HOUSING FINANCE POLICY CENTER
HOUSING FINANCE
AT A GLANCE
A MONTHLY CHARTBOOK
December 2013
1
ABOUT THE CHARTBOOK
HOUSING FINANCE POLICY CENTER STAFF
The Housing Finance Policy Center’s (HFPC) mission is
to produce analyses and ideas that promote sound public
policy, efficient markets, and access to economic
opportunity in the area of housing finance. At A Glance, a
monthly chartbook and data source for policymakers,
academics, journalists, and others interested in the
government’s role in mortgage markets, is at the heart of
this mission.
Laurie Goodman
Center Director
Ellen Seidman
Senior Fellow
Jim Parrott
Senior Fellow
Jun Zhu
Senior Financial Methodologist
Wei Li
Senior Research Associate
Bing Bai
Research Associate I
Pamela Lee
Research Associate II
Taz George
Research Assistant
Maia Woluchem
Research Assistant
Alison Rincon
Special Assistant to the Director
We would like to thank The Citi Foundation and The John D. and Catherine T. MacArthur Foundation for providing generous support at the
leadership level to launch the Housing Finance Policy Center. Additional support was provided by the Ford Foundation and the Open
Society Foundations. We are also especially grateful to Sarah Rosen Wartell, president of the Urban Institute, and Rolf Pendall, director of
the Metropolitan Housing and Communities Policy Center, for their creative visions and valuable insights.
We welcome your feedback. Please send any comments or questions to ataglance@urban.org.
2
INTRODUCTION
As we close out 2013, the housing market continues to
show signs of improvement. Home prices have increased
23 percent nationwide since early 2011 but are still 21
percent short of pre-crisis levels. Furthermore, there is
significant regional variability in the pace of the recovery.
Of the top 15 MSAs, Houston, Dallas, and Denver have
already surpassed their peak-level housing prices, while
Phoenix and Riverside, CA remain around 50 percent
below their peak (page 16).
With home prices rising, the share of homeowners with
negative equity has steadily declined. Serious
delinquencies and foreclosures are down substantially,
although they are remain significantly higher than the
2000-2004 levels (pages 17, 21 and 22). Unfortunately,
the increase in home prices, when combined with the rise
in interest rates over the last 6 months, has decreased
affordability nationally, with some regions suffering more
than others (page 15).
Furthermore, the rise in interest rates has reshaped the
mortgage landscape substantially by reducing refinance
activity and originator profitability (pages 10-12). For
example, GSE refinances are now just over half of total
activity, down from over 80 percent, and FHA refinances
are 23 percent, down from over 50 percent. Originator
profitability is down, as illustrated by a new addition to this
month’s chartbook. We present a unique measure
formulated by the Federal Reserve Bank of New York,
which is superior to simply looking at the primarysecondary spread (page 12).
interest rates mean that extending the cut-off date will
affect relatively few borrowers because most high LTV,
recently originated loans would not benefit from a
refinancing, since their interest rate is similar to the
current rate.
Finally, the decline in affordability will put increased
pressure on Watt to loosen the credit box (page 15) and
to consider reversing recent FHFA decisions to raise gfees generally, as well as on "higher risk" loans and loans
from New York, New Jersey, Connecticut and Florida.
We appreciate all the positive feedback we have received
for At A Glance, as well as your constructive suggestions.
Please keep them coming. Best wishes from the entire
HFPC team for a good holiday season and a happy new
year.
New This Month:
•
Mortgage origination estimates from Fannie Mae,
Freddie Mac and the Mortgage Bankers
Association (page 11)
•
Originator Profitability (page 12)
•
Home Price Trends (page 16)
•
Negative Equity, Serious Delinquencies and
Foreclosures (page 17)
These changes in the mortgage landscape have three
key implications for policymakers. First, since QE3 began
in September 2012, net Federal Reserve purchases have
remained roughly steady. With lower originations, the
Federal Reserve is now capturing an ever-increasing
share of gross originations (page 30). The increase of this
share will start to slow, as the Federal Open Market
Committee recently announced that it will cut its monthly
MBS purchases from $40 billion to $35 billion beginning in
January 2014.
Second, new Federal Housing Finance Agency (FHFA)
Director Mel Watt must soon decide whether to extend
the Home Affordable Refinance Program (HARP) to
borrowers whose loans were originated after June 2009,
the current cut-off date. This program encourages GSE
borrowers with LTVs greater than 80 to refinance. Rising
3
CONTENTS
Overview
Market Size Overview
Value of the US Residential Housing Market
Size of the US Residential Mortgage Market
Private-Label Securities by Product Type
Agency Mortgage-Backed Securities
6
6
7
7
Origination Volume and Composition
First Lien Origination Volume
First Lien Origination Share
8
8
Securitization Volume and Composition
Agency/Non-Agency Share of Residential MBS Issuance
Non-Agency MBS Issuance
Non-Agency Securitization 2.0
9
9
9
Agency Activity: Volumes and Purchase/Refi Composition
At-Issuance Balance
Percent Refi at Issuance
10
10
State of the Market
Mortgage Origination Projections
Total Originations and Refinance Shares
Housing Starts and Home Sales
11
11
Originator Profitability
Originator Profitability and Unmeasured Costs (OPUC)
12
Credit Availability for Purchase Loans
Borrower FICO Score at Origination Month
Combined LTV at Origination Month
Origination FICO and LTV by MSA
13
13
14
Housing Affordability
National Housing Affordability Over Time
Affordability Adjusted for MSA-Level DTI
15
15
Home Price Indices
National Year-Over-Year HPI Growth
Changes in CoreLogic HPI for Top MSAs
16
16
Negative Equity and Serious Delinquency
Negative Equity Share
Loans in Serious Delinquency and Foreclosure
17
17
GSEs under Conservatorship
GSE Portfolio Wind-Down: Fannie Mae
Fannie Mae Mortgage-Related Investment Portfolio Over Time (Volume & Share)
18
GSE Portfolio Wind-Down: Freddie Mac
Freddie Mac Mortgage-Related Investment Portfolio Over Time (Volume & Share)
19
4
CONTENTS
Effective Guarantee Fees
Effective Guarantee Fees
GSE Risk-Sharing Transactions
20
20
Serious Delinquency Rates
Serious Delinquency Rates – Fannie Mae & Freddie Mac
Serious Delinquency Rates – Single-Family Loans & Multifamily GSE Loans
21
22
Refinance Activity
Total HARP Refinance Volume
HARP Refinances
23
23
GSE Loans: Potential Refinances
Loans Meeting HARP Pay History Requirements
24
Modification Activity
HAMP Activity
New HAMP Modifications
Cumulative HAMP Modifications
25
25
Modification by Type of Action and Bearer of Risk
Changes in Loan Terms for Modifications
Type of Modification Action by Investor and Product Type
26
26
Modifications and Liquidations
Loan Modifications and Liquidations
Cumulative Modifications and Liquidations
27
27
Modification Redefault Rates by Bearer of the Risk
Redefault Rate 12 Months after Modification
Redefault Rate 24 Months after Modification
28
28
Agency Issuance
Agency Gross and Net Issuance
Agency Gross Issuance
Agency Net Issuance
29
29
Agency Gross Issuance and Fed Purchases
Monthly Gross Issuance
Fed Absorption of Agency Gross Issuance
30
30
Mortgage Insurance Activity
MI Activity
MI Market Share
FHA MI Premiums for Typical Purchase Loan
31
31
32
Related HFPC Work
Publications and Events
33-34
5
OVERVIEW
MARKET SIZE OVERVIEW
Home values continue to improve, increasing the total value of the US residential housing market. According to the
2013 Q3 Fed Flow of Funds report, the total size of the mortgage market stands at $9.87 trillion, a slight uptick
from the previous quarter. This is the first quarterly increase in total mortgage debt outstanding since early 2008,
driven largely by a $50 billion increase in Agency mortgage-backed securities (MBS), 1.7 percent higher than in
2013 Q2. Agency MBS now make up 60.3 percent of the total; private-label securities make up 8.3 percent; and
unsecuritized first liens at commercial banks, savings institutions, and credit unions make up 18.9 percent. Second
liens and GSE loans in portfolio comprise the remaining 7.2 and 5.3 percent of the total, respectively.
