In our episode exploring capital markets and how they were affected by rate hikes and other current events, Rob Chrisman provided incredible insights into what is happening behind the scenes. 

Navigating the ever-changing landscape of the lending industry can be daunting, but with the help of industry experts like Rob Chrisman, it doesn't have to be. Rob, a veteran in capital lending and lending commentator, has provided insight into the mortgage industry for over 25 years. His expertise in loan servicing and its impact on mortgage rates is especially valuable.

To digest the meat of what we talk about in the episode, it’s vital to understand the ins and outs of capital markets and what role they play in lending. 

A Breakdown of Capital Lending

Primary vs. secondary markets

The primary market is where loans are originated and dealt with by loan officers or realtors. This is the stage where borrowers deal with lending institutions face-to-face; the loans are processed, underwritten, and closed.

The secondary market, also known as the capital market, happens after the loan is closed and the borrower starts making payments. This is the stage where the loan is sold to investors as a bond, just like a treasury bond or a German bund. 

This is where lending institutions like Bank of England package and sell loans as securities to investors worldwide, whether Fannie Mae, Freddie Mac, FHA, VA, non-QM, or jumbo loans.

Investors such as money managers, hedge funds, pension funds, etc., buy these securities and invest in them. This means that when someone gets a mortgage, they may unknowingly be invested in other people's mortgages, whether they know it or not, via their 401k, pension funds, or other portfolios. 

The loan may be sold and serviced by different companies, and the borrower may not know to whom they will send their monthly payments a few months later.

Loan Servicing

The loan servicing process is complex, involving collecting payments from borrowers, managing escrow accounts, and ensuring compliance with state and federal laws. It plays a critical role in the lending process, ensuring that lenders receive their payments on time and that borrowers remain in good standing with their loans. 

Rob’s understanding of this process allows him to offer valuable advice on how to best manage finances when taking out a loan, including tips on budgeting, debt management, and understanding credit scores.

How the Federal Reserve Impacts this Facet of Lending

In addition to loan servicing, Rob also offers insight into the effects of the Federal Reserve's decision to raise interest rates on the lending landscape. We’ve seen this move spook the market, leading lenders’ best course of action to consider offering more flexible loan terms to remain competitive. 

Lenders can adjust their strategies by focusing on educating consumers about the benefits of fixed-rate mortgages and other loan options and leveraging technology to make it easier for borrowers to compare different loan products and find the best option for them.

Bottom Line

Rob Chrisman's expertise and insights make him an invaluable resource for navigating the ever-changing lending landscape. 

With knowledge of how capital lending works, we can now speculate on how the Federal Reserve’s actions impacted the US economy and speculate on the future of lending and capital markets.  

Tune in to learn tons of stuff, from debt levels and inflation to insider knowledge of the current state of the economy and its complex relationship with debt and interest rates.