HOUSING FINANCE POLICY CENTER
HOUSING FINANCE
AT A GLANCE
A MONTHLY CHARTBOOK
September 2014
1
ABOUT THE CHARTBOOK
HOUSING FINANCE POLICY CENTER STAFF
The Housing Finance Policy Center’s (HFPC) mission is
to produce analyses and ideas that promote sound public
policy, efficient markets, and access to economic
opportunity in the area of housing finance. At A Glance, a
monthly chartbook and data source for policymakers,
academics, journalists, and others interested in the
government’s role in mortgage markets, is at the heart of
this mission.
Laurie Goodman
Center Director
Ellen Seidman
Senior Fellow
Jim Parrott
Senior Fellow
Sheryl Pardo
Associate Director of Communications
We welcome feedback from our readers on how we can
make At A Glance a more useful publication. Please
email any comments or questions to
ataglance@urban.org.
Jun Zhu
Senior Financial Methodologist
Wei Li
Senior Research Associate
Bing Bai
Research Associate I
Taz George
Research Assistant
Maia Woluchem
Research Assistant
Alison Rincon
Special Assistant to the Director
2
INTRODUCTION
Originations have slowed
Mortgage origination has been very low in 2014, reflecting
sharp declines in both refinancing and home sales.
Agency issuance for the first 8 months of 2014 is down
51.3 percent from the same period in 2013 (page 30) and
overall issuance is down 52.9 percent. Many attribute a
significant portion of the decline to the Qualified Mortgage
rule, which went into effect in January. As we show in a
recent blogpost, we believe this to be incorrect.
FHFA/GSE actions
The FHFA has requested input on a number of key issues
this fall, and we have explored several of them in recent
commentaries: how to determine guarantee fees
(responses due September 8), proposed private
mortgage insurance eligibility requirements (PMIERS;
September 8), a proposed single security for Fannie and
Freddie (October 13), and proposed affordable housing
goals (October 28).
The FHFA's scorecard for Fannie and Freddie called for
each to share the risk on $90 billion of their guarantee
book of business. Thus far in 2014, Fannie has issued
risk-sharing securities (page 21) on $168.3 billion of loans
(cumulatively 7.5 percent of their book) and Freddie has
done $123.2 billion (cumulatively 11.9 percent of their
book). These efforts to inject private capital into the
system have been hugely successful.
It will be important to understand the interplay of these
issues in the coming months. For instance, the PMIERs
initiative to strengthen the mortgage insurers should
encourage front-end risk sharing pilots in which the GSEs
buy loans with much more mortgage insurance to cover
their potential loss. This will put more private capital
ahead of the GSEs’ risk and should cause both the FHFA
and GSEs to rethink the loss severity portion of the g-fee
calculation, leading to lower g-fees than implied by the gfee request for input.
this year (page 10), has not nearly kept up with
prepayments and liquidations on the legacy book of
business. In August, investors, issuers, and trade
associations took advantage of the Treasury’s request for
comments on how to revive this market.
One of the comments made by many investors is that expost policy changes that adversely affected investors
have created mistrust that gives them pause in reentering the market. They cite, in particular, the multiple
state and federal settlements with servicers, which
allowed the servicers to meet part of their obligations with
investors’ money but excluded investors from the
negotiations. We are sympathetic to this argument, if not
to their suggested ban on using investor funds at all. In
order to address investors’ concerns in future settlements,
we have suggested setting a limit on the use of these
funds, and disclosing and monitoring the net present
value test used on these loans. While the latest Bank of
America settlement did not contain these provisions, it did
incorporate many positive elements for FHA/VA loans,
rental housing and community stabilization initiatives,
which we will comment on later this month.
INSIDE THIS ISSUE
•
ARM share of purchase mortgages continues to
grow (page 9)
•
GSE projections less bullish on 2015 housing
starts, originations (page 12)
•
Median and 10th percentile FICO scores on new
originations tick up slightly (page 14)
•
New Freddie Mac risk-sharing deal totals $33.4
billion (page 21)
•
Delinquency rates continue to fall, but still above
pre-crisis levels (page 23)
•
HAMP activity is tapering off slowly (page 26)
•
Total mods and liquidations in 2014 below last
year’s pace (page 28)
The private label securities (PLS) market
The PLS market now stands at $746 billion,
approximately 7.5 percent of the total mortgage market. It
has been shrinking month after month, as the paltry
amount of new PLS origination, totaling $7.5 billion so far
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
Fed Flow of Funds data from 2014 Q1 indicate an increase in the total value of the US residential 1-4 unit housing
market to 21.2 trillion from 20.4 trillion the previous quarter. Household equity, which surged to $11.4 trillion from
just under $6.6 trillion in 2011, drove this increase. Meanwhile, with credit standards tight and an elevated cash
sales share, mortgage debt has gradually declined since 2007 and now stands at $9.85 trillion. Agency MBS make
up 56.9 percent of the total mortgage market, private-label securities make up 7.8 percent, and unsecuritized first
liens at the GSEs, commercial banks, savings institutions, and credit unions make up 28.3 percent. Second liens
comprise the remaining 7.0 percent of the total.
Value of the US Housing Market
Debt, household mortgages
Household equity
Total value
25
$21.2
$ trillions
20
15
$11.4
10
$9.9
5
0
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Q1
Sources: Federal Reserve Flow of Funds and Urban Institute.
Size of the US Residential Mortgage Market
6
Agency MBS
$5.6
5
$ trillions
4
Unsecuritized first liens
Debt,
household
mortgages,
$9,833
3
2
$2.8
Private Label Securities
$0.8
1
$0.7
Second Liens
0
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
Q1
Sources: Federal Reserve Flow of Funds, Inside Mortgage Finance, Fannie Mae, Freddie Mac, eMBS and Urban Institute.
Note: Unsecuritizied first liens includes loans held by commercial banks, GSEs, savings institutions, and credit unions
6
OVERVIEW
MARKET SIZE OVERVIEW
As of July 2014, debt in the private-label securitization market totaled $746 billion and was split among prime
(19.7 percent), Alt-A (43.9 percent), and subprime (36.4 percent) loans. In August 2014, outstanding securities in
the agency market totaled $5.59 trillion and were 46.6 percent Fannie Mae, 27.3 percent Freddie Mac, and 26.1
percent Ginnie Mae.
Private-Label Securities by Product Type
Alt-A
Subprime
Prime
1
$ trillions
0.8
0.6
0.4
$0.327
$0.272
$0.147
0.2
Jul-14
Jan-14
Jul-13
Jan-13
Jul-12
Jan-12
Jul-11
Jan-11
Jul-10
Jan-10
Jul-09
Jan-09
Jul-08
Jan-08
Jul-07
Jan-07
Jul-06
Jan-06
Jul-05
Jan-05
Jul-04
Jan-04
Jul-03
Jan-03
Jul-02
Jan-02
Jul-01
Jan-01
Jul-00
Jan-00
Jul-99
Jan-99
0
Sources: CoreLogic and Urban Institute.
