Mortgage CEOs warn liquidity is top risk as rates stay higher for longer

Mortgage executives are sharpening their focus on liquidity, technology and selective acquisitions as they brace for a higher-for-longer rate environment.

Stan Middleman, founder, president and CEO of Freedom Mortgage, said during a Housing Finance Strategies webinar on Tuesday that liquidity risk should be a top concern across the sector, especially in a rising rate cycle.

“Rising interest rates create a whole different set of issues when it comes to liquidity than falling interest rates,” Middleman said.

He recalled that during the financial crisis, his representative at JPMorgan Chase asked him not to close loans at the end of the quarter because the bank needed the liquidity on its balance sheet. “When liquidity at JPMorgan is tight, that makes the rest of us have a really good reason to worry — and that truth remains so today,” Middleman said.

Middleman noted that liquidity pressures extend beyond servicing advances to warehouse and repo facilities, as well as the cost of financing mortgage-backed securities (MBS). He said many firms that have failed in past cycles did so not because of credit losses alone but because they “didn’t have cash on hand to meet their requirements.”

Companies active in Ginnie Mae-backed loans are particularly exposed given higher delinquency rates in government-insured portfolios, which can drive up servicing advance obligations and strain operating cash.

“I’m preparing my team to be in a lower origination environment, to be really interested in the customer and taking care of our existing customers, and opportunistically doing acquisitions as they become available to us. Whether it’s assets or companies doesn’t really matter,” Middleman said. “We’re also taking advantage to improve our technology and our operations, and become more efficient and deploy some of the current technology that’s going to drive future success.”

Chris Abate, CEO at specialty finance company and real estate investment trust Redwood Trust, said the current backdrop is “challenging” for both liquidity and capital, but it’s also creating room for well-capitalized players to grow.

“We have done 35 securitizations this year – it’s more than we’ve ever done. You will be well positioned if you can manage your liquidity and take advantage of the opportunities when they arise.”

Jay Bray, president and CEO at Rocket Mortgage, said 2026 has been a year of market share gains for the company after the Redfin and Mr. Cooper Group acquisitions, but Rocket is now positioning for rates to remain elevated longer than many anticipated.

“We are investing heavily in technology, heavily in AI, and both from an efficiency standpoint as well as from a client and customer standpoint, that’s going to result in us continuing to be able to compete in a very fierce way in the marketplace and continuing to be able to grow share,” Bray said. “There’s going to be opportunities. The world is going to consolidate; we will be opportunistic, whether it’s portfolios, whether it’s companies.”

Bray added that Rocket has maintained a “disciplined approach around the balance sheet,” emphasizing that liquidity should be a central focus for mortgage operators.

“Liquidity is something we should all be thinking about — and probably talking less about some of these other issues and focus more on that, candidly,” he said.

Source: www.housingwire.com — article syndicated from the publisher’s feed; all rights remain with the original publisher.