HOUSING FINANCE POLICY CENTER
HOUSING FINANCE
AT A GLANCE
A MONTHLY CHARTBOOK
July 2014
1
ABOUT THE CHARTBOOK
HOUSING FINANCE POLICY CENTER STAFF
The Housing Finance Policy Center’s (HFPC) mission is
to produce analyses and ideas that promote sound public
policy, efficient markets, and access to economic
opportunity in the area of housing finance. At A Glance, a
monthly chartbook and data source for policymakers,
academics, journalists, and others interested in the
government’s role in mortgage markets, is at the heart of
this mission.
Laurie Goodman
Center Director
Ellen Seidman
Senior Fellow
Jim Parrott
Senior Fellow
Sheryl Pardo
Associate Director of Communications
We welcome feedback from our readers on how we can
make At A Glance a more useful publication. Please
email any comments or questions to
ataglance@urban.org.
Jun Zhu
Senior Financial Methodologist
Wei Li
Senior Research Associate
Bing Bai
Research Associate I
Taz George
Research Assistant
Maia Woluchem
Research Assistant
Alison Rincon
Special Assistant to the Director
We would like to thank The Citi Foundation and The John D. and Catherine T. MacArthur Foundation for providing generous support at the
leadership level to launch the Housing Finance Policy Center. Additional support was provided by the Ford Foundation and the Open
Society Foundations. We are also especially grateful to Sarah Rosen Wartell, president of the Urban Institute, and Rolf Pendall, director of
the Metropolitan Housing and Communities Policy Center, for their creative visions and valuable insights.
2
INTRODUCTION
FHFA Actions
With legislative GSE Reform now unlikely in 2014,
attention has turned to administrative actions, which do
not require Congressional approval. Access and
affordability are front and center. FHFA has begun to act
on representations and warranties, giving lenders more
certainly as to when a loan will be required to be
repurchased.
Now, FHFA turns to pricing, releasing requests for
comments on g-fees (due August 4) and on capital
standards for private mortgage insurance providers (due
September 8). The g-fee request centers on former FHFA
Director DeMarco’s g-fee and LLPA increases, adopted in
December and put on hold by Mel Watt in January, but
asks broader philosophical questions about the goals of
g-fee pricing in conservatorship. We believe the outcome
will leave g-fees largely unchanged, and we expect a final
decision prior to 2015.
On the PMI side, a set of sweeping changes were
proposed to better protect the GSEs, including higher
capital requirements and more risk-based pricing. This
potentially could have the effect of raising PMI fees on
high LTV, low FICO borrowers, and may prove to have a
more significant impact on access and pricing than the gfee revisions. However, actions to increase confidence in
the MIs are necessary to allow them to take on a larger
risk sharing role, including the adoption of front-end risk
sharing as proposed by the Mortgage Bankers
Association.
One effect of any increase in PMI premiums will likely be
the increased migration of high LTV, low FICO borrowers
to the FHA. This is because FHA does very little riskbased pricing, while the GSEs and MIs do substantially
more. For example, a 95% LTV loan with a FICO of 680 is
likely to be executed through the GSEs, while loans to
borrowers with a FICO less than 680 will likely go through
FHA (page 33). If FHFA receives comments on the MI
proposal by September, they could introduce a final set of
rules this year, though full implementation would not
occur until 2017.
The Agency Landscape
The composition of outstanding mortgages has changed
dramatically over the past few years, with FHA and VA
loans growing while GSE loans are static. VA loans
historically perform better than FHA loans (see our recent
commentary) and are now the faster growing of the two.
As a result, this year GSE outstandings have shrunk by
$9.8 billion while GNMA has grown by $25.9 billion (page
30). Since 2009, GSE net issuance has been sharply
negative, while GNMA has grown quite rapidly. GNMA’s
outstanding balance recently crossed the $1.5 trillion
mark, with over 90 percent of this attributable to the
single family business. In a recent blog, we project that
outstanding GNMA single family securities will overtake
Freddie Mac outstandings in about a year.
Fed Tapering
Under QE 3, new mortgage purchases by the Fed were
$40 billion per month. The Fed has since tapered to $15
billion a month, and is likely to be down to zero by
October. However, buying will continue at a much
reduced level, as the Fed is likely to keep reinvesting
funds from pay downs on mortgages and agency
debentures into the mortgage market. Despite the fact
that Fed buying was a huge percent of gross issuance for
much of the program (page 31), we do not see mortgage
rates rising sharply because the Fed is ending new
purchases. Agency production has been very light this
year, with gross agency issuance down 56 percent from
the first half of 2013, reflecting lower refinance activity.
Net issuance is down even more in percentage terms.
The effect of very limited issuance is that spreads should
stay tight even in the absence of Fed buying, suggesting
that continued Fed tapering will have a very small effect
on mortgage rates.
INSIDE THIS ISSUE
•
ARM share of purchase loans doubled to 7 percent
since April 2013 (page 9)
•
Just over $1 bil. in new private label securities
issued in Q2 2014; lowest since Q4 2011 (page
10)
•
Mortgage originations outlook is weak for
remainder 2014 and 2015 (page 12)
•
See the details of Fannie Mae’s latest risk sharing
deal (page 21)
•
Mods and liquidations far below 2013 pace;
redefault rates down for gov-backed mods; still
higher than other product types (pages 28-29)
•
GSE gross issuance down 60 percent from last
year; net issuance down 140 percent (page 30)
•
Which borrowers get a lower payment from FHA
than private mortgage insurance? (page 33)
3
CONTENTS
Overview
Market Size Overview
Value of the US Residential Housing Market
Size of the US Residential Mortgage Market
Private Label Securities
Agency Mortgage-Backed Securities
6
6
7
7
Origination Volume and Composition
First Lien Origination Volume & Share
8
Mortgage Origination Product Type
Composition (All Originations & Purchase Originations Only)
9
Securitization Volume and Composition
Agency/Non-Agency Share of Residential MBS Issuance
Non-Agency MBS Issuance
Non-Agency Securitization 2.0
10
10
10
Agency Activity: Volumes and Purchase/Refi Composition
Agency Gross Issuance
Percent Refi at Issuance
11
11
State of the Market
Mortgage Origination Projections
Total Originations and Refinance Shares
Housing Starts and Home Sales
12
12
Originator Profitability
Originator Profitability and Unmeasured Costs (OPUC)
13
Credit Availability for Purchase Loans
Borrower FICO Score at Origination Month
Combined LTV at Origination Month
Origination FICO and LTV by MSA
14
14
15
Housing Affordability
National Housing Affordability Over Time
Affordability Adjusted for MSA-Level DTI
16
16
Home Price Indices
National Year-Over-Year HPI Growth
Changes in CoreLogic HPI for Top MSAs
17
17
Negative Equity & Serious Delinquency
Negative Equity Share
Loans in Serious Delinquency
18
18
GSEs under Conservatorship
GSE Portfolio Wind-Down
Fannie Mae Mortgage-Related Investment Portfolio
Freddie Mac Mortgage-Related Investment Portfolio
19
19
4
CONTENTS
Effective Guarantee Fees & GSE Risk-Sharing Transactions
Effective Guarantee Fees
Fannie Mae Upfront Loan-Level Price Adjustment
GSE Risk-Sharing Transactions
20
20
21
Serious Delinquency Rates
Serious Delinquency Rates – Fannie Mae & Freddie Mac
Serious Delinquency Rates – Single-Family Loans & Multifamily GSE Loans
22
23
Refinance Activity
Total HARP Refinance Volume
HARP Refinances
24
24
GSE Loans: Potential Refinances
Loans Meeting HARP Pay History Requirements
25
Modification Activity
HAMP Activity
New HAMP Modifications
Cumulative HAMP Modifications
26
26
Modification by Type of Action and Bearer of Risk
Changes in Loan Terms for Modifications
Type of Modification Action by Investor and Product Type
27
27
Modifications and Liquidations
Loan Modifications and Liquidations (By Year & Cumulative)
28
Modification Redefault Rates by Bearer of the Risk
Redefault Rate after Modification (12 Months & 24 Months)
29
Agency Issuance
Agency Gross and Net Issuance
Agency Gross Issuance
Agency Net Issuance
30
30
Agency Gross Issuance & Fed Purchases
Monthly Gross Issuance
Fed Absorption of Agency Gross Issuance
31
31
Mortgage Insurance Activity
MI Activity & Market Share
FHA MI Premiums for Typical Purchase Loan
Initial Monthly Payment Comparison: FHA vs. PMI
32
33
33
Related HFPC Work
Publications and Events
34
5
OVERVIEW
MARKET SIZE OVERVIEW
Home values continue to improve, with the Q1 2014 Fed Flow of Funds data indicating an increase in the total
value of the US residential 1-4 unit housing market to $21.25 trillion, up from $20.4 trillion in Q4 2013. Just under
half of the market, $9.85 trillion, is mortgage debt, a slight downtick from the previous quarter, while household
equity increased over $800 billion to $11.4 trillion. Agency MBS make up 56.4 percent of the total, private-label
securities make up 7.8 percent, and unsecuritized first liens at commercial banks, savings institutions, and credit
unions make up 23.9 percent. Second liens and GSE loans in portfolio comprise the remaining 7.0 and 4.9 percent
of the total, respectively.