Agency Mortgage-Backed Securities
6
Total
$5.59
5
$ trillions
4
Fannie Mae
3
$2.60
2
Freddie Mac
1
$1.53
$1.46
Ginnie Mae
Aug-14
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
Sources: eMBS and Urban Institute.
7
OVERVIEW
OVERVIEW
ORIGINATION VOLUME
AND COMPOSITION
First Lien Origination Volume and Share
First lien originations in the first half of 2014 began far below their 2013 pace, totaling only $513 billion. The share of
bank portfolio and FHA/VA originations rose to 26 percent and 22 percent each, while the GSE share dropped to 50
percent from 61 percent in 2013, reflecting the curtailment of refinancing activity. The private label origination share
remains less than one percent.
$4.0
Bank portfolio
$3.5
PLS securitization
FHA/VA securitization
$3.0
$ trillions
GSE securitization
$2.5
$2.0
$1.5
$0.135
$1.0
$0.003
$0.117
$0.259
$0.5
2014 Q1-2
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
$0.0
100%
90%
26.2%
80%
0.5%
70%
22.8%
60%
50%
40%
30%
50.5%
20%
10%
2013
2012
2011
2010
2009
2008
2014 Q1-2
Sources: Inside Mortgage Finance and Urban Institute.
2007
2006
2005
2004
2003
2002
0%
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 slowly grew to 7.5
percent in June 2014, almost doubling from the level one year ago. Fifteen-year FRMs, predominantly a refinance
product, comprise 14.3 percent of new originations. If we exclude refinances (bottom chart), the share of 30-year
FRMs in June 2014 stood at 84.7 percent, 15-year FRMs at 6.3 percent, and ARMs at 7.6 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%
Jun-14
Nov-13
Apr-13
Sep-12
Jul-11
Feb-12
Dec-10
Oct-09
May-10
Mar-09
Jan-08
Aug-08
Jun-07
Nov-06
Apr-06
Feb-05
Sep-05
Jul-04
Dec-03
Oct-02
May-03
Mar-02
Jan-01
Aug-01
Jun-00
0%
Sources: CoreLogic Prime Servicing and Urban Institute.
Purchase Loans Only
100%
90%
80%
70%
60%
50%
Fixed-rate 30-year mortgage
40%
Fixed-rate 15-year mortgage
30%
Adjustable-rate mortgage
Other
20%
10%
Sources: CoreLogic Prime Servicing and Urban Institute.
9
Jun-14
Nov-13
Apr-13
Sep-12
Feb-12
Jul-11
Dec-10
May-10
Oct-09
Mar-09
Aug-08
Jan-08
Jun-07
Nov-06
Apr-06
Sep-05
Feb-05
Jul-04
Dec-03
May-03
Oct-02
Mar-02
Aug-01
Jan-01
Jun-00
0%
OVERVIEW
SECURITIZATION VOLUME AND
COMPOSITION
Agency/Non-Agency Share of Residential MBS Issuance
99%
Agency share
Non-Agency share
2014 YTD
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1%
1995
Non-agency single-family 100%
MBS issuance has
90%
hovered at or below 2
80%
percent of total issuance
since early 2011, and this 70%
share is even lower if re60%
REMICs are excluded.
The environment in 2014
50%
has not been favorable
40%
for new non-agency
deals. In the first 8
30%
months of 2014, total
non-agency issuance was 20%
$7.5 billion, compared to
10%
$24.0 billion over the
same period in 2013.
0%
Sources: Inside Mortgage Finance and Urban Institute.
Non-Agency Securitization 2.0
$1,200
$6
$1,000
$5
$800
$4
$ billions
$400
Subprime
Alt A
$1
Apr-14
Jun-14
Feb-14
Dec-13
Oct-13
Aug-13
Jun-13
Apr-13
Feb-13
Dec-12
Oct-12
Aug-12
Jun-12
$0
Apr-12
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014 Q1-2
$0
$3.2
$0.4
$0
$2.3
0.661
$2
$200
Prime
$3
All other
Source: 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
Aug-14
$600
Feb-12
$ billions
Non-Agency MBS Issuance
OVERVIEW
AGENCY ACTIVITY:
VOLUMES AND PURCHASE/REFI
COMPOSITION
Agency issuance continues declining, totaling $586.4 billion in the first eight months of 2014, compared to
$1.203 trillion for the same period a year ago. Annualizing production year-to-date, 2014 is on pace for total
production of $879.7 billion, much less than $1.57 trillion in 2013. In August 2014, refinances were 42 and 44
percent of the GSEs’ business, down from the first quarter’s average of 52 and 55 percent. The Ginnie Mae
market has always been more purchase-driven, with refinance volume of 22 percent.
Agency Gross Issuance
Fannie Mae
Freddie Mac
Ginnie Mae
$2.5
$ trillions
$2.0
$1.5
$1.0
$0.28
$0.5
$0.24
$0.36
$0.0
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
Ann.
Sources: eMBS and Urban Institute.
Note: Year to date as of August 2014.
Percent Refi at Issuance
Fannie Mae
Freddie Mac
Ginnie Mae
Mortgage rate
100%
9.0%
8.0%
7.0%
6.0%
5.0%
4.0%
3.0%
2.0%
1.0%
0.0%
80%
60%
40%
20%
Aug-14
Feb-14
Aug-13
Feb-13
Aug-12
Feb-12
Aug-11
Feb-11
Aug-10
Feb-10
Aug-09
Feb-09
Aug-08
Feb-08
Aug-07
Feb-07
Aug-06
Feb-06
Aug-05
Feb-05
Aug-04
Feb-04
0%
Sources: eMBS and Urban Institute.
Note: Based on at-issuance balance.
11
OVERVIEW
STATE OF THE MARKET
MORTGAGE ORIGINATION
PROJECTIONS
The sharp drop in mortgage originations, combined with a gradual rise in interest rates and the Fed tapering, has led
to lower origination projections from the GSEs and MBA over the next two years. While all three project an increase in
housing starts in 2014 and 2015 versus 2013, all have scaled back the size of the increases. For example, Fannie
shows housing starts were 925,000 in 2013, and projects a rise to 995,000 in 2014 and 1.17 million in 2015; last
month’s projections were 1.054 million and 1.273 million, respectively. All three forecast lower home sales in 2014,
but see a sharp rise in 2015. Of note, both Fannie and Freddie revised down their 2014 home sales forecast.
Total Originations and Refinance Shares
Period
2013 Q1
2013 Q2
2013 Q3
2013 Q4
2014 Q1
2014 Q2
2014 Q3
2014 Q4
2015 Q1
2015 Q2
2015 Q3
2015 Q4
FY 2011
FY 2012
FY 2013
FY 2014
FY 2015
Originations ($ billions)
Total, FNMA
Total, FHLMC
Total, MBA
estimate
estimate
estimate
532
532
524
572
572
537
450
450
401
358
350
293
237
250
226
313
320
267
319
320
274
243
260
240
225
265
271
288
340
288
282
260
295
260
185
276
1496
1492
1436
2154
2122
2044
1925
1913
1755
1112
1250
1007
1056
1125
1130
FNMA
estimate
73
65
52
52
48
41
38
28
33
24
23
26
66
72
62
39
26
Refi Share (%)
FHLMC
estimate
73
65
52
51
48
41
31
30
30
22
18
17
64
70
61
40
23
MBA
estimate
74
66
51
53
49
41
42
40
38
35
34
35
65
71
63
43
35
Sources: Mortgage Bankers Association, Fannie Mae, Freddie Mac and Urban Institute.