Value of the US
Housing Market
Size of the US Residential
Mortgage Market
as of Q3 2013
as of Q3 2013
$25,000
Unsecuritized first liens at commercial banks,
savings institutions, credit unions
Fannie and Freddie loans in portfolio
$20,000
Agency MBS
$15,000
Private-label securities
Equity,
$10,176
$ billions
Second liens
$10,000
$10,000
$1,865
$7,500
$ billions
$5,000
Debt,
household
Debt,
mortgages,
Household
$9,833
Mortgages
$9,865
$5,000
$519
$5,945
$2,500
$0
Sources: Federal Reserve Flow of Funds and Urban Institute.
$0
$819
$715
Sources: Federal Reserve Flow of Funds, Inside Mortgage
Finance, Fannie Mae, Freddie Mac and Urban Institute.
6
OVERVIEW
MARKET SIZE OVERVIEW
As of October 2013, debt in the private-label securitization market is split among prime (20.8 percent), Alt-A (42.9
percent), and subprime (36.2 percent) loans. The agency market, as of June 2013, is 48.7 percent Fannie Mae,
28.1 percent Freddie Mac, and 23.2 percent Ginnie Mae securities.
Private-Label Securities by Product Type
as of October 2013; dollars in billions
100%
90%
Prime, $164
80%
70%
60%
Alt-A, $338
50%
40%
30%
20%
Subprime, $285
10%
0%
Sources: CoreLogic and Urban Institute.
Agency Mortgage-Backed Securities
as of Q3 2013; dollars in billions
100%
90%
80%
Fannie Mae, $2,897
70%
60%
50%
40%
Freddie Mac, $1,671
30%
20%
10%
Ginnie Mae, $1,377
0%
Sources: Inside Mortgage Finance and Urban Institute.
7
OVERVIEW
OVERVIEW
ORIGINATION VOLUME
AND COMPOSITION
First Lien Origination Volume
First lien originations through the first three quarters of 2013 stand at $1.55 trillion. 2013 originations will likely fall
just short of 2012's $2.12 trillion due to the impact of higher rates. Note that the 2012 numbers were revised upward
about $250 billion from last month's edition based on newly released HMDA figures. Year-to-date private
label originations, at $12.2 billion, are still very small but already double last year's amount.
$4.0
$3.5
Bank portfolio
$ trillions
$3.0
$2.5
$2.0
FHA/VA securitization
$1.0
0.26
0.01
0.30
GSE securitization
$0.5
0.98
PLS total securitization
$1.5
First Lien Origination Share
2013 (Q1-3)
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
$0.0
Sources: Inside Mortgage
Finance and Urban Institute.
The GSE share of first lien originations, at 63.2 percent year-to-date, remains elevated compared to historic levels.
FHA/VA originations remain strong at 19.4 percent, slightly ahead of the 2012 share of 17.6 percent. The PLS
share, still less than 1 percent, is barely creeping back, and the share of bank portfolio originations has declined
slightly from 2012, now at 16.6 percent.
100%
90%
80%
70%
60%
Bank portfolio
50%
PLS total securitization
40%
FHA/VA securitization
30%
GSE securitization
20%
10%
2013 (Q1-3)
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
0%
Sources: Inside Mortgage
Finance and Urban Institute.
8
OVERVIEW
SECURITIZATION VOLUME AND
COMPOSITION
Agency/Non-Agency Share of Residential MBS Issuance
98%
$1,000
$10
$800
$8
$ billions
$12
$200
$2
$0
$0
2013 YTD
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
Sep-10
Nov-10
Jan-11
Mar-11
May-11
Jul-11
Sep-11
Nov-11
Jan-12
Mar-12
May-12
Jul-12
Sep-12
Nov-12
Jan-13
Mar-13
May-13
Jul-13
Sep-13
Nov-13
$4
Alt A
2002
$6
$400
Subprime
Non-Agency share
Non-Agency Securitization 2.0
$1,200
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013 YTD (Q1-Q3)
$ billions
Non-Agency MBS Issuance
Prime
2001
Agency share
Sources: Inside Mortgage Finance and Urban Institute.
Note: 2013 YTD figure updated through November.
$600
2000
1999
1998
1997
1996
2%
1995
Non-agency single-family MBS
issuance has ticked up but remains 100%
less than 2 percent of the market for 90%
2013 through November, and the
80%
share is even lower excluding ReREMICS. Over this period, total non- 70%
agency issuance was $27.7 billion, 60%
compared to $12.7 billion for all of
50%
2012. This represents significant
40%
progress, but still pales in
comparison to non-agency numbers 30%
in the pre-bubble years such as
20%
2002, when issuance reached $400
10%
billion. The pace of new
securitization slowed dramatically in 0%
October, but pricing and volume
improved slightly in November.
All other
Sources: Inside Mortgage Finance and Urban Institute.
Sources: Inside Mortgage Finance and Urban Institute.
Note: Monthly figures equal total non-agency MBS issuance
minus Re-REMIC issuance.
9
OVERVIEW
AGENCY ACTIVITY:
VOLUMES AND PURCHASE/REFI
COMPOSITION
Year-to-date agency issuance totaled $1.5 trillion in November. In November, refinances were just over half of
the GSEs’ business, down from over 80 percent in January. The decline reflects rising interest rates. The Ginnie
Mae market has always been more purchase-driven, and its refinancing volume is now down to 22.8 percent in
November from 56 percent in January.
At-Issuance Balance
Fannie Mae
Freddie Mac
Ginnie Mae
$2.5
$ trillions
$2.0
$1.5
$0.373
$1.0
$0.405
$0.5
$0.714
$0.0
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
Sources: eMBS and Urban Institute.
Note: Year-to-date figure is through November 2013.
2011
2012
2013
YTD
Percent Refi at Issuance
Fannie Mae
Freddie Mac
Ginnie Mae
90%
80%
70%
60%
52.6%
50.8%
50%
40%
30%
22.8%
20%
10%
Nov-03
Feb-04
May-04
Aug-04
Nov-04
Feb-05
May-05
Aug-05
Nov-05
Feb-06
May-06
Aug-06
Nov-06
Feb-07
May-07
Aug-07
Nov-07
Feb-08
May-08
Aug-08
Nov-08
Feb-09
May-09
Aug-09
Nov-09
Feb-10
May-10
Aug-10
Nov-10
Feb-11
May-11
Aug-11
Nov-11
Feb-12
May-12
Aug-12
Nov-12
Feb-13
May-13
Aug-13
Nov-13
0%
Sources: eMBS and Urban Institute.
Note: Based on at-issuance balance.
10
OVERVIEW
STATE OF THE MARKET
MORTGAGE ORIGINATION
PROJECTIONS
Historical estimates and future projected originations volume from Fannie Mae, Freddie Mac, and the Mortgage
Bankers Association are depicted in the tables below. All three expect total originations to fall in 2014 relative to
2013, and the share of refinance originations to continue to decline relative to purchase originations as interest rates
are expected to rise modestly. Home sales and starts will also increase as the recovery gains steam.
Total Originations and Refinance Shares
Originations ($B)
Period
Total, FNMA Total, FHLMC
estimate
estimate
Refi Share (%)
Total, MBA
estimate
FNMA
estimate
FHLMC
estimate
MBA
estimate
2013 Q1
430
540
524
0.72
0.72
0.74
2013 Q2
554
560
537
0.65
0.65
0.66
2013 Q3
442
400
401
0.55
0.57
0.51
2013 Q4
396
350
293
0.56
0.38
0.53
2014 Q1
317
383
264
0.53
0.44
0.5
2014 Q2
372
453
311
0.39
0.4
0.37
2014 Q3
354
332
315
37%
39%
36%
2014 Q4
315
242
290
37%
35%
36%
FY 2011
1496
1500
1436
66%
64%
65%
FY 2012
2153
2130
2044
72%
70%
71%
FY 2013
1822
1850
1755
62%
60%
63%
FY 2014
1358
1410
1180
41%
40%
39%
FY 2015
-
1190
1229
-
20%
35%
Note: Shaded boxes indicate forecasted figures. All figures are estimates for total single-family market; column labels indicate source of
estimate. Forecasts include interest rates as well. The yearly average in 2011 and 2012 was 4.5% and 3.7%, respectively. The three
sources' projected annual average rates for 2013, 2014, and 2015 range from 4.2% to 4.4%, 4.8% to 5.1%, and 5.2% to 5.5%,
respectively.