Size of the US Residential
Mortgage Market
Value of the US Housing Market
as of Q1 2014; dollars in trillions
as of Q1 2014; dollars in trillions
$25
Unsecuritized first liens at commercial banks, savings
institutions, credit unions
$20
Fannie and Freddie loans in portfolio
Agency MBS
Equity,
$11.397
Private-label securities
$ trillions
$15
Second liens
$10
$10
$2.359
$8
$ trillions
$5
Debt,
household
mortgages,
Debt,
$9,833
Household
Mortgages,
$9.851
$0.479
$5
$5.554
$3
$0
Sources: Federal Reserve Flow of Funds and Urban Institute.
$0
$0.768
$0.692
Sources: Federal Reserve Flow of Funds, Inside Mortgage Finance,
Fannie Mae, Freddie Mac, eMBS and Urban Institute.
6
OVERVIEW
MARKET SIZE OVERVIEW
As of May 2014, debt in the private-label securitization market is split among prime (19.9 percent), Alt-A (44.0
percent), and subprime (36.1 percent) loans. Outstanding securities in the agency market, as of Q2 2014, are
46.8 percent Fannie Mae, 27.2 percent Freddie Mac, and 26.0 percent Ginnie Mae.
Private Label Securities by Product Type
as of May 2014; dollars in trillions
100%
90%
Prime, $0.151
80%
70%
60%
Alt-A, $0.335
50%
40%
30%
20%
Subprime, $0.274
10%
0%
Sources: CoreLogic and Urban Institute.
Agency Mortgage-Backed Securities
as of Q2 2014; dollars in trillions
100%
90%
80%
Fannie Mae, $2.604
70%
60%
50%
40%
Freddie Mac, $1.151
30%
20%
10%
Ginnie Mae, $1.446
0%
Sources: eMBS and Urban Institute.
7
OVERVIEW
OVERVIEW
ORIGINATION VOLUME
AND COMPOSITION
First lien originations in Q1 2014 began far below their 2013 pace, totaling only $227.6 billion. The share of bank
portfolio and FHA/VA originations rose to around 22 percent each, while the GSE share dropped to 54 percent from
61 percent in 2013, reflecting the curtailment of refinancing activity. The private label origination share remains less
than one percent.
First Lien Origination Volume and Share
$4.0
$3.5
$ trillions
$3.0
$2.5
$2.0
$1.5
$0.5
$0.002
$0.0
$0.123
1Q14
2013
2012
2011
2010
2009
2008
2007
2006
2005
FHA/VA securitization
2004
$0.052
2003
PLS securitization
$0.050
2002
Bank portfolio
$1.0
GSE securitization
100%
90%
22.1%
80%
0.7%
70%
22.9%
60%
50%
40%
30%
54.3%
20%
10%
1Q14
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
0%
Sources: Inside Mortgage Finance and Urban Institute.
8
OVERVIEW
OVERVIEW
MORTGAGE
MORTGAGE ORIGINATION
ORIGINATION PRODUCT
PRODUCT
TYPE
TYPE
Adjustable-rate mortgages (ARMs) accounted for as much as 29 percent of all new originations during the peak of the
recent housing bubble in 2005 (top chart). They fell to a historic low of 1 percent in 2009, and now consist of 7
percent of total originations. Fifteen-year FRMs, predominantly a refinance product, comprise 16 percent of new
originations. If we exclude refinances (bottom chart), the share of 30-year FRMs in April 2014 stood at 86 percent,
15-year FRMs at 6 percent, and ARMs at 7 percent.
All Originations
100%
90%
80%
70%
60%
Fixed-rate 30-year mortgage
Fixed-rate 15-year mortgage
50%
40%
30%
Adjustable-rate mortgage
20%
Other
10%
Sources: CoreLogic Prime Servicing and Urban Institute.
Purchase Loans Only
100%
90%
80%
70%
60%
50%
Fixed-rate 30-year mortgage
40%
Fixed-rate 15-year mortgage
30%
Adjustable-rate mortgage
Other
20%
10%
Apr-00
Nov-00
Jun-01
Jan-02
Aug-02
Mar-03
Oct-03
May-04
Dec-04
Jul-05
Feb-06
Sep-06
Apr-07
Nov-07
Jun-08
Jan-09
Aug-09
Mar-10
Oct-10
May-11
Dec-11
Jul-12
Feb-13
Sep-13
Apr-14
0%
Sources: CoreLogic Prime Servicing and Urban Institute.
9
Apr-14
Sep-13
Jul-12
Feb-13
Dec-11
Oct-10
May-11
Mar-10
Aug-09
Jan-09
Jun-08
Nov-07
Apr-07
Sep-06
Jul-05
Feb-06
Dec-04
Oct-03
May-04
Mar-03
Aug-02
Jan-02
Jun-01
Nov-00
Apr-00
0%
OVERVIEW
SECURITIZATION VOLUME AND
COMPOSITION
Agency/Non-Agency Share of Residential MBS Issuance
Agency share
100%
99%
90%
80%
70%
60%
50%
40%
30%
20%
10%
1%
Sources: Inside Mortgage Finance and Urban Institute.
Note: Year-to-date figures as of June 2014.
Non-Agency Securitization 2.0
$1,200
$6
$1,000
$5
$800
$4
$ billions
$600
$3
$2
$400
$200
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
1Q14
$0
Prime
Subprime
Alt A
Source: Inside Mortgage Finance and Urban Institute.
$0.8
$0.4
$0
$1.3
$1
$0
May-12
Jun-12
Jul-12
Aug-12
Sep-12
Oct-12
Nov-12
Dec-12
Jan-13
Feb-13
Mar-13
Apr-13
May-13
Jun-13
Jul-13
Aug-13
Sep-13
Oct-13
Nov-13
Dec-13
Jan-14
Feb-14
Mar-14
Apr-14
May-14
Jun-14
$ billions
Non-Agency MBS Issuance
2014 YTD
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
0%
1995
Non-agency single-family
MBS issuance has hovered
at or below 2 percent of
total issuance since early
2011, and this share is
even lower if re-REMICs
are excluded. The
environment in 2014 has
not been favorable for new
non-agency deals. In the
first half of 2014, total nonagency issuance was $5.8
billion, compared to $18.7
billion over the same period
in 2013.
Non-Agency share
All other
Sources: Inside Mortgage Finance and Urban Institute.
Note: Monthly figures equal total non-agency MBS issuance
minus Re-REMIC issuance.
10
OVERVIEW
AGENCY ACTIVITY:
VOLUMES AND PURCHASE/REFI
COMPOSITION
Agency issuance continues declining, totaling $407.0 billion in the first half of 2014, compared to $923.6 billion
for the same period a year ago. In June 2014, refinances were 42 and 44 percent of the GSEs’ business, down
from the first quarter’s average of 52 and 55 percent. The Ginnie Mae market has always been more purchasedriven, with refinance volume of 21 percent in June 2014.
Agency Gross Issuance
Fannie Mae
Freddie Mac
Ginnie Mae
$2.5
$ trillions
$2.0
$1.5
$1.0
$0.26
$0.22
$0.34
$0.5
$0.0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Ann.
Sources: eMBS and Urban Institute.
Note: Year to date as of June 2014.
Percent Refi at Issuance
Freddie Mac
Ginnie Mae
Mortgage rate
90%
80%
70%
60%
50%
40%
30%
20%
Jun-04
Sep-04
Dec-04
Mar-05
Jun-05
Sep-05
Dec-05
Mar-06
Jun-06
Sep-06
Dec-06
Mar-07
Jun-07
Sep-07
Dec-07
Mar-08
Jun-08
Sep-08
Dec-08
Mar-09
Jun-09
Sep-09
Dec-09
Mar-10
Jun-10
Sep-10
Dec-10
Mar-11
Jun-11
Sep-11
Dec-11
Mar-12
Jun-12
Sep-12
Dec-12
Mar-13
Jun-13
Sep-13
Dec-13
Mar-14
Jun-14
9.0%
8.0%
7.0%
6.0%
5.0%
4.0%
3.0%
2.0%
Sources: eMBS, Freddie Mac PMMS and Urban Institute.
