HOUSING FINANCE POLICY CENTER
HOUSING FINANCE
AT A GLANCE
A MONTHLY CHARTBOOK
February 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 year of 2013 began with the promise of progress on
GSE reform but closed under a cloud of increasing
uncertainty. House reform efforts stalled after the PATH
Act cleared the Financial Services Committee, and
Senate leaders were unable to achieve their goal of
getting a bill out of committee by the end of 2013. But as
the window of opportunity narrows with the approach of
midterms, work in both chambers is heating up: On the
Senate side, Banking Committee leaders Johnson and
Crapo may be close to finalizing a proposal for long-term
reform, which is likely to build on the work of Senators
Corker and Warner. In the House, Democratic
Representatives Delaney, Carney, and Himes are drafting
a proposal in which the government provides broad
support for the market through a structure modeled on
Ginnie Mae.
While many analysts and experts are scratching their
heads about what will happen next on GSE reform, we
believe there are two mortgage market trends of which
you can be certain.
First, there will be renewed focus on credit
availability. In one of his first decisions as FHFA’s new
director, Mel Watt reversed the former acting director’s
plans to hike the GSEs’ loan-level pricing adjustments
(LLPA) and securitization guarantee fees. G-fee
increases would have hit all borrowers, and LLPA
increases would have sharply increased costs for
borrowers lacking pristine credit or access to substantial
down payments. This shift in FHFA policy comes at a time
of extremely tight credit as measured by FICO scores
(page 14). We expect that in the next few months, the
FHFA will turn its attention to reps and warrants as a way
to reduce uncertainty that has led lenders to add credit
overlays to their GSE lending.
The issue of tight credit and lender overlays extends to
FHA as well. The recent announcement by Wells Fargo
that it will begin accepting FHA borrowers with credit
scores as low as 600 (the prior limit was 640) is a step
toward increasing credit availability. The move suggests
that if FHA proceeds with promised indemnification
revisions, more lenders may be willing to reduce overlays.
Second, there will be continued focus on risk-sharing
as a mechanism for bringing private capital back to
the market (pages 20-21). Freddie Mac completed its
third risk-sharing transaction in February, following Fannie
Mae’s January deal. The collateral backing Freddie’s
deal, while still of very high quality (all loans have LTVs
between 60 and 80 percent), had marginally lower FICO
scores, marginally higher LTVs, marginally higher DTIs,
more risk layering, and less embedded home price
appreciation than in previous deals. For the GSEs to
transfer a more considerable amount of risk to the private
sector, they must eventually do risk-sharing on the higherLTV portion of their books of business as well.
We welcome feedback from readers on how we can make
At A Glance a more useful publication. Please continue to
contact us at ataglance@urban.org with comments or
questions.
INSIDE THIS ISSUE
•
New depiction of mortgage product type
composition for all loans and purchases only (page
9)
•
Non-agency securitization remains flat in late 2013
and early new year (page 10)
•
Agency refi share ticks up in January but still below
2013 average (page 11)
•
Mean combined LTV at origination continues
gradual decline (page 14)
•
Housing prices still far below peak levels in most
large MSAs (page 17)
•
Latest details on planned Freddie Mac risk-sharing
transactions (page 21)
•
HARP reaches milestone of 3 million borrowers
served (page 25)
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 Loans & Purchase Loans)
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 Risk-Sharing Transactions
Freddie Mac 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
MI Market Share
FHA MI Premiums for Typical Purchase Loan
32
32
33
Related HFPC Work
Publications and Events
34-35
5
OVERVIEW
MARKET SIZE OVERVIEW
Home values continue to improve, increasing the total value of the US residential housing market. According to the
2013 Q3 Fed Flow of Funds report, the total size of the mortgage market stands at $9.87 trillion, a slight uptick
from the previous quarter. This is the first quarterly increase in total mortgage debt outstanding since early 2008,
driven largely by a $50 billion increase in agency mortgage-backed securities (MBS), 1.7 percent higher than in
2013 Q2. Agency MBS make up 60.3 percent of the total, private-label securities make up 8.3 percent, and
unsecuritized first liens at commercial banks, savings institutions, and credit unions make up 18.9 percent. Second
liens and GSE loans in portfolio comprise the remaining 7.2 and 5.3 percent of the total, respectively.
Value of the US
Housing Market
Size of the US Residential
Mortgage Market
as of Q3 2013
as of Q3 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,
$10.176
$ trillions
Second liens
$10.0
$10
$1.865
$7.5
$ trillions
$5
Debt,
household
Debt,
mortgages,
Household
$9,833
Mortgages
$9.865
$5.0
$0.519
$5.945
$2.5
$0
Sources: Federal Reserve Flow of Funds and Urban Institute.
$0.0
$0.819
$0.715
Sources: Federal Reserve Flow of Funds, Inside Mortgage
Finance, Fannie Mae, Freddie Mac and Urban Institute.
6
OVERVIEW
MARKET SIZE OVERVIEW
As of December 2013, 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 agency market, as of September 2013, is 48.7 percent
Fannie Mae, 28.1 percent Freddie Mac, and 23.2 percent Ginnie Mae outstanding securities.
Private-Label Securities
as of December 2013; dollars in trillions
100%
90%
Prime, $0.164
80%
70%
60%
Alt-A, $0.338
50%
40%
30%
Subprime, $0.285
20%
10%
0%
Sources: CoreLogic and Urban Institute.
Agency Mortgage-Backed Securities
as of Q3 2013; dollars in trillions
100%
90%
80%
Fannie Mae, $2.897
70%
60%
50%
40%
Freddie Mac, $1.671
30%
20%
10%
Ginnie Mae, $1.377
0%
Sources: Inside Mortgage Finance and Urban Institute.
