LOs, Have You Actually Read Your Contract? 👀

Well, that escalated quickly. 👀

Democrats just flipped both chambers of Congress, which means Bill Pulte & the Trump administration's mortgage agenda are about to face a whole lot more scrutiny.

Meanwhile, I've been digging through LO employment contracts after CrossCountry Mortgage's cease-and-desist blitz. And holy hell, some of the fine print is wild. We're talking possible $700K clawbacks, restrictions on accepting business from former customers & even a "confession of judgment."

Also in today's Scoop: Another IMB merger, UWM's rather peculiar return to profitability & FICO earnings that could finally answer some burning questions about 2027 pricing.

But before we get into it - I did a special edition on Tuesday about how AI is fundamentally changing the economics of mortgage lead gen. Check it out! I promise you’ll learn a lot! And a special thanks to Plaid for sponsoring it.

Democrats flipped both the House & Senate on Tuesday, setting up two years of divided government (yaaay?!). For mortgage lenders, servicers & the GSEs, the stakes go well beyond political theater.

Here's what I'm watching:

👀 Pulte's agenda gets a stress test: FHFA's moves on VantageScore, cheaper credit reports, LLPAs & potential GSE privatization could face congressional scrutiny. Lenders investing in new credit-scoring workflows may find themselves caught between competing political agendas. Expect the lobbying game to get way more interesting.

⚖️ Mortgage deregulation hits Dem resistance: The Trump administration wants to loosen ATR/QM, TRID & servicing requirements. Democratic lawmakers can't necessarily stop agency rulemaking, but they can make it politically & procedurally more difficult. Lenders counting on compliance savings shouldn't bank on them just yet IMO.

🔎 Servicers in the hot seat: Sen. Elizabeth Warren is positioned to chair Senate Banking, potentially putting servicing fees, loss mit, borrower retention practices & nonbank oversight back under the microscope. Large servicers w/ aggressive recapture strategies could attract particular attention.

🏦 Banks vs. IMBs: Proposed capital changes would make mortgage servicing assets more attractive for banks to hold (I’m talking about Basel III). Democrats could challenge those reforms, potentially affecting whether depositories reenter the MSR market more aggressively.

🏠 Where are the borrowers? Democrats could push DPA & housing supply initiatives, but Trump’s got veto power & he’s said some weird shit about not wanting to hurt home values for any reason. So… don't expect a flood of new qualified buyers from Washington. Historically, Dems have done a lot of buy-side gimmicks & that isn’t going to solve the real problems anyway.

📉 What about rates? Divided government might influence Treasury yields, but it won't manufacture a refinance boom. Best case scenario is the Trump administration abandons its unpopular war in Iran & we get mortgage rates back in the mid-6s. Goldman Sachs seems to think that’s possible.

The bottom line: Pulte, HUD & the CFPB still have tons of power. But Democrats now control the committees that can investigate their decisions, challenge their priorities & complicate implementation. I also think we might also hear more from our old pal Rohit Chopra more regularly now…

Another week, another IMB M&A deal. Absolute Home Mortgage Corp., Matthew VanFossen’s NJ-based shop, announced Monday that Suwanee, GA–based First Option Mortgage is “joining forces” w/ the company.

As part of the deal, First Option’s team moves over to Absolute & will run as a DBA. Its leaders, Alvin Shah & Kurt Nikolai, join Absolute’s ownership group & board once regulators green light the deal. Shah becomes chief strategy officer, & his main job is finding the next acquisition.

Absolute says the combined company, including its subsidiary Mortgage Equity Partners (MEP), is positioned for roughly $4B in annual originations.

The pitch to other independents is a familiar one. Costs are rising, margins are thin & compliance keeps creeping up, so join us, keep your name & share our marketing, compliance & ops back office. Absolute also says it’s pushing harder into servicing retention.

“We are actively talking with lenders who see the same opportunity,” Shah said.

Holy hell, did I get a lot of texts, calls & emails about CrossCountry Mortgage going after former LOs for refinancing CCM customers. People are really split on this one.

One camp says: You took the money. You signed the contract. Don't complain when the lender tries to enforce it.

The other camp says: Hang on. If an LO spent 15 years building relationships w/ borrowers & Realtors, why should those relationships suddenly belong to CCM?

Well, funny you should ask. Because some of these contracts have pretty eye-popping language.

I reviewed a 13-page CCM inside-sales agreement claiming exclusive ownership of referral sources developed during employment. There's a two-year nonsolicitation restriction & even a “legal presumption” that an LO who originates a loan for a CCM customer after leaving violated the agreement. Would that hold up in court? 🤷‍♂

But CCM is hardly alone. Here’s what I saw in a few other contracts at large IMBs.