HOUSING FINANCE POLICY CENTER
HOUSING FINANCE
AT A GLANCE
A MONTHLY CHARTBOOK
March 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
This March brings spring, daylight savings, and the highly
anticipated presidential budget. On March 5, the president
sent Congress his proposed budget for fiscal year 2015.
We review three key takeaways from the budget for
housing finance folks: the FHA’s improved financial
condition, the possibility of renewed tax relief for principal
reductions, and the implications of the GSEs’ profitability.
FHA back in the black
Last fall, the FHA required its first-ever cash infusion from
Treasury. To shore up its finances, the FHA introduced
higher insurance premiums and other reforms that have
bolstered its capital reserves, now projected to reach $7.8
billion by year’s end. Contributing to the FHA’s stronger
finances has been an unusually strong book of business,
with FICOs averaging 692. This is down from 709 a year
ago, and we believe the average will continue dropping
for two reasons. First, since the FHA does not vary its
insurance premium based on credit scores, GSE loans
with private mortgage insurance (PMI) are now more
economic than FHA loans for higher FICO applicants .
We quantify this in a new feature (page 33) and
concurrent blog post. Second, the FHA has been working
with lenders to reduce lender overlays, clarifying
situations in which lenders will need to provide
indemnification against losses, as Jim Parrott discusses
in a recent commentary. Anticipating this change, Wells
Fargo announced it will lower the credit floor it uses to
screen out the riskiest FHA applicants. We do not expect
these changes to reverse the positive trend in the FHA’s
finances.
Renewed tax relief for principal reductions?
The President’s budget also asked Congress to extend
tax relief for mortgage debt cancellation on principal
residences through 2017. We estimated that a two-year
extension could help 2 million borrowers who are
delinquent or in foreclosure, as well as 160,000 borrowers
who are likely to receive principal reductions, a number
that could climb if the FHFA revisits principal reduction for
GSE loans. The strengthening housing market means
that overall modifications and liquidations will taper, but
we still expect the share of borrowers receiving principal
reductions to remain higher than the 2008 to 2013
average (pages 27-28).
continue to collaborate on reform legislation. Just 2 weeks
after the budget was released, the leaders of the Senate
Banking Committee outlined their revised, bipartisan plan
for GSE reform. This followed on the heels of the GSEs’
4Q 2013 SEC filings, which indicated that total payments
to taxpayers now exceed the amount the GSEs received
in the 2008 bailout. Serious delinquency rates dipped to
their lowest levels since the immediate post-crisis period
(page 18), a development which has contributed to the
GSEs’ financial turnaround through lower losses and by
allowing for the release of loan loss reserves.
Together with rising house prices, these are reasons for
optimism about housing. But it is important to remember
that while delinquencies and foreclosures are down, they
remain high relative to the early 2000s. Proposals
outlined in the budget are aimed at cleaning up the
aftermath of the crisis, and the renewal of legislative
activity is a step toward a more stable housing finance
system, but much work remains to be done. We hope this
Chartbook, and other research produced by the Housing
Finance Policy Center, will inform the process.
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
•
Increase in value of the US housing market from
flow of funds data (page 6)
•
Mortgage origination projections diverge for 2014;
MBA predicts large drop (page 12)
•
GSEs face lower portfolio cap for year-end 2014;
Freddie already below, Fannie within easy reach.
(page 19)
•
New table of Fannie Mae’s upfront Loan Level
Pricing Adjustments (page 20)
•
Few loans eligible and in-the-money for HARP
(page 25)
•
New analysis of MI premiums: PMI route less
costly than FHA for high FICO borrowers (page 33)
The GSEs financial turnaround
Specifics on the GSEs were not discussed in the FY2015
budget. Nevertheless, the administration and Congress
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
MI Market Share
FHA MI Premiums for Typical Purchase Loan
Initial Monthly Payment Comparison: FHA vs. PMI
32
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 is mortgage debt. The total size of the mortgage market stands at $9.86 trillion, a very slight
downtick from the previous quarter. Agency MBS make up 60.0 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
23.8 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 January 2014, debt in the private-label securitization market is split among prime (20.2 percent), Alt-A (43.8
percent), and subprime (36.0 percent) loans. The agency market, as of Q4 2013, is 46.6 percent Fannie Mae,
28.0 percent Freddie Mac, and 25.3 percent Ginnie Mae outstanding securities.
