[Gustan Cho]

Inflation Remains High, Mortgage Demand Drops, and Housing Faces New Challenges – GCA Mortgage Forums Daily News – August 26, 2026GCA MORTGAGE FORUMS DAILY NEWS | Wednesday, August 26, 2026

On Wednesday, the U.S. economy faced new challenges. Inflation remains a major concern. Higher mortgage rates have led to fewer loan applications and a sharp decline in new home sales. People are saving less, gas prices are above $4 per gallon, gold prices have hit record highs, and the stock market is at its peak. Despite this, many families feel the economy is weaker than the stock market suggests.

GCA Mortgage Forums Daily News: Aug 26, 2026 – latest on rates, inflation, housing, home prices, stocks, oil, gold, jobs, affordability.

The Federal Reserve reported that the Personal Consumption Expenditures (PCE) Price Index for July increased by 3.7% from last year, and the core PCE Price Index rose by 3.3%. Inflation-adjusted spending barely grew, and the personal savings rate was 3.0%.

The Housing Market is Also Facing New Problems

Mortgage applications continue to fall, and the average 30-year fixed mortgage rate rose to 6.78% for the week, according to the Mortgage Bankers Association. At the same time, new home sales dropped 10.5% in July compared to June, and the supply of new homes increased to 9.6 months. These changes are not solely due to high stock market levels. It is also incorrect to claim that a stock market crash, housing crash, or recession is guaranteed. To really understand the situation, we need to look past the headlines and examine the details.

Welcome to GCA Mortgage Forums Daily News

Here, we explain the numbers that matter most to homebuyers, homeowners, real estate professionals, and working Americans.

Today’s Economic Breaking News: Inflation Isn’t Going Quietly

The Federal Reserve received an unwelcome inflation report. Wednesday’s PCE data showed overall inflation at 3.7% in July compared with a year ago, well above the Fed’s long-term goal of 2%.

Core PCE, which leaves out food and energy, was 3.3%. Personal income rose 0.4%, disposable income went up 0.5%, and consumer spending increased by 0.2%. But after adjusting for inflation, spending actually dropped.

These changes affect the wider economy, influencing both incomes and household budgets. People keep spending, but inflation reduces how much their money can buy. With a personal savings rate of only 3.0%, they have little extra money to spend on non-essential items. The effect of inflation is clear in the latest Consumer Price Index (CPI) data.

Update on Consumer Price Index CPI

New Consumer Price Index (CPI) data for July show prices rose 0.1 percent from the previous month and 3.4 percent from last year. Core CPI, which leaves out food and energy, went up 0.2 percent from last month and 2.5 percent from last year.

Housing costs are also climbing. The price of shelter jumped 3.2 percent over the past year.

The biggest price increases came from energy. The energy component of the CPI rose 14.7 percent, gasoline rose 24.6 percent, fuel oil rose 39.1 percent, and food prices rose 3.0 percent.

Even though some government reports suggest pressures are easing, people still notice higher prices at the grocery store, gas station, and elsewhere. Economists may talk about cooling inflation, but most Americans still see prices climbing fast in their daily lives.

Economic and Financial News: Is the United States in a Recession?

There may not be obvious signs of a recession, but it’s clear that consumers are worried. The current data show that the largest concern for Americans is the cost of goods, not a drop in GDP growth.

While GDP growth may not meet the definition of a recession, the data do show significant cost inflation and gas price hikes, among other factors.

In July, real spending barely increased. Savings are low, confidence is dropping, and mortgage demand is weak. Home sales are slow, and prices for food, housing, energy, insurance, and loans are still high.

Consumer Confidence Just Hit a Seven-Month Low

The Conference Board says consumer confidence in the US dropped to 89.4 in August, the lowest since January this year. Reuters reports that only 5.2% of consumers plan to buy a new house in the next six months, a significant drop in buying intentions. This figure stands out to real estate professionals at the moment. Even with active buyers, monthly payments of $6,000 to $7,000 are causing many people to reconsider buying a home.

Mortgage Rates Today: Buyers Are Still Fighting the 6% – 7% Payment Problem

Mortgage rates remain well above the rock-bottom lows of the last decade. The daily consumer mortgage-rate survey conducted by Bankrate on August 26 showed the average 30-year fixed mortgage rate at 6.70%, while the average 15-year fixed mortgage rate was 6.07%.

According to the Mortgage Bankers Association’s latest survey, the average contract rate for a conforming 30-year fixed mortgage was 6.78%, for an FHA mortgage 6.46%, and for a 15-year fixed mortgage 6.10%. Because these surveys use different methods, it’s not accurate to compare their reported rates directly.

Mortgage Applications Decrease Further

The Mortgage Bankers Association cited a 1% decrease in total mortgage applications for the week ending August 21.

Refinance applications dropped 2% from the previous week and were 17% lower than the same week last year. Adjusted purchase applications fell 0.3% and were 5% below last year’s level. The mortgage market offers many considerations.

Mortgage rates are still low compared to past decades, but high home prices are keeping many potential buyers out of the market. Refinancing is tough right now because many homeowners already have much lower mortgage rates.

New Home Sales Plummet by 10.5% as Inventory Rises.

Tuesday’s new home sales report raised more concerns for builders and housing experts. Sales of newly constructed single-family homes decreased to a seasonally adjusted annual rate of 607,000 in July, a 10.5% drop from June and 6.3% below July 2021 levels. In the interim, roughly 488,000 new homes were available for sale, equating to a supply of 9.6 months of sales at the current pace.

The median price for a new home in July was about $393,800. With slower sales and more homes on the market, builders are getting ready for more competition. Incentives will likely play a bigger role in 2026.

When looking at new homes, there’s more to think about than just the price. Sellers often offer lower mortgage rates, help with closing costs, upgrade packages, and other incentives to attract buyers. A builder may resist cutting a home’s asking price but offer financing packages with thousands of dollars in incentives. For most buyers, the monthly payment is more important than a small decrease in the asking price.

Existing-Home Market Stuck in First Gear

Across the nation, the existing-home market isn’t crashing, but it is moving slowly.

• The sales pace of existing homes was 4.06 million units, down 1.7% from the prior month but up 0.7% from the previous year.
• The median existing-home price was $434,100, a 2.0% increase from the previous year.
• So, it is wrong to say the housing market is having a widespread crash.
• Sales are moving very slowly.
• Affordability is a serious problem.
• Some local markets are beginning to show signs of weakness.
• Most importantly, home prices have not experienced a bubble like the one during the 2008 housing crisis.

Prices Are Still Going Up, Inflation Changes The Story

According to the FHFA House Price Index, home sales in the U.S. increased 2.1% in the second quarter of 2026 from the prior quarter, including a 0.3% increase from the previous quarter. Prices from the second quarter of 2025 to the second quarter of 2026 increased by 2.1%. Alaska posted the highest increase at 8.3%, while Vermont showed an increase of 7.3%, followed by Illinois and West Virginia at 5.6% each.

One of the worst declines of the 46 states plus DC was New Mexico, down -1.2% from the previous year. The S&P CoreLogic Case-Shiller National Home Price Index showed a 1.5% increase in June compared to last year. Seattle saw a 2% drop from last year, and Chicago homeowners should note that inflation is rising faster than home prices nationwide.

The Case-Shiller report shows that for 13 months in a row, home values, adjusted for inflation, have fallen. This means home prices can go up even while their real, inflation-adjusted values are actually decreasing.

America’s Housing Affordability Crisis

The primary challenge remains housing affordability. NAHB’s analysis for the second quarter showed that a typical family earning about $106,800 would need 34% of their income to pay the mortgage on a typical new house. Owning a median-priced existing house would take about 36% of that family’s income. For typical lower-income households, a new house mortgage would need about 67% of their income, and for a typical existing house, 71%. For most families, there is little hope for an easy solution to the housing affordability problem.

Home Prices Affect How Affordable Homes Are

Property taxes and insurance costs affect how affordable homes are.

• The costs and fees associated with home upkeep and homeowner association dues also affect how affordable homes are.
• Wages need to rise just to keep up with the constant increase in costs.
• Some parts of the mortgage market have clearly gotten worse.
• Both purchase and refinance activity have slowed down significantly.
• Getting a mortgage is not cheaper now, and loan officers are competing for fewer clients.
• Not all parts of mortgage lending can be described as deteriorating.
• In fact, mortgage credit was easier to get in July than in earlier months.
• The Index (MBA) rose 2.5% to 108.4 in June, its highest level since July 2022.
• Conventional credit increased 3.0%, government credit 1.8%, and jumbo credit 4.2%.
• The MBA attributed the rise mainly to substantial growth in non-QM credit offerings.

Improving Second-Quarter Profits Were Also Reported by Independent Mortgage Banks

The MBA also reported that the average pre-tax production profit per loan was $973 (up from $727 in Q1), but production costs remained well above historical averages.

