Morning Brief · Friday, September 25, 2026

📊Mortgage Market Snapshot

Fixed rates kept climbing to close the week, with the 30-year fixed up 19 basis points to 7.17%, its highest level since January 2025, and the 15-year up 13 basis points to 6.55%. The 5/1 ARM told a different story, pulling back 23 basis points to 6.47%, which snaps the fixed-to-ARM spread back out to roughly 70 basis points after it compressed to just 7 basis points earlier this week. The 10-year Treasury eased 2 basis points to 5.11%, giving back a sliver of the multi-decade highs it touched after Wednesday's Fed decision, but the broader trend for both fixed rates and yields is still pointed up.

The driver is the same one that has been running this whole week: the Fed's 25 basis point hike to a 3.75% to 4.00% target range, its first increase since 2023, delivered on a unanimous vote. August inflation is running 3.4% year over year, well above the Fed's 2% target, while unemployment sits at a still-steady 4.1%. Sixteen of eighteen FOMC participants project at least one more hike before year end, with four penciling in two, which is exactly why fixed rates have kept grinding higher even as the ARM and the 10-year took a breather today. Thursday's housing starts and jobless claims data came in largely as expected, and today's durable goods orders print is a lighter, secondary release, so nothing this week has been strong enough to change the market's read on the Fed's trajectory.

For your pipeline, the practical read is this: a 7.17% 30-year fixed changes the affordability math meaningfully versus the mid-6s borrowers got used to earlier this summer, and that is exactly the conversation to be having proactively rather than waiting for a client to ask. The ARM's pullback to 6.47%, nearly 70 basis points under the fixed rate, is a genuinely compelling story for anyone with a 5 to 10 year horizon, and DSCR and bank statement borrowers who don't lean on conforming guidelines have real room to move regardless of what the 30-year fixed is doing.

⚡ This Week's Focus

Next Wednesday's core PCE and Q2 GDP, followed by Friday's September jobs report, are the two data points that decide whether "at least one more hike" turns into an actual December move. A hot PCE print keeps the 10-year pinned near current highs; a soft jobs number complicates the case for another hike even with inflation running above target.

📰Industry Headlines

Fed Policy

Fed's First Hike Since 2023 Ripples Through the Curve as Fixed-ARM Spread Snaps Back Out

Wednesday's unanimous 25 basis point hike to 3.75% to 4.00% is still working its way through mortgage pricing three days later. Fixed rates have climbed on every session since, while the 5/1 ARM has actually eased, widening the fixed-to-ARM spread from a razor-thin 7 basis points earlier this week back out to roughly 70 basis points today. That's a meaningful shift in the ARM's value proposition for any borrower planning to sell, refinance, or pay off the loan within five to ten years. Fed guidance suggests the hiking cycle isn't over, with a strong majority of participants projecting at least one more move by December.

Source: The Mortgage Reports, Federal Reserve · September 2026

Non-QM

Non-QM Securitization Issuance on Pace to Hit $100 Billion in 2026, Up From $80 Billion Last Year

Bank of America Securities now projects non-QM originations will reach $175 billion for 2026, a 62% jump from $108 billion in 2025, with DSCR and investor products making up roughly half of all non-QM collateral. Securitization issuance is expected to climb from $80 billion to $100 billion, with about 70% of non-QM loans getting securitized and insurance companies buying most of the rest. A notable shift in loan profile: 28% of 2026 originations carry balances over $1 million, up from just 20% in 2018, as larger "jumbo-like" loans draw investor demand for high-quality asset pools.

Source: HousingWire, Bank of America Securities · September 2026

Wholesale Channel

Loan Officers Lean Harder Into DSCR as Conforming Rates Sit Above 7%

With the 30-year fixed now at 7.17%, more originators are actively building out DSCR and investor lending as a second revenue stream rather than treating it as a side product. Friday Harbor expanded its AI pre-underwriting technology to evaluate DSCR, asset-based, and fix-and-flip files against program guidelines, and Clear Capital's updated Rental AVM platform now delivers market rent estimates and comps in under a second across 105 million properties nationwide, versus roughly five days for a traditional Form 1007 rent schedule. Velocity Financial's agreement to acquire Toorak Capital's business-purpose lending platform adds another signal that capital is flowing toward this space even as conforming volume cools.

Source: National Mortgage News · September 2026

Housing Market

Housing Starts and Jobless Claims Land Largely In Line, Setting Up a Heavier Data Week Ahead

Thursday's housing starts and initial jobless claims came in close to expectations, giving the market little reason to revise its outlook either direction. Today's durable goods orders is a secondary release that typically only moves Treasury yields on a real surprise. The calm is likely temporary: next week brings consumer confidence and JOLTS job openings Tuesday, core PCE and Q2 GDP Wednesday, ISM manufacturing Thursday, and the September jobs report Friday. That's about as dense a data week as the calendar gets, and it lands right before the Fed's October 27-28 meeting.