Sources: Mortgage Bankers Association, Fannie Mae, Freddie Mac and Urban Institute
Housing Starts and Homes Sales
Housing Starts, thousands
Home Sales
Total,
FNMA
estimate
Existing,
Total,
Total, MBA
MBA
FHLMC
estimate
estimate
estimate
Year
Total,
FNMA
estimate
FY 2011
609
610
577
4566
4588
4501
4200
301
FY 2012
781
780
783
5028
5030
5030
4661
369
Total,
Total, MBA
FHLMC
estimate
estimate
New, MBA
Estimate
FY 2013
922
920
913
5563
5580
5599
5149
450
FY 2014
1106
1150
1040
5777
5900
5905
5409
496
Note: Shaded boxes indicate forecasted figures. All figures are estimates for total single-family market; column labels indicate source of
estimate.
Sources: Mortgage Bankers Association, Fannie Mae, Freddie Mac and Urban Institute
11
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. Originator profitability is often measured as the spread between
the rate the borrower pays for the mortgage (the primary rate) and the yield on the underlying mortgage-backed
security in the secondary market (the secondary rate). However, with guarantee fees rising steadily over the past
few years, the so-called primary-secondary spread has become a very imperfect measure to compare
profitability across time. This measure used here, Originator Profitability and Unmeasured Costs (OPUC), is
formulated and calculated by the Federal Reserve Bank of New York. It looks at the price at which the originator
actually sells the mortgage into the secondary market and adds the value of retained servicing (both base and
excess servicing, net of g-fees) as well as points paid by the borrower. As mortgage interest rates have risen and
fewer borrowers find it economical to refinance, originator profitability is lower.
Originator Profitability and Unmeasured Costs (OPUC)
OPUC
6
Dollars per $100 loan
5
4
3
2
1
Nov-13
May-13
Nov-12
May-12
Nov-11
May-11
Nov-10
May-10
Nov-09
May-09
Nov-08
May-08
Nov-07
May-07
Nov-06
May-06
Nov-05
May-05
Nov-04
May-04
Nov-03
May-03
Nov-02
May-02
Nov-01
May-01
Nov-00
May-00
0
Note: OPUC stands for "originator profits and unmeasured costs" as discussed in Fuster et al. (2013). The OPUC series is a monthly (4week moving) average.
Source: Federal Reserve Bank of New York, updated monthly and will be available at this link:
http://www.ny.frb.org/research/epr/2013/1113fust.html and Urban Institute.
12
STATE OF THE MARKET
OVERVIEW
CREDIT
CREDIT AVAILABILITY
AVAILABILITY FOR
FOR
PURCHASE LOANS
Access to credit has become extremely limited and continues to tighten, especially for borrowers with low FICO
scores. The 10th percentile of FICO scores on new originations, which represents the lower bound of
creditworthiness needed to qualify for a mortgage, stood at 659 as of October 2013. Prior to the housing crisis, this
threshold held steady in the low 600s. Mean LTV levels at origination remain relatively high at 86.3, while the average
for the past ten years is around 85. The above average LTV reflects the relatively large number of FHA purchase
originations.
Borrower FICO Score at Origination Month
850
800
799
FICO Score
750
735
700
659
650
600
550
Mean
500
Oct-00
Apr-01
Oct-01
Apr-02
Oct-02
Apr-03
Oct-03
Apr-04
Oct-04
Apr-05
Oct-05
Apr-06
Oct-06
Apr-07
Oct-07
Apr-08
Oct-08
Apr-09
Oct-09
Apr-10
Oct-10
Apr-11
Oct-11
Apr-12
Oct-12
Apr-13
Oct-13
90th percentile
10th percentile
Sources: CoreLogic Prime Servicing as of October 2013 and Urban Institute.
Note: Purchase-only loans.
Combined LTV at Origination Month
110
101.7
100
90
86.3
LTV
80
70
68.2
60
50
90th percentile
40
Oct-13
Oct-12
Apr-13
Apr-12
Oct-11
Oct-10
Apr-11
Oct-09
Apr-10
Oct-08
Apr-09
Apr-08
Oct-07
Apr-07
Oct-06
Oct-05
Apr-06
Oct-04
Apr-05
Apr-04
Oct-03
Apr-03
Oct-02
Oct-01
Apr-02
30
Oct-00
10th percentile
Apr-01
Mean
Sources: CoreLogic Prime Servicing as of October 2013 and Urban Institute.
Note: Purchase-only loans.
13
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 October 2013 and Urban Institute.
Note: Purchase-only loans.
14
LTV
SAN FRANCISCO-SAN MATEO-REDWOOD CITY, CA
SAN JOSE-SUNNYVALE-SANTA CLARA, CA
OAKLAND-FREMONT-HAYWARD, CA
NEW YORK-WHITE PLAINS-WAYNE, NY-NJ
LOS ANGELES-LONG BEACH-GLENDALE, CA
NASSAU-SUFFOLK, NY
SAN DIEGO-CARLSBAD-SAN MARCOS, CA
PORTLAND-VANCOUVER-HILLSBORO, OR-WA
SEATTLE-BELLEVUE-EVERETT, WA
NEWARK-UNION, NJ-PA
MINNEAPOLIS-ST. PAUL-BLOOMINGTON, MN
WASHINGTON-ARLINGTON-ALEXANDRIA, DC-VA
DENVER-AURORA-BROOMFIELD, CO
SACRAMENTO--ARDEN-ARCADE--ROSEVILLE, CA
ST. LOUIS, MO-IL
PHILADELPHIA, PA
BOSTON-QUINCY, MA
CHARLOTTE-GASTONIA-ROCK HILL, NC-SC
BALTIMORE-TOWSON, MD
CHICAGO-JOLIET-NAPERVILLE, IL
KANSAS CITY, MO-KS
TAMPA-ST. PETERSBURG-CLEARWATER, FL
ORLANDO-KISSIMMEE-SANFORD, FL
COLUMBUS, OH
PITTSBURGH, PA
DALLAS-PLANO-IRVING, TX
ATLANTA-SANDY SPRINGS-MARIETTA, GA
HOUSTON-SUGAR LAND-BAYTOWN, TX
CINCINNATI-MIDDLETOWN, OH-KY-IN
FORT WORTH-ARLINGTON, TX
LAS VEGAS-PARADISE, NV
RIVERSIDE-SAN BERNARDINO-ONTARIO, CA
MIAMI-MIAMI BEACH-KENDALL, FL
CLEVELAND-ELYRIA-MENTOR, OH
PHOENIX-MESA-GLENDALE, AZ
DETROIT-LIVONIA-DEARBORN, MI
SAN ANTONIO-NEW BRAUNFELS, TX
FICO score
STATE OF THE MARKET
OVERVIEW
CREDIT
CREDIT AVAILABILITY
AVAILABILITY FOR
FOR
PURCHASE LOANS
Credit has been tight for all borrowers with less than stellar credit scores, but there are significant variations across
MSAs. The mean origination FICO for borrowers in San Jose-Sunnyvale-Santa Clara, CA is 770, while in San
Antonio-New Braunfels, TX it is 720. Note that across all MSAs, lower FICO scores go hand in hand with high LTVs
at origination, as these MSAs rely heavily on FHA/VA financing.
