information frictions in the mortgage market create estimated losses of 23-27 basis points
• Delayed sales serve as a signaling mechanism for loan quality in markets with information asymmetry 10

Economic & Political News

Federal Judge Blocks Trump’s Attempt to Fire CFPB Staff

A federal judge has issued an order pausing President Trump’s attempt to fire nearly all employees at the Consumer Financial Protection Bureau. The judge expressed deep concern about the administration’s actions, warning that officials appeared to be “thumbing their nose” at the courts. This development creates significant uncertainty for mortgage regulations and enforcement.

Legal Developments:

• Federal judge issued an order on Friday blocking President Trump’s plan to fire nearly all CFPB employees
• Judge stated she was “deeply concerned” about the administration’s actions regarding the consumer watchdog agency
• Court order warned that administration officials appeared to be “thumbing their nose” at the judiciary
• The CFPB oversees numerous mortgage regulations, including the Qualified Mortgage Rule, servicing requirements, and disclosure rules
• This legal battle creates uncertainty for mortgage lenders and servicers who must comply with CFPB regulations
• The agency’s enforcement actions against mortgage lenders and servicers may continue while the legal challenge proceeds
• Banking and mortgage industry groups are closely monitoring the situation for potential impacts on regulatory compliance
• The CFPB’s ongoing rulemaking activities may face delays or disruptions during this period of uncertainty
• Mortgage industry participants should prepare for potential volatility in regulatory expectations and enforcement priorities
• The case highlights ongoing tensions between the administration and independent financial regulators 5

FHA Accelerates Phase-Out of COVID-19 Recovery Options

The Federal Housing Administration has issued Mortgagee Letter 2025-12, replacing the previously issued Mortgagee Letter 2025-06. These changes reflect a tightening of policies under the current administration and accelerate the timeline for ending pandemic-era accommodations.

Policy Changes:

• COVID-19 Recovery Options ending September 30, 2025 (previously February 1, 2026)
• New permanent loss mitigation options effective October 1, 2025 (previously February 2, 2026)
• FHA-HAMP program ending September 30, 2025
• Borrowers limited to one permanent loss mitigation option every 24 months(previously 18 months)
• Scheduled increases in borrower/servicer incentives canceled
• Previously proposed language accessibility requirements removed
• References to discrimination based on “sexual orientation or gender identity” eliminated from Nondiscrimination Policy
• Payment Supplement Program under evaluation for potential elimination 3

Tariff Policies Raise Economic Concerns

President Trump’s tariff policies are creating divided consumer sentiment across demographic groups. Betting markets now place recession odds above 50%, affecting major purchase decisions differently based on political affiliation and age.

Economic Impact:

• 79% of Democrats less likely to make major purchases vs. 32% of Republicans
• 23% of adults 18-34 more likely to make major purchases due to tariffs vs. 4% of those 55+
• 55% overall less likely to make major purchases this year
• 39% “much less likely” to make major purchases
• 13% more likely to make major purchases because of tariffs
• Survey conducted by Ipsos between April 10-14, 2025
• Redfin economist notes potential for home prices to “stay flat, or even fall” due to decreased demand
• Possibility of mortgage rates dropping “in the next few months” 4

Commercial Real Estate Financing & Servicing

Strategic Refinancing Activity Highlights Investor Confidence

Commercial real estate financing activity shows continued momentum in select sectors despite economic headwinds. Recent refinancing deals demonstrate lender confidence in well-positioned assets, particularly in industrial and multifamily sectors. Meanwhile, servicing regulations are evolving to reflect the current administration’s priorities.

CRE Financing Trends:

• Seagis Property Group secured $184.2M in refinancing through a life insurance company for industrial portfolios in Miami-Dade and Northern New Jersey
• The Miami-Dade portfolio received an $87.7M loan for seven buildings totaling 787,728 SF near Miami International Airport and Port of Miami
• Northern New Jersey assets secured $96.5M for six buildings totaling 773,433 SF in the Meadowlands and Ports submarkets
• Seagis has refinanced nearly $387M worth of industrial assets in the past year, capitalizing on strong demand in core logistics markets
• The refinancing continues a trend of institutional investors targeting Class A industrial properties in supply-constrained markets 8

Multifamily Financing Environment:

• Core multifamily assets saw the spread between going-in and exit cap rates widen to 19 basis points, signaling increasing investor confidence in long-term stability
• Value-add multifamily cap rate spreads narrowed for the second consecutive quarter, falling to just 10 basis points
• Uneven regional performance with markets like Austin and Miami seeing modest cap rate compression while other markets posted increases
• Developers and institutional investors may find more deal alignment in coming quarters as capital markets stabilize
• Investor appetite expected to broaden as the Fed gradually shifts toward a looser monetary stance 9

CRE Servicing Updates:

• FHA issued Mortgagee Letter 2025-12, replacing Mortgagee Letter 2025-06, with significant implications for commercial and multifamily servicers
• The new letter accelerates the phase-out of COVID-19 Recovery Options by 5 months, ending September 30, 2025
• Implementation of new permanent loss mitigation options moved up to October 1, 2025
• Borrower eligibility for permanent loss mitigation options tightened from once every 18 months to once every 24 months
• Previously proposed language accessibility requirements for borrowers with limited English proficiency have been eliminated
• References to discrimination based on “sexual orientation or gender identity” removed from the Nondiscrimination Policy
• Payment Supplement Program under evaluation for potential elimination, signaling further tightening of FHA servicing policies 3