The Mortgage Problem is Low Demand, High Price, and Cost, Not A Lack of Credit

Recognizing this difference is key to making sense of today’s mortgage market.

• The current mortgage market is not 2008.
• With high financing costs, fewer deals, tight affordability, and high origination fees, profitability is difficult right now.
• Conversely, non-QM, jumbo, and other specialized mortgage products continue to grow and, in particular, offer opportunities for loan purchases for borrowers with atypical income, credit histories, and other issues that may require complex loan documents, even in the current slow housing market.

Federal Reserve Watch: The Stakes Are Higher Than Ever

The Federal Reserve stood pat, keeping its target range for the federal funds rate at 3.50-3.75% on July 28-29. The decision was 9-3. Three members of the Fed preferred a 25-basis-point increase. Inflation remains high, and the Fed continues to address price pressures relative to the 2% objective amid energy price shocks.

A 3.7% PCE for July signals policymakers to be more cautious. The event is on September 15-16, 2026. Markets on Wednesday priced in a higher chance of a Fed Funds Rate increase in September, but still expected a hold to be more likely.

Do Not Assume a Fed Move Automatically Changes Mortgage Rates by the Same Amount

Other factors such as Treasury yields, mortgage-backed securities, inflation expectations, economic growth, credit spreads, and investor demand all affect mortgage rates.

The Fed can hold rates and see mortgage rates go up. The Fed can move short-term rates, while 30-year mortgage rates move in the opposite direction. Homebuyers should keep an eye on bond market trends, not just the Fed’s moves.

Wall Street Ends Lower, but There Was No Crash Today

After a hawkish inflation report was released on Wednesday, major U.S. stock indexes closed slightly lower.

• The Dow Jones Industrial Average closed at 53,463.88 after a 0.21% drop.
• The S&P 500 closed at 7,675.70 after falling 0.02%, and the Nasdaq Composite closed at 26,130.20 after a drop of 0.08%.
• Even with these declines, the market still appears overvalued, which makes analysts uneasy.

GCA MORTGAGE FORUMS Fact Check States:

• A large market correction is definitely a possibility, but it is not guaranteed to happen.
• Anyone who states that a large market correction will occur in the Dow Jones, S&P 500, or Nasdaq is making a prediction.

Why Investors Can’t Afford to Tune Out

Arguably, the strongest case for bullish sentiment is a strong corporate earnings report. However, there are also strong AI-related sentiments, increased government borrowing, geopolitical tensions, rising inflation, and strong pressure on energy prices.

• As language evolves, so must our understanding.
• A recent Reuters survey suggests respondents expect the S&P 500 to reach around 7,900 points by the end of 2026.
• However, many of those surveyed signaled a potential short-term correction.
• This consensus can easily be mistaken.
• Bullish predictions can prove mistaken.
• Bearish predictions can prove mistaken.
• The best approach is to stay aware of risks without panicking.
• People planning to retire or buy a home should not assume that recent stock market gains will last forever.
• Prices Fall on Wednesday, but Energy is Still an Economic Threat
• Energy is still one of the wild cards shaping inflation, mortgage rates, and consumer confidence.
• Brent Crude settled at approximately $87.84 per barrel, down 0.84%, while U.S. West Texas Intermediate settled around $82.23, down 0.16%.
• Market participants are paying attention to developments in negotiations between Iran and Oman over the Strait of Hormuz, one of the world’s most important Energy Corridors.
• Prior to the current conflict, about one-fifth of the global oil and gas shipments moved through that waterway.
• Any problems in this Strait can cause major changes in oil, gas, transportation, manufacturing costs, and inflation expectations.
• Inflation expectations are an important factor in setting mortgage rates.

Gasoline Prices Over $4 Are Squeezing Household Budgets

• According to AAA, on August 26, the average price paid by U.S. consumers for a gallon of gasoline was about $4.10.
• Elevated gasoline prices add a financial burden, reducing disposable income for food, savings, debt repayment, and other expenses.
• Families with the longest commutes are most affected by high gas prices.

Today’s Gold Prices Are High, but Why?

• Gold prices retreated from multi-month highs on Wednesday,
• Spot gold fell around 1.3% to $4,595.93 per ounce, while US gold futures settled at $4,653.30, a 1% fall.
• Silver fell around 1% to $67.93 per ounce.
• Gold has soared to its highest price ever in dollar terms.
• Precious metals such as gold are popular hedge assets, and investors have bought them to protect their wealth from currency risk and fears of inflation, geopolitical uncertainty, and government debt devaluation.

Can Gold Reach $5,000?

• It is possible, though no one should expect it.
• A RA Reuters source predicted that sometime in 2026, gold could trade above $5,000 and possibly set new highs in 2027.
• With any investment, it is essential to be prepared for potential downturns, as gold prices can decline rapidly.
• Investors should view gold as just one part of a balanced portfolio, not something to buy just because others are.
• The job market is still strong, with steady unemployment and a slight drop in hiring.
• The recent report cites a loss of 23,000 jobs in July, with the unemployment rate steady at 4.1 percent.
• This trend of stable, though declining, jobs persists in the health care sector, with an increase in hires, and in the local government teaching sector and retail trade, with decreases in hires.

GCA Mortgage Forums Jobs and Unemployment News

Annualized unemployment claims declined steadily to 206,000 for the week ending August 15, down 6,000 from the previous week. These numbers don’t spell doom for the economy. They indicate a return to slower but stable job growth after the pandemic-related employment boom.

Balances for credit cards and auto loans also increased during the quarter. With housing and energy costs rising, many families are under financial pressure. Most are still working and paying bills, but their savings are smaller than ever in case of an emergency.

GCA Mortgage Forums Housing Market Forecast and News

The housing market, though, will still be slow to recover economic growth. Hiring and jobs will remain the primary focus. The average consumer is still in a difficult financial position. Even with record market highs, many households are vulnerable and are not driving the recovery as Wall Street’s numbers might suggest. According to the Federal Reserve’s annual survey, in 2025, 58% of participants reported that their financial situation had worsened due to rising prices.

Approximately 16% of participants reported being unable to pay all their bills for the previous month. Conversely, about 63% stated they could cover a $400 emergency expense, whereas 12% were unable to.

Despite these figures, surveys do not indicate that most Americans are unable to pay their bills. Soaring stock prices don’t guarantee financial security for everyday Americans. Total household debt for the U.S. in the second quarter of 2026 was approximately $18.8 trillion, according to the New York Federal Reserve. Household mortgage debt was approximately $13.1 trillion.

Property Taxes Continue to Infringe Upon Affordability

While rising mortgage costs grab headlines, fast-growing property taxes can chip away at affordability just as much.

ATTOM’s recent report on the cost of property taxes for the country’s 2025 single-family homes was about $396.8 billion, a 3.7% increase from the previous year.

New Jersey has the highest average property tax in the nation at $10,499, followed by Connecticut at $8,901, New Hampshire at $8,174, Massachusetts at $7,904, and New York at $7,732.

Average property taxes for single-family homes hit $4,427, a 3.0% year-over-year increase. Illinois has the highest average effective property-tax rate in the nation at 1.84%, followed by New Jersey at 1.58%, Vermont at 1.40%, Connecticut at 1.36%, and Ohio at 1.32%.

Closing Costs: Taxes Are Part Of Your New Monthly Budget

A fixed-rate mortgage keeps your principal and interest the same, but unexpected increases in property taxes or insurance can still raise your total housing costs particularly important for those using escrow accounts.

Borrowers may receive loan approval and close on their mortgage, only to encounter subsequent tax adjustments or escrow shortages that increase monthly payments. It’s crucial to factor in insurance and taxes when tallying up your true housing costs.

State Budget Growth: Focus On The Slowly Eroding Foundations Of Finance Rather Than The Popular Press

Most states are required by the Constitution or by law to have a balanced budget. Reporters must be careful in how they describe state budgets, as language matters. When analysts refer to “state budget deficits,” they usually are not referring to budgets that continue to operate while maintaining an imbalance, as with the federal budget. They are referring to projected budget gaps that lawmakers are required to fix by reducing spending, raising taxes, transfers, and so on. To start, Pew reported that states were entering a more difficult fiscal period after several years of decreasing ending balances. Sixteen states plan to tap into their rainy-day funds in fiscal year 2027.

States with Budget Deficits and Property Tax Increase Forecast

Colorado faced a $1.2 billion structural gap, while Maryland faced a $1.5 billion gap that was closed through transfers and expenditure changes. Georgia’s tax policy was projected to leave a gap of about $1.3 billion that would need both spending changes and the use of reserves.

Longer-term projections also identified structural fiscal issues in several other states, including Alaska, California, Florida, Illinois, Minnesota, New York, Pennsylvania, and Rhode Island.

