AI is fueling a surge in borrower lawsuits against mortgage servicers

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1. AI is fueling a surge in borrower lawsuits against mortgage servicers

Pro se litigation — where borrowers represent themselves in court without an attorney — has surged, with federal filings jumping 39% in fiscal year 2024 to 54,675.

Attorneys say AI tools are a major driver, letting distressed homeowners facing foreclosure generate professional-looking lawsuits in seconds without legal training.

The tells are obvious to defense counsel: 25-page responses to motions filed within 20 minutes, hallucinated case citations, and a wave of long-debunked foreclosure theories from 2010-2014 that AI is surfacing from old internet searches.

The suits mostly don't win — but even meritless filings require full review and formal responses, driving up servicer legal costs considerably.

2. Bed Bath & Beyond is buying a mortgage company

The revived Bed Bath & Beyond — now based in Nashville and focused on becoming a one-stop homeownership platform — has agreed to acquire Fathom Holdings in an all-stock deal valued at roughly $53 million.

Fathom brings residential brokerage, mortgage, title, and insurance to the table. Its mortgage subsidiary originated $248.5 million in loans in 2025. The deal is the latest move in Bed Bath & Beyond's "Everything Home" strategy, which aims to build a single consumer destination for buying, financing, and maintaining a home.

The company also recently acquired a renovation and construction firm and previously struck a deal with Figure Technology Solutions to offer home finance products via blockchain. CEO Marcus Lemonis signaled more acquisitions are coming.

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3. More Nuggets

🥼 UWM announces doctor loan offering. (UWM)

⏯️ Fed leaves interest rates unchanged but signals higher rates are ahead. (CNN)

🧑‍⚖️ Appeals court sides with CFPB's union, blocks job cuts. (Reuters)

📉 Investor home purchase activity falls by over 20% in 1Q. (ASR)

👴 Retirement plan participation reaches record high, but financial pressures persist. (Vanguard)

4. Two ex-Googlers built an AI mortgage broker — and just raised $2.9M to scale it

Ralo, founded by former Google employees Arjun Lalwani and Helly Shah, launched this week with a $2.9 million seed round backed by Y Combinator, Manresa Ventures, and Pack Ventures.

The platform uses AI to shop wholesale lender rate sheets, surface the lowest available rate for a borrower's scenario, and guide them through the entire loan process without a human loan officer.

The founders got licensed as loan officers themselves before building the product. They say customers are seeing rates averaging 0.6 percentage points below the national benchmark, with some cases reaching a full point lower, and closings averaging 15 to 17 days.

Ralo closed its first loans in March and is currently licensed in California, Colorado, and Texas, with expansion planned using the new funding.

5. Home sales beat expectations in May despite elevated rates

The national median home sale price hit $395,000 in May, up 1.8% year over year, while about 335,000 homes sold — down just 1.2% annually, better than forecasts given the rate headwinds.

Active listings rose 4.3% to 1.4 million homes, with inventory growing in 72% of tracked markets.

The regional picture is split. San Francisco prices jumped 9.6% and Midwest cities like Pittsburgh and St. Louis posted solid gains, while Texas and Florida markets saw price declines led by San Jose at -5.8% and San Antonio at -3.1%. New York sales fell 14.6% while San Francisco sales volume rose 12.2% despite tighter inventory.

☀️ You’re all caught up. See you on Wednesday!

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