Fannie Mae raises rate forecast

☀️ Good morning, Monday. Today’s newsletter is 613 words, a 2-minute read.

1. Fannie Mae raises rate forecast

Fannie Mae now projects the 30-year fixed rate to average 6.3% for each remaining quarter of 2026 and through most of 2027 — a notable shift from its pre-war February forecast of 6% by year-end.

The Iran conflict's impact on oil prices and inflation is the primary driver, with Redfin's chief economist noting rates are now moving more with oil prices and peace negotiation headlines than traditional economic data.

The revised outlook also trimmed origination forecasts slightly — $2.36 trillion for 2026 and $2.49 trillion for 2027, both down from February projections — as higher rates reduce refinance incentive.

2. IMBs stay profitable, but costs climb in Q1

Independent mortgage banks posted a pretax net production profit of $727 per loan in Q1 2026, up from $674 in Q4 2025, with 76% of lenders profitable — helped by servicing income as MSR markdowns slowed. Production revenues rose enough to offset costs, but just barely.

The problem: per-loan production costs jumped to $11,898, up from $11,102 the prior quarter. For context, the long-run average since 2008 is $7,903 per loan — meaning today's cost structure is running roughly 50% above historical norms.

Purchase loans made up 65% of originations by dollar volume, with average loan balances rising to $387,881. Volume per company slipped from Q4, as the market's seasonal slowdown and rate volatility kept a lid on production.

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3. More Nuggets

🧮 The true cost of mortgage credit reports: A deeper look. (Equifax)

💰 AD Mortgage announces $407M non-QM securitization. (PWD)

🍷 ION: How America beat France at wine. (theHustle)

📰 UWM brokers report use of VantageScore 4.0 improved loan terms. (HousingWire)

4. HUD audit: 1,200+ reverse mortgage borrowers may run out of tax and insurance funds

A HUD Inspector General audit found that 1,237 HECM borrowers could exhaust their Life Expectancy Set Aside accounts — funds required to cover property taxes and insurance — significantly earlier than projected, potentially exposing HUD to up to $258 million in losses.

The culprit is rising costs that outpaced HUD's formula. One borrower's annual property tax and insurance bill jumped from $2,103 in 2021 to $12,262 in 2024 — a 483% increase.

HUD's formula includes a 120% multiplier for cost increases, but auditors found 31 of 72 affected borrowers blew past that ceiling. The OIG also criticized HUD for using life expectancy tables from the late 1970s and early '80s.

5. Two Harbors faces stockholder suit over CCM proxy

A Two Harbors stockholder is seeking a restraining order to delay the May 19 merger vote, alleging the proxy statement concealed material facts — including roughly $35 million in immediate management payouts at closing and the board's doubling of the termination fee from $25.4 million to $50 million without explanation.

The complaint leans heavily on Mat Ishbia's public accusation that Two Harbors' board steered the deal to CrossCountry to protect management jobs and compensation rather than acting in shareholders' best interests.

Two Harbors denied the claims but voluntarily filed a proxy supplement to address them — without admitting wrongdoing — saying it did so "solely to eliminate the burden and expense of further litigation." A hearing on the restraining order is scheduled for May 18, the day before the vote.

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

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