Note: Shaded boxes indicate forecasted figures. All figures are estimates for total single-family market. Column labels indicate source of
estimate. The yearly averages for interest rates in 2011, 2012, and 2013 were 4.5, 3.7, and 4.0 percent, respectively. The three sources all
projected an annual average rate of 4.3 percent for 2014. For 2015, their projections ranged from 4.6 percent to 5 percent.
Housing Starts and Homes Sales
Housing Starts, thousands
Home Sales. thousands
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
995
1170
610
780
920
1020
1300
612
783
930
999
1163
4566
5028
5519
5342
5660
4570
5030
5510
5310
5600
4501
5030
5505
5322
5760
4200
4661
5073
4878
5258
301
369
432
444
502
Sources: Mortgage Bankers Association, Fannie Mae, Freddie Mac and Urban Institute.
Note: Shaded boxes indicate forecasted figures. All figures are estimates for total single-family market. Column labels indicate source of
estimate.
12
STATE OF THE MARKET
ORIGINATOR PROFITABILITY
When originator profitability is high, mortgage rates tend to be less responsive to the general level of interest
rates, as originators are capacity-constrained. When originator profitability is low, mortgage rates are far more
responsive to the general level of interest rates. As mortgage interest rates have risen and fewer borrowers find
it economical to refinance, originator profitability is lower. Originator profitability is often measured as the spread
between the rate the borrower pays for the mortgage (the primary rate) and the yield on the underlying
mortgage-backed security in the secondary market (the secondary rate). However, with guarantee fees rising
steadily over the past few years, the so-called primary-secondary spread has become a very imperfect measure
to compare profitability across time.
The measure used here, Originator Profitability and Unmeasured Costs (OPUC), is formulated and calculated by
the Federal Reserve Bank of New York. It looks at the price at which the originator actually sells the mortgage
into the secondary market and adds the value of retained servicing (both base and excess servicing, net of gfees) as well as points paid by the borrower.
Originator Profitability and Unmeasured Costs
6
Dollars per $100 loan
5
4
3
$2.1
2
1
Feb-14
Aug-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
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 39 and 42 points over the last decade, respectively. The 10th
percentile of FICO scores, which represents the lower bound of creditworthiness needed to qualify for a mortgage,
stood at 661 as of June 2014. Prior to the housing crisis, this threshold held steady in the low 600s. LTV levels at
origination remain relatively high, averaging 85.6, which reflects the large number of FHA purchase originations.
Borrower FICO Score at Origination
90th percentile
Mean
Median
10th percentile
FICO Score
850
800
801
750
749
739
700
661
650
600
550
Jun-14
Dec-13
Jun-13
Dec-12
Jun-12
Dec-11
Jun-11
Dec-10
Jun-10
Dec-09
Jun-09
Dec-08
Jun-08
Dec-07
Jun-07
Dec-06
Jun-06
Dec-05
Jun-05
Dec-04
Jun-04
Dec-03
Jun-03
Dec-02
Jun-02
Dec-01
Jun-01
500
Sources: CoreLogic Prime Servicing and Urban Institute.
Note: Purchase-only loans.
Combined LTV at Origination
90th percentile
Mean
Median
10th percentile
LTV
110
100
100
90
80
90
86
70
67
60
50
40
Jun-14
Dec-13
Jun-13
Dec-12
Jun-12
Dec-11
Jun-11
Dec-10
Jun-10
Dec-09
Jun-09
Dec-08
Jun-08
Dec-07
Jun-07
Dec-06
Jun-06
Dec-05
Jun-05
Dec-04
Jun-04
Dec-03
Jun-03
Dec-02
Jun-02
Dec-01
Jun-01
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
Sources: CoreLogic Prime Servicing as of June 2014 and Urban Institute.
Note: Purchase-only loans.
15
Origination LTV
San Francisco-Redwood City-South San Francisco CA
San Jose-Sunnyvale-Santa Clara CA
Oakland-Hayward-Berkeley CA
Los Angeles-Long Beach-Glendale CA
New York-Jersey City-White Plains NY-NJ
San Diego-Carlsbad CA
Newark NJ-PA
Portland-Vancouver-Hillsboro OR-WA
Seattle-Bellevue-Everett WA
Nassau County-Suffolk County NY
Washington-Arlington-Alexandria DC-VA-MD-WV
Boston MA
Baltimore-Columbia-Towson MD
Chicago-Naperville-Arlington Heights IL
Minneapolis-St. Paul-Bloomington MN-WI
Denver-Aurora-Lakewood CO
Philadelphia PA
Charlotte-Concord-Gastonia NC-SC
St. Louis MO-IL
Pittsburgh PA
Sacramento--Roseville--Arden-Arcade CA
Columbus OH
Cincinnati OH-KY-IN
Dallas-Plano-Irving TX
Atlanta-Sandy Springs-Roswell GA
Tampa-St. Petersburg-Clearwater FL
Kansas City MO-KS
Miami-Miami Beach-Kendall FL
Houston-The Woodlands-Sugar Land TX
Orlando-Kissimmee-Sanford FL
Riverside-San Bernardino-Ontario CA
Cleveland-Elyria OH
Fort Worth-Arlington TX
Detroit-Dearborn-Livonia MI
Las Vegas-Henderson-Paradise NV
Phoenix-Mesa-Scottsdale AZ
San Antonio-New Braunfels TX
Origination FICO
STATE OF THE MARKET
OVERVIEW
CREDIT
CREDIT AVAILABILITY
AVAILABILITY FOR
FOR
PURCHASE LOANS
Credit has been tight for all borrowers with less-than-stellar credit scores, but there are significant variations across
MSAs. For example, the mean origination FICO for borrowers in San Francisco- Redwood City- South San
Francisco, CA is 770, while in San Antonio-New Braunfels TX it is 727. 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
Oakland-Hayward-Berkeley CA
Newark NJ-PA
$240,000
$200,000
Sources: CoreLogic, US Census, Freddie Mac and UI calculations based on NAR methodology.
Note: Affordability index is calculated relative to home prices in 2000-03. A ratio above 1 indicates higher affordability in
June 2014 than in 2000-03.
