HOUSING FINANCE POLICY CENTER
HOUSING FINANCE
AT A GLANCE
A MONTHLY CHARTBOOK
November 2013
1
INTRODUCTION
In the tradition of the Urban Institute, 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. The
November edition of At A Glance draws on the rich
institutional resources of the center, and its unique
capabilities in analyzing complex data. The center is
committed to making key metrics widely available for
policymakers, academics, journalists, and others
interested in the government's role in mortgage markets
and broader trends in housing finance.
At A Glance’s development will mirror HFPC’s dynamic,
evolving research agenda. More than a one-stop
reference, At A Glance underscores the connections
between the housing market and public policy. This
month we added detailed, succinct data for the three GSE
risk-sharing transactions to date, as well as historical
information on FHA mortgage insurance premiums. A
new quarterly feature, “GSE Composition and Default
Rates,” draws from newly released Fannie Mae and
Freddie Mac public loan-level databases. We translate
this information to illustrate composition and default rates.
Our vision is that this and other HFPC publications will
serve as the basis for thoughtful, well-crafted housing
finance policies that meet the nation’s diverse housing
needs.
HOUSING FINANCE POLICY CENTER STAFF
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
INSIDE THIS ISSUE
•
New non-agency securitization drops to near zero
in October (page 8)
•
Key measures of credit availability by MSA; Bay
Area FICO scores average over 750 (page 11)
•
GSE portfolio wind-down continues; Fannie g-fees
rise but Freddie's drops in Q3 (pages 13-15)
•
Mod activity down in September; total liquidations
below 2012 pace (page 22)
•
Private MI share grows relative to FHA/VA (page
26)
•
Historical information on FHA MI Premiums (page
27)
•
Fannie and Freddie composition and default rates
from newly released data sets (pages 29-32)
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
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
5
5
6
6
Origination Volume and Composition
First Lien Origination Volume
First Lien Origination Share
7
7
Securitization Volume and Composition
Agency/Non-Agency Share of Residential MBS Issuance
Non-Agency MBS Issuance
Non-Agency Securitization 2.0
8
8
8
Agency Activity: Volumes and Purchase/Refi Composition
At-Issuance Balance
Percent Refi at Issuance
9
9
Credit Availability for Purchase Loans
Borrower FICO Score at Origination
Combined LTV at Origination
Origination FICO and LTV by MSA
10
10
11
Housing Affordability
National Housing Affordability Over Time
Affordability Adjusted for MSA-Level DTI
12
12
GSEs under Conservatorship
GSE Portfolio Wind-Down: Fannie Mae
Fannie Mae Mortgage-Related Investment Portfolio Over Time (Volume)
Fannie Mae Mortgage-Related Investment Portfolio Over Time (Share)
13
13
GSE Portfolio Wind-Down: Freddie Mac
Freddie Mac Mortgage-Related Investment Portfolio Over Time (Volume)
Freddie Mac Mortgage-Related Investment Portfolio Over Time (Share)
14
14
Effective Guarantee Fees
Effective Guarantee Fees
GSE Risk-Sharing Transactions
15
15
Serious Delinquency Rates
Serious Delinquency Rates – Fannie Mae
Serious Delinquency Rates – Freddie Mac
Serious Delinquency Rates – Single-Family Loans
Serious Delinquency Rates – Multifamily GSE Loans
16
16
17
17
Refinance Activity
Total HARP Refinance Volume
HARP Refinances
18
18
3
CONTENTS
GSE Loans: Potential Refinances
Loans Meeting HARP Pay History Requirements
19
Modification Activity
HAMP Activity
New HAMP Modifications
Cumulative HAMP Modifications
20
20
Modification by Type of Action and Bearer of Risk
Changes in Loan Terms for Modifications
Type of Modification Action by Investor and Product Type
21
21
Modifications and Liquidations
Loan Modifications and Liquidations
Cumulative Modifications and Liquidations
22
22
Modification Redefault Rates by Bearer of the Risk
Redefault Rate 12 Months after Modification
Redefault Rate 24 Months after Modification
23
23
Agency Issuance
Agency Gross and Net Issuance
Agency Gross Issuance
Agency Net Issuance
24
24
Agency Gross Issuance and Fed Purchases
Monthly Gross Issuance
Fed Absorption of Agency Gross Issuance
25
25
Mortgage Insurance Activity
MI Activity
MI Market Share
FHA MI Premiums for Typical Purchase Loan
26
26
27
Quarterly Feature: Loan Level Credit Data from the GSEs
Fannie Mae Balance
Fannie Mae Default Rate
Freddie Mac Balance
Freddie Mac Default Rate
Fannie Mae Cumulative Default Rate by Vintage Year
Freddie Mac Cumulative Default Rate by Vintage Year
28
29
30
31
32
32
Related HFPC Work
Publications and Events
33-34
4
OVERVIEW
MARKET SIZE OVERVIEW
Home values continue to improve, increasing the total value of the US residential housing market. However, the
reliance on mortgage financing is decreasing because of a sizable share of cash purchases. According to the 2013
Q2 Fed Flow of Funds report, the total size of the mortgage market stands at $9.8 trillion. Agency mortgagebacked securities (MBS) make up 56 percent of the total; private-label securities make up 8.6 percent; and
unsecuritized first liens at commercial banks, savings institutions, and credit unions make up 22.4 percent
Value of the US
Residential Housing
Market
Size of the US
Residential Mortgage
Market
as of Q2 2013
as of Q2 2013
$25,000
Unsecuritized first liens at commercial banks,
savings institutions, credit unions
Fannie and Freddie loans in portfolio
$20,000
Agency MBS
Equity,
$9,772
Private-label securities
Equity,
$9,772
Second liens
$ billions
$15,000
$10,000
$10,000
$2,208
$5,000
Debt,
household
mortgages,
$9,833
$7,500
$537
$5,000
$5,508
$2,500
$0
Sources: Federal Reserve Flow of Funds and Urban
Institute.
