HOUSING FINANCE POLICY CENTER
HOUSING FINANCE
AT A GLANCE
A MONTHLY CHARTBOOK
June 2014
1
ABOUT THE CHARTBOOK
HOUSING FINANCE POLICY CENTER STAFF
The Housing Finance Policy Center’s (HFPC) mission is
to produce analyses and ideas that promote sound public
policy, efficient markets, and access to economic
opportunity in the area of housing finance. At A Glance, a
monthly chartbook and data source for policymakers,
academics, journalists, and others interested in the
government’s role in mortgage markets, is at the heart of
this mission.
Laurie Goodman
Center Director
Ellen Seidman
Senior Fellow
Jim Parrott
Senior Fellow
Sheryl Pardo
Associate Director for Communications
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 state of the housing market and broader economy is
inextricably intertwined with the state of credit access and
housing affordability. Housing is less affordable than a
year ago, as mortgage rates have risen 65 basis points
(page 11) and home prices have risen 10.5 percent, but
still affordable by historic standards (pages 16-17). The
real problem we see in today’s market is that credit is tight
for borrowers with less-than-stellar credit scores. At the
end of the first quarter of 2014, the mean FICO score at
origination was 743, up nearly 50 basis points since 2001
(page 14).
looks at a lender’s serious delinquency rate without
consideration of the composition of the lender’s book of
business. We applaud that action and propose a slight
variation of the new metric to eliminate incentives to limit
lending to only a fraction of borrowers who would
otherwise qualify for an FHA loan.
Request for input on guarantee fees
INSIDE THIS ISSUE
•
Value of the US housing market increases
according to Fed Flow of Funds (page 6)
•
No new non-agency MBS issuance in May 2014;
non-agency share at 1 percent (page 10)
•
Fannie, Freddie, MBA project weaker home sales
but stronger housing starts in 2014 (page 12)
•
Houston, Dallas, and Denver are above peak
housing prices levels (page 17)
•
GSE portfolios continue to wind down, already
below their 2014 year-end caps (page 19)
•
HARP volume continues decline in 2014 Q1; less
than 700k borrowers remain eligible and in-themoney (pages 24-25)
•
Agency issuance 2014 YTD far below 2013,
reflecting higher interest rates bringing down refi
activity (page 30)
We were pleased to see recent actions by the Federal
Housing Finance Agency (FHFA) to address access to
credit. On June 5, the FHFA requested input on changes
to both the overall level of guarantee fees and to the loanlevel pricing adjustments (LLPAs), upfront fees on riskier
loans. FHFA is seeking very broad input, asking about the
factors and goals that should be considered in setting gfees, as well as the allocation of capital across risk
buckets. The responses may allow FHFA to determine
what action to take on g-fees and LLPAs. It is clear that in
Mel Watt’s FHFA, LLPAs could decline. In two recent blog
posts we showed that the GSEs are failing to reach lessthan-pristine borrowers. Watt’s FHFA would like to
change this, and their request for input on g-fees is
another early step down that path.
We welcome feedback from our readers on how we can
make At A Glance a more useful publication. Please email any comments or questions to ataglance@urban.org.
Federal Housing Administration (FHA) actions to
reduce overlays
FHA is also concerned about access to credit. The same
day that Mel Watt gave his maiden speech as director of
the FHFA, FHA announced its Blueprint for Access, a set
of initiatives including the Homeowner Armed with
Knowledge (HAWK) program, in which borrowers who
commit to housing counseling receive a discount on their
upfront and annual FHA mortgage insurance premiums.
The initiatives also include quality assurance efforts
intended to resolve some of lenders’ uncertainty about
how FHA underwriting rules are applied, which should
relieve pressure on lenders to apply overlays to FHA
lending. Overlays have become a huge issue for FHA, the
traditional lender of last resort. The proportion of FHA
borrowers with FICO credit scores under 640 shrunk from
47 percent in 2001 to less than 3 percent today. In a
recent commentary, we examine FHA’s proposed
Supplemental Performance Metric, which would
supplement the Lender Compare Ratio, a measure that
3
CONTENTS
Overview
Market Size Overview
Value of the US Residential Housing Market
Size of the US Residential Mortgage Market
Private-Label Securities
Agency Mortgage-Backed Securities
6
6
7
7
Origination Volume and Composition
First Lien Origination Volume & Share
8
Mortgage Origination Product Type
Composition (All Originations & Purchase Originations Only)
9
Securitization Volume and Composition
Agency/Non-Agency Share of Residential MBS Issuance
Non-Agency MBS Issuance
Non-Agency Securitization 2.0
10
10
10
Agency Activity: Volumes and Purchase/Refi Composition
Agency Gross Issuance
Percent Refi at Issuance
11
11
State of the Market
Mortgage Origination Projections
Total Originations and Refinance Shares
Housing Starts and Home Sales
12
12
Originator Profitability
Originator Profitability and Unmeasured Costs (OPUC)
13
Credit Availability for Purchase Loans
Borrower FICO Score at Origination Month
Combined LTV at Origination Month
Origination FICO and LTV by MSA
14
14
15
Housing Affordability
National Housing Affordability Over Time
Affordability Adjusted for MSA-Level DTI
16
16
Home Price Indices
National Year-Over-Year HPI Growth
Changes in CoreLogic HPI for Top MSAs
17
17
Negative Equity & Serious Delinquency
Negative Equity Share
Loans in Serious Delinquency
18
18
GSEs under Conservatorship
GSE Portfolio Wind-Down
Fannie Mae Mortgage-Related Investment Portfolio
Freddie Mac Mortgage-Related Investment Portfolio
19
19
4
CONTENTS
Effective Guarantee Fees & GSE Risk-Sharing Transactions
Effective Guarantee Fees
Fannie Mae Upfront Loan-Level Price Adjustment
GSE Risk-Sharing Transactions
20
20
21
Serious Delinquency Rates
Serious Delinquency Rates – Fannie Mae & Freddie Mac
Serious Delinquency Rates – Single-Family Loans & Multifamily GSE Loans
22
23
Refinance Activity
Total HARP Refinance Volume
HARP Refinances
24
24
GSE Loans: Potential Refinances
Loans Meeting HARP Pay History Requirements
25
Modification Activity
HAMP Activity
New HAMP Modifications
Cumulative HAMP Modifications
26
26
Modification by Type of Action and Bearer of Risk
Changes in Loan Terms for Modifications
Type of Modification Action by Investor and Product Type
27
27
Modifications and Liquidations
Loan Modifications and Liquidations (By Year & Cumulative)
28
Modification Redefault Rates by Bearer of the Risk
Redefault Rate after Modification (12 Months & 24 Months)
29
Agency Issuance
Agency Gross and Net Issuance
Agency Gross Issuance
Agency Net Issuance
30
30
Agency Gross Issuance & Fed Purchases
Monthly Gross Issuance
Fed Absorption of Agency Gross Issuance
31
31
Mortgage Insurance Activity
MI Activity & Market Share
FHA MI Premiums for Typical Purchase Loan
Initial Monthly Payment Comparison: FHA vs. PMI
32
33
33
Related HFPC Work
Publications and Events
34
5
OVERVIEW
MARKET SIZE OVERVIEW
Home values continue to improve, with the Q1 2014 Fed Flow of Funds data indicating an increase in the total
value of the US residential 1-4 unit housing market to 21.2 trillion, from 20.4 trillion in Q4 2013. Just under half of
the market, $9.85 trillion, is mortgage debt, a slight downtick from the previous quarter, while household equity
increased over $800 billion to $11.4 trillion. Agency MBS make up 56.2 percent of the total, private-label securities
make up 7.8 percent, and unsecuritized first liens at commercial banks, savings institutions, and credit unions
make up 24.0 percent. Second liens and GSE loans in portfolio comprise the remaining 7.0 and 4.9 percent of the
total, respectively.
Size of the US Residential
Mortgage Market
Value of the US Housing Market
as of Q1 2014
as of Q1 2014
$25
Unsecuritized first liens at commercial banks, savings
institutions, credit unions
$20
Fannie and Freddie loans in portfolio
Agency MBS
Equity
$11.397
Private-label securities
$ trillions
$15
Second liens
$10
$10
$2.371
$8
$ trillions
$5
Debt,
household
mortgages,
Debt,
$9,833
Household
Mortgages
$9.851
$0.479
$5
$5.541
$3
$0
Source: Federal Reserve Flow of Funds and Urban Institute.
