August 2026 Mortgage Data, HELOC Growth & 100 Episodes of Optimal Insights

Jim Glennon (: 00:00

Welcome to Optimal Insights. I'm your host, Jim Glennon, Senior Vice President of Hedging and Trading Operations at Optimal Blue. Our clients and industry partners have long relied on Optimal Blue for trusted insights and commentary. And these podcasts are an evolution of our commitment to keeping the industry informed. Let's dive into today's episode.

Jim Glennon (: 00:34

Okay, welcome everybody. Thanks for listening again today. We've got a great show, as always, after the long holiday weekend. We are here making sure you know what to watch out for, whether you're an originator, a capital markets person, or just someone interested in the mortgage industry, and some great market commentary. So we will kick it off with a market update. Not a ton going on, but some developments in the war. Had the unemployment report last week, which we'll talk about inflation numbers coming up, plus we've got

a Fed decision. Before we get to the market update, the rest of the agenda would be this is our 100th episode. So we're gonna talk a little bit about that, just a little bit of a retrospective. What have we learned over the past couple of years hosting this podcast for y'all?

then of course the market advantage. It's the first

Episode of the month. So we will get the market advantage report, kind of a sneak preview of that from Mike and Brennan.

Then we will meet with Vimmy. Vimi represented us at a HELOC and home equity workshop in DC last week. So we'll talk to her about what she learned there and some highlights.

Before we get into the market update, just in the way of data, interest rates, again, a bit higher than we'd like to see them. We are at 6.75, maybe a little above that by the time this airs on the OBMMI. So conventional 30-year fixed, right about six and three quarters. The 10 year about two points below that as usual, 4.8-ish.

And yeah, volume is just off a little bit. partially as a result of rates where they are, but we're also hitting that season. You know, we start hitting fall and w and getting into the holidays, we do see a drop off in volume in the fourth quarter pretty much every year, except for last year, because we did have stellar rates going into the new year. All let's transition over to the market update. Welcome, Alex. Welcome, James. Good to see you.

James Cahill (: 02:28

Thank you as always.

Jim Glennon (: 02:30

Let's see, where should we start today? Maybe we'll recap what we saw in the unemployment report last week, which was once again a stunner. Like it was not even anemic this time either either. It was a it was a you know largely positive print on the non farm number.

Alex Hebner (: 02:46

Yeah, stunner in the in the other direction, as we've come to expect over the last few releases have been pretty middling, if not, if not negative. The last one was actually negative. but yeah, that Friday number, the headline came out at at plus 162,000, higher than any of the expectations. and then the revisions for July and June were both in total were up additional 55,000 rolls. unemployment's unchanged at 4.1%.

and we also saw a kind of a shift in where that job creation was. we've come to expect it to be in the in the healthcare and construction sectors with with healthcare by and large well away from the rest of the pack. but this time around it was it was hospitality and education. we do see education pop this time of year just because this is the report that captures new hires as the as the school year begins. I don't think

anyone can, you know, gripe too much about, you know, more teachers in our schools.

And then hospitality. Hospitality really stuck out to me because hospitality by and large is is discretionary spending. So

it's it's a positive sign to see hiring in you know industries that are, you know, people have a little extra money to be spending right now is kind of what that tells. So it's good to see. hopefully we can continue to see growth in both those sectors. but just by and large the print was was very positive on Friday.

Jim Glennon (: 04:08

Yeah, that shift is great. That's it bodes well for the consumer, as you said, that we're finally hiring in the areas of, you know, hotels and restaurants and the hospitality industry versus forever there. It felt like just it was basically a recovery jobs build from COVID. The hospitality industry. And then it was because of, you know, all the the noise around a housing shortage, it was construction, residential construction.

was driving a lot of those jobs, but now it's starting to spread out a little bit, so it's not so obvious where the jobs are gonna be coming from. I I I had not guessed that hospitality was going to be one of the big winners this time.

Alex Hebner (: 04:46

Yeah, absolutely. yeah, good signs there. But what I think it does do for for what everyone's focusing on our industry in regards to that September rate rate decision, you know, it kind of gives them leeway to lean into the hawkish side. there doesn't seem to be too much pain in the in the employment area.

Jim Glennon (: 05:05

Yeah, so we'll find out next week whether the job has already been done on behalf of the Fed or if the Fed actually has to act to raise l shorter term rates. I mean, right now, a lot of folks would say that the rate activity over the past month or so has already done their job for them. Rates are up a quarter percent no matter what index you look at, mortgages or treasuries or corporate bonds. But maybe we need another quarter to just put the breakdown a little harder so we get down to that two handle on inflation instead of this.

kind of three area we've been hovering around for the past for forever, right?

Alright, what is so we have inflation numbers coming up this week. James, have you looked very closely at what we're expecting there or have any kind of thoughts on what maybe where we sh might expect a surprise?

