Rocky Butani interviews Nema Daghbandan, CEO of Lightning Docs and Partner at Fortra Law, for a data-driven look at the private lending market in 2026. Nema shares what Lightning Docs is seeing across more than 300 lender clients, including trends in RTL and DSCR loan volume, interest rates, competition, foreclosures, and fraud. They also discuss the Figure acquisition of Kiavi, how AI is changing lending technology, and AI concerns for legal matters in private lending.
Watch short clips from this interview
Episode Summary
Below is a summary of the interview with highlights and key takeaways.
Private Lending Volume in 2026
Nema separates the market into two primary categories: residential transition loans (RTL), which include bridge, fix-and-flip, and similar short-term loans, and DSCR loans used primarily for long-term rental properties.
The two markets are performing differently in 2026.
- RTL volume has remained relatively flat compared with 2025.
- Lightning Docs users experienced roughly 6% year-over-year RTL growth through the first half of 2026.
- Broader industry data showed even more modest RTL growth.
- DSCR lending continues to grow significantly faster than RTL.
- DSCR volume increased approximately 50% year-over-year in Q1 and roughly 25% in Q2 among Lightning Docs users.
The slowdown is particularly noticeable because 2025 was such a strong growth year. Nema explains that lenders could grow substantially last year simply by participating in an expanding market. In 2026, growth is more difficult because overall market volume is relatively stable.
Interest Rates Continue to Decline
On the short-term lending side, interest rates continue trending downward, although the movement has become much more gradual.
Nema says national RTL pricing is moving toward an average below 10%, with increasing competition at the lower end of the market.
- Average RTL rates continue drifting lower.
- Some highly competitive loans are being originated below 8%.
- Pricing competition is increasing among lenders targeting stronger borrowers.
- DSCR rates remain closely connected to movements in the 10-year Treasury.
An important factor in DSCR pricing is the spread between Treasury yields and the rate offered to borrowers. Historically, that spread may have been closer to 3% or more. Nema notes that it has recently compressed to roughly 2.7%, allowing lenders to offer DSCR rates in the low 7% range even while Treasury yields remain elevated.
Lightning Docs Market Data
Because Lightning Docs processes thousands of loans every month, the company has developed one of the largest real-time datasets within business-purpose mortgage lending.
Lightning Docs publishes much of this information for the industry, including:
- Average RTL interest rates
- Average DSCR interest rates
- Loan volume trends
- State and metropolitan-area comparisons
- Treasury and capital market benchmarks
The company publishes weekly rate data on its website and distributes a more detailed monthly market report. Nema also describes a roughly 50-page market analysis that breaks lending activity down to individual metropolitan areas and allows lenders to benchmark their own production against broader market trends.
A More Competitive Lending Environment
One of the biggest differences between 2025 and 2026 is competition.
In an expanding market, multiple lenders can grow simultaneously as overall transaction volume rises. In a flat market, however, one lender’s growth increasingly comes at the expense of another lender.
Nema describes 2026 as more of a “winners and losers” environment.
Lenders generally have several ways to compete:
- Lower interest rates
- Higher leverage
- Better execution and service
- Faster closings
- Stronger borrower relationships
For RTL loans, lowering rates only goes so far because experienced investors frequently care more about certainty of execution and the ability to close. The more concerning competitive pressure is leverage.
Increasing LTC and LTV may help lenders win deals, but it also introduces significantly more risk. Nema describes aggressive leverage as a potential “race to the bottom” that many experienced operators are reluctant to participate in.
Borrower Data Is Changing Competition
Another major shift is the growing availability of public lending data.
Borrower relationships that were once proprietary are increasingly visible through data platforms that track recorded mortgage transactions.
This allows lenders to identify:
- Which borrowers are most active
- Which lenders they currently work with
- How many transactions they complete
- Which markets they operate in
- Potential high-value borrowers to target
Nema points out that lenders can now identify another lender’s strongest customers and market directly to them. In a flat origination environment, this makes borrower retention increasingly important.
Competition From Non-QM Mortgage Lenders
Private lenders are also seeing increasing competition from traditional non-QM mortgage companies, particularly for DSCR loans.