Private Label Securities
as of January 2014; dollars in trillions
100%
90%
Prime, $0.164
80%
70%
60%
Alt-A, $0.338
50%
40%
30%
20%
Subprime, $0.285
10%
0%
Sources: CoreLogic and Urban Institute.
Agency Mortgage-Backed Securities
as of Q4 2013; dollars in trillions
100%
90%
80%
Fannie Mae, $2.574
70%
60%
50%
40%
Freddie Mac, $1.548
30%
20%
10%
Ginnie Mae, $1.398
0%
Sources: Fannie Mae, Freddie Mac, Ginnie Mae and Urban Institute.
7
OVERVIEW
OVERVIEW
ORIGINATION VOLUME
AND COMPOSITION
First Lien Origination Volume
First lien originations in 2013 totaled $1.83 trillion, just short of 2012's $2.12 trillion due to the impact of higher rates.
Private label originations, at $13.1 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
$0.35
$0.01
$0.36
$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 post-crisis levels, now sitting at 60.6 percent. Likewise,
FHA and VA continue to hold a much larger share than in pre-crisis years, with 19.7 percent of the market. The
private label share has increased but remains less than one percent.
100%
90%
80%
70%
60%
50%
40%
Bank portfolio
30%
PLS securitization
20%
FHA/VA securitization
10%
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
0%
2002
GSE securitization
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 16 percent of new
originations. If we exclude refinances (bottom chart), the share of 30-year FRMs in December 2013 stood at 87
percent, 15-year FRMs at 6 percent, and ARMs at 5 percent.
All Originations
100%
90%
80%
70%
60%
50%
40%
30%
Fixed-rate 15-year mortgage
Adjustable-rate mortgage
20%
10%
0%
Jun-00
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
Fixed-rate 30-year mortgage
Other
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%
Jun-00
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
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 share
Non-agency single-family
100%
MBS issuance has
hovered at or below 2
90%
percent of total issuance
80%
since early 2011, and this
70%
share is even lower if reREMICs are excluded. In
60%
the first two months of
50%
2014, total non-agency
issuance was only $1.8
40%
billion, less than half of the
30%
issuance in the first two
months of 2013.
20%
99%
10%
1%
Sources: Inside Mortgage Finance and Urban Institute.
Note: Year-to-date figures as of February 2014.
Non-Agency Securitization 2.0
$6
$1,000
$5
$800
$4
$600
$3
$2
$200
$1
$0
$0
Prime
Subprime
Alt A
Jan-12
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
$400
0.731
$ billions
$1,200
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
$ 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%
All other
Sources: Inside Mortgage Finance and Urban Institute
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 $135.6 billion in the first two months of 2014, compared to $316.4
billion for same months a year ago. In February 2014, refinances were 52 and 56 percent of the GSEs’ business,
down again from the slight uptick of 54 and 58 percent last month, reflecting the recent fluctuation in mortgage
rates. The Ginnie Mae market has always been more purchase-driven, with refinance volume down to 25.0
percent in February 2014 from 28.2 percent in January.
At-Issuance Balance
Freddie Mac
Fannie Mae
Ginnie Mae
$2.5
$ trillions
$2.0
$1.5
$1.0
$0.25
$0.5
$0.34
$0.23
$0.0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Ann.
Sources: eMBS and Urban Institute.
Note: Annualized figure based on data from February 2014.
