Housing Policy, Inflation Trends & June Market Advantage | July 14, 2026

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

All right, welcome everybody. Welcome to another July episode of Optimal Insights. Thanks for listening to us today. And we are here making sure that you know what to watch out for, whether you're an originator, capital markets person, or just someone who's interested in the mortgage industry and some great market commentary. On that note, we will get into a solid market update here in just a moment with Alex and James. And then after that, we will visit with Brennan and Mike, and we will go through.

The market advantage report. before we get into any of that, just in the way of very high level rate data, 10 year treasury still stubbornly high, four point six percent as of right this second. And the OBMMI, so the average conventional 30 year rate is up back up to six and a half. So not what we want to see. Certainly reflecting some things that are going on economically and also geopolitically.

There, so you know, n there's no expectations out there to go much higher or much lower than that six and a half mark, unfortunately, but we'll talk about some of those things here in a second. Welcome, gentlemen. Thanks for being here as always.

Alex Hebner (: 01:45

Morning, how are you?

James Cahill (: 01:46

Thank you.

Jim Glennon (: 01:48

Good, good. Hope you all had a good weekend. So let's let's talk through it. So a couple things happened last week, and then we've got a couple things to look forward to this week. One is that that road to housing bill that we've been talking about off and on for it feels like the last year, and I think that might be about right. This is the the housing bill that you know, there's been various versions out there as there is with any usually major law.

That gets changed or it gets created. It bounces back between the House and the Senate and the Democrats and the Republicans. And the final bill was finally sent up to the president for signing a couple of weeks ago. So this is the bill that essentially looks to address the supply side of housing. So it it's it has some low income housing pieces in it. it has some sort of standardized regulation.

In it as well to try to streamline if states adopt the framework of it, look to streamline building new neighborhoods, financing for housing, that sort of thing. It also has the the much debated institutional investor ban in it. So essentially it's what it comes down to or what it ended up being was an institution cannot own more than 350 properties. So

That's a lot of properties, but there's certainly some, you know, hedge funds and and banks out there that own at least that many properties. It it doesn't require that those entities then sell properties to get below that 350. It just means going forward, you can't buy any more properties, you can't buy enough properties to get over 350. So it ha you know, it it is what people wanted in general. I think there's still some debate on whether that makes a dent in housing appreciation. Some think that it's a bad idea because if we do have like a crash.

in housing prices that there wouldn't be that institutional buyer to come in and save the day. But who knows? Well, I guess we'll find hopefully we won't have to find out on on the low end if the if it creates that sort of demand issue. But anyway, the the president refused to sign it, right? Because he was whether it was for show or not, he was demanding the Save America Act be pushed forward, which is basically v voter ID, law

Federally, no movement was made there. So he sort of just ignored the bill. And as is law, after ten days of Congress being in session, any new law that isn't signed by the president becomes law unless the president vetoes it, which he did not exercise. So so it's in place. No no no immediate changes are expected. It's not gonna lower rates, it's not gonna make housing cheaper tomorrow, but it's it's sort of a five to seven year plan. Does that sound right to you guys?

Alex Hebner (: 04:42

Yeah, no, I I think you're dead on that you no one's expecting the housing market to correct itself pricing wise over the you know next forty eight hours. But yeah, it's probably on a on a decade long time scale. It it puts in some levers that should hopefully help to alleviate some of the pressures that we that we see. I personally thought Trump might actually exercise that veto, but as you said, it's it was so overwhelmingly supported in Congress by both Democrats and Republicans that

It might have made the the veto look pretty weak and just easily been overridden. So it is law, as you said.

Jim Glennon (: 05:14

Okay. Yeah, it wasn't going away. And it may have just been symbolic that he refused to sign it knowing that it was going to become law anyway. Signing it would have been one less opportunity to to kind of publicize the the voter ID discussion.

yeah, I mean what's going on in the Middle East? Is it Groundhog's Day over there? It feels like oil's up, rates are up, tensions are high, the strait is maybe it's open, maybe it's closed. Is that j generally what we're seeing?