7
OVERVIEW
OVERVIEW
ORIGINATION VOLUME
AND COMPOSITION
First Lien Origination Volume
First lien originations in 2013 totaled $1.84 trillion, just short of 2012's $2.12 trillion due to the impact of higher rates.
Private-label originations, at $15.3 billion, were more than double their 2012 total of $6 billion.
$4.0
$3.5
$3.0
Bank portfolio
$ trillions
$2.5
PLS securitization
FHA/VA securitization
GSE securitization
$2.0
$1.0
$0.36
$0.02
$0.35
$0.5
$1.11
$1.5
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
$0.0
Sources: Inside Mortgage Finance and Urban Institute.
First Lien Origination Share
The GSE share of first lien originations is in line with historical levels, now sitting at 60.6 percent. Likewise, FHA
and VA continue to hold a much larger share than in pre-crisis years, with 19 percent of the market. While
private-label originations are less than 1 percent, that constitutes an increase from the depths of the recession,
when such originations all but disappeared.
2013
2012
2011
2010
2009
2008
2007
2006
2005
GSE securitization
2004
FHA/VA securitization
2003
PLS securitization
2002
Bank portfolio
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Sources: Inside Mortgage Finance and Urban Institute.
8
OVERVIEW
OVERVIEW
MORTGAGE
MORTGAGE ORIGINATION
ORIGINATION PRODUCT
PRODUCT
TYPE
TYPE
While the 30-year fixed-rate mortgage (FRM) dominates the US market, adjustable-rate mortgages (ARM) accounted
for as much as 30 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. 15-year FRMs,
traditionally more of a refinance product comprise 18 percent of new originations. If we exclude refinances (bottom
chart), in December, 2013, the share of 30-year FRMs stood at 84 percent, 15-year FRMs at 7 percent, and ARMs at
7 percent.
Mortgage Origination Product Type Composition,
All Loans
Fixed-rate 15-year mortgage
Adjustable-rate mortgage
Jan-01
Jun-01
Nov-01
Apr-02
Sep-02
Feb-03
Jul-03
Dec-03
May-04
Oct-04
Mar-05
Aug-05
Jan-06
Jun-06
Nov-06
Apr-07
Sep-07
Feb-08
Jul-08
Dec-08
May-09
Oct-09
Mar-10
Aug-10
Jan-11
Jun-11
Nov-11
Apr-12
Sep-12
Feb-13
Jul-13
Dec-13
Fixed-rate 30-year mortgage
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Other
Sources: CoreLogic Prime Servicing as of December 2013 and Urban Institute.
Mortgage Origination Product Type Composition,
Purchase Loans
100%
90%
80%
70%
60%
50%
40%
30%
Fixed-rate 15-year mortgage
Adjustable-rate mortgage
Other
20%
10%
0%
Jan-01
Jun-01
Nov-01
Apr-02
Sep-02
Feb-03
Jul-03
Dec-03
May-04
Oct-04
Mar-05
Aug-05
Jan-06
Jun-06
Nov-06
Apr-07
Sep-07
Feb-08
Jul-08
Dec-08
May-09
Oct-09
Mar-10
Aug-10
Jan-11
Jun-11
Nov-11
Apr-12
Sep-12
Feb-13
Jul-13
Dec-13
Fixed-rate 30-year mortgage
Sources: CoreLogic Prime Servicing as of December 2013 and Urban Institute.
9
OVERVIEW
SECURITIZATION VOLUME AND
COMPOSITION
Agency/Non-Agency Share of Residential MBS Issuance
Agency share
Non-Agency share
Non-agency single-family
100%
MBS issuance has now
hovered near 2 percent of
90%
total issuance since early
80%
2011, and this share is
70%
even lower if re-REMICs
are excluded. Total non60%
agency issuance in 2013
50%
was $31.4 billion,
compared to $13.1 billion
40%
for all of 2012, but still far
below pre-bubble years like 30%
2002, when non-agency
20%
issuance reached $400
10%
billion.
98%
2%
Jan-14
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.
Non-Agency MBS Issuance
Non-Agency Securitization 2.0
$1,200
$12
$1,000
$10
$8
$ billions
$600
$400
$6
$4
$2
$0
$0
Prime
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013 (Q1-3)
$200
Subprime
Alt A
All other
Sources: Inside Mortgage Finance and Urban Institute.
Sep-10
Nov-10
Jan-11
Mar-11
May-11
Jul-11
Sep-11
Nov-11
Jan-12
Mar-12
May-12
Jul-12
Sep-12
Nov-12
Jan-13
Mar-13
May-13
Jul-13
Sep-13
Nov-13
Jan-14
$ billions
$800
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 $69.8 billion in the first month of 2014, compared to 160.7 billion
for same month a year ago. In January 2014, refinances were about 54-58 percent of the GSEs’ business,
slightly up from 50-54 percent last month – an uptick after nearly a year of decline, reflecting a recent 16 bps
drop in interest rates. The Ginnie Mae market has always been more purchase-driven, with refinance volume up
to 25.1 percent in January 2014 from 24.4 percent in December 2013.
At-Issuance Balance
Freddie Mac
Fannie Mae
Ginnie Mae
$2.5
$ trillions
$2.0
$1.5
$1.0
$0.5
$0.0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Ann.
Sources: eMBS and Urban Institute.
Note: Annualized figure based on data from January 2014.