Percent Refi at Issuance
Fannie Mae
Ginnie Mae
Mortgage rate
80%
8%
70%
7%
60%
6%
50%
5%
40%
4%
30%
3%
20%
2%
10%
1%
0%
0%
Feb-04
May-04
Aug-04
Nov-04
Feb-05
May-05
Aug-05
Nov-05
Feb-06
May-06
Aug-06
Nov-06
Feb-07
May-07
Aug-07
Nov-07
Feb-08
May-08
Aug-08
Nov-08
Feb-09
May-09
Aug-09
Nov-09
Feb-10
May-10
Aug-10
Nov-10
Feb-11
May-11
Aug-11
Nov-11
Feb-12
May-12
Aug-12
Nov-12
Feb-13
May-13
Aug-13
Nov-13
Feb-14
9%
Sources: eMBS, Freddie Mac PMMS and Urban Institute.
Note: Based on at-issuance loan balance.
11
Mortgage Rate
Percent Refi
Freddie Mac
90%
OVERVIEW
STATE OF THE MARKET
MORTGAGE ORIGINATION
PROJECTIONS
The sharp drop in mortgage originations in Q4 2013, combined with higher interest rates in the second half of 2013
and the Fed tapering, has led the MBA, Fannie Mae, and Freddie Mac to lower their 2014 estimates for origination
activity. This reflects lower estimates on the refinance percentage, at 38 to 40 percent for 2014, down sharply from
51 percent in Q4 2013 and 62 percent for full year 2013. Housing activity is expected to pick up further in 2014, with
both housing starts and existing home sales up sharply.
Total Originations and Refinance Shares
Period
Originations ($ billions)
Total, FNMA Total, FHLMC Total, MBA
estimate
estimate
estimate
516
559
440
308
284
361
336
297
251
323
315
287
1496
2153
1823
1278
1176
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
350
425
333
242
300
375
295
210
1492
2122
1900
1350
1180
524
537
401
293
226
271
315
290
287
320
327
296
1436
2044
1755
1102
1229
FNMA
estimate
Refi Share (%)
FHLMC
estimate
73
65
56
49
50
38
33
33
35
26
25
27
66
72
62
38
28
71
65
52
51
44
40
33
33
30
20
15
15
64
70
61
38
20
MBA
estimate
74
66
51
53
49
41
36
36
36
34
35
36
65
71
63
40
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
923
1106
1356
610
780
930
1150
1400
612
783
928
1048
1194
4566
5028
5518
5655
6028
4570
5030
5500
5800
6100
4501
5030
5504
5689
6093
4200
4661
5074
5184
5564
301
369
430
505
529
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
2.42
2
1
Feb-14
Aug-13
Feb-13
Aug-12
Feb-12
Aug-11
Feb-11
Aug-10
Feb-10
Aug-09
Feb-09
Aug-08
Feb-08
Aug-07
Feb-07
Aug-06
Feb-06
Aug-05
Feb-05
Aug-04
Feb-04
Aug-03
Feb-03
Aug-02
Feb-02
Aug-01
Feb-01
Aug-00
Feb-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 657 as of December 2013. Prior to the housing crisis, this
threshold held steady in the low 600s. LTV levels at origination remain relatively high, averaging 86.3, 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
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
90th percentile
10th percentile
Sources: CoreLogic Prime Servicing and Urban Institute.
Note: Purchase-only loans.