While California has longer-term structural issues, the state closed the 2026-27 budget with a structural balance. Because of this, the state should not be described as having an unbalanced budget for the current year. That’s why GCA MORTGAGE FORUMS DAILY NEWS checks the facts instead of just repeating popular headlines you should know that holding out for the ‘perfect’ moment to buy rarely pays off in a big way. This means considering your mortgage, taxes, insurance, HOA dues, utilities, and maintenance, and setting aside some emergency savings.

Incentives from Home Builders and Sellers

Some prospective buyers may benefit from a buyer’s market and from increased incentives for sellers and builders to negotiate. Still, buyers looking for better deals should be careful not to overextend their finances. Individuals should assess risks based on their personal circumstances.

Strong Buyers Can Negotiate as If the Press Says More

A slow market with more homes for sale can give buyers an advantage.

• Buyers can look into seller concessions, permanent or temporary rate buy-downs, closing cost credits, or builder financing deals.
• The best deal is not always the biggest price cut. Often, it’s the home with the lowest monthly payment.
• For homeowners with mortgage rates in the 2%, 3%, or even low 4% range, a sale means trading down a low mortgage for a new high mortgage rate in the 6% to 7% range.
• This situation helps explain why the supply of resale homes remains limited, even as demand slows.
• Homeowners with low mortgage rates should evaluate the costs of cash-out refinancing, home equity lines of credit, and home equity loans before making financial decisions.

What This Market Means to Borrowers Rejected Elsewhere

Even when the market gets tough, borrowers facing hurdles still have doors open to them. The first lender may impose additional requirements in the areas of credit, debt-to-income ratio, employment, or document checks beyond the loan program’s minimum requirements, resulting in the borrower not qualifying.

Other borrowers may be looking at an FHA or VA manual underwriting, non-QM loans, bank-statement loans, DSCR loans, alternative income documentation, or other programs.

Gustan Cho Associates’ published materials describe the company as specializing in complex mortgage files and in borrowers who have been denied by other mortgage lenders. As with all mortgages, final approval remains contingent upon the applicable loan program, the lender’s requirements, the mortgage investor’s rules, and the supporting documentation and underwriting.

GCA Mortgage Forums Fact Check: Five Headlines We Will Not Misrepresent

Is the U.S. Economy Already in a Recession?

Not with the data we currently have. Real GDP expanded at a 1.5% annualized rate in the second quarter. There are definitely real risks to the economy, but “recession” should not be suggested as a fact without evidence.

Is the National Housing Market Crashing?

I don’t think so. National price indexes show no crash. In fact, some local markets continued to fall, but the second-quarter FHFA prices rose 2.1% from the prior year, and Case-Shiller prices increased 1.5% in June.

Is the Mortgage Industry Collapsing?

Mortgage demand is low, but credit remained strong in July, and independent mortgage banks reported higher profits in the second quarter. So, the answer isn’t “yes”—the mortgage industry is under a lot of pressure.

Major Stock-Market Crash Guaranteed?

It’s unlikely there will be a major stock market crash. While elevated equity valuations and HIGH market concentration do create risks, there is no credible source that predicts a crash or can pinpoint when it will occur.

Is Inflation Back Under Control?

No, inflation is still above the Federal Reserve’s target. PCE inflation in July was 3.7%, above the Fed’s preferred inflation target of 2%.

GCA Mortgage Forums Takeaway for August 26, 2026

Today’s economic signals are a mixed bag and growing more worrisome, but there’s a pattern beneath the noise. Economic output and jobs are still in the plus column. But buying or selling a home is expensive, with national prices and essential costs like housing and energy on the rise.

As costs climb and savings shrink, buyers are growing cautious, leading to a sharp drop in new home sales from last year. Meanwhile, the stock market keeps climbing, notching new record highs.

GCA Mortgage Forums Daily News will continue to spotlight the differences between the housing and stock markets, always with an eye on the bigger economic picture. Inflation and steep borrowing costs may not topple the economy, but the real question is:

How Long Can Families Shoulder These High Housing Costs Before the Strain Becomes Too Much for the Economy to Bear?

We’ll keep tracking this story as it unfolds, making it a central theme in our future coverage.

Questions About Mortgage Rates, Housing, and the U.S. Economy Asked Frequently

What Are the Mortgage Rates on August 26, 2026?

Currently, 30-year fixed mortgage rates are around the upper 6 percent range. According to Bankrate’s study, the national average was around 6.70 percent. According to the Mortgage Bankers Association, their weekly contract index rate was 6.78 percent. Lenders will offer different rates to individual borrowers based on credit, loan terms, points, property, occupancy, LTV, and other factors.

Will Mortgage Rates Drop in 2026?

This is possible; however, neither a definite date nor a definite drop is known. A drop in mortgage rates would depend on how inflation and bond market yields behave. At this point, the July PCE inflation rate of 3.7 percent would not prompt investors to speculate that mortgage rates will return to extremely low levels.

What Is the Current U.S. Inflation Rate?

According to the latest Consumer Price Index (CPI), consumer prices increased by 3.4 percent over the previous year. The latest PCE price index also spiked by 3.7 percent. The two metrics use different methodologies, so there is no expectation that they will be the same.

Will the Housing Market Crash in 2026?

There has not been a national crash in the latest published data. Sales are weak, and individual markets may decline; however, FHFA national home prices for the second quarter were still up 2.1 percent from last year. Buyers need to assess their local markets rather than assuming the same will happen across all markets.

Are Housing Prices Starting to Decrease?

This is true for some markets. National nominal prices are still higher than last year, but Case-Shiller suggests national price growth is lower than consumer inflation. Basically, house values are decreasing.

Is Now a Good Time to Buy a House?

It can be for a financially prepared buyer who expects to reside in the property for a while and can sustain the entire costs of ownership. Slower sales and increased builder inventory may make deals more favorable to buyers. People predicting higher interest rates who plan to purchase a house should not assume they will not have to pay as much.

Is the Stock Market Going to Crash?

There is no way to confirm that a stock market crash will happen or when it will happen. Yes, there are macroeconomic reasons that could influence a market decline, such as inflation, high interest rates, geopolitical concerns, and high stock valuations, but people need to distinguish risk and uncertainty. The current situation calls for diversification based on personal risk tolerance rather than fear-of-the-month predictions.

Why Is Gold So Expensive in 2026?

People have valued gold for centuries. Today, gold remains valuable for several reasons. It tends to rise in price when geopolitical tensions are high, inflation is a concern, and there are worries about currency and debt. Many investors see gold as a safe-haven asset. On Wednesday afternoon, spot gold was priced at $4,596 per ounce. Some forecasts predict gold could go above $5,000, but for now, that is the best-case scenario.

Why Are Gas Prices So High?

Gasoline prices are driven by oil supply and demand, geopolitical risk, oil market disruptions, refinery conditions, taxes, and regional transportation. As of August 26, the national average cost of a gallon of gasoline was $4.10. A year prior, the CPI reported a 24.6% increase in gasoline prices.

Can I Still Get a Mortgage After Another Lender Turned Me Down?

It is certainly possible. The reasoning behind the rejection is something that you should consider. In certain circumstances, a borrower may have access to programs such as FHA, VA, conventional loans, manual underwriting, no-documentation, or low-documentation programs. Of course, there are still requirements for each.

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• Ask the headline question.
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GCA Mortgage Forums News is a news and community platform and is not an NMLS licensee. Mortgage licensing belongs to Gustan Cho NMLS 873293, the National Managing Director, Branch Manager, and NMLS licensed mortgage loan originator. Gustan Cho Associates is a DBA of Coast 2 Coast Mortgage Lending, LLC NMLS 376205, and the staff at Gustan Cho Associates are NMLS-licensed mortgage loan originators. This DISCLAIMER is for compliance and for consumer protection.

GCA MORTGAGE FORUMS DAILY NEWS – Facts First. Mortgage Expertise. Real Housing Stories

https://www.youtube.com/watch?v=terAJ5Ao5qM

[Gustan Cho]

Your response is so confusing and does not make sense. I don’t need a book or a formal thesis that does not make any sense. I appreciate your answer; however, look at what you wrote!!!! Respectfully, it is enough to confuse a genius with a 300 IQ. Let me reword it a different way. From my knowledge, you DO NOT NEED TO BE LICENSED to originate and broker commercial loans. Any property that is not a one to four unit residential property and exceeds the number of unit of more than four units is generally a commercial loan. Let me re-ask the question. How many states in the United States require a form of licensing to originate commercial loans, and which states do not? Thank you.

[Gustan Cho]

Managing cash flow and unsecured debt is challenging when your credit score is below 580. Avoid taking out additional loans, as this may worsen your financial situation.

Your Current Cash Flow

Your annual income is approximately $90,000, or $7,500 per month.

