Mortgage originators continue to face strong headwinds

Moreover, government loan products gained market share as FHA lock activity increased at the expense of non-conforming loan volumes, a trend also likely reflected in another decline in the average loan amount — from $351,000 to $344,000. The overall average credit score in July was 722, with scores on cash-out refinances edging modestly lower to 692 — the lowest since Optimal Blue began tracking the metric in 2013.

The originations market continues to react to previous increases and continuing affordability challenges, the report found, even while 30-year interest rates pulled back slightly in July. Mortgage Professional America reached out to Andy Walden, vice president of Enterprise Research and Strategy at Black Knight, for additional insight. He agreed that housing affordability loomed large in the report’s making: “Housing affordability continues to be the primary driver of falling purchase rate locks which were down 14.3% from June and are now down 22% from the same time last year,” Walden said. “The purchase lock count, which excludes the impact of soaring home values on volume, is off 25.8% from last year and 11% from 2019, marking the first month the number of purchase locks has fallen below pre-pandemic levels. Despite interest rates coming off their June peaks, home affordability still ranks among the lowest levels seen over the past 30 years.”

Rising property values have given rise to an assortment of non-conforming products across the landscape, he noted: “While their share has pulled back in recent months, we continue to see strong demand (comparatively speaking) for non-conforming mortgages given elevated home values and attractive rates compared to conforming mortgages.”