James Cahill (: 05:50

Yeah, so we we have both PPI and CPI this week. So PPI is set to come out on Thursday. The expectation is actually looking pretty hot. It looks like it's gonna come out at about five point three percent year over year, which is quite the increase from last time around, where it would have been four point seven. So, you know, more than a half a point increase in the producer side of these items. it does show just

Inflated price of gas kind of wearing on the inputs for many producers. even though there's been, you know, relief in the tariffs and the refunds that have come to a lot of these producers, there is still now this conversation with Canada threat of continuing. So just a lot of prices being higher for longer, starting to bleed through and really hit where the goods are coming from.

that'll take us through to Friday where we'll see CPI. The expectation is at 3.4% for year over year and 2.4% for core, which is that's right where we've been sitting. So the actual hitting your specific wallet number is not going to budge too, too much. it a little, you know, a little surprising that we can see producer and

PCE start to creep up more and more, but CPI is just staying right where it is. I think that we might see this number start to creep up again. Just gas prices haven't come back up over the past couple of months, now hovering at about 415 on average for the nation. So just pieces of the inputs starting to creep up. It will eventually bleed back down to all of us.

Alex Hebner (: 07:26

yeah, I'd second that with just with energy prices. I think we've we've been in a lull over the summer with with different peace proposals and and memorandums of understanding for sixty odd days. and we have gotten through that summer travel season now. But right now, again, there's there's no end in sight to the conflict in the Middle East, even if there aren't active hostilities right now. And and right now oil is is trading north of ninety dollars a barrel, which it it hasn't for for a month or two now. It's been closer to eighty, sometimes even touching into the seventies. So

I'm with James. I think that there's room to the upside for a surprise on on on both PPI and CPI.

Jim Glennon (: 08:03

Yeah, agreed. It it doesn't doesn't feel right that the two numbers should be first of all, so far apart from each other. Typically they start to gravitate, right? Producers will only eat margins for so long before they pass it on to the consumer. So it feels like maybe that's the number that where we see the surprise, but it probably is a crapshoot. If both of them come in high, then we probably maybe see a little bit of a a a a bigger increase

in the probability of a hike next week. And we're already pricing in more chance of a hike than a than a pause right now, right? Last time I looked at the CME, let's look at it right now. CME is calling for a fifty eight percent chance of a hike next week, which is as high as I've seen it right like going into a meeting. So it does kind of feel like we're gonna get maybe that one hike for the year right now.

Alex Hebner (: 08:54

So keep in mind they've got three Hawk voters already. They they really just need to convince a handful more votes and they'll have it.

James Cahill (: 09:04

It also, you know, over the past week we've seen a resumption of the administration putting pressure on the Fed to actually go

the other way. there was a I'll call it a a threat by the administration that if rates aren't actually lowered, that we'll stop trading with trade partners who have a

surplus versus the US. So anyone that we would have a deficit with, try to either wind down our spending outwardly or to encourage the Fed to lower rates. So we are, you know, once again back in that part of the cycle. I'm not confident that

Warsh will take the bite there. But the CME with eight days to go until the next decision still being at 40, 60, does tell you that there's a huge amount of uncertainty. You know, go back a year, we would not have been sitting with that kind of a spread. We would been sitting at 98%. It's staying flat. There's a hike. We would know what's going on. So there's a lot more uncertainty just moving forward and where the rates are going go.

Jim Glennon (: 10:09

Yeah, I mean that's the lack of transparency that Kevin Walsh is going for and and it's it's working. Like we're really not sure which way they're gonna move, but they and they may not know either. If it like you said, if the votes are a little bit split right now. And yes, I think I did see that threat as well, or and even comments from the administration saying, you know, the unemployment picture is is great right now. We should cut rates. But to me that's counterintuitive, at least in the traditional sense of

Observing how the Fed typically works, right? If the job market it's is good, you typically have less of a need to cut rates, right?

especially when inflation's still running hot. So it feels like the numbers are saying we should see a a hike, and maybe hopefully that's the last step that needs to be taken to get us back below two and a half percent. But I guess we'll we'll see tomorrow in this shortened week.

All right. Anything else as far as the market goes, gentlemen?

James Cahill (: 11:10

I might throw

i international

items to keep your eye on. We've all been, you know, talking a lot about Iran, the war going

on there, but there was conversations over the weekend between Ukraine and Russia.

Zelensky came out, the president of Ukraine, saying he didn't think the war was going be coming to an end quite soon. But this is the first time they've really gotten together and spoken. So there might be some thawing there, some movement. And Ukraine is a major exporter of oil and natural gas to Europe. And so that would, if the war was to cease, there would be

a a bit of time there, but as exports of oil and natural gas out of Ukraine came back to Europe, that would lower prices there and by extension the United States. So just a story to kind of keep your eyes on, you know, hopefully violence can end in the European continent.

Jim Glennon (: 11:59

Agreed. That one's been going on forever as y as everybody knows. And I'm sure there's a lot of pressure and there is pressure publicly, but probably a lot of pressure behind the scenes too from other European nations, including from the US, to end that war because that would lead to some reduction of pressure in energy prices. And grains, I think that they've they're one of the largest exporters of grain as well. Just a lot of a lot of resources tied up in that struggle. That's part of the reason that war's going on, right? Is is is

You know, future access to those resources.

All right. So that's another thing to keep an eye on, gang. And of course, watch for the Fed announcement next week. We'll talk a little bit more about that on the pod next week. And then yeah, just the inflation numbers coming up here in the next few days are something to keep an eye on. All right, gentlemen, let's welcome Vimmy and we'll talk a little bit about what we've learned on our first hundred episodes.

