12.11.25 Fed Takeaways; L1's Justin Demola on Credit Costs; Prepayment Deep Dive

Welcome to The Chrisman Commentary, your go-to daily mortgage news podcast, where industry insights meet expert analysis. Hosted by Robbie Chrisman, this podcast delivers the latest updates on mortgage rates, capital markets, and the forces shaping the housing finance landscape. Whether you're a seasoned professional or just looking to stay informed, you'll get clear, concise breakdowns of market trends and economic shifts that impact the mortgage world.

In today’s episode, we look at takeaways from yesterday's Fed decision, Chair Powell's press conference, and what some are mistakenly referring to as the return of quantitative easing. Plus, Robbie sits down with L1’s Justin Demola for a discussion on the evolving credit cost landscape in the mortgage industry. And we close by examining what we are seeing across the coupon stack when it comes to prepayment speeds.

With rising credit costs, every dollar matters. L1 Credit is a full-service credit reporting agency designed to help you reduce expenses and safeguard margins. Lenders switching to L1 Credit are consistently seeing 15-20% savings on credit costs.  L1 Credit delivers the flexibility and value you need on credit, flood, fraud, and verification products—all backed by the high standard of service you expect from Lenders One. Don’t wait—request your FREE cost-savings review today at lendersone.com.

Transcript

"With all this craziness, you’d think the United States was cursed. Like it was built on an Indian burial ground. Oh, wait…” Roughly 2.6 million people die in the United States every year. (This shot up well above 3 million in 2020 and 2021, despite those who say COVID didn’t or doesn’t exist.) Our birth rate has been going down for many years, with its own set of issues. Lenders are on the front line of these trends and usually shift their product lines to accommodate changes in age and demographics. Underwriting guidelines that understand co-habitation and shared living arrangements. Setting up reverse mortgage divisions. Offering HELOC and 2nd mortgage products to tap into the trillions of dollars of equity. Good agents will often charge more and aren’t afraid to articulate their value. “This is how much I charge, and this is why.” “Pure price” agents will be coming down in fees. With these trends in mind, today’s The Big Picture (noon PT) features NextHome’s James Dwiggins and will discuss referral fees, and the competitive landscape in real estate and mortgage, and NAR governance. They will also explore NextHome’s growth, franchise trends, and the key forces shaping the industry’s future. (Today’s podcast can be found here and this week’s are sponsored by Lenders One. Lenders One is dedicated to helping independent mortgage bankers, banks and credit unions reduce costs, improve profitability, and operate competitively in the mortgage industry and within their communities. Hear an interview with L1’s Justin Demola on the evolving credit cost landscape in the mortgage industry.)

Exec available

_________________________________________________

“The future of mortgage needs different leadership. There's a fundamental disconnect happening in our industry right now. The technology, customers, and products exist to transform mortgage from transactional nightmares into seamless, concierge experiences. Yet most companies continue executing the same strategies, deploying the same tech stacks, and wondering why growth stalls. I don't operate that way. As Founder, CEO, President, CSO, and COO, I've delivered what others discuss: complete Freddie Mac AIM deployment in 2022, 4x sales improvements, 50 percent tech stack reductions with higher adoption and ROI, and capture of additional customer revenue channels without extensive hiring. Seamless systems integration eliminates human error. Vendor contracts include performance-based incentives that protect delivery schedules and ROI. Long-term competitive advantage drives every decision. I've built the operational playbook for fundamental transformation, not incremental improvements. I'm seeking a C-Suite position where this difference matters. If reimagining your business model interests you, email Anjelica Nixt to be connected to this changemaker.’

The Chrisman Job Board is the go-to platform for employment opportunities across the mortgage industry. For employers, adding a job listing is easy. Simply create an account and drop in your existing application link, or forward the details to our team and we’ll take care of it for you. For job seekers, joining our Talent Community is completely free. Upload your resume to be visible to hiring companies across the industry and stay connected to new opportunities as they go live.

Lender and broker services, products, and software

_________________________________________________

For some servicers, the idea of implementing workflow automation is both appealing and overwhelming. Often, knowing where to start is the most challenging part, especially when the path forward isn’t always obvious. Clarifire’s latest blog, “Three Cost-Saving Ways Servicers Are Using Workflow Automation,” explores real-world examples of how servicers are modernizing core processes with measurable results. From one-click trial modification letters to streamlined foreclosure collaboration and automated GSE exception handling, the blog highlights practical scenarios already producing meaningful operational improvements. If you’ve considered workflow automation but aren’t sure where to begin, this quick read offers a clear view of where time and cost savings can be realized. Read the blog and see how CLARIFIRE® Workflow is helping servicers simplify processes and strengthen day-to-day operations.