16
Las Vegas-Henderson-Paradise NV
Credit
Bubble
Cleveland-Elyria OH
Columbus OH
Pittsburgh PA
Tampa-St. Petersburg-Clearwater FL
Cincinnati OH-KY-IN
Nassau County-Suffolk County NY
Detroit-Dearborn-Livonia MI
Median sales price
Max affordable price at 6.0% rate
Minneapolis-St. Paul-Bloomington MN-WI
Orlando-Kissimmee-Sanford FL
Chicago-Naperville-Arlington Heights IL
$260,000
San Antonio-New Braunfels TX
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
Jun-14
$280,000
Kansas City MO-KS
Sacramento--Roseville--Arden-Arcade CA
Denver-Aurora-Lakewood CO
Fort Worth-Arlington TX
St. Louis MO-IL
Riverside-San Bernardino-Ontario CA
Phoenix-Mesa-Scottsdale AZ
Houston-The Woodlands-Sugar Land TX
Charlotte-Concord-Gastonia NC-SC
Housing prices
Sources: CoreLogic, US Census, Freddie Mac
and Urban Institute.
Note: The maximum affordable price is the
house price that a family can afford putting 20
percent down, with a monthly payment of 28
percent of median family income, at the Freddie
Mac prevailing rate for 30-year fixed-rate
mortgage, and property tax and insurance at
1.75 percent of housing value.
San Diego-Carlsbad CA
Home prices are still very affordable by
historical standards, despite increases
over the last three years. Even if
interest rates rose to 6 percent,
affordability would be at the long term
historical average.
Atlanta-Sandy Springs-Roswell GA
New York-Jersey City-White Plains NY-NJ
Miami-Miami Beach-Kendall FL
Dallas-Plano-Irving TX
Baltimore-Columbia-Towson MD
Seattle-Bellevue-Everett WA
Portland-Vancouver-Hillsboro OR-WA
San Francisco-Redwood City-S. San Francisco CA
Philadelphia PA
San Jose-Sunnyvale-Santa Clara CA
Los Angeles-Long Beach-Glendale CA
Washington-Arlington-Alexandria DC-VA-MD-WV
Boston MA
Ratio
STATE OF THE MARKET
HOUSING AFFORDABILITY
National Housing Affordability Over Time
Max affordable price
$300,000
$278,432
$238,861
$220,000
$203,016
$180,000
$160,000
$140,000
$120,000
Affordability Adjusted for MSA-Level DTI
1.4
1.3
1.2
1.1
1
0.9
0.8
0.7
STATE OF THE MARKET
HOME PRICE INDICES
National Year-Over-Year HPI Growth
The strong year-over-year house price growth through 2013 has slowed somewhat in 2014, as indicated by
both the repeated sales HPI from CoreLogic and hedonic index from Zillow.
15.0%
CoreLogic HPI
10.0%
5.0%
0.0%
7.4%
6.5%
Zillow HVI
-5.0%
-10.0%
-15.0%
Jul-14
Jan-14
Jul-13
Jan-13
Jul-12
Jan-12
Jul-11
Jan-11
Jul-10
Jan-10
Jul-09
Jan-09
Jul-08
Jul-07
Jan-08
Jan-07
Jul-06
Jan-06
Jul-05
Jan-05
Jul-04
Jan-04
Jul-03
Jan-03
Jul-02
Jan-02
Jul-01
-20.0%
Jan-01
Year-over-year growth rate
20.0%
Sources: CoreLogic, Zillow and Urban Institute.
Changes in CoreLogic HPI for Top MSAs
Despite rising 30.5 percent from the trough, national house prices still must grow 13.6 percent to reach pre-crisis
peak levels. At the MSA level, three of the top 15 MSAs have reached their peak HPI– Houston, TX; Dallas, TX;
and Denver, CO. Two MSAs particularly hard hit by the boom and bust– Phoenix, AZ and Riverside, CA– would
need to rise more than 40 percent to return to peak levels.
HPI changes (%)
MSA
2000 to peak
United States
99.2
New York-Jersey City-White Plains NY-NJ
116.1
Los Angeles-Long Beach-Glendale CA
181.8
Chicago-Naperville-Arlington Heights IL
65.5
Atlanta-Sandy Springs-Roswell GA
40.8
Washington-Arlington-Alexandria DC-VA-MD-WV
160.0
Houston-The Woodlands-Sugar Land TX
44.3
Phoenix-Mesa-Scottsdale AZ
126.3
Riverside-San Bernardino-Ontario CA
194.4
Dallas-Plano-Irving TX
38.2
Minneapolis-St. Paul-Bloomington MN-WI
74.2
Seattle-Bellevue-Everett WA
94.2
Denver-Aurora-Lakewood CO
36.2
Baltimore-Columbia-Towson MD
129.0
San Diego-Carlsbad CA
148.9
Anaheim-Santa Ana-Irvine CA
162.8
Sources: CoreLogic HPIs as of July 2014 and Urban Institute.
Note: This table includes the largest 15 Metropolitan areas by mortgage count.
Peak to
trough
Trough to
current
-32.5
-20.1
-39.2
-36.6
-33.4
-33.4
-12.7
-52.8
-53.4
-13.8
-30.7
-32.1
-14.5
-25.7
-38.3
-37.1
30.5
17.6
45.0
26.8
40.5
31.5
31.9
49.5
48.6
26.8
26.9
35.6
34.1
12.6
38.5
39.1
% Rise needed
to achieve
peak
13.6
6.4
13.4
24.3
7.0
14.2
-13.1
41.7
44.3
-8.5
13.7
8.6
-12.7
19.4
17.1
14.3
17
OVERVIEW
STATE OF THE MARKET
NEGATIVE EQUITY & SERIOUS
DELINQUENCY
Negative Equity Share
With home 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 have dropped to 12.7 percent.
Residential properties in near negative equity (LTV between 95 and 100) comprise another 3.2 percent.
35%
30%
Near or in negative
equity
25%
20%
15.9%
15%
12.7%
10%
Negative equity
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.
Loans in Serious Delinquency/Foreclosure
Serious delinquencies and foreclosures continue to decline with the housing recovery, but remain high relative to
the early 2000s. Loans 90 days delinquent or in foreclosure totaled 4.8 percent in the second quarter of 2014,
down from 5.9 percent for the same quarter a year earlier.
12%
10%
8%
Percent of loans 90 days
delinquent
Percent of loans in
foreclosure
6%
4%
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
2Q14
Percent of loans 90 days
delinquent or in foreclosure
Sources: Mortgage Bankers Association and Urban Institute.
18
GSES UNDER CONSERVATORSHIP
GSE PORTFOLIO WIND-DOWN
Freddie and Fannie continue to rapidly shrink their portfolios. Year-over-year, Fannie has contracted by 17.8
percent, and Freddie Mac by 19.9 percent. As of July 2014, they were both below their year-end 2014
portfolio cap. They are shrinking their less liquid assets (mortgage loans and non-agency MBS) at close to
the same pace that they are shrinking their entire portfolio.