Jim Glennon (: 12:53

Okay, for this segment, I I'd we all just wanted to commemorate our one hundredth episode. Like that that's it's been about two years. We've you know, we've taken a week off around the holidays here and there, but we've also had a couple bonus episodes. And in any case, we ended up just a couple weeks ago with you know, our producer Matt, noticed that we were up to like our ninety seventh episode. So we thought it'd be fun on the one hundredth, which is today, just to commemorate and think about and

reflect on what we've done the past couple of years. So, I mean, first of all, it's been a super fun couple of years for me. Thank you all out there for listening. I know there's, you know, some days it doesn't feel like there's a ton of people following this podcast every week. But then again, we get out to industry events or we're talking on calls with clients and we do get a lot of comments about, hey, the podcast is pretty awesome. I listen to it every week to get, you know, to get market information, to find out what's going on in the industry.

To just get general wisdom or you know, kind of surrounding the mortgage industry, mortgage rates, mortgage volume, other goings on like vantage score and and things around conferences and all that. So anyway, really appreciative for anybody who's out there listening. It's honestly worth it if, you know, we have a dozen people listen every week. So hopefully it's slightly more than that. And hopefully we get to do this for another one hundred episodes. That would be I think that would be phenomenal. So

Let's just go around the room here a little bit. Start with Vimmy. Vimmy is a very regular host on the show, has dropped a lot of wisdom recently around MSR, around conferences. And she's also, you know, on for some of our more fun episodes, like we do stuff around the holidays. But Vimmy, what are your thoughts just on what we've done over the past couple of years and things you've learned, maybe some things that surprised you or maybe some things that you just like or hate about

About podcasting.

Vimi Vasudeva (: 14:53

I was thinking about what I've learned over the last hundred episodes or that we've recorded, I think the thing that stood out to me the most is that while our industry often operates in silos, everyone's ultimately trying to solve the same challenges, right? Serving borrowers better, managing risk, building sustainable businesses. And whether we've had the pleasure of hosting many guests, as you said, Jim, across the industry, really. So whether we're we've been talking to lenders or servicers or investors.

The conversations always seem to come back to the same themes, and the the podcast has really been a reminder that some of the best ideas happen when we bring different perspectives together, and I think that's just been really neat to see.

Jim Glennon (: 15:35

Absolutely. Love that. I think that's a great perspective on what we've been doing. And and yeah, having just industry interviews on this podcast, I think has been has taught me a lot just about what's going on and being able to ask, you know, questions to interesting people. But I think hopefully it's also disseminated out to our listeners and help them understand different perspectives on what's going on. So it's not just sometimes us, right? It brings more credibility to it when it's I think outside parties explaining.

an issue or or educating about an industry problem or how to solve it or what the status is of a rollout of a certain product or initiative or what's going on with the G S E's, right?

Vimi Vasudeva (: 16:17

Yeah, I I think as you said, it adds a lot of credibility and just really different perspectives. And I think we've even come up with solutions while ha having conversations with different industry players, just talking about challenges and sort of the train of thought, like, that's a really interesting point. And that's probably something that we can solve for. Cause you at Optimal Blue, we're always trying to solve for problems. So that's been really fun.

you asked about things that surprised me. one thing I will say that I didn't expect when we started on this journey was just how much I'd learn about communication. Listening back to yourself is very humbling. I'm sure you can all agree.

Jim Glennon (: 16:53

Well,

Vimi Vasudeva (: 16:56

You start noticing every every you know, every unfinished thought, but over a hundred episodes has taught me the value of slowing down, being intentional, and letting a thought

Breathe before filling the silence. And I know our podcast producer will be really happy to hear me say that.

Alex Hebner (: 17:16

Ha ha ha.

Jim Glennon (: 17:18

Absolutely.

Now that if you listen to the older episodes, it was we went through an evolution for sure, where the first couple episodes sounded a little too scripted and we realized that and we changed our our way of doing this into something that's a quite a bit more conversational. And that reminds me of something. I'll I'll I don't know if I'm gonna embarrass Vimmy with this one or not, but we have Vimi has a huge fan out there and it's it's it's it's the mom of of one of our

our teammates, his name is Tage. So shout shout out to Tage's mom. She is a huge fan of the podcast. Probably the first one to listen to every episode when it comes out every Tuesday morning. And particularly a big fan of Vimmy's. So shout out to Vimmy for that too, for having having some really good fandom out there.

Vimi Vasudeva (: 18:06

Love it. Thanks to the call out, Jim.

Jim Glennon (: 18:09

How about Alex? What's going on in your mind when you think about the the first two years, first hundred episodes of Optimal Insights?

Alex Hebner (: 18:17

Well, first and foremost, I think we need to have Taj on as a guest, just to begin.

Jim Glennon (: 18:21

That's gonna happen.

Alex Hebner (: 18:24

but I think for me it's the cyclical nature of it and keeping myself in the loop and and by extension our our listeners in the loop. I find myself every Sunday night thinking what's happened this last week, what's going on, as as I kind of begin to prepare myself for for that Monday morning recording session. So that for me has been the number one thing.

And I think just some of the connection kind of to what Vimy was saying, connecting with our clients, with our our counterparties throughout the industry. I I particularly remember back in May and at the New York MBA, a couple of folks walk up to me, hey, you're the podcast guy. And it's a great, great spot to to kick off a relationship from, even if it's someone you've you've never maybe they've heard you speak, but maybe you've never met them before. So yeah, no, it's just been a great connection tool and way to stay.

Up to date on everything that's going on both in our industry and around the world.

