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Chase Home Lending has resumed offering home equity lines of credit after a five-year absence from the product, the company announced.While parent JPMorgan Chase has participated in HELOC securitizations, it did not originate or service the loans.In April 2020, just as the pandemic entered full swing, Chase paused taking new applications for HELOCs because of the potential for economic turmoil.Approximately two years later, comments from Marianne Lake, co-CEO of JPMorgan's consumer and community banking unit, at an investor day event indicated the company was looking into offering more HELOCs, adding the bank would tread lightly if it did reenter the business.In the interim since Chase pulled back, alternatives like home equity investment products have entered the market. But the HEI business has generated some controversy, including a Massachusetts lawsuit against Hometap, which alleges its offering is actually a loan. A state judge has rejected Hometap's motion to dismiss the case.When asked why it is getting back into this now, Chase pointed to home values remaining high. But various sources are now reporting those gains have plateaued.Recent developments with home valuesTuesday's S&P Cotality Case-Shiller Index release found it rose 1.9% on an annual basis in June, a marked slowing of the pace of growth; at the start of 2024, prices grew by 6.4%.When compared with May, prices grew by just 0.1% on an unadjusted basis.The Federal Housing Finance Agency Home Price Index fell down 0.2% on a seasonally adjusted basis between May and June. It was flat in the second quarter versus the first quarter.Compared with one year ago, prices rose by 2.9% in the second quarter, according to the FHFA HPI findings.How HELOCs are performingData from the Federal Reserve Bank of New York noted HELOC balances have increased during the second quarter by $9 billion to a total of $411 billion. It marks 13 consecutive quarters of increase. The annual increase was $31 billion.Serious delinquencies (90 days or more late on payments) for HELOCs also increased to 115 basis points from 51 basis points in the second quarter of 2024.Why Chase restarted HELOC lendingChase's new product is available nationwide, except in Texas. Texas law bars the HELOC product from being offered in the state.During the time it no longer offered HELOCs, Chase did provide cash-out refinance products to borrowers looking to tap their equity, noted Erik Schmitt, digital channel executive at Chase Home Lending.However, Chase has received "increased demand from customers looking for more flexible options to borrow against their home's equity," Schmitt said.While this is the formal roll-out, HELOCs have been available to some Chase customers for several months."Amid rolling the product online HELOCs were initially introduced to branches in all available states except Texas in Spring 2025," said Schmitt. "Since then, we've seen a positive response from customers."Chase has created a HELOC calculator, where consumers can enter details about their property."It first assesses the customer's eligibility by considering factors such as property type and occupancy type," Schmitt explained. It uses that information to provide real-time rates, the one-time fees and it estimates monthly costs for the borrower.

David Paul Morris/Bloomberg As California considers new artificial intelligence requirements for financial regulators, trade groups and legal experts are pushing regulators to recruit AI experts to produce guidance for financial institutions adopting newer forms of the technology.California Senate Bill 69, introduced by Senator Jerry McNerney in January of this year, would require the California Attorney General's office to "establish and maintain a program to build internal expertise in artificial intelligence" within the state's Department of Justice.The American Fintech Council released a statement on Monday in "strong support" of SB 69. The AFC stated that the bill would require the attorney general to "recruit or train personnel with AI expertise.""AFC commends California lawmakers for recognizing the need to build regulatory capacity around AI and stands ready to work with policymakers to ensure consumer-first, innovation-friendly policies that preserve California's standing as a leader in responsible financial technology," the statement said.Ian P. Moloney, head of policy and regulatory affairs at AFC, told American Banker that AI as a tool has been in the banking industry for many years, particularly through machine learning and automation. New regulations concerning more recent forms of AI, such as generative and agentic AI, may intersect with existing regulatory frameworks surrounding existing technology."AFC believes it's important for regulators to understand the existing legal and regulatory landscape and how it applies to AI technology before pursuing any additional or new requirements," Moloney told American Banker.As the use of AI is reshaping the banking and financial services industry, there have been relatively few federal AI laws implemented in what is typically a regulation-heavy industry. A Biden-era executive order on AI was overturned by President Trump within a few days of his return to the White House. President Trump replaced it with his own executive order calling for U.S. innovation in AI later that week.Moloney told American Banker that there is a potential for "regulatory diffusion" should state-level AI regulation see success."There is a need to move the AI conversation to the federal level where, given the lack of geographic limitations associated with the use cases and the technology at large, the federal government has the best jurisdiction and the best opportunity to ensure that there's a harmonized AI approach to legislation and regulation," he said."Responsible fintech companies