HOUSING FINANCE POLICY CENTER
HOUSING FINANCE
AT A GLANCE
A MONTHLY CHARTBOOK
May 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
Jun Zhu
Senior Financial Methodologist
Wei Li
Senior Research Associate
Bing Bai
Research Associate I
Pamela Lee
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.
We welcome your feedback. Please send any comments or questions to ataglance@urban.org.
2
INTRODUCTION
The Senate Banking Committee passed a comprehensive
housing finance reform bill out of committee after months
of work, beginning with that of Sens. Corker and Warner,
and following with that of Sens. Johnson and Crapo. They
reached a broad consensus on the issues of continued
availability of the 30-year fixed mortgage, the position of
private capital ahead of taxpayer risk, and the importance
of access and affordability. Nonetheless, they could not
get the support needed to bring the bill to the Senate floor
for a vote, and the effort is likely to slip into the next
Congress.
With that chapter closing for the moment, all eyes turned
to Federal Housing Finance Agency (FHFA) director Mel
Watt as he outlined his vision for the agency, Fannie Mae
and Freddie Mac (the GSEs). The uncertainty around
GSE reform instills the director’s remarks with extra
significance given the potential for an indefinite
conservatorship. Two key themes from the director’s
speech are discussed below (a more thorough analysis is
featured in a recent blog post).
private sector (page 21). Future risk-share deals on the
GSEs’ single-family book of business will continue to
transfer credit risk to private capital while protecting
taxpayers from bearing all losses. The FHFA also plans to
deepen and diversify forthcoming deals, something we
wrote about in a recent blog. Further, to ensure that
mortgage insurers (page 32-33) are equipped to meet the
increased demands that will come with expanded GSE
risk-sharing, Watt set forth plans to formalize stronger
standards for the industry.
As policies around housing finance develop and evolve,
we hope this Chartbook and other research products from
the Housing Finance Policy Center will provide readers
with the depth of knowledge to inform evidence-based,
well-reasoned decision-making.
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.
Improve access to credit
After discussions with the GSEs and the mortgage
industry, Watt announced an easing of representation and
warranty standards, which determine when banks must
buy back faulty loans. This put-back risk is often blamed
for tight credit access (pages 14-15). The GSEs will relax
payment history requirements for representation and
warranty relief, provide lenders with loan-level
confirmations when mortgages pass quality control
reviews, and eliminate automatic repurchases when a
loan’s primary mortgage insurance is rescinded. These
and other actions were designed to clarify lender
responsibility and should hence facilitate lending to an
expanded group of creditworthy borrowers.
To help struggling homeowners, the FHFA announced it
would pursue a targeted effort to reach underwater
borrowers who still stand to benefit from the Home
Affordable Refinance Program (HARP; pages 24-25),
though it will not change the terms of the program.
Additionally, the director announced a pilot program in
Detroit that would provide a deeper and more aggressive
range of pre- and post-foreclosure strategies.
INSIDE THIS ISSUE
•
First lien originations drop in Q1 2014, expected to
remain low (pages 8, 12)
•
LTV and FICO distributions continue to reflect tight
credit access (page 14)
•
Fannie g-fees rise, Freddie’s decline slightly in Q1
2014 (page 20)
•
Serious delinquency drops further across all
sectors (pages 18, 22-23)
•
What kinds of loan modifications are being made?
(page 27) Principal reductions continue to decline.
•
Mortgage insurance issuance falls, FHA/VA gain
share on private insurers, GSEs in Q1 2014 (page
8, 31-32)
Reduce taxpayer risks
While his predecessor focused on contracting the GSEs’
footprint to facilitate the return of private capital, Director
Watt has shifted the focus to maintaining the GSEs’
footprint while ramping up the amount of risk sold to the
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
At-Issuance Balance
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
34-35
5
OVERVIEW
MARKET SIZE OVERVIEW
Home values continue to improve, with the Q4 2013 Fed Flow of Funds data indicating an increase in the total
value of the US residential 1-4 unit housing market to $20.41 trillion, from $20.04 trillion in Q3 2013. Just under
half of the market, $9.86 trillion, is mortgage debt, a very slight downtick from the previous quarter. Agency MBS
make up 56.2 percent of the total, private-label securities make up 8.0 percent, and unsecuritized first liens at
commercial banks, savings institutions, and credit unions make up 23.6 percent. Second liens and GSE loans in
portfolio comprise the remaining 7.1 and 5.0 percent of the total, respectively.
Value of the US Housing
Market
Size of the US Residential
Mortgage Market
as of Q4 2013
as of Q4 2013
$25
Unsecuritized first liens at commercial banks,
savings institutions, credit unions
Fannie and Freddie loans in portfolio
$20
Agency MBS
$15
Private-label securities
Equity
$10,552
$ trillions
Second liens
$10.0
$10
$2.350
$7.5
$ trillions
$5
Debt,
household
Debt,
mortgages,
Household
$9,833
Mortgages
$9,863
$0.496
$5.0
$5.521
$2.5
$0
Sources: Federal Reserve Flow of Funds and Urban Institute.
$0.0
$0.793
$0.704
Sources: Federal Reserve Flow of Funds, Fannie Mae,
Freddie Mac and Urban Institute.
6
OVERVIEW
MARKET SIZE OVERVIEW
As of March 2014, debt in the private-label securitization market is split among prime (20.0 percent), Alt-A (44.0
percent), and subprime (36.0 percent) loans. The outstanding composition of the agency market, as of Q1 2014,
is 46.5 percent Fannie Mae, 28.2 percent Freddie Mac, and 25.3 percent Ginnie Mae.
