HOUSING FINANCE POLICY CENTER
HOUSING FINANCE
AT A GLANCE
A MONTHLY CHARTBOOK
October 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
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.
Ellen Seidman
Senior Fellow
Jim Parrott
Senior Fellow
Sheryl Pardo
Associate Director of Communications
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
HMDA Data
Home Mortgage Disclosure Act (HMDA) data covering
2013 origination activity was released in late September.
This data showed that the overall level of purchase activity
increased 14.8 percent over 2012. Non-Hispanic white
borrowers accounted for much of the increase, while
purchase loans to African American and Hispanic
borrowers rose by only 7.4 percent and 8.2 percent,
respectively. Tight lending conditions remain the culprit.
Contrary to reports of a more flexible lending market,
purchase loans with FICO scores less than 660
represented only 10 percent of new originations in 2013,
down from 13 percent in 2012, and 20 percent in 2001.
The mean and median FICO scores continue to increase, as
does the 10th percentile score (page 14).
Refinancing volume is down by 25.4 percent, with
refinances to white and Asian borrowers down by 27.4
percent and 35.8 percent, respectively, and refinances of
African American and Hispanic borrowers showing more
muted declines of 3 and 5.5 percent, respectively. We
mapped HMDA data from 2001 through 2013 to show
originations (purchase and refi) in each MSA over time, by
race and ethnicity.
Comments on the proposal to expand the HMDA data
collection efforts, largely mandated by Dodd Frank, are
due to the CFPB on October 29. A group of Urban Institute
researchers has submitted a comment letter supporting
the proposal, and in particular the unique identifiers, more
complete information on points and fees, loan purpose and
the number of units in the property.
Opening the Credit Box
Comments on the FHFA’s affordable housing goals for the
GSEs are due on October 29. We have put our thoughts
together on this. It is important to realize the goals interact
with other policy issues. While the affordable housing goals
could help at the margin, a more meaningful increase in
lending to underserved borrowers will result from further
clarification of reps and warrants, reasonable G-fees and
mortgage insurer requirements, and addressing the costs
of servicing delinquent loans. The key is to create a more
hospitable environment for lending to underserved
borrowers, including many who are locked out of the
market by today’s tight credit box.
FHA released their Single Family Housing Loan Quality
Assessment Methodology (Defect Taxonomy) in late
September, with comments due October 15. The document
attempts to categorize defects into 9 main types, identify
the causes and sources for each type, and grade the
severity. Once agreed upon, this would serve as one of
FHA’s first steps to provide more certainty to lenders with
regard to the loan quality assessment outcomes for loans
that are selected for defect review. We believe making the
punishment fit the crime is critical to opening the credit
box, and we hope that the GSEs do a similar taxonomy at
some point.
In the effort to open the credit box, we noted one
counterproductive item—the FHFA’s Office of Inspector
General produced a report that was very critical of the
FHA’s January 2013 action to provide lenders with a
limited 3-year sunset on their obligation to repurchase
loans. We have blogged that this report was misleading in
that the authors did not focus exclusively on the full
documentation loans the GSEs are exclusively buying
today. Focusing only on full documentation loans, we show
the impact is much smaller than reported. We also believe
the report did not adequately acknowledge the importance
of opening the credit box.
Remember to sign up for our November 5 Symposium,
Data, Demand and Demographics II, co-sponsored with
CoreLogic.
INSIDE THIS ISSUE
•
Home prices continue to improve, negative equity
share down to 10.7 percent (page 18)
•
Number of loan modifications is down sharply in
2014 (page 28)
•
The share of principal forgiveness mods drops to 5
percent of total mods in Q2 2014, down from 12.2
percent a year earlier
•
Fed absorption of agency gross issuance declined
further to 33 percent in September (page 31)
•
PLS volumes is very low in 2014, $8.7 billion yearto-date, as compared with $25.8 billion over the
same period in 2013 (page 10)
•
Agency issuance for the first 9 months of 2014 is
down 48 percent from the same period in 2013
(page 30)
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 Q2 indicate a small increase in the total value of the US residential 1-4 unit
housing market to $21.3 trillion from $20.6 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 $9.86 trillion, a
decrease of $39 billion from the previous quarter. Agency MBS make up 56.5 percent of the total mortgage market,
private-label securities make up 7.5 percent, and unsecuritized first liens at the GSEs, commercial banks, savings
institutions, and credit unions make up 29.0 percent. Second liens comprise the remaining 7.0 percent of the total.