and innovative banks increasingly rely on AI to deliver safe, modern services, from expanding access to credit to servicing historically underserved communities," said Ashley Urisman, director of state government affairs at AFC. "This legislation ensures regulators fully understand these technologies so they can protect consumers and encourage fair competition among companies leveraging AI."A different California AI bill known as SB 1047 was vetoed by Governor Gavin Newsom in September 2024, and Virginia Governor Glenn Youngkin also vetoed a Virginia AI bill in March of this year.Experts say that SB 69 may see success where other bills have failed. Devika Kornbacher, co-chair of the global tech group at multinational law firm Clifford Chance, told American Banker that SB 69 is employing a different tactic than the vetoed SB 1047 from last year."SB 1047 focused on regulating frontier (or the most powerful) AI models and, among other things, fed the debate on whether development of AI should be regulated at all," Kornbacher said. "SB 69 focuses on building out AI expertise among the regulators and in California more broadly. Of course, that expertise could lead to a regulator deciding that frontier AI models should have more scrutiny, but the bill doesn't take a particular stance on what should be regulated, just how the regulators should be prepared." "As far as the outcome of this bill, AI literacy is a commonly understood and supported concept and SB 69 seems to be framed broadly enough to avoid a veto," she continued. "The current political environment is not one where I would place a bet on any outcome, [but] perhaps SB 69 will be seen as less controversial and be signed into law."

Federal Reserve Gov. Lisa Cook.Bloomberg News President Donald Trump's unprecedented move to fire Federal Reserve Gov. Lisa Cook Monday is likely to kick off a high-stakes legal battle over the exact contours of the central bank's independence, and that battle will likely hinge on whether past actions can disqualify a board member from their current office. Trump posted a screenshot of a letter addressed to Cook Monday evening informing her that she was "terminated" from her post due to allegations that she claimed primary residence on two mortgage applications in 2021, before she served on the Fed Board of Governors. Cook said through her attorneyMonday evening that she will not resign and is expected to challenge Trump's termination in court. The crux of that potential suit, according to several legal experts, is whether Cook can be removed "for cause" for an alleged action that took place while she was a private citizen. She was appointed by President Joe Biden to serve on the Federal Reserve in 2022 and confirmed in May of that year, making her the first Black woman to serve on the Fed board.Scott Alvarez, adjunct professor at Georgetown University Law and former general counsel at the Federal Reserve, said there is much uncertainty regarding how the removal "for cause" can be applied in this case."Does the 'cause' have to be somehow related to your job? In this case, it's something that happened before she was nominated to the Fed and has nothing to do with her job responsibilities," said Alvarez.Richard Horn, co-founder of law firm Garris Horn LLP and former counsel to the Consumer Financial Protection Bureau, said that because the timeline of the alleged occupancy fraud is before Cook joined the Fed, courts could find a reason why the allegations as described don't amount to "cause" for termination."Courts could potentially say that the 'cause' provision doesn't cover this type of activity outside of the board position, or activity before being appointed," Horn said.Legal experts are also questioning whether the vetting process Cook underwent before her confirmation as a Federal Reserve governor indicates the issue was previously reviewed and deemed not disqualifying. Alvarez and others noted that "pretty good vetting" is done for candidates before they're nominated and again before they're confirmed."So that's part of the question: after you've been through that vetting with Congress and the Senate says, 'We're okay,' can that past charge be brought up?" Alvarez said. "I just don't know the answer to that. That's a novel question of law, that's one the courts will have to decide."In a weekly blog post, Peter Conti-Brown, associate professor of financial regulation at the University of Pennsylvania, wrote it is likely the Biden White House and the U.S. Senate received these applications."If that's true, then the only very clear qualification required for a Fed governor — to be appointed by the president and confirmed by the Senate — is already satisfied, and this error is old news," he wrote. Trump fires Fed Gov. Lisa Cook 'effective immediately' President Trump posted a letter on social media addressed to Federal Reserve Gov. Lisa Cook, informing her that he was terminating her due to allegations of mortgage fraud. The move is likely to tee up an unprecedented legal fight over the Fed's independence. Regarding the allegations, Horn added that while there seems to be a "whole lot of smoke," the available evidence does not necessarily yet point to "a fire.""Her intent is a factual question, and we've seen no evidence regarding her intent at the time of application," Horn said. "It's still possible she has a defense, and she's indicated she plans to fight this, so she probably has something to say about it."Details surrounding the alleged misconduct are limited. The allegations came to light after a criminal referral was filed by Federal Housing Finance Agency Director Bill Pulte last week, alleging that Cook claimed two homes as primary residences on separate mortgage applications in 2021.On Monday evening, Trump posted a letter around 8 p.m. EST addressed to Cook stating: "… you are hereby removed from your position on the