There are plenty of second acts in mortgage. It’s one of the things I love about the industry.

Many of my sources once worked at Wells Fargo, WaMu, Countrywide, HSBC, Fremont, & other lenders that have since become synonymous w/ fraud, greed & reckless lending practices. A lot of those people have since reckoned—publicly or privately—with that era. Today, they occupy senior leadership roles, boast large LinkedIn followings, & lecture from conference stages about risk management & discipline.

Second acts are common. Third acts are not, especially after multiple high-profile blowups.

On Friday, The Mortgage Scoop broke the news that Michael Strauss—who paid a $2.5M fraud fine & was banned from financial services for 5 years after American Home Mortgage collapsed in 2007, and later piloted non-QM lender Sprout Mortgage into bankruptcy & lawsuits—is back again. He is now helming a new California-based non-QM lender.

Why would warehouse lenders & investors sign up for the risk after his last 2 companies imploded so spectacularly?

That’s the central question we explore in today’s edition, alongside fresh data on Fannie Mae & Freddie Mac repurchase trends & signs that even the wholesale channel is embracing vertical integration.

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I asked one mortgage executive who has had past dealings w/ Strauss why investors & warehouse lenders would work w/ him again given what happened at Sprout & American Home Mortgage.

“He is brilliant & a visionary,” said NY-based mortgage exec Jeff VanNote. “He single-handedly developed the DSCR space...desperate market cowboys know he’s brilliant in that regard.”

In short, investors believe it’s worth the risk given that there aren’t many mortgage operators who know how to make money on the DSCR space like Strauss, VanNote said. “There aren’t many good deals out there. Institutional investors have all this money & need to return a profit to their investors, so that's what they do. They bring guys like [Strauss] in…”

Investor capital often chases market trends b/c they’re not building a long-term business, he added.

VanNote actually managed to settle w/ Sprout one day before the company shut its doors. ”They fucked me on a DSCR loan I took out in 2017,” he said. “They called me & said take a forbearance. I did. Next month they delivered me foreclosure docs. I spent $50K in lawyers to defend & won & they paid me out. They flew up 3 partners from their law firm from Jacksonville, Florida. I have recordings, docs etc. They wired my settlement on a Tuesday, on Wednesday they shut down.”

VanNote had a fairly philosophical take on Strauss’s latest entrance. “Just b/c something went wrong & a company went out of business doesn’t mean it was anyone’s fault. It’s the market. The market makes winners & losers. It’s all about knowing when to get in & when to get out.”

If my inbox is any indication, former Sprout & American Home Mortgage employees are less zen about their former boss getting back in the game. 

Elliot Salzman, the former chief credit officer at Sprout, was aghast that Strauss was hiring again for a new non-QM outfit. 

“Just so people know who Strauss really is: He withheld money from our paychecks for health insurance & never paid the insurer. By the time he finally did, over 60 days later, our coverage was gone & COBRA was no longer an option,” he said. “One person on my team had stage-3 cancer. She lost all benefits. She lost her home. She had to move into a trailer on her mother’s property & was never able to get health coverage again.” 

Salzman added: “People may need jobs, but if warehouse lenders & investors were burned by him & are still willing to do business with this man, that says everything. I’ve lost all respect for them. When money is involved, too many people are willing to look past even criminal behavior. What have we become?”

Strauss did not return requests for comment. 

To read more details about his new firm, upgrade to be a paid subscriber & check out our Friday edition.

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Repurchase activity remained an area of focus in Q3 ’25. A total of 1,771 loans, representing $581.2M in UPB, were repurchased during the quarter, up 18.8% from Q2 ‘25. Repurchases from Fannie Mae made up 51.1% of UPB compared to 43.7% in the prior quarter. Freddie Mac was 48.9% compared to 56.3% in the prior quarter. Fannie Mae issued 825 new repurchase demands and Freddie Mac issued 976 new repurchase demands in Q3 ‘25.

Of total resolved repurchase demands (repurchased loans + withdrawn demands), 80.3% of Fannie Mae resolved demands resulted in a repurchase, while 56.0% of Freddie Mac resolved demands resulted in a repurchase. Repurchases were most concentrated in the Q3 ‘24- & Q4 ‘24-issuance loans, which together accounted for 41.9% of total activity.

Rocket Mortgage, UWM & Fairway were the largest originators with repurchases, with a repurchase share of 8.3%, 5.3%, and 3.4% of total reported repurchases, respectively. These three originators accounted for 9.4%, 7.4%, & 2.2% of new securitization issuance in Q3 ‘25.

This report is brought to you by Milliman. Milliman provides strategic and quantitative consulting services across the mortgage market with expertise in origination, servicing and capital investment.

Source: SEC; Note: includes originated since 2020 & excludes multifamily repurchase activity.

Rocket rightfully captures an outsized number of headlines about top-of-funnel in mortgage. With Redfin, Mr. Cooper & title, they’re arguably further along than anyone in building a homebuilder-esque vertical homeownership platform. 

After all, going vertical is what consultants at Stratmor say will be the great differentiator as we (hopefully) enter a lower-rate environment & new fights for borrowers emerge. Several big broker wholesale shops are hoping to capture the lead at the source by forming their own real estate brokerages & hiring agents. Barrett’s doing it, as is NEXA. 

But there’s a problem. They’re not exactly scooping up the creme de la creme of the agent pool. Here’s a fun game: Scan the list of licensed AXEN Realty agents & find anyone who did more than a couple deals in ‘25. And for a primer on related plays, see our past reporting on dual licensing, another strategy they’re tapping.

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