Value of the US Housing Market
Debt, household mortgages
($ trillions)
Household equity
Total value
25
21.3
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
Q2
Sources: Federal Reserve Flow of Funds and Urban Institute.
Size of the US Residential Mortgage Market
Agency MBS
Unsecuritized first liens
Private Label Securities
Second Liens
($ trillions)
6
5.6
5
4
Debt,
household
mortgages,
$9,833
3
2.9
2
0.7
0.7
1
0
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
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
2013
2014
Q2
6
OVERVIEW
MARKET SIZE OVERVIEW
As of August 2014, debt in the private-label securitization market totaled $737 billion and was split among prime
(19.8 percent), Alt-A (44.0 percent), and subprime (36.2 percent) loans. In September 2014, outstanding securities
in the agency market totaled $5.6 trillion and consisted of 46.5 percent Fannie Mae, 27.3 percent Freddie Mac, and
26.2 percent Ginnie Mae.
Private-Label Securities by Product Type
Alt-A
($ trillions)
1
Subprime
Prime
0.8
0.6
0.4
0.32
0.27
0.2
0
1999
0.15
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
Sources: CoreLogic and Urban Institute.
2014
August 2014
Agency Mortgage-Backed Securities
Fannie Mae
($ trillions)
Freddie Mac
Ginnie Mae
Total
6
5.6
5
4
3
2.6
2
1.5
1.5
1
0
2000
2001
2002
2003
Sources: eMBS and Urban Institute.
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
September 2014
7
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 $513 billion. The share of
bank portfolio and FHA/VA originations rose to 26 percent and 22 percent each, while the GSE share dropped to 50
percent from 61 percent in 2013, reflecting the curtailment of refinancing activity. The private label origination share
remains less than one percent.
($ trillions)
GSE securitization
FHA/VA securitization
PLS securitization
Bank portfolio
$4.0
$3.5
$3.0
$2.5
$2.0
$1.5
$1.0
$0.5
$0.0
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014 Q12
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014 Q12
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Sources: Inside Mortgage Finance and Urban Institute.
8
OVERVIEW
MORTGAGE
ORIGINATION
MORTGAGE 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 have slowly grown to 7.0
percent of total originations as ofJuly 2014, 46 percent higher than year ago level. Fifteen-year FRMs, predominantly a
refinance product, comprise 14.6 percent of new originations. If we exclude refinances (bottom chart), the share of 30year FRMs in July 2014 stood at 85.5 percent, 15-year FRMs at 6.1 percent, and ARMs at 7.1 percent.
All Originations
Fixed-rate 30-year mortgage
Fixed-rate 15-year mortgage
Adjustable-rate mortgage
Other
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
July 2014
Sources: CoreLogic Prime Servicing and Urban Institute.
Purchase Loans Only
Fixed-rate 30-year mortgage
Fixed-rate 15-year mortgage
Adjustable-rate mortgage
Other
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
2000
2001
2002
2003
2004
2005
Sources: CoreLogic Prime Servicing and Urban Institute.
2006
2007
2008
2009
2010
2011
2012
2013
2014
July 2014
9
OVERVIEW
SECURITIZATION VOLUME AND
COMPOSITION
Agency/Non-Agency Share of Residential MBS Issuance
100%
Non-agency singlefamily MBS issuance has
hovered at or below 2
percent of total
issuance since early
2011, and this share is
even lower if reREMICs are excluded.
The environment in
2014 has not been
favorable for new nonagency deals. In the first
9 months of 2014, total
non-agency issuance
was $8.7 billion,
compared to $25.8
billion over the same
period in 2013.
90%
99%
Agency share
80%
70%
60%
50%
40%
30%
Non-Agency share
20%
10%
1%
Sources: Inside Mortgage Finance and Urban Institute.
Note: Year-to-date figure as of September 2014.