Board of Governors of the Federal Reserve, effective immediately."The next expected step for Cook will likely be filing a lawsuit to obtain a restraining order, allowing her to stay on the Federal Reserve Board until the case can be resolved in court.Cook's attorney, Abbe David Lowell, founder of Lowell & Associates, said they will challenge Trump's decision to fire the Fed governor."We will take whatever actions are needed to prevent his attempted illegal action," Lowell said in a statement.Ryan Levitt, a white-collar crime attorney at Benesch, said that the investigation into whether Cook committed mortgage fraud should be an open-and-shut case."There's a level of simplicity to this. Mortgage fraud is not complicated by any stretch of the imagination," Levitt said. "It's one of those few areas where you still need to have a wet signature and you still have to have documents notarized, which means someone has to stand in front of you."If there's a notary stamp and her signature on it, there's going to be a witness saying, 'Yes, she signed both of these documents,' and the documents will say whether the places are her primary residence or not," he added.But whether the allegations are true is less important than whether the allegations, even if true, amount to a fireable offense for a member of the Fed board, whose members have long been afforded a wide berth from political interference. The expected legal challenge, therefore, will very likely make its way to the Supreme Court, which has been highly skeptical of independent regulatory agencies in recent years but has also carved out a distinct difference between the standards it holds for the Fed versus other agencies. Conti-Brown, writing in a separate blog post Tuesday, said that any sense of how the Supreme Court will rule on the question of what counts as "cause" is inherently speculative, but noted that statutes governing other agencies — notably the Federal Trade Commission, Office of Special Counsel and National Transportation Safety Board — specifically cite "inefficiency, neglect of duty or malfeasance in office" as the standard for removal. That tradition could well serve as a guide for the high court when deciding this case, Conti-Brown said."Other statutes have defined the term with greater reference to that office: cause means 'inefficiency, neglect of duty, or malfeasance in office,'" Conti Brown said. "My sense — speculated, to be sure — is that the Court will review Trump's attempt to fire Cook through that lens."Alvarez said the removal of Cook by the president shows he is "willing to do anything to create vacancies on the Fed and put his own people in.""And he's willing to use rumors and things that people say without proof, in order to get control of the Fed," Alvarez added. "So that's a discouraging sign. It's also broader than the Fed, right? I mean he's been using this mortgage allegation thing against other people as well."Michael Strain, director of economic studies at the American Enterprise Institute, declined to comment on Cook specifically but said it is problematic if the "president is rooting through government records in order to find a reason to fire Fed governors," noting this can stifle independence."It is a threat to the independence of monetary policy. It is an abuse of power on the part of the president," Strain said. "And it could really deter high-quality people from accepting those jobs, which would be to the detriment of the American people."

Bloomberg News WASHINGTON — The Consumer Financial Protection Bureau is proposing a new rule that would limit its ability to oversee nonbanks, according to a notice published quietly in the Federal Register Tuesday. The CFPB said it plans to adopt a new definition of "risks to consumers with regard to the offering or provision of consumer financial products or services." That new definition, the CFPB said, will "bind" the bureau in legal actions that designate a nonbank person that's subject to CFPB oversight. The new proposed rule, published in the federal register without press outreach, the CFPB said that it would narrow the definition of "financial products or services" to the specific products and services that Congress charged the CFPB with overseeing. The bureau is also asking whether "risks to consumers" should be considered violations of consumer law, a much higher standard than the bureau operated under during former Director Rohit Chopra's tenure.The move is the latest by the CFPB to dramatically limit the bureau's authority to police nonbanks and the country's largest banking institutions. The bureau said in a briefly public 2025 rulemaking agenda that it would seek to tighten standards around which nonbank companies can be designated "risky" under Dodd-Frank section 1024. It also comes amid the Trump administration's full-scale attempt to dismantle the bureau. Last week, a federal appeals court ruled against the CFPB's union, allowing the bureau's acting Director Russel Vought to fire up to 90% of the bureau's staff.The proposed rule would result in fewer entities being designated by the CFPB, the bureau said, and will reduce costs for companies."The Bureau expects that under the proposed rule it will be less likely to designate any particular entity for supervision, all other factors being equal," the CFPB said in its proposed rule. "This would reduce the costs of supervision for entities that might otherwise have been designated. The proposed rule also could influence behavior for entities that would otherwise have seen themselves as being on the margin of being designated or not." The agency acknowledged that, while the rule changes would reduce costs for supervised firms, the outcomes for consumers could be different. "At the same time, firms may be more likely to engage in conduct that could be said to present some probability of harm to consumers," the CFPB said.