$0
$849
$731
Sources: Federal Reserve Flow of Funds, Inside Mortgage
Finance, Fannie Mae, Freddie Mac, and Urban Institute.
5
OVERVIEW
MARKET SIZE OVERVIEW
As of September 2013, debt in the private-label securitization market is split among prime (20.4 percent),Alt-A
(44.2 percent), and subprime (35.4 percent) loans. The agency market is 47.6 percent Fannie Mae, 28 percent
Freddie Mac, and 24.4 percent Ginnie Mae.
Private-Label Securities by Product Type
as of September 2013; dollars in billions
100%
90%
Prime, $168.9
80%
70%
60%
Alt-A, $366.3
50%
40%
30%
20%
Subprime, $293.6
10%
0%
Sources: CoreLogic and Urban Institute.
Agency Mortgage-Backed Securities
as of Q2 2013; dollars in billions
100%
90%
80%
Fannie Mae, $2,620
70%
60%
50%
40%
Freddie Mac, $1,545
30%
20%
10%
Ginnie Mae, $1,343
0%
Sources: Inside Mortgage Finance and Urban Institute.
6
OVERVIEW
OVERVIEW
ORIGINATION VOLUME
AND COMPOSITION
First Lien Origination Volume
First lien originations through the first three quarters of 2013 stand at $1.59 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-todate private label originations, at $12.2 billion, while still very small, are already double last year's amount.
$4.0
$3.5
$ trillions
$3.0
Bank portfolio
$2.5
PLS total securitization
$2.0
FHA/VA securitization
$1.5
GSE securitization
$1.0
$0.5
2013 (Q1-3)
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
$0.0
First Lien Origination Share
Sources: Inside Mortgage
Finance and Urban Institute.
The GSE share of first lien originations, at 61.7 percent, is down slightly from last quarter but remains elevated
compared to historic levels. FHA/VA originations remain strong at 18.9 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 16.2 percent.
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Bank portfolio
PLS total securitization
FHA/VA securitization
GSE securitization
2013 (Q1-3)
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
Sources: Inside Mortgage
Finance and Urban Institute.
7
OVERVIEW
SECURITIZATION VOLUME AND
COMPOSITION
Agency/Non-Agency Share of Residential MBS Issuance
98%
2012
2011
2010
2009
2008
2006
2007
Non-Agency share
Sources: Inside Mortgage Finance and Urban Institute.
Non-Agency MBS Issuance
Non-Agency Securitization 2.0
$1,200
$12
$1,000
$10
$800
$8
$ billions
$ billions
2013 (through Oct.)
Agency share
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
2%
1995
Non-agency single-family MBS
100%
issuance has ticked up but remains
less than 2 percent of the market for
90%
2013 through October, and the share
80%
is even lower excluding Re-REMICS.
70%
Over this period, total non-agency
issuance was $25.7 billion, compared 60%
to $13.2 billion for all of 2012. This
50%
represents significant progress, but
40%
still pales in comparison to nonagency numbers in the pre-bubble
30%
years such as 2002, when issuance
20%
reached $400 billion. The pace of new
10%
securitization slowed dramatically in
October as pricing became
0%
increasingly unfavorable. Several
deals were pulled during the course of
the month.
$600
$400
$6
$4
$200
$2
Prime
Subprime
Alt A
$0
Aug-10
Oct-10
Dec-10
Feb-11
Apr-11
Jun-11
Aug-11
Oct-11
Dec-11
Feb-12
Apr-12
Jun-12
Aug-12
Oct-12
Dec-12
Feb-13
Apr-13
Jun-13
Aug-13
Oct-13
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013 YTD (Q1-Q3)
$0
All other
Sources: Inside Mortgage Finance and Urban Institute.