Non-Agency MBS Issuance
Subprime
Alt A
Non-Agency Securitization 2.0
All other
($ billions)
($ billions)
$1,400
$6
$1,200
$5
$1,000
$4
$800
$3
$3,370.1
$374.3
$0
$5,803.7
$600
$400
$200
$2
1.179
Prime
2014 YTD
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
0%
$1
Sources: Inside Mortgage Finance and Urban Institute.
Note: Monthly figures equal total non-agency MBS issuance
minus Re-REMIC issuance.
10
Sep-14
Jul-14
May-14
Mar-14
Jan-14
Nov-13
Jul-13
Sep-13
May-13
Mar-13
Jan-13
Nov-12
Sep-12
Jul-12
May-12
Mar-12
2014 Q1-3
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
Sources: Inside Mortgage Finance and Urban Institute.
Jan-12
$0
$0
OVERVIEW
AGENCY ACTIVITY:
VOLUMES AND PURCHASE/
REFI COMPOSITION
Agency issuance continues declining, totaling $678.9 billion in the first three quarters of 2014, compared to $1.311
trillion for the same period a year ago. Annualizing production year to date, 2014 is on pace for total production of
$905.2 billion, much less than $1.57 trillion in 2013. In September 2014, refinances were 45 and 49 percent of the
GSEs’ business, down from the first quarter’s average of 52 and 55 percent. The Ginnie Mae market has always
been more purchase-driven, with refinance volume of 24 percent.
Agency Gross Issuance
Fannie Mae
Freddie Mac
Ginnie Mae
($ billions)
$2.5
$2.0
$1.5
$1.0
$0.5
$0.0
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
Sources: eMBS and Urban Institute.
Note: Year to date as of September 2014.
2014
Ann.
Percent Refi at Issuance
Fannie Mae
Freddie Mac
Ginnie Mae
Mortgage rate
100%
10%
90%
9%
80%
8%
70%
7%
60%
6%
50%
5%
40%
4%
30%
3%
20%
2%
10%
1%
0%
2004
0%
2005
2006
Sources: eMBS and Urban Institute.
Note: Based on at-issuance balance.
2007
2008
2009
2010
2011
2012
2013
2014
August 2014
11
STATE OF THE MARKET
MORTGAGE ORIGINATION
PROJECTIONS
The sharp drop in mortgage originations, combined with a gradual rise in interest rates and the Fed tapering, has led to
lower origination projections from the GSEs and MBA over the next two years. While all three project an increase in
housing starts in 2014 and 2015 versus 2013, all have scaled back the size of the increases. For example, Fannie shows
housing starts were 925,000 in 2013, and projects a rise to 995,000 in 2014 and 1.17 million in 2015; last month’s
projections were 1.054 million and 1.273 million, respectively. All three forecast lower home sales in 2014, but see a
sharp rise in 2015.
Total Originations and Refinance Shares
Period
2013 Q1
2013 Q2
2013 Q3
2013 Q4
2014 Q1
2014 Q2
2014 Q3
2014 Q4
2015 Q1
2015 Q2
2015 Q3
2015 Q4
FY 2011
FY 2012
FY 2013
FY 2014
FY 2015
Originations ($ 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 interest rates have risen from the lows in 2012, 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 up dramatically from 2011 levels, 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 g-fees) as
well as points paid by the borrower.
Originator Profitability and Unmeasured Costs
Dollars per $100 loan
6
5
4
3
$2.13
2
1
0
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
September 2014
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 (4-week
moving) average.
13
STATE OF THE MARKET
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 both drifted up about 40 and 43 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 661 as
of July 2014. Prior to the housing crisis, this threshold held steady in the low 600s. LTV levels at origination remain
relatively high, averaging 85.4, which reflects the large number of FHA purchase originations.
Borrower FICO Score at Origination
FICO Score
90th percentile
Mean
Median
10th percentile
850
800
801
750
749
739
700
661
650
600
550
500
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
Sources: CoreLogic Prime Servicing and Urban Institute.
Note: Purchase-only loans.