Known Monthly Obligation Amount

Mortgage $2,300

Vehicle Loan 1: $576

Vehicle Loan 2 $838

Total Known Fixed Payments: $3,714

• After fixed payments, you have $3,786 remaining each month before accounting for utilities, food, insurance, fuel, credit card bills, and other expenses.
• Nearly half of your monthly income is allocated to credit card payments.
• With over 30 cards near their limits, minimum payments may consume the remaining $3,786 each month.
• Timely bill payments are essential for maintaining a positive credit history.
• To protect your credit, avoid debt settlement companies.

Best Path: Stabilize First

With a credit score below 580 and high credit card balances, obtaining a consolidation loan is difficult. If approved, the interest rate may be high, and lower monthly payments could result in higher total interest over time.

Consider a nonprofit debt management plan (DMP) before seeking additional loans. A DMP counselor will review your debts and income, may negotiate lower interest rates and fees, and help you establish a single monthly payment. You will still owe the full balance; this is not debt settlement.

According to the CFPB, credit card companies often offer hardship programs, and nonprofit counselors can assist with budgeting and repayment plans. DMPs consolidate your debts into one payment and may reduce interest rates and fees, but typically close your accounts to new purchases.

Since most of your 30 credit cards are maxed out, this can help prevent further increases in your balances. Use cash or a debit card for necessities, and avoid using your credit cards. Do not close any accounts or attempt further consolidation at this stage. Prepare a detailed list of all debts, including creditor, balance, credit limit, interest rate, minimum payment, and due date for each card. Also, list all other monthly bills, such as car insurance, utilities, groceries, medical expenses, child support or alimony, taxes, subscriptions, and personal loans.

Contact the Hardship Departments of Each Credit Card Issuer and State the Following:

• State, “I have always made payments on time, but the payments on my revolving debt have become unaffordable.”
• Inquire about hardship programs, lower APRs, fixed payment plans, or other assistance options.
• Obtain all details for any offer, including interest rate, payment amount, plan duration, fees, account status, and credit report impact.
• Schedule meetings with two nonprofit counseling agencies affiliated with the National Foundation for Credit Counseling (NFCC).
• Request a formal written DMP proposal from each, not just an estimate.
• Compare monthly payments, fees, interest rates, repayment terms, and the effect on your credit accounts.
• NFCC-certified counselors will review your budget and may recommend a DMP.
• If these options are not suitable, continue making minimum payments to protect your payment history.
• Avoid for-profit debt settlement programs, as they often advise stopping payments, which can damage your payment history.
• Balances may increase due to additional fees and interest, potentially leading to collections or legal action.
• Forgiven debt may also be taxable.
• The CFPB recommends nonprofit counseling, and the FTC warns against scams and false promises from debt relief companies.
• By law, these companies cannot charge fees until your debt is reduced or paid off.
• If considering refinancing or a home equity line of credit (HELOC) to pay off credit cards, be aware that this converts unsecured debt into debt secured by your home.
• Given your current credit card usage and 580 credit score, loan terms may be unfavorable.
• Only consider this option after receiving a written DMP offer, reviewing all mortgage and closing costs, and understanding the payments and risks.
• Calculate the total cost, payment terms, fees, and APR to ensure all credit card debt is addressed.
• Lower payments over a longer period may result in higher overall costs.
• If DMP payments are unaffordable or the plan exceeds five years, consider consulting a bankruptcy attorney.
• Local attorneys can provide a judgment-free consultation and review your finances.
• Before using home equity or retirement savings, seek legal advice.
• If you have a steady income, a court-supervised repayment plan may offer more flexibility than managing credit card bills on your own.
• Seek legal advice tailored to your state and financial situation.
• A professional can explain your options and help you determine the best course of action.
• To decide your next step, whether it is a hardship program, DMP, consolidation, changing vehicles, refinancing, or bankruptcy, you will need to know your total credit card balances, total minimum monthly payments, and essential monthly expenses, excluding mortgage and car payments.

For example, with $50,000 in credit card debt at a 30% interest rate, you would pay over $1,250 in interest each month before reducing the principal. This demonstrates why minimum payments are often insufficient, even with a high income. Prepare a comprehensive list of your debts and obtain two written proposals for nonprofit DMPs.

[Gustan Cho]

Yes, there are practical ways to lower your payments and manage debt. Given your financial ratios, it’s important to have a careful plan and consider getting professional advice.

• Begin by making a plan to pay down your debt. Focus on paying off the balances with the highest interest rates first. You might also want to look into debt consolidation to lower your monthly payments. Having a clear payoff plan can save you money in the long run.
• Take another look at your housing costs. If you can get a better mortgage rate or loan terms, refinancing could help lower your payments.
• Set up a budget that covers your essentials, debt payments, and some savings for emergencies. Lowering your credit card balances and improving your credit score will also help if you need to borrow in the future.

If you’d like, I can create a step-by-step plan based on your specific numbers and suggest some refinancing or consolidation options.

[Gustan Cho]

NMLS State Licensing Costs for Mortgage Brokers, MLOs, Branches, and DBAs

Mortgage licensing support costs vary widely. When reviewing proposals, it is important to separate consulting service fees from those paid to the NMLS, state regulators, surety companies, registered agents, testing services, and other entities.

Mortgage licensing support quotes may range from several hundred to several thousand dollars, but only a small portion usually covers NMLS or state fees.

Mortgage companies should request a detailed breakdown to distinguish consulting charges from government or third-party fees. As of 2026, the NMLS may charge a processing fee for company, branch, and individual MLO filings, as well as sponsorship requests. State licensing agencies may impose fees for applications, investigations, renewals, branches, background checks, and licenses. There may be additional costs for surety bonds, registered agents, foreign business registrations, certificates of good standing, fingerprinting, credit checks, and others.

Typical Cost to Establish a New Mortgage Brokerage

Establishing a new mortgage brokerage is significantly more involved than obtaining an additional state license for an existing company. A licensing consultant may be required to establish the company’s NMLS record, prepare the MU1 filing, create MU2 records for owners and control persons, identify qualifying individuals, draft organizational charts, review financials, arrange surety bonds, coordinate registered agents, develop business plans and policies, register as a foreign entity, and complete initial mortgage broker applications.

Establishing a Basic Licensing Infrastructure Through Professional Consultants

Establishing a basic licensing infrastructure through professional consulting services typically costs between $2,000 and $5,000, excluding state application fees and other service costs. Costs for more complex organizations will vary.

Companies with multiple owners, changing corporate structures, strict compliance requirements, audited financials, several qualifying individuals, or legal considerations may require additional consulting services.

These processes are generally more time-consuming than renewing an existing license.

For a single-state license, consulting fees in the range of $1,000 to $1,600 per state are considered reasonable, based on publicly available pricing in the mortgage licensing sector.

Cost of Getting Multi-State NMLS State Mortgage Licenses

Companies seeking licenses in multiple states should expect to receive a volume discount on consulting fees. Most of the basic information provided by a mortgage company can be reused for licensing across multiple states.

Corporate documents, ownership information, policies, charts, records of control persons, and the MU1 filing do not need to be duplicated for each state.

For significant multi-state expansions, a competitive professional fee is approximately $900-$1,200 per state.

Some states are more demanding than others.

Cost and Fees of NMLS State Licensing Advisors and Consultants

Consultants may charge higher fees in states that require additional documentation, strict qualifying-individual rules, specific office setups, or complex regulatory communication. As a clear example, one mortgage licensing company discloses pricing for obtaining a state license in one state at approximately $1,495.

Once a client obtains multiple licenses, the company discounts its per-state pricing to approximately $1,150 for large multi-state licensing orders.

This demonstrates that most companies expect and receive volume discounts when obtaining licenses in multiple states. Companies licensed in 30 or 40 states should anticipate discounted per-state licensing fees rather than paying standard rates.

Cost of Licensing a Newly Hired Mortgage Loan Originator

A new state MLO license for a newly hired mortgage loan originator typically costs less than a company license. The market price for hiring a professional consultant to secure an MLO license is usually between $125 and $225 per MLO per state.

A rate of $150 to $195 per MLO per state is more competitive for companies that employ many mortgage loan originators or operate in multiple states.

A consultant may assist by reviewing the MLO’s current licenses, determining if additional education or examinations are required, completing or updating the MU4 filing, managing background checks, identifying state-specific requirements, tracking application progress, and communicating with regulators.

Government fees charged through the NMLS and state agencies are in addition to professional consulting fees.

Cost of Transferring an MLO From Another Mortgage Company

Usually, it costs less to transfer an MLO to a new employer than to obtain new licenses, provided the MLO already holds valid state licenses from previous employment.

A reasonable professional consulting fee for a simple MLO transfer is approximately $50 to $125 per state. Large mortgage companies that recruit multi-state MLOs should negotiate bulk transfer pricing.