Percent Refi at Issuance
Fannie Mae
Ginnie Mae
Mortgage rate
80%
8%
70%
7%
60%
6%
50%
5%
40%
4%
30%
3%
20%
2%
10%
1%
0%
0%
Jan-04
Apr-04
Jul-04
Oct-04
Jan-05
Apr-05
Jul-05
Oct-05
Jan-06
Apr-06
Jul-06
Oct-06
Jan-07
Apr-07
Jul-07
Oct-07
Jan-08
Apr-08
Jul-08
Oct-08
Jan-09
Apr-09
Jul-09
Oct-09
Jan-10
Apr-10
Jul-10
Oct-10
Jan-11
Apr-11
Jul-11
Oct-11
Jan-12
Apr-12
Jul-12
Oct-12
Jan-13
Apr-13
Jul-13
Oct-13
Jan-14
9%
Sources: eMBS, Freddie Mac PMMS and Urban Institute.
Note: Based on at-issuance loan balance.
11
Mortgage Rate
Percent Refi
Freddie Mac
90%
OVERVIEW
STATE OF THE MARKET
MORTGAGE ORIGINATION
PROJECTIONS
The sharp drop in mortgage originations in Q4 of 2013 combined with higher interest rates in the second half of
2013 has led the MBA, Fannie Mae, and Freddie Mac to lower their 2014 estimate for origination activity. Note that
Fannie, Freddie and the MBA all estimate the 2014 refi share at 37-40 percent, not far off from 2013 Q4. The
housing market is expected to pick up further in 2014, with both housing starts and existing home sales up sharply.
Total Originations and Refinance Shares
Originations ($B)
Refi Share (%)
Period
Total, FNMA
estimate
Total, FHLMC
estimate
Total, MBA
estimate
FNMA
estimate
FHLMC
estimate
MBA
estimate
2013 Q1
2013 Q2
2013 Q3
2013 Q4
2014 Q1
2014 Q2
2014 Q3
2014 Q4
FY 2011
FY 2012
FY 2013
FY 2014
FY 2015
430
554
442
396
317
372
354
315
1,496
2,153
1,817
1,255
1,145
540
560
400
350
383
453
332
242
1,500
2,130
1,900
1,410
1,190
524
537
401
293
264
311
315
290
1,436
2,044
1,755
1,116
1,229
72
65
66
56
53
39
37
37
66
72
62
37
26
72
65
57
38
44
40
39
35
64
70
62
40
20
74
66
51
53
50
37
36
36
65
71
63
39
35
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.
Sources: Mortgage Bankers Association, Fannie Mae, Freddie Mac and Urban Institute.
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
1,106
1,356
610
780
920
1,100
1,350
612
783
922
1,043
1,145
4,566
5,028
5,523
5,697
6,026
4,570
5,030
5,530
5,900
6,100
4,501
5,030
5,599
5,905
6,052
4,200
4,661
5,111
5,309
5,542
301
369
449
490
510
Note: Shaded boxes indicate forecasted figures. All figures are estimates for total single-family market. Column labels indicate source of
estimate.
Sources: Mortgage Bankers Association, Fannie Mae, Freddie Mac and Urban Institute.
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
1
Jan-14
Jul-13
Jan-13
Jul-12
Jan-12
Jul-11
Jan-11
Jul-10
Jan-10
Jul-09
Jan-09
Jul-08
Jan-08
Jul-07
Jan-07
Jul-06
Jan-06
Jul-05
Jan-05
Jul-04
Jan-04
Jul-03
Jul-02
Jan-03
Jan-02
Jul-01
Jan-01
Jul-00
Jan-00
0
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.
Source: 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.
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 662 as of December 2013. Prior to the housing crisis, this
threshold held steady in the low 600s. LTV levels at origination remain relatively high at 84.2, which reflects the large
number of FHA purchase originations.
Borrower FICO Score at Origination Month
FICO Score
850
90th percentile
800
801
750
740
700
662
650
600
550
Mean
Dec-00
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
500
10th percentile
Sources: CoreLogic Prime Servicing as of December 2013 and Urban Institute.
Note: Purchase-only loans.
Combined LTV at Origination
110
100
100
90
84
CLTV
80
70
65
60
90th percentile
40
Mean
30
10th percentile
Dec-00
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
50
Sources: CoreLogic Prime Servicing as of December 2013 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 December 2013 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
Seattle-Bellevue-Everett WA
Newark NJ-PA
Nassau County-Suffolk County NY
San Diego-Carlsbad CA
Portland-Vancouver-Hillsboro OR-WA
Denver-Aurora-Lakewood CO
Minneapolis-St. Paul-Bloomington MN-WI
Washington-Arlington-Alexandria DC-VA-MD-WV
Boston MA
Chicago-Naperville-Arlington Heights IL
Baltimore-Columbia-Towson MD
Tampa-St. Petersburg-Clearwater FL
Sacramento-Roseville-Arden-Arcade CA
Charlotte-Concord-Gastonia NC-SC
Atlanta-Sandy Springs-Roswell GA
Miami-Miami Beach-Kendall FL
Houston-The Woodlands-Sugar Land TX
Pittsburgh PA
Philadelphia PA
Dallas-Plano-Irving TX
Columbus OH
Riverside-San Bernardino-Ontario CA
Orlando-Kissimmee-Sanford FL
St. Louis MO-IL
Cincinnati OH-KY-IN
Kansas City MO-KS
Las Vegas-Henderson-Paradise NV
Phoenix-Mesa-Scottsdale AZ
Fort Worth-Arlington TX
Detroit-Dearborn-Livonia MI
San Antonio-New Braunfels TX
Cleveland-Elyria OH
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. The mean origination FICO for borrowers in San Francisco-Redwood City-South San Francisco, CA is over
770, while in Cleveland-Elyria, OH it is slightly above 720. Note that across all MSAs, lower average FICO scores
tends to be correlated with high average LTVs at origination, as these MSAs rely heavily on FHA/VA financing.