Jim Glennon (: 19:18

Agreed. Yeah, I I think, you know, for me a huge thing that's really been honestly inspiring for me or and really interesting to see mature is is Alex, you and James and in your your market updates. I think that's you know, that's at the onset of the podcast every time. I think people tune in initially to hear the market update and then to hear what comes next, who we're interviewing or who went to the latest conference. But I think that that that kind of

Every week that rock, right, that we that the show revolves around is that market update. I've just had a lot of fun listening to it and asking you guys questions and understanding, you know, your different perspectives. And you guys always come with a lot of great information. And for me, sometimes it's how I get my market information is just is at that moment when we're recording every week. So I feel like I'm I'm grounded. I know what's going on in the financial markets and the geopolitical sphere, and then breaking that down and bringing that back to.

what that means for interest rates and volume and you know what we should be thinking about as capital markets people. So thank

Alex Hebner (: 20:21

Absolutely.

Jim Glennon (: 20:22

thank you for doing that. every week, I know it's a lot.

Vimi Vasudeva (: 20:26

Alex, you did mention the Sunday night preparation. I'm sure it's tamed down what would otherwise have been maybe a more exciting Sunday night for you. I don't know.

Alex Hebner (: 20:36

Yeah. No, I I try and keep my Sunday nights pretty pretty open, pretty free. So it's just something going on back of

Vimi Vasudeva (: 20:43

There you go.

Alex Hebner (: 20:44

the mind, you know, what's what's been going on. Yeah.

Jim Glennon (: 20:47

For sure. No, I think for a lot of us it's just y you like to know what's going on in the world. And this is a way you can not just read that article yourself and understand it, but actually disseminate it to other people and and and bring your you know, your specific angle to the listeners.

Alex Hebner (: 21:04

Definitely. And and I second what you said, Jim. If you go back and listen to our original episodes, not only like you said, are they are they do they feel a little bit scripted, but also I think w what myself and James are probably still working most on was tying it all back. I think we were great at bringing headlines to the listener, but

you know, the the secondary effects of how does this relate to your day job in mortgage has been a skill we've developed. I think one we've we've been able to sharpen and one we can hopefully grow as we head towards two hundred.

Jim Glennon (: 21:34

Yes, two hundred. Well, we've got the holidays coming up. That's another thing that I find pretty fun about this is sometimes we do a a slightly different episode where maybe we, you know, talk about our favorite holiday movies around the holidays, or we talked about the history of of mortgages and mortgage finance in the US for the two hundred and fiftieth anniversary of our country back on the, you know, fourth of July episode. I thought that was a lot of fun. I I I I appreciate that we are given a very strong level of

Latitude for the programming of this show. We kind of put on what we feel is interesting or sometimes just fun. So appreciate, you know, Matt and Sarah and the rest of the crew that that produces this this podcast as well. So they're there, you know, couldn't could not do it without them. A hundred episodes is a lot to to piece together and for and for Matt to listen to our voices as he does that every single time. And double speed. I think he listens to it fast too. That's gotta be a just a trip.

All right, what else gang? Feeling good about another hundred episodes here?

Alex Hebner (: 22:40

Right, get after it.

Vimi Vasudeva (: 22:41

Absolutely.

I'm sure it'll be here before

Jim Glennon (: 22:42

All right. Well thanks.

Vimi Vasudeva (: 22:44

we know it.

Jim Glennon (: 22:46

Hundred and one coming up next week, right before the Fed decision. Thanks for your time, you two. That was fun. Talk again soon.

Alex Hebner (: 22:53

Thanks, Jim. Demi. Have

Vimi Vasudeva (: 22:54

Thank you guys.

Alex Hebner (: 22:54

a good one.

Mike V (: 22:55

Welcome to the Market Advantage for August. We're really excited that this is also the hundredth episode of the Optimal Insights podcast. It's been a couple months, maybe even a year now, where Brennan and I we left our old podcast and started the crash the Optimal Insights podcast on a monthly basis. And we're we're excited for the next hundred episodes. Brennan, why don't you take us through some of these trends from the origination side for August?

Brennan (: 23:22

Yeah, thanks to Jim and team for continuing to let us crash here once a month. beyond the hundredth episode, we're also very excited because football season is starting. I don't talk about it a lot, but I'm recording here out of my Packer dungeon. And I've got Lombardi and the ninety-six Packers behind me. So got a lot to look forward to this year. Hopefully all you football fans are also gearing up for Labor Day and then the the real part of the year starts here.

week later. August lock activity slowed a bit. mortgage rates remained elevated and typical late sum summer seasonality. Weight on purchase demand unfortunately. total rate lock volume declined about nine percent month over month, twelve percent down over the past three months and about three percent decline year over year. Purchase activity though remained

% from August: 2025

Twenty-three percent over three months. Sounds like a big number given where we're at. It's still a relatively small refinance number from an absolute sense. So that twenty-three percent isn't necessarily jarring from an absolute perspective. cash out refi volume held up somewhat better, declined three percent from a month ago in July and then five percent year over year while remaining

two percent above where it was just a quarter ago. despite the decline in refi volume, the share did increase modestly as we saw purchase volume dropping into the fall season. So it was up to nineteen percent of production. It's up approximately forty basis points from market share from where it was in July. refi share still though s almost seven percentage points below where it was last year. So it really sh shows you that we are in this

basis points above August: 2025

10-year Treasury closed at four and three quarters, unchanged for the month, but you know, 30 basis points higher over the last three months and and 50 basis points higher where we were from a year ago. So continuing to weigh on not just mortgage, but you know, the the economy in general with higher rates. the spread between the 10-year and the OBMMI 30-year conforming rate, that's the rate that drives the CMA mortgage rate futures contract sits just just below two points, 197 basis points.