For example, if an MLO licensed in fifteen states moves to another company, transferring those licenses generally requires less work than processing fifteen original license applications, as long as the licenses remain valid and only the sponsorship or employment changes. For example, if twenty MLOs join your company and each holds ten or fifteen licenses, you should not be charged the full retail price for all two hundred transactions.

Cost of Underwriting an MLO Under a Mortgage Company

When a mortgage company sponsors an MLO through NMLS and the state license is approved without issues, the process is primarily administrative.

There is a fee for NMLS sponsorship, and a consultant may charge a fee for reviewing the license, sponsorship, and eligibility, as well as for transaction monitoring.

For straightforward sponsorship, a consultant’s fee, in addition to the NMLS sponsorship fee, typically ranges from $35 to $100.

Higher fees may be justified for situations involving other issues, such as requests for license transfers, deficiency rectification, amendment requests, correspondence with state regulators, and compliance issues. Mortgage companies should check whether MLO sponsorship proposals cover just the sponsorship or also include additional licensing services.

Mortgage Branch Office

Obtaining a license for a mortgage branch generally costs much less than licensing an entire mortgage company.

A basic branch license application may include filing an MU3 branch form, designating a branch manager, confirming the branch office address, obtaining state approval, providing the names of the responsible individuals, and satisfying any state-specific requirements for an office or branch.

Professional Fees for Creating NMLS Approved Branch Office of Mortgage Company

A professional consulting fee of $300 to $500 is typical for the first branch in a state. For additional, similar branch licenses in other states, a fee of $150 to $300 per state is considered competitive. Some states have more complex branch office laws, which may require a physical office, specific signage, certain records, branch managers, qualifying individuals who must pass an exam, local business licenses, and zoning board approval. These additional requirements can increase costs.

From a consulting standpoint, a reasonable estimate for a full net branch establishment would be $500 to $1,500, with state and NMLS costs additional.

Preparing a simple branch license application differs from setting up a mortgage net branch, which requires a consultant to analyze the branch, branch manager, location, licensing structure, corporate control, MU3 filing, branch approvals and compliance, responsible individuals, compensation plans, policies, regulatory requirements, and the relationship between the parent company and the branch.

Consultant’s Fee of Completing MU3 Filing

If a consultant is merely completing an MU3 filing for a completely structured and compliant branch, the fee would be less.

Mortgage companies should understand that labeling a branch as a “net branch” does not make it an independent mortgage company. The licensed parent company must still provide the supervision and control required by law.

Cost of Establishing a DBA or Trade Name

DBA and trade name licenses can vary substantially from state to state. In some states, a DBA or trade name can be added by registering the name and updating the company’s NMLS listing.

Mortgage companies may require multiple approvals from the Secretary of State, Department of Financial Institutions, banking and mortgage regulators, or other state agencies before a name can be used.

A basic trade name change or DBA is approximately $100 to $300 per state. A complicated DBA may cost $250 to $500 per state for corporate filing, regulatory approvals, changes at the NMLS, and branch-level filing. A DBA consulting fee of $750 to $1,000 per state is only justified in cases involving complex regulations.

Volume Discount for Setting Up Multiple States

Companies expanding into multiple states should seek discounts when adding DBAs or trade names in several jurisdictions.

Pricing for future state expansions should not be left solely to contract terms. These costs should be proactively negotiated.

Companies should negotiate lower prices for additional MLO licenses, targeting a range of $150 to $200 per MLO per state.

Similarly, lower prices should be negotiated for branch licenses, with a target range of $200 to $350 for a straightforward branch filing. For ordinary DBA additions, the expected cost per state is $100 to $250.

Routine DBA amendments typically cost $75 to $150. Complex amendments may range from $200 to $500 or more, depending on the work involved.

Cost of NMLS Amendments

MLOs and mortgage companies all must ensure their NMLS records are accurate. Amendments are required for changes to addresses, ownership, officers, directors, control persons, branch managers, trade names, and contact information, among others. A simple amendment typically costs $75 to $150.

More complex amendments involving ownership, control persons, qualifying persons, regulatory approvals, or corporate changes across multiple state regulators may cost several hundred dollars or more.

The key factor is whether the consultant charges based on the amount of work involved, such as during a substantial corporate restructure of a national mortgage company.

Annual Mortgage Company License Renewals

After a license is issued, additional fees associated with mortgage licenses may still apply. Annual NMLS and state-specific licensing requirements must also be met. For straightforward annual renewals, professional consulting fees are expected to be in the range of $75 to $150 per license per state.

Companies with licenses in 30, 40, or 50 states should receive significant discounts compared to those with only one or two state licenses.

Additional charges may include preparation of the consultant’s financial statements, annual reports, Mortgage Call Reports, surety bond renewals, state reports, ownership updates, and responses to regulatory requirements.

NMLS Branch License Renewals

Branch renewals usually take less time than corporate renewals. A reasonable professional consulting fee for administering annual renewals for one branch in one state is $50 to $100. Companies with 20 or more branches in a state should expect and request a discounted rate. Significant cost savings may be achieved by engaging a single consultant to manage all branch renewals.

MLO License Renewals

Another area where substantial savings are possible is the administration of MLO renewals. For administering an MLO’s renewal in a single state, a reasonable professional consulting fee is $25 to $75. The MLO may still need to incur the cost for state renewal, NMLS processing, and continuing education.

Companies with numerous multi-state MLOs should consider establishing a contract with an annual per-MLO maintenance fee to cover routine licensing tasks, rather than paying for each transaction individually.

Mortgage Call Reports and Annual Regulatory Filings

Mortgage companies that operate under a state license will likely have ongoing reporting requirements in addition to yearly license renewals. These can be Mortgage Call Reports, financial condition reports, annual reports, ownership filings, surety bond updates, and other regulatory reports. A renewal report or licensing maintenance may cost $75 to $200 in professional consulting fees. More complex regulatory reporting incurs higher costs, especially when reconciling financial data, communicating with management, and drafting responses to regulators regarding identified deficiencies.

Ongoing Mortgage Licensing Compliance Retainers

A national mortgage lender or broker will likely have a steady need for licensing services. It’s likely there will be ongoing MLO hires, terminations, sponsorships, license transfers, branch additions and closings, DBA registrations, state license expansions, changes to the primary address and qualifying individual, annual renewals, and correspondence and reporting to regulatory agencies. When a company has a high volume of licensing activities, paying for each service separately can become costly.

Based on the mortgage company’s size and complexity, an ongoing $1,000 to $5,000 licensing and compliance retainer would be reasonable. The scale of responsibility and activity may justify higher fees for larger companies.

The service inclusions are the most important aspect of the retainer. At $5,000 per month, a retainer may comprehensively cover reporting and licensing activities related to dozens of MLOs, branch filings, and renewals, with ongoing compliance tracking, regulatory correspondence, and reporting. If a substantial retainer is paid, companies should not be charged full price for each filing. All additional charges should be reviewed carefully.

Separate Professional Fees From NMLS and Government Fees

Separating costs is one of the most important protections for a mortgage company when working with a licensing consultant. Each proposal and invoice must clearly separate professional service fees from NMLS processing fees, state regulator fees, and third-party service costs.

Examples of third-party services and costs might include, but are not limited to, surety bonds, credit reports, background checks, educational courses, testing, certificates of good standing, foreign entity registrations, fees charged by secretaries of state, state regulatory fees, etc.

This separation makes it easier for mortgage companies to compare prices among different licensing consultants. This approach allows mortgage companies to determine whether fees, such as a $2,000 charge, are for consulting services or expenses reimbursed by a state regulator. Therefore, transparency in fee structures is essential.

What Would Be Competitive Mortgage Licensing Prices for 2026?

For mortgage companies operating nationwide or planning expansion, company licensing fees of $1,000 to $1,150 per state are recommended when a significant number of licenses are required. For an MLO recruiting new employees who would require licensing in new states, a state licensing cost of $150-$195 per MLO would be beneficial. For MLO transfers, a reasonable license cost for a no- or low-complications transfer would be $50-$100 per state.

For sponsoring an MLO, a professional service fee of around $50-$75, and the cost of NMLS sponsorship would be appropriate. For filing a branch license, $200-$350 is a fair cost for a routine filing.

For more customized net branch configurations, expect to pay between $500 and $1,000 in professional fees. (More complex configurations will likely exceed this estimate.). Adding a DBA or filing a trade name will average between $100 and $250 per state for normal filings. Amendments should average $100; however, more complicated amendments will likely be between $200 to $400, or more, depending on the time involved. Renewals should also average $75 to $125. For companies holding numerous licenses, renewal fees should be significantly lower.

Large Mortgage Companies Should Negotiate Enterprise Pricing

The pricing structure should also vary based on the number of states a mortgage company operates in and the number of multi-state MLOs it employs. A company with forty or fifty state licenses, multiple DBAs, numerous branches, and many MLO licenses should not pay the same retail transaction fees as a small brokerage with one office and three loan officers.

