Private Mortgages in the U.S.: Record Growth and Systemic Risks

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Private mortgage lenders in the U.S. have ramped up originations to record levels, but the first cracks are already showing. In Baltimore, inflated property valuations derailed deals and pushed companies to limit new loans, Bloomberg
reports. Such signals have heightened concerns that problems could spread to other cities.

Major funds—KKR, Apollo’s Athene, and Temasek—have poured capital into private mortgages, lifting the segment from a marginal niche into global finance. Pools of these loans have already landed on the balance sheets of pension funds, insurers, and hedge funds, turning the segment into a “gear in the investment machine.” John Hornik, head of the National Private Lenders Association, noted: “When you’re making 40 loans a year, you can visit every property, but today the process has become institutional and oversight has weakened.”



Even isolated failures are taking on systemic significance. Baltimore has become a starting point for a crisis of confidence: Dominion Financial partner Jack BeVier said competitors are halting originations, raising rates, or cutting limits in response to “inflated appraisals.” He stressed that Dominion is not involved with those borrowers and continues lending. Major player Kiavi froze brokered deals in July “out of an abundance of caution,” saying it is actively monitoring the market to determine “when to lift the pause.” “The question is whether this becomes a black swan or simply an indicator of systemic risk,” BeVier summed up.

Local investors are already losing ground. Agent and developer Jonathan Kirk said costly short-term financing is forcing him to seek permanent loans under tighter standards. One deal to buy a house for $191,000 collapsed when the lender pulled out at the last moment. In another case, a buyer exploited the chaos and demanded a last-minute price cut.

In California, a dispute has flared between Toorak Capital and Private Money Lenders (PML). Toorak, backed by KKR, alleged that its partner sold the same loans to different investors over several years. The lawsuit cites 70 deals in four years, including a home in East Hampton. Missing documents prevented Toorak from registering its lien, and when it attempted to foreclose, the borrower claimed to be making payments to another creditor. PML representative Michael Kamarinos categorically denied the allegations, called the conflict a documentation issue, and emphasized the parties are negotiating an amicable resolution.



Lenders are tightening controls. John Hornik is developing a “blacklist,” modeled on Fannie Mae and Freddie Mac, to exclude unreliable appraisers, title firms, and borrowers. In parallel, Forecasa is preparing “red-flag reports” and plans to include 11,000 clients with negative histories in the first edition. Forecasa CEO Sean Morgan noted that loans in this segment are issued under the motto “speed to close,” and that very principle is now under intense scrutiny across the market.

At a summit in Utah, Matthew Cox—a former fraudster who served more than ten years in prison and wrote Shark in the Housing Pool—gave a provocative talk. Cox named two key threats: the ease of forging documents online and executing schemes without in-person presence at the property or with attorneys. He emphasized that technology truly helps detect violations, but at the same time slows credit decisions for honest borrowers. “We’re going to have to live with a certain level of fraud,” he concluded.



Private mortgages have become a pillar for global investors, but rapid expansion has exposed vulnerabilities. Whether stronger oversight and self-regulation can keep the segment attractive—or it becomes a source of fresh shocks—will be decided by how quickly the market closes the control gaps.

Meanwhile, the mass housing market is shifting. U.S. long-term mortgage rates fell to a ten-month low. According to Freddie Mac, the average 30-year fixed rate in late August 2025 reached 6.56% (6.58% a week earlier). The drop has not revived buyers: pending home sales declined for the second straight month, the National Association of Realtors reports. Weak demand is already affecting owners. Redfin estimates that July supply fell by about 14,000 listings compared with May—the first decline since July 2023, when affordability neared an all-time low. “Buyers are deterred by high prices, expensive loans, and economic uncertainty—now sellers are deterred because buyers are deterred,” said Asad Khan, Redfin’s senior economist. Many owners are delisting or not listing at all as properties sit for months and eventually sell below ask.

Supply still far exceeds demand. The gap has reached 36.3%—the widest since 2013. In several Florida and Texas metros, the number of active listings is more than double the number of real buyers, Redfin analysts found.