2014
July 2014
Combined LTV at Origination
LTV
90th percentile
Mean
Median
10th percentile
110
100
100
90
90
85
80
70
67
60
50
40
30
2001
2002
2003
2004
2005
2006
Sources: CoreLogic Prime Servicing and Urban Institute.
Note: Purchase-only loans.
2007
2008
2009
2010
2011
2012
2013
2014
July 2014
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 July 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
Newark NJ-PA
San Diego-Carlsbad CA
Seattle-Bellevue-Everett WA
Portland-Vancouver-Hillsboro OR-WA
Nassau County-Suffolk County NY
Boston MA
Chicago-Naperville-Arlington Heights IL
Denver-Aurora-Lakewood CO
Charlotte-Concord-Gastonia NC-SC
Washington-Arlington-Alexandria DC-VA-MD-WV
Minneapolis-St. Paul-Bloomington MN-WI
St. Louis MO-IL
Baltimore-Columbia-Towson MD
Columbus OH
Atlanta-Sandy Springs-Roswell GA
Pittsburgh PA
Sacramento--Roseville--Arden-Arcade CA
Dallas-Plano-Irving TX
Houston-The Woodlands-Sugar Land TX
Tampa-St. Petersburg-Clearwater FL
Kansas City MO-KS
Orlando-Kissimmee-Sanford FL
Miami-Miami Beach-Kendall FL
Philadelphia PA
Riverside-San Bernardino-Ontario CA
Cincinnati OH-KY-IN
Fort Worth-Arlington TX
Cleveland-Elyria OH
Las Vegas-Henderson-Paradise NV
Phoenix-Mesa-Scottsdale AZ
San Antonio-New Braunfels TX
Detroit-Dearborn-Livonia MI
Origination FICO
STATE OF THE MARKET
CREDIT AVAILABILITY
AVAILABILITY FOR
FOR
CREDIT
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 769, while in Detroit-Dearborn-Livonia MI it is 723. 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
STATE OF THE MARKET
HOUSING AFFORDABILITY
National Housing Affordability Over Time
Median sales price
Max affordable price at 6.0% rate
Home prices are still very affordable by
historical standards, despite increases
Housing Prices ($ thousands)
over the last three years. Even if interest
$300
rates rose to 6 percent, affordability
$280
would be at the long term historical
$260
average.
$279,890
Credit
Bubble
$240
$220
$200
$180
$160
$140
$120
$238,861
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
$212,000
2000
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.
Max affordable price
July 2014
Affordability Adjusted for MSA-Level DTI
Ratio
Cleveland-Elyria OH
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
July 2014 than in 2000-03.
16
Las Vegas-Henderson-Paradise NV
Columbus OH
Pittsburgh PA
Cincinnati OH-KY-IN
Tampa-St. Petersburg-Clearwater FL
St. Louis MO-IL
Chicago-Naperville-Arlington Heights IL
Minneapolis-St. Paul-Bloomington MN-WI
Nassau County-Suffolk County NY
Denver-Aurora-Lakewood CO
Sacramento--Roseville--Arden-Arcade CA
Kansas City MO-KS
Orlando-Kissimmee-Sanford FL
San Antonio-New Braunfels TX
Houston-The Woodlands-Sugar Land TX
Detroit-Dearborn-Livonia MI
Fort Worth-Arlington TX
Charlotte-Concord-Gastonia NC-SC
Riverside-San Bernardino-Ontario CA
Phoenix-Mesa-Scottsdale AZ
San Diego-Carlsbad CA
Atlanta-Sandy Springs-Roswell GA
Dallas-Plano-Irving TX
Boston MA
Oakland-Hayward-Berkeley CA
Seattle-Bellevue-Everett WA
Newark NJ-PA
Miami-Miami Beach-Kendall FL
New York-Jersey City-White Plains NY-NJ
Philadelphia PA
San Francisco-Redwood-S San Francisco CA
Baltimore-Columbia-Towson MD
Portland-Vancouver-Hillsboro OR-WA
Washington DC-VA-MD-WV
San Jose-Sunnyvale-Santa Clara CA
Los Angeles-Long Beach-Glendale CA
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 repeat-sales HPI from CoreLogic and hedonic index from Zillow.