Combined LTV at Origination
110
101.8
100
CLTV
90
86.3
80
70
Mean
10th percentile
60
50
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
90th percentile
68.6
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 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
Portland-Vancouver-Hillsboro OR-WA
Nassau County-Suffolk County NY
San Diego-Carlsbad CA
Newark NJ-PA
Boston MA
Minneapolis-St. Paul-Bloomington MN-WI
Washington-Arlington-Alexandria DC-VA-MD-WV
Chicago-Naperville-Arlington Heights IL
Denver-Aurora-Lakewood CO
Charlotte-Concord-Gastonia NC-SC
Baltimore-Columbia-Towson MD
Tampa-St. Petersburg-Clearwater FL
Pittsburgh PA
Dallas-Plano-Irving TX
Atlanta-Sandy Springs-Roswell GA
Sacramento--Roseville--Arden-Arcade CA
St. Louis MO-IL
Cincinnati OH-KY-IN
Riverside-San Bernardino-Ontario CA
Kansas City MO-KS
Miami-Miami Beach-Kendall FL
Philadelphia PA
Houston-The Woodlands-Sugar Land TX
Orlando-Kissimmee-Sanford FL
Columbus OH
Fort Worth-Arlington TX
San Antonio-New Braunfels TX
Phoenix-Mesa-Scottsdale AZ
Las Vegas-Henderson-Paradise NV
Cleveland-Elyria OH
Detroit-Dearborn-Livonia MI
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 Detroit-Dearborn-Livonia, MI it is 724. 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
Kansas City MO-KS
Denver-Aurora-Lakewood CO
$220,000
$160,000
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
Credit
Bubble
Columbus OH
Detroit-Dearborn-Livonia MI
Las Vegas-Henderson-Paradise NV
Cincinnati OH-KY-IN
Chicago-Naperville-Arlington Heights IL
Pittsburgh PA
Tampa-St. Petersburg-Clearwater FL
$260,000
Minneapolis-St. Paul-Bloomington MN-WI
Housing prices
$280,000
Atlanta-Sandy Springs-Roswell GA
Sacramento--Roseville--Arden-Arcade CA
Orlando-Kissimmee-Sanford FL
Oakland-Hayward-Berkeley CA
San Antonio-New Braunfels TX
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
Charlotte-Concord-Gastonia NC-SC
Sources: CoreLogic, US Census, Freddie Mac and Urban Institute.
Newark NJ-PA
St. Louis MO-IL
Max affordable price
Houston-The Woodlands-Sugar Land TX
Median sales price
Boston MA
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
Nassau County-Suffolk County NY
Riverside-San Bernardino-Ontario CA
Seattle-Bellevue-Everett WA
San Diego-Carlsbad CA
Dallas-Plano-Irving TX
Phoenix-Mesa-Scottsdale AZ
Baltimore-Columbia-Towson MD
San Francisco-Redwood City-South San Francisco CA
Portland-Vancouver-Hillsboro OR-WA
San Jose-Sunnyvale-Santa Clara CA
New York-Jersey City-White Plains NY-NJ
Philadelphia PA
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
$271,993
$240,000
$238,861
$200,000
$180,000
$195,000
$140,000
$120,000
Affordability Adjusted for MSA-Level DTI
1.4
1.3
1.2
1.1
1
0.9
0.8
0.7
STATE OF THE MARKET
HOME PRICE INDICES
National Year-Over-Year HPI Growth
The strong year-over-year house price growth through 2013 has continued for the beginning 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%
12.0%
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
6.3%
Jan-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 22.9 percent from the trough, national house prices still must grow 20.9 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– 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
116.8
182.3
65.6
40.5
160.5
44.4
126.3
194.7
38.2
74.3
94.3
36.3
128.6
149.0
163.0
-32.7
-20.0
-39.4
-36.5
-33.7
-33.6
-12.9
-52.9
-53.4
-13.9
-30.8
-32.3
-14.7
-25.8
-38.4
-37.2
22.9
15.5
35.6
16.2
28.4
24.1
21.6
46.1
40.1
19.0
19.8
26.0
24.5
9.0
32.3
32.3
% Rise needed
to achieve
peak
20.9
8.2
21.7
35.6
17.5
21.3
-5.6
45.4
53.2
-2.4
20.7
17.3
-5.9
23.6
22.7
20.4
Sources: CoreLogic HPIs as of January 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 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 above 100 percent current LTV. Loans
near negative equity refer to loans above 95 percent LTV
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%
5.4%
4%
2.9%
2.6%
2%
0%
2Q00
4Q00
2Q01
4Q01
2Q02
4Q02
2Q03
4Q03
2Q04
4Q04
2Q05
4Q05
2Q06
4Q06
2Q07
4Q07
2Q08
4Q08
2Q09
4Q09
2Q10
4Q10
2Q11
4Q11
2Q12
4Q12
2Q13
4Q13
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 27.7 percent of the Fannie portfolio and 40 percent of the
Freddie portfolio. Both GSEs are within easy reach of their year-end portfolio cap of $469.6 billion, with
Freddie already below it.
