On Wednesday, the Federal Open Market Committee announced its decision to maintain benchmark interest rates at a range of 4.25% to 4.5%, The move itself was unsurprising to the mortgage industry and market observers.
The decision does not remove uncertainty around the short-term trajectory of mortgage rates, which have steadily declined over the past two months. But economists and policymakers are closely monitoring inflation data, unemployment reports and President Donald Trump’s various tariffs to assess where the U.S. economy is headed.
The Fed noted in its prepared statement that “uncertainty around the economic outlook has increased” while economic activity continues to expand at a “solid pace.”
To evaluate the impact of the Fed’s decision on the mortgage servicing segment, Sagent CEO Geno Paluso sat down with HousingWire to discuss how the company is preparing for potential economic changes — including inflation and recession risks — by continuing to develop and invest in efficient technology for its servicing partners.
This interview has been edited for length and clarity.
Sarah Wolak: The Fed decided to leave interest rates alone, but it also noted some interesting things. There’s uncertainty around the economic outlook, economic activity that’s expanding at a solid pace, an unemployment rate that’s stabilizing at a low level and inflation that’s slightly elevated. From Sagent’s perspective as a company that works with servicers, what does this week’s Fed decision mean for you?
Geno Paluso: As a technology company that provides technology to servicers, we pay very close attention to this. And, you know, the decision is much in line with what we’ve been thinking. It’s no shocker. It’s the same as what others have speculated, given the volatility of what’s going on in the market in D.C. right now.
Wolak: If the Fed had made a different decision, then maybe refinances or new home-purchase activity would come into play. But what is your exact role because of this news?
Paluso: I think we’re very well positioned as a company for what we’re doing for the servicers. We provide the core platforms as well as the consumer and default platforms for the mortgage servicing industry.
And what that really means, though, is we have to be able to pivot with every change to make sure our servicer partners have what they need to take care of the borrowers, for people that are servicing their loans. But the volatility piece of this makes this very interesting — whether it’s the tariffs, the trade wars, the immigration policies, that’s feeding into the inflation worry about a recession.
So, for us, it’s about being able to provide the right technology for the servicers so they can take care of the borrowers, regardless of a recession. If a borrower is having issues with making their payments and they need some kind of loss-mitigation help to retain their house, or a stable borrower is looking to refinance, we’ve got to be able to shift to all of those with our platforms and make sure that they can be serviced and taken care of right.
Wolak: The decision to hold rates extends a pause that’s been in place since January. During that time, you’ve said that Sagent has to be prepared to follow the Fed’s decisions. How have you been bolstering the servicers that you work with throughout this pause?
Paluso: Staying in close contact with them is key, and making sure they have what they need as we try to predict what’s coming next, which is very difficult to do. But again, our servicing partners need to have the tools and the ability to take care of the borrowers that they’re servicing. They need the flexibility and the speed of decision-making and servicing. So that’s what we’re focusing on.
We run a couple of platforms, and we’re building a new one that’s going to be a real-time, end-to-end servicing platform that’s going to modernize everything — which is Dara. And when Dara comes online here this year, that’s going to make all the difference in the world, because things will be able to happen in real time. That’ll also help with flexibility and speed of servicing — not just for the servicer but really for the borrower.
Wolak: You mentioned that Sagent keeps in touch with servicers’ needs during the pause in Fed rate movements. Is efficiency at the top of that list?
Paluso: People are looking to become more and more efficient. Especially as technology gets better, the more efficient you can become and the better off your business is. So if you can reduce a servicer’s cost by 30% to 40% in some cases, depending on their size, that’s huge for them.
But during this pause period, we can’t focus just on recession or on inflation, or when the economy is good or when the economy is bad. We have to be able to pivot and provide that technology and those platforms to those servicers, no matter what.