Fannie Mae Mortgage-Related Investment Portfolio
Composition
900
800
700
600
$ billions
Current size: $449.9 billion
Current cap: $469.625 billion
Shrinkage year-over-year: 17.8%
Shrinkage in less-liquid assets
year-over-year: 15.7%
500
400
300
Mortgage loans
200
Non-agency MBS
100
Non-FNMA agency MBS
Jul-06
Nov-06
Mar-07
Jul-07
Nov-07
Mar-08
Jul-08
Nov-08
Mar-09
Jul-09
Nov-09
Mar-10
Jul-10
Nov-10
Mar-11
Jul-11
Nov-11
Mar-12
Jul-12
Nov-12
Mar-13
Jul-13
Nov-13
Mar-14
Jul-14
0
Fannie MBS in portfolio
Sources: Fannie Mae and Urban Institute.
Freddie Mac Mortgage-Related Investment Portfolio
Composition
900
700
600
500
400
300
Non-agency MBS
200
Non-FHLMC agency MBS
100
FHLMC MBS in portfolio
Sources: Freddie Mac and Urban Institute.
0
Jul-06
Nov-06
Mar-07
Jul-07
Nov-07
Mar-08
Jul-08
Nov-08
Mar-09
Jul-09
Nov-09
Mar-10
Jul-10
Nov-10
Mar-11
Jul-11
Nov-11
Mar-12
Jul-12
Nov-12
Mar-13
Jul-13
Nov-13
Mar-14
Jul-14
Mortgage loans
800
$ billions
Current size: $417.5 billion
Current cap: $469.625 billion
Shrinkage year-over-year: 19.9%
Shrinkage in less-liquid assets
year-over-year: 20.9%
19
GSES UNDER CONSERVATORSHIP
GSES UNDER CONSERVATORSHIP
EFFECTIVE
EFFECTIVE GUARANTEE
GUARANTEE FEES
FEES AND
GSE RISK-SHARING TRANSACTIONS
Effective Guarantee Fees
Fannie’s average charged g-fee on new single-family originations was 62.6 bps in Q2 2014, down slightly from 63.0
in the previous quarter but up from 56.9 a year earlier. This is a marked increase over 2012 (39.9 bps) and 2011
(28.8 bps), and has contributed to the GSEs’ 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 about the level of g-fees and LLPAs; September 8th was the comment deadline.
70.0
Fannie Mae single-family effective gfee rate
62.6
60.0
Fannie Mae single-family average
charged g-fee on new acquisitions
50.0
40.0
40.3
Freddie Mac management and g-fee
rate
30.0
30.4
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
3Q10
4Q10
1Q11
2Q11
3Q11
4Q11
1Q12
2Q12
3Q12
4Q12
1Q13
2Q13
3Q13
4Q13
1Q14
2Q14
20.0
Sources: Fannie Mae, Freddie Mae and Urban
10.0
Institute.
Note: Freddie only reports the effective g-fee on the 0.0
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.
Note: Adverse Market Delivery Charge (AMDC) of 0.250% has been added to the LLPA numbers in the matrix by LTV and credit score. Freddie
Mac charges very comparable LLPAs.
20
GSES UNDER CONSERVATORSHIP
GSE RISK-SHARING TRANSACTIONS
Freddie Mac – Structured Agency Credit Risk (STACR)
Transaction
Reference Pool Size
($ millions)
July 24, 2013
STACR Series 2013 - DN1
$22,584.40
November 12, 2013
STACR Series 2013 - DN2
$35,327.30
February 6, 2014
STACR Series 2014 - DN1
$32,076.80
April 2, 2014
STACR Series 2014 - DN2
$28,146.98
August 6, 2014
STACR Series 2014 - DN3
$19,746.23
August 6, 2014
STACR Series 2014 – HQ1
$9,974.68
September 10, 2014
STACR Series 2014 – HQ2
Date
$33,434.43
Freddie Mac Total Reference Collateral
$181,290.82
Percent of Freddie Mac’s Total Book of Business
11.9%
Fannie Mae – Connecticut Avenue Securities (CAS)
Transaction
Reference Pool Size
($ millions)
October 24, 2013
CAS 2013 - C01
$26,756.40
January 14, 2014
CAS 2014 - C01
$29,308.70
May 28, 2014
CAS 2014 - C02
$60,818.48
July 25, 2014
CAS 2014 – C03
$78,233.73
Date
Fannie Mae Total Reference Collateral
$195,117.31
Percent of Fannie Mae’s Total Book of Business
7.5%
Details of Freddie Mac’s latest capital markets transaction, STACR Series 2014 – HQ2
Class
A-H
Amount
($ millions)
Tranche
Thickness (%)
CE (%)
Rating
Initial
Spread (bps)
$9,326.33
93.5
6.5
NR
-
M-1, M-1H, Total
$192.00, $47.39, $239.39
2.4
4.1
F: A-sf; M: A2
145
M-2, M-2H, Total
$124.00, $30.61, $154.61
1.55
2.55
F: BBB-sf; M: Baa2
220
M-3, M-3H, Total
$144.00, $35.54, $179.54
1.8
0.75
NR
375
$74.81
$33,434.43
0.75
100
0
NR
-
B-H
Reference Pool Size
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, “M” = Moody’s.
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 July 2014, 2.00 percent of the Fannie portfolio
and 2.02 percent of the Freddie portfolio were seriously delinquent, down from 2.70 percent for both agencies in
July 2013.
Serious Delinquency Rates–Fannie Mae
Single-family: Non-credit enhanced
Single-family: Credit enhanced
Single-family: Total
Percentage of total loans
16%
14%
12%
10%
8%
6%
4%
3.81%
2%
2.00%
1.71%
Jul-14
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
0%
Sources: Fannie Mae and Urban Institute.
Serious Delinquency Rates–Freddie Mac
Single-family: Non-credit enhanced
Single-family: Credit enhanced
Single-family: Total
10%
Percentage of total loans
9%
8%
7%
6%
5%
4%
3.89%
3%
2.02%
1.75%
2%
1%
Jul-14
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
0%
Sources: Freddie Mac and Urban Institute.
22
GSES UNDER CONSERVATORSHIP
SERIOUS DELINQUENCY RATES
Serious delinquencies for FHA and GSE single-family loans continue to decline, but remain high relative to
2005-2007. FHA delinquencies are declining from a higher relative starting point. GSE multifamily delinquencies
have declined to pre-crisis levels, though they did not reach problematic levels even in the worst years.
Serious Delinquency Rates–Single-Family Loans
FHA
Fannie Mae
Freddie Mac
10%
Percentage of total loans
9%
8%
7%
6.22%
6%
5%
4%
3%
2.07%
2.05%
2%
1%
1Q05
2Q05
3Q05
4Q05
1Q06
2Q06
3Q06
4Q06
1Q07
2Q07
3Q07
4Q07
1Q08
2Q08
3Q08
4Q08
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
3Q10
4Q10
1Q11
2Q11
3Q11
4Q11
1Q12
2Q12
3Q12
4Q12
1Q13
2Q13
3Q13
4Q13
1Q14
2Q14
0%
Sources: Fannie Mae, Freddie Mac, MBA Delinquency Survey and Urban Institute.
Note: Serious delinquency is defined as 90 days or more past due or in the foreclosure process.