Origination FICO and LTV by MSA
Mean origination LTV
Ratio
1.4
1.3
1.2
1.1
1
0.9
0.8
0.7
BOSTON-QUINCY, MA
NEWARK-UNION, NJ-PA
ST. LOUIS, MO-IL
15
CLEVELAND-ELYRIA-MENTOR, OH
DETROIT-LIVONIA-DEARBORN, MI
LAS VEGAS-PARADISE, NV
KANSAS CITY, MO-KS
COLUMBUS, OH
PITTSBURGH, PA
TAMPA-ST. PETERSBURG-CLEARWATER, FL
CHICAGO-JOLIET-NAPERVILLE, IL
CINCINNATI-MIDDLETOWN, OH-KY-IN
$260,000
DENVER-AURORA-BROOMFIELD, CO
Housing prices
$280,000
ORLANDO-KISSIMMEE-SANFORD, FL
OAKLAND-FREMONT-HAYWARD, CA
SAN ANTONIO-NEW BRAUNFELS, TX
ATLANTA-SANDY SPRINGS-MARIETTA, GA
HOUSTON-SUGAR LAND-BAYTOWN, TX
MINNEAPOLIS-ST. PAUL-BLOOMINGTON, MN
SACRAMENTO--ARDEN-ARCADE--ROSEVILLE, CA
Sources: CoreLogic, US Census, Freddie Mac and Urban Institute.
Oct-00
Apr-01
Oct-01
Apr-02
Oct-02
Apr-03
Oct-03
Apr-04
Oct-04
Apr-05
Oct-05
Apr-06
Oct-06
Apr-07
Oct-07
Apr-08
Oct-08
Apr-09
Oct-09
Apr-10
Oct-10
Apr-11
Oct-11
Apr-12
Oct-12
Apr-13
Oct-13
Max affordable price at 6.0% Rate
FORT WORTH-ARLINGTON, TX
CHARLOTTE-GASTONIA-ROCK HILL, NC-SC
Max affordable price
MIAMI-MIAMI BEACH-KENDALL, FL
Median sales price
RIVERSIDE-SAN BERNARDINO-ONTARIO, CA
SAN DIEGO-CARLSBAD-SAN MARCOS, CA
The maximum affordable price is the
house price that a family can afford
based on the following assumptions:
20% down payment, monthly payment
of 28% of median family income (US
Census), Freddie Mac prevailing rate
for 30-year fixed-rate mortgage, and
property tax and insurance at 1.75% of
housing value.
DALLAS-PLANO-IRVING, TX
PHOENIX-MESA-GLENDALE, AZ
BALTIMORE-TOWSON, MD
SEATTLE-BELLEVUE-EVERETT, WA
NASSAU-SUFFOLK, NY
SAN FRANCISCO-SAN MATEO, CA
PORTLAND-VANCOUVER-HILLSBORO, OR-WA
NEW YORK-WHITE PLAINS-WAYNE, NY-NJ
SAN JOSE-SUNNYVALE-SANTA CLARA, CA
PHILADELPHIA, PA
LOS ANGELES-LONG BEACH-GLENDALE, CA
WASHINGTON-ARLINGTON-ALEXANDRIA, DC-VA
STATE OF THE MARKET
HOUSING AFFORDABILITY
National Housing Affordability Over Time
$300,000
Credit
Bubble
$240,000
$220,000
$200,000
$180,000
$160,000
$140,000
$120,000
Affordability Adjusted for MSA-Level DTI
Sources: CoreLogic, US Census, Freddie Mac and UI calculations based on NAR methodology.
Note: Affordability compares home prices in October 2013 to that prevailing in 2000-2003. A ratio above 1.0 indicates the median home is
less expensive relative to median income than was the case in 2000-2003. For more, see Lan Shi’s article on housing affordability, The
Impact of Mortgage Rate Increases on Housing Affordability.
STATE OF THE MARKET
HOME PRICE INDICES
National Year-Over-Year HPI Growth
The year-over-year house price growth has been strong through the third quarter, as indicated by both the repeated
sales HPI from CoreLogic and hedonic index from Zillow.
Zillow HVI year-over-year
20.0%
15.0%
10.0%
5.0%
0.0%
-5.0%
-10.0%
-15.0%
-20.0%
Sep-13
Mar-13
Sep-12
Mar-12
Sep-11
Mar-11
Sep-10
Mar-10
Sep-09
Mar-09
Sep-08
Mar-08
Sep-07
Mar-07
Sep-06
Mar-06
Sep-05
Mar-05
Sep-04
Mar-04
Sep-03
Mar-03
Sep-02
Mar-02
Sep-01
Mar-01
12.0%
6.3%
Sep-00
Year-over-year growth rate
CoreLogic HPI year-over-year
Sources: CoreLogic, Zillow and Urban Institute.
Changes in CoreLogic HPI for Top MSAs
Despite rising 23% from the trough, national house prices still must grow 21.1% to reach peak pre-crisis levels.
At the MSA level, three of the top 15 MSAs have reached their peak HPI– Houston, TX; Dallas, TX; and Denver,
CO. One MSA particularly hard hit by the boom and bust– Riverside, CA– remains more than 50% below its
peak.
HPI Changes
MSA
United States
Chicago-Joliet-Naperville IL
Los Angeles-Long Beach-Glendale CA
Atlanta-Sandy Springs-Marietta GA
New York-White Plains-Wayne NY-NJ
Washington-Arlington-Alexandria DC-VA-MD-WV
Houston-Sugar Land-Baytown TX
Phoenix-Mesa-Glendale AZ
Riverside-San Bernardino-Ontario CA
Dallas-Plano-Irving TX
Minneapolis-St. Paul-Bloomington MN-WI
Philadelphia PA
Seattle-Bellevue-Everett WA
Denver-Aurora-Broomfield CO
Baltimore-Towson MD
San Diego-Carlsbad-San Marcos CA
2000 to Peak
Peak to
Trough
Trough to
Current
99.6%
65.0%
182.5%
40.6%
118.6%
160.6%
44.4%
126.2%
194.7%
38.3%
74.4%
90.1%
94.3%
36.3%
128.6%
149.3%
-32.8%
-36.9%
-39.5%
-33.9%
-18.0%
-33.6%
-12.9%
-53.0%
-53.5%
-14.0%
-30.9%
-16.9%
-32.4%
-14.9%
-25.8%
-38.5%
22.9%
18.9%
32.2%
30.4%
14.9%
26.9%
19.1%
43.6%
34.8%
17.3%
21.5%
7.1%
25.5%
24.3%
9.8%
30.6%
% Rise Needed
to Achieve
Peak
21.1%
33.3%
25.0%
15.9%
6.1%
18.6%
-3.6%
48.2%
59.3%
-0.9%
19.1%
12.4%
17.8%
-5.5%
22.7%
24.4%
Sources: CoreLogic HPIs as of September 2013 and Urban Institute.
Note: This table includes the largest 15 Metropolitan areas by mortgage count.
16
OVERVIEW
STATE OF THE MARKET
NEGATIVE EQUITY AND SERIOUS
DELINQUENCY
Negative Equity Share
With housing prices appreciating through September 2013, residential properties in negative equity (LTV
greater than 100) as a share of all residential properties with a mortgage has dropped to 13 percent.
Residential properties in near negative equity (LTV between 95 and 100) comprise another 3.2 percent.
Negative equity
Near negative equity
35%
30%
25%
20%
16.2%
15%
13.0%
10%
5%
3Q13
2Q13
1Q13
4Q12
3Q12
2Q12
1Q12
4Q11
3Q11
2Q11
1Q11
4Q10
3Q10
2Q10
1Q10
4Q09
3Q09
0%
Sources: CoreLogic and Urban Institute.
Loans in Serious Delinquency and Foreclosure
Serious delinquencies and foreclosures continue to decline with the housing recovery, but remain quite high
relative to the early 2000s
12%
10%
8%
Percent of loans in
foreclosure
Percent of loans in 90 days
or more delinquent or in
foreclosure
6%
5.7%
4%
3.1%
2.6%
2%
0%
1Q00
3Q00
1Q01
3Q01
1Q02
3Q02
1Q03
3Q03
1Q04
3Q04
1Q05
3Q05
1Q06
3Q06
1Q07
3Q07
1Q08
3Q08
1Q09
3Q09
1Q10
3Q10
1Q11
3Q11
1Q12
3Q12
1Q13
3Q13
Percent of loans 90 days or
more delinquent
Sources: Mortgage Bankers Association and Urban Institute.