Since mortgage companies are valuable clients for licensing firms, contracts should include a deep discount on transactions.

Because mortgage companies are valuable clients for licensing firms, contracts should include significant discounts on transaction fees, as well as a monthly retainer. Mortgage Licensing System and Services (NMLS), state licensing renewals, MLO sponsorships, branch licenses, closures, DBAs, state correspondence, and routine licensing matters. The larger projects will be charged separately. These include acquisitions, changes of control, ownership restructuring, complex state licensing requirements, and requests for regulatory examinations.

How to Avoid Paying Full Retail for Big MLO Transfer Pricing

This is especially true when dealing with experienced mortgage loan originators. Take the example of a mortgage company that hires 10 MLOs, and assume each MLO holds licenses in 15 states. This creates 150 licensing transactions. If the licensing consultant charges $195 or $250 per transaction, professional services can become costly, even for repetitive processes. This scenario exemplifies the importance of negotiating bulk transfer pricing.

Consultants should be compensated fairly for their work; however, processing multiple similar transactions at once generally requires less effort than handling them individually.

When choosing a mortgage licensing consultant, price is not the only consideration. Cutting corners on a license application to save money can result in higher costs if state requirements are not met. Companies must ensure state licenses and surety bonds are in place, branches and DBAs are compliant, amendment deadlines are met, and license deficiencies do not delay mortgage lending activities. Simple tasks like MLO sponsorships, MU3 branch filings, renewals, or amendments should not be priced at the same level as complex legal matters.

Final Thoughts on NMLS State Licensing Consulting Costs

Mortgage licensing consulting fees vary widely, but reasonable benchmarks can be found by reviewing public data. For multi-state mortgage companies, the largest price concession available is volume pricing. Licensing multiple entities, sponsorships, transfers, branches, DBAs, amendments, and renewals should be less expensive when the licensing consultant serves a large clientele.

Mortgage companies should request pricing structures that reflect the full scope of the business relationship, rather than focusing only on individual services.

The agreement must carefully distinguish between professional services, NMLS fees, state licensing fees, and third-party costs. It must also regulate the future cost of new states, new branches, new MLOs, MLO transfers, new sponsors, DBAs, changes, and annual renewals.

Try to Get a Bulk Discounted Rate from NMLS Licensing Consulting Advisor

The most favorable agreement for national or rapidly growing mortgage companies is likely a combination of reasonable monthly licensing management fees and discounted rates for each service performed. This kind of agreement provides mortgage companies with predictable costs and ensures that consultants are paid for managing large, multi-state licensing projects. Ultimately, mortgage companies should carefully review licensing proposals, considering both current pricing and potential future costs as they expand into new states, branches, MLOs, and DBAs.

[Gustan Cho]

How Do You Pass Residual Income on VA Loans?

To meet the residual income requirement on a VA loan, enough money must remain each month after paying the proposed mortgage payment, taxes, insurance, all monthly debt payments, payroll taxes, and any other expenses. VA refers to this amount of money as residual income.

Unlike conventional financing, residual income is a key factor in VA loans and is used to determine whether the veteran will have sufficient funds to cover living expenses after the loan closes.

On VA loans of at least $80,000, the residual income requirement for a majority of loans will depend on the borrower’s family size and geographical location. The minimum requirement for a one-person household will be between $441 and $491, and for a four-person household, between $1,003 and $1,117, depending on the location.

Lenders will divide the country into the Northeast, Midwest, South, and West divisions to determine the minimum residual income requirements.

There are Several Options Available to Borrowers with Residual Income Shortfalls:

• Reducing the proposed mortgage payment.
• Purchasing a lower-priced home, making a larger down payment, or securing a lower interest rate can increase residual income.
• Pay off current debts. Paying off an automobile loan, credit card debt, installment debt, or other qualifying debt that can be excluded under VA guidelines can substantially increase residual income.

Increase Income, Decrease Debt

Document all stable income, including employment, VA disability compensation, retirement income, Social Security, etc., as they may all help.

• Be careful verifying debts.
• Ensure the lender checks to confirm if the debts reported on the credit report actually need to be counted per VA guidelines.
• Be sure to review taxes and all applicable deductions.
• Residual income uses the borrower’s actual qualifying income and applicable deductions.
• Ensure the calculation includes the obligation and all required taxes (federal, state, and local).
• Consider all expenses related to the property.
• Property taxes, homeowners insurance, HOA fees, and maintenance, as well as utilities, can all impact the residual income calculation.

Non-Taxable Income and VA Residual Income

Non-taxable income can be advantageous when determining qualifying income for the debt-to-income ratio (DTI). However, on VA loans, borrowers must use their actual income, not a grossed-up amount, to determine residual income.

This is especially impactful for Veterans who receive VA disability compensation or other tax-free income.

Why Residual Income Is So Important on VA Loans

Because of the VA mortgage program’s focus on residual income, Veterans with a high DTI may still qualify for a solid loan package if they have a high income, good credit, and sufficient residual income to afford their mortgage.

Current VA residual income requirements and tables can be found in VA Pamphlet 26-7, Chapter 4: Credit Underwriting. The dated December 16, 2025, section of the Know VA shows the most recent updates.

In summary, to clear VA residual income, just look at the budget’s bottom line. It is not their bottom DTI. The biggest elements of the budget can be adjusted. Also, fully documenting all applicable sources of stable income can help a high-DTI marginal VA loan qualify.

https://gustancho.com/va-dti-mortgage-calculator/

gustancho.com

VA DTI Mortgage Calculator | Calculate Your VA Loan DTI

Use the VA DTI Mortgage Calculator to calculate what your housing payment and DTI on AUS-Approved and Manual Underwrites on VA loans.

[Gustan Cho]

Every mortgage loan originator has their own way of doing business. Many meet one-on-one with prospective homebuyers or homeowners. Some MLOs concentrate on borrowers from certain states or regions. Many loan originators partner up with real estate agents. Others, like myself, have a national platform where we are licensed in most of the 50 states.

Difficult Borrowers and Gustan Cho Associates

Gustan Cho Associates provides expert loan analysis and connects difficult-to-serve borrowers to over 300 lenders.

How Gustan Cho Associates Helps Borrowers Other Lenders Cannot

Quick Answer

Gustan Cho Associates is a national mortgage broker and lender that helps borrowers turned down by other lenders find a way to get a loan.

By working with over 300 lenders, including banks and specialty lenders, Gustan Cho Associates offers a wide range of loan options, from government-backed and standard loans to special programs.

Gustan Cho Associates has grown by providing detailed mortgage information and attracting clients through natural online searches. Instead of buying leads, the company connects with borrowers looking for a second opinion after reading its helpful articles.

What Is Gustan Cho Associates?

Gustan Cho Associates is a large national mortgage broker and correspondent lender, helping borrowers in nearly every state.

Gustan Cho Associates helps borrowers who were denied mortgages, have complicated loan approval issues, or need loans for unusual properties. The team also assists those with credit or income problems.

The company carefully checks whether a borrower truly cannot qualify or whether the previous lender simply did not offer the right loan option.

Some of the major borrower hurdles are:

• Poor credit
• Excessive debt-to-income ratio
• Bankruptcy and foreclosure
• Charge-offs and collections
• Manual underwriting
• Unsteady income, especially if self-employed
• 1099 income and bank statement income
• Non-warrantable condos
• Modular and manufactured homes
• Mortgage denials at the last moment

What Causes Other Lenders to Deny Borrowers

Being denied a mortgage is not the end; there may still be ways to qualify for a loan.

Many lenders add extra rules on top of the usual FHA, VA, USDA, Fannie Mae, Freddie Mac, or other guidelines.

For example, a lender might deny a loan because of low credit scores, high debt, recent late payments, the need for special review, or unusual property types. Another lender might approve the same borrower if they only follow standard rules.

Gustan Cho Associates looks more closely at loan challenges and does not reject applications just because they are complicated.

We will look at the following, along with other factors:

• Payment history
• Income
• Assets
• Monthly Debts
• Debt-to-Income (DTI) Ratios
• Income Residuals
• History of bankruptcy and foreclosure
• Charge-offs
• Judgments
• Type of Property
• Automated Underwriting
• Manual Underwriting

Expanded Offerings

Gustan Cho Associates works with over 300 lenders and mortgage investors.

Instead of limiting borrowers to a single lender, the team offers a range of loan options tailored to each person’s needs.

Financing may include:

• FHA, VA, USDA, and conventional loans
• Jumbo mortgages
• Bank statement loans
• 1099-only mortgage programs
• Asset-depletion loans
• DSCR investor loans
• Recent bankruptcy or foreclosure programs
• Home equity loans and HELOCs
• Business and commercial financing
• Non-warrantable condo and condotel loans
• Manufactured, modular, and chattel financing
• Barndominium and other specialty property loans

Loan programs change based on the borrower, property, state, loan size, who will live there, and the current lender.

