The mortgage market in Baltimore is way down in the hole. The Baltimore Banner recently published a great piece about how 2 New York investors – Benjamin Eidlisz & Eluzer Gold – allegedly used DSCR loans & inflated appraisals to buy 500+ homes in Charm City.

Many of those mortgages are now in default, with companies like Kiavi, Loan Funder, Deephaven, A&D Mortgage left holding the bag.

One safeguard that could have identified red flags didn't happen: appraisal. Eidlisz & Gold used just 2 appraisers for their whole portfolio — Jason Taylor & Christopher Actie, who’ve since been blacklisted by Wall Street, the Banner reported.

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The crisis has resulted in worse housing conditions in Baltimore & fewer lenders willing to do business in some city neighborhoods. Kiavi was among the lenders that paused originations for brokered loans in Baltimore.

There are other DSCR issues out there. Non-full doc loans originated in ‘23 are the worst-performing cohort of non-QM RMBS, per Fitch, with an average 30-day delinquency rate of 10.73%, which is 3.47% higher YoY. In August, Toorak Capital filed a lawsuit alleging Beverly Hills-based Private Money Lenders had engaged in a "years-long, sophisticated scam" that involved selling the same notes to multiple investors, per Bloomberg.

Hey, everybody! The Mortgage Scoop launched about 2 months ago & I’ve been blown away by the support. Thank you 🙏 so much. I wanted to share an important update about the business. We’ll be moving to a paywall pretty soon.

Paid subscribers will get exclusive MWF newsletters packed with scoops, analysis & insights you won’t find anywhere else (plus some bonus content). Founding Members can lock in the price for 2 years for $240. Monday editions will remain free & open for all subscribers. Hit me up w/ any questions you might have. - James Kleimann

Remember that TN lawsuit that accuses Optimal Blue & 26 lenders of colluding through the PPE platform to juice rates & screw borrowers? OB says it’s BS.

“The complaint misrepresents the capabilities of Optimal Blue in an effort to force this case into the template of other ‘algorithmic pricing’ lawsuits; however, Optimal Blue’s products are, in fact, nothing like the products at issue in those cases,” CEO Joe Tyrell said. “Our products do not provide any pricing or rate recommendations, our products are not pricing algorithms, & our market obviously doesn’t operate in a manner where the rates of any individual or group of lenders determine what thousands of other lenders choose to do.” 

Tyrell argues that OB’s products do the opposite, & the market transparency actually results in more competition. That matches what non-OB sources told The Scoop back when the suit first dropped.

The CFPB is rescinding 2 Rohit Chopra-era rules: one that required nonbanks to register & report violations of local & state court orders, & the another that required lenders to provide the agency w/ terms & conditions of arbitration clauses. 

Who benefits? Big tech firms like Apple, Google, Meta, but also nonbank mortgage lenders. The CHLA requested an exemption to the rule on reporting enforcement orders in ‘23 since very similar disclosures are already required to be made to the NMLS. Re conditions & arbitration clauses: IMBs are also not allowed to waive most of the consumer rights identified by the CFPB in that rule.

In August, The Scoop detailed the systematic dismantling of the CFPB.

Freed from the clutches of Accenture, there’s newfound hope at mortgage tech company Mortgage Cadence. The LOS company is being sold to fast-growing software company PartnerOne. “It’s a way better fit,” said one company source. “Nobody is surprised by the sale. Accenture was an ill-fitting marriage.”

PartnerOne is not expected to do layoffs. The software group’s model is to hold long-term & they have experience in banking, the source added. 

Mortgage Cadence has lost ground in the LOS space in recent years; many clients (typically credit unions & community banks) have found its platform too unwieldy. The Scoop reported in August that Accenture put the firm up for sale & had stopped accepting new integrations. Mortgage Cadence rolled out its more streamlined Essentials platform in the spring, which doesn't require as much admin staff/work.

The Federal Reserve cut the federal funds rate this afternoon by 25 bps. And don’t look now, but mortgage rates are in the low 6s. As is customary, I asked OB’s Kevin Foley for his thoughts on where the market is headed. Here’s what he wrote:

Does it feel like the U.S. isn't able to agree on anything anymore? As the government shutdown enters its second month, the Federal Reserve has actually done something quite remarkable - it's gotten almost everyone to agree. 

In fact, more than 9 out of 10 market participants agree there will be 2 quarter-point rate cuts in the 4th quarter. The inertia of this consensus makes it difficult for the Fed to make a different decision, even if there might be a good argument for doing so. But let's take a look at the data, or at least what we have. 

We've missed the September nonfarm payroll report due to the government shutdown, but the Chicago Fed's real-time unemployment report shows the unemployment rate at 4.35%, little change from August's number. We also expect to miss Core PCE on Halloween, which is the Fed's preferred inflation metric. However, the latest CPI report from last Friday came in at 3%, slightly below consensus & slightly above August's report. With the limited data we have, it's hard to see anything shaking up the expected rate cuts between now & the end of the year. This rare agreement does appear to be "transitory,” however. Expectations for a rate cut in January are down to 50%.

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