Many consumer mortgage lenders have large sales organizations and operational infrastructure but continue to face lower volume in conventional and non-QM consumer lending.
DSCR provides an attractive alternative.
These companies already have:
- Large account executive networks
- Established capital market relationships
- Mortgage operations infrastructure
- Experience originating long-term mortgage products
Nema believes this dynamic is contributing to increasingly intense competition in DSCR lending.
Capital Markets Remain Strong but More Selective
Institutional demand for business-purpose mortgage loans remains significant. Capital providers still have substantial amounts of money that need to be deployed.
However, Nema says the definition of an acceptable loan is becoming narrower.
Loan buyers are becoming less willing to approve exceptions and are increasingly focused on loans that fit clearly within their predetermined credit parameters.
- Capital remains readily available for strong, standardized loans.
- Secondary market buyers are becoming less flexible on exceptions.
- Originators relying on creative or outside-the-box transactions may face more difficulty selling loans.
- The tightening began becoming noticeable around the second half of 2025.
Nema views some of this tightening as a healthy correction after a period of increasingly aggressive lending.
The Figure Acquisition of Kiavi
One of the most significant industry developments discussed is Figure’s acquisition of Kiavi, the largest private lending originator in the United States.
Nema views the transaction differently from many previous acquisitions in private lending.
Historically, institutional capital providers often acquired lenders because they were already purchasing much of their production. Those transactions primarily combined origination and capital.
The Figure-Kiavi transaction brings together two technology-focused companies addressing different parts of the mortgage lifecycle.
- Kiavi built technology around the borrower and origination experience.
- Figure has focused heavily on modernizing capital markets and loan transfers.
- The combination could connect technology-driven origination directly with technology-driven secondary market infrastructure.
Nema describes the transaction as a potential “one plus one equals three” scenario and believes the combination could have meaningful implications for how mortgage loans are originated, transferred, and sold.
Blockchain and the Future of Loan Transfers
Figure’s use of blockchain technology also leads to a broader discussion about the secondary mortgage market.
Traditionally, selling mortgage loans involves assignments, recordings, title companies, and other administrative steps. Systems such as MERS were created in part to make those transfers more efficient.
Blockchain could potentially create another evolution by allowing ownership or economic interests in mortgage loans to move across a distributed ledger.
Potential benefits include:
- Faster loan transfers
- Reduced administrative friction
- More efficient secondary market transactions
- Potential fractional ownership or distribution of loan risk
Nema believes combining this type of capital markets technology with Kiavi’s origination infrastructure could make the acquisition particularly important for private lending.
Foreclosures Are Rising, But Remain Historically Low
The conversation also examines concerns about increasing foreclosure activity.
Nema reviewed actual recording data comparing 2025 with 2026 and found that foreclosure filings had increased significantly on a percentage basis.
However, he cautions against interpreting large percentage increases without context.
- Foreclosure filings increased roughly 50% year-over-year in the data he reviewed.
- Overall foreclosure levels remain historically low.
- For some major lenders, problem loans still represent only a small percentage of total production.
- Stress appears concentrated among certain lenders rather than across the entire industry.
Nema does not currently see foreclosure activity as evidence of systemic stress within private lending.
Fraud Remains a Major Concern
Unlike foreclosure risk, fraud continues to rank among the biggest concerns for large private lenders.
Nema participates in a monthly forum with general counsels from many of the industry’s largest originators, and he says fraud remains the number-one recurring issue.
The problem is not necessarily that fraudulent activity is increasing dramatically, but that fraud is becoming more sophisticated.
Examples include:
- Manipulated bank statements and financial records
- Fraudulent borrower identities or entities
- Misrepresentation of transaction details
- More sophisticated document manipulation
Technology has made it easier to alter documents convincingly, creating an ongoing challenge for underwriting and compliance teams.
The Challenge of Sharing Information About Bad Actors
Lenders would like to share information about borrowers or other parties suspected of fraud, but creating an industry-wide “bad actor” database is more complicated than it sounds.
Potential challenges include:
- Defamation risk
- Determining whether a borrower is actually fraudulent or simply did not meet one lender’s underwriting criteria
- Matching entities with the correct individuals
- Providing enough context to explain why a lender rejected a transaction
- Keeping information accurate and current
Nema believes data companies may ultimately be best positioned to develop a system that combines property records, entity data, and contextual information about potentially problematic transactions.