What Makes Gustan Cho Associates Different?

Gustan Cho Associates stands out by working with many lenders and carefully reviewing complicated borrower situations to find solutions for tough cases.

An experienced mortgage loan originator will look at:

• Prior lender’s reason for denial
• Was it an overlay or a rule from the agency?
• Was income calculated correctly?
• Is there another loan program?
• Is manual underwriting an option?
• Which wholesale lender will accept the borrower’s profile?

Choosing the wrong lender can lead to additional credit checks, repeated denials, costly delays, lost deposits, and higher costs.

Gustan Cho Associates strives to identify

Gustan Cho Associates works to find and fix these problems before the loan review starts. Many clients find the company themselves by searching online for help with their mortgage problems. Chapter 13 bankruptcy.

• FHA loans with lower credit scores
• VA manual underwriting
• Mortgages with collection items or charge-offs
• High DTI mortgage lenders
• Bank statement mortgage loans
• Non-warrantable condo loans

Most borrowers begin with a full consultation after reading an article by Gustan Cho Associates. This approach works better than buying leads because it connects the company with people who are actively looking for mortgage help and are ready to move forward.

The mortgage loan originator’s first task is to understand the issue with the previous lender.

Some of the specific questions that the loan originator may ask are:

• Why was the loan denied?
• Was the file reviewed by an underwriter?
• Did the denial occur due to credit, income, debt, assets, or the property?
• Is the borrower currently under contract?
• Is there a closing date set?
• Was the appraisal completed?
• Did the lending company disclose any conditions that were deemed unsatisfactory and could not be met?

The loan originator inquires about the borrower’s home-buying objectives, anticipated purchase price, property taxes, insurance, down payment, and preferred monthly payment.

Assessing Income, Credit, and Debt

The next step is to review the borrower’s job, income, credit history, savings, and debts.

Types of income may consist of:

• Salaries and wages
• Overtime and bonuses
• Commissions
• Income from a business
• 1099 income
• Social Security or pension income
• Disability income
• Income from rental or other investments

For people with changing income, applicants usually need to show steady earnings and provide proof. Self-employed people, 1099 workers, and business owners may need to provide tax returns instead of pay stubs. The review also looks at credit scores, unpaid debts, legal judgments, tax debts, bankruptcies, foreclosures, and monthly bills.

A regular credit score is enough for early talks, but formal mortgage pre-approval requires a detailed credit report from three credit agencies.

Completing the Mortgage Application

If the preliminary credit review is favorable, borrowers can complete a secure online mortgage application and upload supporting documents.

Common documents include:

• Signed pay stubs
• W-2 forms
• Bank statements
• Photo ID
• Award letters
• Income tax returns, if applicable
• Bankruptcy documents
• Purchase contract
• Previous lender conditions and/or denial letters

The mortgage loan originator or loan officer reviews the application and supporting documents in detail.

Income, savings, debts, job history, property details, and the chosen loan program must be checked before using the automated loan review system.

An automated underwriting system may return findings such as Approve/Eligible or Refer/Eligible for a borrower’s file.

If the submitted documents align with the system’s information, automated approval may be granted, which carries greater authority than pre-approval.

A Refer/Eligible result does not mean denial; it may indicate the loan needs manual underwriting.

Things that can be considered in manual underwriting include:

• Housing payment history and the ability to support the payment.
• Recent credit history.
• Employment history and the degree of stability.
• Cash reserves and residual income.
• Payment shock and other compensating factors.
• Past financial problems and the underlying causes.

Not all lenders offer manual loan reviews. Gustan Cho Associates works with those who do, giving more options to qualified borrowers.

People often contact Gustan Cho Associates after another lender denies their loan right before closing. The team then checks if there is still a way to move forward.

The team must quickly determine:

• Why was the loan denied?
• Can the loan denial be overcome?
• Is there a lender who will accept the loan in its current state?
• Can the appraisal be transferred?
• Does the borrower still qualify?
• Does the purchase contract allow more time? These cases are called “rescue loans.” While closing is not guaranteed, a careful second review checks if moving forward is possible. Identify the exact problem, and determine whether another lender or loan program could provide a viable solution.

Final Thoughts

Gustan Cho Associates grew quickly by sharing helpful mortgage information online, reaching borrowers who struggled to find reliable advice elsewhere.

The company’s unique approach focuses on mortgage education, careful borrower reviews, and links to over 300 lenders. While some denials are valid, many stem from additional lender rules, income errors, missing documents, incorrect loan programs, or a lack of manual loan review options.

A careful second review often uncovers the true reason behind a denial and opens the door to new possibilities.

Frequently Asked Questions

Does Gustan Cho Associates purchase leads?

Absolutely not. Gustan Cho Associates has relied on organic search traffic, education, and referrals, with the greatest focus being on borrowers who contact them directly.

Can Gustan Cho Associates approve all borrowers?

No. Gustan Cho Associates cannot approve all borrowers, and no mortgage company can. Borrowers need to meet requirements specific to the loan program and lender.

Can Gustan Cho Associates assist after another lender denies the loan?

Yes, Gustan Cho Associates will review the reason for denial and see if there is another lender, loan program, or possibly another form of underwriting.

Does Gustan Cho Associates provide non-QM loans?

Yes, the available loans include bank statement loans, 1099-only loans, asset-depletion loans, DSCR loans, investor loans, and recent credit-event loans.

Does Gustan Cho Associates provide manual underwriting?

Yes, Gustan Cho Associates also works with wholesale lenders that will accept manually underwritten loans for FHA, VA, and other loan types.

Can Gustan Cho Associates provide financing on atypical properties?

Non-warrantable condos, condotels, barndominiums, modular homes, manufactured homes, and other atypical properties may qualify for specialty financing.

[Gustan Cho]

What HUD’s FHA Rules Actually Say

Your understanding is directionally correct, but the safest compliance explanation is more precise:

HUD does not expressly say, “Every FHA mortgage loan originator must receive a W-2.” HUD requires personnel performing FHA origination for an FHA-approved mortgagee to be employees under the mortgagee’s supervision and control. HUD separately requires the Direct Endorsement underwriter to be an employee of one FHA-approved mortgagee. A non-FHA-approved broker or correspondent operating as a sponsored third-party originator is treated differently.

1. FHA-Approved Mortgagees Must Employ Origination Personnel

The federal regulation underlying Handbook 4000.1 is 24 CFR § 202.5(b), Employees. It states that an FHA-approved lender or mortgagee must:

“employ competent personnel trained to perform their assigned responsibilities in consumer or mortgage lending, including origination…”

This is the strongest regulatory basis for concluding that an FHA-approved mortgagee’s FHA loan originators should be employees rather than independent contractors. The regulation uses the word employ, but it does not specifically use the terms W-2 or 1099.

Handbook 4000.1 also describes employees as individuals working under the mortgagee’s direct supervision and control. Therefore, the real HUD test is the employment and control relationship—not merely which IRS tax form is issued. (HUD.gov)

2. FHA DE Underwriters Must Be Employees

The clearest rule concerns the Direct Endorsement underwriter.

Look in:

HUD Handbook 4000.1
Section I.B.3.b.i — Direct Endorsement Underwriter Eligibility: Eligibility Requirements

The DE underwriter must:

• Be an employee of a single mortgagee.

• Be authorized to bind that mortgagee in matters involving mortgage origination.

• Meet HUD’s applicable experience and eligibility requirements.

HUD Mortgagee Letter 2025-16 eliminated the previous requirement that a DE underwriter work full-time. A DE underwriter may now work part-time, but HUD expressly retained two conditions:

• The underwriter must remain a permanent employee of a single mortgagee.

• The underwriting function may not be contracted out.

Therefore, a DE underwriter cannot be treated as a freelance 1099 contractor who underwrites FHA loans for several unrelated mortgage companies.

3. HUD Does Not Generally Use “Mini-Correspondent”

I did not find mini-correspondent as a separately defined FHA approval category in current Handbook 4000.1.

HUD generally classifies the entity as either:

1. An FHA-approved mortgagee, or

2. A sponsored third-party originator, commonly called a sponsored TPO.

The company’s marketing label—broker, mini-correspondent, non-delegated correspondent or correspondent lender—is less important than:

• Whether the company itself holds FHA approval.

• Whose name the FHA loan closes in.

• Which company underwrites and approves the FHA loan.

• Which FHA-approved mortgagee sponsors and reports the origination.

4. Non-FHA-Approved Brokers and Correspondents Are Sponsored TPOs

Under 24 CFR § 202.8, a sponsored TPO may originate FHA loans while working with and through an FHA-approved sponsoring mortgagee.