$0
$0.768
$0.692
Sources: Federal Reserve Flow of Funds, Inside Mortgage Finance,
Fannie Mae, Freddie Mac, and Urban Institute.
6
OVERVIEW
MARKET SIZE OVERVIEW
As of April 2014, debt in the private-label securitization market is split among prime (20.0 percent), Alt-A (44.0
percent), and subprime (36.0 percent) loans. Outstanding securities in the agency market, as of Q1 2014, are
46.5 percent Fannie Mae, 28.2 percent Freddie Mac, and 25.3 percent Ginnie Mae.
Private Label Securities by Product Type
as of April 2014; dollars in billions
100%
90%
Prime, $0.154
80%
70%
60%
Alt-A, $0.339
50%
40%
30%
20%
Subprime, $0.281
10%
0%
Sources: CoreLogic and Urban Institute.
Agency Mortgage-Backed Securities
as of Q1 2014; dollars in trillions
100%
90%
80%
Fannie Mae, $2,588
70%
60%
50%
40%
Freddie Mac, $1570
30%
20%
10%
Ginnie Mae, $1.410
0%
Sources: Fannie Mae, Freddie Mac, Ginnie Mac, and Urban Institute.
7
OVERVIEW
OVERVIEW
ORIGINATION VOLUME
AND COMPOSITION
First lien originations in Q1 2014 began far below their 2013 pace, totaling only $123.6 billion. The share of bank
portfolio and FHA/VA originations rose to around 22 percent each, while the GSE share dropped to 54 percent from
61 percent in 2013, reflecting the curtailment of refinancing activity. The private label origination share remains less
than one percent.
First Lien Origination Volume and Share
$4.0
$3.5
$ trillions
$3.0
$2.5
$2.0
$1.5
$0.5
$0.01
$0.12
1Q14
2013
2012
2011
2010
2009
2008
2007
2006
2005
FHA/VA securitization
2004
$0.0
2003
PLS securitization
$0.30
2002
Bank portfolio
$1.0
$0.05
GSE securitization
100%
90%
22.1%
80%
0.7%
70%
22.9%
60%
50%
40%
30%
54.3%
20%
10%
1Q14
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
0%
Sources: Inside Mortgage Finance and Urban Institute.
8
OVERVIEW
OVERVIEW
MORTGAGE
MORTGAGE ORIGINATION
ORIGINATION PRODUCT
PRODUCT
TYPE
TYPE
Adjustable-rate mortgages (ARMs) accounted for as much as 29 percent of all new originations during the peak of the
recent housing bubble in 2005 (top chart). They fell to a historic low of 1 percent in 2009, and now consist of 6
percent of total originations. Fifteen-year FRMs, predominantly a refinance product, comprise 17 percent of new
originations. If we exclude refinances (bottom chart), the share of 30-year FRMs in March 2014 stood at 86 percent,
15-year FRMs at 6 percent, and ARMs at 6 percent.
All Originations
100%
90%
80%
70%
60%
Fixed-rate 30-year mortgage
Fixed-rate 15-year mortgage
50%
40%
30%
Adjustable-rate mortgage
20%
Other
10%
Mar-14
Aug-13
Jan-13
Jun-12
Apr-11
Nov-11
Sep-10
Jul-09
Feb-10
Dec-08
Oct-07
May-08
Mar-07
Aug-06
Jan-06
Jun-05
Nov-04
Apr-04
Sep-03
Jul-02
Feb-03
Dec-01
Oct-00
May-01
Mar-00
0%
Sources: CoreLogic Prime Servicing and Urban Institute.
Purchase Loans Only
Fixed-rate 30-year mortgage
Fixed-rate 15-year mortgage
Adjustable-rate mortgage
Mar-00
Oct-00
May-01
Dec-01
Jul-02
Feb-03
Sep-03
Apr-04
Nov-04
Jun-05
Jan-06
Aug-06
Mar-07
Oct-07
May-08
Dec-08
Jul-09
Feb-10
Sep-10
Apr-11
Nov-11
Jun-12
Jan-13
Aug-13
Mar-14
Other
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Sources: CoreLogic Prime Servicing and Urban Institute.
9
OVERVIEW
SECURITIZATION VOLUME AND
COMPOSITION
Agency/Non-Agency Share of Residential MBS Issuance
Agency share
Non-agency single-family MBS
issuance has hovered at or
100%
below 2 percent of total issuance
90%
since early 2011, and this share
80%
is even lower if re-REMICs are
excluded. The environment in
70%
2014 has not been favorable for
60%
new non-agency deals. In the
50%
first five months of 2014, total
40%
non-agency issuance was $4.5
billion, compared to $16.1 billion
30%
over the same period in 2013.
20%
May 2014 was the first month in
10%
2 years with absolutely no new
non-agency deals.
0%
Non-Agency share
99%
2014 YTD
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1%
Sources: Inside Mortgage Finance and Urban Institute.
Note: Year-to-date figures as of May 2014.
Non-Agency MBS Issuance
Non-Agency Securitization 2.0
$1,200
$6
$1,000
$5
$4
$600
$ billions
$ billions
$800
$400
$3
$2
$200
$1
Prime
Subprime
Alt A
All other
Sources: Inside Mortgage Finance and Urban Institute.
$0
Mar-12
Apr-12
May-12
Jun-12
Jul-12
Aug-12
Sep-12
Oct-12
Nov-12
Dec-12
Jan-13
Feb-13
Mar-13
Apr-13
May-13
Jun-13
Jul-13
Aug-13
Sep-13
Oct-13
Nov-13
Dec-13
Jan-14
Feb-14
Mar-14
Apr-14
May-14
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
1Q14
$0
Sources: Inside Mortgage Finance and Urban Institute.
Note: Monthly figures equal total non-agency MBS issuance minus
Re-REMIC issuance.
10
OVERVIEW
AGENCY ACTIVITY:
VOLUMES AND PURCHASE/REFI
COMPOSITION
Agency issuance continues declining, totaling $329.4 billion in the first five months of 2014, compared to $773.8
billion for the same period a year ago. In May 2014, refinances were 46 percent of the GSEs’ business, down
from the first quarter’s average of 52 and 57 percent. The Ginnie Mae market has always been more purchasedriven, with refinance volume of 24 percent in May 2014.
Agency Gross Issuance
Fannie Mae
Freddie Mac
Ginnie Mae
$2.5
$ trillions
$2.0
$1.5
$1.0
$0.26
$0.22
$0.34
$0.5
$0.0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Ann.
Sources: eMBS and Urban Institute.
Note: Year to date as of May 2014.
Percent Refi at Issuance
Freddie Mac
Ginnie Mae
Mortgage rate
9.0%
8.0%
7.0%
6.0%
5.0%
4.0%
3.0%
2.0%
May-04
Aug-04
Nov-04
Feb-05
May-05
Aug-05
Nov-05
Feb-06
May-06
Aug-06
Nov-06
Feb-07
May-07
Aug-07
Nov-07
Feb-08
May-08
Aug-08
Nov-08
Feb-09
May-09
Aug-09
Nov-09
Feb-10
May-10
Aug-10
Nov-10
Feb-11
May-11
Aug-11
Nov-11
Feb-12
May-12
Aug-12
Nov-12
Feb-13
May-13
Aug-13
Nov-13
Feb-14
May-14
90%
80%
70%
60%
50%
40%
30%
20%
Sources: eMBS, Freddie Mac PMMS and Urban Institute.
Note: Based on at-issuance loan balance.
11
Mortgage Rate
Percent Refi
Fannie Mae
OVERVIEW
STATE OF THE MARKET
MORTGAGE ORIGINATION
PROJECTIONS
The sharp drop in mortgage originations in late 2013 and early 2014, combined with higher interest rates in the
second half of 2013 and the Fed tapering, has led to lower origination projections from the GSEs and MBA. Home
sales are expected to be slightly softer in 2014 than in 2013, while housing starts are expected to pick up steam.
And both housing starts and home sales are expected to strengthen considerably in 2015. Interest rates will edge up
through the end of the year and in 2015, contributing to a sharp decline in the refinance share.
