6.19.26 Bank of Mom and Dad; Provident Bank’s Bruno Viscariello on Consumer Behavior; Low-FICO Mortgages

Today’s episode includes a discussion on creative ways the younger generation is making home ownership a reality. Plus, Robbie interviews Provident Bank’s Bruno Viscariello on how rate lock-in, changing consumer behavior, and rising ownership costs are reshaping housing demand, affordability, and lender value propositions. And we close with a look at how recent changes to conventional underwriting have increased the issuance of lower-FICO mortgages.

Thank you to Truework, a Checkr Company, the one verification solution to replace in-house waterfalls. Verify any borrower with a VOIE solution that automates the entire process to quickly deliver the most accurate and complete reports with broad GSE coverage.

The Chrisman Commentary is 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.

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SPEAKER_01 0:02

Welcome to the Crispin Commentary, Daily Mortgage News Podcast. I'm your host, Robbie Crisman. Topics on today's episode include the bank of mom and dad, where we're seeing higher issuance of lower FICO mortgages. In my interview with Provident Banks, Bruno Viscarello, on how rate lock-in, changing consumer behavior, and rising home ownership costs are reshaping housing demand, affordability, and lender value propositions. Here, take a listen to a little preview.

SPEAKER_02 0:30

Where do lenders and loan officers still create meaningful value? And where do you feel like the traditional guidance model has broken down?

SPEAKER_00 0:38

I mean, listen, loan officers definitely a good loan officer and a good lender, I mean, they still create value where there's a complexity with a borrower. I mean, let's take a self-employed borrower who's investing in real estate and has unusual income, tight timelines, tight guy, uh, tight debt to income, or it's a complicated transaction. I mean, a great lender can structure the deal correctly, navigate them through underwriting, and keep the whole process from falling apart. In those types of cases, they're not just selling a loan, they're solving problems and managing the risk for the client and for the bank. And this philosophy is also geared towards the first-time home buyer pool. CRA type loans have allowed, you know, for this segment of buyers to have more options when seeking a loan officer that can help them navigate through the multitude of options that are out there with grants, free money, things that they can benefit with. So a loan officer and a lender is definitely key in your success in buying a home or getting into this type of market.

SPEAKER_01 1:43

Thank you to TrueWork for sponsoring this week's podcast. TrueWork is the one verification solution to replace in-house waterfalls. Verify any borrower with a VOIE solution that automates the entire process to quickly deliver the most accurate and complete reports with broad GSE coverage. To learn more, visit Truework.com. A son asked his dad why there's a tax on tobacco, to which the dad replied, so people smoke less. The son then asks, why is there an income tax? I'm not sure the dad had a good answer. Parents serve an important role in educating and then often helping their children. The bank of mom and dad is a thing. Lenders and MLOs have a deeper view of consumer behavior, revealing patterns, trajectories, and resilience rather than simply balances and scores at a single point in time. By incorporating trended credit data, rent payment history, and other indicators of financial responsibility that were once invisible, lenders have a huge opportunity to make more informed decisions based on how borrowers manage their obligations over time. Better data allows lenders, servicers, and investors to distinguish between misunderstood risk and genuine risk, reducing unnecessary friction while improving both access and risk management. As younger generations adopt new financial habits, manage multiple income streams, and engage with money in increasingly sophisticated ways, credit models must evolve alongside them. Call it credit modernization. The recent flattening of the treasury curve reflects growing confidence that inflation pressures are easing while the Fed remains committed to price stability. With 2s 10s falling below 25 basis points and potentially heading toward this year's low near 16 basis points, investors are responding to lower oil and gasoline prices, improving Middle East conditions, and Walsh's hawkish message, all of which have reduced medium-term inflation concerns. Despite Walsh strongly emphasizing the Fed's determination to control inflation, the market still sees a reasonable chance that further rate hikes will prove unnecessary if energy prices continue to moderate. The base case remains unchanged policy rates through 2027, but the new Fed leadership appears willing to adjust course based on incoming economic and inflation data. Warsh began his tenure as Fed chairman with a solemn vow to curb inflation and a clear sign that he plans to swiftly revamp how the U.S. central bank does its job. What was missing was any clear guidance on what it means for interest rates. Traders quickly piled into bets that the Fed will raise interest rates sooner than had been expected. Investors now see the odds of a hike at the September meeting of the Federal Open Market Committee at more than 80% and more than one move higher priced in for October. Before this week's Fed meeting, traders didn't see the likelihood of an increase until December. For today's interview, I wanted to welcome to the show Provident Bank's Bruno Viscarello to talk about how rate lock-in, changing consumer behavior, and rising ownership costs are reshaping housing demand, affordability, and lender value propositions. He's senior vice president and director of mortgage sales and has more than two decades of industry experience assisting borrowers in all aspects of the mortgage process.