A Massachusetts judge denied a home equity investment platform's request to dismiss a state lawsuit filed against it in a case that could provide clues to how products from such companies might ultimately be defined. State Attorney General Andrea Joy Campbell originally sued HEI platform Hometap in February, putting forth multiple claims, including allegations that the company's products were disguised as "illegal" loans with excessively high interest rates. Campbell also called Hometap's marketing practices deceptive, citing lack of appropriate disclosures, and described HEI contracts generally as "unfair, oppressive or otherwise unconscionable."In its motion to dismiss, Boston-based Hometap pushed back, describing its products as options contracts that do not meet the definition of a loan and claimed the state had failed to prove any deception or unfair actions occurred.  But Massachusetts Superior Court Judge Debra A. Squires-Lee threw out Hometap's assertions, writing in her decision last week that the state sufficiently alleged HEIs could be described as loans.  "Hometap never intended to be a joint equity owner with any homeowner. Those allegations make the HEI — in substance — more akin to a loan than an option to purchase real estate," Squires-Lee stated. Critics of HEI businesses regularly point to instances where customers in Massachusetts and elsewhere found themselves under serious financial distress or threat of foreclosure. In several consumer lawsuits involving other providers brought to court, customers claimed they were caught unaware of risks and penalties if unable to comply with terms in HEI contracts.  With HEI contracts, homeowners are able to draw upon a share of their available equity, with repayment to include any appreciation in value due at the end of the term or early termination. With lower thresholds for qualification compared to refinances or home equity loans and no monthly payments required, HEI products have been touted as options for certain consumers with credit scores traditional lenders may find risky.  The judge found flaws, though, in Hometap's claim the agreements are not equivalent to mortgage loans."The money is either repaid in ten years, with a substantial increase, which the commonwealth alleges constitutes interest, or Hometap exercises its option and its right to foreclose or force a sale," she wrote.The opposing parties reactIn response, Hometap reaffirmed the value of its home equity investment contracts and pointed to the need for them in the current housing market."Hometap firmly stands by the integrity of our products, which provide Massachusetts homeowners with alternative and flexible financial products and further our mission of making homeownership more accessible. We look forward to the discovery process, which we are confident will introduce facts that further reinforce the strength of our position," the company said in a statement provided to National Mortgage NewsOn the other side, Massachusetts officials celebrated the judge's reasoning to proceed. "My team and I are pleased by the court's decision and look forward to continuing this critical litigation to protect Massachusetts homeowners from Hometap's harmful practices," noted Attorney General Campbell.While the community of home equity investment providers is still in its early years of development, leaders within the space emphasize they seek a regulatory framework to provide clear guidelines for both companies and consumers. Earlier this year, Hometap, alongside peers Unlock Technologies and Point, helped found the Coalition for Home Equity Partnership, which said it hopes to work with state officials to come up with clear consumer-protection laws that differentiate their offerings from mortgage loans. The growth of HEI businesses gained momentum in the past decade, with the arrival of several new fintech providers, including Hometap, which was founded in 2017. As a result, most HEI originations, which usually come with 10-year terms, have not yet reached a stage to fully gauge customer performance and ability to repay.