(Year-over-year growth rate)
20%
CoreLogic HPI
15%
10%
5%
0%
6.6%
Zillow HVI
-5%
-10%
-15%
-20%
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
Sources: CoreLogic, Zillow and Urban Institute.
2013
2014
August 2014
Changes in CoreLogic HPI for Top MSAs
Despite rising 30.2 percent from the trough, national house prices still must grow 13.8 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
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
% Rise needed
to achieve
peak
99.1
116.0
181.7
65.5
40.8
159.9
44.3
126.3
194.4
38.2
74.1
94.3
36.2
128.9
148.8
162.5
-32.5
-20.1
-39.1
-36.5
-33.3
-33.4
-12.7
-52.8
-53.3
-13.7
-30.6
-31.9
-14.5
-25.6
-38.2
-36.9
30.2
17.8
44.4
26.4
39.8
30.4
32.2
48.9
48.5
27.1
27.0
35.2
33.7
11.7
38.2
39.0
13.8
6.2
13.8
24.7
7.3
15.1
-13.3
42.2
44.3
-8.8
13.5
8.7
-12.6
20.4
17.2
13.9
Sources: CoreLogic HPIs as of August2014 and Urban Institute.
Note: This table includes the largest 15 Metropolitan areas by mortgage count.
17
STATE OF THE MARKET
NEGATIVE EQUITY & SERIOUS
DELINQUENCY
Negative Equity Share
With housing prices appreciating through the first half of 2014, residential properties in negative equity (LTV
greater than 100) as a share of all residential properties with a mortgage has dropped to 10.7 percent. Residential
properties in near negative equity (LTV between 95 and 100) comprise another 2.7 percent.
35%
30%
Near or in negative
equity
25%
20%
13.4%
15%
10%
Negative equity
10.7%
5%
2Q14
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 in
foreclosure
6%
4.8%
4%
2.5%
2.3%
2%
Percent of loans 90 days
delinquent or in foreclosure 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
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 16.6
percent, and Freddie Mac by 18.4 percent. As of August 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
($ billions)
900
Current size: $443.1 billion
Current cap: $469.625 billion
Shrinkage year-over-year: 16.6%
Shrinkage in less-liquid assets
year-over-year: 14.4%
800
700
600
500
400
Mortgage loans
300
Non-agency MBS
200
Non-FNMA agency MBS
100
Fannie MBS in portfolio
Sources: Fannie Mae and Urban Institute.
0
2006
2007
2008
2009
2010
2011
2012
2013
2014
August 2014
Freddie Mac Mortgage-Related Investment Portfolio
Composition
($ billions)
900
Current size: $417.7 billion
Current cap: $469.625 billion
Shrinkage year-over-year: 18.4%
Shrinkage in less-liquid assets
year-over-year: 19.9%
800
700
600
500
400
Mortgage loans
Non-agency MBS
Non-FHLMC agency MBS
FHLMC MBS in portfolio
Sources: Freddie Mac and Urban Institute.
300
200
100
0
2006
2007
2008
2009
2010
2011
2012
2013
2014
August 2014
19
GSES UNDER CONSERVATORSHIP
EFFECTIVE GUARANTEE 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.
Fannie Mae single-family effective gfee rate
70.0
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
Credit Score
≤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%
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
$33,434.43
Date
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
SERIOUS
DELINQUENCY
GSES UNDER CONSERVATORSHIP
SERIOUS
RATES
RATES ATDELINQUENCY
THE GSEs
Serious delinquency rates of GSE loans continue to decline as the legacy portfolio is resolved and the pristine, post2009 book of business exhibits very low default rates. As of August 2014, 1.99 percent of the Fannie portfolio and
1.98 percent of the Freddie portfolio were seriously delinquent, down from 2.61 percent for Fannie and 2.64 percent
for Freddie in August 2013.
Serious Delinquency Rates–Fannie Mae
Single-family: Credit enhanced
Single-family: Non-credit enhanced
Single-family: Total
Percentage of total loans
16%
14%
12%
10%
8%
6%
4%
3.73%
2%
1.99%
1.70%
0%
2006
2007
2008
2009
2010
2011
2012
2013
2014
August 2014
Sources: Fannie Mae and Urban Institute.
