So, you're thinking about buying a home. You haven't won the lottery, so you're going to use a mortgage. I hope you've been saving your pennies - 5 million of them. If regulators in Washington have their way, that's what it's going to take to buy an average-priced home in Austin.
Last summer, Congress passed a sweeping overhaul of the financial system called the Dodd-Frank bill. That bill created a new class of mortgage loans called "qualified residential mortgages" (QRMs). This class is important because the bill makes it harder for mortgage lenders to securitize any loan that is not a QRM, and securitization is the grease that makes the mortgage market work and keeps interest rates low.
The problem is the bill left it to regulators to define a QRM, and as regulators seem apt to do, they have made a mess of things. The proposed definition for QRM is a 20% down payment with other limiting restrictions. In Austin, to buy a $263,700 average-priced home, that means you would need $52,740 for the down payment.
Senators inserted the QRM language into Dodd-Frank in an effort to encourage less risky lending. But as with a lot of government meddling, the unintended consequences may be horrendous. Many industry pundits expect the QRM to become the new "conforming" mortgage, the loan product offering the lowest interest rates. Non-QRM loans are likely to have interest rates as much as 2% higher.
The real estate industry and consumer groups are united against this proposed definition. The Community Mortgage Banking Project released a report in March that analyzed 33 million home loans written between 2002 and 2008. The results showed higher down payments had a very small impact on mortgage defaults. Doubling the down payment from 5% to 10% only reduced the default rate by 0.2% to 0.3%, and increasing the down payment requirement to 20% would eliminate between 27% and 40% of potential homebuyers from eligibility for a loan.
Consumer groups point out that middle-class and minority borrowers would feel the greatest impact from the proposed definition. A recent study showed it would take the average consumer more than a decade to save the required 20% down payment in most parts of the country. Homebuyers unable to afford the minimum down payment would be considered high risk even if they have an otherwise stellar credit history.
The senators responsible for QRM recently wrote regulators advising them that they intentionally did NOT include a down payment requirement in the definition and they never intended the definition to be so strict. More than 160 House lawmakers also wrote to regulators stating that the "overly burdensome dictate could threaten a full-fledged economic recovery."
Regulators have responded to all this pressure by extending the comment period for the definition to Aug 1st. It is not clear whether regulators are having second thoughts, but at least this gives lawmakers, consumer group, industry representatives, and YOU more time to encourage them to develop a more reasonable definition.
If you have a mortgage question, please leave a comment below, and I'll address it in an upcoming column.
Austinites who order groceries through the Instacart delivery service may find that their grocery bills contain an unwanted surprise.
An investigation conducted by Consumer Reports and two nonprofits, Groundwork Collaborative and More Perfect Union, found that AI-enabled experiments performed by Instacart resulted in prices on identical grocery products fluctuating as much as 23 percent from one shopper to another.
“Algorithmic pricing is usually invisible to consumers, who typically see only the prices and fees they’re offered,” Consumer Reports says.
Algorithmic pricing, also known as surveillance pricing, relies on AI and software to crunch mounds of customers’ personal data and set real-time prices tailored to each shopper.
In Texas, Instacart’s grocery partners include H-E-B, Aldi, Costco, Kroger, Sam’s Club, and Sprouts Farmers Market. San Antonio-based H-E-B, the dominant grocery chain in Texas, launched Instacart grocery deliveries in Texas in 2015, with Austin and Houston being the first two markets.
The investigation analyzed data from more than 400 Instacart shoppers in four U.S. cities, none of which is in Texas. Nearly three-fourths of grocery items featured in the Instacart investigation offered different prices to different shoppers.
Overall, the Instacart grocery bills examined by researchers varied by an average of seven percent for the same items purchased from the same locations at precisely the same times. The average price variations revealed by the study could cost a four-member household about $1,200 per year, Consumer Reports says.
In response to the investigation, Instacart confirms Consumer Reports and Groundwork Collaborative’s findings and acknowledges AI-driven pricing experiments were underway at 10 of Instacart’s grocery partners at the time of the investigation. Instacart tells Consumer Reports that the experiments, which it calls “limited, short-term, and randomized tests,” affect only a small number of its retail partners, have a limited effect on consumers’ wallets, and are aligned with in-store pricing practices.
Four of the grocers cited in the Instacart investigation operate in Texas: Costco, Kroger, Sprouts Farmers Market, and Target. Although H-E-B is a common place to see Instacart shoppers, it isn't mentioned.
Deidre Popovich, associate professor of marketing and supply chain management at Texas Tech University, says the many Texas shoppers who rely on Instacart and other grocery-focused companies that embrace AI pricing might wind up paying higher prices and facing less pricing transparency.
“Consumers can no longer have consistent price expectations when AI-pricing algorithms are used,” Popovich tells CultureMap.
Popovich says consumers can reduce their exposure to AI-influenced grocery prices by doing comparison shopping — through brands’ apps and other means — at several retailers, such as H-E-B, Costco, and Sam’s Club. Furthermore, she advises shopping for groceries at consistent times and limiting “impulse add-ons” that signal to retailers a willingness to pay higher prices.
The issue raised by the investigation has a strong tie to Texas regardless of which chains are involved.
U.S. Rep. Greg Casar, an Austin Democrat, introduced legislation in July that would ban companies from using AI to set prices based on personal data, a practice called “surveillance pricing.” The bill is known as the Stop AI Price Gouging and Wage Fixing Act of 2025.
“Instacart’s AI price-gouging scheme is exactly why I introduced the first bill in Congress to stop surveillance pricing,” Casar says in a statement provided to CultureMap. “No corporation should be allowed to use hidden algorithms to exploit working families, and I’m fighting to make sure Texans are protected from this kind of abuse.”
The National Retail Federation, the country’s largest trade group for retailers, hasn’t commented on Casar’s bill. However, the group unsuccessfully tried in federal court to block a new state law in New York that requires retailers to disclose whether they use algorithmic pricing.
Stephanie Martz, the retail group’s chief administrative officer and general counsel, says in a news release that the New York law interferes with the ability of retailers to provide customers “with the highest value and best shopping experience they can.”
“Algorithms are created by humans, not computers, and they are an extension of what retailers have done for decades, if not centuries, to use what they know about their customers to serve them better. It’s just done at the scale of the modern economy,” Martz adds. “Stigmatizing tools that drive prices down turns offering deals into a liability, and consumers will end up paying more."
Representatives of the grocers named in the Instacart investigation couldn’t be reached for comment. A representative of H-E-B also couldn’t be reached for comment.