In the latest episode of Optimal Insights, Jim Glennon, Alex Hebner, James Cahill explore the evolving landscape of market complexity, highlighting the nuanced trends and pivotal shifts that every housing professional should keep in focus.
This episode features a Market Advantage segment, where Mike Vough and Brennan O’Connell discuss the latest origination trends, product shifts, and secondary market dynamics – offering a data-driven preview of the Market Advantage report (November 2025 data) and its implications for the mortgage industry.
Here’s what you need to know this week.
Economic Undercurrents and Labor Dynamics
Private Payrolls Contraction: November saw a rare contraction in private payrolls, with small businesses (under 50 employees) experiencing a net loss of 120,000 jobs. This six-figure drawdown signals a palpable deceleration in the employment sector, particularly among enterprises most sensitive to tariffs and healthcare policy shifts.
Inflation Moderation: The Consumer Price Index (CPI) registered at 2.7%, continuing its downward trajectory. Despite widespread expectations of tariff-driven inflation, consumer reticence and wage stagnation are exerting deflationary pressure.
Interest Rate Environment: The OBMMI for conventional 30-year mortgages stands at 6.2%, with the 10-year Treasury at 4.2%. While short-term rates may see relief following the upcoming Fed meeting, long-term mortgage rates remain stubbornly elevated, underscoring the complexity of monetary transmission mechanisms.
Regulatory Crosscurrents
Tariff Litigation: The Supreme Court is poised to rule on the legality of current tariffs, with major importers like Costco already seeking restitution. The administration is preparing alternative mechanisms, such as Section 232 national security tariffs, to maintain trade barriers regardless of judicial outcomes.
Fed Leadership Turnover: The coming months will see significant turnover at the Federal Reserve, with implications for credit conditions and short-term rates. However, as Jim Glennon cautions, “It doesn’t necessarily translate to lower mortgage rates.”
Market Advantage: November Data with Mike Vough and Brennan O’Connell
Origination Trends and Product Mix
Lock Volume: Total lock volume declined 25% month-over-month but remains up 17% year-over-year, marking the strongest November since 2021. Rate-and-term refinances surged 223% year-over-year, while cash-out refis climbed 29%.
Purchase Market: Despite a more attractive rate environment, purchase lock volumes fell 22% in October and 6% year-over-year, constrained by limited supply, affordability challenges, and the persistent “lock-in effect.”
Product Shifts: FHA and non-conforming production gained market share at the expense of conforming and VA lending. Notably, non-QM (non-qualified mortgage) share hit a record 9%, reflecting robust demand for unconventional products.
“Non-QM share hit 9% for the first time since we’ve been tracking it… just continue to see strong demand for these more esoteric products.” – Brennan O’Connell
Secondary Market and Execution Strategies
Mandatory Spread: The 30-year conforming best-effort mandatory spread held nearly flat, while the 15-year spread increased. Lenders are strategically managing investor relationships, sometimes prioritizing mix over marginal price improvements.
MSR Valuations: Mortgage servicing rights (MSRs) dipped slightly, but multiples remain historically robust, signaling enduring value in servicing portfolios.
Investor Activity: The number of investors per loan sale held steady, though year-end may bring a cyclical contraction as capacity limits are reached.
“You might be seeing some activity there from lenders where they’re like, hey, I’ve sent too much of a certain type of geo or loan production type to an individual investor. And I might not take the best price if it’s a basis point or two higher.” – Mike Vough
Actionable Advice for Mortgage Professionals
Monitor Labor and Inflation Data: Upcoming employment reports and CPI releases will inform rate expectations and market sentiment.
Diversify Product Offerings: Consider expanding into non-QM and FHA products to capture emerging demand and mitigate cyclical downturns in conforming markets.
Strategic Investor Management: Evaluate investor mix and delivery strategies, especially as year-end approaches, to optimize relationships and execution outcomes.
Leverage Data-Driven Insights: Review monthly Market Advantage reports for granular analysis of origination trends, rate movements, and secondary market dynamics.
This week’s Optimal Insights episode underscores the importance of vigilance and adaptability in the mortgage sector. From labor market contractions to regulatory inflection points and evolving product landscapes, industry professionals must remain agile, informed, and strategic.
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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.