Origination FICO and LTV by MSA
Mean origination LTV
Boston MA
San Antonio-New Braunfels TX
Note: Affordability index is calculated relative to home prices in 2000-03. A ratio above 1 indicates higher affordability in December
2013 than in 2000-03.
Sources: CoreLogic, US Census, Freddie Mac and Urban Institute calculations based on NAR methodology.
16
Cleveland-Elyria OH
Detroit-Dearborn-Livonia MI
Cincinnati OH-KY-IN
Las Vegas-Henderson-Paradise NV
Columbus OH
Chicago-Naperville-Arlington Heights IL
Pittsburgh PA
Kansas City MO-KS
Tampa-St. Petersburg-Clearwater FL
$260,000
Atlanta-Sandy Springs-Roswell GA
Housing prices
$280,000
Denver-Aurora-Lakewood CO
Sacramento--Roseville--Arden-Arcade CA
Minneapolis-St. Paul-Bloomington MN-WI
Orlando-Kissimmee-Sanford FL
Oakland-Hayward-Berkeley CA
Dec-00
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
Max affordable price at 6.0% rate
St. Louis MO-IL
Sources: CoreLogic, US Census, Freddie Mac and Urban Institute.
Charlotte-Concord-Gastonia NC-SC
Max affordable price
Newark NJ-PA
Median sales price
Houston-The Woodlands-Sugar Land TX
Fort Worth-Arlington TX
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.
Miami-Miami Beach-Kendall FL
Riverside-San Bernardino-Ontario CA
San Diego-Carlsbad CA
Seattle-Bellevue-Everett WA
Dallas-Plano-Irving TX
Philadelphia PA
Nassau County-Suffolk County NY
Phoenix-Mesa-Scottsdale AZ
Baltimore-Columbia-Towson MD
Portland-Vancouver-Hillsboro OR-WA
San Jose-Sunnyvale-Santa Clara CA
San Francisco-Redwood City-South San Francisco CA
New York-Jersey City-White Plains NY-NJ
Washington-Arlington-Alexandria DC-VA-MD-WV
Los Angeles-Long Beach-Glendale CA
Ratio
STATE OF THE MARKET
HOUSING AFFORDABILITY
National Housing Affordability Over Time
$300,000
Credit
Bubble
$240,000
$220,000
$200,000
$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 year-over-year house price growth has been strong through 2013, as indicated by both the repeated sales HPI
from CoreLogic and hedonic index from Zillow.
Zillow HVI year-over-year
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
20%
15%
10%
5%
0%
-5%
-10%
-15%
-20%
Dec-00
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 21.8 percent from the trough, national house prices still must grow 22.0 percent to reach peak
pre-crisis 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– remains more than
50 percent below 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%
116.9%
182.3%
65.5%
40.5%
160.6%
44.3%
126.3%
194.7%
38.2%
74.4%
94.3%
36.3%
128.6%
149.0%
163.1%
-32.7%
-20.0%
-39.4%
-36.6%
-33.7%
-33.6%
-12.9%
-52.9%
-53.4%
-13.9%
-30.9%
-32.3%
-14.7%
-25.8%
-38.4%
-37.2%
21.8%
12.2%
33.1%
16.6%
28.8%
24.8%
19.7%
44.3%
38.1%
17.3%
19.0%
24.5%
23.6%
7.7%
30.0%
32.0%
% Rise needed
to achieve
peak
22.0%
11.4%
23.9%
35.2%
17.1%
20.7%
-4.1%
47.2%
55.4%
-0.9%
21.6%
18.7%
-5.2%
25.2%
24.9%
20.7%
Sources: CoreLogic HPIs as of December 2013 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 September 2013, residential properties in negative equity (LTV
greater than 100) as a share of all residential properties with a mortgage has dropped to 13 percent.
Residential properties in near negative equity (LTV between 95 and 100) comprise another 3.2 percent.
Negative equity
Near negative equity
35%
30%
25%
20%
16.2%
15%
13.0%
10%
5%
3Q13
2Q13
1Q13
4Q12
3Q12
2Q12
1Q12
4Q11
3Q11
2Q11
1Q11
4Q10
3Q10
2Q10
1Q10
4Q09
3Q09
0%
Sources: CoreLogic and Urban Institute.
Loans in Serious Delinquency
Serious delinquencies and foreclosures continue to decline with the housing recovery, but remain quite high
relative to the early 2000s.
12%
10%
8%
Percent of loans in
foreclosure
Percent of loans in 90 days
or more delinquent or in
foreclosure
6%
5.7%
4%
3.1%
2.6%
2%
0%
1Q00
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
Percent of loans 90 days or
more delinquent
Sources: Mortgage Bankers Association and Urban Institute.
18
GSES UNDER CONSERVATORSHIP
GSE PORTFOLIO WIND-DOWN
Under conservatorship, both Fannie Mae and Freddie Mac have shrunk their portfolios and shifted their mix
of assets, as the agency MBS share is shrinking more rapidly than the less liquid assets (mortgage loans and
non-agency MBS). Agency MBS now comprises 28.3 percent of the Fannie portfolio and 40.1 percent of the
Freddie portfolio. Both GSEs were well under their portfolio cap of $552.5 billion for year-end 2013, finishing
the year at $490.7 billion for Fannie and $461.0 billion for Freddie.
Fannie Mae Mortgage-Related Investment Portfolio
Composition
900
Current size: $490.7 billion
Current cap: $552.5 billion
Shrinkage year-to-date: 20.9%
800
$ billions
700
600
500
400
315
300
Mortgage loans
37
9
130
200
Non-agency MBS
100
Non-FNMA agency MBS
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
0
Fannie MBS in portfolio
Sources: Fannie Mae and Urban Institute.
