Middleman
spoke
Wednesday
morning
during
a
session
at

The
Gathering,

HousingWire‘s
annual
conference
held
in
Scottsdale,
Arizona,
when
the
30-year
fixed
mortgage
rate
for
conforming
loans
reached
7.52%,
according
to

HousingWire’s
Mortgage
Rate
Center. 

Amid
a
challenging
environment,
Freedom
has
kept
its
cost
structure
low
and
has
acquired
loans
to
increase
its

servicing
portfolio. 

Middleman
believes
that
the
current
vintage
mortgages,
which
lenders
have
originated
over
the
past
four
or
five
years,
”might
be
the
best
credit
that
ever
existed.”
while
adding
that
”we’re
getting
towards
the
tail.”

To
prove
his
point,
Middleman
said
that
he
is
seeing
average
loan-to-value
ratios
of
50%,
average
debt-to-income
ratios
in
the
lower
40%
range,
and
credit
scores
in
the
low
700s,
which
is
an
”extraordinary”
credit
profile,
he
said. 

The
problem
is
that
acquiring
excellent
loans
is
expensive,
but
if
”you
want
to
live
in
a
nice
house,
you
can’t
really
complain
about
the
taxes,”
Middleman
added. 

Inside
Mortgage
Finance
(IMF)
estimates
Freedom’s
owned
mortgage
servicing
was
$458
billion
at
the
end
of
2023,
up
1.3%
compared
to
the
previous
year.
In
September
2023,
to
support
its
operations,
Freedom
Mortgage
raised
$1.3
billion
in

debt
in
about
24
hours,
more
than
the
$1
billion
expected
in
June
when
the
company
announced
the
offering.  

”We
can
raise
public
debt;
we
have
a
lot
of
money,
and
we
can
afford
to
invest
in
the
assets.
Without
being
concerned,
we
would
probably
have
$550
billion
[in
servicing]
currently
on
the
books,
and
we’re
going
to
be
approaching
3
million
customers,”
Middleman
said.

”So,
when
we
think
about
our
business
and
what
we
are
interested
in,
we
want
to
have
customers;
we
want
to
have
predictable
cash
flows.
We
want
people
with
good
credit
that
won’t
default.”

According
to
Middleman,
Freedom’s
strategy
allows
the
company
to
have
a
30
basis-point
cost
to
produce
a
loan.
IMF
estimates
that
the
company
originated
$16
billion
in
mortgages
in
2023,
down
41%
year
over
year. 

In
a
shrinking
market,
a
dangerous
step
is
that
“everybody
thinks
it’s
the
time
to
go
big,”
Middleman
said.

“You
can’t
create
economies
of
scale
if
you
lose
money
on
every
loan.
Our
business
is
one
of
those
businesses
where
you
can’t
lose
money
on
every
transaction
and
make
it
up
on
volume,”
Middleman
said. 

When
thinking
about
profitability,
another
incorrect
strateg,
is
to
offer
a
wide
range
of
products,
he
added.

“A
smaller
menu
really
adds
to
profitability
rather
than
the
larger
number,”
Middleman
said.
”And
one
of
the
things
that
somebody
that’s
running
a
good
business
might
do
is
scale
back
into
products.”