Inside PennyMac's AI Glow-up & How to Protect Your Book From the Heavies

It’s Fed Day! And even though the new guy is no J-POW, the ending was familiar: We’re holding steady, folks. The Fed voted 12-0 to maintain the benchmark rate at 3.5% to 3.75%, though the real drama is in what comes next. 

Optimal Blue’s Kevin Foley shared his insights on where the market is headed exclusively w/ Scoopers, so check that out. Also in today’s edition: inside PennyMac’s AI remake, how to stop Rocket, CCM, Freedom & others from gobbling up your past clients. Plus, a memestock buys a real estate brokerage, mortgage & title operation for $53M & more.

The following Fed Day commentary was shared by OB’s Kevin Foley.

Going into Kevin Warsh’s first meeting as Fed chair, I was watching for three things. First, will he be hawkish or dovish on rates? Second, would he move early to put his mark on the institution, and if so, how? Third, will he be in command of the room, or just one voice among many?

On the first question, any hopes for a more dovish Fed Chairman haven’t come to fruition in this meeting. His lack of dot on the dot plot notwithstanding, the clear takeaway from this meeting is to expect a Fed rate hike in the next 6 months to control persistent & rising inflation.

On the second question, we’re already seeing momentum, with task forces proposed in a number of areas to review existing Fed policy, plus a recommendation on moving to “price stability” as a guiding north star. Have we done away with the 2% inflation target for good?

The third question in my view is yet to play out. Will Warsh’s proposed task force changes play out, or will the voices of the other FOMC board members begin to matter more relative to past chairmen? This will be what I’m looking at in the coming months.

“Yeah, I’d like to grab this air fryer, these throw pillows that say, ‘Live, Laugh, BRRRR,’ & lemme get a HELOC for $65K w/ this token. I’m renovating my kitchen.”

What’s the logical progression of that business model? Agents! Mortgage! Title! For $53M, Bed Bath & Beyond is acquiring Fathom Holdings, the corporate parent of a brokerage w/ 14K agents, a mortgage lender (Encompass Lending) that did $441M in volume over the last 14 months & a slew of title shops. It’s an all-stock deal.

Basically, the dream is that a prospective homebuyer discovers/buys a home through a Fathom agent, finances it through Encompass Lending/Figure HELOC/renovation loan, then gets a rebate to furnish the home at Bed Bath & Beyond/Overstock.com (which is only online these days - no physical retail). 

The pieces fit on paper for a coherent lifecycle play, but umm, can BB&B operate a real estate brokerage, mortgage lender, title business, big box retailer & fintech as one funnel? That’s an execution challenge for the best operators (ask Zillow or Rocket) & Fathom’s CEO was just bounced for alleged policy violations, it lost $20M last year & it’s not like BB&B has any track record in this space. I’ll air fry my socks & eat them if this play succeeds, but good luck!

One of my favorite data sets to track is the loan retention leaderboard. RETR shows which lenders are scooping up borrowers — & loan volume — that other lenders failed to keep. (Disclosure: RETR is an advertising partner.)

And the ‘25 leaderboard makes one thing pretty clear: the biggest winners tend to have some combination of servicing assets, borrower relationships, recapture muscle & very large call centers. Just look at who’s feasting:

Rocket remained the industry's largest recipient of migrated borrower volume, growing from approximately $7.3B in ‘24 to $11.6B in ‘25.

What’s particularly interesting is who’s in & who’s out. In ‘24, Wells Fargo, Discover Bank, PHH/Onity & Select Portfolio Servicing were among the biggest recipients of migrated volume, but a year later they were knocked off by CCM, JPM, Rate & Guild. (Penny & Freedom have been consistent for years.)

“Are the industry's biggest migration winners increasingly those w/ access to servicing relationships? The data suggests there may be a meaningful connection,” RETR’s James Hooper wrote in a newsletter post this week.

There’s an element of playing offense & defense here. Orgs w/ servicing portfolios, recapture infrastructure & trigger marketing capabilities & large customer contact operations are uniquely positioned to capitalize on opportunities (refis especially).

But for orgs that are looking to retain borrowers or even take from others, the answer might be servicing scale or stronger customer engagement, better recapture strategies, more timely outreach or deeper borrower intelligence, Hooper wrote. “Those that can identify at-risk borrowers before they leave may have the greatest opportunity to protect market share, improve retention, and create growth.”

PennyMac has partnered w/ AWS & there is a lot to unpack here. So let’s do it!