Freddie Mac Mortgage-Related Investment Portfolio
Composition
1,000
900
Current size: $461 billion
Current cap: $552.5 billion
Shrinkage year-to-date: 16.2%
800
600
500
400
Mortgage loans
300
Non-agency MBS
200
Non-FHLMC agency MBS
100
FHLMC MBS in portfolio
Sources: Freddie Mac and Urban Institute
181
95
17
168
0
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
$ billions
700
19
GSES UNDER CONSERVATORSHIP
GSES UNDER CONSERVATORSHIP
EFFECTIVE
EFFECTIVE GUARANTEE
GUARANTEE FEES
FEES AND
GSE RISK-SHARING TRANSACTIONS
Effective Guarantee Fees
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.
60
50
40
30
20
10
0
58.7
38
29.8
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
3Q10
4Q10
1Q11
2Q11
3Q11
4Q11
1Q12
2Q12
3Q12
4Q12
1Q13
2Q13
3Q13
Fannie Mae single-family average charged gfee on new acquisitions
Fannie Mae single-family effective g-fee rate
Basis points
In Q3, effective g-fees on new Fannie acquisitions rose to 58.7 bps; they were scheduled to increase again in
early 2014. However, the FHFA’s newly appointed director, Mel Watt, halted plans to implement further g-fee
increases. G-fees should remain constant as Watt decides on the FHFA’s path forward.
Fannie Mae Risk-Sharing Transactions
Date
Deal
Class
A-H
Oct 24,
2013
Connecticut Avenue
Securities (CAS)
2013-C01
CE (%)
Rating
Initial
Spread
(bps)
$25,953.7
97
3
NR
-
$361.2
1.35
1.65
F: BBB-sf
200
M-1
$337.5
1.26
M-1H
$23.7
0.09
M-2, M-2H
$361.2
1.35
0.30
NR
525
M-2
$337.5
1.26
M-2H
$23.7
0.09
$80.3
0.30
0
NR
-
$26,756.4
100
A-H
$28.4
97
3
NR
-
M-1, M-1H
$395.7
1.35
1.65
F: BBB-sf; M: Baa2
160
M-1
$375
1.28
M-1H
$20.7
0.07
M-2, M-2H
$395.7
1.35
0.30
NR
440
M-2
$375.0
1.28
M-2H
$20.7
0.07
$87.9
0.30
0
NR
-
$29,308.7
100
Total Reference
Pool Size
CAS Series
2014-C01
Tranche
Thickness (%)
M-1, M-1H
B-H
Jan 14,
2014
Amount
($ millions)
B-H
Total Reference
Pool Size
Sources: Fannie Mae and Urban Institute.
Notes: 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. “CE” = credit enhancement. Under “Ratings,” “F” stands for Fitch, “M” stands for Moody’s, and “K” stands for “Kroll Bond Ratings.”
20
GSES UNDER CONSERVATORSHIP
GSE RISK-SHARING TRANSACTIONS
Freddie Mac Risk-Sharing Transactions
Date
Amount
($ millions)
Tranche
Thickness (%)
CE
(%)
Rating
Initial
Spread
(bps)
$21,906.8
97
3
NR
-
M-1, M-1H
$304.9
1.35
1.65
NR
340
M-1
$250.0
1.26
0.30
NR
715
0
NR
-
Deal
Class
A-H
July 24,
2013
Structured
Agency Credit Risk
(STACR) Debt
Notes,
Series 2013-DN1
M-1H
$54.9
0.09
M-2, M-2H
$304.9
1.35
M-2
$250.0
1.26
M-2H
$54.9
0.09
$67.8
0.30
$22,584.4
100
B-H
Total Reference
Pool Size
A-H
Nov 12,
2013
STACR Debt Notes,
Series 2013-DN2
$34,267.5
97
3
NR
-
M-1, M-1H
$370.9
1.05
1.95
F: BBB-sf; M: Baa1
145
M-1
$245 .0
0.69
0.30
NR
425
0
NR
-
M-1H
$125.9
0.36
M-2, M-2H
$582.9
1.65
M-2
$385 .0
1.09
M-2H
$197.9
0.56
$106 .0
0.30
$35,327.3
100
B-H
Total Reference
Pool Size
A-H
Feb 6,
2014
STACR Debt Notes,
Series 2014-DN1
$30,980.8
95.5
4.50
NR
-
M-1, M-1H
$240.0
1.00
3.50
-
100
M-1
$155.6
0.65
M: A1 (sf); K: A(sf)
M-1H
$84.4
0.35
NR
M-2, M-2H
$360.0
1.50
M-2
$233.4
0.97
M: Baa1(sf); K: BBB(sf)
M-2H
$126.6
0.53
NR
M-3, M-3H
$408.0
1.70
M-3
$264.5
1.10
NR
M-3H
$143.5
0.60
NR
$87.9
0.30
$32,076.8
100
B-H
Total Reference
Pool Size
2
0.30
0
-
-
NR
220
450
-
Sources: Freddie Mac and Urban Institute.
Notes: Classes A-H, M-1H, M-2H, M-3H, and B-H are reference tranches only. These classes are not issued or sold. The risk is retained by
Fannie Mae. “CE” = credit enhancement. Under “Ratings,” “F” stands for Fitch, “M” stands for Moody’s, and “K” stands for “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 year end 2013, 2.38 percent of the Fannie
portfolio and 2.39 percent of the Freddie portfolio were seriously delinquent, down from 3.18 percent and 3.20
percent at the beginning of 2013, respectively.