17
OVERVIEW
GSES UNDER CONSERVATORSHIP
GSE PORTFOLIO WIND DOWN:
GSE
PORTFOLIO
WIND-DOWN:
FANNIE
MAE
FANNIE MAE
Under conservatorship, both Fannie Mae and Freddie Mac have shrunk their portfolios and shifted their mix
of assets, as the agency MBS share is shrinking more rapidly than the less liquid assets (mortgage loans and
non-agency MBS). Agency MBS now comprises 28.5 percent of the Fannie portfolio and 41 percent of the
Freddie portfolio.
Both GSEs will be well under their portfolio cap of $552.5 billion for year-end 2013. Fannie now stands at
$504.9 billion and Freddie at $482.7 billion.
Fannie Mae Mortgage-Related Investment Portfolio
Composition Over Time (Volume)
900
Current size: $504.9 billion
Current cap: $552.5 billion
Shrinkage year-to-date: 18.6%
800
$ billions
700
600
500
400
Mortgage loans
300
Non-agency MBS
200
100
Non-FNMA agency MBS
Oct-13
Feb-13
Feb-13
Oct-13
Oct-12
Oct-12
Jun-13
Jun-12
Jun-12
Jun-13
Oct-11
Feb-12
Feb-12
Jun-11
Oct-11
Jun-11
Oct-10
Feb-11
Jun-10
Feb-10
Oct-09
Jun-09
Oct-08
Feb-09
Jun-08
Oct-07
Feb-08
Jun-07
Feb-07
Oct-06
Jun-06
Sources: Fannie Mae and Urban Institute.
Feb-06
0
Fannie MBS in portfolio
Fannie Mae Mortgage-Related Investment Portfolio
Composition Over Time (Share)
50%
40%
30%
20%
10%
Feb-11
Oct-10
Jun-10
Feb-10
Oct-09
Jun-09
Feb-09
Oct-08
Jun-08
Feb-08
Sources: Fannie Mae and Urban Institute.
Oct-07
0%
Jun-07
Fannie MBS in portfolio
60%
Feb-07
Non-FNMA agency MBS
70%
Oct-06
Non-agency MBS
80%
Jun-06
Mortgage loans
90%
Feb-06
Less liquid assets
(mortgage loans and nonagency MBS) = 71.5%
Percentage of end balance
100%
18
OVERVIEW
GSES UNDER CONSERVATORSHIP
GSE PORTFOLIO WIND DOWN:
GSE
PORTFOLIO
FREDDIE
MAC WIND-DOWN:
FREDDIE MAC
Freddie Mac Mortgage-Related Investment Portfolio
Composition Over Time (Volume)
1,000
900
Current size: $482.7 billion
Current cap: $552.5 billion
Shrinkage year-to-date: 12.3%
800
700
$ billions
600
500
400
Mortgage loans
300
Non-agency MBS
200
Non-FHLMC agency MBS
100
FHLMC MBS in portfolio
Oct-13
Jun-13
Oct-12
Feb-13
Jun-12
Feb-12
Oct-11
Jun-11
Oct-10
Feb-11
Jun-10
Feb-10
Oct-09
Jun-09
Oct-08
Feb-09
Jun-08
Feb-08
Oct-07
Jun-07
Feb-07
Oct-06
Sources: Freddie Mac and Urban Institute
Jun-06
Feb-06
0
Freddie Mac Mortgage-Related Investment Portfolio
Composition Over Time (Share)
100%
60%
50%
40%
30%
20%
10%
19
Oct-13
May-13
Dec-12
Jul-12
Feb-12
Sep-11
Apr-11
Nov-10
Jun-10
Jan-10
Aug-09
Mar-09
Oct-08
May-08
Dec-07
Jul-07
Feb-07
Sep-06
Sources: Freddie Mac and Urban Institute.
0%
Apr-06
FHLMC MBS in portfolio
Nov-05
Non-FHLMC agency MBS
70%
Jun-05
Non-agency MBS
80%
Jan-05
Mortgage loans
90%
Percentage of end balance
Less liquid assets
(mortgage loans and nonagency MBS) = 58.7%
GSES UNDER CONSERVATORSHIP
EFFECTIVE GUARANTEE FEES
Effective Guarantee Fees
In Q3, effective g-fees on new Fannie acquisitions rose to 58.7 bps. Effective g-fees will rise further in the
months ahead as FHFA announced an increase in g-fees, an increase in their Loan Level Pricing Adjustments
(LLPAs) as well as a special increase for FL, NY, NJ and CT-- states with long liquidation timelines. These g-fee
increases are effective early Spring 2014.
60
Freddie Mac management and g-fee rate
50
Basis points
Fannie Mae single-family average charged gfee on new acquisitions
Fannie Mae single-family effective g-fee rate
58.7
38
40
30
29.8
20
10
0
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
3Q10
4Q10
1Q11
2Q11
3Q11
4Q11
1Q12
2Q12
3Q12
4Q12
1Q13
2Q13
3Q13
Sources: Fannie Mae, Freddie Mae and Urban Institute
Note: Freddie only reports the effective g-fee on the
entire book of business..
GSE Risk-Sharing Transactions
Date
July 24,
2013
October 24,
2013
November
12, 2013
Agency
Freddie
Mac
Fannie
Mae
Freddie
Mac
Deal
Structured
Agency Credit
Risk (STACR)
Debt Notes,
Series 2013-DN1
Connecticut
Avenue
Securities (CAS)
2013-C01
STACR Debt
Notes, Series
2013-DN2
Class
Amount
Tranche
Thickness
Credit
Enhancement
Rating
Initial
Spread
A-H
M-1, M-1H
M-1
M-1H
M-2, M-2H
M-2
M-2H
B-H
Total Reference
Pool Size
A-H
M-1, M-1H
M-1
M-1H
M-2, M-2H
M-2
M-2H
B-H
Total Reference
Pool Size
A-H
M-1, M-1H
M-1
M-1H
M-2, M-2H
M-2
M-2H
B-H
Total Reference
Pool Size
$21,906,830,673
$304,888,881
$250,000,000
$54,888,881
$304,888,881
$250,000,000
$54,888,881
$67,753,085
97%
1.35%
1.26%
0.09%
1.35%
1.26%
0.09%
0.30%
3%
1.65%
NR
NR
n/a
340
0.30%
NR
715
0%
NR
n/a
$22,584,361,520
100%
$25,953,684,593
$361,211,074
$337,500,000
$23,711,074
$361,211,074
$337,500,000
$23,711,074
$80,269,128
97%
1.35%
TK
TK
1.35%
TK
TK
0.30%
3%
1.65%
NR
BBB-sf
n/a
200
0.30%
NR
525
0%
-
n/a
$26,756,375,869
100%
$34,267,497,133
$370,936,825
$245,000,000
$125,936,825
$582,900,724
$385,000,000
$197,900,724
$105,981,950
97%
1.05%
0.69%
0.36%
1.65%
1.09%
0.56%
0.30%
3%
1.95%
NR
BBB-sf
n/a
145
0.30%
NR
425
0%
NR
n/as
$35,327,316,632
100%
Sources: Fannie Mae, Freddie Mac and Urban Institute.
Note: Classes A-H, M-1H, M-2H, and B-H are reference tranches only. These classes are not issued or sold. The risk is retained by Freddie
Mac and Fannie Mae.
20
OVERVIEW
SERIOUS
DELINQUENCY RATES AT
GSES UNDER CONSERVATORSHIP
SERIOUS
THE GSEsDELINQUENCY RATES
Serious delinquency rates at the GSEs continue to decline as the legacy portfolio is resolved and the pristine,
post-2009 book of business exhibits very low default rates. As of October, 2.48 percent of the Fannie portfolio and
2.48 percent of the Freddie portfolio are seriously delinquent, down from 3.35 percent and 3.31 percent a year
earlier, respectively.
Serious Delinquency Rates–Fannie Mae
16%
Single-family: Credit
enhanced
Single-family: Noncredit enhanced
Percentage of total loans
14%
12%
10%
8%
6%
4.97%
4%
2.48%
2.08%
2%
Single-family: Total
Oct-13
Dec-12
May-13
Jul-12
Feb-12
Sep-11
Apr-11
Jun-10
Nov-10
Jan-10
Aug-09
Mar-09
Oct-08
May-08
Dec-07
Jul-07
Feb-07
Sep-06
Apr-06
Nov-05
Jun-05
Sources: Fannie Mae and Urban Institute.