Private Label Securities
as of March 2014; dollars in trillions
100%
90%
Subprime, $0.279
80%
70%
60%
Prime, $0.155
50%
40%
30%
Alt-A, $0.342
20%
10%
0%
Sources: CoreLogic and Urban Institute.
Agency Mortgage-Backed Securities
as of March 2014; dollars in trillions
100%
90%
80%
Fannie Mae, $2.588
70%
60%
50%
40%
Freddie Mac, $1.569
30%
20%
10%
Ginnie Mae, $1.410
0%
Sources: Fannie Mae, Freddie Mac, Ginnie Mac, and Urban Institute.
7
OVERVIEW
OVERVIEW
ORIGINATION VOLUME
AND COMPOSITION
First lien originations in Q1 2014 began far below their 2013 pace, totaling only $123.6 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
$0.01
$0.12
1Q14
2013
2012
2011
2010
2009
2008
2007
2006
2005
FHA/VA securitization
2004
$0.0
2003
PLS securitization
$0.30
2002
Bank portfolio
$1.0
$0.05
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 (ARM) 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 6
percent of total originations. Fifteen-year FRMs, predominantly a refinance product, comprise 17 percent of new
originations. If we exclude refinances (bottom chart), the share of 30-year FRMs in February 2014 stood at 87
percent, 15-year FRMs at 6 percent, and ARMs at 6 percent.
All Originations
100%
90%
80%
70%
60%
50%
40%
30%
Fixed-rate 30-year mortgage
Fixed-rate 15-year mortgage
10%
Jun-13
Feb-14
Oct-12
Jun-11
Feb-12
Oct-10
Feb-10
Oct-08
Jun-09
Feb-08
Oct-06
Jun-07
Jun-05
Feb-06
Oct-04
Feb-04
Oct-02
Jun-03
Feb-02
Oct-00
Other
Jun-01
0%
Feb-00
Adjustable-rate mortgage
20%
Sources: CoreLogic Prime Servicing and Urban Institute.
Purchase Originations Only
100%
90%
80%
70%
60%
50%
40%
30%
Fixed-rate 30-year mortgage
20%
Fixed-rate 15-year mortgage
10%
Other
0%
Feb-00
Aug-00
Feb-01
Aug-01
Feb-02
Aug-02
Feb-03
Aug-03
Feb-04
Aug-04
Feb-05
Aug-05
Feb-06
Aug-06
Feb-07
Aug-07
Feb-08
Aug-08
Feb-09
Aug-09
Feb-10
Aug-10
Feb-11
Aug-11
Feb-12
Aug-12
Feb-13
Aug-13
Feb-14
Adjustable-rate mortgage
Sources: CoreLogic Prime Servicing and Urban Institute.
9
OVERVIEW
SECURITIZATION VOLUME AND
COMPOSITION
Agency/Non-Agency Share of Residential MBS Issuance
Agency share
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 reREMICs are excluded. In
the first four months of
2014, total non-agency
issuance was $4.5 billion,
compared to $11.4 billion
over the same period in
2013.
Non-Agency share
100%
98%
90%
80%
70%
60%
50%
40%
30%
20%
10%
2%
Sources: Inside Mortgage Finance and Urban Institute.
Note: Year-to-date figures as of April 2014.
Non-Agency Securitization 2.0
$6
$1,000
$5
$800
$4
$600
$3
$2
$200
$1
$0
$0
Prime
Subprime
Alt A
All other
Sources: Inside Mortgage Finance and Urban Institute.
Feb-12
Mar-12
Apr-12
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
$400
0.185
$ billions
$1,200
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
1Q14
$ 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
1995
0%
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 $259.5 billion in the first four months of 2014, compared to $621.9
billion for the same months a year ago. In April 2014, refinances were 43 and 50 percent of the GSEs’ business,
down from the first quarter’s average of 52 and 57 percent. The Ginnie Mae market has always been more
purchase-driven, with refinance volume of 27 percent in April 2014.
At-Issuance Balance
Freddie Mac
Fannie Mae
Ginnie Mae
$2.5
$ trillions
$2.0
$1.5
$1.0
$0.24
$0.5
$0.32
$0.21
$0.0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Ann.
Sources: eMBS and Urban Institute.
Note: Annualized figure based on data from April 2014.
Percent Refi at Issuance
Fannie Mae
Ginnie Mae
Mortgage rate
80%
8%
70%
7%
60%
6%
50%
5%
40%
4%
30%
3%
20%
2%
10%
1%
0%
0%
Apr-04
Jul-04
Oct-04
Jan-05
Apr-05
Jul-05
Oct-05
Jan-06
Apr-06
Jul-06
Oct-06
Jan-07
Apr-07
Jul-07
Oct-07
Jan-08
Apr-08
Jul-08
Oct-08
Jan-09
Apr-09
Jul-09
Oct-09
Jan-10
Apr-10
Jul-10
Oct-10
Jan-11
Apr-11
Jul-11
Oct-11
Jan-12
Apr-12
Jul-12
Oct-12
Jan-13
Apr-13
Jul-13
Oct-13
Jan-14
Apr-14
9%
Sources: eMBS, Freddie Mac PMMS and Urban Institute.
Note: Based on at-issuance loan balance.