Total Originations and Refinance Shares
Period
Originations ($ billions)
Total, FNMA Total, FHLMC Total, MBA
estimate
estimate
estimate
532
572
450
358
237
322
302
261
237
302
297
263
1496
2153
1913
1122
1099
2013 Q1
2013 Q2
2013 Q3
2013 Q4
2014 Q1
2014 Q2
2014 Q3
2014 Q4
2015 Q1
2015 Q2
2015 Q3
2015 Q4
FY 2011
FY 2012
FY 2013
FY 2014
FY 2015
532
572
450
350
300
390
320
240
285
360
280
200
1492
2122
1925
1250
1125
524
537
401
293
226
267
289
264
290
307
324
296
1436
2044
1755
1046
1217
FNMA
estimate
Refi Share (%)
FHLMC
estimate
73
65
52
52
48
39
32
30
32
23
23
24
66
72
62
37
25
73
65
52
51
48
40
33
33
30
20
15
15
64
70
61
39
20
MBA
estimate
74
66
51
53
49
41
38
36
35
33
32
35
65
71
63
41
34
Sources: Mortgage Bankers Association, Fannie Mae, Freddie Mac and Urban Institute.
Note: Shaded boxes indicate forecasted figures. All figures are estimates for total single-family market; column labels indicate source of
estimate. Forecasts include interest rates as well. The yearly averages for 2011, 2012, and 2013 were 4.5%, 3.7%, and 4.0%, respectively.
The three sources' projected annual average rates for 2014 and 2015 range from 4.4% to 4.7%, and 4.8% to 5.2%, respectively.
Housing Starts and Homes Sales
Housing Starts, thousands
Home Sales
Year
Total,
FNMA
estimate
Total,
FHLMC
estimate
Total,
MBA
estimate
Total,
FNMA
estimate
Total,
FHLMC
estimate
Total,
MBA
estimate
Existing,
MBA
estimate
New,
MBA
Estimate
FY 2011
FY 2012
FY 2013
FY 2014
FY 2015
609
781
925
1050
1273
610
780
930
1090
1400
612
783
929
1015
1196
4566
5028
5519
5457
5834
4570
5030
5500
5500
5960
4501
5030
5505
5454
6111
4200
4661
5073
4976
5568
301
369
432
478
543
Sources: Mortgage Bankers Association, Fannie Mae, Freddie Mac and Urban Institute.
Note: Shaded boxes indicate forecasted figures. All figures are estimates for total single-family market. Column labels indicate source of
estimate.
12
STATE OF THE MARKET
ORIGINATOR PROFITABILITY
When originator profitability is high, mortgage rates tend to be less responsive to the general level of interest
rates, as originators are capacity-constrained. When originator profitability is low, mortgage rates are far more
responsive to the general level of interest rates. As mortgage interest rates have risen and fewer borrowers find
it economical to refinance, originator profitability is lower. Originator profitability is often measured as the spread
between the rate the borrower pays for the mortgage (the primary rate) and the yield on the underlying
mortgage-backed security in the secondary market (the secondary rate). However, with guarantee fees rising
steadily over the past few years, the so-called primary-secondary spread has become a very imperfect measure
to compare profitability across time.
This measure used here, Originator Profitability and Unmeasured Costs (OPUC), is formulated and calculated by
the Federal Reserve Bank of New York. It looks at the price at which the originator actually sells the mortgage
into the secondary market and adds the value of retained servicing (both base and excess servicing, net of gfees) as well as points paid by the borrower.
Originator Profitability and Unmeasured Costs
OPUC
6
Dollars per $100 loan
5
4
3
2.27
2
1
May-14
Nov-13
May-13
Nov-12
May-12
Nov-11
May-11
Nov-10
May-10
Nov-09
May-09
Nov-08
May-08
Nov-07
May-07
Nov-06
May-06
Nov-05
May-05
Nov-04
May-04
Nov-03
May-03
Nov-02
May-02
Nov-01
May-01
Nov-00
May-00
0
Sources: Federal Reserve Bank of New York, updated monthly and available at this link:
http://www.ny.frb.org/research/epr/2013/1113fust.html and Urban Institute.
Note: OPUC stands for "originator profits and unmeasured costs" as discussed in Fuster et al. (2013). The OPUC series is a monthly (4week moving) average.
13
STATE OF THE MARKET
OVERVIEW
CREDIT
CREDIT AVAILABILITY
AVAILABILITY FOR
FOR
PURCHASE LOANS
Access to credit has become extremely tight, especially for borrowers with low FICO scores. The mean and median
FICO scores on new originations have drifted up about 39 points over the last decade. The 10th percentile of FICO
scores, which represents the lower bound of creditworthiness needed to qualify for a mortgage, stood at 658 as of
March 2014. 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
90th percentile
Mean
FICO Score
850
800
799
750
743
735
700
658
650
Median
600
10th percentile
550
Mar-01
Sep-01
Mar-02
Sep-02
Mar-03
Sep-03
Mar-04
Sep-04
Mar-05
Sep-05
Mar-06
Sep-06
Mar-07
Sep-07
Mar-08
Sep-08
Mar-09
Sep-09
Mar-10
Sep-10
Mar-11
Sep-11
Mar-12
Sep-12
Mar-13
Sep-13
Mar-14
500
Sources: CoreLogic Prime Servicing and Urban Institute.
Note: Purchase-only loans.
Combined LTV at Origination
110
101.5
90th percentile
LTV
100
90
90
80
86.3
70
68.9
Mean
60
Median
50
10th percentile
40
Mar-01
Sep-01
Mar-02
Sep-02
Mar-03
Sep-03
Mar-04
Sep-04
Mar-05
Sep-05
Mar-06
Sep-06
Mar-07
Sep-07
Mar-08
Sep-08
Mar-09
Sep-09
Mar-10
Sep-10
Mar-11
Sep-11
Mar-12
Sep-12
Mar-13
Sep-13
Mar-14
30
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
Origination LTV
San Francisco-Redwood City-South San Francisco CA
San Jose-Sunnyvale-Santa Clara CA
Oakland-Hayward-Berkeley CA
Los Angeles-Long Beach-Glendale CA
New York-Jersey City-White Plains NY-NJ
Seattle-Bellevue-Everett WA
San Diego-Carlsbad CA
Nassau County-Suffolk County NY
Newark NJ-PA
Washington-Arlington-Alexandria DC-VA-MD-WV
Minneapolis-St. Paul-Bloomington MN-WI
Portland-Vancouver-Hillsboro OR-WA
Baltimore-Columbia-Towson MD
Boston MA
Denver-Aurora-Lakewood CO
Chicago-Naperville-Arlington Heights IL
Charlotte-Concord-Gastonia NC-SC
Sacramento--Roseville--Arden-Arcade CA
Tampa-St. Petersburg-Clearwater FL
Orlando-Kissimmee-Sanford FL
Philadelphia PA
Houston-The Woodlands-Sugar Land TX
Riverside-San Bernardino-Ontario CA
St. Louis MO-IL
Kansas City MO-KS
Dallas-Plano-Irving TX
Miami-Miami Beach-Kendall FL
Atlanta-Sandy Springs-Roswell GA
Columbus OH
Phoenix-Mesa-Scottsdale AZ
Pittsburgh PA
Cincinnati OH-KY-IN
Fort Worth-Arlington TX
Cleveland-Elyria OH
Detroit-Dearborn-Livonia MI
Las Vegas-Henderson-Paradise NV
San Antonio-New Braunfels TX
Origination FICO
STATE OF THE MARKET
OVERVIEW
CREDIT
CREDIT AVAILABILITY
AVAILABILITY FOR
FOR
PURCHASE LOANS
Credit has been tight for all borrowers with less-than-stellar credit scores, but there are significant variations across
MSAs. For example, the mean origination FICO for borrowers in San Francisco- Redwood City- South San
Francisco, CA is 766, while in San Antonio-New Braunfels, TX it is 720. Across all MSAs, lower average FICO
scores tend to be correlated with high average LTVs, as these MSAs rely heavily on FHA/VA financing.
Origination FICO and LTV by MSA
Mean origination LTV
Sources: CoreLogic Prime Servicing as of March 2014 and Urban Institute.
Note: Purchase-only loans.