According to renowned astrophysicist Neil deGrasse Tyson, “One of the great challenges in this world is knowing enough about a subject to think you’re right, but not enough about the subject to know you’re wrong.” That philosophy of slow, deep learning drives Class Valuation’s mission in preparing lenders and appraisers early for UAD 3.6. Check out the UAD 3.6 Resource Hub for tools, guidance, and a webinar series outlining key differences from the legacy 2.6 format to help you prepare for the 2026 GSE mandate. Breaking the UAD 3.6 learning curve into logical steps helps you prepare now with clarity and confidence, echoing Tyson’s view that knowledge grows strongest when it is explored with focus rather than last-minute cramming. Visit Class Valuation’s UAD 3.6 resource hub.

MCT®️ and FICO have announced their expanded collaboration to integrate the predictive FICO®️ Score 10T across MSR valuation, risk models, and investor price discovery in MCT’s software suite. Following the successful initial rollout, which embedded Score 10T into bid tapes within MCT Marketplace®️, the enhanced integration broadens how MSR portfolio managers and investors can apply credit intelligence in their analysis. As Paul Yarbrough, Head of CSG and Data & Analytics at MCT, noted, “We’ve heard from adopters on both the buy and sell sides… that FICO Score 10T is delivering more clarity into asset quality while identifying unique opportunities for improved execution.” Score 10T is now embedded within MSRlive!®️ to strengthen credit-driven valuation insights and will also enhance seller-side decisioning within Enhanced Best Execution (EBX) by modeling differences between traditional scores and Score 10T. This collaboration sets a new benchmark for transparency, valuation accuracy, and analytics across MCT Marketplace, MCTlive!®️, MSRlive!, and EBX. Mortgage lenders or investors interested in integrating FICO®️Score 10T into their secondary marketing operations are encouraged to schedule a consultation.

Discover the ROI lenders are achieving with Encompass® and what it could mean for your business. Dive into how innovative workflows and automation are driving measurable results with the average Encompass customer seeing a financial benefit of $1,056 per loan. With real-world data and expert insights, this must-read resource equips you to optimize operations and boost your competitive edge. View the data now and explore actionable strategies for success.

The Chrisman Marketplace is a centralized hub for vendors and service providers across the mortgage industry to be viewed by lenders in a very cost-effective manner. We’re adding new providers daily, so check back often to see what’s new. To reserve your place or learn more, contact us at info@chrismancommentary.com.

Broker and correspondent loan products

_________________________________________________

As we approach the final weeks of 2025, AmeriHome Correspondent would like to thank its clients and partners for helping AmeriHome maintain its status as the largest bank owned correspondent investor in the country! With recent enhancements to their AUS Express Jumbo, Expanded, and DSCR programs, AmeriHome is the partner you need going into the new year. With growth expected in all product lines in 2026, AmeriHome continues to look for senior underwriting leadership: click here for details. Don’t forget the benefits and synergies of AmeriHome’s parent, Western Alliance Bank! The Bank’s suite of products (Warehouse Lines, MSR Financing, Treasury Management services and Corporate Credit Cards) all have value add features when loans are sold to AmeriHome. Looking to connect with AmeriHome in 2026? Check here to see where the staff will be throughout 2026, find your sales rep here, or send them an email to schedule a meeting, and follow AmeriHome Correspondent on LinkedIn to stay in the loop!

“As the year draws to a close, Planet Home Lending’s Correspondent Division extends our heartfelt gratitude to our invaluable correspondent partners. Together, we've stood strong in the face of challenges in another demanding market. Thank you for being an integral part of our shared journey. As we look forward to 2026, we continue our commitment to being your go-to team: your reliable partner, your toolkit, and your product gateway. Here’s to a smooth finish for 2025 and a prosperous New Year.”

“As we embrace the coming of a new year, U.S. Bank welcomes the opportunity to reinforce our commitment to supporting our clients and partners and our shared goals enhancing the home lending experience. As of November 17, government loans are now permitted within U.S. Bank’s eMortgage expansion program. This enhancement broadens digital capabilities for our partners and their customers, making the closing process more efficient. Additionally, effective November 28, U.S. Bank aligned with Fannie Mae and Freddie Mac on the recently announced conforming and super conforming loan limit increases. As the holiday season approaches, U.S. Bank extends our warmest wishes to all our partners for a joyful holiday season. Thank you for your continued partnership. To hear more about U.S. Bank contact a U.S. Bank Account Executive.”