so you know, relatively tight spreads, but given the the treasury yield situation, no real relief there. to that end, we're seeing arm utilization staying relatively high. We're a little bit over 10% of all of our rate lock volume coming in through adjustable rate mortgages. Down a little bit. It was 11% last month, but again, in this, you know, pretty firmly into the double digit area we're

We hadn't seen that if you go back a few months. product mix-wise, we saw a continued shift away from conforming production. conforming loans represented under 47% of total volume, down nearly four percentage points from where they were a year ago. So just continuing to see this secular decline of loan production that would be sort of fanny Freddy eligible. Non-conforming share, the primary beneficiary.

mostly unchanged from July, but it's up two points over the last three months and and roughly four points year over year. So that's really Govy's taken a small share of the conforming business, but primarily what we're seeing is a shift towards non-conforming and and a lot of that's coming in the form of non-QM lending, which just in August hit another high for the optimal blue data set. We're up to eleven point three percent of overall volume in August.

by dollars is coming from non-QM business. About a third of that is DSCR, a little bit over a third is DSCR, a little bit below a third is bank statement, and then and then you kind of have like in every other bucket. few other notes, credit trends varied by product. So conforming borrower credit scores, we're down a point from July, down four points year over year. I wouldn't make a ton out of that. FHA borrower

credit scores near 677, VA borrower scores sitting around 714. No, no material changes either month over month or year over year. I think on the credit side, what's going to be really interesting over the next handful of months is as we start to see more use of the alternative credit scores, how that's going to start to impact the credit landscape in general and just, you know, what we're reporting here, I think we'll at some point try to start sussing out what we're seeing in vantage versus

FICO scores. last note here, which you know, not not really a surprise. We saw a pickup in FHA and VA borrowing in August. So we saw a decline in average total loan amount. So we were down to $388,000 as the average loan amount, down from $395 a month ago. And we were up a little bit above 400 in kind of the meat of the summer buying season, but now down you know anywhere from $12 to $15,000.

on the average loan amount. Maybe maybe a a good sign, a little bit easier for first time home buyers. Any any bit helps right now. but I think that I think that's it on the origination side, Mike. What are what's what's the world look like for secondary and in cap markets?

Mike V (: 29:13

Yeah, kind of a a bit of the same for compared to last month with just a couple of notable exceptions that I'll call out. big trend to see was we saw MSR values increase quite a bit, almost five basis points on average, to a one point three eight price. That's a five point five two multiple, which is pretty pretty pretty pretty large in the grand scheme of things. You know, I think kind of pre COVID if you if you had a four multiple, you were

Hitting that bid and and and you retaining that loan all the time. But now we're in this new world with higher rates, and you know, I don't I'm unsure if we're gonna see it materially lower in the near future. And you're seeing just that that percentage chance of prepay or projected prepay really, really, really diminish. And when that happens, the servicing rate becomes such a you know kind of like durable and desirable asset for investors. You know, like you said, OBMMI was up throughout the course of the month. So this makes sense on average. It was up about 10 basis points.

Compared to last month. So that four basis point or five basis point move in MSR value tracks along with that very nicely. With that trend, we also saw an a a fairly material increase in the amount of loans that were retained a servicing perspective this month. last month, about 53% of our loans were s were retained, meaning that the seller is actually going to keep the servicing rates on their books and

Then service the loan and get the cash flows associated with that loan for the life of the loan. We saw that that percentage increase to 57% of all of our loan sales, having the servicing being retained. You know, that seems to be the next battleground in the industry where, you know, borrowers, that FaceTime with the borrower is the most important thing, that connection, that recurring talking point with them is what.

seems to be the lifeblood that everybody's focusing at. You see MA trends out there based upon it, both in the lender space with the tech space as well. And we're seeing that become a a a much more predominant strategy in in the mortgage banking space. Now with with that, the rest of the rest of the rest of the trends were a little ho-hum in my opinion. best effort mandatory spread was down four basis points for conventional 30-year loans to 26 basis points from 30 basis points last month.

Conventional 15 best effort mandatory spread was down from 40 to 37 basis points, while the Govy 30 best effort mandatory spread remained flat. Our loan sale metrics, where we we track how lenders are selling their loans, effectively the same, but with a a change with mortgage-backed security execution, which is predominantly those larger lenders, taking a little bit more market share, going from 40 to 43%.