Alex Hebner (: 05:44

Yeah, well that seems to be where we're back to today. last week we saw tensions slowly ramp up after Iran I think launched some drones at some cargo ships. Iran alleged that they would had failed to comply with Iranian commands and in how they were conducting their transit through the Strait of Hormuz. and since then it's it's really just escalated from there. The US has continued to strike sites along the coast in southern Iran and

Iran has responded mainly by hitting targets in Bahrain, Jordan, regional, maybe not US allies, but US aligned nations, which is how the the war played itself out back in April, May. So yeah, it seems that we're back to a more of a hot, hot conflict. markets so far haven't really you know, oils up a little bit, but nowhere near where it was during the the main conflict that we saw back in May. So I think

At least for the moment, markets seem to be kinda calling the bluff on this one of yeah, we're gonna see both sides do some strikes, but we'll see s another memorandum of understanding or peace deal here in the next week or two.

Jim Glennon (: 06:54

Right. Okay. So still something to keep an eye on. As long as the tensions in the the straight remain elevated, you're gonna see a floor under rates probably. We still continue to see six and a half on the thirty year and then you know a four point six, four point five on the ten year. We also had the last week the Fed minutes, which you know, first meeting post Kevin Walsh.

Entering the picture as as the chair. I guess it was as expected. We w there was expected to be some disagreement within the Fed, even though they came out unanimously for a pause. There was anyway, discussion on whether there should be hikes later this year or early next year and and a little bit of I don't know, they called it like family fighting, right? Just within the within the FOMC.

James Cahill (: 07:47

Yeah, the minutes kind of revealed what a lot of us I think knew.

Is thinking a little bit differently than say Powell had previously, that rates are being looked at through a different light and he's you know he's looking at the handle on inflation rather than the whole item. So it's a a pushback on the idea that hey, rates are mighty be increasing.

He's saying, you know, they need to stay where they are. We might be able to get them down. And it really was a big disagreement between the current sitting members and Walsh in his first run. I he will have more to say later this week. He's going to be testifying in front of Congress, and I'm sure that they will be grilling him on how exactly he intends to be communicating.

With all of us moving forward and what exactly he's seeing on rates, I'm sure they'll try and pin him to say something more substantial.

Jim Glennon (: 08:42

Sure. Yeah, it's a tough that's a tough gig, right? Like we all see it from the more of the diplomatic side. We see the public persona of Warsh and some of the other Fed heads, and they sort of have prescribed what they can say and what they're going to say in public. But this is the new boss, right? The new boss walks in, new leader of the FYMC, and you kind of have to win the hearts and minds a little bit, don't you? You can't, you know, people are gonna have their own opinions, everyone wants to be heard, some people want that job someday. So there's gonna be this

you would think they're not just gonna immediately fall in line. Otherwise why are there so many why are there so many members of the of the board, right? That's interesting to think about what it might really look like behind the closed doors, right, when they're having these more frank or open conversations about how to run the how to basically manage the world economy.

Alex Hebner (: 09:28

Absolutely. I think Walsh came in more so than any other Fed had in in recent history with his own his own baggage. Probably a little awkward walking into that room on the the first day, just knowing all the drama that's transpired over the last twelve months in regards to PAL and the Fed's independence and then Walsh's confirmation within itself. So yeah, no, I think when he says we're having a good family fight, I think I think you're right, Jim. I think they're speaking pretty frankly behind closed doors.

But it remains to be seen if we get a cut this year, or rather a hike this year. I I there are, I guess, arguments out there for a cut, but right now I think we're looking at a hike likely in September. again, it really seems to be driven by this energy price shock we've seen from the conflict in the Middle East, which I I think could give them the cover that they need to hike, whether you know, whether you agree with that or not is up for debate. And I think

This might be one of the more hotly contested decisions for the FOMC that we've seen in in recent years. in fact we might not even see, you know, it could be a a thin margin vote, I I would have to imagine.

Jim Glennon (: 10:32

Right. Still seeing these these sort of rifts or the this separation within the Fed, whereas y you look previous years and there's been generally a unanimous vote, but it does feel like like the last couple Jerome Powell votes that there could be some dissent. Or maybe a good amount, like split down the middle. You know, one vote makes the difference. So that that'll be fun to watch. And we get a little bit of fuel this week, right? We have a full raft of

Inflation numbers, James, have you been following this much? Do you know what we're expecting here and if it we're gonna shrug off a high number because of the you know, the war is expected to be temporary or transient, if you will?

James Cahill (: 11:14

Yeah, th that is exactly right. So this week we're gonna see both CPI and PPI.

both these measures are expected to be reduced compared to how they were last month. CPI, a little bit more interesting to me. It's gonna be expected to be down.2%. So as a year-over-year value, this would take us to about 2.8. again, the idea that Warsh is looking at the handle rather than the whole number means he sees this as a two, right? Rounding down. And that's right on target. So right where you'd want to be.