Jan-05
0%
Serious Delinquency Rates–Freddie Mac
10%
Single-family: Credit
enhanced
Single-family: Noncredit enhanced
Single-family: Total
Percentage of total loans
9%
8%
7%
6%
5%
5.04%
4%
3%
2.48%
2%
2.12%
1%
Oct-13
Dec-12
May-13
Jul-12
Feb-12
Sep-11
Apr-11
Nov-10
Jun-10
Jan-10
Aug-09
Mar-09
Oct-08
May-08
Dec-07
Jul-07
Feb-07
Sep-06
Apr-06
Nov-05
Jun-05
Sources: Freddie Mac and Urban Institute.
Jan-05
0%
21
GSES UNDER CONSERVATORSHIP
SERIOUS DELINQUENCY RATES
Serious delinquencies for FHA and GSE single-family loans continue to decline with the housing recovery, but
remain quite high relative to 2005-2007. FHA loans are declining from a much higher relative starting point.
GSE multifamily delinquencies are also declining, although they never reached problematic levels even at the
height of the crisis.
Serious Delinquency Rates–Single-Family Loans
FHA
Fannie Mae
Freddie Mac
10%
Percentage of total loans
9%
8%
7.24%
7%
6%
5%
4%
3%
2.58%
2%
1%
1Q05
2Q05
3Q05
4Q05
1Q06
2Q06
3Q06
4Q06
1Q07
2Q07
3Q07
4Q07
1Q08
2Q08
3Q08
4Q08
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
3Q10
4Q10
1Q11
2Q11
3Q11
4Q11
1Q12
2Q12
3Q12
4Q12
1Q13
2Q13
3Q13
0%
Sources: Fannie Mae, Freddie Mac, MBA Delinquency Survey and Urban Institute.
Note: Serious delinquency defined as three months 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%
0.13%
0.06%
0.1%
Oct-13
May-13
Dec-12
Jul-12
Feb-12
Sep-11
Apr-11
Nov-10
Jun-10
Jan-10
Aug-09
Mar-09
Oct-08
May-08
Dec-07
Jul-07
Feb-07
Sep-06
Apr-06
Nov-05
Jun-05
Jan-05
0.0%
Sources: Fannie Mae, Freddie Mac and Urban Institute.
Note: Serious delinquency defined as 60 days or more past due.
22
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. There have been
over 18 million refinances of GSE loans since Q2 2009, 2.9 million of these through HARP. As a result, the pool
of eligible loans remaining is much lower.
Total HARP Refinance Volume
HARP Refinance Volume - Freddie
HARP Refinance Volume - Fannie
350
300
200
73.6
Thousands
250
150
2Q13
1Q13
4Q12
3Q12
2Q12
1Q12
4Q11
3Q11
2Q11
1Q11
4Q10
3Q10
2Q10
1Q10
4Q09
3Q09
-0
2Q09
50
3Q13
130
100
Sources: FHFA Refinance Report and Urban Institute.
HARP Refinances
Q3 2013
Year-to-date
2013
Inception to
date
2012
2011
2010
Total refinances
898,120
3,037,883
18,366,213
4,750,530
3,229,066
3,604,640
Total HARP refinances
203,536
653,499
2,942,817
1,074,769
400,024
431,647
Share 80–105 LTV
63.3%
58.8%
69.9%
56.4%
85.0%
93.4%
Share 105–125 LTV
20.2%
21.5%
17.2%
22.4%
15.0%
6.6%
Share >125 LTV
16.5%
19.7%
12.9%
21.2%
0%
0%
All other streamlined
refinances
166,478
631,458
3,149,445
729,235
785,049
763,477
Sources: FHFA Refinance Report and Urban Institute.
23
OVERVIEW
GSES UNDER CONSERVATORSHIP
GSE LOANS: DISTRIBUTION OF
GSE
LOANS:REFINANCES
POTENTIAL
POTENTIAL REFINANCES
To qualify for HARP, a loan must be originated before June 2009, have a marked-to-market loan-to-value (MTM
LTV) ratio above 80, and have no more than one delinquent payment in the past year and none in the past six
months. There are 1,352,285 eligible loans, but 35 percent are out-of-the-money because the closing cost would
exceed the long-term savings, leaving 872,457 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 7,630,152 loans in this category, 5,536,857 are
in-the-money.
More than half the GSE book of business was originated after the cutoff date. Of these loans, 2,291,652 meet the
other HARP criteria, but 87 percent are out-of-the-money, leaving only 295,348 loans that, if there was a change in
the eligibility date, would be potential HARP candidates at current interest rate levels.
Total loan count
24,863,082
Loans that don't meet pay history requirement
2,013,095
Loans that meet pay history requirement:
22,849,986
Pre-June 2009 origination
8,982,437
Post-June 2009 origination
13,867,549
Loans Meeting HARP Pay History Requirements
Pre-June 2009
LTV category
In-the-money
Out-of-the-money
Total
≤80
5,536,857
2,093,295
7,630,152
>80
872,457
479,828
1,352,285
Total
6,409,314
2,573,123
8,982,437
Post-June 2009
LTV category
In-the-money
Out-of-the-money
Total
≤80
1,105,929
10,469,968
11,575,897
>80
295,348
2,000,000
2,291,652
Total
1,401,277
12,466,272
13,867,549
Sources: CoreLogic prime servicing data as of October 2013.
Note: Figures are scaled up from source data by a factor of 1/.65 to account for data coverage. Striped box indicates HARP-eligible
loans that are in-the-money.
24
MODIFICATION ACTIVITY
HAMP ACTIVITY
New trial mods started have tapered off as new defaults have declined. Modification success rates, however, are
improving, so the number of new permanent mods started remains fairly stable. During 2013, new permanent
mods started has ranged between 11,913 and 19,318 per month, averaging 14,817. The last data available
(October) is slightly above average at 16,000 new permanent modifications.
New HAMP Modifications
New trial mods started
New permanent mods started
New active permanent mods
Number of mods (thousands)
180
160
140
120
100
80
60
40
20
Oct-13
Aug-13
Jun-13
Apr-13
Feb-13
Dec-12
Oct-12
Aug-12
Jun-12
Apr-12
Feb-12
Dec-11
Oct-11
Aug-11
Jun-11
Apr-11
Feb-11
Dec-10
Oct-10
Aug-10
Jun-10
Apr-10
Feb-10
Dec-09
Oct-09
Aug-09
Jun-09
Apr-09
0
16.0
10.8
7.9
Sources: U.S. Treasury Making Home Affordable and Urban Institute.
Cumulative HAMP Modifications
All trials mods started
All permanent mods started
Active permanent mods
Number of mods (millions)
2.5
2.12
2.0
1.5
1.29
1.0
0.92
0.5
Oct-13
Aug-13
Jun-13
Apr-13
Feb-13
Dec-12
Oct-12
Aug-12
Jun-12
Apr-12
Feb-12
Dec-11
Oct-11
Aug-11
Jun-11
Apr-11
Feb-11
Dec-10
Oct-10
Aug-10
Jun-10
Apr-10
Feb-10
Dec-09
Oct-09
Aug-09
Jun-09
Apr-09
0.0
Sources: U.S. Treasury Making Home Affordable and Urban Institute.
25
MODIFICATION BY TYPE OF ACTION
MODIFICATION
BYOF
TYPE
AND BY BEARER
RISKOF ACTION
AND BEARER OF RISK
MODIFICATION
ACTIVITY
OVERVIEW
The share of principal reduction modifications peaked at 20 percent in December 2012 and has dropped in the
past two quarters. This is to be expected, as increasing home prices have increased equity, reducing the need
for principal reduction and making such modifications less likely to be net-present-value positive. Principal
reduction is most likely to be done on private investor loans, followed by portfolio loans. The GSEs and FHA/VA
do not allow this type of modification.