While both cash and best effort valuations decreased about two per 2% on average. We did see loan sales sold to the rank one execution drop from 79 to 77%. Still the vast majority of these loan sale decisions are based on price, but you could be seeing things where maybe that second that second execution is right behind the first, and maybe your strategy is to retain. So I'm I'm wondering if there's a through line there to watch where hey, you're

Your in-house valuation, your own view of the servicing rate has increased compared to the market. And you want to actually retain that loan. That's a perfectly reasonable reason to not sell to rank one because you want to maintain that relationship with your borrower. So that'll be interesting trend to watch if we see that percentage continue to drop, but your retention percentage go up. The amount of investors that have been included on our loan sale has been now flat for two months in a row at 13. Our percentage of

spec eligible loans stayed flat at 80% month over month. Still can't get over how large that number is. I had to like pinch myself every time I see that. But the interesting kind of like subcohorts to watch is, you know, we saw states that have some type of refi tax or some type of you know slower prepayment story. Think New York, think Florida, Texas, Puerto Rico. previous month it was about four and four point three percent.

of the loans that were that were eligible in the pipeline for a spec payup there, that increased about 4.68%. Now we strip out low low balances and things out of that number. So folks might be like, well, Texas and Florida, that should be larger, but we don't want to double count spec payups. So anything that's with a low low balances, we we we basically bucket it elsewhere and then we did see a decrease in our 350 to 250k amount tier

again, not super material, 22.15% to 21.86%. But again, you know, on average, that spec eligible payment stayed flat. And the last piece I wanted to call out was our pipeline trade composition. This one's really interesting to me because it gives you insight into how lenders are managing their interest rate risk. And you know, we continue to see lenders predominantly using that UM30 five and a half coupon as their hedge instrument. It did drop compared to last month.

Last month, 67% of our hedges that we observe in our Compass Edge and Compass Point platforms drop to 62%. But in comparison to where loans are slotting in their pipeline on a best X basis, you've got 62% using that five and a half as your hedge, but we actually only see 27% of our loans slotting to that bucket, but then 25% slotting to that 6% bucket.

So you might see some instances where loans are now starting to slot up in execution as rates are drifting up. And so it'll be interesting to see if lenders have to re are going to reshuffle their hedge at all as you as we go up into this higher rate environment in that six coupon gets more liquidity, more loans slotting to it. It'll be interesting to see if that 62% number maybe becomes 55 or 50% next month. if we're still at the same spot in the rate, the rate curve where we are today.

And I I wish I knew you were gonna s you're gonna talk about the Packers and Lombardi. I have my signed Pat Sertan Broncos helmet just out of reach over here. Really excited about Denver Broncos football this year and can't wait to see the boys in blue, the Penn State Kittley Lions on Saturdays with our new head coach. really excited about the future of both my football teams. So we'll have to layer that into some of our podcast content going forward.

Brennan (: 35:29

Certainly no homerism going on here in the market advantage segment. well, good good catching up with everyone again this month. Happy one hundredth optimal insights podcast to the rest of the crew. Thanks for letting us join in Crash. And we'll see you next month.

Mike V (: 35:47

Thanks again, everybody.

Jim Glennon (: 35:48

Right, everybody. A nice treat for all of us today. please welcome our own Vimi Vasudeva. Welcome, Vimi. How's it going?

Vimi Vasudeva (: 35:57

Thanks, Jim. Going well.

Jim Glennon (: 36:01

Thank you for representing us last week. So, for those who aren't familiar, Vimi represented us at the first ever, the inaugural MBA Home Equity and HELOC workshop in D.C. So Vimmy's based in DC, so kind of an easy trip for her.

But also as you know, just a representative of Optimal Blue out there in the world, especially when it comes to some of the headier headier topics like MSR servicing, HELOCs and home equity. So thanks again, Vimi, for repping us. And why don't we start with just telling us a little bit about what was this? Was it a kind of a typical conference? Was it a was it something different? Is it something that we should hope to see more of in the future?

Vimi Vasudeva (: 36:43

Yeah, absolutely. It was actually, as you said, it was the inaugural workshop for the MBA. I think the MBA does such a great job about surveying members to see what types of events and what types of topics would really help lenders. And I think that this is a very popular one. There was a really good turnout, especially for it being the first workshop. it was a little different than a typical conference, as you asked. It was more of a workshop style, which I think really led to

some great conversations, a little bit more personal. It it wasn't the typical presentation style where a lot of folks are feel like they're talking to an audience, but there was a lot of back and forth, which I thought was great.

Jim Glennon (: 37:24

That's awesome. So a little bit more of a round table. the workshop name works too, just a lot more interactive. Roughly how many people were at this thing?

Vimi Vasudeva (: 37:33

Probably about eighty people. And most people had to fly

Jim Glennon (: 37:36

Okay, good size.

Vimi Vasudeva (: 37:38

in for it. I w I was one of the lucky ones that got to take an Uber ten minutes away from my home to attend, but most were talking about travel woes as there always are. So I I felt very fortunate to not have to deal with that.

Jim Glennon (: 37:51

Sure. But it's it says a lot about an event usually if people will will travel by air to get there. It means it was a a big enough deal that they can't there's not an event local to them that would suffice. So it sounds like something that was pretty important to people. So to that end, HELOC and home equity, obviously a a a topic surrounding like the lock in effect. People don't want to give up their first lien mortgages because they're paying two and a half, three percent.

on the bulk of their their home equity. But so it makes sense that we're talking more about how you could take out a second lien to tap into some of that record equity that's out there, that many trillions of dollars of equity in people's homes. But why now? Like why did they decide now to to create this new workshop around the very specific subject of HELOCs and home equity, do you think?

Vimi Vasudeva (: 38:43

I think it's is to your point. I think we're in a very unique environment right now, just with the unprecedented amount of equity. The workshop highlighted that nearly 70% of borrowers have a first mortgage rate below 5%, which I think homeowners collectively have more than 35 trillion in equity. meanwhile, consumer debt continues to rise. So historically, many borrowers would have used a cash-out refi to access that equity, but

Today, giving up a three percent mortgage to take on a six or seven percent mortgage doesn't make as much sense. So I think borrowers are increasingly turning to HELOCs and second liens, and and I think that's why the MBA chose to put on this workshop now, given the the increased interest in the product.

