Optimal Blue: Refinances, Product Shifts and Strong Agency Participation Define June

(illustration courtesy of Optimal Blue)

Optimal Blue, Plano, Texas, reported total lock volume rose 1.95% month-over-month in June, driven by increased refinance activity.

The firm’s June Market Advantage mortgage data report said the refinance share climbed from 16% to 18% of all locks as rate-and-term refinances jumped 17.4% month-over-month and 18.4% year-over-year.

Cash-out refinances rose 8.1% from May and nearly 28% year-over-year. “Meanwhile, purchase activity held relatively steady–a better-than-expected result for June, when the spring homebuying season typically tapers off,” the report said.

The report includes 19 mortgage data metrics, including additional borrower profile metrics and secondary market indicators. One new metric, non-QM lending, accounted for 7.4% of all June rate locks–a share that has gradually increased in recent months as lenders and borrowers explore alternative qualification paths.

“As market conditions evolve and affordability challenges persist, non-QM lending offers a path for qualifying creditworthy borrowers who may not meet qualified mortgage guidelines,” said Mike Vough, head of corporate strategy at Optimal Blue. “The steady rise in this category reflects the industry’s growing focus on flexibility and meeting borrowers where they are.”

On the capital markets side, the aggregator share of loan sales dropped 300 basis points month-over-month to 35%, suggesting that the agencies improved pricing margins and gained market share, either via the cash window or MBS securitizations.

“Given current news headlines, the decrease in aggregator market share corresponding with the increase in agency market share is noteworthy,” Vough added. “Both loans sold to the cash window and via MBS securitization were up 2% month over month. This highlights the need for lenders to review multiple investors and delivery methods to squeeze the most out of their loan sales.”

Other findings from the Market Advantage report include:

Rates edge lower: The 30-year conforming loan rate dropped 17 basis points to 6.67%. Jumbo rates fell 24 basis points to 6.78%. FHA rates declined 6 basis points to 6.47% and VA rates decreased 16 basis points to 6.29%.

Product mix shifts: Conforming share rose 114 basis points to 53% of total volume, while non-conforming dipped 25 basis points to 16.2%. FHA share declined 80 basis points to 18.9%. VA and USDA shares held steady at or near last month’s levels at 11.3% and 0.7%, respectively.

Credit quality unchanged: The average FICO score edged up 1 point to 733.

Loan characteristics hold steady: The average loan amount declined slightly to $386,084. Across the top 30 metros, average loan amounts ranged from a high of $586,997 in metro New York to a low of $311,331 in Indianapolis. Average loan-to-value ratio stood at 80.5%. Debt-to-income ratio averaged 36.8% for conforming loans, 44.7% for FHA and 43.8% for VA.

ARMs decline: Adjustable-rate mortgage share fell to 8.81%, compared to 9.11% in May. This decrease coincided with a slight flattening of the yield curve compared to the previous month.

Market spread trends remain steady: The 10-year Treasury yield dropped 17 basis points to 4.24%, while the OBMMI 30-year conforming fixed-rate (the benchmark for CME Group’s Mortgage Rate futures) declined 17 basis points to 6.67%, keeping the spread steady at 2.43%.

Loan sales trend in agencies’ favor: Bulk aggregator sales declined 300 basis points to 35%, while agency share grew as cash and MBS executions each rose 200 basis points, signaling stronger agency appetite.

Loan pricing improves: The share of loans sold at the highest price increased 100 basis points to 69%, while sales in the lowest pricing tier declined 100 bps to 12%, suggesting that loan characteristics or eligibility requirements played a smaller role in driving price dispersion.

Servicing valuations edge lower: MSR values for 30-year conforming loans declined slightly to 1.226%, tracking alongside the decrease in mortgage rates.

Pull-through rates increase: Supported by late-month rate improvements and steady new construction activity, purchase pull-through rose 170 basis points to 84.8% and refinance pull-through climbed 29 basis points to 62.6%.