Note: Based on at-issuance loan balance.
11
Mortgage Rate
Percent Refi
Fannie Mae
OVERVIEW
STATE OF THE MARKET
MORTGAGE ORIGINATION
PROJECTIONS
A sharp drop in mortgage originations in late 2013 and Q1 2014, combined with higher interest rates, has prompted
the GSEs and MBA to lower their projections for mortgage originations. Home sales are expected to be slightly
softer in 2014 than in 2013, while housing starts are expected to pick up steam. And both housing starts and home
sales are expected to strengthen considerably in 2015. Interest rates will gradually edge up through the end of the
year and in 2015, contributing to a decline in the refinance share.
Total Originations and Refinance Shares
Period
Originations ($ billions)
Total, FNMA Total, FHLMC Total, MBA
estimate
estimate
estimate
532
572
450
358
237
318
311
264
239
305
300
275
1496
2154
1913
1130
1119
2013 Q1
2013 Q2
2013 Q3
2013 Q4
2014 Q1
2014 Q2
2014 Q3
2014 Q4
2015 Q1
2015 Q2
2015 Q3
2015 Q4
FY 2011
FY 2012
FY 2013
FY 2014
FY 2015
532
572
450
350
300
390
320
240
285
360
280
200
1492
2122
1925
1250
1125
524
537
401
293
226
267
281
240
271
288
295
276
1436
2044
1755
1014
1130
FNMA
estimate
Refi Share (%)
FHLMC
estimate
73
65
52
52
48
39
34
30
33
24
23
27
66
72
62
37
26
73
65
52
51
48
42
34
34
32
22
18
17
64
70
61
40
23
MBA
estimate
74
66
51
53
49
41
41
40
38
35
34
35
65
71
63
43
35
Sources: Mortgage Bankers Association, Fannie Mae, Freddie Mac and Urban Institute.
Note: Shaded boxes indicate forecasted figures. All figures are estimates for total single-family market. Column labels indicate source of
estimate. The yearly averages for interest rates in 2011, 2012, and 2013 were 4.5, 3.7, and 4.0 percent, respectively. The projected average
annual rates for 2014 and 2015 range from 4.3 to 4.5 percent, and 4.5 to 5.0 percent, respectively.
Housing Starts and Homes Sales
Housing Starts, thousands
Home Sales
Year
Total,
FNMA
estimate
Total,
FHLMC
estimate
Total,
MBA
estimate
Total,
FNMA
estimate
Total,
FHLMC
estimate
Total,
MBA
estimate
Existing,
MBA
estimate
New,
MBA
Estimate
FY 2011
FY 2012
FY 2013
FY 2014
FY 2015
609
781
925
1057
1273
610
780
920
1090
1400
612
783
930
1013
1163
4566
5028
5519
5444
5835
4570
5030
5500
5400
5800
4501
5030
5505
5305
5756
4200
4661
5073
4850
5253
301
369
432
455
503
Sources: Mortgage Bankers Association, Fannie Mae, Freddie Mac and Urban Institute.
Note: Shaded boxes indicate forecasted figures. All figures are estimates for total single-family market. Column labels indicate source of
estimate.
12
STATE OF THE MARKET
ORIGINATOR PROFITABILITY
When originator profitability is high, mortgage rates tend to be less responsive to the general level of interest
rates, as originators are capacity-constrained. When originator profitability is low, mortgage rates are far more
responsive to the general level of interest rates. As mortgage interest rates have risen and fewer borrowers find
it economical to refinance, originator profitability is lower. Originator profitability is often measured as the spread
between the rate the borrower pays for the mortgage (the primary rate) and the yield on the underlying
mortgage-backed security in the secondary market (the secondary rate). However, with guarantee fees rising
steadily over the past few years, the so-called primary-secondary spread has become a very imperfect measure
to compare profitability across time.
The measure used here, Originator Profitability and Unmeasured Costs (OPUC), is formulated and calculated by
the Federal Reserve Bank of New York. It looks at the price at which the originator actually sells the mortgage
into the secondary market and adds the value of retained servicing (both base and excess servicing, net of gfees) as well as points paid by the borrower.
Originator Profitability and Unmeasured Costs
OPUC
6
Dollars per $100 loan
5
4
3
$2.28
2
1
Jun-14
Dec-13
Jun-13
Dec-12
Jun-12
Dec-11
Jun-11
Dec-10
Jun-10
Dec-09
Jun-09
Dec-08
Jun-08
Dec-07
Jun-07
Dec-06
Jun-06
Dec-05
Jun-05
Jun-04
Dec-04
Dec-03
Jun-03
Dec-02
Jun-02
Dec-01
Jun-01
Dec-00
Jun-00
0
Sources: Federal Reserve Bank of New York, updated monthly and available at this link:
http://www.ny.frb.org/research/epr/2013/1113fust.html and Urban Institute.
Note: OPUC stands for "originator profits and unmeasured costs" as discussed in Fuster et al. (2013). The OPUC series is a monthly (4week moving) average.
13
STATE OF THE MARKET
OVERVIEW
CREDIT
CREDIT AVAILABILITY
AVAILABILITY FOR
FOR
PURCHASE LOANS
Access to credit has become extremely tight, especially for borrowers with low FICO scores. The mean and median
FICO scores on new originations have both drifted up about 36 points over the last decade. The 10th percentile of
FICO scores, which represents the lower bound of creditworthiness needed to qualify for a mortgage, stood at 657 as
of April 2014. Prior to the housing crisis, this threshold held steady in the low 600s. LTV levels at origination remain
relatively high, averaging 86.4, which reflects the large number of FHA purchase originations.
Borrower FICO Score at Origination
90th percentile
Mean
Median
10th percentile
FICO Score
850
800
800
750
742
735
700
657
650
600
550
Apr-01
Oct-01
Apr-02
Oct-02
Apr-03
Oct-03
Apr-04
Oct-04
Apr-05
Oct-05
Apr-06
Oct-06
Apr-07
Oct-07
Apr-08
Oct-08
Apr-09
Oct-09
Apr-10
Oct-10
Apr-11
Oct-11
Apr-12
Oct-12
Apr-13
Oct-13
Apr-14
500
Sources: CoreLogic Prime Servicing as of April 2014 and Urban Institute.
Note: Purchase-only loans.
Combined LTV at Origination
90th percentile
LTV
110
100
101
90
90
80
86
70
69
Mean
60
Median
50
10th percentile
40
Apr-01
Oct-01
Apr-02
Oct-02
Apr-03
Oct-03
Apr-04
Oct-04
Apr-05
Oct-05
Apr-06
Oct-06
Apr-07
Oct-07
Apr-08
Oct-08
Apr-09
Oct-09
Apr-10
Oct-10
Apr-11
Oct-11
Apr-12
Oct-12
Apr-13
Oct-13
Apr-14
30
Sources: CoreLogic Prime Servicing as of April 2014 and Urban Institute.
Note: Purchase-only loans.
14
Mean origination FICO score
780
100
770
95
760
90
750
85
740
80
730
75
720
70
710
65
700
60
Sources: CoreLogic Prime Servicing as of April 2014 and Urban Institute.
Note: Purchase-only loans.
15
Origination LTV
San Francisco-Redwood City-South San Francisco CA
San Jose-Sunnyvale-Santa Clara CA
Oakland-Hayward-Berkeley CA
Seattle-Bellevue-Everett WA
Los Angeles-Long Beach-Glendale CA
New York-Jersey City-White Plains NY-NJ
San Diego-Carlsbad CA
Nassau County-Suffolk County NY
Portland-Vancouver-Hillsboro OR-WA
Newark NJ-PA
Washington-Arlington-Alexandria DC-VA-MD-WV
Chicago-Naperville-Arlington Heights IL
Denver-Aurora-Lakewood CO
Boston MA
Baltimore-Columbia-Towson MD
Columbus OH
Minneapolis-St. Paul-Bloomington MN-WI
Charlotte-Concord-Gastonia NC-SC
Pittsburgh PA
Sacramento--Roseville--Arden-Arcade CA
Dallas-Plano-Irving TX
Atlanta-Sandy Springs-Roswell GA
St. Louis MO-IL
Tampa-St. Petersburg-Clearwater FL
Cincinnati OH-KY-IN
Kansas City MO-KS
Philadelphia PA
Houston-The Woodlands-Sugar Land TX
Orlando-Kissimmee-Sanford FL
Riverside-San Bernardino-Ontario CA
Phoenix-Mesa-Scottsdale AZ
Fort Worth-Arlington TX
Miami-Miami Beach-Kendall FL
Las Vegas-Henderson-Paradise NV
Cleveland-Elyria OH
Detroit-Dearborn-Livonia MI
San Antonio-New Braunfels TX
Origination FICO
STATE OF THE MARKET
OVERVIEW
CREDIT
CREDIT AVAILABILITY
AVAILABILITY FOR
FOR
PURCHASE LOANS
Credit has been tight for all borrowers with less-than-stellar credit scores, but there are significant variations across
MSAs. For example, the mean origination FICO for borrowers in San Francisco-Redwood City-South San
Francisco, CA is 770, while in San Antonio-New Braunfels, TX it is 720. Across all MSAs, lower average FICO
scores tend to be correlated with high average LTVs, as these MSAs rely heavily on FHA/VA financing.