Jim Glennon (: 11:43

Two.

James Cahill (: 11:48

I'm not sure I I'd love that argument, but it is you know, it is below three. It is below like a kind of a eyebrow razor. Rates are far too high from where they wanna be. it is with that price coming down, know, as the ceasefire came as ships started.

transporting through the Strait of Hormuz, oil prices came down pretty dramatically. Gas prices still lagging, but they have come down from the mid-fours down to it's a you know three dollars and eighty cent average in the state of Maryland. It's about the same, a little higher nationally. So gas prices are looking in the right direction. All of that you know bleeds through. So we are going to see a shock the other way, prices coming down. you know

The inflation is always going to be persistent. The impacts of higher gas prices from earlier will still kind of echo later in this year. And even though we might see an immediate come down, it's almost as though we've come from a very high outlier back to just a high number. so that reduction shouldn't be viewed as a you know huge victory yet. it's just a a step back from a massive step up.

Jim Glennon (: 13:04

Mm-hmm. A bit of a hangover. Yeah. And I I wonder too about this this round of inflation, almost you could look at it as the same round that we went through after the pandemic, twenty three, twenty four. we were making progress. Then we have this shock from oil prices. Meanwhile, inflation was just still elevated above where the Fed would typically like to see it, whether you're looking at the handle or the overall number.

But at the same time, what you you've got a consumer that's like increasingly stressed every month. Record level of consumer debt. rent and housing is still an extreme burden on most households. You add to that the you know, the inflation of gasoline and food. I I wonder if some of what's keeping inflation low is is a little bit of the demand side. It's just folks are running out of money. n not what you love to think about, because that's typically what triggers something like a

Could be a credit crisis or some sort of credit event that could be coming in the near future can be good for interest rates in the long run because of what the FOMC might have to do about something like that or just generally how bonds get traded. But anyway, it just popped in my pops in my head sometimes when I think about how spending was rampant in the early days of the coming out of the pandemic. People had paid down debt, had saved money. So they almost didn't care what, you know.

what Uber Eats cost. These people are just kind of blowing blowing cash. But now it's a little bit different. It and it's it feels like some of that is keeping CPI especially lower, even when PPI rises as some of these goods get more expensive or fuel gets more expensive. I don't know. Alex, you got any thoughts on that, just the general health of the consumer today versus when we were fighting inflation, you know, two, three years ago?

Alex Hebner (: 14:53

Sure. I I mean anecdotally speaking, I feel like you talk to just about anybody on the street and you quote the inflation rate to them and they'll they'll cock their eyebrow and say, You believe that number? you know, you know that too. I think a lot of people they're under the impression that inflation's running a little hotter even than than the official numbers would say. you know, that could just be that their basket of goods is a little bit different than the basket of goods that is being you know, sampled.

Jim Glennon (: 15:04

Yeah, that too.

Alex Hebner (: 15:21

these inflation metrics. but that seems to be the the again, anecdotally, the most oft-cited thing that I hear about the economy is that you know the basket of goods folks are taking home every month is is definitely pressing on the wallet. the numbers don't again it shows the inflation rate's high at the same time though, you know, wages, wage growth it remains decently strong, which is another point in favor of the the Fed potentially hiking rates as you know

Strong wage growth can can be a prelude to further inflation as, you know, if you have more dollars in your pocket, you're you're more likely to to pursue additional goods. yeah, I I I I remember in twenty three and twenty-four, I felt like the news cycle was always citing all those savings from COVID. to me it it didn't feel as if people had really continued to use those savings three, four years after the pandemic.

but you're definitely not seeing that that line included in, you know, the the economics write-ups that you know, in the news anymore. So I am in agreement with you. I think, you know, the the average consumer is definitely feeling the the press on the wallet from multiple sides. Yeah, the savings are exhausted. They, you know, while the numbers that are being released look strong on paper when it comes to reality, they they don't feel that they're all that strong.

Yeah, no, I'm I'm with you and I think I'm in fairly large agreement.