11
Mortgage Rate
Percent Refi
Freddie Mac
90%
OVERVIEW
STATE OF THE MARKET
MORTGAGE ORIGINATION
PROJECTIONS
The sharp drop in mortgage originations in late 2013 and early 2014, combined with higher interest rates in the
second half of 2013 and the Fed tapering, has led the MBA, Fannie Mae, and Freddie Mac to lower their 2014
estimates for origination activity. This reflects lower estimates of the refinance share, at 39 percent for 2014, down
sharply from around 50 percent in Q4 2013 and over 60 percent for full year 2013. Housing starts and existing home
sales are expected to pick up slightly in 2014.
Total Originations and Refinance Shares
Period
Originations ($ billions)
Total, FNMA Total, FHLMC Total, MBA
estimate
estimate
estimate
532
572
450
358
246
328
304
263
238
314
310
270
1496
2153
1912
1141
1132
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
540
560
450
350
320
410
330
240
295
365
285
205
1492
2122
1900
1300
1150
524
537
401
293
226
267
298
274
297
314
318
290
1436
2044
1755
1065
1219
FNMA
estimate
Refi Share (%)
FHLMC
estimate
73
65
52
52
48
38
32
29
32
25
25
25
66
72
62
37
27
71
65
52
51
48
40
33
33
30
20
15
15
64
70
61
39
20
MBA
estimate
74
66
51
53
49
41
35
35
35
33
32
35
65
71
63
39
34
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, respectively. The projected average annual
rates for 2014 and 2015 range from 4.8 to 4.9, and 5.2 to 5.6, 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
1051
1292
610
780
930
1100
1400
612
783
929
1010
1194
4566
5028
5520
5533
5879
4570
5030
5500
5500
6000
4501
5030
5506
5598
6114
4200
4661
5074
5097
5580
301
369
432
501
534
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.
This 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)
OPUC
6
Dollars per $100 loan
5
4
3
2.2
2
1
Apr-14
Oct-13
Apr-13
Oct-12
Apr-12
Oct-11
Apr-11
Oct-10
Apr-10
Oct-09
Apr-09
Oct-08
Apr-08
Oct-07
Apr-07
Oct-06
Apr-06
Oct-05
Apr-05
Oct-04
Apr-04
Oct-03
Apr-03
Oct-02
Apr-02
Oct-01
Apr-01
Oct-00
Apr-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 limited and continues to tighten, especially for borrowers with low FICO
scores. The 10th percentile of FICO scores on new originations, which represents the lower bound of
creditworthiness needed to qualify for a mortgage, stood at 657 as of February 2014. Prior to the housing crisis, this
threshold held steady in the low 600s. LTV levels at origination remain relatively high, averaging 86.1, which reflects
the large number of FHA purchase originations.
Borrower FICO Score at Origination Month
850
FICO Score
800
799
750
734
700
657
650
600
Mean
550
Feb-01
Aug-01
Feb-02
Aug-02
Feb-03
Aug-03
Feb-04
Aug-04
Feb-05
Aug-05
Feb-06
Aug-06
Feb-07
Aug-07
Feb-08
Aug-08
Feb-09
Aug-09
Feb-10
Aug-10
Feb-11
Aug-11
Feb-12
Aug-12
Feb-13
Aug-13
Feb-14
90th percentile
10th percentile
Sources: CoreLogic Prime Servicing and Urban Institute.
Note: Purchase-only loans.
Combined LTV at Origination
110
101.3
100
CLTV
90
86.1
80
70
Mean
10th percentile
60
50
Feb-01
Aug-01
Feb-02
Aug-02
Feb-03
Aug-03
Feb-04
Aug-04
Feb-05
Aug-05
Feb-06
Aug-06
Feb-07
Aug-07
Feb-08
Aug-08
Feb-09
Aug-09
Feb-10
Aug-10
Feb-11
Aug-11
Feb-12
Aug-12
Feb-13
Aug-13
Feb-14
90th percentile
68
Sources: CoreLogic Prime Servicing 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 February 2014 and Urban Institute.
Note: Purchase-only loans.
15
LTV
San Francisco-Redwood City-South San Francisco CA
San Jose-Sunnyvale-Santa Clara CA
Oakland-Hayward-Berkeley CA
New York-Jersey City-White Plains NY-NJ
Los Angeles-Long Beach-Glendale CA
San Diego-Carlsbad CA
Seattle-Bellevue-Everett WA
Nassau County-Suffolk County NY
Portland-Vancouver-Hillsboro OR-WA
Denver-Aurora-Lakewood CO
Boston MA
Minneapolis-St. Paul-Bloomington MN-WI
Newark NJ-PA
Washington-Arlington-Alexandria DC-VA-MD-WV
Tampa-St. Petersburg-Clearwater FL
Chicago-Naperville-Arlington Heights IL
Sacramento--Roseville--Arden-Arcade CA
Charlotte-Concord-Gastonia NC-SC
Pittsburgh PA
Dallas-Plano-Irving TX
Miami-Miami Beach-Kendall FL
Riverside-San Bernardino-Ontario CA
Baltimore-Columbia-Towson MD
Orlando-Kissimmee-Sanford FL
Kansas City MO-KS
St. Louis MO-IL
Las Vegas-Henderson-Paradise NV
Houston-The Woodlands-Sugar Land TX
Atlanta-Sandy Springs-Roswell GA
Philadelphia PA
Phoenix-Mesa-Scottsdale AZ
Cincinnati OH-KY-IN
Columbus OH
Fort Worth-Arlington TX
Cleveland-Elyria OH
Detroit-Dearborn-Livonia MI
San Antonio-New Braunfels TX
FICO score
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 716. 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
St. Louis MO-IL
Credit
Bubble
$220,000
Sources: CoreLogic, US Census, Freddie Mac and Urban Institute 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 February 2014
than in 2000-03.