While mortgage rates are currently the lowest they’ve been all year, additional improvement might be hard to come by soon.In case you missed it, the 30-year fixed fell to 6.52%, per Mortgage News Daily, its best reading since early October.The move lower was initially driven by a weak jobs report, and later helped on by a dovish Powell speech at Jackson Hole.Long story short, the economy is worse than we all thought and labor is at risk of breaking.As such, the Fed will likely cut at its next meeting in September and bond yields have fallen, all good news for mortgage rates. But what next?How Do Mortgage Rates Keep Falling From Here?The issue now is that the 30-year fixed is at its best levels since nearly September.At that time, mortgage rates were the lowest seen since February 2023, when the 30-year fixed briefly touched 5.99%.So we’re arguably in a pretty good spot as it stands, and certainly much lower than the 8% rates seen in October 2023.The problem is it might be tough to move any lower in the immediate future. Many think that Fed rate cut day (if it 100% comes) will be the day mortgage rates move lower.This isn’t how it works, and in fact, mortgage rates have often risen on the day of an actual Fed cut day.That’s because Fed stuff is telegraphed and baked in ahead of time, and by the day of the cut, other things might be happening.Or you just get a sort of sell the news situation where mortgage rates bounce a little.Also, the Fed doesn’t set mortgage rates to begin with.Anyway, what’s important to look at between now and September 17th is the economic data that is released.This is always the case, but it’s even more important given what has transpired lately.Recall that President Trump recently let go of Bureau of Labor Statistics (BLS) commissioner Erika McEntarfer after she supposedly fudged the numbers.The numbers, of course, weren’t good and made Trump look bad. Can’t have that!But it makes you wonder what the jobs report will look like next. And what the preliminary 12-month jobs revision will look like too.Lots of Economic Data Between Now and the Next Fed MeetingBefore the Fed meets next month and provides its always-important FOMC announcement, there’s going to be a lot of economic data.We’ve got the Personal Consumption Expenditures (PCE) price index report this Friday, which is the Fed’s preferred inflation gauge.There’s a decent chance that comes in hot given the tariffs and sticky inflation of late.That could cause mortgage rates to creep back up from their low levels at the moment, though it could go other way too.It’s just that chances are bonds will be defensive and more focused on the jobs report, which comes out next Friday September 5th.That jobs report will be very closely watched because of the recent shakeup that took place at the BLS.If we’re arguing that the old statistician got canned for reporting bad numbers, what’s the next report going to look like?Does the administration want it to look good? I would assume so, even if it’s counter to their goal of getting rates down.But they’re also creating a new-look Federal Reserve who might do their bidding regardless, and lower the federal funds rate to at least make the government debt cheaper to pay off.Logically, it wouldn’t help mortgage rates though, so you wonder what the plan is there if they truly want to help home buyers.Without soft economic data, it’ll be difficult for mortgage rates to continue marching lower.Especially when you’ve also got upside risk of inflation due to the tariffs, with more and more reports of rising prices, due to, you guessed it, tariffs.Makes you wonder what the path is to even lower mortgage rates, and highlights the risk of mortgage rates backtracking toward 7% yet again.Something the housing market (and prospective home buyers) likely won’t be able to stomach.Read on: Should You Wait for Mortgage Rates to Fall Even More Before Refinancing Your Mortgage? Before creating this site, I worked as an account executive for a wholesale mortgage lender in Los Angeles. My hands-on experience in the early 2000s inspired me to begin writing about mortgages 19 years ago to help prospective (and existing) home buyers better navigate the home loan process. Follow me on X for hot takes.Latest posts by Colin Robertson (see all)

Mortgage spreads reached their narrowest point in three years on Aug. 22, but were still wider than their historic average, Redfin reported.The normal spread, which in this case measures the difference between the 30-year fixed rate mortgage and the 10-year Treasury yield, is in a range between 150 basis points and 200 basis points. Last Friday, it fell to 226 basis points, down from around 250 basis points at the start of the summer and 268 basis points one year ago.What the Treasury-mortgage spread representsRedfin compared the spread's effect on mortgage rates to how restaurants price meals. "The Treasury yield is the cost of raw ingredients, the mortgage rate is the price of the meal on the table, and the spread is the restaurant's markup, which covers the cost of the chef, rent on the restaurant, profit margin, etc," said Chen Zhao, Redfin's head of economics, in a press release. "Regardless of the cost of raw ingredients, if the restaurant has a lower markup, that lowers the customer's bill."This is why, no matter what actions the Federal Open Market Committee might take, a lower spread helps to reduce mortgage rates, Zhao continued.What happens if spreads keep narrowingAn FHN Financial analysis said if mortgage rates were to fall another 20-to-30 