While nearly every mortgage lender has struggled mightily in recent years, homebuilders 🏗 & their lending arms have made bank using a pretty simple playbook: Because they’re vertically integrated & still making a fat margin overall, homebuilders can offer unbeatable 🔥 deals to customers—often buying down mortgage rates by tens of thousands of dollars.

But they’re also not exactly working w/ prime buyers. A large percentage of their buyers have weak credit & need gift funds to close.

The Mortgage Scoop spoke to 2 insiders at large homebuilder-owned lenders to learn how they get such borrowers to the closing table. We’ve also got details on why the inside sales agents at the homebuilder aren’t exactly their friends w/ the builder LOs. This one is exclusively for Insiders, so please consider upgrading your subscription.

(🙏 If you like what you’re reading, tell a fellow mortgage junkie to sign up here.)

If you’ve been reading The Scoop, you already know what you’re getting: real reporting, deep sourcing, & stories nobody else in mortgage media is touching. We’ve exposed shady lender tactics, examined ICE’s hate-love relationship w/ mortgage, broken dozens of tech stories, explored UWM’s correspondent play, Rocket’s retail strategy & much more.. Insiders get the full Monday/Wednesday/Friday edition—scoops, analysis, sourcing, & context you will not find anywhere else—plus early access to new features. If you rely on The Scoop to stay sharp, informed, & ahead, this is your chance to support independent, scoop-driven mortgage journalism. Insiders pay $22/month. Sign up for a 2-week free trial today.

No chairs were thrown, but there was violence at the Triple Play conference yet again this year. Video captured by a NJ real estate agent shows 2 men & 2 women fighting at the Absolute Home Loans party on Wednesday night. No one was injured & it was broken up quickly. Still, it’s ridiculous that grown adults behave this way. 

The Scoop brought you the full story on the epic chair-throwing, floor-clearing brawl between rival NY/NJ lenders in ‘21. Check that out here. 

President Trump on Thursday signed an executive order blocking states from enforcing their own AI policies. Not to shock you, but it may not be legal…

Suha Beidas Zehl, a mortgage tech consultant w/ a focus on AI compliance, said the order was not a law passed by Congress & several state leaders have publicly said a presidential order cannot legally preempt state legislation.

Still, creating a national policy framework for AI appears to be a step forward, she said. “Mortgage lenders, banks, any regulated industry for that matter, cannot realistically operationalize 50 distinct, & potentially contradictory, AI standards (especially around transparency, algorithmic discrimination, model disclosures, audit obligations, etc.).”

Beidas Zehl said the EO aims to discourage, litigate against, & ultimately preempt certain state AI laws it deems onerous using federal grants & dollars as leverage. “The Attorney General must establish an AI Litigation Task Force within 30 days to challenge state AI laws deemed inconsistent w/ federal policy. My question is this: who/what determines if something is ‘onerous’? What are the criteria? The EO leaves it very vague & IMO this is one of those gray area that we need to keep an eye on.”

Currently, Colorado is currently the only state w/ a comprehensive AI Act that clearly covers high-risk systems making lending & housing decisions, though Beidas Zehl noted that states like MA/CA/TX/UT are using existing fair lending/consumer protection frameworks & AI advisories to govern AI in credit & mortgage-related contexts.

There’s a common belief that homebuilders set high face prices on new homes & are happy to buy down rates or offer certain finishes/perks, but never want to lower the sale price & risk blowing up comps.

“That’s true only to an extent,” said one LO at a large homebuilder-owned lender who’s based in the South. “When they really want to clear inventory & there’s a lot of unsold product in a development, they’ll sell a bunch to investors at a discount.”

“They do drop the price quite a bit,” added the other LO, who’s based in the Midwest. “But it’s like a Black Friday deal where on Tuesday it’s $900, on Wednesday it’s $900, on Thursday it’s $900 and on Friday it’s $1,000 marked down to $900. If the comps are $400K in the neighborhood, they’ll start the prices at $520K & use $20K to buy down the interest rate & take $60K off the price & in reality sell it for around $400K to $420K, where the comps typically will be.”