16
Cleveland-Elyria OH
Detroit-Dearborn-Livonia MI
Cincinnati OH-KY-IN
Columbus OH
Pittsburgh PA
Chicago-Naperville-Arlington Heights IL
Tampa-St. Petersburg-Clearwater FL
Las Vegas-Henderson-Paradise NV
$260,000
Atlanta-Sandy Springs-Roswell GA
$280,000
Minneapolis-St. Paul-Bloomington MN-WI
Denver-Aurora-Lakewood CO
Oakland-Hayward-Berkeley CA
Orlando-Kissimmee-Sanford FL
Nassau County-Suffolk County NY
Sacramento--Roseville--Arden-Arcade CA
Feb-01
Aug-01
Feb-02
Aug-02
Feb-03
Aug-03
Feb-04
Aug-04
Feb-05
Aug-05
Feb-06
Aug-06
Feb-07
Aug-07
Feb-08
Aug-08
Feb-09
Aug-09
Feb-10
Aug-10
Feb-11
Aug-11
Feb-12
Aug-12
Feb-13
Aug-13
Feb-14
Max affordable price at 6.0% rate
Boston MA
Sources: CoreLogic, US Census, Freddie Mac and Urban Institute.
Newark NJ-PA
San Antonio-New Braunfels TX
Max affordable price
Kansas City MO-KS
Median sales price
Fort Worth-Arlington TX
Housing prices
The maximum affordable price is the house
price that a family can afford based on the
following assumptions: 20 percent down
payment, monthly payment of 28 percent of
median family income (US Census), Freddie
Mac prevailing rate for 30-year fixed-rate
mortgage, and property tax and insurance at
1.75 percent of housing value. The chart shows
that home prices are very affordable by
historical standards, and even if interest rates
rose to 6 percent, affordability would be at the
long term historical average level nationwide.
Charlotte-Concord-Gastonia NC-SC
Miami-Miami Beach-Kendall FL
Baltimore-Columbia-Towson MD
Houston-The Woodlands-Sugar Land TX
Riverside-San Bernardino-Ontario CA
San Diego-Carlsbad CA
Phoenix-Mesa-Scottsdale AZ
Dallas-Plano-Irving TX
Seattle-Bellevue-Everett WA
Philadelphia PA
Washington-Arlington-Alexandria DC-VA-MD-WV
Portland-Vancouver-Hillsboro OR-WA
San Jose-Sunnyvale-Santa Clara CA
New York-Jersey City-White Plains NY-NJ
San Francisco-Redwood City-South San Francisco CA
Los Angeles-Long Beach-Glendale CA
Ratio
STATE OF THE MARKET
HOUSING AFFORDABILITY
National Housing Affordability Over Time
$300,000
$275,785
$240,000
$238,861
$200,000
$180,000
$160,000
$189,900
$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 continued for the first quarter of 2014, as indicated
by both the repeated sales HPI from CoreLogic and hedonic index from Zillow.
Zillow HVI year-over-year
20%
15%
10%
5%
0%
-5%
-10%
-15%
-20%
Mar-14
Sep-13
Mar-13
Sep-12
Mar-12
Sep-11
Mar-11
Sep-10
Mar-10
Sep-09
Mar-09
Sep-08
Mar-08
Sep-07
Mar-07
Sep-06
Mar-06
Sep-05
Mar-05
Sep-04
Mar-04
Sep-03
Mar-03
Sep-02
Mar-02
Sep-01
11.1%
5.7%
Mar-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 24.7 percent from the trough, national house prices still must grow 19.1 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. One MSA particularly hard hit by the boom and bust– Riverside, CA– would need to rise more
than 50 percent to return to its peak.
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
99.4
116.6
182.0
65.7
40.6
160.5
44.4
126.2
194.6
38.1
74.3
94.2
36.2
128.6
149.0
163.1
-32.7
-20.0
-39.3
-36.5
-33.7
-33.6
-12.8
-52.9
-53.4
-13.8
-30.8
-32.2
-14.7
-25.8
-38.4
-37.2
24.7
16.0
38.4
13.8
29.4
26.7
25.3
46.5
43.0
21.4
18.8
29.0
27.4
8.5
34.7
35.4
% Rise needed
to achieve
peak
19.1
7.8
19.1
38.5
16.6
18.8
-8.5
44.8
50.1
-4.4
21.7
14.4
-8.0
24.2
20.5
17.6
Sources: CoreLogic HPIs as of March 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 2013, residential properties in negative equity (LTV greater than 100) as
a share of all residential properties with a mortgage has dropped to 13.3 percent. Residential properties in near
negative equity (LTV between 95 and 100) comprise another 3.3 percent.
Negative equity
Near negative equity
35%
30%
25%
20%
16.6%
13.3%
15%
10%
5%
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.
Percent of loans 90 12%
days delinquent or in
10%
foreclosure
Percent of loans in
foreclosure
8%
Percent of loans 90
days delinquent
4%
6%
5.0%
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 portfolio. Year over year, Fannie has contracted by 21.7%,
and Freddie Mac by 18.7%. As of March 2014, they were both below their year-end 2014 portfolio cap. They
are shrinking their less liquid assets at close to the same pace that they are shrinking their entire portfolio.