Serious Delinquency Rates–Freddie Mac
Single-family: Non-credit enhanced
Single-family: Credit enhanced
Single-family: Total
PMI Credit Enhanced*
Percentage of total loans
10%
9%
8%
7%
6%
5%
4%
3%
2%
1%
0%
2006
2007
3.89%
3.30%
1.98%
1.82%
2008
2009
2010
2011
2012
Sources: Freddie Mac and Urban Institute.
Note*: Following a change in Freddie reporting, we switched from credit enhanced to PMI credit enhanced.
2013
2014
August 2014
22
GSES UNDER CONSERVATORSHIP
SERIOUS DELINQUENCY RATES
Serious delinquencies for FHA and GSE single-family loans continue to decline, but remain high relative to 20052007. 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
Percentage of total loans
Fannie Mae
Freddie Mac
10%
9%
8%
7%
6.22%
6%
5%
4%
3%
2.07%
2.05%
2%
1%
0%
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2Q2014
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
Percentage of total loans
0.9%
0.8%
0.7%
0.6%
0.5%
0.4%
0.3%
0.2%
0.1%
0.0%
2005
0.09%
0.04%
2006
2007
2008
2009
2010
2011
2012
2013
2014
August 2014
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-themoney), 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 16.3 percent of all GSE refinances in this
period.
Total HARP Refinance Volume
Fannie Mae
Thousands
Freddie Mac
350
300
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
July 2014
Year-to-date
2014
Inception to
date
2013
2012
2011
Total refinances
119,699
858,063
19,707,315
4,081,911
4,750,530
3,229,066
Total HARP refinances
15,671
146,641
3,204,597
892,914
1,074,769
400,024
Share 80–105 LTV
73.9%
71.6%
69.8%
56.4%
56.4%
85.0%
Share 105–125 LTV
16.7%
17.4%
17.2%
22.4%
22.4%
15.0%
Share >125 LTV
9.4%
11.0%
12.9%
21.2%
21%
0%
All other streamlined
refinances
20,117
167,419
3,420,616
735,210
729,235
785,049
Sources: FHFA Refinance Report and Urban Institute.
24
GSES UNDER CONSERVATORSHIP
GSE LOANS:
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 823,598 eligible loans, but 44 percent are out-of-the-money because the closing cost
would exceed the long-term savings, leaving 457,597 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 6,921,751 loans in this category, 5,063,503 are inthe-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 (362,568 by our estimate) would benefit from the change.
Total loan count
26,812,838
Loans that do not meet pay history requirement
Loans that meet pay history requirement:
978,031
25,834,807
Pre-June 2009 origination
7,745,349
Post-June 2009 origination
18,089,458
Loans Meeting HARP Pay History Requirements
Pre-June 2009
LTV category
In-the-money
Out-of-the-money
Total
≤80
5,063,503
1,858,248
6,921,751
>80
457,597
366,001
823,598
Total
5,521,100
2,224,249
7,745,349
LTV category
In-the-money
Out-of-the-money
Total
≤80
1,703,781
13,858,788
15,562,569
>80
362,568
2,164,321
2,526,889
Total
2,066,349
16,023,109
18,089,458
Post-June 2009
Sources: CoreLogic Prime Servicing as of August 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).
Shaded 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
0
2009
2010
2011
2012
2013
2014
June 2014
Sources: U.S. Treasury Making Home Affordable and Urban Institute.
Cumulative HAMP Modifications
Number of mods
(millions)
2.5
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
0.0
2009
2010
2011
Sources: U.S. Treasury Making Home Affordable and Urban Institute.