15
Fort Worth-Arlington TX
Nassau County-Suffolk County NY
$160
16
Detroit-Dearborn-Livonia MI
$220
Chicago-Naperville-Arlington Heights IL
Credit
Bubble
Pittsburgh PA
Cleveland-Elyria OH
Columbus OH
Las Vegas-Henderson-Paradise NV
Tampa-St. Petersburg-Clearwater FL
Cincinnati OH-KY-IN
Kansas City MO-KS
St. Louis MO-IL
Minneapolis-St. Paul-Bloomington MN-WI
$260
Atlanta-Sandy Springs-Roswell GA
$280
Newark NJ-PA
San Antonio-New Braunfels TX
Denver-Aurora-Lakewood CO
Sacramento--Roseville--Arden-Arcade CA
Orlando-Kissimmee-Sanford FL
Mar-01
Sep-01
Mar-02
Sep-02
Mar-03
Sep-03
Mar-04
Sep-04
Mar-05
Sep-05
Mar-06
Sep-06
Mar-07
Sep-07
Mar-08
Sep-08
Mar-09
Sep-09
Mar-10
Sep-10
Mar-11
Sep-11
Mar-12
Sep-12
Mar-13
Sep-13
Mar-14
Sources: CoreLogic, US Census, Freddie Mac, and Urban
Institute.
$120
Note: The maximum affordable price is the house price that a
family can afford putting 20 percent down, with a monthly
payment of 28 percent of median family income, at the Freddie
Mac prevailing rate for 30-year fixed-rate mortgage, and
property tax and insurance at 1.75 percent of housing value.
Oakland-Hayward-Berkeley CA
Charlotte-Concord-Gastonia NC-SC
Max affordable price at 6.0% rate
Houston-The Woodlands-Sugar Land TX
Max affordable price
Housing prices ($ thousands)
Median sales price
Baltimore-Columbia-Towson MD
Home prices are very affordable by
historical standards, despite increasing
home prices and a modest rise in interest
rates over the past year. Even if interest
rates rose to 6 percent, affordability would
be at the long term historical average.
Riverside-San Bernardino-Ontario CA
San Diego-Carlsbad CA
Phoenix-Mesa-Scottsdale AZ
Seattle-Bellevue-Everett WA
Miami-Miami Beach-Kendall FL
Philadelphia PA
New York-Jersey City-White Plains NY-NJ
Portland-Vancouver-Hillsboro OR-WA
Boston MA
Dallas-Plano-Irving TX
San Franc-Redwood City-South San Francisco CA
Washington-Arlington-Alexandria DC-VA-MD-WV
San Jose-Sunnyvale-Santa Clara CA
Los Angeles-Long Beach-Glendale CA
Ratio
STATE OF THE MARKET
HOUSING AFFORDABILITY
National Housing Affordability Over Time
$300
$274,830
$240
$238,861
$200
$180
$194,000
$140
Affordability Adjusted for MSA-Level DTI
1.4
1.3
1.2
1.1
1
0.9
0.8
0.7
Sources: CoreLogic, US Census, Freddie Mac, and UI calculations based on NAR methodology.
Note: Affordability index is calculated relative to home prices in 2000-03. A ratio above 1 indicates higher affordability in March 2014 than in
2000-03.
STATE OF THE MARKET
HOME PRICE INDICES
National Year-Over-Year HPI Growth
Year-over-year growth rate
The strong year-over-year house price growth through 2013 has flattened out through April 2014, as
indicated by both the repeated sales HPI from CoreLogic and hedonic index from Zillow.
CoreLogic HPI year-over-year
20.0%
Zillow HVI year-over-year
15.0%
10.0%
11.1%
5.0%
5.9%
0.0%
-5.0%
-10.0%
-15.0%
Apr-14
Oct-13
Apr-13
Oct-12
Apr-12
Oct-11
Apr-11
Oct-10
Apr-10
Oct-09
Apr-09
Oct-08
Apr-08
Oct-07
Apr-07
Oct-06
Apr-06
Oct-05
Apr-05
Oct-04
Apr-04
Oct-03
Apr-03
Oct-02
Apr-02
Oct-01
Apr-01
-20.0%
Sources: CoreLogic, Zillow, and Urban Institute.
Changes in CoreLogic HPI for Top MSAs
Despite rising 27.3 percent from the trough, national house prices still must grow 16.7 percent to reach pre-crisis
peak levels. At the MSA level, three of the top 15 MSAs have reached their peak HPI– Houston, TX; Dallas, TX;
and Denver, CO. Two MSAs particularly hard hit by the bust– Riverside, CA and Phoenix, AZ– would need to
rise over 40 percent to return to peak prices.
HPI changes (%)
MSA
United States
New York-Jersey City-White Plains NY-NJ
Los Angeles-Long Beach-Glendale CA
Chicago-Naperville-Arlington Heights IL
Atlanta-Sandy Springs-Roswell GA
Washington-Arlington-Alexandria DC-VA-MD-WV
Houston-The Woodlands-Sugar Land TX
Phoenix-Mesa-Scottsdale AZ
Riverside-San Bernardino-Ontario CA
Dallas-Plano-Irving TX
Minneapolis-St. Paul-Bloomington MN-WI
Seattle-Bellevue-Everett WA
Denver-Aurora-Lakewood CO
Baltimore-Columbia-Towson MD
San Diego-Carlsbad CA
Anaheim-Santa Ana-Irvine CA
2000 to peak
Peak to
trough
Trough to
current
99.3
116.6
182.0
65.7
40.7
160.4
44.4
126.3
194.5
38.1
74.3
94.2
36.2
128.7
149.1
163.0
-32.6
-20.1
-39.3
-36.5
-33.6
-33.5
-12.7
-52.8
-53.4
-13.8
-30.8
-32.2
-14.6
-25.8
-38.4
-37.2
27.3
16.0
40.5
17.8
32.4
28.8
29.2
48.6
44.9
24.3
22.0
32.4
30.0
9.7
36.2
37.3
% Rise needed
to achieve
peak
16.7
7.8
17.2
33.8
13.8
16.8
-11.3
42.7
48.1
-6.6
18.5
11.5
-9.9
22.9
19.2
15.9
Sources: CoreLogic HPIs as of April 2014 and Urban Institute.
Note: This table includes the largest 15 Metropolitan areas by mortgage count.
17
OVERVIEW
STATE OF THE MARKET
NEGATIVE EQUITY & SERIOUS
DELINQUENCY
Negative Equity Share
With housing prices appreciating through the first quarter of 2014, residential properties in negative equity (LTV
greater than 100) as a share of all residential properties with a mortgage has dropped to 12.7 percent. Residential
properties in near negative equity (LTV between 95 and 100) comprise another 3.2 percent.
Negative equity
Near negative equity
35%
30%
25%
20%
15.9%
12.7%
15%
10%
5%
1Q14
4Q13
3Q13
2Q13
1Q13
4Q12
3Q12
2Q12
1Q12
4Q11
3Q11
2Q11
1Q11
4Q10
3Q10
2Q10
1Q10
4Q09
3Q09
0%
Sources: CoreLogic and Urban Institute.
Note: CoreLogic negative equity rate is the percent of all residential properties with a mortgage with greater than 100 percent current LTV.
Loans near negative equity refer to loans above 95 percent current LTV.
Loans in Serious Delinquency/Foreclosure
Serious delinquencies and foreclosures continue to decline with the housing recovery, but remain quite high
relative to the early 2000s. Loans 90 days delinquent or in foreclosure totaled 5.0 percent in the first quarter of
2014, down from 6.4 percent for the same quarter a year earlier.
12%
Percent of loans 90
days delinquent or in
foreclosure
Percent of loans in
foreclosure
Percent of loans 90
days delinquent
10%
8%
6%
5.0%
4%
2.7%
2%
2.4%
3Q00
1Q01
3Q01
1Q02
3Q02
1Q03
3Q03
1Q04
3Q04
1Q05
3Q05
1Q06
3Q06
1Q07
3Q07
1Q08
3Q08
1Q09
3Q09
1Q10
3Q10
1Q11
3Q11
1Q12
3Q12
1Q13
3Q13
1Q14
0%
Sources: Mortgage Bankers Association and Urban Institute.
18
GSES UNDER CONSERVATORSHIP
GSE PORTFOLIO WIND-DOWN
Freddie and Fannie continue to rapidly shrink their portfolio. Year over year, Fannie has contracted by 21.5
percent, and Freddie Mac by 18.9 percent. As of April 2014, they were both below their year-end 2014
portfolio cap. They are shrinking their less liquid assets at close to the same pace that they are shrinking their
entire portfolio.