Origination FICO and LTV by MSA
Mean origination LTV
Kansas City MO-KS
$240,000
$200,000
Sources: CoreLogic, US Census, Freddie Mac, and UI calculations based on NAR methodology.
Note: Affordability index is calculated relative to home prices in 2000-03. A ratio above 1 indicates higher affordability in
April 2014 than in 2000-03.
16
Detroit-Dearborn-Livonia MI
Credit
Bubble
Cleveland-Elyria OH
Las Vegas-Henderson-Paradise NV
Cincinnati OH-KY-IN
Chicago-Naperville-Arlington Heights IL
Columbus OH
Tampa-St. Petersburg-Clearwater FL
Pittsburgh PA
St. Louis MO-IL
Median sales price
Max affordable price at 6.0% rate
Minneapolis-St. Paul-Bloomington MN-WI
$260,000
Nassau County-Suffolk County NY
Apr-00
Oct-00
Apr-01
Oct-01
Apr-02
Oct-02
Apr-03
Oct-03
Apr-04
Oct-04
Apr-05
Oct-05
Apr-06
Oct-06
Apr-07
Oct-07
Apr-08
Oct-08
Apr-09
Oct-09
Apr-10
Oct-10
Apr-11
Oct-11
Apr-12
Oct-12
Apr-13
Oct-13
Apr-14
$280,000
Newark NJ-PA
Atlanta-Sandy Springs-Roswell GA
Sacramento--Roseville--Arden-Arcade CA
Denver-Aurora-Lakewood CO
Orlando-Kissimmee-Sanford FL
San Antonio-New Braunfels TX
Boston MA
Charlotte-Concord-Gastonia NC-SC
Fort Worth-Arlington TX
Riverside-San Bernardino-Ontario CA
Houston-The Woodlands-Sugar Land TX
Housing prices
Sources: CoreLogic, US Census, Freddie Mac,
and Urban Institute.
Note: The maximum affordable price is the
house price that a family can afford putting 20
percent down, with a monthly payment of 28
percent of median family income, at the Freddie
Mac prevailing rate for 30-year fixed-rate
mortgage, and property tax and insurance at
1.75 percent of housing value.
Baltimore-Columbia-Towson MD
Home prices are still very affordable by
historical standards, despite increases
over the last three years and a modest
rise in interest rates over the past year.
Even if interest rates rose to 6 percent,
affordability would be at the long term
historical average.
Phoenix-Mesa-Scottsdale AZ
San Diego-Carlsbad CA
Philadelphia PA
Oakland-Hayward-Berkeley CA
Dallas-Plano-Irving TX
Seattle-Bellevue-Everett WA
New York-Jersey City-White Plains NY-NJ
Miami-Miami Beach-Kendall FL
Portland-Vancouver-Hillsboro OR-WA
San Francisco-Redwood City-S San Francisco CA
Washington-Arlington-Alexandria DC-VA-MD-WV
Los Angeles-Long Beach-Glendale CA
San Jose-Sunnyvale-Santa Clara CA
Ratio
STATE OF THE MARKET
HOUSING AFFORDABILITY
National Housing Affordability Over Time
Max affordable price
$300,000
$274,830
$238,861
$220,000
$198,500
$180,000
$160,000
$140,000
$120,000
Affordability Adjusted for MSA-Level DTI
1.4
1.3
1.2
1.1
1
0.9
0.8
0.7
STATE OF THE MARKET
HOME PRICE INDICES
National Year-Over-Year HPI Growth
The strong year-over-year house price growth through 2013 has slowed somewhat in 2014, as indicated by
both the repeated sales HPI from CoreLogic and hedonic index from Zillow.
Zillow HVI year-over-year
20.0%
15.0%
10.0%
5.0%
0.0%
-5.0%
-10.0%
-15.0%
-20.0%
May-14
Nov-13
May-13
Nov-12
May-12
Nov-11
May-11
Nov-10
May-10
Nov-09
May-09
Nov-08
May-08
Nov-07
May-07
Nov-06
May-06
Nov-05
May-05
Nov-04
May-04
Nov-03
May-03
Nov-02
May-02
Nov-01
8.8%
5.4%
May-01
Year-over-year growth rate
CoreLogic HPI year-over-year
Sources: CoreLogic, Zillow, and Urban Institute.
Changes in CoreLogic HPI for Top MSAs
Despite rising 28.4 percent from the trough, national house prices must still grow 15.6 percent to reach pre-crisis
peak levels. At the MSA level, three of the top 15 MSAs have reached their peak HPI– Houston, TX; Dallas, TX;
and Denver, CO. Two MSAs particularly hard hit by the boom and bust– Riverside, CA and Phoenix, AZ– would
need to rise more than 40 percent to return to peak levels.
HPI changes (%)
MSA
United States
New York-Jersey City-White Plains NY-NJ
Los Angeles-Long Beach-Glendale CA
Chicago-Naperville-Arlington Heights IL
Atlanta-Sandy Springs-Roswell GA
Washington-Arlington-Alexandria DC-VA-MD-WV
Houston-The Woodlands-Sugar Land TX
Phoenix-Mesa-Scottsdale AZ
Riverside-San Bernardino-Ontario CA
Dallas-Plano-Irving TX
Minneapolis-St. Paul-Bloomington MN-WI
Seattle-Bellevue-Everett WA
Denver-Aurora-Lakewood CO
Baltimore-Columbia-Towson MD
San Diego-Carlsbad CA
Anaheim-Santa Ana-Irvine CA
2000 to peak
Peak to
trough
Trough to
current
99.3
116.5
181.9
65.6
40.7
160.3
44.5
126.3
194.4
38.2
74.2
94.2
36.2
128.7
149.0
163.0
-32.6
-20.0
-39.2
-36.6
-33.6
-33.5
-12.8
-52.8
-53.4
-13.9
-30.8
-32.2
-14.6
-25.8
-38.4
-37.1
28.4
18.2
42.0
21.0
35.6
29.3
30.1
48.5
46.9
24.5
24.8
34.9
31.6
11.0
36.6
38.1
% Rise needed
to achieve
peak
15.6
5.8
15.9
30.3
10.9
16.3
-11.9
42.7
46.0
-6.7
15.8
9.3
-11.0
21.4
18.7
15.2
Sources: CoreLogic HPIs as of May 2014 and Urban Institute.
Note: This table includes the largest 15 Metropolitan areas by mortgage count.
17
OVERVIEW
STATE OF THE MARKET
NEGATIVE EQUITY & SERIOUS
DELINQUENCY
Negative Equity Share
With housing prices appreciating through the first quarter of 2014, residential properties in negative equity (LTV
greater than 100) as a share of all residential properties with a mortgage has dropped to 12.7 percent. Residential
properties in near negative equity (LTV between 95 and 100) comprise another 3.2 percent.
Negative equity
Near or in negative equity
35%
30%
25%
20%
15.9%
12.7%
15%
10%
5%
1Q14
4Q13
3Q13
2Q13
1Q13
4Q12
3Q12
2Q12
1Q12
4Q11
3Q11
2Q11
1Q11
4Q10
3Q10
2Q10
1Q10
4Q09
3Q09
0%
Sources: CoreLogic and Urban Institute.
Note: CoreLogic negative equity rate is the percent of all residential properties with a mortgage with greater than 100 percent current LTV.
Loans near negative equity refer to loans above 95 percent current LTV.
Loans in Serious Delinquency/Foreclosure
Serious delinquencies and foreclosures continue to decline with the housing recovery, but remain quite high
relative to the early 2000s. Loans 90 days delinquent or in foreclosure totaled 5.0% in the first quarter of 2014,
down from 6.4% for the same quarter a year earlier.