SPEAKER_02 5:08

Bruno, I want to start by talking about fundamental shifts in the housing market or technical shifts in the housing market. And a lot of that has to do with the rate lock-in effect, or maybe I should say the Federal Reserve enacting quantitative easing and lowering interest rates effectively. Pulled a lot of demand from a regular housing market cycle forward. And now we're kind of we've cycled through it a little bit, but I I believe that it's still impacting the way that the housing market is functioning. And not necessarily so much from a borrower psychology perspective like it was, but from a supply perspective in a lot of senses, and in an affordability perspective and other senses. But I'd like to give you the floor. How do you feel like the rate lock-in has changed the natural flow of the housing market? Or how would you view the flow of the natural housing market here in the the what is soon to be the third quarter of 2026?

SPEAKER_00 6:10

I think it's completely frozen the housing market. There's so many people with the pandemic era uh mortgages holding at 2 and 4%. I mean, if they were to move in today's market, that rate would be six, seven percent, depending on their credit and their profile. So even if they were to buy a cheaper home, which is difficult to find, their payment would chances go up. And at the moment, we're looking at higher rates, less inventory, which is keeping prices high in our market. Um I predominantly lend in the New Jersey area, and the prices are, you know, they're still going up. So I know there's some markets in the country that they're seeing depreciation, but um few and far between. But in the tri-state area, the market's going up, and the uh the rate lock market has definitely uh frozen. And then that goes into the affordability, right?

SPEAKER_02 7:07

There are a couple takeaways from this cycle that we've been in, and that is you touched on it, what things are becoming more metro specific. And so maybe things were going gangbusters in Florida or Texas a couple years ago. I've heard recently markets like Austin or markets in Colorado have slowed markedly, even if others, like you say in New Jersey, are still going. But in general, affordability is very strained, and so outgoing from what rates have done or what the Fed did and how it's altered supply, what ripple effects are you seeing across affordability, transaction volume, and the broader mortgage ecosystem? And I I guess I'm remiss in asking that because once again, maybe it is more geography specific, but in in general, thoughts on on affordability, transaction volume, and just kind of the broader ecosystem in general?

SPEAKER_00 7:56

I mean, in regards to affordability, the higher interest rates are not leading to lower prices. The existing owners are holding on to their low rate mortgages, not looking to upgrade, knowing of the higher rate market that they'd be going into. The scenario is freezing it, trading up for more space, downsizing after kids leave, moving for a job now comes with a huge financial penalty, right? So turnover is down on every price point, and lenders are dealing with the collapse in the refi activity and a much smaller pool of purchase loans. So us lenders are competing, and it's harder to get a deal, leaning on different lending strategies. The average age of a first-time buyer is 40 plus years old, and that's a reflection of the affordability issue. It takes years to save and to be in the right position to buy a home. So this whole interest rate rate lock affordability is creating more problems than I think anyone anticipated.

SPEAKER_02 8:57

Yeah, certainly hindsight is 2020, and maybe the Fed would have done things differently, knowing what it's done to the housing market, or likely the Fed would have done things differently. But when it comes to younger buyers, there is a lot of distrust out there of financial institutions. And I should say you mentioned at the start of your answer, older people are holding on to homes, but there's also younger people delaying purchases because of higher rates. Or, like I said, with the distrust factor, they're they're increasingly researching mortgages online and independently of a mortgage loan originator or licensed professional. What does all this shifting behavior say about trust expectations in the lending process? I will add a statistic without any actual numerical figures because I don't know them off the top of my head. But once people close on a loan, the second transaction they do, they seem to have a lot more trust in whoever gave them that loan. So it just seems like there's kind of a misperception going on here.