Jim Glennon (: 16:49

Yeah. The questioning of the the survey numbers is another piece of that. Is everybody's inflation number is different based on what they buy and where they live, right? It's not it's not the family of five in Indiana necessarily. You you have kind of a different spectrum of of goods that you spend your money on and yeah, people are you know the unemployment rate is good, wages is are growing, corporate

earnings are very good. So the stock market is performing well, but that doesn't make that doesn't necessarily translate to the average American doing well and thinking that the economy's doing well. And that's that's evident in almost any article you read and any poll about, you know, as we lead up to an election later this year, people are not thrilled about what's going on with the economy, but they are exuberant about investing in and some other areas where people are making money.

All right, what else, gentlemen? Do we miss anything?

Alex Hebner (: 17:43

I don't think so. Just keep your eye on those inflation numbers. They'll definitely be driving the next sixty, seventy days of you know, economics talk and into the lead up for these FOMC meetings in July and September.

Jim Glennon (: 17:56

Absolutely. All right. Next we will hear from Brennan and Mike. They will give us the lowdown and the highlights of the market advantage report. Let's kick it over to them. Thanks, gentlemen.

Alex Hebner (: 18:11

Dick sure.

Mike V (: 18:13

Welcome everyone to the June market advantage data summary. We had another exciting month here with with lots data changes and and new trends to call out. Brendan, you wanna kick us off with the origination trends?

Brennan (: 18:25

Yeah, absolutely. Happy well, I guess July now to everyone. Hope everybody had a good Fourth of July holiday. June. Optimism was in the air. So we had lock activity pretty strong, despite some slightly higher rate environments to deal with sort of across the board. total lock volume rose nine point seven percent month over month.

% from the same time in: 2025

And approximately 32% from the same period last year. So not not a necessarily a better month but I think we did see some some pickup maybe an extra business day in there, but but just generally speaking, some good optimism in June. refi activity is representing about 18 to 19 percent of total lock volume. It's

Basically unchanged for May, but it's you know certainly materially higher than than some of the other months that we saw and in years gone by. Purchase loans, accounting for the rest of that, just over 81% of total production. Mortgage rates, like I said, mixed. the conforming 30 year rate, the benchmark that Optimum Blue offers, that's the benchmark that sits behind the CME mortgage rate futures, that finished June at six point four five percent up a bp.

over the same or the end of May and 10 bps above March level. So so we're we're quite a bit higher than where we finished Q1, but still twenty-two basis points lower than June of twenty twenty-five. FHA rates increased a couple of bps to finish the month at six point two nine. VA rates declined mostly flat two bps to six point three. And and jumbo rates, this is where we did see some improvement, fell 30 bps to six point four percent. So some of the non-agency production

certainly benefited from downturn or a downtick in jumbo rates. The 10 year finished the month at 4.44%, roughly flat. And the spread between the 10 year and the 30 year mortgage rate sat around 200 basis points, pretty similar to where it's been the last couple of months. I would say, you know, looking at this purchase lock volume as we get into late

spring, early summer buying season. We're up 14% over a year and and really reached as highest levels in the spring. So I think that's where a lot of the optimism is coming from. In terms of loan amount, we're we're creeping back. We had hit $400,000 earlier in the year, fell back, and we were at $399,000 in June. So very high. I mean it's not necessarily great from a first time home buyer or affordability perspective, but in terms of origination, volume,

Seeing those those loan volumes tick higher is is a nice sign. product mix continue to shift away from agency lending. Conforming share fell to it's just below 49% of total production. So we're consistently now here under 50% of production going to Fannie and Freddie eligible products. Nonconforming lending continuing to expand. As I mentioned, the net the jumbo rates were quite a bit lower in June. so that's non-conforming is inclusive of both jumbo and

e sort of gone in waves since: 2022

is driving the purchase market. So we track planned unit developments PUDs and they're a pretty good proxy on our platform for new construction activity. And we're up to twenty-eight percent of total volume in June. so continues to tick a little bit higher. You know, we've seen this sort of new new build story ebb and flow. And it's an interesting one as we get into the summer months and

we start to see more new home builds come on the market. So it'll be interesting to see how much of new construction sort of takes over the the share of new properties or the purchase demand in summer of twenty twenty six. And with that I think I'll pass it back to you, Mike. What are we seeing on the secondary side?

Mike V (: 22:45

Thanks, Brandon.