2012
2013
2014
June 2014
26
MODIFICATION ACTIVITY
MODIFICATION BY TYPE OF
ACTION AND BEARER OF RISK
The share of principal reduction modifications peaked at 20 percent in December 2012 before dropping
dramatically to 5 percent in Q2 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-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
Modification Quarter
13Q1
13Q2
13Q3
13Q4
14Q1
14Q2
One quarter
% change
One year
% change
Capitalization
79.3
81.6
83.5
87.7
74.3
59
-20.6
-27.7
Rate reduction
80.1
81.0
78.9
76.7
73.3
71.9
-1.9
-11.3
Rate freeze
3.7
5.2
5.5
7
6.5
7.1
8.7
36.9
Term extension
60.3
67.7
69.3
75.9
78
84
7.7
24.1
Principal reduction
15.2
12.2
13.6
10.5
8.1
5
-38.4
-58.8
Principal deferral
18.2
20.5
25.3
30.6
25.1
11.5
-54.1
-43.8
Not reported*
0.7
1.5
2.2
0.7
0.7
0.7
5.0
-52.1
Sources: OCC Mortgage Metrics Report for the Second 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
97.3%
96.6%
21.8%
91.0%
94.1%
59.0%
Rate reduction
52.1%
70.0%
78.0%
73.3%
72.1%
71.9%
Rate freeze
10.2%
5.7%
6.8%
4.1%
8.5%
7.1%
Term extension
93.0%
94.0%
96.6%
31.9%
59.2%
84.0%
Principal reduction
0.1%
0.0%
0.1%
16.2%
25.5%
5.0%
Principal deferral
13.5%
18.5%
3.9%
23.1%
22.1%
11.5%
Not reported*
0.6%
0.2%
0.8%
1.2%
0.3%
0.7%
Sources: OCC Mortgage Metrics Report for the Second 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
Number of loans (thousands)
1,600
1,400
1,200
1,000
HAMP mods
800
Proprietary mods
600
Liquidations
400
200
0
2007 (Q3Q4)
2008
2009
2010
2011
2012
2013
2014
(Ann.)
Sources: Hope Now Reports and
Urban Institute.
Note: Liquidations includes both
foreclosure sales and short sales.
Annualized figure based on data
from July 2014.
Cumulative Modifications and Liquidations
Number of loans (millions)
8
7
6
HAMP mods
5
Proprietary mods
4
Liquidations
3
Sources: Hope Now Reports and
Urban Institute.
Note: Liquidations includes both
foreclosure sales and short sales.
2
1
0
2007 (Q3Q4)
2008
2009
2010
2011
2012
2013
2014 YTD
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%
20%
Portfolio Loans
10%
Overall
0%
2008
2009
2010
2011
2012
2013
Year of modification
Sources: OCC Mortgage Metrics Report for the Second 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
2011
2012
Year of modification
Sources: OCC Mortgage Metrics Report for the Second 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 year-to-date (through September) totaled $679 billion, a 48 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
$465.7
$213.2
$678.9
2014 YTD
$8.5
$43.8
$52.3
%Change
year-over-year
-52.9%
-33.7%
-48.2%
%Change
year-over-year
-81.7%
-34.4%
-53.8%
2014 (Ann.)
$620.88
$284.32
$905.20
2014 (Ann.)
$11.29
$58.40
$69.70
Sources: eMBS and Urban Institute.
Note: Dollar amounts are in billions.
Year-to-date figure as of September 2014.
Sources: eMBS and Urban Institute.
Note: Dollar amounts are in billions.
Year-to-date figure as of September 2014.
30
AGENCY GROSS AND NET
AGENCY GROSS
ISSUANCE &
ISSUANCE
BY MONTH
FED PURCHASES
AGENCY ISSUANCE
Monthly Gross Issuance
While government and GSE
lending have dominated the
mortgage market since the crisis,
there has been a change in the
mix. The Ginnie Mae share
reached a peak of 28 percent of
total agency issuance in 2010,
declined to 25 percent in 2013,
and has since then risen to 29
percent in September 2014. The
recent increase in the GNMA
share reflects the decline in
refinance activity, as GNMA is
less impacted by this decline.
Fannie Mae
Freddie Mac
Ginnie Mae
($ billions)
250
200
150
100
50
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
Sources: eMBS, Federal Reserve Bank of
New York and Urban Institute.
2002
2001
0
September 2014
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 September, gross issuance edged up to $92.46 billion, while total Fed purchases declined further to 30.69
billion, yielding 33 percent Fed absorption of gross issuance. This share is likely to fall further as the Fed plans to
end its purchase program in its Oct. 28-20 meeting.