SPEAKER_00 9:58

Yeah, no, I I agree with you. So listen, these younger buyers, they use their phones. They're getting misinformation from people that don't know what the process actually is. They're definitely researching their options independently online and reflecting shifts in the consumer uh consumer trust and their expectations in our lending process. Many of these young consumers are more cautious, shaped by the economic crisis, leading them to conduct more research. They demand a clear, straightforward information, preferring to compare rates in terms. And you know, these young buyers, they have so many options. If they fall into a CRA area where they're buying, they have a multitude of banks buying for their business, and they definitely want the digital interaction. I have more uh younger buyers that I never speak to, maybe once at time of lock-in just to get the verbal. But other than that, it's it's all digital. So lenders need to adapt, or they are just not going to be surviving in this space for sure with the younger buyers.

SPEAKER_02 11:16

Yeah, and they certainly need to cater to a range of options, whether somebody wants high touch because it's their first time doing this and they need someone holding their hand, or somebody has done this several times and they want low touch. I don't want to see a phone call or what you know, just we can interact via email or text, whatever it might be.

SPEAKER_00 11:32

Yeah, they're definitely leaning towards technology. It's it's crazy how it's changed.

SPEAKER_02 11:37

What I'm hearing from loan officers out there is that the discussion has shifted from what's my interest rate to what's my payment. And for good reason, because when I think about insurance costs, when I think about taxes, when I think about HOA fees, there's a there's a myriad of different factors that actually make for a lack of affordability well beyond interest rate. And let's let's focus on how the mortgage industry can better account for these. Because I I don't know if the mortgage industry is is properly accounting for some of those other costs that are rolled into a monthly payment. Your thoughts?

SPEAKER_00 12:10

Yeah, I mean, you know, let's go with the insurance piece of it, right? We're looking at the binder and the invoice at time of closing. And you may have a borrower who's got a tight debt to income when you're closing the transaction that you're working on. But what happens if the insurance is going up next year, 10, 20, 30 percent? That should be accounted. It's not being taken into consideration at this time. So I do see as insurance costs, which is the you know, insurance and taxes being the two numbers that can change and usually go up. There could be an underwriting shift down the road for you know future increases that'll be calculated into the deal to make sure that the borrower will be able to pay. It's not happening now, but I have a feeling that it's gonna be something in the future.

SPEAKER_02 13:05

Well put. Bruno, I I really enjoyed the conversation. I think there's a ton of valuable insight in there for listeners, and I appreciate you making the time. So thank you.

SPEAKER_00 13:12

Thanks.

SPEAKER_01 13:16

Recent changes to conventional underwriting have increased the issuance of lower FICO mortgages with sub-700 borrowers accounting for a larger share of new UMBS30 production than in recent years. However, these loans still represent a relatively small portion of overall agency supply, and there's little evidence of a broad expansion into deeply subprime lending. While investors should monitor the gradual rise in lower credit borrowers, the average credit quality remains solid, and FICO specified pools are unlikely to face a supply glut. The larger policy challenge is balancing expanded access to homeownership with prudent risk management, particularly given the strong historical relationship between low credit scores and severe mortgage delinquencies. With the bond markets closed today, those lenders putting out a rate sheet and taking locks either hedged their expected lock volume yesterday, priced conservatively, or both. The tenure yield closed yesterday at 4.45%, down six basis points over the course of the trading week. Let's wrap up with some history and some housekeeping. Juneteenth, the name first used in the 1890s, is a portmanteau of June and 19th, commemorates the ending of slavery in the United States, and it was on June 19, 1865, that the Union soldiers, led by Major General Gordon Granger, landed at Galveston, Texas with news that the war had ended and that the enslaved were now free, two and a half years after President Lincoln's Emancipation Proclamation, which had become official January 1, 1863. The Emancipation Proclamation had little impact on the Texans due to the minimal number of Union troops to enforce the new executive order. On January 1st, 1980, Juneteenth became an official state holiday through the efforts of Al Edwards, an African American state legislator. The successful passage of this bill marked Juneteenth as the first emancipation celebration, granted official state recognition, and celebrates African-American freedom and achievement while encouraging continuous self-development and respect for all cultures. On June 17, 2021, President Joe Biden signed the Juneteenth National Independence Day Act into law establishing Juneteenth as a federal holiday. Thanks again to this week's podcast sponsor, TrueWork, the one verification solution to replace in-house waterfalls. Verify any borrower with a VOIE solution that automates the entire process to quickly deliver the most accurate and complete reports with broad GSC coverage. To learn more, visit Truework.com.