Fannie Mae Mortgage-Related Investment Portfolio
Composition
900
800
700
$ billions
Current size: $467.7 billion
Current cap: $469.625 billion
Shrinkage year-over-year: 21.7%
Shrinkage in non-liquid assets
year-over-year: 17.6%
600
500
400
300
Mortgage loans
200
Non-agency MBS
100
Non-FNMA agency MBS
0
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
Fannie MBS in portfolio
Sources: Fannie Mae and Urban Institute.
Freddie Mac Mortgage-Related Investment Portfolio
Composition
900
Current size: $434.4 billion
Current cap: $469.625 billion
Shrinkage year-over-year: 18.7%
Shrinkage in non-liquid assets
year-over-year: 21.3%
800
700
500
400
Mortgage loans
300
Non-agency MBS
200
Non-FHLMC agency MBS
100
FHLMC MBS in portfolio
Sources: Freddie Mac and Urban Institute
0
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
$ billions
600
19
GSES UNDER CONSERVATORSHIP
GSES UNDER CONSERVATORSHIP
EFFECTIVE
EFFECTIVE GUARANTEE
GUARANTEE FEES
FEES AND
GSE RISK-SHARING TRANSACTIONS
Effective Guaranty 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.
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
Class
Amount
($ millions)
Tranche
Thickness (%)
CE (%)
Rating
Initial Spread
(bps)
Fannie Mae: Connecticut Avenue Securities (CAS) 2013-C01 | October 24, 2013
A-H
M-1, M-1H, Total
M-2, M-2H, Total
B-H
Reference Pool Size
$25,953.7
$337.5, $23.7, $361.2
$337.5, $23.7, $361.2
$80.3
$26,756.4
97
1.26, 0.09, 1.35
1.26, 0.09, 1.35
0.30
100
3
1.65
0.30
0
NR
F: BBB-sf
NR
NR
200
525
-
$28.4
97
3
-
M-1, M-1H, Total
$375, $20.7, $395.7
1.28, 0.07, 1.35
1.65
M-2, M-2H, Total
B-H
Reference Pool Size
$375, $20.7, $395.7
$87.9
$29,308.7
1.28, 0.07, 1.35
0.30
100
0.30
0
NR
F: BBB-sf; M:
Baa2
NR
NR
Fannie Mae: CAS 2014-C01 | January 14, 2014
A-H
160
440
-
Freddie Mac: Structured Agency Credit Risk (STACR) Debt Notes, Series 2013-DN1 | July 24, 2013
A-H
M-1, M-1H, Total
M-2, M-2H, Total
B-H
Reference Pool Size
$21,906.8
$250.0, $54.9, $304.9
$250.0, $54.9, $304.9
$67.8
$22,584.4
97
1.26, 0.09, 1.35
1.26, 0.09, 1.35
0.30
100
3
1.65
0.30
0
NR
NR
NR
NR
340
715
-
NR
F: BBB-sf; M:
Baa1
NR
NR
-
Freddie Mac: STACR Debt Notes, Series 2013-DN2 | November 12, 2013
A-H
$34,267.5
97
3
M-1, M-1H, Total
$245.0, $125.9, $370.9
0.69, 0.36, 1.05
1.95
M-2, M-2H, Total
B-H
Reference Pool Size
$385.0, $197.9, $582.9
$106 .0
$35,327.3
1.09, 0.56, 1.65
0.30
100
0.30
0
145
425
-
Freddie Mac: STACR Debt Notes, Series 2014-DN1 | February 6, 2014
A-H
$30,980.8
95.5
4.50
M-1, M-1H, Total
$155.6, $84.4, $240.0
0.65, 0.35, 1.00
3.50
M-2, M-2H, Total
$233.4, $126.6, $360.0
0.97, 0.53, 1.50
2
M-3, M-3H, Total
B-H
$264.5, $143.5, $408.0
$87.9
1.10, 0.60, 1.70
0.30
0.30
0
Reference Pool Size
$32,076.8
100
NR
M: A1(sf); K:
A(sf) | NR | M: Baa1(sf);
K:BBB(sf) | NR | NR | NR | NR
100
220
450
-
Freddie Mac: STACR Debt Notes, Series 2014-DN2 | April 2, 2014
A-H
M-1, M-1H, Total
$26,880.4
$230.0, $51.5, $281.5
95.5
0.82, 0.18, 1.00
4.5
3.5
M-2, M-2H, Total
$345.0, $77.2, $422.2
1.23, 0.27, 1.50
2
M-3, M-3H, Total
B-H
$391.0, $87.5, $478.5
$84.4
1.39, 0.31, 1.70
0.30
0.30
0
Reference Pool Size
$28,146.98
100
NR
F: Asf; K: A(sf)
F: BBB (sf); K:
BBB (sf)
NR
NR
85
165
360
-
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 “Ratings,” “F” = Fitch, “M” = Moody’s, and “K” = “Kroll Bond Ratings.”
21
OVERVIEW
SERIOUS
DELINQUENCY RATES AT
GSES UNDER CONSERVATORSHIP
SERIOUS
THE GSEsDELINQUENCY RATES
Serious delinquency rates at the GSEs continue to decline as the legacy portfolio is resolved and the pristine,
post-2009 book of business exhibits very low default rates. As of March 2014, 2.19 percent of the Fannie portfolio
and 2.2 percent of the Freddie portfolio were seriously delinquent, down from 3.02 percent and 3.03 percent a
year earlier, respectively.
