Episode summary
SitusAMC’s Michael Franco on building a mortgage business that works at 7% rates
HousingWire Daily
· · 19 min · Hosts: Sarah Wheeler · Guests: Michael Franco
Summary
Mortgage leaders cannot wait for rates to fall back to old levels; Michael Franco argues they have to redesign their businesses for a 7% to 7.5% world. He says the market is operating in a smaller universe, closer to 5 million units than the 14 million-unit environment lenders may wish for, so firms need to size costs, product mix, and capacity to match today’s demand rather than a boom cycle.
Franco says lenders should look beyond traditional agency origination and consider products like HELOCs, second liens, nonQM, and affordability solutions, while also making fixed costs more variable through outsourcing, AI, and automation. But he stresses that efficiency only matters if it is paired with real process redesign and disciplined change management; otherwise, automation can simply make broken workflows move faster.
He also says lenders should favor buying technology over building it themselves, especially outside the largest firms, but they must choose partners carefully because thinly capitalized vendors can disappear and leave lenders stranded. On UAD 3.6, Franco expects short-term disruption and higher costs, but thinks the shift to standardized data will ultimately improve appraisal quality, capital markets review, and the industry’s ability to modernize.
Key takeaways
- Franco says mortgage leaders must plan for a higher-rate operating environment instead of waiting for a cycle change.
- He argues lenders should resize to a roughly 5 million-unit market and consider adjacent products like HELOCs, second liens, and nonQM.
- He says AI and automation only create value when they are tied to process redesign, governance, and clear ROI targets.
- Franco recommends buy-versus-build for most lenders, but warns that partner financial strength matters as much as technical capability.
- He expects UAD 3.6 to create near-term disruption but believes standardized data will improve appraisal quality and downstream execution.
Notable quotes
“this is not a cycle to wait out. It's a change in the operating environment”
“business leaders need to be really thinking about hedging the operating model and not just your origination pipeline”
“we think that people need to continue to look at those sorts of things, those sorts of changes in your operating model”
“automation can also just make the things that are broken happen faster”
“you have to be very careful when you're choosing who your partners are going to be”
How the episode opens
Welcome everyone. My guest for this sponsored episode is Michael Franco, CEO of Situs AMC to talk about building a mortgage business that works at 7% rates. I'm excited to get started. Michael, welcome to the podcast. — Sarah, thank you for having me. Really appreciate it.
No, I'm really excited about this conversation. you know, we've we've had a pretty big market shift um in some ways. And so, let's talk about that because the industry can't keep waiting for rates to fall. So, what hard decisions do mortgage leaders need to make now to build businesses that work in a higher rate environment?
Yeah, look, it's a obviously a problem for a lot of people and this is not a cycle to wait out. It's a change in the operating environment. You've got rates here that are seven and a quarter, seven and a half, the highest level since November of 23.
You've got about 75% of the loans in the market that are 100 to 150 basis points below where current rates are and you've got a terrible number in pending home sales that just came out in September. On top of that, you've got some people even calling for rates to get to in the eights. So, business leaders need to be really thinking about hedging the operating model and not just your origination pipeline.
In times like these, the market shrink, uh, conditions change, but it also brings great opportunities for those who can adjust, and that means sizing the business for where we are today. We'd all love to see, you know, 14 million units back again, but we're in a market that's going to be about 5 million units. And that means that you have to find a way to make your business work in a 5 million unit, you know, universe.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- mortgage lending
- interest rates
- mortgage business strategy
- housing market
- 7% rates
Companies and tickers mentioned
- SitusAMC
Watch the episode
Watch “SitusAMC’s Michael Franco on building a mortgage business that works at 7% rates” on YouTube
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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