Serious Delinquency Rates–Multifamily GSE Loans
Fannie Mae
Freddie Mac
0.9%
Percentage of total loans
0.8%
0.7%
0.6%
0.5%
0.4%
0.3%
0.2%
0.1%
0.10%
0.05%
Jul-14
Mar-14
Nov-13
Jul-13
Mar-13
Nov-12
Jul-12
Mar-12
Jul-11
Nov-11
Mar-11
Nov-10
Jul-10
Mar-10
Nov-09
Jul-09
Mar-09
Nov-08
Jul-08
Mar-08
Nov-07
Jul-07
Mar-07
Nov-06
Jul-06
Mar-06
Nov-05
Jul-05
0.0%
Sources: Fannie Mae, Freddie Mac and Urban Institute.
Note: Multifamily serious delinquency rate is the unpaid balance of loans 60 days or more past due, divided by the total unpaid balance.
23
GSES UNDER CONSERVATORSHIP
REFINANCE ACTIVITY
The Home Affordable Refinance Program (HARP) refinances have begun to slow. Two factors are responsible
for this: (1) higher interest rates, leaving fewer eligible loans where refinancing is economically advantageous
(in-the-money), and (2) a considerable number of borrowers who have already refinanced. Nonetheless, HARP
refinances total 3.2 million since the Q2 2009 program inception, accounting for 17.2 percent of all GSE
refinances in this period.
Total HARP Refinance Volume
Fannie Mae
Freddie Mac
350
300
Thousands
250
200
150
100
50
2Q14
1Q14
4Q13
3Q13
2Q13
1Q13
4Q12
3Q12
2Q12
1Q12
4Q11
3Q11
2Q11
1Q11
4Q10
3Q10
2Q10
1Q10
4Q09
3Q09
2Q09
-0
21
33
Sources: FHFA Refinance Report and Urban Institute.
HARP Refinances
June
2014
Year-to-date
2014
Inception to
date
2013
2012
2011
Total refinances
119,896
715,364
19,587,616
4,081,911
4,750,530
3,229,066
Total HARP refinances
17,787
130,970
3,188,926
892,914
1,074,769
400,024
Share 80–105 LTV
74.3%
71.4%
69.8%
56.4%
56.4%
85.0%
Share 105–125 LTV
16.7%
17.5%
17.2%
22.4%
22.4%
15.0%
Share >125 LTV
9.0%
11.2%
12.9%
21.2%
21%
0%
23,010
147,242
3,400,439
735,210
729,235
785,049
All other streamlined
refinances
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 861,723 eligible loans, but 42 percent are out-of-the-money because the closing cost
would exceed the long-term savings, leaving 495,803 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 7,039,938 loans in this category, 5,539,984 are
in-the-money.
More than two thirds of the GSE book of business that meets the pay history requirements was originated after the
June 2009 cutoff date. FHFA Director Mel Watt announced in May 2014 that they are not planning to extend the
date, as too few borrowers (516,746 by our estimate) would benefit from the change.
Total loan count
26,756,215
Loans that do not meet pay history requirement
Loans that meet pay history requirement:
930,292
25,825,923
Pre-June 2009 origination
7,901,661
Post-June 2009 origination
17,924,262
Loans Meeting HARP Pay History Requirements
Pre-June 2009
LTV category
In-the-money
Out-of-the-money
Total
≤80
>80
Total
5,539,984
495,803
6,035,787
1,499,954
365,920
1,865,874
7,039,938
861,723
7,901,661
Post-June 2009
LTV category
In-the-money
Out-of-the-money
Total
≤80
>80
Total
2,671,587
516,746
3,188,333
12,746,186
1,989,743
14,735,929
15,417,773
2,506,489
17,924,262
Sources: CoreLogic Prime Servicing as of July 2014.
Note: Figures are scaled up from source data to account for data coverage of the GSE active loan market (based on MBS data from
eMBS). Striped box indicates HARP-eligible loans that are in-the-money.
25
MODIFICATION ACTIVITY
HAMP ACTIVITY
New HAMP trial mods have tapered off as new defaults have declined. Meanwhile, modification success rates are
improving, so the number of new permanent modifications remains stable, at 10,000 in June compared to 12,000 in
each of the two months prior. Active permanent mods have increased 8 percent since June 2013 to 959,000
(bottom).
New HAMP Modifications
New trial mods started
New permanent mods started
New active permanent mods
Number of mods (thousands)
180
160
140
120
100
80
60
40
10.00
9.00
4.30
20
Apr-14
Jun-14
Feb-14
Dec-13
Oct-13
Aug-13
Apr-13
Jun-13
Feb-13
Dec-12
Oct-12
Aug-12
Apr-12
Jun-12
Feb-12
Dec-11
Oct-11
Aug-11
Apr-11
Jun-11
Feb-11
Dec-10
Oct-10
Aug-10
Apr-10
Jun-10
Feb-10
Dec-09
Oct-09
Aug-09
Apr-09
Jun-09
0
Sources: U.S. Treasury Making Home Affordable and Urban Institute.
Cumulative HAMP Modifications
2.5
Number of mods (millions)
All trials mods started
2.2
2.0
All permanent mods
started
1.5
1.39
1.0
0.96
Active permanent mods
0.5
Jun-14
Apr-14
Feb-14
Dec-13
Oct-13
Jun-13
Aug-13
Apr-13
Feb-13
Dec-12
Oct-12
Aug-12
Jun-12
Apr-12
Feb-12
Dec-11
Oct-11
Aug-11
Jun-11
Apr-11
Feb-11
Dec-10
Oct-10
Jun-10
Aug-10
Apr-10
Feb-10
Dec-09
Oct-09
Aug-09
Jun-09
Apr-09
0.0
Sources: U.S. Treasury Making Home Affordable and Urban Institute.
26
MODIFICATION BY TYPE OF ACTION
MODIFICATION
BYOF
TYPE
AND BY BEARER
RISKOF ACTION
AND BEARER OF RISK
MODIFICATION
ACTIVITY
OVERVIEW
The share of principal reduction modifications peaked at 20 percent in December 2012 before dropping
dramatically to 8.1 percent in Q1 2014. This is to be expected, as increasing home prices have increased
equity, reducing the need for principal reduction and making such modifications less likely to be net-presentvalue positive. Portfolio loans are the most likely candidates for principal reduction, followed by private investor
loans, because the GSEs and FHA/VA generally do not allow this type of modification.
Changes in Loan Terms for Modifications
Modification Quarter
12/31/12 03/31/13
6/30/13
9/30/13
12/31/13
3/31/14
One quarter
% change
One year
% change
Capitalization
84.6
79.3
81.6
83.5
87.7
74.3
-15.3
-5.9
Rate Reduction
73.3
80.1
81.0
78.9
76.7
73.3
-4.4
-8.5
Rate Freeze
3.9
3.7
5.2
5.5
7
6.5
-6.6
76.9
Term Extension
Principal
Reduction
Principal Deferral
58.9
60.3
67.7
69.3
75.9
78
2.7
29.2
20.0
15.2
12.2
13.6
10.5
8.1
-22.8
-46.4
20.5
18.2
20.5
25.3
30.6
25.1
-17.9
37.8
Not Reported*
1.1
0.7
1.5
2.2
0.7
-5.6
-1.7
0.7
Sources: OCC Mortgage Metrics Report for the First Quarter of 2014 and Urban Institute.