Fannie Mae Mortgage-Related Investment Portfolio
Composition
900
800
700
600
$ billions
Current size: $461.7 billion
Current cap: $469.625 billion
Shrinkage year-over-year: 21.5%
Shrinkage in non-liquid assets
year-over-year: 17.9%
500
400
300
Mortgage loans
200
Non-agency MBS
100
Apr-06
Aug-06
Dec-06
Apr-07
Aug-07
Dec-07
Apr-08
Aug-08
Dec-08
Apr-09
Aug-09
Dec-09
Apr-10
Aug-10
Dec-10
Apr-11
Aug-11
Dec-11
Apr-12
Aug-12
Dec-12
Apr-13
Aug-13
Dec-13
Apr-14
0
Non-FNMA agency MBS
Fannie MBS in portfolio
Sources: Fannie Mae and Urban Institute.
Freddie Mac Mortgage-Related Investment Portfolio
Composition
900
800
700
600
Mortgage loans
500
400
300
Non-agency MBS
200
Non-FHLMC agency MBS
100
FHLMC MBS in portfolio
Sources: Freddie Mac and Urban Institute.
0
Oct-06
Feb-07
Jun-07
Oct-07
Feb-08
Jun-08
Oct-08
Feb-09
Jun-09
Oct-09
Feb-10
Jun-10
Oct-10
Feb-11
Jun-11
Oct-11
Feb-12
Jun-12
Oct-12
Feb-13
Jun-13
Oct-13
Feb-14
$ billions
Current size: $428.5 billion
Current cap: $469.625 billion
Shrinkage year-over-year: 18.9%
Shrinkage in non-liquid assets
year-over-year: 22.4%
19
GSES UNDER CONSERVATORSHIP
GSES UNDER CONSERVATORSHIP
EFFECTIVE
EFFECTIVE GUARANTEE
GUARANTEE FEES
FEES AND
GSE RISK-SHARING TRANSACTIONS
Effective Guaranty Fees
Fannie’s average charged g-fee on new single-family originations was 63 bps in Q1 2014, up from 61.2 in the
previous quarter, and 54.4 a year earlier. This is a marked increase over 2012 (39.9 bps) and 2011 (28.8 bps),
and has contributed to the GSEs’ strong profits. Fannie’s 2014 loan-level price adjustments (LLPAs) are shown in
the second table. The 25 bp Adverse Market Delivery Charge has been added to these upfront numbers. The
FHFA has asked for input by August 4th about the level of g-fees and LLPAs.
Freddie Mac management and g-fee rate
Sources: Fannie Mae, Freddie Mae and Urban Institute.
Note: Freddie only reports the effective g-fee on the
entire book of business.
70.0
60.0
50.0
40.0
30.0
20.0
10.0
0.0
63.0
39.8
28.3
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
3Q10
4Q10
1Q11
2Q11
3Q11
4Q11
1Q12
2Q12
3Q12
4Q12
1Q13
2Q13
3Q13
4Q13
1Q14
Fannie Mae single-family average charged gfee on new acquisitions
Fannie Mae single-family effective g-fee rate
Fannie Mae Upfront Loan-Level Price Adjustments (LLPAs)
LTV
≤60
60.01 – 70
70.01 – 75
75.01 – 80
80.01 – 85
85.01 – 90
90.01 – 95
> 740
0.000%
0.250%
0.250%
0.500%
0.500%
0.500%
0.500%
720 – 739
0.000%
0.250%
0.500%
0.750%
0.750%
0.750%
0.750%
700 – 719
0.000%
0.750%
1.000%
1.250%
1.250%
1.250%
1.250%
680 – 699
0.250%
0.750%
1.500%
2.000%
1.750%
1.500%
1.500%
660 – 679
0.250%
1.250%
2.250%
2.750%
3.000%
2.500%
2.500%
640 – 659
0.750%
1.500%
2.750%
3.250%
3.500%
3.000%
3.000%
620 – 639
0.750%
1.750%
3.250%
3.250%
3.500%
3.500%
3.500%
< 620
0.750%
1.750%
3.250%
3.250%
3.500%
3.500%
3.500%
Credit Score
Product Feature (Cumulative)
Investment Property
1.750%
1.750%
1.750%
3.000%
3.750%
N/A
N/A
2-unit property
1.000%
1.000%
1.000%
1.000%
1.000%
N/A
N/A
2-4 unit property
1.000%
1.000%
1.000%
1.000%
1.000%
N/A
N/A
Condominiums
0.000%
0.000%
0.000%
0.750%
0.750%
0.750%
0.750%
Sources: Fannie Mae and Urban Institute.
Note: Adverse Market Delivery Charge (AMDC) of 0.250% has been added to the LLPA numbers in the matrix by LTV and credit score. Freddie
Mac charges very comparable LLPAs.
20
GSES UNDER CONSERVATORSHIP
GSE RISK-SHARING TRANSACTIONS
Below are the GSEs' capital markets risk-sharing deals to date–four by Freddie Mac covering 8 percent of the
collateral in their book of business, and three by Fannie Mae, covering 5 percent of their book of business. The
bottom table shows specifics of CAS 2014-C02, Fannie Mae's latest deal and the first to include mortgages with
LTVs above 80. CAS 2014-C02 is divided into two loan groups: Group 1 consists of loans with LTVs between 60
and 80 and has 3 percent subordination, and group 2 consists of loans with LTVs between 80 and 97 and
required 3.75 percent subordination.
Freddie Mac – Structured Agency Credit Risk (STACR)
Date
Reference Pool Size
($ millions)
$22,584.40
$35,327.30
$32,076.80
$28,146.98
$118,135.48
8
Transaction
July 24, 2013
STACR Series 2013 - DN1
November 12, 2013
STACR Series 2013 - DN2
February 6, 2014
STACR Series 2014 - DN1
April 2, 2014
STACR Series 2014 - DN2
Freddie Mac Total Reference Collateral
Percent of Freddie Mac’s Total Book of Business (Q1 2014)
Fannie Mae – Connecticut Avenue Securities (CAS)
Date
Reference Pool Size
($ millions)
$26,756.40
$29,308.70
$60, 818.48
$116,883.58
5
Transaction
October 24, 2013
CAS 2013 - C01
January 14, 2014
CAS 2014 - C01
May 28, 2014
CAS 2014 - C02
Fannie Mae Total Reference Collateral
Percent of Fannie Mae’s Total Book of Business (Q1 2014)
Details of Fannie Mae’s latest capital markets transaction, CAS 2014 – C02
Class
1A-H
1M-1, 1M-1H, Total
1M-2, 1M-2H, Total
1B-H
2A-H
2M-1, 2M-1H, Total
2M-2, 2M-2H, Total
2B-H
Reference Pool
Size
Amount
($ millions)
Tranche
Thickness (%)
CE (%)
Rating
Initial Spread
$45,438
$556, $30, $586
$645, $35, $679
$140
$13,451
$174, $15, $189
$226, $19, $245
$91
97
1.19, 0.06, 1.25
1.38, 0.07, 1.45
0.30
96.25
1.25, 0.1, 1.35
1.62, 0.13, 1.75
0.65
3
1.75
0.30
0
3
3.75
2.40
0.65
NR
F: BBB, SP: BBBNR
NR
NR
F: BBB+, SP: BB
NR
NR
95
260
95
260
-
$60,818.5
100
-
-
-
Sources: Fannie Mae, Freddie Mac and Urban Institute.
Note: Classes A-H, M-1H, M-2H, and B-H are reference tranches only. These classes are not issued or sold. The risk is retained by Fannie
Mae and Freddie Mac. “CE” = credit enhancement. Under “Rating,” “F” = Fitch, “SP” = Standard & Poors.
21
OVERVIEW
SERIOUS
DELINQUENCY RATES AT
GSES UNDER CONSERVATORSHIP
SERIOUS
THE GSEsDELINQUENCY RATES
Serious delinquency rates of GSE loans continue to decline as the legacy portfolio is resolved and the pristine,
post-2009 book of business exhibits very low default rates. As of April 2014, 2.13 percent of the Fannie portfolio
and 2.15 percent of the Freddie portfolio were seriously delinquent, down from 2.93 percent and 2.91 percent a
year earlier, respectively.