Serious Delinquency Rates–Fannie Mae
16%
Single-family: Noncredit enhanced
Single-family: Credit
enhanced
Percentage of total loans
14%
12%
10%
8%
6%
4.75%
4%
2.38%
2.00%
2%
Single-family: Total
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
Sources: Fannie Mae and Urban Institute.
Jun-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%
4.83%
4%
3%
2.39%
2.04%
2%
1%
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
Sources: Freddie Mac and Urban Institute.
Jun-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 much higher relative starting
point. GSE multifamily delinquencies are also declining, although they never reached problematic levels, even
at the height of the crisis.
Serious Delinquency Rates–Single-Family Loans
FHA
Fannie Mae
Freddie Mac
10%
Percentage of total loans
9%
8%
7.24%
7%
6%
5%
4%
3%
2.58%
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
0%
Sources: Fannie Mae, Freddie Mac, MBA Delinquency Survey and Urban Institute.
Note: Serious delinquency is defined as 90 days or more past due or in the foreclosure process.
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%
0.10%
0.09%
0.1%
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
0.0%
Sources: Fannie Mae, Freddie Mac and Urban Institute.
Note: Serious delinquency is defined as 60 days or more past due.
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
73.6
Thousands
250
150
130
100
50
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
November
2013
Year-to-date
2013
Inception to
date
2012
2011
2010
Total refinances
163,547
3,931,048
18,721,388
4,750,530
3,229,066
3,604,640
Total HARP refinances
38,732
862,892
3,027,937
1,074,769
400,024
431,647
Share 80–105 LTV
66.3%
59.5%
69.8%
56.4%
85.0%
93.4%
Share 105–125 LTV
19.7%
21.3%
17.2%
22.4%
15.0%
6.6%
Share >125 LTV
14.0%
19.2%
13.0%
21.2%
0%
0%
All other streamlined
refinances
35,798
704,962
3,222,949
729,235
785,049
763,477
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 June 2009, have a marked-to-market loan-to-value (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 1,332,375 eligible loans, but 38 percent are out-of-the-money because the closing cost would
exceed the long-term savings, leaving 831,891 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 7,338,163 loans in this category, 5,103,151 are
in-the-money.
More than half the GSE book of business was originated after the cutoff date. Of these loans, 2,502,746 meet the
other HARP criteria, but 90 percent are out-of-the-money, leaving only 259,426 loans that, if there was a change in
the eligibility date, would be potential HARP candidates at current interest rate levels. If the cutoff date was moved
forward one year, 116,531 of the 259,426 borrowers would potentially qualify; 52 to 70 percent of these additional
borrowers have already received a HARP refinance once. If the cutoff date was moved forward two years, 203,865
of the 259,426 borrowers would potentially qualify.
Total loan count
24,736,654
Loans that do not meet pay history requirement
1,966,065
Loans that meet pay history requirement:
22,770,589
Pre-June 2009 origination
8,670,538
Post-June 2009 origination
14,100,051
Loans Meeting HARP Pay History Requirements
Pre-June 2009
LTV category
In-the-money
Out-of-the-money
Total
≤80
>80
Total
5,103,151
831,891
5,935,042
2,235,012
500,485
2,735,497
7,338,163
1,332,375
8,670,538
Post-June 2009
LTV category
In-the-money
Out-of-the-money
Total
≤80
>80
Total
855,572
259,426
1,114,998
10,741,732
2,243,320
12,985,052
11,597,305
2,502,746
14,100,051
Sources: CoreLogic prime servicing data as of December 2013.
Note: Figures are scaled up from source data by a factor of 1/.65 to account for data coverage. Striped box indicates HARP-eligible
loans that are in-the-money.
25
MODIFICATION ACTIVITY
HAMP ACTIVITY
New trial mods have tapered off as new defaults have declined. Modification success rates, however, are
improving, so the number of new permanent mods started remains fairly stable. During 2013, new permanent
mods started has ranged between 11,913 and 19,318 per month, averaging 14,683. The last data available
(December) is slightly below average at 14,000 new permanent modifications. We would expect new permanent
mods to begin to taper off in the months ahead, due to sharp declines in new defaults.
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
14
10
5
20
Dec-13
Oct-13
Aug-13
Jun-13
Apr-13
Feb-13
Dec-12
Oct-12
Aug-12
Jun-12
Apr-12
Feb-12
Dec-11
Oct-11
Aug-11
Jun-11
Apr-11
Feb-11
Dec-10
Oct-10
Aug-10
Jun-10
Apr-10
Feb-10
Dec-09
Oct-09
Aug-09
Jun-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
2.15
2.0
1.5
1.31
1.0
0.93
0.5
Dec-13
Oct-13
Aug-13
Jun-13
Apr-13
Feb-13
Dec-12
Oct-12
Aug-12
Jun-12
Apr-12
Feb-12
Dec-11
Oct-11
Aug-11
Jun-11
Apr-11
Feb-11
Dec-10
Oct-10
Aug-10
Jun-10
Apr-10
Feb-10
Dec-09
Oct-09
Aug-09
Jun-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 and has dropped 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. Principal reduction is most
likely to be done on private investor loans, followed by portfolio loans. The GSEs and FHA/VA 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
One quarter
% change
One year
% change
Capitalization
88.2
84.6
79.3
81.7
83.6
2.3
-5.3
Rate Reduction
77.1
73.3
80.1
81.0
78.9
-2.6
2.3
Rate Freeze
7.1
3.9
3.7
5.2
5.5
5.0
-22.9
Term Extension
64.9
58.9
60.3
67.7
69.3
2.4
6.7
17.2
20.0
15.2
12.1
13.6
11.9
-20.8
19.0
20.5
18.2
20.5
25.3
23.5
33.3
0.4
1.1
0.6
1.4
2.2
57.0
487.8
Principal
Reduction
Principal Deferral
Not Reported*
Sources: OCC Mortgage Metrics Report for the Third 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
90.1
97.1
60.9
95.2
89.5
83.6
Rate reduction
62.4
78.2
94.7
75.6
76.0
78.9
Rate freeze
10.4
4.2
0.6
4.6
10.1
5.5
Term extension
81.6
90.3
91.1
21.5
60.3
69.3
Principal reduction
0.0
0.2
3.9
25.4
44.1
13.6
Principal deferral
24.0
33.8
15.3
34.2
26.1
25.3
Not reported*
6.4
1.4
0.8
0.9
1.7
2.2
Sources: OCC Mortgage Metrics Report for the Third 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
6,912,971 borrowers have received a modification since Q3 2007, compared with 6,923,264 liquidations in the
same period. Foreclosure sales dropped 6.2 percent from November to December, to 38,740. Modifications fell
by 1.7 percent, to 43,569. Both declines are reflective of the housing market continuing to gain steam.