Serious Delinquency Rates–Fannie Mae
16%
Single-family: Noncredit enhanced
Single-family: Credit
enhanced
Percentage of total loans
14%
12%
10%
Single-family: Total
8%
6%
4%
4.27%
2%
2.19%
1.85%
Mar-14
Sep-13
Mar-13
Sep-12
Mar-12
Sep-11
Mar-11
Sep-10
Mar-10
Sep-09
Mar-09
Sep-08
Mar-08
Sep-07
Mar-07
Sep-06
Mar-06
Sources: Fannie Mae and Urban Institute.
Sep-05
0%
Serious Delinquency Rates–Freddie Mac
10%
Single-family: Noncredit enhanced
Single-family: Credit
enhanced
Single-family: Total
Percentage of total loans
9%
8%
7%
6%
5%
4.40%
4%
3%
2.20%
1.89%
2%
1%
Mar-14
Sep-13
Mar-13
Sep-12
Mar-12
Sep-11
Mar-11
Sep-10
Mar-10
Sep-09
Mar-09
Sep-08
Mar-08
Sep-07
Mar-07
Sep-06
Mar-06
Sources: Freddie Mac and Urban Institute.
Sep-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 quite high relative to 2005-2007. FHA delinquencies are declining from a higher relative starting point.
GSE multifamily delinquencies are also declining, although they never reached problematic levels.
Serious Delinquency Rates–Single-Family Loans
FHA
Fannie Mae
Freddie Mac
10%
9%
8%
7%
6.65%
6%
5%
4%
3%
2.20%
2%
2.19%
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%
0.8%
0.7%
0.6%
0.5%
0.4%
0.3%
0.2%
0.10%
0.1%
Nov-13
Jul-13
Mar-13
Nov-12
Jul-12
Mar-12
Nov-11
Jul-11
Mar-11
Jul-10
Nov-10
Mar-10
Nov-09
Jul-09
Mar-09
Nov-08
Jul-08
Mar-08
Nov-07
Jul-07
Mar-07
Nov-06
Jul-06
Mar-06
Nov-05
Jul-05
Mar-05
Jul-04
Nov-04
Mar-04
Mar-14
0.04%
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. Despite these
factors, HARP recently crossed a milestone of 3 million refinances since Q2 2009, accounting for about 16
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
200
150
43.4
Thousands
250
100
71.7
50
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
February
2014
Year-to-date
2014
Inception to
date
2013
2012
2011
Total refinances
127,417
265,746
19,137,997
4,081,911
4,750,530
3,229,066
Total HARP refinances
26,964
56,938
3,114,897
892,914
1,074,769
400,024
Share 80–105 LTV
Share 105–125 LTV
Share >125 LTV
All other streamlined
refinances
70.3%
69.9%
69.8%
56.4%
56.4%
85.0%
18.1%
18.1%
17.3%
22.4%
22.4%
15.0%
11.7%
12.0%
13.0%
21.2%
21%
0%
29,233
58,262
3,311,460
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 1,230,621 eligible loans, but 41 percent are out-of-the-money because the closing cost
would exceed the long-term savings, leaving 722,038 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 7,152,250 loans in this category, 5,037,493 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. FHFA director Mel Watt announced recently that they are not planning to extend the date, as too
few borrowers (369,271 by our estimate) would benefit from the change.
Total loan count
26,818,296
Loans that do not meet pay history requirement
Loans that meet pay history requirement:
976,112
25,842,184
Pre-June 2009 origination
8,382,871
Post-June 2009 origination
17,459,313
Loans Meeting HARP Pay History Requirements
Pre-June 2009
LTV category
In-the-money
Out-of-the-money
Total
≤80
>80
Total
5,037,493
722,038
5,759,531
2,114,757
508,583
2,623,340
7,152,250
1,230,621
8,382,871
Post-June 2009
LTV category
In-the-money
Out-of-the-money
Total
≤80
>80
Total
1,186,749
369,271
1,556,020
13,092,484
2,810,809
15,903,293
14,279,233
3,180,080
17,459,313
Sources: CoreLogic prime servicing data as of March 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). Stripped 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 at 13,000 in February and March 2014.
New HAMP Modifications
New trial mods started
New permanent mods started
New active permanent mods
Number of mods (thousands)
160
140
120
100
80
60
40
20
Mar-14
Dec-13
Sep-13
Jun-13
Mar-13
Dec-12
Sep-12
Jun-12
Mar-12
Dec-11
Sep-11
Jun-11
Mar-11
Dec-10
Sep-10
Jun-10
Mar-10
Dec-09
Sep-09
Jun-09
Mar-09
0
13
8
7
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
2.2
2.0
1.5
1.4
1.0
0.9
0.5
Mar-14
Dec-13
Sep-13
Jun-13
Mar-13
Dec-12
Sep-12
Jun-12
Mar-12
Dec-11
Sep-11
Jun-11
Mar-11
Dec-10
Sep-10
Jun-10
Mar-10
Dec-09
Sep-09
Jun-09
Mar-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 in
2013. 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-present-value 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
9/30/12
12/31/12 03/31/13
6/30/13
9/30/13
12/31/13
One quarter One year
% change % change
Capitalization
88.2
84.6
79.3
81.7
83.6
87.2
4.3
3.0
Rate Reduction
77.1
73.3
80.1
81.0
78.9
76.7
-2.8
4.7
Rate Freeze
7.1
3.9
3.7
5.2
5.5
7
28.4
77.9
Term Extension
Principal
Reduction
Principal Deferral
64.9
58.9
60.3
67.7
69.3
75.9
9.6
28.9
17.2
20.0
15.2
12.2
13.6
10.5
-22.5
-47.4
19.0
20.5
18.2
20.5
25.3
30.6
20.9
49.3
Not Reported*
0.4
1.1
0.6
1.4
2.2
0.7
-68.1
-37.8
Sources: OCC Mortgage Metrics Report for the Fourth Quarter of 2013 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
96.3
97.5
61.9
93.6
94.2
87.2
Rate reduction
61.6
79.5
91.0
73.6
75.0
76.7
Rate freeze
14.3
3.9
3.2
4.6
9.2
7.0
Term extension
92.1
94.4
94.8
26.6
62.9
75.9
Principal reduction
0.4
0.2
0.2
19.9
38.4
10.5
Principal deferral
24.0
34.2
35.0
33.3
25.9
30.6
Not reported*
1.5
0.2
0.3
1.1
0.5
0.7
Sources: OCC Mortgage Metrics Report for the Fourth Quarter of 2013 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
7,045,753 borrowers have received a modification since Q3 2007, compared with 7,082,771 liquidations in the
same period. We expect to see sharp declines in both liquidation and modification activity in 2014. In February
and March, foreclosures and short sales dropped to their lowest totals since 2008.
