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Market Volatility and the Anatomy of Mortgage Rates

Published March 18, 2020

Optimal Blue recently co-authored an article with Andrew Davidson & Co., Inc. (AD&Co), a leading provider of risk analytics and consulting for residential lending and MBS, titled Market Volatility and the Anatomy of Mortgage Rates. This timely article examines mortgage market pricing dynamics and how they have been impacted by the recent extreme market volatility spurred by the global impact of COVID-19 (Coronavirus Disease 2019).

These are unprecedented times for all of us in many ways, and the mortgage industry is no exception – record low rates, record high volume, overflowing pipelines, and the challenges of processing and closing a loan under tight restrictions on social interactions. Things are moving extremely fast! So fast, in fact, that the recent Fed announcement that the Fed Funds rate was reduced to near zero and the re-institution of Quantitative Easing occurred after we finalized this article. Regardless, while the primary rate to 10-year treasury rate spread has tightened as a result of the Fed actions, the concepts still apply, and the spread remains historically high. Enjoy!

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