What I heard at Western Secondary this year and what worries me
I spent this year’s Western Secondary Market Conference listening for one thing: whether the industry’s answer to margin pressure was going to create a bigger problem than it solved. I think the answer is yes, and I want to explain why.
The Pressure Is Real
The pressure itself is not in question. Rates sit at 6.79 percent after the market flipped from pricing in cuts to pricing in hikes. Spec pool values have deteriorated through the year. Servicing costs have climbed to roughly $185 per loan per year, up 15 percent since 2016, and industry-wide cost per loan remains above $11,000. Independent mortgage banks (IMBs) carry more of that weight than anyone. IMBs now originate 90 percent of Ginnie Mae issuance, up from 30 percent before the financial crisis, while banks have largely stepped back into a credit-line role.\
The Industry’s Answer
Every session I sat in landed on the same response: adopt AI aggressively to cut costs and lean harder into outsourcing. This response makes sense, what concerns me is the pace at which it is happening relative to oversight right-sizing.
AI compliance obligations do not transfer to vendors. Data security due diligence stays with the lender, regardless of the tool sitting behind the workflow. At the same time, AI has infinitely increased loan officers’ ability to generate marketing, increasing the potential of regulatory risk exposure. There is no federal AI standard to lean on, only a patchwork of state legislation moving quickly.
What This Already Looks Like in Exams
The industry doesn’t need to wait for a future exam cycle to see what this looks like in practice. At AARMR’s 2026 conference, attended by ActiveComply’s very own Melissa Grindel and Michelle Kemper, the North Carolina Commissioner of Banks presented two exam exhibits that made the point. In one, a licensee’s own social media activity was the evidence behind a RESPA Section 8 referral-inducement finding, tied to 234 loans totaling $49.9 million originated during the exam period, with remediation still pending. In the other, a broker’s co-marketing with realtors, done informally with no marketing services agreement to establish fair market value, drew a separate finding requiring documented cost-sharing going forward. Neither exhibit involved anything unfamiliar. Both involved activity that was already public, reviewed by an examiner who knew exactly what to look for. The CFPB reached a similar conclusion at the federal level in its August 17, 2023 consent orders against Freedom Mortgage Corporation and Realty Connect USA Long Island, fining the lender $1.75 million and the brokerage $200,000 for using marketing services agreements to disguise referral payments.
The Part I Keep Coming Back To
That is the part I keep coming back to. The lenders under the most margin pressure right now are, structurally, the same lenders with the thinnest compliance bench. They are the ones outsourcing the most, applying the most pressure on loan officer performance, and staffing the compliance department the least.
Where This Leaves Us
That is not a reason to slow down on AI or on outsourcing. It is a reason to be honest about what has to sit alongside this reality: a system that knows the rules well enough to catch what a loan officer’s own social feed might already be showing an examiner, and to make sure co-marketing agreements are documented before someone else asks why they are not. This is the problem ActiveComply was built to solve, and it is why I think it matters more this year than last. AI adoption and outsourcing are not going to slow down, and they should not have to. The oversight layer underneath them just has to be real.