Fannie Mae Mortgage-Related Investment Portfolio
Composition
900
Current size: $480.7 billion
Current cap: $469.625 billion
Shrinkage year-over-year: 22.5%
800
$ billions
700
600
500
400
300
Mortgage loans
200
Non-agency MBS
100
Non-FNMA agency MBS
0
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
Fannie MBS in portfolio
Sources: Fannie Mae and Urban Institute.
Freddie Mac Mortgage-Related Investment Portfolio
Composition
1,000
900
Current size: $453.9 billion
Current cap: $469.625 billion
Shrinkage year-over-year: 17.5%
700
$ billions
Mortgage loans
800
600
500
400
300
Non-FHLMC agency MBS
FHLMC MBS in portfolio
Sources: Freddie Mac and Urban Institute.
200
100
0
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
Non-agency MBS
19
GSES UNDER CONSERVATORSHIP
GSES UNDER CONSERVATORSHIP
EFFECTIVE
EFFECTIVE GUARANTEE
GUARANTEE FEES
FEES AND
GSE RISK-SHARING TRANSACTIONS
Effective Guarantee Fees
Fannie’s effective g-fees dipped very slightly, to 57.4 bps in Q4 from 58.7 bps in Q3. This is a serious increase over
2012 (39.9 bps) and 2011 (28.8 bps), which in combination with other factors has been instrumental in the GSEs’
strong profits. Fannie’s 2014 loan-level price adjustments (LLPAs) are shown in the second table. The 25 basis
point Adverse Market Delivery Charge has been added to these upfront numbers. G-fees and LLPAs were
scheduled to increase in January, but with the arrival of FHFA Director Mel Watt, we expect these to remain
constant as Watt considers the impact of future pricing changes.
60.0
Fannie Mae single-family average charged gfee on new acquisitions
Fannie Mae single-family effective g-fee rate
57.4
50.0
40.0
36.7
30.0
30.0
Freddie Mac management and g-fee rate
20.0
10.0
0.0
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
3Q10
4Q10
1Q11
2Q11
3Q11
4Q11
1Q12
2Q12
3Q12
4Q12
1Q13
2Q13
3Q13
4Q13
Sources: Fannie Mae, Freddie Mae and Urban Institute.
Note: Freddie only reports the effective g-fee on the entire
book of business.
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.
Notes: 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
$25,953.7
97
3
NR
-
M-1, M-1H, Total
$337.5, $23.7, $361.2
1.26, 0.09, 1.35
1.65
F: BBB-sf
200
M-2, M-2H, Total
$337.5, $23.7, $361.2
1.26, 0.09, 1.35
0.30
NR
525
$80.3
0.30
0
NR
-
$26,756.4
100
3
NR
160
B-H
Reference Pool Size
Fannie Mae: Connecticut Avenue Securities (CAS) 2014-C01 | January 14, 2014
A-H
$28.4
97
M-1, M-1H, Total
$375, $20.7, $395.7
1.28, 0.07, 1.35
1.65
F: BBB-sf; M:
Baa2
M-2, M-2H, Total
$375, $20.7, $395.7
1.28, 0.07, 1.35
0.30
NR
440
$87.9
0.30
0
NR
-
$29,308.7
100
B-H
Reference Pool Size
Freddie Mac: Structured Agency Credit Risk (STACR) Debt Notes, Series 2013-DN1 | July 24, 2013
A-H
$21,906.8
97
3
NR
-
M-1, M-1H, Total
$250.0, $54.9, $304.9
1.26, 0.09, 1.35
1.65
NR
340
M-2, M-2H, Total
$250.0, $54.9, $304.9
1.26, 0.09, 1.35
0.30
NR
715
$67.8
0.30
0
NR
-
$22,584.4
100
B-H
Reference Pool Size
Freddie Mac: Structured Agency Credit Risk (STACR) Debt Notes, Series 2013-DN2 | November 12, 2013
A-H
$34,267.5
97
3
NR
145
M-1, M-1H, Total
$245.0, $125.9, $370.9
0.69, 0.36, 1.05
1.95
F: BBB-sf; M:
Baa1
M-2, M-2H, Total
