Freedom Mortgage CEO Stan Middleman discusses why 2026 could bring renewed opportunity, how AI could upend interest rates, and why complacency may be the mortgage industry’s biggest risk.
Few executives in housing finance have witnessed as many market cycles as Stan C. Middleman, President and CEO of Freedom Mortgage Corporation. Since founding the company in 1990, Middleman has guided Freedom Mortgage to become one of the nation’s largest nonbank lenders and servicers, while also serving on the boards of the MBA, Fannie Mae, Freddie Mac, and others.
When we spoke earlier this year, Middleman described 2025 as a “wait-and-see” period marked by limited movement in rates or volume. As the year closes, his outlook has proven prescient, but his focus has already shifted to what’s ahead. In this conversation, he discusses how AI could reshape employment and interest rates, why affordability pressures may persist, and what lenders should watch as the market positions for a new cycle.
Back in March, you described 2025 as a wait-and-see kind of year. As we close it out, what surprised you most about how the housing and mortgage markets actually performed? Did any trends play out differently than you expected?
Middleman: No, the reality is it played out exactly as we anticipated. There wasn’t much movement one way or the other, and we expected interest rates to be lower at the end of the year, to set up a slight improvement for next year.
You predicted earlier this year that rates will remain relatively stable through 2025. How do you see the Fed’s current stance shaping early 2026, and what kind of mortgage rate environment should lenders and borrowers brace for?
Middleman: Interest rates have stayed fairly stable. They’re marginally lower, as we would have anticipated.
Recently, when Amazon announced large layoffs, it gave me some pause. If, in fact, this is the first of the layoffs that are related to AI and the vast improvements that have started to take root in that area—the increase in unemployment would result in lower interest rates. I would suspect interest rates to be somewhat lower next year.
More moved from the short end than the long end. There are some balancing factors along the inflationary front that’ll keep the long end somewhat more stable than the short end. However, all bets are off if unemployment rises dramatically as a result of the progress in AI.
The deflationary impact of technology on the economy cannot be overstated. It’s harder to predict when it hits, and it’ll be substantial when it does. We could see, again, somewhat of a reformation with the interest rate environment, if in fact AI results in a larger dose of unemployment than expected. And if that is the case, we can expect somewhat lower interest rates. I don’t know that interest rates are going to return to 2020 or 2021 levels, but I do believe that the short end can be as much as 75 or 100 basis points lower through the course of the year next year. I think unemployment could moderate, and all that would produce a larger mortgage volume for the year: perhaps two and three-quarters trillion dollars, perhaps even approaching $3 trillion if we really get a big impact from the increase in unemployment.
Whether or not that occurs, and how long it takes to occur, and when the impact of all that is felt, is a whole other story. If I would forced to make a bet, I would say we would probably be at $2.5 trillion as an industry in mortgage originations, a slight improvement over this year.
Homeownership affordability has remained one of the biggest headlines this year. Do you think 2026 will bring meaningful relief, or has affordability entered a new normal that the industry and consumers will need to adapt to?
Middleman: Well, according to Warren Buffett in the newspaper recently, interest rates will not get low enough to increase affordability. One of the things that is true is that, as interest rates go lower, prices rise. They will, in my opinion, offset one another, even though there may be an opportunity to have lower interest rates to buy a home. It doesn’t mean the price is going to be the same. The two pieces—the interest rate and the price of the home—come into play. There’s no reason to believe that we are going to have a sudden oversupply of housing, driving housing prices down.
Property prices will rise, and affordability will not change. Or, in fact, it may get a little worse.
In September, you noted that data and AI were improving the speed and quality of servicing. What’s your outlook on how technology will redefine borrower relationships in the next few years?
Middleman: It could have an enormous impact. The speed at which data moves, access to that data, and the ability to communicate the meaning of that data all should improve dramatically in 2026. All that can have a big impact on the normal service in question.
So, what has been a somewhat tedious process to get rather mundane information should be easier and more effective, and I think that we’ll be able to communicate that information to the greater satisfaction of the customer.
Exceptions will still be exceptions, and the problems that fall in the exception bucket will become more and more readily defined, but even they will improve as we wind through the year and into the following year. I’m very optimistic about the customer experience and our ability to provide outstanding service to the consumer.
With 2026 shaping up to be another politically charged year, how do you think potential policy shifts, whether on housing, regulation, or fiscal policy, could impact the mortgage market and consumer confidence?
Middleman: The deregulation that has come out of this administration has bolstered the industry, as well as other industries. We should have a couple more years of that. Whether or not the current administration is able to control all the houses of Congress and manage legislation is a horse of a different color. I’m not sure what that outcome is going to look like, but the more control a single party has, the more of their agenda they’re able to put forward. If they can continue the control of the two houses of Congress, the likelihood of continued deregulation and pro-business environment should continue.
You’ve talked before about staying in the middle of the fairway and avoiding overexposure to risk. As we head into what could be a transitional economic period, where do you see the biggest risk and opportunities for lenders?
Middleman: I don’t think this is a year that the risk will be in the forefront, but I think the seeds of malcontent will be planted this year.
The issues that’ll arise in future years will be created in a more meaningful way this year. This means that products like CLOs, second mortgages, and non-QM—products which are subject to the private securitization market—are more likely to start to face a bout of lack of liquidity as we enter the second half of 2027 and into 2028.
I have some concerns about the broader market liquidity around some of these products that are dependent upon private-label securitization.
Non-bank lenders like Freedom Mortgage have continued to grow their footprint. How do you see the competitive landscape evolving in 2026 and beyond?
Middleman: That depends a little bit on the progress the administration makes in the areas of supporting the banks. If the banks remain on the trail they are on, I think you’ll see more scale in the non-banks, and you’ll see leaders in the non-bank sector start to emerge in scaled operations. The changes in technology and the ease of the regulatory environment should lead itself to the development of scale, and I would expect the largest scaled competitors to be the most successful.
If you had to sum up one key lesson for the mortgage industry from 2025, what would it be?
Middleman: Wake up, we have to pay attention! We have been pressing the snooze alarm for a while.
I think we’re going to have some lower interest rates and some activities. There’s going to be opportunities to do business over the next year—I believe as much as a 20% increase over volumes in 2025. So, I would say that the alarm went off, and it’s time to wake up and get back to work.
