Since December, interest rates have increased on both non-agency jumbos and conventional-conforming mortgages. But rates have increased by a lower amount on jumbos thanks to demand for the loans at banks.
MBS and ABS participants gathered in Las Vegas this week, discussing volatility and weak demand from investors. The consensus? Buyers will remain cautious until getting a better handle on the Fed’s actions.
Inflation and lingering economic struggles from the pandemic have exacerbated housing affordability challenges among financially stressed households, the report said.
Rate locks for purchase mortgages declined from April to May. Numerous factors are depressing demand for the loans: higher interest rates, accelerating home prices and inflation.
Originations of adjustable-rate mortgages declined in the first quarter of 2022, but at a slower rate than the downturn in total first-lien production. ARMs accounted for 7.9% of total originations during the quarter. (Includes data chart.)
Issuance of expanded-credit MBS flowed in the first half of the year even as lenders grappled with higher interest rates. Issuance is expected to slow as lenders work to establish a new supply of loans with higher interest rates.
Spreads on interest rates between jumbos and conventional-conforming mortgages are at some of the widest levels ever seen, driven by uncertainty on monetary policy and strong demand from banks for jumbos.
Rising interest rates helped to push up income tied to mortgage servicing rights more than they reduced income from originations among a group of publicly-traded nonbanks. Results varied to some extent, with one large mortgage company even taking a loss in the quarter. (Includes data chart.)
If projections by the MBA are correct, interest rates for mortgages are levelling off, which should relieve some of the pressure lenders are facing on originations and profit margins.