Serious Delinquency Rates–Fannie Mae
16%
Single-family: Total
10%
8%
6%
4%
4.13%
2%
2.13%
1.80%
Apr-14
Oct-13
Apr-13
Oct-12
Apr-12
Oct-11
Apr-11
Oct-10
Apr-10
Oct-09
Apr-09
Oct-08
Apr-08
Oct-07
Apr-07
Oct-05
0%
Oct-06
Single-family: Credit
enhanced
12%
Apr-06
Single-family: Noncredit enhanced
Percentage of total loans
14%
Sources: Fannie Mae and Urban Institute.
Serious Delinquency Rates–Freddie Mac
Single-family: Non-credit
enhanced
Single-family: Credit
enhanced
Single-family: Total
Percentage of total loans
10%
9%
8%
7%
6%
5%
4.26%
4%
3%
2%
2.15%
1.84%
1%
Apr-14
Oct-13
Apr-13
Oct-12
Apr-12
Oct-11
Apr-11
Oct-10
Apr-10
Oct-09
Apr-09
Oct-08
Apr-08
Oct-07
Apr-07
Oct-06
Apr-06
Sources: Freddie Mac and Urban Institute.
Oct-05
0%
22
GSES UNDER CONSERVATORSHIP
SERIOUS DELINQUENCY RATES
Serious delinquencies for FHA and GSE single-family loans continue to decline with the housing recovery, but
remain high relative to 2005-2007. FHA delinquencies are declining from a higher relative starting point. GSE
multifamily delinquencies have also declined substantially, although they never reached problematic levels.
Serious Delinquency Rates–Single-Family Loans
FHA
Fannie Mae
Freddie Mac
10%
Percentage of total loans
9%
8%
7%
6.65%
6%
5%
4%
3%
2.20%
2%
2.19%
1%
1Q05
2Q05
3Q05
4Q05
1Q06
2Q06
3Q06
4Q06
1Q07
2Q07
3Q07
4Q07
1Q08
2Q08
3Q08
4Q08
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
3Q10
4Q10
1Q11
2Q11
3Q11
4Q11
1Q12
2Q12
3Q12
4Q12
1Q13
2Q13
3Q13
4Q13
1Q14
0%
Sources: Fannie Mae, Freddie Mac, MBA Delinquency Survey and Urban Institute.
Note: Serious delinquency rate is the number of loans 90 days or more past due or in the foreclosure process, divided by the total loan count.
.
Serious Delinquency Rates–Multifamily GSE Loans
Fannie Mae
Freddie Mac
0.9%
Percentage of total loans
0.8%
0.7%
0.6%
0.5%
0.4%
0.3%
0.2%
0.11%
0.05%
0.1%
Apr-14
Dec-13
Aug-13
Apr-13
Dec-12
Aug-12
Apr-12
Dec-11
Apr-11
Aug-11
Dec-10
Aug-10
Apr-10
Dec-09
Aug-09
Apr-09
Dec-08
Aug-08
Apr-08
Dec-07
Aug-07
Apr-07
Dec-06
Aug-06
Apr-06
Dec-05
Aug-05
Apr-05
0.0%
Sources: Fannie Mae, Freddie Mac and Urban Institute.
Note: Multifamily serious delinquency rate is the unpaid balance of loans 60 days or more past due, divided by the total unpaid balance.
23
GSES UNDER CONSERVATORSHIP
REFINANCE ACTIVITY
The Home Affordable Refinance Program (HARP) refinances have begun to slow. Two factors are responsible
for this: (1) higher interest rates, leaving fewer eligible loans where refinancing is economically advantageous
(in-the-money), and (2) a considerable number of borrowers who have already refinanced. Despite these
factors, HARP recently crossed a milestone of 3 million refinances since Q2 2009, accounting for about 16.3
percent of all GSE refinances in this period. As a result of the large volume of refi activity, the pool of eligible
loans remaining is now much lower.
Total HARP Refinance Volume
HARP Refinance Volume - Fannie
HARP Refinance Volume - Freddie
350
300
Thousands
250
200
150
100
30.0
50
46.9
1Q14
4Q13
3Q13
2Q13
1Q13
4Q12
3Q12
2Q12
1Q12
4Q11
3Q11
2Q11
1Q11
4Q10
3Q10
2Q10
1Q10
4Q09
3Q09
2Q09
-0
Sources: FHFA Refinance Report and Urban Institute.
HARP Refinances
March
2014
Year-to-date
2014
Inception to
date
2013
2012
2011
Total refinances
105,110
370,856
19,243,107
4,081,911
4,750,530
3,229,066
Total HARP refinances
19,992
76,930
3,134,889
892,914
1,074,769
400,024
Share 80–105 LTV
Share 105–125 LTV
Share >125 LTV
All other streamlined
refinances
69.4%
69.8%
69.8%
56.4%
56.4%
85.0%
18.2%
18.1%
17.3%
22.4%
22.4%
15.0%
12.4%
12.1%
13.0%
21.2%
21%
0%
20,729
78,991
3,332,189
735,210
729,235
785,049
Sources: FHFA Refinance Report and Urban Institute.
24
OVERVIEW
GSES UNDER CONSERVATORSHIP
GSE LOANS: DISTRIBUTION OF
GSE
LOANS:REFINANCES
POTENTIAL
POTENTIAL REFINANCES
To qualify for HARP, a loan must be originated before the June 2009 cutoff date, have a marked-to-market loan-tovalue (MTM LTV) ratio above 80, and have no more than one delinquent payment in the past year and none in the
past six months. There are 1,108,564 eligible loans, but 40 percent are out-of-the-money because the closing cost
would exceed the long-term savings, leaving 664,933 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 7,149,312 loans in this category, 5,276,574 are
in-the-money.
More than two thirds of the GSE book of business that meets the pay history requirements was originated after the
June, 2009 cutoff date. FHFA Director Mel Watt announced recently that they are not planning to extend the date,
as too few borrowers (439,259 by our estimate) would benefit from the change.
Total loan count
26,804,111
Loans that do not meet pay history requirement
Loans that meet pay history requirement:
966,214
25,837,897
Pre-June 2009 origination
8,257,876
Post-June 2009 origination
17,580,021
Loans Meeting HARP Pay History Requirements
Pre-June 2009
LTV category
In-the-money
Out-of-the-money
Total
≤80
>80
Total
5,276,574
664,933
5,941,507
1,872,738
443,631
2,316,369
7,149,312
1,108,564
8,257,876
Post-June 2009
LTV category
In-the-money
Out-of-the-money
Total
≤80
>80
Total
1,640,975
439,259
2,080,234
13,016,965
2,482,822
15,499,787
14,657,940
2,922,081
17,580,021
Sources: CoreLogic prime servicing data as of April 2014, eMBS and Urban Institute.
Note: Figures are scaled up from source data to account for data coverage of the GSE active loan market (based on MBS data from
eMBS). Striped box indicates HARP-eligible loans that are in-the-money.
25
MODIFICATION ACTIVITY
HAMP ACTIVITY
New HAMP trial mods have tapered off as new defaults have declined. Meanwhile, modification success rates are
improving, so the number of new permanent modifications remains stable at 13,000 in February and March 2014.
New HAMP Modifications
New trial mods started
New permanent mods started
New active permanent mods
Number of mods (thousands)
160
140
120
100
80
60
40
20
Mar-14
Dec-13
Sep-13
Jun-13
Mar-13
Dec-12
Sep-12
Jun-12
Mar-12
Dec-11
Sep-11
Jun-11
Mar-11
Dec-10
Sep-10
Jun-10
Mar-10
Dec-09
Sep-09
Jun-09
Mar-09
0
13
8
7
Sources: U.S. Treasury Making Home Affordable and Urban Institute.
Cumulative HAMP Modifications
All trials mods started
All permanent mods started
Active permanent mods
Number of mods (millions)
2.5
2.2
2.0
1.5
1.4
1.0
0.9
0.5
Mar-14
Dec-13
Sep-13
Jun-13
Mar-13
Dec-12
Sep-12
Jun-12
Mar-12
Dec-11
Sep-11
Jun-11
Mar-11
Dec-10
Sep-10
Jun-10
Mar-10
Dec-09
Sep-09
Jun-09
Mar-09
0.0
Sources: U.S. Treasury Making Home Affordable and Urban Institute.