Source: U.S. Census Bureau, Bureau of Labor Statistics · September 2026

Capital Markets

Non-QM Credit Performance Holds Up Overall, But Lenders Are Watching Older Vintages Closely

Cumulative losses across the non-QM sector remain modest at just 3.6 basis points historically, a track record that continues to draw institutional capital into the space. That said, delinquencies on 2022 through 2024 vintages have continued to creep up, a byproduct of the looser underwriting that prevailed before rates moved higher. The 2025 vintage is performing better as lenders tightened credit standards, which is worth knowing if you're fielding investor or capital markets questions about program durability heading into 2027.

Source: National Mortgage News · September 2026

💬Consumer & Investor Talking Points

"Everyone's chasing the 30-year fixed right now, but at 7.17%, it might not be your best move if you're not planning to hold this loan for fifteen years."

For Real Estate Investors

The 5/1 ARM just pulled back to 6.47% while the 30-year fixed climbed to 7.17%, which means the spread between them widened to nearly 70 basis points almost overnight. For an investor evaluating a DSCR purchase or refinance with a realistic five to seven year hold, that gap is real cash flow, not a rounding error. Cotality's research shows mega-investors retreating from non-owner-occupied properties, and local, smaller investors are filling that space, which means there's less competition at the table than there was a year ago. Pair the rate story with the fact that DSCR products don't touch personal income or debt-to-income ratios, and this is a conversation worth having with every investor client this week, not just the ones already asking about it.

"You don't need a W-2 to get competitive terms right now. Lenders are actively expanding non-QM guidelines because the volume is there."

For Self-Employed Borrowers

Non-QM origination volume is tracking toward $175 billion this year, up 62% from $108 billion last year, and that growth is being driven by real capital and real lender appetite, not a temporary blip. Bank statement and asset-based programs exist precisely for the self-employed borrower who can't show a conventional two-year income history, and the technology behind these files has genuinely improved, with AI-assisted underwriting cutting turn times that used to make these loans a hard sell. If a self-employed client got turned down or discouraged from a conventional loan earlier this year, it's worth revisiting that file now rather than assuming the answer is still no.

"The Fed just told us more hikes might be coming. Waiting for rates to drop isn't a strategy right now, it's a bet against the Fed's own guidance."

For Buyers on the Fence

Sixteen of eighteen Fed participants are projecting at least one more rate hike before year end, and the 30-year fixed is already sitting at its highest level since January 2025. That's not a market anticipating relief anytime soon. Buyers who have been waiting on the sidelines for rates to soften are, at minimum, taking on real risk that the wait gets longer and more expensive rather than shorter. Locking now doesn't mean giving up on a future refinance if rates do eventually ease, it means not losing purchasing power in the meantime, which is the argument that tends to land with borrowers who are otherwise ready to move.

📅Economic Watch

Background · This Week

Housing Starts & Initial Jobless Claims (Thursday)

Both landed close to consensus, offering little new signal on the direction of housing supply or labor market slack. Neither is likely to shift the Fed's near-term thinking on its own, but they add to the broader picture the Fed is weighing heading into October.

Medium Impact · Today

Durable Goods Orders

A read on big-ticket manufacturing demand that typically only moves Treasury yields on a genuine surprise in either direction. After this week's Fed-driven volatility, a quiet print here would let the market catch its breath before next week's heavier calendar.

High Impact · Next Week (Wed, Sept 30)

Core PCE Price Index & Q2 GDP

Core PCE is the Fed's preferred inflation gauge and the last major data point before the October 27-28 FOMC meeting. A hot print reinforces the case for another hike and likely keeps the 10-year pinned near current highs; a softer number could give fixed rates some room to ease.

High Impact · Next Week (Fri, Oct 2)

September Jobs Report (Nonfarm Payrolls)

Unemployment has held at a steady 4.1%, and a soft payrolls print would complicate the case for additional hikes even with inflation running above target. Watch how this balances against Wednesday's PCE data two days earlier, since a hot-inflation, soft-jobs combination would leave the Fed with a genuinely difficult call in October.

⚡Quick Hits

🎯Non-QM originations are tracking toward $175 billion for 2026, a 62% jump from $108 billion last year, and DSCR is roughly half of that collateral.

📉The fixed-to-ARM spread widened back out to roughly 70 basis points today after compressing to just 7 basis points earlier this week. Worth revisiting with anyone who dismissed the ARM conversation on Wednesday.

🏦16 of 18 FOMC participants see at least one more hike before year end. This is not a market that's pricing in near-term relief.