12%
Percent of loans 90
days delinquent or in
foreclosure
Percent of loans in
foreclosure
Percent of loans 90
days delinquent
10%
8%
6%
5.0%
4%
2.7%
2%
2.4%
3Q00
1Q01
3Q01
1Q02
3Q02
1Q03
3Q03
1Q04
3Q04
1Q05
3Q05
1Q06
3Q06
1Q07
3Q07
1Q08
3Q08
1Q09
3Q09
1Q10
3Q10
1Q11
3Q11
1Q12
3Q12
1Q13
3Q13
1Q14
0%
Sources: Mortgage Bankers Association and Urban Institute.
18
GSES UNDER CONSERVATORSHIP
GSE PORTFOLIO WIND-DOWN
Freddie and Fannie continue to rapidly shrink their portfolios. Year over year, Fannie has contracted by 20.6
percent, and Freddie Mac by 18.5 percent. As of May 2014, they were both below their year-end 2014
portfolio cap. They are shrinking their less liquid assets (mortgage loans and non-agency MBS) at close to
the same pace that they are shrinking their entire portfolio.
Fannie Mae Mortgage-Related Investment Portfolio
Composition
900
800
700
600
$ billions
Current size: $456.6 billion
Current cap: $469.625 billion
Shrinkage year-over-year: 20.6%
Shrinkage in less-liquid assets
year-over-year: 17.2%
500
400
300
Mortgage loans
200
Non-agency MBS
100
May-06
Sep-06
Jan-07
May-07
Sep-07
Jan-08
May-08
Sep-08
Jan-09
May-09
Sep-09
Jan-10
May-10
Sep-10
Jan-11
May-11
Sep-11
Jan-12
May-12
Sep-12
Jan-13
May-13
Sep-13
Jan-14
May-14
0
Non-FNMA agency MBS
Fannie MBS in portfolio
Sources: Fannie Mae and Urban Institute.
Freddie Mac Mortgage-Related Investment Portfolio
Composition
900
700
600
500
400
300
Non-agency MBS
200
Non-FHLMC agency MBS
100
FHLMC MBS in portfolio
Sources: Freddie Mac and Urban Institute.
0
May-06
Sep-06
Jan-07
May-07
Sep-07
Jan-08
May-08
Sep-08
Jan-09
May-09
Sep-09
Jan-10
May-10
Sep-10
Jan-11
May-11
Sep-11
Jan-12
May-12
Sep-12
Jan-13
May-13
Sep-13
Jan-14
May-14
Mortgage loans
800
$ billions
Current size: $422.4 billion
Current cap: $469.625 billion
Shrinkage year-over-year: 18.5%
Shrinkage in less-liquid assets
year-over-year: 22.2%
19
GSES UNDER CONSERVATORSHIP
GSES UNDER CONSERVATORSHIP
EFFECTIVE
EFFECTIVE GUARANTEE
GUARANTEE FEES
FEES AND
GSE RISK-SHARING TRANSACTIONS
Effective Guarantee Fees
Fannie’s average charged g-fee on new single-family originations was 63 bps in Q1 2014, up from 61.2 in the
previous quarter, and 54.4 a year earlier. This is a marked increase over 2012 (39.9 bps) and 2011 (28.8 bps),
and has contributed to the GSEs’ strong profits. Fannie’s 2014 loan-level price adjustments (LLPAs) are shown in
the second table. The 25 bp Adverse Market Delivery Charge has been added to these upfront numbers. The
FHFA has asked for input by August 4th about the level of g-fees and LLPAs.
Freddie Mac management and g-fee rate
Sources: Fannie Mae, Freddie Mae and Urban Institute.
Note: Freddie only reports the effective g-fee on the
entire book of business.
70.0
60.0
50.0
40.0
30.0
20.0
10.0
0.0
63.0
39.8
28.3
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
3Q10
4Q10
1Q11
2Q11
3Q11
4Q11
1Q12
2Q12
3Q12
4Q12
1Q13
2Q13
3Q13
4Q13
1Q14
Fannie Mae single-family average charged gfee on new acquisitions
Fannie Mae single-family effective g-fee rate
Fannie Mae Upfront Loan-Level Price Adjustments (LLPAs)
LTV
≤60
60.01 – 70
70.01 – 75
75.01 – 80
80.01 – 85
85.01 – 90
90.01 – 95
> 740
0.000%
0.250%
0.250%
0.500%
0.500%
0.500%
0.500%
720 – 739
0.000%
0.250%
0.500%
0.750%
0.750%
0.750%
0.750%
700 – 719
0.000%
0.750%
1.000%
1.250%
1.250%
1.250%
1.250%
680 – 699
0.250%
0.750%
1.500%
2.000%
1.750%
1.500%
1.500%
660 – 679
0.250%
1.250%
2.250%
2.750%
3.000%
2.500%
2.500%
640 – 659
0.750%
1.500%
2.750%
3.250%
3.500%
3.000%
3.000%
620 – 639
0.750%
1.750%
3.250%
3.250%
3.500%
3.500%
3.500%
< 620
0.750%
1.750%
3.250%
3.250%
3.500%
3.500%
3.500%
Credit Score
Product Feature (Cumulative)
Investment Property
1.750%
1.750%
1.750%
3.000%
3.750%
N/A
N/A
2-unit property
1.000%
1.000%
1.000%
1.000%
1.000%
N/A
N/A
2-4 unit property
1.000%
1.000%
1.000%
1.000%
1.000%
N/A
N/A
Condominiums
0.000%
0.000%
0.000%
0.750%
0.750%
0.750%
0.750%
Sources: Fannie Mae and Urban Institute.
Note: Adverse Market Delivery Charge (AMDC) of 0.250% has been added to the LLPA numbers in the matrix by LTV and credit score. Freddie
Mac charges very comparable LLPAs.
20
GSES UNDER CONSERVATORSHIP
GSE RISK-SHARING TRANSACTIONS
Freddie Mac – Structured Agency Credit Risk (STACR)
Date
Reference Pool Size
($ millions)
$22,584.40
$35,327.30
$32,076.80
$28,146.98
$118,135.48
8%
Transaction
July 24, 2013
STACR Series 2013 - DN1
November 12, 2013
STACR Series 2013 - DN2
February 6, 2014
STACR Series 2014 - DN1
April 2, 2014
STACR Series 2014 - DN2
Freddie Mac Total Reference Collateral
Percent of Freddie Mac’s Total Book of Business
Fannie Mae – Connecticut Avenue Securities (CAS)
Date
Reference Pool Size
($ millions)
$26,756.40
$29,308.70
$60,818.48
$78,233.73
$195,117.31
7.5%
Transaction
October 24, 2013
CAS 2013 - C01
January 14, 2014
CAS 2014 - C01
May 28, 2014
CAS 2014 - C02
July 25, 2014
CAS 2014 – C03
Fannie Mae Total Reference Collateral
Percent of Fannie Mae’s Total Book of Business
Details of Fannie Mae’s latest capital markets transaction, CAS 2014 – C03
Amount
($ millions)
Tranche
Thickness (%)
CE (%)
Rating
$57,437.79
97
3
1M-1, 1M-1H, Total
$555, $37.14, $592.14
1
2
1M-2, 1M-2H, Total
1B-H
2A-H
$945, $61.64, $1006.64
$177.64
$18,296.66
1.7
0.3
96.25
0.3
0
3.75
2M-1, 2M-1H, Total
$239.5, $17.13, $256.63
1.35
2.4
2M-2, 2M-2H, Total
2B-H
Reference Pool
Size
$310.5, $22.17, $332.67
$123.56
1.75
0.65
0.65
0
NR
F: BBB-sf, DBRS:
BBB (high)-sf
NR
NR
NR
F: BBB-sf, DBRS:
BBB (low)-sf
NR
NR
$78,223.73
100
Class
1A-H
Initial
Spread (bps)
120
300
120
290
Sources: Fannie Mae, Freddie Mac and Urban Institute.
Note: Classes A-H, M-1H, M-2H, and B-H are reference tranches only. These classes are not issued or sold. The risk is retained by Fannie
Mae and Freddie Mac. “CE” = credit enhancement. Under “Rating,” “F” = Fitch, “D” = DBRS.
21
OVERVIEW
SERIOUS
DELINQUENCY RATES AT
GSES UNDER CONSERVATORSHIP
SERIOUS
THE GSEsDELINQUENCY RATES
Serious delinquency rates of GSE loans continue to decline as the legacy portfolio is resolved and the pristine,
post-2009 book of business exhibits very low default rates. As of May 2014, 2.08 percent of the Fannie portfolio
and 2.10 percent of the Freddie portfolio were seriously delinquent, down from 2.83 percent and 2.85 percent a
year earlier, respectively.
