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Jumbo Loans Drive Increase In Mortgage Dollar Volume In February

Keith Griffin
Mar 13, 2023
Black Knight Rate Lock Volume 0223

Black Knight data shows nonconforming loans helped overcome rate lock drop.

New data released by Black Knight Sunday reveals an interesting trend. Higher interest rates drove mortgage origination lock rates down but overall dollar volume was up.

Black Knight’s February 2023 Originations Market Monitor report, shows production continued to suffer under the weight of high-interest rates in February, though rate lock dollar volumes rose 2% month-over-month. At the same time, the number of locks dropped as borrowers shifted toward jumbos with more favorable rates than conforming GSE products.

The average loan amount grew $9,000 in February to $349,000. The refinance share of the market dropped to 14%, a record low. Purchase locks edged up 4%, and cashouts declined by 11%

That’s based on daily rate lock data from Optimal Blue PPE, Black Knight’s widely used pricing engine. Kevin McMahon, president of Optimal Blue, said, “Conforming rates dipped below 6% early in the month but finished it up 52 basis points from January. Even though the number of rate locks was down month over month, dollar volume increased due to a rate environment that favored jumbo and ARM loans over GSE products. Essentially, though, the story remains the same – one of a market facing significant interest rate-driven headwinds.”

Nonconforming loans – including jumbos and expanded guidelines – picked up share relative to all other loan products (12.2%), while conforming (56.6%), FHA (18.4%) and VA (12.0%) all lost share. Likewise, the ARM share of lending popped back above 10% as borrowers looked for alternatives to fixed-rate loans.

Despite the dollar volume increase, purchase lock counts – which exclude the impact of home prices – are well below both last year’s (-42%) and pre-pandemic (-35% against 2020) levels.

MCT, a San Diego-based provider of fully integrated capital markets services and technology, released its MCTlive! Lock Volume Indices for February 2023 last week. According to the report:

  • Overall rate lock activity fell 15% in February from January. 
  • Purchase lock activity was down 13% from January. 
  • Rate/term refinance volume was 42%, and 
  • Cash-out refinance volume was down 25%.

Optimal Blue's McMahon added, “As rates resumed their upward trajectory in February, borrowers responded predictably, moving toward more rate-favorable offerings. That included a shift to jumbos, ARMs and other nonconforming products in the month. With refinance activity basically at a floor, all eyes are on the purchase market. And yet such lock volumes remain more than 40% down from last year’s level, with the triple-threat of rate, affordability and inventory challenges still looming large for the foreseeable future.”

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