Jim Glennon (: 39:28

Sure. Yeah. I mean, for our listeners who aren't familiar, and maybe you have one of those mortgages that's less than five percent on your home, you can tap into the equity of your home without letting go of that lower interest rate mortgage. You can take out what's called a second mortgage, which maybe has, you know, negative connotations from the great financial crisis because people were taking out second mortgages that were up to and even above a hundred percent of the value of their home. But you can take out a ten percent loan.

To tap into some of that equity without without giving up that first lien and and the rates on those are still pretty competitive, even though we are in a higher rate environment. So yeah, probably overdue to have more large group discussions around the topic. So other than the fact that just the huge numbers we're talking about in terms of percentage of people with low interest rates and the high kind of unfathomable dollar amount of

Home equity that's out there right now. What what else surprised you about this conference, or what did you learn at this conference that was surprising to you?

Vimi Vasudeva (: 40:32

Definitely learned a lot. in fact, it was fascinating to me that we could spend an entire day just talking about this one product. And I think that we probably could have gone two days. There was so much to to think about. But the one thing that really stood out to me, which actually surprises me because I obviously look at borrower behavior quite a bit. When we look at the pipeline hedge side, we're always looking at borrower behavior to form pull-through predictions, right?

And then on the MSR side, we're looking at borrower behavior for prepayment assumptions. But what was interesting here was that how much speed actually impacts borrower behavior. And so what I mean by that is we saw data that showed non-bank lenders funding HELOCs significantly faster than traditional institutions, sometimes weeks faster. And then what was

Interesting is that borrowers who close quickly were more than twice as likely to actually draw funds at closing. So that tells us speed isn't just an operational metric, right? Like a lot of people tend to think of it as, but it's actually directly impacting customer adoption and then that ultimately impacts lender profitability.

Jim Glennon (: 41:41

Right, it's a performance metric too. So it I mean, presumably those borrowers wanted the money quickly, but maybe they were also maybe well educated by the independent mortgage bank to say, here's how this thing works, here's you know, no reason not to take some cash out immediately if you're going to put it to good use, like lowering your overall interest by paying off things like credit cards or car loans that could that with credit cards certainly cost a ton more than a home and e home equity loan would

Right. What other I don't know, any other big maybe not a surprise but a big takeaway?

Vimi Vasudeva (: 42:22

I think that there was just a lot of focus on technology. So, like to the speed comment, right? Of what's gonna help with speed and broad faster adoption, it's gonna be technology. And in fact, the panel that I was on was specifically focused on how technology might impact HELOCs. And so I think that there was a general consensus that the borrower experience isn't just simply

just dig simply digitizing paperwork, right? It and I hate to use these buzzwords that we often see when we talk about technology, but it's going to reduce friction. So if a lender

already has a relationship with a borrower, they know the property, they know the mortgage, they have access to all the relevant data. So a borrower shouldn't necessarily have to start from scratch, right? The lender best lenders would be using technology to streamline this decision making and

Reduce documentation requests, which would then shorten the cycle times that we were just talking about. gonna create a more personalized experience. But as as I actually spoke to that on the panel, it was really interesting. I I kind of made an anecdote that, well, why should a borrower even have to simply put in any data? Why wouldn't a lender just approach them and say, Hey, I see this data, I see this is how much you have in tappable equity. and I was on the the panel with several wonderful folks, but

Ivan from Experian, who was one of the panelists, he made a comment that they've noticed that if an institution approaches a borrower with all of their information already at their fingertips, he used the word creepy. He said a lot of borrowers actually think that that's creepy and

Jim Glennon (: 43:51

Ha ha ha.

Vimi Vasudeva (: 43:53

kind of wonder, like, why why do you have access to all this information?

Jim Glennon (: 43:56

Yeah.

Vimi Vasudeva (: 43:56

And so they're really just kind of two sides of the coin.

Jim Glennon (: 43:59

Yeah, it certainly a competitive advantage you would think. I mean credit card companies I feel like have been doing it for years, probably with less information, but you get those things in the mail. Pre-approved, you're good, right? Then they ha obviously have some idea of what your credit looks like based on publicly available information. But for a HELOC, obviously you need more data and there is probably more access to that data than one might think.

So yeah, I could see how it be is creepy. There's a there's a a fine balance there, I I imagine. And and but if that is available to everyone, you kind of have to strongly consider taking that competitive advantage because if you don't, someone's is probably willing to be creepy and get ahead of you with with that information.

Vimi Vasudeva (: 44:43

Yeah.

Jim Glennon (: 44:45

so yeah, technology obviously and automation near and dear to us at Optimal Blue.

and so is AI. Was there much talk about AI in this? w you know, it's servicing there's a ton of discussion around it and origination of first mortgages, a ton of of adoption. Is there a play here too? I would assume there is, but was there much discussion about artificial intelligence as it relates to HELOCs and home equity?