Note: This table presents modifications of each type as a share of total modifications. Columns sum to over 100% because loans often
receive modifications with multiple features.
*Processing constraints at some servicers prevented them from reporting specific modified term(s).
Type of Modification Action by Investor and Product Type
Fannie Mae
Freddie Mac
Governmentguaranteed
Private
Investor
Portfolio
Overall
Capitalization
76.0
70.0
36.5
79.2
93.6
63.7
Rate reduction
56.8
75.6
82.8
70.6
69.5
73.3
Rate freeze
9.6
4.7
6.6
3.6
7.8
6.5
Term extension
90.0
93.4
96.1
29.6
57.8
78.0
Principal reduction
0.0
0.0
0.1
15.0
37.6
8.1
Principal deferral
20.8
27.8
22.3
31.4
27.6
25.1
Not reported*
2.1
0.3
0.1
1.9
0.8
0.9
Sources: OCC Mortgage Metrics Report for the First Quarter of 2014 and Urban Institute.
Note: This table presents modifications of each type as a share of total modifications. Columns sum to over 100% because loans often
receive modifications with multiple features.
*Processing constraints at some servicers prevented them from reporting specific modified term(s).
27
MODIFICATION ACTIVITY
MODIFICATIONS AND LIQUIDATIONS
Total modifications (HAMP and proprietary) are now roughly equal to total liquidations. Hope Now reports show
7.16 million borrowers have received a modification since Q3 2007, compared with 7.23 million liquidations in
the same period. Annualizing year-to-date numbers, we have seen sharp declines in both liquidation and
modification activity in 2014 versus 2013. In fact, in the first six months of 2014, foreclosures and short sales
dropped to their lowest rates since 2008.
Loan Modifications and Liquidations
1,400
1,200
614.6
1,000
800
600
151.5
346.3
Number of loans (thousands)
1,600
400
200
0
2007
(Q3-Q4)
2008
2009
2010
2011
2012
2013
2014
(Ann.)
HAMP mods
Proprietary mods
Liquidations
Sources: Hope Now Reports and
Urban Institute.
Note: Liquidations includes both
foreclosure sales and short
sales. Annualized figure based
on data from June 2014.
Cumulative Modifications and Liquidations
7.2
8
6
6
5
HAMP mods
4
Proprietary mods
3
Liquidations
1.4
Number of loans (millions)
7
2
1
0
2007
(Q3-Q4)
2008
2009
2010
2011
2012
2013
2014
YTD
Sources: Hope Now Reports
and Urban Institute.
Note: Liquidations includes both
foreclosure sales and short
sales.
28
MODIFICATION ACTIVITY
MODIFICATION REDEFAULT RATES BY
BEARER OF THE RISK
Redefault rates on modified loans have come down dramatically from 2008 to 2013. For the period as a whole,
the steepest drops have been on private label modifications. More recently, there have been sharp declines in
the redefault rates on government-guaranteed modifications, although this product type still has higher
redefault rates than others.
Redefault Rate 12 Months after Modification
80%
70%
Fannie Mae
Freddie Mac
Government-guaranteed
Private
Redefault rate
60%
50%
40%
30%
Portfolio Loans
20%
Overall
10%
0%
2008
2009
2010
2011
Year of modification
2012
2013
Sources: OCC Mortgage Metrics Report for the First Quarter of 2014 and Urban Institute.
Redefault Rate 24 Months after Modification
80%
70%
Fannie Mae
Freddie Mac
Government-guaranteed
Private
Portfolio loans
Redefault rate
60%
50%
40%
30%
20%
Overall
10%
0%
2008
2009
2010
Year of modification
2011
2012
Sources: OCC Mortgage Metrics Report for the First Quarter of 2014 and Urban Institute.
29
AGENCY ISSUANCE
AGENCY GROSS AND NET ISSUANCE
With refinancing activity falling off with rising interest rates, newly issued agency securities (agency gross
issuance) have fallen off as well. Agency gross issuance totaled $586 billion in August 2014, a 56 percent decline
year-over-year. Net issuance, which excludes repayments, prepayments, and refinances on outstanding
mortgages, remains low and dominated by Ginnie Mae. This is unsurprising given the increased role of FHA and
VA 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
$400.2
$186.3
$586.4
2014 YTD
-$1.9
$38.8
$36.9
%Change
year-over-year
-56.0%
-36.4%
-51.3%
%Change
year-over-year
-104.4%
-34.5%
-63.6%
2014 (Ann.)
$600.27
$279.39
$879.66
2014 (Ann.)
-$2.78
$58.14
$55.37
Sources: eMBS and Urban Institute.
Note: Dollar amounts are in billions.
Year-to-date figure as of August 2014.
Sources: eMBS and Urban Institute.
Note: Dollar amounts are in billions.
Year-to-date figure as of August 2014.
30
OVERVIEW
AGENCY
ISSUANCE
OVERVIEW
AGENCY GROSS AND NET ISSUANCE
AGENCY
GROSS
ISSUANCE
&
FED
BY MONTH
PURCHASES
Monthly Gross Issuance
Fannie Mae
While government and GSE
lending have dominated the
mortgage market since the crisis,
there has been a change in the
mix. The Ginnie Mae share
reached a peak of 28 percent of
total agency issuance in 2010,
declined to 25 percent in 2013,
and has since risen to 32 percent
by August 2014. The recent
increase in the GNMA share
reflects the decline in refinance
activity, which has had a
disproportionate effect on the
GSEs.
Freddie Mac
Ginnie Mae
250
$ billions
200
150
100
50
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
Aug-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 agency gross issuance. In Q1 2014, the Fed began to taper,
but gross issuance dropped even more, and Fed absorption reached 74 percent. More recently, gross issuance
increased and the Fed have continued to taper, resulting in the Fed absorbing a lower percent of gross
issuance. In August, gross issuance edged up to $92.55 billion, while total Fed purchases declined further to
$32.24 billion, yielding 35 percent Fed absorption of gross issuance. This share is likely to fall further as the
bond-buying program is expected to end in October 2014.
Gross issuance
Total Fed purchases
250
$ billions
200
150
100
50
Sources: eMBS, Federal Reserve Bank of New York and Urban Institute.
31
Aug-14
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
AGENCY ISSUANCE
MORTGAGE INSURANCE ACTIVITY
MI Activity
150
$ billions
Overall mortgage insurance
activity bounced back from
three consecutive quarters
of declining volume,
reaching $106.7 billion in Q2
2014. Private mortgage
insurers regained their slight
loss in market share from
the previous quarter,
accounting for 40.0 percent
of the market in the first half
of the year. The FHA share
dropped to 35.8 percent, its
lowest since the recession.