Loan Modifications and Liquidations
1,600
1,200
638.0
1,000
800
365.7
600
400
200
0
2007
(Q3-Q4)
2008
2009
2010
2011
2012
2013
HAMP mods
Proprietary mods
Liquidations
165.4
Number of loans (thousands)
1,400
2014
(Ann.)
Sources: Hope Now Reports
and Urban Institute.
Note: Liquidations includes
both foreclosure sales and
short sales. Annualized figure
based on data from March
2014.
Cumulative Modifications and Liquidations
7.1
8
5.7
6
5
HAMP mods
4
Proprietary mods
3
Liquidations
2
1.4
Number of loans (millions)
7
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. Year-to-date
figure as of March 2014.
28
MODIFICATION ACTIVITY
MODIFICATION REDEFAULT RATES BY
BEARER OF THE RISK
Redefault rates have come down across each sector, especially on private-label modifications. Governmentguaranteed mortgages have much higher redefault rates than other product types.
Redefault Rate 12 Months after Modification
80%
70%
Fannie Mae
Freddie Mac
Government-guaranteed
Private
Portfolio Loans
Overall
Redefault rate
60%
50%
40%
30%
20%
10%
0%
2008
2009
2010
Year of modification
2011
2012
Sources: OCC Mortgage Metrics Report for the Fourth Quarter of 2013 and Urban Institute.
Redefault Rate 24 Months after Modification
80%
70%
Fannie Mae
Freddie Mac
Government-guaranteed
Private
Portfolio loans
Overall
Redefault rate
60%
50%
40%
30%
20%
10%
0%
2008
2009
2010
Year of modification
2011
Sources: OCC Mortgage Metrics Report for the Fourth Quarter of 2013 and Urban Institute.
29
AGENCY ISSUANCE
AGENCY GROSS AND NET ISSUANCE
While newly issued agency securities (agency gross issuance) had been robust in 2013, much of the issuance
has been driven by refinancing. As that activity has fallen off with rising interest rates, new issuance has fallen off
as well. Agency gross issuance totaled 68.4 billion in April 2014, a 56 percent decline year-over-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 after the crisis.
Agency Gross Issuance
Agency Net Issuance
Issuance
Year
GSEs
Ginnie Mae
Total
Issuance
Year
GSE
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
$893.9
$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
$179.5
$80.0
$259.5
2014 YTD
-$7.4
$16.8
$9.4
2014 (Ann.)
$538.4
$240.1
$778.4
2014 (Ann.)
-$22.1
$50.5
$28.3
Sources: eMBS and Urban Institute.
Note: Dollar amounts are in billions.
Year-to-date figure as of April 2014
Sources: eMBS and Urban Institute.
Note: Dollar amounts are in billions.
Year-to-date figure as of April 2014
30
OVERVIEW
AGENCY
ISSUANCE
OVERVIEW
AGENCY GROSS AND NET ISSUANCE
AGENCY
GROSS
ISSUANCE
&
FED
BY MONTH
PURCHASES
Monthly Gross Issuance
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. It
has begun to rise as we move from
a refinance market to a purchase
market. April 2014 showed a Ginnie
Mae share of 31.8 percent.
250
$ billions
200
Ginnie Mae
150
100
50
Fannie Mae
Freddie Mac
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
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
April, total Fed purchases declined slightly to $41.60 billion, while gross issuance ticked up to 68.4 billion,
resulting in 61 percent for the Fed absorption of gross issuance, roughly same as the 2013 Q4’s 63 percent.
Gross issuance
Total Fed purchases
250
150
100
50
Sources: eMBS, Federal Reserve Bank of New York and Urban Institute.
