Agency MBS issuance slows in June on fewer refis

Agency mortgage-backed securities issuance activity in June was hampered by a decline in refinance volumes, although for the full second quarter it was up over the previous period, a report from BTIG said.

The industry had a 3% decline in agency issuances to $118.5 billion. But for the companies BTIG covers — loanDepot, Onity, PennyMac Financial Services, Rithm, Rocket and UWM Holdings — the decline was 5%.

Agency issuance activity during the second quarter

During the second quarter, agency MBS issuance totaled $374.0 billion, up 11% for the period, which was attributed by BTIG analyst Douglas Harter to a 20% increase in purchase volume.

Just for those companies he covers, issuance volume was up 8% for the quarter, which "is above our expectations of a 5% increase in origination volume and in line with consensus expectations," Harter said.

"Given the timing differences we expect both funded volume and lock volume (which drives revenue) to be lower than MBS issuance; for our coverage we expect lock volume to be down 1% in the quarter."

When Optimal Blue releases its rate lock volume index for June, Harter expects it to be 6% lower for the second quarter.

In both the April and May reports, Optimal Blue reported a 9% month-to-month decline in rate lock activity.

Second quarter rate lock data from ICE Mortgage Technology found that while millennials had the largest share of both purchase (45%) and rate-and-term refi activity (44%), they lagged Gen Xers and baby boomers in cash-out share, 38% and 31% versus 25%.

By channel, correspondent volume was 1% higher in June, retail was down by 5% and wholesale was 6% lower, BTIG said.

Non-agency issuance

Non-agency issuance, which a recent Bank of America Securities report noted was on pace to have a record year, moderated in the second quarter, Harter said. But this is still elevated compare with 2025.

BofA Securities predicted total non-agency MBS issuance of $236 billion, including $100 billion of non-qualified mortgages, for 2026. This compares with a total of $206 billion, including $80 billion non-QM, one year ago.

According to the BTIG report, during the second quarter, non-QM issuance was $27 billion, which was down 16% from the first quarter but up 58% from the same period in 2025.

Another subset of non-agency, home equity products (HELOC, closed-end and home equity investment) had $7.8 billion of issuance, down 10% quarter-to-quarter but more than double, at 115%, compared to the same period the prior year.

Non-agency spreads tightened during the second quarter, Harter noted, using a recent issuance from Annaly (because of its frequent activity) as a proxy. The "AAA"-rated tranche was 10 basis points tighter, while the "BBB" was 20 basis points tighter.

AD Mortgage was in the midst of doing a non-agency issuance, Jared Neale, portfolio manager of RMBS, commented in an interview at the Mortgage Bankers Association's Secondary and Capital Market Conference in May. When it would close shortly afterwards, Neale was hoping for a tighter spread, a result of institutional investor interest in the product, he said. That is what happened, going to a 135 basis point spread from the previously expected 140 basis point spread.

AD's was not the only deal with narrowed spreads. A Rocket closed-end second securitization had spreads 20 basis points tighter for the AAA tranche and 10 basis points tighter for the BBB, Harter noted.

What were the MBS prepayment speeds for June?

Prepayment speeds for conventional MBS was up 10 basis points to 8.5% in June. For government securitizations, they were down 120 basis points to 10.6%, BTIG said.

During the second quarter, conventional speeds were 90 basis points lower and government prepayment rates were down by 60 basis points.

Keefe, Bruyette and Woods reported Fannie Mae speeds increased to an 8.4 conditional prepayment rate in June from 8.2 in May. Freddie Mac speeds also increased to an 8.7 CPR from 8.6.

But Ginnie Mae speeds were down to a 10.5 CPR from an 11.3 CPR.

"With the higher rate environment and uncertain Fed, we remain relatively constructive on the servicing-heavy originators (PennyMac Financial/Rithm/Rocket), which look reasonably attractive given the sell-off year-to-date," wrote Bose George in a July 7 note.

Rocket's retail/direct-to-consumer production operation and its ability to gain purchase share in this channel are "the most impactful" to the company's valuation, Harter commented in the BTIG report.

"Rocket's purchase share (of MBS) of the retail channel was 9.2% in June, down about 80 basis points from May but 50 basis points above March/April levels," Harter said. "Pro forma for the Mr. Cooper acquisition, Rocket's retail purchase share has been in the high-single to low-double digit range over the past few years."

BTIG, using data from Bloomberg, found that Rocket had the highest CPR in June at 10.6, down from May's 10.9.

In comparison, UWM had a 9.9 CPR, as Onity and Pennymac, while Rithm and loanDepot had a 9.5; the industry average was 9.2.

Unlike the other companies, who have significant portions of the portfolio with coupons under 4% (all above a 40% share other than Onity at 31%), UWM has a minimal portion of its book in this range.

Nearly all of UWM's servicing rights, 98%, have coupons over 5%; 43% is between 5% and 6%, while 45% is between 6% and 7%, according to the Bloomberg data Harter cited.