Sources: Inside Mortgage Finance and Urban Institute.
Note: Monthly figures equal total non-agency MBS issuance
minus Re-REMIC issuance.
8
OVERVIEW
AGENCY ACTIVITY:
VOLUMES AND PURCHASE/REFI
COMPOSITION
Year-to-date agency issuance totaled $1.4 trillion in October. In October, refinances were 50-55 percent of the
GSEs’ business, down from over 80 percent in January – a decline reflects rising interest rates. The Ginnie Mae
market has always been more purchase-driven, with refinance volume down to 24.2 percent in October from 56
percent in January.
At-Issuance Balance
Fannie Mae
Freddie Mac
Ginnie Mae
$2,500
$ millions
$2,000
$1,500
$348.3
$1,000
$384.2
$500
$674.5
$0
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
YTD
Sources: eMBS and Urban Institute.
Note: Year to date as of October 2013.
Percent Refi at Issuance
Fannie Mae
Freddie Mac
Ginnie Mae
Oct-03
Jan-04
Apr-04
Jul-04
Oct-04
Jan-05
Apr-05
Jul-05
Oct-05
Jan-06
Apr-06
Jul-06
Oct-06
Jan-07
Apr-07
Jul-07
Oct-07
Jan-08
Apr-08
Jul-08
Oct-08
Jan-09
Apr-09
Jul-09
Oct-09
Jan-10
Apr-10
Jul-10
Oct-10
Jan-11
Apr-11
Jul-11
Oct-11
Jan-12
Apr-12
Jul-12
Oct-12
Jan-13
Apr-13
Jul-13
Oct-13
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Sources: eMBS and Urban Institute.
Note: Based on at-issuance balance.
9
OVERVIEW
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 662 as of September 2013. Prior to the housing
crisis, this threshold held steady in the low 600s. LTV levels at origination remain relatively high, which reflects
the large number of FHA purchase originations.
Borrower FICO Score at Origination
850
800
800
FICO Score
750
738
700
661
650
600
550
90th percentile
Mar-13
Sep-13
Sep-12
Mar-12
Sep-11
Mar-11
Mar-10
Sep-10
Mar-09
Sep-09
Mar-08
Sep-08
Sep-07
Mar-07
Sep-06
Mar-06
Sep-05
Mar-05
Mar-04
Sep-04
Mar-03
Sep-03
Mar-02
Sep-02
Sep-01
10th percentile
Mar-01
500
Sep-00
Mean
Sources: CoreLogic Prime Servicing as of September 2013 and Urban Institute.
Note: Purchase-only loans.
Combined LTV at Origination
110
100.9
100
90
85.3
LTV
80
90th percentile
Mean
70
66.7
60
50
10th percentile
40
Sep-00
Mar-01
Sep-01
Mar-02
Sep-02
Mar-03
Sep-03
Mar-04
Sep-04
Mar-05
Sep-05
Mar-06
Sep-06
Mar-07
Sep-07
Mar-08
Sep-08
Mar-09
Sep-09
Mar-10
Sep-10
Mar-11
Sep-11
Mar-12
Sep-12
Mar-13
Sep-13
30
Sources: CoreLogic Prime Servicing as of September 2013 and Urban Institute.
Note: Purchase-only loans.
10
Origination FICO
100
770
95
760
90
750
85
740
80
730
75
720
70
710
65
700
60
SAN JOSE-SUNNYVALE-SANTA CLARA, CA
OAKLAND-FREMONT-HAYWARD, CA
Sources: CoreLogic Prime Servicing as of September 2013 and Urban Institute.
Note: Purchase-only loans.