The the the big story kind of starting off this month was kind of a tale of two stories with best effort mandatory spread. So just to remind folks, that's the spread between a best effort lock and selling a loan in the in the secondary market. And it's effectively how investors look at the hedge cost or the ability of moving that interest rate risk off their books to a lender to to manage, right? And that's where a lot of our hedging solutions come in that really to really make those economics make sense. And we saw the conventional

30 year best effort mandatory spread drop nine basis points from 40 to 31, while we saw the government 30 actually increase six basis points from 12 to 18 basis points. So kind of kind of kind of hard to say what what the exact factor is. maybe we're seeing some volatility go down, but to see both of those move in different directions is definitely a trend for us to keep an eye on going into next month.

Another one that's a kind of a continuation of previous trends was the shift away from N agency MBS securitizations. We saw that drop on our percentage point this month to 40% of our of our loan sales. This was closer to 50% about four months ago. And we've seen both the aggregator share and the agency cash window share take away from that. But this was the first month in a while that we actually saw best efforts committing and take it take a percentage point. It went from two percent of our

loan sales to 3% of our loan sales, which is which is interesting. Typically you see lenders sell to that execution if it's not updating as quickly as the market, or if there are CRA bet bids or really specific specified payup stories that are embedded in someone's best effort rate sheet. So again, definitely a trend to watch, but hard to say exactly why that changed. tr another trend to keep an eye out for was our our loan sales.

and where they actually went to from a price perspective, the share of loans sold to the first price increased from 77 to 78% of our loan sales, where our second and third ranked price both dropped the percentage point. And then we saw the loan sold to the fourth or worse actually increase the percentage point. So everybody was up a percent or down a percent last month. The interesting one to watch was that fourth or lower ranked price execution.

went from six percent of our loan sales to seven percent of our loan sales. So what that means is lenders are are, you know, looking at things other than price to kind of gauge their their best X. So whether that is a maybe some an investor has a quicker turn time, maybe there's representative mix that they're looking to manage across their different outlets. Hey, making sure you're not, you know, giving too much of one product or one type of loan to a specific investor to manage the overall relationship.

Or there could be pool pooling constraints that folks are looking at, like, hey, I want to move a loan out of a lower low balance loan to a multi-issuer pool. There's a variety of reasons of doing that. Our software at Optimal Blue helps folks do that. So, you know, there's ways to program these rules in here. So I kind of cringe a little bit every time I see that percentage change because there's ways to to automate and put those into the system. So it shows up as your rank one, even though the price isn't your rank one. So there's there's some work for our our lenders to do there.

We also saw MSR values decrease a little bit this month, which is actually interesting considering rates on average were up compared to last month, albeit quite immaterial of an amount, to your points from earlier. A couple of reasons why this might be the case. You know, we did see the shape of the yield curve change a little bit, theory would be that maybe the you know retention.

projections for folks might be decreasing a little bit given you know rates kind of staying higher here. We saw the 30-year servicing rate drop about three basis points to 1.33 on a 25-bit servicing strip. That's still a 5.3 multiple, pretty, pretty rich and pretty healthy. So not not much to fret about there. And then the last point I wanted to call out is that we actually saw our investor count stay flat at at 14 bidders.

at that's still a pretty healthy amount for a majority of twenty five and twenty four was in that twelve to thirteen range. So this is basically just showing a a proxy for demand out there, that there are plenty of investors that are bidding on the average loan sale tape that's going through our systems today.

that wraps up for the hedging side. Any any last points you wanna you wanna hit Brendan to get us out of this?

Brennan (: 27:03

No, I would just say to all those depressed soccer fans who watch the United States fumble in the round of sixteen. it's probably par par for the course for our men's soccer team, but still plenty of good World Cup games to watch. So hopefully ever everybody enjoys July and we'll see you in August.

Mike V (: 27:20

Yeah, it was it was great to see soccer kind of sweep the nation, and you know, everybody get behind the the guys in red, white, and blue. it'll be interesting to see if, you know, ten years from now we're able to see a little bit of a soccer boom from just the popularity of this of this World Cup being on on US soil. you know, I know of Portugal's only a five hour flight from the us East Coasters and that's where the next World Cup is. Maybe maybe there's a way for us to maybe take it on the road. I've you I've been to Portugal before. It's a really beautiful country. So

it's a it's a cool a cool venue for the next one.

Brennan (: 27:51

Yeah, you heard it here. Twenty thirty market advantage report coming to you live from Portugal.

Mike V (: 27:55

We'll be in we'll be in Porto. It'll be great. but we appreciate everybody you know, listening to the podcast and we'll see everybody next month.

Jim Glennon (: 28:03

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.