31
Apr-14
Oct-13
Apr-13
Oct-12
Apr-12
Oct-11
Apr-11
Oct-10
Apr-10
Oct-09
Apr-09
Oct-08
Apr-08
Oct-07
Apr-07
Oct-06
Apr-06
Oct-05
Apr-05
Oct-04
Apr-04
Oct-03
Apr-03
Oct-02
Apr-02
Oct-01
Apr-01
0
Oct-00
$ billions
200
AGENCY ISSUANCE
MORTGAGE INSURANCE ACTIVITY
MI Activity
$180
$160
$140
$120
$100
$20
$80
$60
$31
$ billions
Private mortgage insurers lost
market share in Q1 2014,
dropping to 38.2 percent from
41.2 percent in the previous
quarter. Overall mortgage
insurance activity declined to
just over $80 billion, compared
to $155 billion in Q1 2013 and
$105 billion in Q4 2013. 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 below charts the history of FHA mortgage insurance premiums since 2001. Note that the most
recent change increased the annual premium by 10 bps, from 1.25 to 1.35 percent, and kept the upfront
premium at 1.75 percent for mortgages with balances less than $625,500. Annual premiums have more than
doubled since 2008, as the FHA has worked to shore up its finances.
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
4.36%
4.00%
620 - 639
640 - 659
660 - 679
680 - 699
700 - 719
720 - 739
740 - 759
760 +
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
$1,511
$1,497
$1,482
$1,402
$1,395
$1,327
$1,320
FHA MI Premiums
PMI
Monthly Payment
FHA
$1,305
PMI
($100)
($86)
($71)
$9
$16
$84
$91
$106
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
June 25—Sunset Seminar III: Cash Sales, Institutional Investors & Single Family Rentals: Performance,
Pricing & Policy
The panel will explore the rise in cash sales and the single family rental business, addressing the impact of higher
prices, the emergence of REO to rental securitization transactions, and issues with scattered-site property
management. In addition, the panel will assess the viability and scale of the institutional investor model, as well as
the securitization of the rental cash flow stream moving forward.
Commentaries
Blog Posts
HAMP Modifications: Is Reset Risk an Issue?
Authors: Laurie Goodman and Jun Zhu
Date: May 14, 2014
Will modification resets cause massive re-defaults?
Authors: Laurie Goodman and Jun Zhu
Date: May 16, 2014
Johnson Crapo GSE Discussion Draft: A Few
Suggestions for Improvement
Risk Sharing: High LTV mortgages are the next
frontier
Authors: Pamela Lee and Bing Bai
Date: May 15, 2014
Authors: Laurie Goodman and Ellen Seidman
Date: April 14, 2014
National Mortgage Settlement: Lessons Learned
Authors: Laurie Goodman and Maia Woluchem
Date: April 14, 2014
A strong pivot for the new director of FHFA
Author: Jim Parrott
Date: May 13, 2014
Authors: Laurie Goodman and Pamela Lee
Date: April 1, 2014
Is mortgage credit finally starting to loosen? Afraid
not.
Authors: Jun Zhu, Laurie Goodman and Bing Bai
Date: May 2, 2014
Where Have All the Loans Gone? The Impact of
Credit Availability on Mortgage Volume
Authors: Laurie Goodman, Jun Zhu, and Taz George
Date: March 13, 2014
Suggestions for housing finance reform
Author: Laurie Goodman and Ellen Seidman
Date: April 21, 2014
Lifting the Fog around FHA Lending?
Author: Jim Parrott
Date: March 13, 2014
The re-emerging dominance of private mortgage
insurers
Authors: Bing Bai and Laurie Goodman
Date: March 18, 2014
The Mortgage Debt Forgiveness Act Has Expired—
Renewal Could Benefit Millions
Authors: Laurie Goodman and Ellen Seidman
Date: February 18, 2014
Serious movement on housing finance reform
Authors: Ellen Seidman
Date: March 16, 2014
OASIS: A Securitization Born from MSR Transfers
Single-Family Securitized Financing: A Blueprint
for the Future?
Author: Laurie Goodman
Date: January 17, 2014
The housing bust disproportionately hurt minorities
Authors: Laurie Goodman, Jun Zhu, and Taz George
Date: March 14, 2014
34
RELATED HFPC WORK
PUBLICATIONS AND EVENTS
Testimony
Housing Finance Reform: Fundamentals of Transferring Credit Risk in a Future Housing Finance
System
Author: Laurie Goodman
December 10, 2013
Issue Papers and Briefs
The Impact of Mortgage Rate Increases on Housing Affordability
Authors: Lan Shi, Laurie Goodman
November 12, 2013
Reps and Warrants: Lessons from the GSEs Experience
Authors: Laurie Goodman, Jun Zhu
October 24, 2013
The GSE Reform Debate: How Much Capital Is Enough?
Authors: Laurie Goodman, Jun Zhu
October 24, 2013
Eminent Domain: The Debate Distracts from Pressing Problems
Author: Pamela Lee
October 24, 2013
QRM Comment Letter: Credit Risk Retention
Author: Laurie Goodman
October 24, 2013
Past Events
May Lunchtime Data Talk– HMDA
Presenters: Ren Essene and Jessica Russell, Consumer Financial Protection Bureau
May 6, 2014
April Lunchtime Data Talk—Counting the Housing Stock with AHS, CPS, ACS, and HVS
Presenters: Kurt Usowski, Deputy Assistant Secretary for Economic Affairs, HUD; Arthur Cresce, Jr., Assistant
Division Chief for Housing Statistics at the U.S. Census Bureau.
April 8, 2014
March Lunchtime Data Talk–Strategic Default
Presenters: Paul Willen, Federal Reserve Bank of Boston; Kris Gerardi, Federal Reserve Bank of Atlanta and
Michael Bradley, CoreLogic; Amy Crews Cutts, Equifax
Discussant: Bob Avery, Federal Housing Finance Agency
March 10, 2014
35
PUBLICATIONS AND EVENTS
Copyright © May 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.
36