Mortgage Market Holds Steady Amid Policy Shifts and Rate Pressure
Despite elevated rates and fiscal uncertainty, the mortgage market continues to demonstrate resilience. In the latest episode of Optimal Insights, Jim Glennon, Alexander Hebner, Vimi Vasudeva, and Kimberly Melton discuss the macroeconomic forces, regulatory signals, and technology trends shaping the second half of 2025. Their insights from the MBA Secondary Conference offer a forward-looking view of where opportunity lies.
Here’s what you need to know this week.
Key Market Trends and Economic Signals
Rates remain stubbornly high: Despite nightly hopes for relief, the OBMMI 30-year fixed rate hovers near 6.9% (as of May 23), with upward pressure driven by:
Advancing tax legislation and deficit concerns
Escalating tariffs, including a proposed 50% levy on EU imports
Lingering inflationary fears and Fed caution
Volume remains resilient: Surprisingly, mortgage volume is up 20 – 40% compared to pre-pandemic levels, with a notable uptick in cash-out refinances as borrowers consolidate high-interest debt.
GSE privatization chatter reignites: President Trump’s recent comments on releasing the GSEs from conservatorship, coupled with FHFA Chair Bill Pulte’s remarks at the MBA Secondary Conference, have stirred speculation. While no formal decision has been made, the implications for market structure and affordability programs are significant.
“They both implied that, obviously the GSEs are super profitable, but they've implied that if they were actually hyper-focused on profitability like they would need to be, if they're back in the hands of non-government shareholders, they may actually be able to be more productive.” – Alex Hebner
MBA Secondary Conference: From Survival to Strategy
This year’s MBA Secondary and Capital Markets Conference in New York marked a clear inflection point for the mortgage industry. The tone among attendees shifted from cautious endurance to forward-looking strategy.
“In all of the meetings we attended last year, there was this consistent theme... ‘survive till 25.’ So it was really great to see that most of our clients did survive until 25... and that we didn’t see that same sentiment for next year.” – Vimi Vasudeva
The Optimal Blue team held over 130 meetings in just two days, an indicator of renewed energy and engagement across the industry.
Key themes that emerged:
AI as a Differentiator: Lenders are actively adopting tools like Ask Obi, Originator Assistant, and Scenario Optimizer to streamline operations, visualize data, and enhance decision-making. While some are still in early stages, others are already integrating these tools into daily workflows.
Non-QM & ARM Innovation: With affordability still a top concern, lenders are exploring non-QM products, adjustable-rate mortgages, and even bulk sales strategies to unlock new revenue streams and serve underserved borrower segments.
Servicing Strategy in Flux: MSR values remain high, but consolidation, such as Rocket’s acquisition of Mr. Cooper, is prompting lenders to reassess their servicing models. Some are bringing servicing in-house to gain more control and reduce reliance on third parties.
Creative Affordability Solutions: HELOCs, debt consolidation refis, and new product development are gaining traction as lenders look to meet borrowers where they are, especially in a high-rate environment.
The conference also underscored a growing divide between tech-forward institutions and those still catching up.
“Now that we've survived into '25, now it's just continuing to get more and more efficient so you can compete with your competitors.”
Practical Actions You Can Take Today
If you’re a lender looking to stay competitive, here’s what you should be thinking about this week:
Explore AI tools already embedded in your tech stack. Start with Optimal Blue’s Ask Obi, Originator Assistant, or CompassEdge AI features.
Monitor GSE developments closely. Prepare for potential shifts in loan eligibility, pricing, and investor behavior.
Evaluate non-QM and ARM strategies. With affordability under pressure, these products may offer a competitive edge, especially if short-term rates decline.
Stay nimble with hedging. Consider innovative instruments like the CME Group's Mortgage Rate futures tied to OBMMI to manage risk in non-agency portfolios.
As we move deeper into 2025, adaptability and insight will be the keys to success.
Listen to the latest episode of Optimal Insights for deeper analysis and expert commentary. Available on all major podcast platforms: https://optimal-insights.captivate.fm/listen
The views and opinions expressed in this program are those of the speakers and do not necessarily reflect the views or positions of Optimal Blue, LLC.