Changes in Loan Terms for Modifications
6/30/12
9/30/12
12/31/12
3/31/13
6/30/13
One quarter
% change
One year
% change
Capitalization
78.3
88.2
84.6
79.3
81.7
3.0
4.4
Rate reduction
78.7
77.1
73.3
80.1
81.0
1.1
2.8
Rate freeze
6.3
7.1
3.9
3.7
5.2
40.5
-17.1
Term extension
62.1
64.9
58.9
60.3
67.7
12.2
9.0
Principal reduction
Principal deferral
15.4
17.2
20.0
15.2
12.1
-20.0
-21.4
19.7
19.0
20.5
18.2
20.5
12.4
3.9
0.7
0.4
1.1
0.6
1.4
117.4
89.2
Not reported
a
Sources: OCC Mortgage Metrics Report for the Second Quarter of 2013 and Urban Institute.
Note: This table presents modifications of each type as a share of total modifications. Columns sum to over 100% because loans often
receive modifications with multiple features.
a. 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
Rate reduction
87.6
96.2
75.6
86.1
69.9
81.7
66.2
85.4
96.1
73.2
79.4
81.0
Rate freeze
11.8
3.4
0.3
6.1
5.7
5.2
Term extension
82.9
90.2
95.6
19.8
47.2
67.7
Principal reduction
0.0
0.0
0.2
27.5
36.5
12.1
Principal deferral
24.8
41.0
0.2
36.8
16.6
20.5
2.9
0.3
0.3
1.8
1.8
1.4
Not reported
a
Sources: OCC Mortgage Metrics Report for the Second Quarter of 2013 and Urban Institute.
Note: This table presents modifications of each type as a share of total modifications. Columns sum to over 100% because loans often
receive modifications with multiple features.
a. Processing constraints at some servicers prevented them from reporting specific modified term(s).
26
MODIFICATION ACTIVITY
MODIFICATIONS AND LIQUIDATIONS
Total modifications (HAMP and proprietary) are now roughly equal to total liquidations. Hope Now reports show
6,825,082 borrowers have received a modification since Q3 2007, compared with 6,813,598 liquidations in the
same period. Mods completed in October 2013 dropped 15.5 percent from September but total liquidations
edged up by 1.4 percent.
Loan Modifications and Liquidations
1,600
1,200
788
1,000
532
800
600
HAMP permanent mods
Proprietary mods completed
Total liquidations
400
149
Number of loans (thousands)
1,400
200
0
2007
(Q3-Q4)
2008
2009
2010
2011
2012
2013
YTD
Sources: Hope Now Reports and
Urban Institute.
Note: Total liquidations includes
both foreclosure sales and short
sales. Year-to-date figures are
through October 2013.
Cumulative Modifications and Liquidations
6.8
5.5
7
6
HAMP mods
5
Proprietary mods
4
Total liquidations
3
1.3
Number of loans (millions)
8
2
1
0
2007
(Q3-Q4)
2008
2009
2010
2011
2012
2013
YTD
Sources: Hope Now Reports and
Urban Institute.
Note: Total liquidations includes
both foreclosure sales and short
sales. Year-to-date figures are
through October 2013.
27
MODIFICATION ACTIVITY
MODIFICATION REDEFAULT RATES BY
BEARER OF THE RISK
Redefault rates have come down across each sector, especially on private-label modifications. Governmentguaranteed mortgages have much higher redefault rates than other product types.
Redefault Rate 12 Months after Modification
80%
70%
Fannie Mae
Governmentguaranteed
Private
Redefault rate
Freddie Mac
60%
50%
40%
30%
Portfolio loans
20%
Overall
10%
0%
2008
2009
2010
Year of modification
2011
2012
Sources: OCC Mortgage Metrics Report for the Second Quarter of 2013 and Urban Institute.
Redefault Rate 24 Months after Modification
80%
Fannie Mae
70%
Freddie Mac
Private
Portfolio loans
Overall
Redefault rate
Governmentguaranteed
60%
50%
40%
30%
20%
10%
0%
2008
2009
2010
2011
Year of modification
Sources: OCC Mortgage Metrics Report for the Second Quarter of 2013 and Urban Institute.
28
AGENCY ISSUANCE
AGENCY GROSS AND NET ISSUANCE
While newly issued agency securities (agency gross issuance) have been robust year to date, much of the
issuance has been driven by refinancing. As that activity falls off with rising interest rates, we expect the volume of
new issuance to fall off as well. Net issuance, which excludes repayments, prepayments, and refinances on
outstanding mortgages, remains low and dominated by Ginnie Mae. This is unsurprising, given the increased role
of FHA and VA during the crisis.
Agency Gross Issuance
Agency Net Issuance
Issuance
Year
GSEs
Ginnie Mae
Total
Issuance
Year
GSE
Ginnie Mae
Total
2000
$360.63
$102.15
$462.78
2000
$159.8
$29.3
$189.1
2001
$885.13
$171.51
$1,056.60
2001
$367.8
-$9.9
$357.9
2002
$1,238.92
$169.00
$1,407.90
2002
$357.6
-$51.2
$306.4
2003
$1,874.94
$213.09
$2,088.00
2003
$335.0
-$77.6
$257.4
2004
$872.62
$119.24
$991.86
2004
$83.3
-$40.1
$43.2
2005
$893.95
$81.36
$975.31
2005
$174.4
-$42.2
$132.1
2006
$853.02
$76.67
$929.69
2006
$313.6
$0.3
$313.8
2007
$1,066.23
$94.89
$1,161.10
2007
$514.7
$30.9
$545.5
2008
$911.41
$267.60
$1,179.00
2008
$314.3
$196.4
$510.7
2009
$1,279.98
$451.31
$1,731.30
2009
$249.5
$257.4
$506.8
2010
$1,003.54
$390.74
$1,394.30
2010
-$305.5
$198.2
-$107.3
2011
$879.33
$315.33
$1,194.70
2011
-$133.4
$149.4
$16.0
2012
$1,288.82
$405.02
$1,693.80
2012
-$46.5
$118.4
$71.9
2013
(Annualized)
$1,221.19
$406.69
$1,627.83
2013
(Annualized)
$67.0
$89.4
$156.4
2013 YTD
$1,119.42
$372.80
$1,492.18
2013 YTD
$61.5
$81.9
$143.4
Sources: eMBS, Federal Reserve Bank of New York, and Urban
Institute.
Note: Year-to-date figure is through November 2013. Dollar amounts
are in billions.
Sources: eMBS, Federal Reserve Bank of New York, and Urban
Institute.
Note: Year-to-date figure is through November 2013. Dollar amounts
are in billions.
29
OVERVIEW
AGENCY
ISSUANCE
OVERVIEW
AGENCY GROSS AND NET ISSUANCE
AGENCY
GROSS
ISSUANCE
AND
FED
BY MONTH
PURCHASES
Monthly Gross Issuance
250
While government and GSE lending
have dominated the mortgage market
since the crisis, there has been a
change in the mix. Ginnie Mae’s
share reached a peak of 28 percent
of total agency issuance for the
second time in October of 2010, and
then declined to 25% in November.
This reflects rising interest rates, and
the subsequent transition from a
refinance market to a purchase
market. Ginnie Mae is a larger share
of purchase activity.
$ billions
200
150
100
50
Ginnie Mae
Fannie Mae
Freddie Mac
Nov-00
May-01
Nov-01
May-02
Nov-02
May-03
Nov-03
May-04
Nov-04
May-05
Nov-05
May-06
Nov-06
May-07
Nov-07
May-08
Nov-08
May-09
Nov-09
May-10
Nov-10
May-11
Nov-11
May-12
Nov-12
May-13
Nov-13
0
Sources: eMBS, Federal Reserve Bank of
New York and Urban Institute.
Fed Absorption of Agency Gross Issuance
The Fed has absorbed near 49 percent of gross issuance this year. The future movement of this number is
uncertain, since gross issuance continues to decline while fed will also start to taper with its recent
announcement that its monthly MBS purchases will be trimmed to $35 billion in 2014, a reduction of $5 billion.
Gross issuance
Fed purchases
250
150
100
50
Sources: eMBS, Federal Reserve Bank of New York and Urban Institute.