26
MODIFICATION BY TYPE OF ACTION
MODIFICATION
BYOF
TYPE
AND BY BEARER
RISKOF ACTION
AND BEARER OF RISK
MODIFICATION
ACTIVITY
OVERVIEW
The share of principal reduction modifications peaked at 20 percent in December 2012 before dropping in
2013. This is to be expected, as increasing home prices have increased equity, reducing the need for principal
reduction and making such modifications less likely to be net-present-value positive. Portfolio loans are the
most likely candidates for principal reduction, followed by private investor loans, because the GSEs and
FHA/VA generally do not allow this type of modification.
Changes in Loan Terms for Modifications
9/30/12
12/31/12 03/31/13
6/30/13
9/30/13
12/31/13
One quarter One year
% change % change
Capitalization
88.2
84.6
79.3
81.7
83.6
87.2
4.3
3.0
Rate Reduction
77.1
73.3
80.1
81.0
78.9
76.7
-2.8
4.7
Rate Freeze
7.1
3.9
3.7
5.2
5.5
7
28.4
77.9
Term Extension
Principal
Reduction
Principal Deferral
64.9
58.9
60.3
67.7
69.3
75.9
9.6
28.9
17.2
20.0
15.2
12.2
13.6
10.5
-22.5
-47.4
19.0
20.5
18.2
20.5
25.3
30.6
20.9
49.3
Not Reported*
0.4
1.1
0.6
1.4
2.2
0.7
-68.1
-37.8
Sources: OCC Mortgage Metrics Report for the Fourth Quarter of 2013 and Urban Institute.
Note: This table presents modifications of each type as a share of total modifications. Columns sum to over 100% because loans often
receive modifications with multiple features.
*Processing constraints at some servicers prevented them from reporting specific modified term(s).
Type of Modification Action by Investor and Product Type
Fannie Mae
Freddie Mac
Governmentguaranteed
Private
Investor
Portfolio
Overall
Capitalization
96.3
97.5
61.9
93.6
94.2
87.2
Rate reduction
61.6
79.5
91.0
73.6
75.0
76.7
Rate freeze
14.3
3.9
3.2
4.6
9.2
7.0
Term extension
92.1
94.4
94.8
26.6
62.9
75.9
Principal reduction
0.4
0.2
0.2
19.9
38.4
10.5
Principal deferral
24.0
34.2
35.0
33.3
25.9
30.6
Not reported*
1.5
0.2
0.3
1.1
0.5
0.7
Sources: OCC Mortgage Metrics Report for the Fourth Quarter of 2013 and Urban Institute.
Note: This table presents modifications of each type as a share of total modifications. Columns sum to over 100% because loans often
receive modifications with multiple features.
*Processing constraints at some servicers prevented them from reporting specific modified term(s).
27
MODIFICATION ACTIVITY
MODIFICATIONS AND LIQUIDATIONS
Total modifications (HAMP and proprietary) are now roughly equal to total liquidations. Hope Now reports show
7,045,753 borrowers have received a modification since Q3 2007, compared with 7,082,771 liquidations in the
same period. We expect to see sharp declines in both liquidation and modification activity in 2014. In the first
quarter, foreclosures and short sales dropped to their lowest totals since 2008.
Loan Modifications and Liquidations
1,600
1,200
638.0
1,000
800
Proprietary mods
365.7
600
HAMP mods
400
Liquidations
165.4
Number of loans (thousands)
1,400
200
Sources: Hope Now Reports
and Urban Institute.
Note: Liquidations includes
both foreclosure sales and
short sales. Annualized figure
based on data from March
2014.
0
2007
(Q3-Q4)
2008
2009
2010
2011
2012
2013
2014
(Ann.)
Cumulative Modifications and Liquidations
7.1
8
5.7
6
5
HAMP mods
4
Proprietary mods
3
Liquidations
2
1.4
Number of loans (millions)
7
1
0
2007
(Q3-Q4)
2008
2009
2010
2011
2012
2013
2014
YTD
Sources: Hope Now Reports
and Urban Institute.
Note: Liquidations includes
both foreclosure sales and
short sales. Year-to-date
figure as of March 2014.
28
MODIFICATION ACTIVITY
MODIFICATION REDEFAULT RATES BY
BEARER OF THE RISK
Redefault rates have come down across each sector, especially on private label modifications. Governmentguaranteed mortgages have much higher redefault rates than other product types.
Redefault Rate 12 Months after Modification
80%
70%
Fannie Mae
Freddie Mac
Government-guaranteed
Private
Portfolio Loans
Overall
Redefault rate
60%
50%
40%
30%
20%
10%
0%
2008
2009
2010
Year of modification
2011
2012
Sources: OCC Mortgage Metrics Report for the Fourth Quarter of 2013 and Urban Institute.
Redefault Rate 24 Months after Modification
80%
70%
Fannie Mae
Freddie Mac
Government-guaranteed
Private
Portfolio loans
Overall
Redefault rate
60%
50%
40%
30%
20%
10%
0%
2008
2009
2010
Year of modification
2011
Sources: OCC Mortgage Metrics Report for the Fourth Quarter of 2013 and Urban Institute.
29
AGENCY ISSUANCE
AGENCY GROSS AND NET ISSUANCE
While newly issued agency securities (agency gross issuance) had been robust in 2013, much of the issuance
has been driven by refinancing. As that activity has fallen off with rising interest rates, new issuance has fallen off
as well. Agency gross issuance totaled 329.4 billion for the first five months in 2014, a 57 percent decline yearover-year from the same period last year. Net issuance, which excludes repayments, prepayments, and
refinances on outstanding mortgages, remains low and dominated by Ginnie Mae. This is unsurprising, given the
increased role of FHA and VA during the crisis.
Agency Gross Issuance
Agency Net Issuance
Issuance
Year
GSEs
Ginnie Mae
Total
Issuance
Year
GSEs
Ginnie Mae
Total
2000
$360.6
$102.2
$462.8
2000
$159.8
$29.3
$189.1
2001
$885.1
$171.5
$1,056.6
2001
$367.8
-$9.9
$357.9
2002
$1,238.9
$169.0
$1,407.9
2002
$357.6
-$51.2
$306.4
2003
$1,874.9
$213.1
$2,088.0
2003
$335.0
-$77.6
$257.4
2004
$872.6
$119.2
$991.9
2004
$83.3
-$40.1
$43.2
2005
$894.0
$81.4
$975.3
2005
$174.4
-$42.2
$132.1
2006
$853.0
$76.7
$929.7
2006
$313.6
$0.3
$313.8
2007
$1,066.2
$94.9
$1,161.1
2007
$514.7
$30.9
$545.5
2008
$911.4
$267.6
$1,179.0
2008
$314.3
$196.4
$510.7
2009
$1,280.0
$451.3
$1,731.3
2009
$249.5
$257.4
$506.8
2010
$1,003.5
$390.7
$1,394.3
2010
-$305.5
$198.2
-$107.3
2011
$879.3
$315.3
$1,194.7
2011
-$133.4
$149.4
$16.0
2012
$1,288.8
$405.0
$1,693.8
2012
-$46.5
$118.4
$71.9
2013
$1,176.6
$393.6
$1,570.1
2013
$66.5
$85.8
$152.3
2014 YTD
$225.2
$104.2
$329.4
2014 YTD
-$11.1
$21.6
$10.5
%Change
year-over-year
-61.8%
-43.4%
-57.4%
%Change
year-over-year
-146.1%
-37.1%
-82.0%
2014 (Ann.)
$556.10
$255.1
$811.2
2014 (Ann.)
-$26.64
$51.84
$25.20
Sources: eMBS and Urban Institute.
Note: Dollar amounts are in billions.
Year-to-date figure as of May 2014.
Sources: eMBS and Urban Institute.
Note: Dollar amounts are in billions.
Year-to-date figure as of May 2014.
30
OVERVIEW
AGENCY
ISSUANCE
OVERVIEW
AGENCY GROSS AND NET ISSUANCE
AGENCY
GROSS
ISSUANCE
&
FED
BY MONTH
PURCHASES
Monthly Gross Issuance
Fannie Mae
Freddie Mac
Ginnie Mae
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. April 2014 showed a
Ginnie Mae share of 31.8
percent.