Gross issuance
($ billions)
Total Fed purchases
250
200
150
100
50
0
2001
2002
2003
2004
2005
2006
2007
2008
Sources: eMBS, Federal Reserve Bank of New York and Urban Institute.
2009
2010
2011
2012
2013
2014
September 2014
31
AGENCY ISSUANCE
MORTGAGE INSURANCE
ACTIVITY
MI Activity
150
$106.7
Total
100
FHA
50
$44.2
Total private primary
MI
$36.0
1Q14
4Q13
3Q13
2Q13
1Q13
4Q12
3Q12
2Q12
1Q12
4Q11
2Q11
1Q11
0
2Q14
$26.5
VA
3Q11
$ 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
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
620 - 639
$250,000
$237,500
95
4.29%
4.00%
640 - 659
660 - 679
680 - 699
700 - 719
720 - 739
740 - 759
760 +
FHA MI Premiums
1.75
1.75
1.75
1.75
1.75
1.75
1.75
1.75
FHA UFMIP
1.30
1.30
1.30
1.30
1.30
1.30
1.30
1.30
FHA MIP*
PMI
3.50
3.00
2.50
1.50
1.25
0.75
0.50
0.50
GSE AMDC & LLPA
1.15
1.15
1.15
0.89
0.89
0.62
0.62
0.54
PMI Annual MIP
Monthly Payment
$1,411
$1,411
$1,411
$1,411
$1,411
$1,411
$1,411
$1,411
FHA
$1,501
$1,487
$1,472
$1,392
$1,385
$1,318
$1,311
$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
November 5—Data, Demand and Demographics: A Symposium on Housing Finance
Cohosted with CoreLogic. Confirmed speakers include: Rick Lazio, Gene Sperling, Ed DeMarco and Bill Emerson
To register for this event, please click here.
Feature Data Visual : A New View of the Housing Boom and Bust
Authors: Bing Bai and Taz George
Publications
Blog Posts
Comment Letter on the CFPB’s HMDA mortgage
data proposal
Authors: Ellen Seidman, Laurie Goodman, Wei Li
Jim Parrott, Kathryn L.S. Pettit, Carlos Martin,
and Peter Tatian
Date: October 22, 2014
The six things we like most in the CFPB’s new mortgage
data proposal
Author: Ellen Seidman
Date: October 20, 2014
Assessing the Proposed Housing Goals
Authors: Jim Parrott, Laurie Goodman, Wei Li
Ellen Seidman, and Jun Zhu
Date: October 22, 2014
Charting the Course to a Single Security
Authors: Laurie Goodman and Lewis Ranieri
Date: September 3, 2014
HARP Significantly Reduced Mortgage
Default Rates
Author: Jun Zhu
Date: September 3, 2014
Putting Mortgage Insurers on Solid Ground
Authors: Mark Zandi, Jim Parrott, and Cristian
deRitis
Date: August 26, 2014
A Realistic Assessment of Housing Finance Reform
Authors: Laurie Goodman
Date: August 18, 2014
Guarantee Fees- An Art Not a Science
Authors: Laurie Goodman, Ellen Seidman,
Jim Parrott, and Jun Zhu
Date: August 14, 2014
Nonbank Specialty Servicers: What the Big Deal?
Author: Pamela Lee
Date: August 4, 2014
Is there a ticking time bomb in the housing market?
Author: Maia Woluchem
Date: October 16, 2014
Incomplete OIG report overstates the risks of FHFA
sunset plan
Authors: Laurie Goodman and Jun Zhu
Date: October 10, 2014
Five cities with the most racially uneven housing market
recoveries
Authors: Bing Bai and Taz George
Date: October 6, 2014
Ten things I like about the $17 billion BOA settlement
Author: Ellen Seidman
Date: September 30, 2014
A surprising disparity in the newest mortgage data
Authors: Bing Bai and Taz George
Date: September 25, 2014
The single-family rental securitization market won’t
exceed $20 billion
Author: Laurie Goodman
Date: September 24, 2014
The $400 million case for a single GSE security
Author: Laurie Goodman
Date: September 5, 2014
34
Copyright © October 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