basis points, it could open up approximately $300 billion in current loans to a refinance opportunity.If the FOMC does cut in September by 25 basis points as expected — or by even a larger amount, like the 50 basis points some pundits are calling for — mortgage rates could fall further than anticipated because the spread is being narrowed, Zhao said.As the spreads narrow, it creates opportunities for both purchase and refinance mortgage originations. Given that the spread is still over the upper range of the norm, it gives mortgage rates the opportunity to fall even further. What are the MBA's expectations for 2025 and 2026The Mortgage Bankers Association's August forecast had the spread ending the first quarter of 2025 at approximately 230 basis points, before rising to 240 basis points in the second quarter. But for the second half of the year, the prediction is back to 230 basis points in each quarter.Its 2026 outlook is consistent, with the 30-year FRM averaging 6.5% and the 10-year averaging 4.3% in all four quarters, creating a 220 basis point spread.As of 11:30 on Aug. 26, the 10-year Treasury was unchanged at 4.275%, while Lender Price data on the National Mortgage News website had the 30-year FRM at 6.574%, meaning the spread had gone back to almost 230 basis points.The MBA rate forecast is higher than the latest from Fannie Mae for the fourth quarter and beyond. Both have third quarter rates averaging 6.7%.But Fannie Mae goes to 6.5% in the fourth quarter, while the MBA outlook only falls to 6.6%. For next year, Fannie Mae has rates falling to 6.1% by the third quarter.In the August forecast, MBA cut its origination projection for this year to $2.015 trillion from $2.021 trillion in July. Expectations have been lowered for the current quarter to $547 billion from last month's $554 billion. But the group's economists upped the fourth quarter forecast by $1 billion to $535 billion.The MBA's 2026 and 2027 forecasts remain unchanged at $2.242 trillion and $2.287 trillion respectively.

(Bloomberg) -- Former Federal Reserve Vice Chair Lael Brainard suggested there's a real risk of multiple Fed district bank presidents getting removed from office next year as a result of politically charged maneuvering by President Donald Trump.Brainard, who served on the Fed board from 2014 to 2023, spoke a day after Trump moved to oust Governor Lisa Cook over allegations that she falsified mortgage documents. Successfully taking out Cook would give Trump the chance of gaining a majority of his picks on the seven-member Board of Governors. The board is scheduled in February 2026 to vote on renewed terms for the 12 district bank chiefs — five of whom each year vote on interest rates."The president essentially is moving to shift the majority of the Board of Governors well before what was contemplated in terms of the institutional structure and their terms," Brainard said in an interview on Bloomberg Television Tuesday. "And that opens the door, when renewals of all of the Reserve Bank presidents come up in February," to potentially not renew some of them, she said.Trump has for months been criticizing Fed Chair Jerome Powell and his colleagues for not cutting interest rates this year. Powell and most of his colleagues have cited the danger of the president's tariff hikes feeding through to inflation.Brainard said she viewed Trump's attack on Cook in the context of his broader pressure on the US central bank as an institution.Inflation Risk"This is not about an individual governor," said Brainard. "This is really an unprecedented attack on the independence of the Federal Reserve as an institution."Interest rates are set by the Federal Open Market Committee, which includes the seven board members in Washington along with the New York Fed president and four other bank presidents on an annually rotating basis.Two current Fed governors, Christopher Waller and Michelle Bowman — Trump picks from his first term — dissented in favor of a rate cut in July. Trump has nominated the White House chief economist, Stephen Miran, for an open board position. Nominations are subject to Senate confirmation.Referring to the scenario of nixing multiple regional bank presidents, Brainard said, "That is exactly the risk that we are seeing play out right now." Attempting to "shift the overall voting majority on the FOMC that is an unprecedented attack on the independence of the Federal Reserve," she said.Undermining that independence "means higher inflation potentially, less credibility, even higher long-term interest rates — bad for the economy," she said.Brainard was appointed by Democratic President Barack Obama and served in President Joe Biden's administration.More stories like this are available on bloomberg.com

