Rate-lock activity dwindles slightly in June as lenders further streamline offerings

Black Knight: Banks back off jumbo loan products while conforming products gain share

Rate-lock volumes edged lower in June as mortgage lenders backed further away from nonconforming loan products, according to the newest Originations Market Monitor report from Black Knight.

The real estate analytics company reported that overall rate-lock volumes pulled back a slight 1% from May as the uncertain atmosphere still permeating the real estate market had banks continuing to tighten lending conditions. In large part, that meant casting more discerning eyes on products like jumbo loans, explained Andy Walden, vice president of enterprise research and strategy at Black Knight.

“As May gave way to June, we saw banks lose some of their appetite for jumbo loans,” he said. “While the [Optimal Blue Mortgage Market Indices] 30-year conforming index (tracking interest rates) rose 6 basis points over the month, the jumbo rate index was up by three times that level.”

Black Knight’s findings, in part, parallel those of the Mortgage Bankers Association. The trade organization reported this week that total mortgage credit availability grew modestly in June, with its Mortgage Credit Availability Index up 0.1% to a reading of 96.6%. This figure, however, remains close to the index’s lowest level since 2013, and conditions for jumbo loans tightened slightly by 0.2%, a second straight month of restricted liquidity in the segment.

The pullback is also reflected within Black Knight’s data in the form of increased credit scores across the board in June. Limited credit access and ongoing affordability issues skewed the housing market toward borrowers with higher credit. The average credit score among purchase locks in June was 735, a record high.

Purchase lending, meanwhile, continued to fuel the vast majority of lending in June, making up more than 88% of rate locks during the month — another new record. But as Walden noted, it’s not a reflection of home sales strength but rather of a dearth of refi possibilities. Purchase-lock counts were down 31% annually and 29% below June 2019 (pre-pandemic) levels.

“Purchase loans continue to claim a larger share of a shrinking origination pipeline as refinance opportunities remain scarce,” Walden said. “Indeed, we saw the purchase lending share of June’s locks hit another all-time high. But keep in mind: it is a dominant share of a very constrained market.”


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