150
100
50
May-01
Nov-01
May-02
Nov-02
May-03
Nov-03
May-04
Nov-04
May-05
Nov-05
May-06
Nov-06
May-07
Nov-07
May-08
Nov-08
May-09
Nov-09
May-10
Nov-10
May-11
Nov-11
May-12
Nov-12
May-13
Nov-13
May-14
0
Sources: eMBS, Federal Reserve Bank of
New York and Urban Institute.
Fed Absorption of Agency Gross Issuance
In 2013, the Fed absorbed nearly 50 percent of the year's gross issuance. In Q1 2014, the Fed began to taper,
but gross issuance dropped even more. As a result, the Fed bought 74 percent of the total gross issuance in
that quarter. Since April, gross issuance started to pick up while the Fed continued to taper. In May, total Fed
purchases declined further to $36.8 billion, while gross issuance edged up to $69.8 billion, resulting in 52
percent for the Fed absorption of gross issuance, down from 61 percent in April.
Gross issuance
Total Fed purchases
250
$ billions
200
150
100
50
May-14
Nov-13
May-13
Nov-12
May-12
Nov-11
May-11
Nov-10
May-10
Nov-09
May-09
Nov-08
May-08
Nov-07
May-07
Nov-06
May-06
Nov-05
May-05
Nov-04
May-04
Nov-03
May-03
Nov-02
May-02
Nov-01
May-01
Nov-00
0
Sources: eMBS, Federal Reserve Bank of New York and Urban Institute.
31
AGENCY ISSUANCE
MORTGAGE INSURANCE ACTIVITY
MI Activity
$180
$160
$140
$120
$100
$20
$80
$60
$31
$ billions
Private mortgage insurers lost
market share in Q1 2014,
dropping to 38.2 percent from
41.2 percent in the previous
quarter. Overall mortgage
insurance activity declined to
just over $80 billion, compared
to $155 billion in Q1 2013 and
$105 billion in Q4 2013. The
decline in the MI share and the
increase in the FHA share is
due to less refinance activity.
$40
FHA
$31
$20
VA
1Q14
4Q13
3Q13
2Q13
1Q13
4Q12
3Q12
2Q12
1Q12
4Q11
3Q11
Total private primary MI
2Q11
1Q11
$0
Sources: Inside Mortgage Finance and Urban Institute.
MI Market Share
Total private primary MI
FHA
VA
23.8%
100%
90%
80%
37.9%
70%
60%
50%
40%
38.3%
30%
20%
10%
0%
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 1Q14
Sources: Inside Mortgage Finance and Urban Institute.
32
AGENCY ISSUANCE
MORTGAGE INSURANCE ACTIVITY
The table below depicts the history of FHA mortgage insurance premiums since 2001. Note that the most
recent change increased the annual premium by 10 bps, from 1.25 to 1.35 percent, and kept the upfront
premium at 1.75 percent for mortgages with balances less than $625,500. Annual premiums have more than
doubled since 2008, as the FHA has worked to shore up its finances.
FHA MI Premiums for Typical Purchase Loan
Case number date
Upfront mortgage insurance
premium (UFMIP) paid
Annual mortgage insurance
premium (MIP)
1/1/2001 - 7/13/2008
7/14/2008 - 9/30/2008*
10/1/2008 - 4/4/2010
4/5/2010 - 10/3/2010
10/4/2010 - 4/17/2011
4/18/2011 - 4/8/2012
4/9/2012 - 6/10/2012
6/11/2012 - 3/31/2013a
4/1/2013 - presentb
150
175
175
225
100
100
175
175
175
50
55
55
55
90
115
125
125
135
Sources: Ginnie Mae and Urban Institute.
Note: A typical purchase loan has an LTV over 95 and a loan term longer than 15 years. Mortgage insurance premiums are listed in
basis points.
* For a short period the FHA used a risk based FICO/LTV matrix for MI. This table assumes the average FICO for 2008 purchase
originations, ~630.
a
Applies to purchase loans less than or equal to $625,500. Those over that amount have an annual premium of 150 bps.
b
Applies to purchase loans less than or equal to $625,500. Those over that amount have an annual premium of 155 bps.
Initial Monthly Payment Comparison: FHA vs. PMI
Assumptions
Property Value
Loan Amount
LTV
Base Rate
Conforming
FHA
FICO
$250,000
$237,500
95
4.36%
4.00%
620 - 639
640 - 659
660 - 679
680 - 699
700 - 719
720 - 739
740 - 759
760 +
FHA UFMIP
1.75
1.75
1.75
1.75
1.75
1.75
1.75
1.75
FHA MIP*
1.30
1.30
1.30
1.30
1.30
1.30
1.30
1.30
GSE AMDC & LLPA
3.50
3.00
2.50
1.50
1.25
0.75
0.50
0.50
PMI Annual MIP
1.15
1.15
1.15
0.89
0.89
0.62
0.62
0.54
$1,411
$1,411
$1,411
$1,411
$1,411
$1,411
$1,411
$1,411
$1,511
$1,497
$1,482
$1,402
$1,395
$1,327
$1,320
FHA MI Premiums
PMI
Monthly Payment
FHA
$1,305
PMI
($100)
($86)
($71)
$9
$16
$84
$91
$106
PMI Advantage
Sources: Genworth Mortgage Insurance, Ginnie Mae and Urban Institute.
Note: Mortgage insurance premiums listed in percentage points. LLPA= Loan Level Price Adjustment, described in detail on page 20.
FHA MIP=1.3 percent for <95 LTV mortgages. Orange shade indicates FHA monthly payment is more favorable, while light blue
indicates PMI is more favorable.
33
RELATED HFPC WORK
PUBLICATIONS AND EVENTS
Upcoming Events
June 25—Sunset Seminar III: Cash Sales, Institutional Investors & Single Family Rentals: Performance,
Pricing & Policy
July 16—July Data Talk: Quantifying the Impact of Student Loan Debt on Homeownership
More details to follow on our events page.
Commentaries
Blog Posts
Supplementing the Compare Ratio: An Important
Step Toward Opening the Credit Box
Author: Laurie Goodman
Date: June 9, 2014
Weaker credit or racial discrimination: the data
are unclear
Author: Wei Li
Date: June 6, 2014
Why Long Term GSE Reform Requires Congress
Author: Jim Parrott
Date: May 22, 2014
How well do the GSEs serve minority borrowers?
Author: Wei Li
Date: June 5, 2014
HAMP Modifications: Is Reset Risk an Issue?
Authors: Laurie Goodman and Jun Zhu
Date: May 14, 2014
Johnson Crapo GSE Discussion Draft: A Few
Suggestions for Improvement
Authors: Laurie Goodman and Ellen Seidman
Date: April 14, 2014
National Mortgage Settlement: Lessons Learned
Authors: Laurie Goodman and Maia Woluchem
Date: April 14, 2014
OASIS: A Securitization Born from MSR Transfers
Authors: Laurie Goodman and Pamela Lee
Date: April 1, 2014
Where Have All the Loans Gone? The Impact of
Credit Availability on Mortgage Volume
Authors: Laurie Goodman, Jun Zhu and Taz George
Date: March 13, 2014
Lifting the Fog around FHA Lending?
Author: Jim Parrott
Date: March 13, 2014
Why the GSEs need Congress to exit
conservatorship
Author: Jim Parrott
Date: May 30, 2014
It’s time for administrative reform to end the GSE
conservatorships
Author: Jim Millstein (guest post)
Date: May 29, 2014
Will modification resets cause massive re-defaults?
Authors: Laurie Goodman and Jun Zhu
Date: May 16, 2014
Risk Sharing: High LTV mortgages are the next
frontier
Authors: Pamela Lee and Bing Bai
Date: May 15, 2014
A strong pivot for the new director of FHFA
Author: Jim Parrott
Date: May 13, 2014
Is mortgage credit finally starting to loosen? Afraid
not.
Authors: Jun Zhu, Laurie Goodman and Bing Bai
Date: May 2, 2014
34
PUBLICATIONS AND EVENTS
Copyright © June 2014. The Urban Institute. All rights reserved. Permission is granted for reproduction of this file, with attribution to the
Urban Institute.
The Urban Institute is a nonprofit, nonpartisan policy research and educational organization that examines the social, economic, and
governance problems facing the nation. The views expressed are those of the authors and should not be attributed to the Urban Institute, its
trustees, or its funders.
35