How wholesale mortgage leaders think regulations will unfold

April 14, 2025 9:04 AM

Even with a pro-business regulatory shift, mortgage professionals cannot afford to be complacent, wholesale stakeholders cautioned during the Broker Action Coalition advocacy conference.

A lively panel made up of three executives from The Loan Store, Paramount Residential Group and Newfi Wholesale discussed how the changing political landscape will push state regulators to the forefront of patrolling the mortgage industry. But if you're following protocols and regulations, you likely have nothing to worry about.

"I think at the end of the day, the environment will continue changing…so pro-business or non-pro business…if you're just doing the right thing, you'll be fine no matter the environment," said Phil Shoemaker, CEO of The Loan Store.

Additionally, the group dissected what the release of Fannie Mae and Freddie Mac from conservatorship could mean and why it might raise the cost of lending.

Kevin Peranio, chief lending officer at PRMG, thinks the release will take place within the next two to three years.

These are the developments that wholesale lenders are watching.

States to ratchet up regulation

All panelists expect state watchdogs to play a more active role in monitoring the financial services space, but also enforcing regulations like the Community Reinvestment Act and the False Claims Act.

Kevin Peranio, chief lending officer at PRMG
"States like Massachusetts, California, Washington state, Kentucky, North Carolin and Illinois have always been tough. You're going to see some of these states step up and implement their own Community Reinvestment Act legislation, which will impact our business. It will hurt lenders more than anyone."

John Wise, executive vice president of sales at Newfi
"There will be an increase in state powers. They'll get more aggressive in their audits, so I think what would be good for the industry, certainly for the non-QM space, is more homogenous regulations. Anytime you layer in regulation, it becomes more difficult. We have to layer in people managing that, which increases our cost that then gets passed down to the borrower. The more consistent state laws are, the better our industry is going to be."

Phil Shoemaker, CEO of The Loan Store
"The regulatory environment is always politically driven, so you'll see the federal side hyper aggressive and then the states back off. The environment we're in right now, the federal side is more pro-business and what that's going to mean and why all of us need to really care about this is you're going to see states step up big time.

"Now if you live in red states, maybe that's less of a concern, but it doesn't matter in that you'll have these state coalitions, New York is always a big one.You will see audits ramp up, but I think at the end of the day, the environment will continue changing…so pro-business or non-pro business…if you're just doing the right thing, you'll be fine no matter the environment."

Issue with FHA rescinding eligibility for non-residence

The wholesale executives took a critical stance on Trump's administration move to limit the Federal Housing Administration loan guarantee to only residents. Some warned that brokers who continued to originate loans to non-residents could be in the cross-hairs with regulators.

Kevin Peranio, PRMG
"What HUD just did when they got rid of non-permanent residents is something we should be talking about. If someone is here on an H-1B visa, they're on a path to citizenship. They live and work here and they can buy a house…I think it was stupid for HUD to pull that back.

And I'll say one more thing. There's a lot of non-permanent resident aliens that are already on an FHA loan and if you streamline their loan, you are setting yourself up for another False Claims Act lawsuit. PRMG put controls in place last week to flag those instances coming through our system to make sure that we don't do it."

John Wise, EVP of sales at Newfi
"Our company offers ITIN loans and we have four national programs. I think the real question here is the push and pull of politics. There's risk there and the question is are those loans going to continue to perform? Our view is that if you're an immigrant in the U.S. and you're here working and paying taxes, you're not going anywhere, so we have not changed our policies."

Fannie Mae, Freddie Mac coming out of conservatorship

The speakers all agreed that the GSEs being released is not a matter of if, it's a matter of when. Once that happens, the wholesale lender executives question whether this would impact costs and what some of the drawbacks could be.

Kevin Peranio, PRMG
"Mark Calabria is a libertarian and he is on a mission for less federal government involvement. I've heard that he will try to make Fannie and Freddie go private without going to Congress. They're just going to spin it up and they think it's a two to three year proposition.

"My first thought in all of this is that they'll kill Freddie and just have one. I have no knowledge of that, but just my intuition. If Fannie is private and someone owns it, [they won't really have to listen to industry feedback as much.] You can be put on a blacklist because you did a bad loan one time as a broker shop. That's the scary part if Fannie goes private. Fannie could be maybe technologically faster and more innovative, but they'll do what they want to do and that's it. You have to be careful what you wish for."

John Wise, EVP of sales at Newfi
"If we work with the assumption that they are going to be privatized, and I think that's the current assumption, then the question becomes, what direction are they going to go if they decide to continue to scale back like they did with the H-1B visas, and reduce their credit box more towards their charters? Then there's a chance that private capital could step into that space.

"There is a chance that we go the other direction and they get privatized, and they start doing bank statement loans, they start doing DSCR. And for us, it's totally fine, we'd love to compete.

"One of the topics that has come up in the last few weeks is the administration wouldn't privatize Fannie and Freddie until they were sure that wasn't going to increase the cost to the borrower. And I don't know how you do that. I think that's a really tricky thing to do. If you lose the government subsidy, your price is going to go up."

Phil Shoemaker, CEO of The Loan Store
"Even when Fannie and Freddie come out of conservatorship, there still will be a capital rule, which keeps them grounded. There's still going to be heavy oversight from the government if things go too far, which oftentimes they do, the government has no choice but to set the second largest bond market in the world. Housing is the biggest part of GDP.

"If they falter, regardless of being private, non private, whatever, the government is going to step in and do what they do with quantitative easing. But being private does put them back in a position where private capital will come back in the market. That's a big part. And there might be a short term spike in costs, but now there will be competition and innovation in the mortgage market."