$385.0, $197.9, $582.9
1.09, 0.56, 1.65
0.30
NR
425
$106 .0
0.30
0
NR
-
$35,327.3
100
B-H
Reference Pool Size
Freddie Mac: Structured Agency Credit Risk (STACR) Debt Notes, Series 2014-DN1 | February 6, 2014
A-H
$30,980.8
95.5
4.50
NR
M: A1 (sf); K:
A(sf) | NR | M: Baa1(sf);
K:BBB(sf) | NR | -
-
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
$264.5, $143.5, $408.0
1.10, 0.60, 1.70
0.30
NR | NR | -
450
$87.9
0.30
0
NR
-
$32,076.8
100
B-H
Reference Pool Size
100
220
Sources: Fannie Mae, Freddie Mac 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 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 January 2014, 2.33 percent of the Fannie
portfolio and 2.34 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%
4.63%
4%
2.33%
1.96%
2%
Single-family: Total
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
Sources: Fannie Mae and Urban Institute.
Jul-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%
4.73%
4%
3%
2.34%
2.00%
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
Sources: Freddie Mac and Urban Institute.
Jul-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%
7.28%
7%
6%
5%
4%
3%
2.39%
2.38%
2%
1%
1Q05
2Q05
3Q05
4Q05
1Q06
2Q06
3Q06
4Q06
1Q07
2Q07
3Q07
4Q07
1Q08
2Q08
3Q08
4Q08
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
3Q10
4Q10
1Q11
2Q11
3Q11
4Q11
1Q12
2Q12
3Q12
4Q12
1Q13
2Q13
3Q13
4Q13
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%
0.8%
Percentage of total loans
0.7%
0.6%
0.5%
0.4%
0.3%
0.2%
0.1%
0.10%
0.05%
Jan-14
Sep-13
May-13
Jan-13
Sep-12
May-12
Jan-12
Sep-11
Jan-11
May-11
Sep-10
May-10
Jan-10
Sep-09
May-09
Jan-09
Sep-08
Jan-08
May-08
Sep-07
Jan-07
May-07
Sep-06
May-06
Jan-06
Sep-05
Jan-05
May-05
Sep-04
May-04
Jan-04
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
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
-
Sources: FHFA Refinance Report and Urban Institute.
HARP Refinances
December
2013
Year-to-date
2013
Inception to
date
2012
2011
2010
Total refinances
150,868
4,081,916
18,872,256
4,750,530
3,229,066
3,604,640
Total HARP refinances
30,021
892,913
3,057,958
1,074,769
400,024
431,647
Share 80–105 LTV
68.3%
59.8%
69.8%
56.4%
85.0%
93.4%
Share 105–125 LTV
18.1%
21.2%
17.2%
22.4%
15.0%
6.6%
Share >125 LTV
13.6%
19.0%
13.0%
21.2%
0%
0%
All other streamlined
refinances
30,243
735,205
3,253,192
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 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 1,310,109 eligible loans, but 38 percent are out-of-the-money because the closing cost
would exceed the long-term savings, leaving 817,931 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 7,273,054 loans in this category, 5,238,345 are
in-the-money.
More than half the GSE book of business was originated after the cutoff date. Of these loans, 2,494,188 meet the
other HARP criteria, but 87 percent are out-of-the-money, leaving only 323,188 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, 131,842 of the 323,188 borrowers would potentially qualify. Between 51 and 68 percent of these
additional borrowers have already been HARP'ed once. If the cut-off date were moved forward two years, 234,931
of the 323,188 borrowers would potentially qualify.