Vimi Vasudeva (: 45:11

Yeah, and Jim, you know what I loved is that we our panel was not until 1 p.m. And a lot of the topics that we had already planned on discussing, of course, a lot of the wonderful points were made by preceding presentations and panels. But the one topic that didn't really come up very much was AI, which is so unlike any other mortgage conference that we've been to of late. That tends to be a very early and consistent conversation. but we certainly touched upon it, and I

I kind of use the reference of our our originator assistant here at Optimal Blue, one of our AI tools that we've developed where the idea is to make a great loan officer even better, right? So it the AI should

not be replacing relationships, but it's helping loan officers identify opportunities that they may have otherwise missed. So a couple of different tools that we have, for example, we've talked about these many times on the podcast, but our capture for originators, our other capture product.

the solutions are different, but the concept is the same, is to help originators look at their existing servicing portfolio or customer database and be proactive about reaching out to borrowers with a potential HELOC product. And the AI part comes in again with our originator assistant. It's going to help a loan officer evaluate the many different products and scenarios that a borrower could.

leverage it's it would be so difficult without this for an originator to truly evaluate all potential opportunities. And so that those examples were very well received.

Jim Glennon (: 46:43

Sure. No, I love that that feature, originator assistant. I think, you know, those of us especially that have been in the mortgage industry for a very long time, longer than I care to admit, we have habits, we have tendencies or biases, and we say we see a borrower and we say, that's a that's an FHA borrower, that's a VA borrower, that's conventional all day. but now with

hen rates started going up in: 2022

That every borrower that walks in the door could be a candidate for some of these different products, some of these non-GSC, non-government products, and certainly HELOCs are one of those. So just a kind of an indifferent machine that can help you think through these things is is invaluable, I think, in that conversation to say just take your biases aside, be practical. What should I do with this borrower? What are my options?

Vimi Vasudeva (: 47:52

Yeah, exactly. And I I think that it also speaks to the retention opportunity, right? Like as you said, if you're not gonna be a creep, someone else will. So you you might as well be the creep, use the data

Jim Glennon (: 48:02

Right.

Vimi Vasudeva (: 48:03

and use these tools that help with your retention. Because again, like if you would get access, you would be the first organization that one would think of to for a HELOC product instead of going to someone else.

Jim Glennon (: 48:15

And and that's that's a good segue to maybe w what we finish up on, which is y you are a an overall industry expert, but you are very much at times focused on servicing, MSR, which leads to the conversation of recapture. So both of those things, recapture and and having a servicing portfolio, how does that play into the into this particular like it's not a borrower that's that's moving, but you have these borrowers in your portfolio of servicing rights.

And you likely have some mechanism to recapture on first liens. How does that relate to HELOCs and second liens?

Vimi Vasudeva (: 48:52

I think it's very similar. I think this is the same concept of you've you've got the servicing portfolio, you have the data with the intent of of recapture. You should I would say servicers shouldn't wait for borrowers to raise their hands when that data that they have will provide the clues well before a borrower raises their hands, and an effective servicer who has the right technology will be proactive about it. So I think that they can use the data to identify.

Equity rich borrowers and engage them with with relevant solutions. think this would have a really meaningful competitive advantage.

Jim Glennon (: 49:28

Yeah, makes total sense. Again, it's one of those things. It's a familiar muscle that we need to exercise, but it's a little bit different, right? Because it is a HELOC that many lenders probably don't have that much experience selling or delivering borrowers into. Okay.

Vimi Vasudeva (: 49:46

Right. And I think that's because there was

still this think there's this perception that HELOCs are a niche or a supplemental product, but the data presented

at the conference really suggests otherwise. And home equity lending is really becoming a meaningful growth category and an increasingly important source of borrower engagement. So I think for many lenders, it's kind of evolving from an optional offering to a strategic necessity at this point.

Jim Glennon (: 50:13

Right. I mean they're they are they tend to be smaller loans and if you don't draw right away from a HELOC, I believe the combination of those two things being a small loan and no immediate draw in some cases, I imagine originators don't get paid quite as much per unit when they deliver a HELOC versus a first lien, but it's just a good service to provide.

To a borrower and it very much, I would think, could lead to recapture down the road. Right. A HELOC is a relatively short term instrument. You use it to g to pay off some higher interest debt or to make home improvements or to borrow money just to unlock that equity from your home. But at some point you're going to either refinance the whole thing to get to an even lower rate, or you're gonna move. Right. And you want that borrower to think of how you've helped them

to get into the right instruments at the right time.

what else, Vimmy, anything that we that we missed that you wanted to cover?

Vimi Vasudeva (: 51:12

good summary. I I would like to shout out both Marina Walsh and John Pennerman from the MBA. They did a fantastic job organizing this workshop. Again, especially considering it was the first one. It was very well attended, very well organized, and I I really appreciated being a part of it.

Jim Glennon (: 51:29

That's a great shout out. Yeah, the NBA just as most of us know, a spectacular organization. We very much enjoy partnering with them on many events throughout the year. We've got it, you know, October coming up here, the NBA national, like the big, you know, the the big major conference. One of two major conferences, I would say, for the MBA. So looking forward to that one as well. And and thank you, Vimi, again, for representing Optimal Blue at this workshop. And looking forward to more events in the future and looking forward to talking

Talking to you in the future as well. Thanks, Vimmy.

Vimi Vasudeva (: 52:00

Likewise, thanks so much, Jim.

Jim Glennon (: 52:03

And that's it for today. Join us next week for another episode of Optimal Insights, where we'll continue to provide you with the latest market analysis and insights to help you stay ahead. Check out our full videos on YouTube. You can also find each episode on all major podcast platforms. Thanks again for tuning into Optimal Insights.