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Mortgage servicing executives foresee significant changes for the industry under a Donald Trump administration, particularly when it comes to interest rates, reform of the government-sponsored enterprises (GSEs) and conforming loan limits. But opinions diverge on what to expect in 2025 and beyond.
Mike Patterson, chief operating officer of Freedom Mortgage Corp., which has more than $600 billion in owned mortgage servicing rights (MSRs), predicts “everything is going to change” in 2025. He said the company is preparing for a “slow drop in rates.”
Patterson and other executives spoke on Thursday morning during the Information Management Network (IMN) Annual Mortgage Servicing Rights Forum in New York City.
“People much smarter than me are saying, ‘There’s going to be roughly three rate changes next year, so payment speeds, yields on escrow and duration comes into consideration,” Patterson said. “However, the housing supply shortage of about 4 million annually probably is not going to change.”
Patterson said that for a significant refinancing wave to occur, mortgage rates must drop to the low 4% range, given that the servicing industry’s weighted average cost of capital currently hovers between 4% and 5%. As of Thursday, the 30-year fixed mortgage rate for conventional loans stood at 6.99%, according to HousingWire’s Mortgage Rate Center.
Bill Greenberg, CEO of Two Harbors Investment Corp., which oversees $200 billion in owned MSRs, offered a differing outlook. He believes there will be upward pressure on rates due to increasing U.S. fiscal deficits under Trump, as well as persistent inflation challenges.
“It’s more likely that we see rates go higher rather than lower,” Greenberg said. “The economic case for lowering rates isn’t that strong. The economy is still doing very well, but even so, the shape of the yield curve has a lot of room to steepen. Mortgage rates here at 7% don’t particularly strike me as being biased lower.”
Larry Goldstone, president of capital markets at BSI Financial, which manages $30 billion of owned MSRs, anticipates greater consolidation of power in the executive branch under a Trump administration. This could potentially influence Federal Reserve policy toward lower short-term rates.
“It could lead to a steepening yield curve and higher rates than where we even are today,” Goldstone said.
The regulatory landscape
Executives also expect the next administration to pursue the privatization of Fannie Mae and Freddie Mac, a goal that went unfinished during Trump’s previous term. In addition, they forecast a less severe regulatory stance and a lower likelihood of enforcement actions from the Federal Housing Finance Agency (FHFA) and the Consumer Financial Protection Bureau (CFPB).
“In the prior Trump administration, they were trying to figure out a way to privatize Fannie and Freddie; they ran out of time,” Goldstone said. “It’s a very complex, hairy problem. Fannie and Freddie are so large and they need so much capital to privatize. But at the end of the day, there’s going to be a push toward that as well.”
“Given the amount of change we’re talking about in Washington, it’s not unlikely that we could actually see something happen this time about” the GSEs being privatized, Greenberg added.
According to him, a consequence is that there will be more “opportunities to shrink what fits into the agencies’ box,” meaning “there are increased opportunities for private capital and private labels.”
Another change, according to Goldstone, would be to pause the increases to the conforming loan limits, which are currently set at $766,550 for 2024. The FHFA is expected to announce a new limit for 2025 in the coming weeks.
“There could very well be a pause on conforming loan limits, maybe trying to move more of the mortgage market into the private sector, away from the GSEs,” Goldstone said.
Robert Williams, co-founder and CEO at Grander Investment Management, said that he expects the next administration to be “revolutionary,” but how this manifests itself is “very unpredictable.”
“It’s hard to predict, but there will be an opportunity. It’ll be profound,” Williams said.