Serious Delinquency Rates–Fannie Mae
16%
Single-family: Non-credit
enhanced
Single-family: Credit
enhanced
Single-family: Total
Percentage of total loans
14%
12%
10%
8%
6%
4%
4.01%
2%
2.08%
1.77%
May-14
Nov-13
May-13
Nov-12
May-12
Nov-11
May-11
Nov-10
May-10
Nov-09
May-09
Nov-08
May-08
Nov-07
May-07
Nov-06
Sources: Fannie Mae and Urban Institute.
May-06
Nov-05
0%
Serious Delinquency Rates–Freddie Mac
10%
Single-family: Non-credit
enhanced
Single-family: Credit
enhanced
Single-family: Total
Percentage of total loans
9%
8%
7%
6%
5%
4.12%
4%
3%
2.10%
1.81%
2%
1%
May-14
Nov-13
May-13
Nov-12
May-12
Nov-11
May-11
Nov-10
May-10
Nov-09
May-09
Nov-08
May-08
Nov-07
May-07
Nov-06
May-06
Sources: Freddie Mac and Urban Institute.
Nov-05
0%
22
GSES UNDER CONSERVATORSHIP
SERIOUS DELINQUENCY RATES
Serious delinquencies for FHA and GSE single-family loans continue to decline with the housing recovery, but
remain high relative to 2005-2007. FHA delinquencies are declining from a higher relative starting point. GSE
multifamily delinquencies have also declined substantially, although they never reached problematic levels.
Serious Delinquency Rates–Single-Family Loans
FHA
Fannie Mae
Freddie Mac
10%
Percentage of total loans
9%
8%
7%
6.65%
6%
5%
4%
3%
2.20%
2.19%
2%
1%
1Q05
2Q05
3Q05
4Q05
1Q06
2Q06
3Q06
4Q06
1Q07
2Q07
3Q07
4Q07
1Q08
2Q08
3Q08
4Q08
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
3Q10
4Q10
1Q11
2Q11
3Q11
4Q11
1Q12
2Q12
3Q12
4Q12
1Q13
2Q13
3Q13
4Q13
1Q14
0%
Sources: Fannie Mae, Freddie Mac, MBA Delinquency Survey and Urban Institute.
Note: Serious delinquency rate is the number of loans 90 days or more past due or in the foreclosure process, divided by the total loan count.
.
Serious Delinquency Rates–Multifamily GSE Loans
Fannie Mae
Freddie Mac
0.9%
Percentage of total loans
0.8%
0.7%
0.6%
0.5%
0.4%
0.3%
0.2%
0.1%
0.10%
0.06%
May-14
Jan-14
Sep-13
May-13
Jan-13
Sep-12
May-12
Jan-12
Sep-11
May-11
Jan-11
Sep-10
May-10
Jan-10
Sep-09
Jan-09
May-09
Sep-08
May-08
Jan-08
Sep-07
May-07
Jan-07
Sep-06
May-06
Jan-06
Sep-05
May-05
0.0%
Sources: Fannie Mae, Freddie Mac and Urban Institute.
Note: Multifamily serious delinquency rate is the unpaid balance of loans 60 days or more past due, divided by the total unpaid balance.
23
GSES UNDER CONSERVATORSHIP
REFINANCE ACTIVITY
The Home Affordable Refinance Program (HARP) refinances have begun to slow. Two factors are responsible
for this: (1) higher interest rates, leaving fewer eligible loans where refinancing is economically advantageous
(in-the-money), and (2) a considerable number of borrowers who have already refinanced. Nonetheless, HARP
refinances total 3.154 million since the Q2 2009 program inception, accounting for 16.3 percent of all GSE
refinances in this period. As a result of the large volume of refi activity, the pool of eligible loans remaining is
now much lower.
Total HARP Refinance Volume
HARP Refinance Volume - Fannie
HARP Refinance Volume - Freddie
350
300
Thousands
250
200
150
100
30.0
50
46.9
1Q14
4Q13
3Q13
2Q13
1Q13
4Q12
3Q12
2Q12
1Q12
4Q11
3Q11
2Q11
1Q11
4Q10
3Q10
2Q10
1Q10
4Q09
3Q09
2Q09
-0
Sources: FHFA Refinance Report and Urban Institute.
HARP Refinances
April
2014
Year-to-date
2014
Inception to
date
2013
2012
2011
Total refinances
117,297
488,153
19,360,404
4,081,911
4,750,530
3,229,066
Total HARP refinances
19,689
96,619
3,154,578
892,914
1,074,769
400,024
Share 80–105 LTV
Share 105–125 LTV
Share >125 LTV
All other streamlined
refinances
73.0%
70.4%
69.8%
56.4%
56.4%
85.0%
16.8%
17.8%
17.3%
22.4%
22.4%
15.0%
10.2%
11.7%
13.0%
21.2%
21%
0%
23,649
102,640
3,355,838
735,210
729,235
785,049
Sources: FHFA Refinance Report and Urban Institute.
24
OVERVIEW
GSES UNDER CONSERVATORSHIP
GSE LOANS: DISTRIBUTION OF
GSE
LOANS:REFINANCES
POTENTIAL
POTENTIAL REFINANCES
To qualify for HARP, a loan must be originated before the June 2009 cutoff date, have a marked-to-market loan-tovalue (MTM LTV) ratio above 80, and have no more than one delinquent payment in the past year and none in the
past six months. There are 1,014,797 eligible loans, but 41 percent are out-of-the-money because the closing cost
would exceed the long-term savings, leaving 596,060 loans where a HARP refinance is both permissible and
economically advantageous for the borrower. Loans below the LTV minimum but meeting all other HARP
requirements are eligible for GSE streamlined refinancing. Of the 7,120,957 loans in this category, 5,243,608 are
in-the-money.
More than two thirds of the GSE book of business that meets the pay history requirements was originated after the
June, 2009 cutoff date. FHFA Director Mel Watt announced in May 2014 that they are not planning to extend the
date, as too few borrowers (407,167 by our estimate) would benefit from the change.
Total loan count
26,768,472
Loans that do not meet pay history requirement
Loans that meet pay history requirement:
959,598
25,808,874
Pre-June 2009 origination
8,135,754
Post-June 2009 origination
17,673,120
Loans Meeting HARP Pay History Requirements
Pre-June 2009
LTV category
In-the-money
Out-of-the-money
Total
≤80
>80
Total
5,243,608
596,060
5,839,668
1,877,350
418,737
2,296,086
7,120,957
1,014,797
8,135,754
Post-June 2009
LTV category
In-the-money
Out-of-the-money
Total
≤80
>80
Total
1,666,893
407,167
2,074,060
13,265,291
2,333,769
15,599,060
14,932,185
2,740,936
17,673,120
Sources: CoreLogic Prime Servicing as of May 2014.
Note: Figures are scaled up from source data to account for data coverage of the GSE active loan market (based on MBS data from
eMBS). Striped box indicates HARP-eligible loans that are in-the-money.
25
MODIFICATION ACTIVITY
HAMP ACTIVITY
New HAMP trial mods have tapered off as new defaults have declined. Meanwhile, modification success rates are
improving, so the number of new permanent modifications remains stable, around 12,000 in both April and May.
Active permanent mods have increased 9 percent since May 2013 to 955,000 (bottom).
New HAMP Modifications
New trial mods started
New permanent mods started
New active permanent mods
Number of mods (thousands)
180
160
140
120
100
80
60
40
12
9
4
20
Mar-14
May-14
Jan-14
Nov-13
Sep-13
Jul-13
May-13
Mar-13
Jan-13
Nov-12
Jul-12
Sep-12
May-12
Jan-12
Mar-12
Nov-11
Sep-11
Jul-11
Mar-11
May-11
Jan-11
Nov-10
Sep-10
Jul-10
May-10
Jan-10
Mar-10
Nov-09
Jul-09
Sep-09
May-09
0
Sources: U.S. Treasury Making Home Affordable and Urban Institute.
Cumulative HAMP Modifications
All trials mods started
All permanent mods started
Active permanent mods
Number of mods (millions)
2.5
2.21
2.0
1.5
1.38
1.0
0.95
0.5
May-14
Mar-14
Jan-14
Nov-13
Sep-13
Jul-13
May-13
Mar-13
Jan-13
Nov-12
Sep-12
Jul-12
May-12
Mar-12
Jan-12
Nov-11
Sep-11
Jul-11
May-11
Mar-11
Jan-11
Nov-10
Sep-10
Jul-10
May-10
Mar-10
Jan-10
Nov-09
Sep-09
Jul-09
May-09
0.0
Sources: U.S. Treasury Making Home Affordable and Urban Institute.