Total loan count
24,658,886
Loans that do not meet pay history requirement
1,874,458
Loans that meet pay history requirement:
22,784,428
Pre-June 2009 origination
8,583,163
Post-June 2009 origination
14,201,265
Loans Meeting HARP Pay History Requirements
Pre-June 2009
LTV category
In-the-money
Out-of-the-money
Total
≤80
>80
Total
5,238,345
817,931
6,056,275
2,034,709
492,178
2,526,888
7,273,054
1,310,109
8,583,163
Post-June 2009
LTV category
In-the-money
Out-of-the-money
Total
≤80
>80
Total
1,085,751
323,188
1,408,939
10,621,326
2,171,000
12,792,326
11,707,077
2,494,188
14,201,265
Sources: CoreLogic prime servicing data as of January 2014.
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 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 fairly stable, at around 15,000. 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
20
Jan-14
Nov-13
Sep-13
Jul-13
May-13
Mar-13
Jan-13
Nov-12
Sep-12
Jul-12
May-12
Mar-12
Jan-12
Nov-11
Sep-11
Jul-11
May-11
Mar-11
Jan-11
Nov-10
Sep-10
Jul-10
May-10
Mar-10
Jan-10
Nov-09
Sep-09
Jul-09
0
15
9
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
2.16
2.0
1.5
1.33
1.0
0.93
0.5
Jan-14
Nov-13
Sep-13
Jul-13
May-13
Mar-13
Jan-13
Nov-12
Sep-12
Jul-12
May-12
Mar-12
Jan-12
Nov-11
Sep-11
Jul-11
May-11
Mar-11
Jan-11
Nov-10
Sep-10
Jul-10
May-10
Mar-10
Jan-10
Nov-09
Sep-09
Jul-09
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. Private investor loans are
the most likely candidates for principal reductions, followed by portfolio loans because the GSEs and FHA/VA
do not allow this type of modification. We expect that Mel Watt will consider whether to allow principal
reductions on GSE loans later in the year.
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
6,957,208 borrowers have received a modification since Q3 2007, compared with 6,983,035 liquidations in the
same period. We expect to see sharp declines in both liquidation and modification activity in 2014.
Loan Modifications and Liquidations
1,600
1,200
717
1,000
800
HAMP mods
Proprietary mods
342
600
400
Liquidations
189
Number of loans (thousands)
1,400
200
0
2007
(Q3-Q4)
2008
2009
2010
2011
2012
2013
Jan.
2014
ann.
Sources: Hope Now and
Urban Institute.
Note: Liquidations include
foreclosure sales and short
sales.
6.98
Cumulative Modifications and Liquidations
8
5.63
6
5
HAMP mods
4
Proprietary mods
Liquidations
3
1.33
Number of loans (millions)
7
2
1
0
2007
(Q3-Q4)
2008
2009
2010
2011
2012
2013
Jan.
2014
ann.
Sources: Hope Now and
Urban Institute.
Note: Liquidations include
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 65.8 billion in February 2014, a 57.7 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
2014 YTD
$94.0
$41.6
$135.6
2014 YTD
-$3.4
$10.2
$6.8
2014 (Ann.)
$563.8
$249.78
$813.6
2014 (Ann.)
-$20.4
$61.2
$40.8
Sources: eMBS and Urban Institute.
Note: Dollar amounts are in billions.
Year-to-date figure as of February 2014
Sources: eMBS and Urban Institute.
Note: Dollar amounts are in billions.
Year-to-date figure as of February 2014
30
OVERVIEW
AGENCY
ISSUANCE
OVERVIEW
AGENCY GROSS AND NET ISSUANCE
AGENCY
GROSS
ISSUANCE
&
FED
BY MONTH
PURCHASES
Monthly Gross Issuance
250
200
$ billions
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
should begin to rise as we move from a
refinance market to a purchase market.
February 2014 showed a Ginnie Mae
share of 30.5 percent.
