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April 2023 » 59 J O U R N A L April 2023 to be," said Kevin McMahon, President of Optimal Blue, a division of Black Knight. "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. As Black Knight reported last week in our latest Mort- gage Monitor, there were clear signs of buyside demand when rates neared 6%—it just quickly pulled back when rates began to climb again." "As rates resumed their upward trajectory in February, borrowers responded predict- ably, moving toward more rate-favorable offerings," McMahon continued. "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." Other notable data revealed in the report include: » Rate lock dollar volumes rose 2% month over month in February, although the number of locks dropped, as loan produc- tion shifted toward jumbos, which offered more favorable rates than GSE products » Purchase lock volumes rose 4%, driven by seasonal tailwinds, while cash-out refi- nance volumes fell 11% on rising interest rates and rate/term locks remained near record lows » The refinance share of the market fell back to 14% of overall activity, the low point in this cycle first reached in October » Despite the month-over-month gains, purchase lock counts—which exclude the impact of home price changes—are well below both last year's (-42%) and pre-pan- demic (-35% against 2020) levels » 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%) products all lost share » Likewise, the ARM share of lending popped back above 10% in February as the rise in rates pushed borrowers to con- sider alternatives to fixed-rate loans » Optimal Blue Mortgage Market Indices from Black Knight showed 30-year rates dipped below 6% for the first time since September, before rising 52 basis points to finish the month at 6.68% » The spread between the 10-year Treasury and 30-year conforming mortgage rate widened by 12 basis points as Agency MBS sold off relative to Treasuries in response to revived inflation concerns » The average loan amount rose from $340,000 to $349,000, while the average purchase price climbed from $421,000 to $434,000 » Credit scores remained essentially flat for cash-out refis and purchases but dropped 7 points for the limited number of rate/ term refi locks "As rates resumed their upward trajectory in February, borrowers responded predictably, moving toward more rate-favorable offerings." —Kevin McMahon, President, Optimal Blue

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