200
$106.7
Total
100
FHA
50
$44.2
Total private primary MI
$36.0
$26.5
VA
2Q14
1Q14
4Q13
3Q13
2Q13
1Q13
4Q12
3Q12
2Q12
1Q12
4Q11
3Q11
2Q11
1Q11
0
Sources: Inside Mortgage Finance and Urban Institute.
MI Market Share
Total private primary MI
FHA
VA
24.2%
100%
90%
80%
35.8%
70%
60%
50%
40%
40.0%
30%
20%
10%
0%
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Q1-2
Sources: Inside Mortgage Finance and Urban Institute.
32
AGENCY ISSUANCE
MORTGAGE INSURANCE ACTIVITY
The top table depicts the history of FHA mortgage insurance premiums since 2001. Annual premiums have
more than doubled since 2008, as FHA has worked to shore up its finances. The most recent change
increased the annual premium by 10 bps and kept the upfront premium at 1.75 percent. The bottom table
compares FHA and GSE execution. For a 95 LTV mortgage, borrowers with a FICO score below 680 will find
FHA a more attractive product, while those above 680 will find GSE execution with PMI to be more favorable.
FHA MI Premiums for Typical Purchase Loan
Case number date
Upfront mortgage insurance
premium (UFMIP) paid
Annual mortgage insurance
premium (MIP)
1/1/2001 - 7/13/2008
7/14/2008 - 9/30/2008*
10/1/2008 - 4/4/2010
4/5/2010 - 10/3/2010
10/4/2010 - 4/17/2011
4/18/2011 - 4/8/2012
4/9/2012 - 6/10/2012
6/11/2012 - 3/31/2013a
4/1/2013 - presentb
150
175
175
225
100
100
175
175
175
50
55
55
55
90
115
125
125
135
Sources: Ginnie Mae and Urban Institute.
Note: A typical purchase loan has an LTV over 95 and a loan term longer than 15 years. Mortgage insurance premiums are listed in
basis points.
* For a short period the FHA used a risk based FICO/LTV matrix for MI. This table assumes the average FICO for 2008 purchase
originations, ~630.
a
Applies to purchase loans less than or equal to $625,500. Those over that amount have an annual premium of 150 bps.
b
Applies to purchase loans less than or equal to $625,500. Those over that amount have an annual premium of 155 bps.
Initial Monthly Payment Comparison: FHA vs. PMI
Assumptions
Property Value
Loan Amount
LTV
Base Rate
Conforming
FHA
FICO
$250,000
$237,500
95
4.29%
4.00%
620 - 639
640 - 659
660 - 679
680 - 699
700 - 719
720 - 739
740 - 759
760 +
FHA UFMIP
1.75
1.75
1.75
1.75
1.75
1.75
1.75
1.75
FHA MIP*
1.30
1.30
1.30
1.30
1.30
1.30
1.30
1.30
GSE AMDC & LLPA
3.50
3.00
2.50
1.50
1.25
0.75
0.50
0.50
PMI Annual MIP
1.15
1.15
1.15
0.89
0.89
0.62
0.62
0.54
$1,411
$1,411
$1,411
$1,411
$1,411
$1,411
$1,411
$1,411
$1,501
$1,487
$1,472
$1,392
$1,385
$1,318
$1,311
FHA MI Premiums
PMI
Monthly Payment
FHA
$1,295
PMI
($90)
($76)
($61)
$19
$26
$93
$100
$116
PMI Advantage
Sources: Genworth Mortgage Insurance, Ginnie Mae and Urban Institute.
Note: Mortgage insurance premiums listed in percentage points. LLPA= Loan Level Price Adjustment, described in detail on page 20.
FHA MIP=1.3 percent for <95 LTV mortgages. Orange shade indicates FHA monthly payment is more favorable, while light blue
indicates PMI is more favorable.
33
RELATED HFPC WORK
PUBLICATIONS AND EVENTS
Upcoming Events
October 6—Lunchtime Data Talk: Home Equity Lines of Credit: Past and Future Performance
November 5—Housing Symposium cohosted with CoreLogic
More details to follow on our events page as it becomes available.
Publications
Blog Posts
Charting the Course to a Single Security
Authors: Laurie Goodman and Lewis Ranieri
Date: September 3, 2014
The $400 million case for a single GSE security
Author: Laurie Goodman
Date: September 5, 2014
HARP Significantly Reduced Mortgage
Default Rates
Author: Jun Zhu
Date: September 3, 2014
Data show surprisingly little impact of new mortgage
rules
Authors: Laurie Goodman, Ellen Seidman, Jim Parrott,
and Bing Bai
Date: August 21, 2014
Putting Mortgage Insurers on Solid Ground
Authors: Mark Zandi, Jim Parrott, and Cristian
deRitis
Date: August 26, 2014
Why it’s no easy task to determine what the GSEs
should charge for their guarantee
Authors: Laurie Goodman, Ellen Seidman, Jim Parrott,
and Jun Zhu
A Realistic Assessment of Housing Finance Reform Date: August 14, 2014
Authors: Laurie Goodman
Date: August 18, 2014
Toward a better Bank of America settlement
Author: HFPC Staff
Guarantee Fees- An Art Not a Science
Date: August 8, 2014
Authors: Laurie Goodman, Ellen Seidman,
Jim Parrott, and Jun Zhu
Specialty mortgage servicers: what’s the big deal?
Date: August 14, 2014
Author: Pamela Lee
Date: August 7, 2014
Nonbank Specialty Servicers: What the Big Deal?
Author: Pamela Lee
Dodd-Frank: Can we really calculate the cost?
Date: August 4, 2014
Author: Ellen Seidman
Date: July 25, 2014
VA Loans Outperform FHA Loans. Why? And What
Can We Learn?
Settling debts with other people’s money: Use of
Authors: Laurie Goodman, Ellen Seidman, and Jun Zhu investor funds in lender settlements
Date: July 16, 2014
Author: Ellen Seidman, Laurie Goodman, and Jim
Parrott
A Johnson-Crapo Dialogue
Date: July 24, 2014
Authors: Jim Parrott, Ellen Seidman, and Laurie
Goodman
Is student debt hindering homeownership?
Date: July 14, 2014
Authors: Maia Woluchem and Taz George
Date: July 17, 2014
34
Copyright © September 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. The Urban Institute’s Housing Finance Policy Center (HFPC) was launched with generous support at the
leadership level from the Citi Foundation and John D. and Catherine T. MacArthur Foundation. Additional support was provided by The
Ford Foundation and The Open Society Foundations.
Ongoing support for HFPC is also provided by the Housing Finance Council, a group of firms and individuals supporting high-quality
independent research that informs evidence-based policy development. Funds raised through the Council provide flexible resources,
allowing HFPC to anticipate and respond to emerging policy issues with timely analysis. This funding supports HFPC’s research, outreach
and engagement, and general operating activities. Funders do not determine research findings or influence scholars’ conclusions.
Scholars are independent and empowered to share their evidence-based views and recommendations shaped by research. The Urban
Institute does not take positions on issues.
35