26
MODIFICATION BY TYPE OF ACTION
MODIFICATION
BYOF
TYPE
AND BY BEARER
RISKOF ACTION
AND BEARER OF RISK
MODIFICATION
ACTIVITY
OVERVIEW
The share of principal reduction modifications peaked at 20 percent in December 2012 before dropping
dramatically to 8.1 percent in Q1 2014. This is to be expected, as increasing home prices have increased
equity, reducing the need for principal reduction and making such modifications less likely to be net-presentvalue positive. Portfolio loans are the most likely candidates for principal reduction, followed by private investor
loans, because the GSEs and FHA/VA generally do not allow this type of modification.
Changes in Loan Terms for Modifications
Modification Quarter
12/31/12 03/31/13
6/30/13
9/30/13
12/31/13
3/31/14
One quarter
% change
One year
% change
Capitalization
84.6
79.3
81.6
83.5
87.7
74.3
-15.3
-5.9
Rate Reduction
73.3
80.1
81.0
78.9
76.7
73.3
-4.4
-8.5
Rate Freeze
3.9
3.7
5.2
5.5
7
6.5
-6.6
76.9
Term Extension
Principal
Reduction
Principal Deferral
58.9
60.3
67.7
69.3
75.9
78
2.7
29.2
20.0
15.2
12.2
13.6
10.5
8.1
-22.8
-46.4
20.5
18.2
20.5
25.3
30.6
25.1
-17.9
37.8
Not Reported*
1.1
0.7
1.5
2.2
0.7
-5.6
-1.7
0.7
Sources: OCC Mortgage Metrics Report for the First Quarter of 2014 and Urban Institute.
Note: This table presents modifications of each type as a share of total modifications. Columns sum to over 100% because loans often
receive modifications with multiple features.
*Processing constraints at some servicers prevented them from reporting specific modified term(s).
Type of Modification Action by Investor and Product Type
Fannie Mae
Freddie Mac
Governmentguaranteed
Private
Investor
Portfolio
Overall
Capitalization
76.0
70.0
36.5
79.2
93.6
63.7
Rate reduction
56.8
75.6
82.8
70.6
69.5
73.3
Rate freeze
9.6
4.7
6.6
3.6
7.8
6.5
Term extension
90.0
93.4
96.1
29.6
57.8
78.0
Principal reduction
0.0
0.0
0.1
15.0
37.6
8.1
Principal deferral
20.8
27.8
22.3
31.4
27.6
25.1
Not reported*
2.1
0.3
0.1
1.9
0.8
0.9
Sources: OCC Mortgage Metrics Report for the First Quarter of 2014 and Urban Institute.
Note: This table presents modifications of each type as a share of total modifications. Columns sum to over 100% because loans often
receive modifications with multiple features.
*Processing constraints at some servicers prevented them from reporting specific modified term(s).
27
MODIFICATION ACTIVITY
MODIFICATIONS AND LIQUIDATIONS
Total modifications (HAMP and proprietary) are now roughly equal to total liquidations. Hope Now reports show
7,124,065 borrowers have received a modification since Q3 2007, compared with 7,183,947 liquidations in the
same period. Annualizing year-to-date numbers, we have seen sharp declines in both liquidation and
modification activity in 2014 versus 2013. In fact, in the first five months of 2014, foreclosures and short sales
dropped to their lowest rates since 2008.
Loan Modifications and Liquidations
1,400
1,200
625.6
1,000
800
600
155.9
350.7
Number of loans (thousands)
1,600
400
200
0
2007
(Q3-Q4)
2008
2009
2010
2011
2012
2013
2014
(Ann.)
HAMP mods
Proprietary mods
Liquidations
Sources: Hope Now Reports and
Urban Institute.
Note: Liquidations includes both
foreclosure sales and short
sales. Annualized figure based
on data from April 2014.
Cumulative Modifications and Liquidations
7.2
8
6.0
6
5
HAMP mods
4
Proprietary mods
3
Liquidations
1.4
Number of loans (millions)
7
2
1
0
2007
(Q3-Q4)
2008
2009
2010
2011
2012
2013
2014
YTD
Sources: Hope Now Reports
and Urban Institute.
Note: Liquidations includes both
foreclosure sales and short
sales. Annualized figure based
on data from April 2014.
28
MODIFICATION ACTIVITY
MODIFICATION REDEFAULT RATES BY
BEARER OF THE RISK
Redefault rates on modified loans have come down dramatically from 2008-2013. For the period as a whole,
the steepest drops have been on private label modifications. More recently, there have been sharp declines in
the redefault rates on government-guaranteed modifications, although this product type still has higher
redefault rates than other product types.
Redefault Rate 12 Months after Modification
80%
70%
Fannie Mae
Freddie Mac
Government-guaranteed
Private
Redefault rate
60%
50%
40%
30%
Portfolio Loans
20%
Overall
10%
0%
2008
2009
2010
2011
Year of modification
2012
2013
Sources: OCC Mortgage Metrics Report for the First Quarter of 2014 and Urban Institute.
Redefault Rate 24 Months after Modification
80%
70%
Fannie Mae
Freddie Mac
Government-guaranteed
Private
Portfolio loans
Redefault rate
60%
50%
40%
30%
20%
Overall
10%
0%
2008
2009
2010
Year of modification
2011
2012
Sources: OCC Mortgage Metrics Report for the First Quarter of 2014 and Urban Institute.
29
AGENCY ISSUANCE
AGENCY GROSS AND NET ISSUANCE
With refinancing activity falling off with rising interest rates, newly issued agency securities (agency gross
issuance) have fallen off as well. Agency gross issuance totaled 407 billion for the first half of 2014, a 60 percent
decline year-over-year from the same period last year. Net issuance, which excludes repayments, prepayments,
and refinances on outstanding mortgages, remains low and dominated by Ginnie Mae. This is unsurprising, given
the increased role of FHA and VA during the crisis.
Agency Gross Issuance
Agency Net Issuance
Issuance
Year
GSEs
Ginnie Mae
Total
Issuance
Year
GSEs
Ginnie Mae
Total
2000
$360.6
$102.2
$462.8
2000
$159.8
$29.3
$189.1
2001
$885.1
$171.5
$1,056.6
2001
$367.8
-$9.9
$357.9
2002
$1,238.9
$169.0
$1,407.9
2002
$357.6
-$51.2
$306.4
2003
$1,874.9
$213.1
$2,088.0
2003
$335.0
-$77.6
$257.4
2004
$872.6
$119.2
$991.9
2004
$83.3
-$40.1
$43.2
2005
$894.0
$81.4
$975.3
2005
$174.4
-$42.2
$132.1
2006
$853.0
$76.7
$929.7
2006
$313.6
$0.3
$313.8
2007
$1,066.2
$94.9
$1,161.1
2007
$514.7
$30.9
$545.5
2008
$911.4
$267.6
$1,179.0
2008
$314.3
$196.4
$510.7
2009
$1,280.0
$451.3
$1,731.3
2009
$249.5
$257.4
$506.8
2010
$1,003.5
$390.7
$1,394.3
2010
-$305.5
$198.2
-$107.3
2011
$879.3
$315.3
$1,194.7
2011
-$133.4
$149.4
$16.0
2012
$1,288.8
$405.0
$1,693.8
2012
-$46.5
$118.4
$71.9
2013
$1,176.6
$393.6
$1,570.1
2013
$66.5
$85.8
$152.3
2014 YTD
$278.1
$128.9
$407.0
2014 YTD
-$9.8
$25.9
$16.1
%Change
year-over-year
-60.3%
-42.0%
-55.9%
%Change
year-over-year
-138.8%
-39.0%
-76.3%
2014 (Ann.)
$556.2
$257.8
$814.0
2014 (Ann.)
-$19.6
$51.8
$32.1
Sources: eMBS and Urban Institute.
Note: Dollar amounts are in billions.
Year-to-date figure as of June 2014.
Sources: eMBS and Urban Institute.
Note: Dollar amounts are in billions.
Year-to-date figure as of June 2014.
30
OVERVIEW
AGENCY
ISSUANCE
OVERVIEW
AGENCY GROSS AND NET ISSUANCE
AGENCY
GROSS
ISSUANCE
&
FED
BY MONTH
PURCHASES
Monthly Gross Issuance
Fannie Mae
While government and GSE
lending have dominated the
mortgage market since the crisis,
there has been a change in the
mix. The Ginnie Mae share
reached a peak of 28 percent of
total agency issuance in 2010,
and that share declined to 25
percent in 2013. Since then, it
has risen sharply as we have
moved from a refinance market
to a purchase market. June 2014
showed a Ginnie Mae share of
32 percent.
