In November, a client came into Danny Velasquez’s Nevada office & told him he was recently denied a mortgage loan. Velasquez, an LO at broker/non-del shop GFL Capital Mortgage, made some calls. One by one, investors said they wouldn’t do the loan for his client. One of Velasquez’s primary investors finally provided an explanation: His client had an order for deportation. 

“So he’s in my office & I had to explain everything casually to him,” Velasquez, who mostly originates in Southern California & Las Vegas, told The Scoop. “It’s a very touchy subject right now. People are scared.”

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This situation w/ clients facing potential deportation plays out multiple times a week, Velasquez said. It also underscores a broader industry-wide challenge: Hispanics are the fastest-growing demographic in America & prize homeownership. But relatively few LOs have experience w/ popular loan products for the demographic, speak Spanish, or are embedded deeply enough in their communities to gain their trust.

ICE raids & rhetoric have contributed to a decline in mortgage activity in some Hispanic communities, per LOs & observers. (The biggest reason remains affordability.)

“Applications are down about 20 to 25% because of fear & that's where the loan officers have to combat that,” said Rogelio Goertzen, who founded H.O.M.E. to help Hispanic & minority homebuyers navigate the mortgage process. “In the Hispanic lending community, you're more than just a loan officer. You’re an advisor in life, in setting goals. So there's a lot more conversations like, ‘If I do get this mortgage, what happens if I do get deported? Who's making the payments?’”

Instead of refinancing some past clients, Velasquez now helps them navigate loan modifications & free up cash in the event they can’t work. He advises DACA recipients (not FHA eligible) & often suggests that clients set up trusts in case something happens.

Goertzen, an executive at EPM Lending, said that ITIN lending was down earlier this year but has picked up in recent months. In terms of default rate, they’re some of the country’s best-performing loans, he added. More lenders are getting into the space, w/ some even offering 10% down loans. There are Native American tribes that will take out an FHA loan for an ITIN borrower & lease it back to them. One bank even has an affidavit that is signed at closing so that if anything happens to the borrower, there's someone that can legally take over, Goertzen said. 

Even with the fear, there are also positive trend lines. “I'm getting anywhere from 1-3 clients calling every week to say, 'I just got my citizenship. Now what do I need to do to get credit? What do I need to do to buy?’" Velasquez said. “As people are going out, you are getting people coming into the system who have been waiting for a long time.”

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Most mortgage lenders have only turned a profit a few quarters since Mortgage Winter set in. How have lenders survived? Many will tell you that the sale of servicing rights or income from MSRs has kept the industry afloat. That’s not wrong.

But there are other (less celebrated) reasons some lenders are still kicking.

Even though many lenders have violated covenants in recent years, Fannie & Freddie couldn't apply their policy to everyone, said one source who works closely w/ the agencies. “Instead, they had many [lenders] on monthly reporting regimens but were not taking action,” he said. “In fact, even as of today, I haven't heard of anyone who got shut down except for companies who had done asset deals to sell their origination team.”

The old adage in business is that no one gets fired for buying IBM. In mortgage, lenders & servicers usually stick with well-trodden, expensive vendors, making it a brutal space for upstarts. 

Over the course of ‘26, The Scoop will be publishing Vendor Wars, a new series of deep dives into the ambitious mortgage tech companies/vendors looking to unseat established rivals. We’ll give you an inside look into how they’re working to claw market share amid long odds.

First up are Nick Rutherford & Andrew Penner of customer retention platform Milo, who openly admit that market leader Homebot has a solid product. Check back next week! (If you’re interested in participating, email me at [email protected].)

A new think tank report argues that the agency MBS market has lost its traditional stabilizer for the first time in decades & borrowers are already paying the price. Laurie Goodman & Jim Parrott write in a new Urban Institute paper that the MBS market no longer has a buyer of last resort. Fannie & Freddie did it prior to '08 & the Federal Reserve assumed the role through QE, which capped volatility & limited how much mortgage rates could overshoot Treasuries.

The Fed exited the MBS market in '22 as part of QT & the GSEs are constrained by conservatorship rules. Without a backstop, MBS spreads widen more during stress, volatility stays priced in during even calm periods & mortgage rates remain structurally higher than they otherwise would be, they argue. Basically, investors now require more $$$ b/c they know no one will step in early to stop a sell-off. It’s essentially a new tax on homeownership. 

Goodman & Parrott are skeptical that policymakers can safely reassign this role w/o creating new systemic risks. Unless the GSEs are explicitly turned into utilities or a new Treasury backstop is created (unlikely), this is the New Normal… 

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