The regulation does not state that the sponsored TPO’s loan originators must be W-2 employees. It focuses on sponsorship, eligibility, sanctions and the sponsor’s responsibility for the TPO’s FHA activities. (Legal Information Institute)

Therefore, a non-FHA-approved mortgage broker or non-delegated correspondent may potentially compensate its MLOs as 1099 independent contractors from HUD’s FHA perspective, provided that:

• State mortgage licensing law permits the arrangement.

• Federal and state worker-classification laws permit it.

• The sponsoring FHA lender allows it.

• The MLOs are properly sponsored and licensed through NMLS.

• The arrangement complies with loan-originator compensation and other applicable laws.

In other words, HUD’s sponsored-TPO rule does not itself create a blanket authorization for 1099 compensation. It simply does not impose the same FHA-approved-mortgagee employee requirement on a non-approved TPO.

5. Whether the Correspondent Is FHA-Approved Is Critical

HUD Mortgagee Letter 2012-02 distinguishes between two types of sponsored TPOs.

Non-FHA-approved sponsored TPO:
The company cannot close an FHA loan in its own name. The FHA loan must close in the name of the sponsoring FHA-approved mortgagee.

FHA-approved mortgagee acting as a sponsored TPO:
The company may originate a loan for underwriting by another FHA-approved mortgagee and may be permitted to close in its own name because it holds its own FHA approval.

This means an FHA-approved company does not automatically escape FHA-approved mortgagee requirements merely because it calls itself a non-delegated correspondent or sends its FHA loans to another lender for underwriting.

Practical Compliance Matrix

Most Accurate Way to State the Rule

A defensible summary would be:

An FHA-approved mortgagee must employ qualified personnel to perform its FHA origination activities. Its FHA Direct Endorsement underwriters must be employees of a single mortgagee, although they may work part-time, and FHA underwriting may not be contracted out. A non-FHA-approved mortgage broker or non-delegated correspondent operating as a sponsored third-party originator is not expressly required by HUD to pay its MLOs as W-2 employees. However, 1099 compensation must still comply with state licensing requirements, worker-classification laws, NMLS sponsorship requirements, and the sponsoring FHA lender’s policies.

Therefore, the statement “underwriting FHA loans means every company MLO must be W-2” is somewhat broader than the exact HUD language. The decisive issue is whether the MLO is conducting FHA origination on behalf of an FHA-approved mortgagee or a non-FHA-approved sponsored TPO. This should be confirmed in writing with the FHA Resource Center or qualified mortgage-regulatory counsel before changing the company’s compensation structure. HUD identifies the FHA Resource Center as the industry contact for questions about FHA processing and policy requirements.

[Gustan Cho]

Can Mortgage Brokers Originate FHA Loans as Correspondent Lenders?

Question

Can a mortgage broker originate FHA loans as a correspondent lender? How do company structure, W-2 or 1099 status, and the mortgage loan originators’ status determine the ability to offer FHA financing?

Quick Answer

It is possible for a mortgage company to offer FHA loans through the appropriate structure of correspondent or sponsored third-party originator agreements.

Through what is called a sponsored third-party originator model, the U.S. Department of Housing and Urban Development (HUD) will allow an FHA-approved lender or mortgagee to sponsor a third-party originator for FHA loan origination.

The FHA lender or mortgagee, who is the sponsor, remains liable for the loans. The sponsored third-party originator’s FHA authority, licensing, employment structure, compensation model, and the sponsoring lender’s line of business must comply with governing federal and state laws and FHA regulations.

How FHA Sponsored Origination Works

Mortgage brokers (and other mortgage companies) usually do not need their own FHA approval to assist in the origination of FHA loans.

An FHA-approved lender with Direct Endorsement authority can sponsor an eligible third-party originator. HUD permits the originator to originate FHA loans and sell or transfer them to the sponsoring lender.

The sponsoring lender must ensure that the third-party originator, its owners, and its management, staff, and loan originators are eligible to work with FHA. The sponsor is also generally responsible to HUD for the actions of the companies it sponsors.

Can a Mortgage Broker Also Be a Correspondent Lender?

This is permissible as long as the licenses, lender agreements, and business structure allow it.

For example, a company could broker some loans to wholesale lenders and concurrently fund others through a warehouse line or correspondent lending. The company’s FHA loan origination structure will determine whether it can originate FHA loans.

The company could also elect to operate as one of the following:

• An FHA-approved mortgagee
• An FHA-sponsored third-party originator
• An FHA-approved mortgagee acting through another FHA-approved sponsor

The mortgage industry often refers to this regulatory structure and business format as a mini-correspondent, but the applicable framework depends on the company’s activities, not the channel’s name.

Do FHA Loan Officers Have to Be Paid W-2?

The Answer Requires Some Explanation and is Not Clear-Cut.

• According to FHA regulations, FHA-approved mortgage lenders are required to ensure that their mortgage lending staff, including those who perform mortgage loan origination, receive the necessary training and are competent.
• There are no general prohibitions in FHA’s regulations that automatically bar a sponsored entity from originating FHA loans if it employs mortgage loan originators as independent contractors.
• This is a significant difference between the employees of an FHA-approved mortgagee and those of a sponsored third-party originator.

The Correct Answer Could Depend on Multiple Factors, Including but Not Limited To:

• the state in which the loan officer and the borrower are located
• state employment and mortgage origination laws
• the entity’s NMLS sponsorship structure
• The lending policies of the sponsoring lender
• The federal classification of the loan officer
• The loan officer’s assigned tasks and the extent to which the sponsoring lender controls the loan officer
• Because of the factors listed above, entities should avoid assuming that a W-2 or 1099 payment system will automatically allow or bar FHA loan originations.

Does a 1099 Status Remove Loan Originator Requirements?

• No.
• When defining a loan originator, Regulation Z generally considers employees, agents, and contractors to be loan originators when they engage in covered origination activities.
• Loan originator compensation, requirements, and anti-steering provisions may apply regardless of the payment method.
• An independent contractor’s status does not exempt them from state licensing requirements.
• In the absence of a specific exemption, any person engaging in the business of mortgage loan origination must be licensed and hold an NMLS unique identifier.
• A company should assess whether the classification of an individual as an independent contractor is permissible under relevant laws, including employment, tax, and state mortgage laws.

What Causes Confusion About FHA Correspondent Lending?

Confusion Arises When a Company Treats Several Inquiries as a Single Problem. These Separate Inquiries Include:

1. Is the company itself an FHA-approved entity, or is the company sponsored by an FHA-approved lender?
2. Is it possible for the company to fund loans in its own name?
3. Is the company allowed to conduct business as both a broker and a correspondent?
4. Are the company’s loan officers certified and sponsored to conduct the business?
5. Are the loan officers classified correctly as employees or independent contractors?

A company can meet one of these requirements and fail to meet the others. For instance, mortgage broker licensing is a prerequisite to holding a broker license, but passing that requirement does not grant FHA correspondent authority. Establishing a correspondent channel also does not resolve the loan officer classification.

Documents Should Provide the Following Before Launching a Sponsored FHA Origination Channel:

1. Will your company act as an FHA-approved mortgagee or as a sponsored 3rd-party originator?
2. Who will underwrite, fund, and close, as well as submit the loan to FHA for insurance?
3. Can your company close the loan in your name?
4. Who would be responsible for quality control, as well as FHA reporting?
5. Are your company and your loan originators licensed in all necessary states?
6. Does your proposed W-2 or 1099 design comply with your employment and tax structures?
7. Does the sponsoring lender allow that compensation design?
8. Are your loan originator compensation structures compliant with Regulation Z?

The company should seek guidance from qualified FHA compliance specialists and attorneys before launching the program.

Through an Approved FHA Correspondent or Sponsored 3rd-Party Originator Structure, a Mortgage Broker May Be Able to Fund FHA Loans

It is, however, a misrepresentation to say that the only consideration for FHA participation is whether loan officers are W-2 employees or 1099 contractors. The company’s relationship with an FHA sponsor, licensing, worker classification, compensation design, and compliance with regulated state requirements must all be evaluated.

The best practice is to document the intended business structure and obtain written approval from the sponsor’s lender, compliance department, and qualified legal counsel before funding FHA loans.

What has your experience been with FHA-sponsored originator or correspondent lending? Have you seen any differences in the interpretation of W-2 vs. 1099 mortgage loan originators? We want to know your thoughts.

The following material is not intended as legal, tax, or employment advice. This is intended as an educational post.

W-2 vs. 1099 Mortgage Loan Originators

CFR Title 12, Chapter X, Part 1026, Subpart E, Section 1026.36.

Consumer Financial Protection Bureau, 12 C.F.R. § 1008.103.

consumerfinance.gov

§ 1026.36 Prohibited acts or practices and certain requirements for credit secured by a dwelling. | Consumer Financial Protection Bureau

§ 1026.36 is part of 12 CFR Part 1026 (Regulation Z). Regulation Z protects people when they use consumer credit.