WTMS Blog Today = What’s up in Mortgage Today (AM) – 10/03/2025
Mortgage backed securities markets are showing mixed signals today as the government shutdown enters its third day. The 10-year Treasury yield has inched higher amid ongoing uncertainty about federal operations, creating headwinds for mortgage rates. Despite these challenges, mortgage rates remain relatively stable with the 30-year fixed rate holding near 6.36% according to recent data. UMBS pricing continues to face pressure from elevated Treasury yields and uncertainty surrounding government-sponsored enterprise operations during the shutdown. Market participants are closely watching for any disruptions to Fannie Mae and Freddie Mac operations that could impact mortgage origination flow.
The slight uptick in Treasury yields is translating to modest pressure on mortgage backed securities pricing across the curve. GNMA securities are experiencing some volatility as investors weigh the impact of reduced government operations on processing and guarantee functions. While these securities carry the full faith and credit of the U.S. government, operational disruptions during shutdowns have historically created short-term pricing inefficiencies. Traders are positioning defensively until clarity emerges on shutdown resolution timing. The broader mortgage origination market is navigating through seasonal slowdowns typical for early October while managing shutdown-related uncertainties.
Lenders are maintaining operational capacity despite questions about government verification services and FHA processing capabilities. Industry observers note that short-term shutdowns typically have minimal long-term impact on mortgage markets, though extended disruptions could create more significant challenges. Real estate market activity continues at a measured pace with buyers and sellers adapting to the current rate environment. The stability in mortgage rates despite Treasury volatility suggests that lenders are managing rate risk effectively through their pipeline hedging strategies. Market sentiment remains cautiously optimistic that any shutdown-related disruptions will be temporary and resolved quickly.
FICO has launched a Mortgage Direct License Program that lets tri-merge resellers distribute credit scores directly to lenders, bypassing credit bureaus and cutting costs.
The program offers two pricing models: a $4.95 royalty per score under a performance-based structure—about 50% cheaper than current fees—or a $10 per-score model. FICO says the change will eliminate bureau markups and give lenders more pricing flexibility. The move comes amid regulatory pressure and competition from VantageScore. Policy changes dating back to 2018 opened the door for alternative models, and recent FHFA updates allowing bi-merge credit reports could threaten a third of FICO’s profits.
Fannie Mae and Freddie Mac issued temporary guidance to keep lending moving during the government shutdown, easing some documentation rules. Lenders can use year-to-date pay statements instead of 30-day paystubs and document attempts to verify employment if federal systems are down. Income, tax, and Social Security checks are still required, but some timelines are relaxed.
The shutdown also affects flood insurance and servicing. Lenders must rely on pending or private flood coverage until the National Flood Insurance Program resumes. Fannie and Freddie are allowing forbearance for affected borrowers.
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