Freddie Mac
Ginnie Mae
250
$ billions
200
150
100
50
Jun-01
Dec-01
Jun-02
Dec-02
Jun-03
Dec-03
Jun-04
Dec-04
Jun-05
Dec-05
Jun-06
Dec-06
Jun-07
Dec-07
Jun-08
Dec-08
Jun-09
Dec-09
Jun-10
Dec-10
Jun-11
Dec-11
Jun-12
Dec-12
Jun-13
Dec-13
Jun-14
0
Sources: eMBS, Federal Reserve Bank of
New York, and Urban Institute.
Fed Absorption of Agency Gross Issuance
In 2013, the Fed absorbed nearly 50 percent of the year's gross issuance. In Q1 2014, the Fed began to taper,
but gross issuance dropped even more. As a result, the Fed bought 74 percent of the total gross issuance in
that quarter. Starting in the second quarter, gross issuance began to pick up while the Fed continued to taper.
In June, gross issuance edged up to $77.79 billion, while total Fed purchases declined further to $36.3 billion,
resulting in 47 percent for the Fed absorption of gross issuance. This share is expected to continue to fall as
Fed officials agreed in June’s meeting to end bond-buying program in October.
Gross issuance
Total Fed purchases
250
$ billions
200
150
100
50
Sources: eMBS, Federal Reserve Bank of New York, and Urban Institute.
31
Jun-14
Dec-13
Jun-13
Dec-12
Jun-12
Dec-11
Jun-11
Dec-10
Jun-10
Dec-09
Jun-09
Dec-08
Jun-08
Dec-07
Jun-07
Dec-06
Jun-06
Dec-05
Jun-05
Dec-04
Jun-04
Dec-03
Jun-03
Dec-02
Jun-02
Dec-01
Jun-01
Dec-00
0
AGENCY ISSUANCE
MORTGAGE INSURANCE ACTIVITY
MI Activity
$180
$160
$140
$120
$100
$20
$80
$60
$31
$ billions
Overall mortgage insurance
activity declined to just over
$80 billion, compared to $155
billion in Q1 2013 and $105
billion in Q4 2013. Private
mortgage insurers lost market
share in Q1 2014, dropping to
38.2 percent from 41.2 percent
in the previous quarter. The
decline in the MI share and the
increase in the FHA share is
due to less refinance activity.
$40
FHA
$31
$20
VA
1Q14
4Q13
3Q13
2Q13
1Q13
4Q12
3Q12
2Q12
1Q12
4Q11
3Q11
Total private primary MI
2Q11
1Q11
$0
Sources: Inside Mortgage Finance and Urban Institute.
MI Market Share
Total private primary MI
FHA
VA
23.8%
100%
90%
80%
37.9%
70%
60%
50%
40%
38.3%
30%
20%
10%
0%
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 1Q14
Sources: Inside Mortgage Finance and Urban Institute.
32
AGENCY ISSUANCE
MORTGAGE INSURANCE ACTIVITY
The table immediately below depicts the history of FHA mortgage insurance premiums since 2001. The most
recent change increased the annual premium by 10 bps and kept the upfront premium at 1.75 percent. Annual
premiums have more than doubled since 2008, as FHA has worked to shore up its finances. The bottom table
compares FHA and GSE execution. For a 95 LTV mortgage, borrowers with a FICO score below 680 will find
FHA a more attractive product, while those above 680 will find GSE execution with PMI to be more favorable.
FHA MI Premiums for Typical Purchase Loan
Case number date
Upfront mortgage insurance
premium (UFMIP) paid
Annual mortgage insurance
premium (MIP)
1/1/2001 - 7/13/2008
7/14/2008 - 9/30/2008*
10/1/2008 - 4/4/2010
4/5/2010 - 10/3/2010
10/4/2010 - 4/17/2011
4/18/2011 - 4/8/2012
4/9/2012 - 6/10/2012
6/11/2012 - 3/31/2013a
4/1/2013 - presentb
150
175
175
225
100
100
175
175
175
50
55
55
55
90
115
125
125
135
Sources: Ginnie Mae and Urban Institute.
Note: A typical purchase loan has an LTV over 95 and a loan term longer than 15 years. Mortgage insurance premiums are listed in
basis points.
* For a short period the FHA used a risk based FICO/LTV matrix for MI. This table assumes the average FICO for 2008 purchase
originations, ~630.
a
Applies to purchase loans less than or equal to $625,500. Those over that amount have an annual premium of 150 bps.
b
Applies to purchase loans less than or equal to $625,500. Those over that amount have an annual premium of 155 bps.
Initial Monthly Payment Comparison: FHA vs. PMI
Assumptions
Property Value
Loan Amount
LTV
Base Rate
Conforming
FHA
FICO
$250,000
$237,500
95
4.29%
4.00%
620 - 639
640 - 659
660 - 679
680 - 699
700 - 719
720 - 739
740 - 759
760 +
FHA MI Premiums
FHA UFMIP
1.75
1.75
1.75
1.75
1.75
1.75
1.75
1.75
FHA MIP*
1.30
1.30
1.30
1.30
1.30
1.30
1.30
1.30
GSE AMDC & LLPA
3.50
3.00
2.50
1.50
1.25
0.75
0.50
0.50
PMI Annual MIP
1.15
1.15
1.15
0.89
0.89
0.62
0.62
0.54
$1,411
$1,411
$1,411
$1,411
$1,411
$1,411
$1,411
$1,411
$1,501
$1,487
$1,472
$1,392
$1,385
$1,318
$1,311
$1,295
PMI
Monthly Payment
FHA
PMI
($90)
($76)
($61)
$19
$26
$93
$100
$116
PMI Advantage
Sources: Genworth Mortgage Insurance, Ginnie Mae and Urban Institute.
Note: Mortgage insurance premiums listed in percentage points. LLPA= Loan Level Price Adjustment, described in detail on page 20.
FHA MIP=1.3 percent for <95 LTV mortgages. Orange shade indicates FHA monthly payment is more favorable, while light blue
indicates PMI is more favorable.
33
RELATED HFPC WORK
PUBLICATIONS AND EVENTS
Upcoming Events
October 6—October Data Talk
More details to follow on our events page.
Commentaries
Blog Posts
VA Loans Outperform FHA Loans. Why? And
What Can We Learn?
Author: Laurie Goodman, Ellen Seidman, and Jun
Zhu
Date: July 16, 2014
Is student debt hindering homeownership?
Author: Maia Woluchem and Taz George
Date: July 17, 2014
A Johnson-Crapo Dialogue
Author: Jim Parrott, Ellen Seidman, and Laurie
Goodman
Date: July 14, 2014
Is residual income the key to the superior
performance of VA loans?
Author: Laurie Goodman, Ellen Seidman, and Jun
Zhu
Date: July 16, 2014
Supplementing the Compare Ratio: An Important
Step Toward Opening the Credit Box
Author: Laurie Goodman
Date: June 9, 2014
Senate GSE reform: What we learned from
Johnson-Crapo
Author: Laurie Goodman, Jim Parrott, Ellen Seidman
Date: July 15, 2014
Why Long Term GSE Reform Requires Congress Move over, Freddie Mac: Ginnie Mae will be
Author: Jim Parrott
number 2 soon
Date: May 22, 2014
Author: Laurie Goodman
Date: July 2, 2014
HAMP Modifications: Is Reset Risk an Issue?
Authors: Laurie Goodman and Jun Zhu
Small investors spurred spike in cash sales. So
Date: May 14, 2014
what happens next?
Author: Taz George and Maia Woluchem
Johnson-Crapo GSE Discussion Draft: A Few
Date: June 30, 2014
Suggestions for Improvement
Authors: Laurie Goodman and Ellen Seidman
Weaker credit or racial discrimination: the data
Date: April 14, 2014
are unclear
Author: Wei Li
National Mortgage Settlement: Lessons Learned Date: June 6, 2014
Authors: Laurie Goodman and Maia Woluchem
Date: April 14, 2014
How well do the GSEs serve minority
borrowers?
OASIS: A Securitization Born from MSR
Author: Wei Li
Transfers
Date: June 5, 2014
Authors: Laurie Goodman and Pamela Lee
Date: April 1, 2014
34
PUBLICATIONS AND EVENTS
Copyright © July 2014. The Urban Institute. All rights reserved. Permission is granted for reproduction of this file, with attribution to the Urban
Institute.
The Urban Institute is a nonprofit, nonpartisan policy research and educational organization that examines the social, economic, and
governance problems facing the nation. The views expressed are those of the authors and should not be attributed to the Urban Institute, its
trustees, or its funders.
35