Loan Modifications and Liquidations
1,400
897.6
1,200
593.4
1,000
800
HAMP permanent mods
Proprietary mods completed
600
Total liquidations
175.1
Number of loans (thousands)
1,600
400
200
0
2007 (Q3Q4)
2008
2009
2010
2011
2012
2013
Sources: Hope Now Reports
and Urban Institute.
Note: Total liquidations includes
both foreclosure sales and short
sales.
Cumulative Modifications and Liquidations
6.9
8
5.6
6
5
HAMP mods
4
Proprietary mods
3
Liquidations
1.3
Number of loans (millions)
7
2
1
0
2007 (Q3Q4)
2008
2009
2010
2011
2012
2013
Sources: Hope Now Reports
and Urban Institute.
Note: Total liquidations
includes both foreclosure
sales and short sales.
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 Third 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 Third Quarter of 2013 and Urban Institute.
29
AGENCY ISSUANCE
AGENCY GROSS AND NET ISSUANCE
While newly issued agency securities (agency gross issuance) have 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 69.8 billion in January 2014, a 56.6 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 during 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
Jan 2014
$48.2
$21.6
$69.8
Jan 2014
-$4.4
$4.9
$0.5
Sources: eMBS and Urban Institute.
Note: Dollar amounts are in billions.
Sources: eMBS and Urban Institute.
Note: Dollar amounts are in billions.
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 has declined to 25 percent
in 2013. It should begin to rise again
as we move from a refinance market
to a purchase market. January 2014
showed a Ginnie Mae share of 30.9
percent.
$250
$200
$150
$100
$50
Ginnie Mae
$0
Jan-00
Jul-00
Jan-01
Jul-01
Jan-02
Jul-02
Jan-03
Jul-03
Jan-04
Jul-04
Jan-05
Jul-05
Jan-06
Jul-06
Jan-07
Jul-07
Jan-08
Jul-08
Jan-09
Jul-09
Jan-10
Jul-10
Jan-11
Jul-11
Jan-12
Jul-12
Jan-13
Jul-13
Jan-14
Fannie Mae
Freddie Mac
Sources: eMBS and Urban Institute.
Fed Absorption of Agency Gross Issuance
In 2013, the Fed absorbed nearly 50 percent of the year's gross issuance. In December, with agency production
lower, and with the Fed not yet tapering, that share rose to 79 percent. The Fed has since tapered twice. They
announced in December that new Fed purchases of MBS were going to be reduced from $40 billion/month to
$35 billion/month, effective in January. In January, they agreed to reduce monthly purchases of MBS from $35
billion/month to $30 billion/month effective in February. The impact of this will be reflected in the chart below in
the coming months, as both gross issuance and Fed purchases will both be down.
Gross issuance
Total Fed purchases
200
150
100
50
Sources: eMBS, Federal Reserve Bank of New York and Urban Institute.
31
Jan-14
Jul-13
Jan-13
Jul-12
Jan-12
Jul-11
Jan-11
Jul-10
Jan-10
Jul-09
Jan-09
Jul-08
Jan-08
Jul-07
Jan-07
Jul-06
Jan-06
Jul-05
Jan-05
Jul-04
Jan-04
Jul-03
Jan-03
Jul-02
Jan-02
Jul-01
Jan-01
Jul-00
0
Jan-00
$ billions
250
AGENCY ISSUANCE
MORTGAGE INSURANCE ACTIVITY
MI Activity
$180
$160
$140
$120
$ billions
Private mortgage insurers lost
market share to FHA and VA in
the crisis. With the recovery
and higher FHA insurance
premiums, the private MI share
is increasing, albeit slowly. In
4Q13, private insurers had
41.3 percent of the market, up
from 21 percent in 1Q11 but
significantly down from nearly
80 percent from 2005-2007.
$100
$22
$80
$39
$60
$40
$43
$20
VA
FHA
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
22.7%
100%
90%
80%
41.2%
70%
60%
50%
40%
36.0%
30%
20%
10%
0%
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
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
150
50
7/14/2008 - 9/30/2008*
175
55
10/1/2008 - 4/4/2010
175
55
4/5/2010 - 10/3/2010
225
55
10/4/2010 - 4/17/2011
100
90
4/18/2011 - 4/8/2012
100
115
4/9/2012 - 6/10/2012
175
125
6/11/2012 - 3/31/2013a
175
125
4/1/2013 - presentb
175
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.