The latest mortgage interest rate drop didn't change refinancing incentives in the conventional securitized market, but a subsequent decline could, a new FHN Financial report shows.Primary mortgage rates' dropped roughly 20 basis points in the past month to around 6.6%. The largest range of loans bucketed together in the securitized market and exposed to refi incentives as a result was about $100 billion in size. A few different buckets that each account for $200 billion to $300 billion dollars of outstanding loans originated in the past few years could be exposed if rates drop that much again."The last 20 basis points really only affected small coupon buckets. The next 20 or 30 will affect very large coupon buckets," Walt Schmidt, senior vice president, mortgage strategies, at FHN Financial said in an interview.The report examines the baseline turnover that occurs for outstanding mortgages due to that occurs without an incentive such as a move to a new home, and a drop of 50 basis points or more, which has an increased likelihood of generating refinancing into lower rates."Turnover at zero is usually cash out, or people moving. Once you get into plus 25, to plus 50 of incentive, most of it then becomes a more typical refinance," he said.Activity has risen even though refi incentives have limitsThe biggest buckets of securitized loans, which date back to the pandemic, still are a long way from having much of an incentive to refi and the largest of which is more than $700 in size, according to FHN Financial's study of conventional loans.Rates would have to be roughly halved before 2020-2021 loans would have refi incentives, that report shows.However, refinancing activity was the strongest seen in a few years for a second quarter, according to Polygon Research's analysis of rate-and-term MBS data.Based on dollar volume, the $31.75 billion seen this year was the largest for any second quarter for at least the last four years. The loan count of 84,693 was the highest seen since the second quarter of 2022. Dollar volume and loan count were higher in some intervening quarters. Fannie Mae's recent Refinance-Level Application Index, which is due for its next update on Tuesday, showed activity during the week ending Aug. 15 based on dollar volume was up 28.6% over the same period a year earlier. The count was 21.5% higher during that time span.Around 4.6 million home purchase loans originated between 2022 and 2024 have rates of 6.5%-plus and could be refinanceable, according to a Polygon Research analysis of Home Mortgage Disclosure Act data.The Fed and what might be next for mortgage ratesFederal Reserve Chairman Jerome Powell did recently give a speech that opens the door to a short-term rate cut in September that "could usher in the front edge of a refinance market shift," said Lyubomira "Val" Buresch, CEO of Polygon, in a blog published Monday.But what that means for longer-term mortgages remains to be seen."Historical patterns show mixed results. After the Fed's 2024 cuts, mortgage rates initially dipped but later rebounded due to yield volatility," Buresch noted.The Polygon Research CEO said she anticipates a drop in mortgage rates into the 6% range if economic indicators show weakness and point to other cuts beyond September, but any signs of inflation could slow the decrease.The bond market that exerts some influence on mortgage rates rallied Friday on the possibility of a Fed cut, but the outlook for future Fed actions was mixed on Monday.

Led by financial services firm Cantor Fitzgerald who also served as initial purchaser of the bonds, the issuance is expected to help Knock deliver $900 million worth of additional originations of its bridge loan product. The deal closed on Aug. 14 and was 75% pre-funded, garnering strong demand from institutional investors operating in residential mortgage-backed securities, according to Knock."Accessing the bond market not only reinforces investor confidence in our model, but also opens up a new channel of capital we plan to continue tapping into as we expand capacity and make the Knock bridge loan available to more lenders nationwide," said the company's co-founder and CEO Sean Black in a press release.Knock offers loans to homebuyers allowing them to draw from their current property's equity and make a non-contingent offer on a new purchase. Sometimes referred to as homeswap loans, the products' design eliminates significant impact on debt-to-income ratios and can be used to help cover costs associated with relocation, including down payments, lien payoff and initial new mortgage payments."The fact that this offering was oversubscribed is a powerful endorsement of the Knock bridge loan as a stable, reliable investment."The securitization also led Knock to achieve profitability for the first time, it said. The demand for bridge financing productsKnock is among a crop of fintechs that arrived over the past 10 years with various types of buy-before-you-sell products aimed to help buyers compete in hot housing markets where sellers were reluctant to accept contingencies. Some nonbank lenders later designed their own programs in response to surging home sales early this decade.  In June, nonbank lending giant Rocket joined the ranks of providers with the rollout of its own bridge finance solution, which similarly allows for short-term financing to homebuyers through their available home equity. While some of the newer firms folded or agreed to be acquired as home sales softened over the past three years, fintechs continuing to operate with buy-before-you-sell financing or trade-in products include the likes of Calque and Flyhomes. Founded in 2015 as a real estate startup, Atlanta-based Knock repositioned itself in recent years as a business-to-business loan platform that serves consumers exclusively through lenders and real estate agents. Knock's product is currently available through partners in 32 states and the District of Columbia. The strategy helped lead to 126% year-over-year volume growth in July, the company said. With the securitization announcement, Knock also said it would increase the maximum loan amounts from $750,000 to $1 million. The company has raised $138 million in capital funding over seven rounds, according to fintech data intelligence provider Tracxn. Its investors include Second Century Ventures and Foundry.