AI and Legal Advice
Artificial intelligence is another major topic affecting private lenders.
Nema is an active AI user himself and believes AI has become an extremely powerful research tool. However, he cautions lenders against relying on general AI tools for legal conclusions without expert review.
The problem is often context.
AI may produce an answer that is directionally correct while missing a state-specific exemption, factual nuance, or technical legal interpretation that changes the ultimate conclusion.
For lenders, this creates a new challenge as executives increasingly arrive at their attorneys with an AI-generated legal answer and ask why they cannot simply rely on it.
How Lightning Docs Is Using AI
Interestingly, Nema says Lightning Docs does not currently rely on AI to create the core legal documents within its platform.
Lightning Docs operates as a rules-based legal engine. Its attorneys determine how documents should be structured based on factors such as:
- Property location
- Lender location
- Borrower location
- Loan structure
- State statutes and regulations
- Capital market expectations
Because many of these decisions require legal judgment rather than simply identifying statutes, Nema still believes human subject-matter expertise is essential.
Where AI has become transformative is around the edges of the platform.
AI Makes Software Development More Accessible
One of the biggest changes at Lightning Docs is the company’s ability to build integrations much faster using AI-assisted development tools.
Historically, connecting a lender’s loan origination system or CRM to Lightning Docs required technical teams on both sides to map dozens or hundreds of data fields.
Today, AI allows Lightning Docs to build custom integrations much faster.
For example:
- Loan data can come from a CRM, LOS, spreadsheet, or other database.
- Lightning Docs can map incoming data into its document system.
- Custom integrations that previously required significant development work can sometimes be built within hours.
- Even smaller lenders originating only a few loans per month can potentially receive customized integrations.
Nema believes AI has effectively democratized software development and allowed Lightning Docs to become a more technology-driven organization despite originating primarily as a legal and document company.
Lightning Docs Reaches $100 Billion in Originations
The episode also highlights several milestones for Lightning Docs.
The platform recently surpassed $100 billion in cumulative loan originations since launching in 2018.
Current activity includes approximately:
- 330 active lending companies and other users
- More than 7,000 business-purpose mortgage loans per month
- More than $4 billion in monthly loan originations
- Approximately 15% to 20% of estimated private lending transaction volume
Nema estimates that Lightning Docs works with roughly 44% of the top 100 private lenders, giving the company an especially strong concentration among larger originators.
That scale is also what makes the company’s market data particularly valuable. Its interest-rate and loan-volume reports are based on thousands of real transactions rather than surveys or advertised rate sheets.
Why Growing Lenders Turn to Lightning Docs
Nema explains that many lenders eventually reach a point where manually managing legal documents becomes difficult to scale.
Small lenders may initially rely on:
- Individual attorneys for every transaction
- State-specific document templates
- Internally coded documents
- Multiple law firms across different states
Those systems may work when a lender operates in only one or two states with a limited number of loan programs. As the company grows geographically and introduces additional products, complexity increases quickly.
Lightning Docs attempts to solve this problem by creating a scalable legal document infrastructure that automatically accounts for state-specific requirements and loan characteristics.
Key Takeaways
Some of the most important insights from the conversation include:
- RTL loan volume is relatively flat in 2026 while DSCR lending continues to grow.
- Private lending rates continue trending lower as competition increases.
- In a flat market, lenders increasingly have to take market share from competitors to grow.
- Public lending data is making borrower relationships easier for competitors to identify and target.
- Capital remains plentiful but institutional loan buyers are becoming more selective.
- The Figure acquisition of Kiavi could accelerate technology adoption across mortgage origination and capital markets.
- Foreclosures are rising but remain low by historical standards.
- Fraud remains one of the largest concerns among major private lenders.
- AI is already transforming lending operations, research, software development, and integrations.
- Lightning Docs has surpassed $100 billion in total originations and now processes more than 7,000 loans per month.
For private lenders, mortgage brokers, capital providers, and technology companies, this episode provides a data-driven look at how private lending is changing in 2026 and how competition, technology, AI, and capital markets are reshaping the industry.