33
RELATED HFPC WORK
PUBLICATIONS AND EVENTS
Upcoming Events
March Data Talk—Recent Research on Strategic Default
The March Data Talk will focus on two papers that discuss Strategic Default. The presenters/co-authors include
Paul Willen, Federal Reserve Bank of Boston; Kris Gerardi, Federal Reserve Bank of Atlanta and Michael
Bradley, CoreLogic; Amy Crew Cutts, Equifax. Bob Avery of the FHFA will serve as the moderator and discussant.
Please check our events page for more information as it becomes available.
Commentaries
Past Events
The Mortgage Debt Forgiveness Act Has Expired—
Renewal Could Benefit Millions
Authors: Laurie Goodman and Ellen Seidman
Date: February 18, 2014
Single-Family Securitized Financing: A Blueprint
for the Future?
Author: Laurie Goodman
Date: January 17, 2014
Sunset Seminar: Bringing Private Capital Back to the
Mortgage Market
Panelists: Laurie Goodman, Director, Housing Finance
Policy Center; Eric Kaplan, Managing Director, Mortgage
Finance, Shellpoint Partners; Paul Leonard, Senior Vice
President, Government Affairs, Financial Services
Roundtable
Moderator: Faith Schwartz, Senior Vice President,
Government Solutions CoreLogic
February 18, 2014
FHA Loan Limits—What Areas Are the Most
Affected?
Authors: Laurie Goodman, Ellen Seidman and Jun Zhu January Lunchtime Data Talk–Multifamily Housing
Date: January 16, 2014
Presenters: Jamie Woodwell, Vice President in the
Research and Economics group at the Mortgage
Blog Posts
Bankers Association, and Mark Obrinsky, Senior Vice
President for Research and Chief Economist at the
Mortgage Debt Forgiveness Act renewal could
National Multi Housing Council
benefit millions
January 13, 2014
Authors: Laurie Goodman and Ellen Seidman
Date: February 18, 2014
December Lunchtime Data Talk: Housing Data:
Home Sales, Affordability, and Realtor/Builder
Fast pay-off, low down payment loans perform well Activity
Authors: Laurie Goodman, Ellen Seidman and Jun Zhu Presenters: Lawrence Yun, Chief Economist and Senior
Date: January 30, 2014
Vice President of Research, National Association of
Realtors and David Crowe, Chief Economist and Senior
Extending the HARP cutoff date is no silver bullet
Vice President, National Association of Home Builders
Authors: Bing Bai and Taz George
December 9, 2013
Date: January 28, 2014
Data, Demand, and Demographics: A Symposium on
GSE reform legislation? Yes, sir.
Housing Finance
Author: Ellen Seidman
Presenters: Gene Sperling, Director of the National
Date: January 22, 2014
Economic Council; Ed Glaeser, Harvard University;
Mark Fleming, Chief Economist, CoreLogic
Are new FHA loan limits a cause for concern?
November 20, 2013
Author: Ellen Seidman
Date: January 17, 2014
34
RELATED HFPC WORK
PUBLICATIONS AND EVENTS
Issue Papers and Briefs
The Impact of Mortgage Rate Increases on Housing Affordability
Authors: Lan Shi, Laurie Goodman
November 12, 2013
By most measures, the US housing market appears to be in strong recovery. House prices have risen consistently since
January 2013, and by August, the US median home price was the highest it had been since December 2004. As a result of a
stronger economy, mortgage rates also have increased consistently since December 2012. Though these trends indicate
that the country is in a housing recovery, they have also made housing less affordable over the past several months.
Moreover, employing a unique methodology that accounts for regional differences in debt-to-income and loan-to-value
ratios, we find that affordability varies significantly among major metropolitan areas.
Reps and Warrants: Lessons from the GSEs Experience
Authors: Laurie Goodman, Jun Zhu
October 24, 2013
GSE credit has become very tight, with a significant increase in the average credit score of approved loans. How Fannie
Mae and Freddie Mac are enforcing their Representations and Warranties (Reps and Warrants) rights is playing a significant
role in this phenomenon. In this paper, we use the recently released Freddie Mac and Fannie Mae loan-level credit data and
find that put-backs are having an outsized chilling effect on lower FICO/higher LTV loans.
The GSE Reform Debate: How Much Capital Is Enough?
Authors: Laurie Goodman, Jun Zhu
October 24, 2013
This paper shows that collateral composition, house price experience, and diversification significantly affect credit risk, and
thus the amount of private capital needed in front of any government catastrophic guarantee of mortgages in the secondary
market.
Eminent Domain: The Debate Distracts from Pressing Problems
Author: Pamela Lee
October 24, 2013
Richmond, CA, has taken steps to become the first city in the nation to vote to use its powers of eminent domain to seize
underwater loans and, the city argues, prevent foreclosures and neighborhood blight. We look at several cities that have
considered this controversial strategy, evaluating what they have in common, and whether the plan, as proposed, will
address the problems they face.
QRM Comment Letter: Credit Risk Retention
Author: Laurie Goodman
October 24, 2013
On August 22, the six regulatory agencies proposed rules for risk retention under Section 941 of the Dodd Frank Act. In this
comment letter, we focused on one aspect of the proposal, the Qualified Residential Mortgage (QRM) definition for
residential mortgage backed securities.
Testimony
Housing Finance Reform: Fundamentals of Transferring Credit Risk in a Future Housing Finance System
Author: Laurie Goodman
December 10, 2013
The GSEs recently completed three transactions that transferred some of the risk from their guarantor book of business to
private investors. In the context of reforms to the nation’s housing finance system, this testimony before the Senate Banking
Committee focuses on the extent to which these deals are transferrable, and to what degree.
35
Copyright © February 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