Brokers, say goodbye to chasing third parties. Logan Finance’s DirectPath Processing takes you and your borrowers exactly where you want to go faster, easier, and with a team that knows commercial lending inside and out. Choose the portal that fits your model: a white-labeled or co-branded experience, or Logan’s own proprietary system. You pick it; Logan handles the setup. DirectPath delivers expert loan structuring with smart recommendations that strengthen approval odds. Their team manages Title, HOI, and Appraisal orders directly with vendors, while securely collecting borrower conditions to keep every file moving. As you head toward closing, DirectPath monitors every detail for accurate, on-time closings, without the usual chaos. Want the full walkthrough? Watch the quick explainer video. Ready to partner? Email DirectPath@loganfinance.com. Logan Finance. Your Experience. Your Advantage. NMLS ID #127722.

Capital markets: once again, longer rates don’t move

_________________________________________________

The Federal Reserve delivered its third straight rate cut yesterday, lowering the federal funds rate range to 3.50 to 3.75 percent in a divided 9 to 3 vote that exposed widening disagreements about how much easing is appropriate at this stage of the cycle. Chair Powell said policy is now in a neutral range, signaling limited room for further reductions as the Fed tries to support employment without reigniting inflation. That tension is likely to intensify as Powell’s term ends in May, and the political spotlight turns to his expected successor, with Kevin Hassett seen as the leading candidate.

Officials raised their 2026 GDP outlook, trimmed their inflation forecasts, and kept their expected long term policy range unchanged, with only one cut penciled in for each of 2026 and 2027. These updates suggest a central bank that believes it has inflation largely under control. Treasury yields were stable before the announcement, but the yield curve steepened afterward as the Fed revealed plans to buy forty billion dollars in Treasury bills over the next month and potentially extend those purchases out to three-year maturities. The reintroduction of front-end purchases aims to ease liquidity strains rather than restart quantitative easing. "Mortgage rates are down almost 1 percent since January, but rates actually rose after September and October Fed cuts,” said Sagent CEO Geno Paluso. “So, we must keep servicers prepared to help consumers through all possible market outcomes, from capitalizing on lower rate refis to navigating hardships.” The Fed also removed the cap on repo operations and adjusted its implementation rates lower in line with the policy cut.

Changing subjects, loan balance pools have long been favored in MBS structuring because they offer investors greater predictability in prepayment behavior, and recent performance highlights how both refinance incentives and loan age shape that behavior. In today’s largely out-of-the-money environment, larger-balance UMBS 30-year pools are actually paying the slowest; not just because refinancing a big mortgage is more painful when rates are high, but because these pools are still very young, with many 300k-plus slices in 4.0 percent and higher coupons not yet a year old and therefore not at peak refi propensity.

Across coupons, speeds generally decline as loan size rises, though even in in-the-money 5.5+ percent coupons the expected faster speeds for high-balance pools have not yet materialized due to their limited seasoning. Over the past year, $170.7 billion of new loan-balance spec pools (mainly in the 275k–300k ranges and concentrated in 5.5 percent to 6.0 percent coupons) have entered the market, providing adequate liquidity, while servicers such as Rocket, AmeriHome, and Freedom remain key determinants of prepayment outcomes. For now, lower-balance pools are paying faster, but as the largest-balance pools age beyond 12 months, they should begin to speed up; among higher-coupon stories, the 175k–275k cohorts appear most attractive.

Today’s economic calendar kicked off with the delayed September trade deficit (greater exports than expected) and weekly jobless claims (236k; 1.838 million continuing claims). Later today brings Wholesale inventories and sales, also from September, Treasury activity that will be headlined by $22 billion reopened 30-year bonds, and Freddie Mac’s Primary Mortgage Market Survey. The Swiss National Bank was out with its latest decision before the open, where it kept rates unchanged at 0.00 percent. We begin Thursday with Agency MBS prices are a few ticks (32nds) better than Wednesday’s close, the 2-year yielding 3.53, and the 10-year yielding 4.13 after closing yesterday at 4.16 percent.

My wife told me to take the spider out instead of killing him.

Went out. Had a few drinks. Nice guy. He's a web designer.

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 2025 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.)