As September ends, the mortgage industry continues to navigate a landscape shaped by policy ambiguity, shifting economic indicators, and evolving borrower behavior.
In this week’s episode of Optimal Insights, the team at Optimal Blue – Jim Glennon, Jeff McCarty, Alex Hebner, and Kevin Foley – explores the latest market developments, unpacks the Taylor Rule, and shares insights from the ACUMA Annual Conference with special guest Olivia DeLancey, director of communications and public relations at Optimal Blue.
Here’s what you need to know this week.
Market Pulse: Rates, Refis, and Shutdown Watch
OBMMI Conventional 30-Year: Edged up to 6.33%, with the 10-year Treasury near 4.14%.
Refinance Activity: Volume has shown signs of improvement, particularly over the past few months.
Purchase Volume: Still subdued, though modest gains may emerge as rate stability improves.
Government Shutdown Risk: While a shutdown could delay key data releases (e.g., BLS unemployment report), historical precedent suggests limited impact on mortgage rates.
Spotlight: The Taylor Rule – A Framework, Not a Forecast
The focal point of this episode is the Taylor Rule, a monetary policy guideline used to estimate the ideal federal funds rate based on inflation and economic output. While not a definitive tool, it offers a structured way to evaluate rate policy.
The Formula
i = r* + π + 0.5(π - π*) + 0.5(Y - Y*)
Where:
i = Target federal funds rate
r* = Neutral interest rate (~1%)
π = Actual inflation rate
π* = Target inflation rate (typically 2%)
Y = Actual GDP
Y* = Potential GDP
Using current inputs, the team arrived at a theoretical rate of 4%, which aligns with prevailing Fed policy. However, recent commentary from Stephen Miran, a new member of the Federal Reserve Board, presents a divergent view.
Miran’s Interpretation: A Lower Rate?
Stephen Miran suggests the federal funds rate could be up to two points lower than current levels.
His rationale includes:
Lagging Inflation Metrics: Argues that rental inflation is overstated due to backward-looking data.
Population Decline: Cites Pew Research estimates of 1.5M+ immigrants leaving the U.S., potentially reducing economic growth capacity.
Policy Impact: Points to deregulatory elements of the “Big Beautiful Bill” as expansionary forces on GDP.
While Miran’s model is compelling, the team emphasized that it’s built on assumptions – some forward-looking, others based on short-term data. This mix introduces uncertainty, and while his projections may hold merit, they are not universally accepted.
ACUMA Annual: Credit Union Collaboration in Focus
Later in the episode, Olivia DeLancey shares insights from the ACUMA (American Credit Union Mortgage Association) Annual Conference in Denver, where over 600 credit union mortgage professionals gathered.
Key Themes:
Collaboration Culture: Credit unions emphasize knowledge-sharing and community over competition.
Member-Centric Focus: Compliance and service take precedence over aggressive growth.
Marketing Challenges: Loan officers often struggle with content creation and regulatory clarity.
“Credit unions are really big on best practice sharing… they don’t like to hoard knowledge.” – Olivia DeLancey
The discussion highlighted how credit unions are adapting to market pressures while maintaining their core values – a model that may offer lessons for other lenders.
Actionable Advice for Mortgage Professionals
Watch Employment Data: Pending home sales rose 0.4% in August, but employment remains a key variable.
Monitor Rate Signals: ADP private payroll data may serve as a proxy if the BLS report is delayed.
Engage in Industry Events: Whether ACUMA or Optimal Blue’s Summit, in-person collaboration drives innovation.
Explore Hedging: Credit unions are increasingly adopting hedging strategies to manage risk and maintain neutrality.
This week’s episode of Optimal Insights offers a balanced view of the mortgage landscape – highlighting both technical frameworks and human-centered strategies. The Taylor Rule discussion provides a lens through which to evaluate rate policy, while the ACUMA recap underscores the value of collaboration in a competitive market.
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.