150
100
Ginnie Mae
50
Fannie Mae
Freddie Mac
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
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 December, with lower agency
production and the Fed not yet tapering, that share rose to 68 percent. The impact of this tapering began to show
in February, when total Fed purchases were $43.5 billion, down from $55.2 billion a month earlier (Fed
purchases include pay downs, as well as net new purchases). With gross issuance also declining, the Fed
absorption of gross issuance remained relatively high at 66 percent in February. This should begin to decline, as
the Fed continues to taper and the weak winter home purchase season (resulting in lower gross mortgage
issuance) gives way to stronger spring purchase activity (resulting in higher gross mortgage issuance).
Total Fed purchases
250
200
150
100
50
Sources: eMBS, Federal Reserve Bank of New York and Urban Institute.
31
Feb-14
Aug-13
Feb-13
Aug-12
Feb-12
Aug-11
Feb-11
Aug-10
Feb-10
Aug-09
Feb-09
Aug-08
Feb-08
Aug-07
Feb-07
Aug-06
Feb-06
Aug-05
Feb-05
Aug-04
Feb-04
Aug-03
Feb-03
Aug-02
Feb-02
Aug-01
Feb-01
0
Aug-00
$ billions
Gross issuance
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 held
41.3 percent of the market, up
from 21 percent in 1Q11 but
significantly down from their
nearly 80 percent share in
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
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
April 8 Lunchtime Data Talk—Counting the Housing Stock with AHS, CPS, ACS, and HVS
Speakers include Kurt Usowski, Deputy Assistant Secretary for Economic Affairs, HUD and Arthur Cresce, Jr.,
Assistant Division Chief for Housing Statistics at the U.S. Census Bureau. Dr. Usowski will walk through the
American Housing Survey collection procedures, the advantages and drawbacks of the data and changes for the
2015 AHS. Dr. Cresce will compare CPS, ACS and HVS, including collection procedures and implications for
counting the US housing stock. Please check our events page for more information as it becomes available.
Commentaries
Blog Posts
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
The re-emerging dominance of private mortgage
insurers
Authors: Bing Bai and Laurie Goodman
Date: March 18, 2014
Lifting the Fog around FHA Lending?
Author: Jim Parrott
Date: March 13, 2014
Serious movement on housing finance reform
Authors: Ellen Seidman
Date: March 16, 2014
The Mortgage Debt Forgiveness Act Has Expired—
Renewal Could Benefit Millions
Authors: Laurie Goodman and Ellen Seidman
Date: February 18, 2014
The housing bust disproportionately hurt minorities
Authors: Laurie Goodman, Jun Zhu, and Taz George
Date: March 14, 2014
Single-Family Securitized Financing: A Blueprint
for the Future?
Author: Laurie Goodman
Date: January 17, 2014
Strategic default: how big an issue?
Author: Maia Woluchem
Date: March 12, 2014
Where have all the mortgages gone?
Authors: Laurie Goodman, Jun Zhu, Taz George
Date: March 6, 2014
FHA Loan Limits—What Areas Are the Most
Affected?
Authors: Laurie Goodman, Ellen Seidman and Jun Zhu We’ve mapped America’s rental housing crisis
Date: January 16, 2014
Author: Erika Poethig
Date: March 3, 2014
Does the mortgage market really need private
capital?
Author: Maia Woluchem
Date: February 21, 2014
Mortgage debt forgiveness act renewal could benefit
millions
Authors: Laurie Goodman and Ellen Seidman
Date: February 18, 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
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 Crew Cutts, Equifax.
Discussant: Bob Avery, Federal Housing Finance Agency.
March 10, 2014
Sunset Seminar: Bringing Private Capital Back to the Mortgage Market
Panelists: Laurie Goodman, Housing Finance Policy Center; Eric Kaplan, Shellpoint Partners; Paul Leonard,
Financial Services Roundtable.
Moderator: Faith Schwartz, CoreLogic.
February 18, 2014
January Lunchtime Data Talk–Multifamily Housing
Presenters: Jamie Woodwell, Mortgage Bankers Association, and Mark Obrinsky, National Multifamily Housing
Council.
January 13, 2014
35
Copyright © March 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