30
Nov-13
May-13
Nov-12
May-12
Nov-11
May-11
Nov-10
May-10
Nov-09
May-09
Nov-08
May-08
Nov-07
May-07
Nov-06
May-06
Nov-05
May-05
Nov-04
May-04
Nov-03
May-03
Nov-02
May-02
Nov-01
May-01
0
Nov-00
$ billions
200
AGENCY ISSUANCE
MORTGAGE INSURANCE ACTIVITY
MI Activity
$180
$160
$140
$33
$120
$ billions
Private mortgage insurers lost
market share to FHA and VA in
the crisis. With the recovery
and higher FHA insurance
premiums, the private MI share
is increasing, albeit slowly. In
3Q13, private insurers had 39
percent of the market, up from
21 percent in 1Q11 but
significantly down from nearly
80 percent from 2005-2007.
$100
$58
$80
$60
$40
$59
$20
VA
FHA
3Q13
2Q13
1Q13
4Q12
3Q12
2Q12
1Q12
4Q11
3Q11
Total private primary MI
2Q11
1Q11
$0
Sources: Inside Mortgage Finance and Urban Institute.
MI Market Share
Total private primary MI
FHA
VA
22.7%
100%
90%
80%
41.2%
70%
60%
50%
40%
36.0%
30%
20%
10%
0%
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Q1-Q3
Sources: Inside Mortgage Finance and Urban Institute.
31
AGENCY ISSUANCE
MORTGAGE INSURANCE ACTIVITY
The table below charts the history of FHA mortgage insurance premiums since 2001. Note that the most
recent change increased the annual premium by 10 bps, from 1.25 to 1.35 percent and kept the upfront
premium at 1.75 percent for mortgages with balances less than $625,500. Annual premiums have more than
doubled since 2008 as the FHA has worked to shore up its finances.
FHA MI Premiums for Typical Purchase Loan
Case number date
Upfront mortgage insurance
premium (UFMIP) paid
Annual mortgage insurance
premium (MIP)
1/1/2001 - 7/13/2008
150
50
7/14/2008 - 9/30/2008*
175
55
10/1/2008 - 4/4/2010
175
55
4/5/2010 - 10/3/2010
225
55
10/4/2010 - 4/17/2011
100
90
4/18/2011 - 4/8/2012
100
115
4/9/2012 - 6/10/2012
175
125
6/11/2012 - 3/31/2013a
175
125
4/1/2013 - presentb
175
135
Sources: Ginnie Mae and Urban Institute.
Note: A typical purchase loan qualifies as one with 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.
32
RELATED HFPC WORK
PUBLICATIONS AND EVENTS
Issue Papers and Briefs
The Impact of Mortgage Rate Increases on Housing Affordability
Authors: Lan Shi, Laurie Goodman
November 12, 2013
By most measures, the US housing market appears to be in strong recovery. House prices have risen consistently since
January 2013, and by August, the US median home price was the highest it had been since December 2004. As a result of a
stronger economy, mortgage rates also have increased consistently since December 2012. Though these trends indicate
that the country is in a housing recovery, they have also made housing less affordable over the past several months.
Moreover, employing a unique methodology that accounts for regional differences in debt-to-income and loan-to-value
ratios, we find that affordability varies significantly among major metropolitan areas.
Reps and Warrants: Lessons from the GSEs Experience
Authors: Laurie Goodman, Jun Zhu
October 24, 2013
GSE credit has become very tight, with a significant increase in the average credit score of approved loans. How Fannie
Mae and Freddie Mac are enforcing their Representations and Warranties (Reps and Warrants) rights is playing a significant
role in this phenomenon. In this paper, we use the recently released Freddie Mac and Fannie Mae loan-level credit data and
find that put-backs are having an outsized chilling effect on lower FICO/higher LTV loans.
The GSE Reform Debate: How Much Capital Is Enough?
Authors: Laurie Goodman, Jun Zhu
October 24, 2013
This paper shows that collateral composition, house price experience, and diversification significantly affect credit risk, and
thus the amount of private capital needed in front of any government catastrophic guarantee of mortgages in the secondary
market.
Eminent Domain: The Debate Distracts from Pressing Problems
Author: Pamela Lee
October 24, 2013
Richmond, CA, has taken steps to become the first city in the nation to vote to use its powers of eminent domain to seize
underwater loans and, the city argues, prevent foreclosures and neighborhood blight. We look at several cities that have
considered this controversial strategy, evaluating what they have in common, and whether the plan, as proposed, will
address the problems they face.
QRM Comment Letter: Credit Risk Retention
Author: Laurie Goodman
October 24, 2013
On August 22, the six regulatory agencies proposed rules for risk retention under Section 941 of the Dodd Frank Act. In this
comment letter, we focused on one aspect of the proposal, the Qualified Residential Mortgage (QRM) definition for
residential mortgage backed securities.
Testimony
Housing Finance Reform: Fundamentals of Transferring Credit Risk in a Future Housing Finance System
Author: Laurie Goodman
December 10, 2013
The GSEs recently completed three transactions that transferred some of the risk from their guarantor book of business to
private investors. In the context of reforms to the nation’s housing finance system, this testimony before the Senate Banking
Committee focuses on the extent to which these deals are transferrable, and to what degree.
33
RELATED HFPC WORK
PUBLICATIONS AND EVENTS
Upcoming Events
January Lunchtime Data Talk – Multifamily Housing
On January 13, 2014, Jamie Woodwell, Vice President in the Research and Economics group at the Mortgage
Bankers Association, and Mark Obrinsky, Senior Vice President for Research and Chief Economist at the National
Multi Housing Council will be at Urban Institute discussing multifamily housing. Look for event information,
biographies, and presentations on the Urban Institute’s events page.
Blog Posts
Past Events
Diversification is critical to protecting the
government in housing finance reform
Authors: Laurie Goodman, Ellen Seidman, Jun Zhu
December 13, 2013
December Lunchtime Data Talk: Housing Data:
Home Sales, Affordability, and Realtor/Builder
Activity
Presenters: Lawrence Yun, Chief Economist and Senior
Vice President of Research, National Association of
Realtors and David Crowe, Chief Economist and Senior
Vice President, National Association of Home Builders
December 9th, 2013
Sunset Provisions on Reps and Warrants: Can
They be More Flexible While Still Protecting the
GSEs?
Authors: Laurie Goodman, Ellen Seidman, Jun Zhu
November 21, 2013
President’s chief economic advisor calls for
comprehensive housing finance reform
Author: Zach McDade
November 20, 2013
There is not enough affordable rental housing
Author: Erika Poethig
November 18, 2013
Let's rethink housing affordability
Authors: Taz George and Lan Shi
November 13, 2013
Ten reasons housing finance policy might keep
you up at night
Author: Lionel Foster
October 31, 2013
Seizing homes to save communities
Author: Pamela Lee
October 30, 2013
Data, Demand, and Demographics: A Symposium on
Housing Finance
Presenters: Gene Sperling (Director of the National
Economic Council), Ed Glaeser (Harvard University) and
Mark Fleming (Chief Economist, CoreLogic)
A Conversation with Jim Stock, Council of Economic
Advisers
Presenter: Jim Stock (Council of Economic Advisers and a
Senior Adviser to the President)
November 13, 2013
Elevating the Housing Finance Debate: The Launch of
Urban Institute’s Housing Finance Policy Center
Presenters: Sarah Rosen Wartell (President, Urban
Institute), Ellen Seidman (Senior Fellow, Urban Institute),
Laurie Goodman (Center Director, Housing Finance Policy
Center, Urban Institute), Rolf Pendall (Center Director,
Metropolitan Housing and Communities Policy Center,
Urban Institute), Signe-Mary McKernan (Senior Fellow and
Co-Director, Opportunity and Ownership Program, Urban
Institute), Eric Toder (Institute Fellow and Co-Director,
Urban-Brookings Tax Policy Center) and Jim Parrot (Senior
Fellow, Urban Institute)
October 24, 2013
34
Copyright © December 2013. The Urban Institute. All rights reserved. Permission is granted for reproduction of this file, with attribution to the
Urban Institute.
The Urban Institute is a nonprofit, nonpartisan policy research and educational organization that examines the social, economic, and
governance problems facing the nation. The views expressed are those of the authors and should not be attributed to the Urban Institute, its
trustees, or its funders.
35