SAN ANTONIO-NEW BRAUNFELS, TX
FORT WORTH-ARLINGTON, TX
DETROIT-LIVONIA-DEARBORN, MI
CLEVELAND-ELYRIA-MENTOR, OH
COLUMBUS, OH
PHOENIX-MESA-GLENDALE, AZ
CINCINNATI-MIDDLETOWN, OH-KY-IN
LAS VEGAS-PARADISE, NV
KANSAS CITY, MO-KS
ATLANTA-SANDY SPRINGS-MARIETTA, GA
MIAMI-MIAMI BEACH-KENDALL, FL
PITTSBURGH, PA
TAMPA-ST. PETERSBURG-CLEARWATER, FL
HOUSTON-SUGAR LAND-BAYTOWN, TX
DALLAS-PLANO-IRVING, TX
RIVERSIDE-SAN BERNARDINO-ONTARIO, CA
ORLANDO-KISSIMMEE-SANFORD, FL
CHARLOTTE-GASTONIA-ROCK HILL, NC-SC
ST. LOUIS, MO-IL
PHILADELPHIA, PA
SACRAMENTO--ARDEN-ARCADE--ROSEVILLE, CA
CHICAGO-JOLIET-NAPERVILLE, IL
BALTIMORE-TOWSON, MD
BOSTON-QUINCY, MA
DENVER-AURORA-BROOMFIELD, CO
MINNEAPOLIS-ST. PAUL-BLOOMINGTON, MN
WASHINGTON-ARLINGTON-ALEXANDRIA, DC-VA
NEWARK-UNION, NJ-PA
NASSAU-SUFFOLK, NY
SAN DIEGO-CARLSBAD-SAN MARCOS, CA
PORTLAND-VANCOUVER-HILLSBORO, OR-WA
SEATTLE-BELLEVUE-EVERETT, WA
LOS ANGELES-LONG BEACH-GLENDALE, CA
NEW YORK-WHITE PLAINS-WAYNE, NY-NJ
Origination FICO
Origination LTV
780
SAN FRANCISCO-SAN MATEO-REDWOOD CITY, CA
OVERVIEW
OVERVIEW
CREDIT
CREDIT AVAILABILITY
AVAILABILITY FOR
FOR
PURCHASE LOANS
Across all MSAs, credit has been tight for all borrowers except for those with the highest FICO scores. Still, there
are variations across MSAs, though FICOs are high overall. Borrowers in San Jose-Sunnyvale-Santa Clara, CA
have origination FICOs near 770, while borrowers in San Antonio-New Braunfels, TX have FICOs near 720. Note
that across 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
Origination LTV
11
OVERVIEW
HOUSING AFFORDABILITY
Look for a forthcoming issue brief describing our efforts to develop more local and accurate estimates of
affordability that unmask variations in housing affordability across regions and MSAs. For more, see Lan Shi’s
recent article on housing affordability, The Impact of Mortgage Rate Increases on Housing Affordability.
National Housing Affordability Over Time
$300,000
$280,000
Housing prices
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.
Credit
bubble
$260,000
$240,000
$220,000
$200,000
$180,000
$160,000
Median sales price
$140,000
Max affordable price
Sep-00
Mar-01
Sep-01
Mar-02
Sep-02
Mar-03
Sep-03
Mar-04
Sep-04
Mar-05
Sep-05
Mar-06
Sep-06
Mar-07
Sep-07
Mar-08
Sep-08
Mar-09
Sep-09
Mar-10
Sep-10
Mar-11
Sep-11
Mar-12
Sep-12
Mar-13
Sep-13
$120,000
Max affordable price at 6.0% Rate
Sources: CoreLogic, US Census, Freddie Mac, and Urban
Institute.
LAS VEGAS-PARADISE, NV
COLUMBUS, OH
KANSAS CITY, MO-KS
CLEVELAND-ELYRIA-MENTOR, OH
CINCINNATI-MIDDLETOWN, OH-KY-IN
CHICAGO-JOLIET-NAPERVILLE, IL
TAMPA-ST. PETERSBURG-CLEARWATER, FL
NEWARK-UNION, NJ-PA
DETROIT-LIVONIA-DEARBORN, MI
PITTSBURGH, PA
ST. LOUIS, MO-IL
OAKLAND-FREMONT-HAYWARD, CA
DENVER-AURORA-BROOMFIELD, CO
FORT WORTH-ARLINGTON, TX
SAN ANTONIO-NEW BRAUNFELS, TX
SACRAMENTO--ARDEN-ARCADE--ROSEVILLE, CA
ORLANDO-KISSIMMEE-SANFORD, FL
HOUSTON-SUGAR LAND-BAYTOWN, TX
CHARLOTTE-GASTONIA-ROCK HILL, NC-SC
MINNEAPOLIS-ST. PAUL-BLOOMINGTON, MN
ATLANTA-SANDY SPRINGS-MARIETTA, GA
RIVERSIDE-SAN BERNARDINO-ONTARIO, CA
MIAMI-MIAMI BEACH-KENDALL, FL
SAN FRANCISCO-SAN MATEO-REDWOOD CITY, CA
PHOENIX-MESA-GLENDALE, AZ
DALLAS-PLANO-IRVING, TX
SAN DIEGO-CARLSBAD-SAN MARCOS, CA
PHILADELPHIA, PA
SEATTLE-BELLEVUE-EVERETT, WA
BALTIMORE-TOWSON, MD
PORTLAND-VANCOUVER-HILLSBORO, OR-WA
NASSAU-SUFFOLK, NY
BOSTON-QUINCY, MA
SAN JOSE-SUNNYVALE-SANTA CLARA, CA
WASHINGTON-ARLINGTON-ALEXANDRIA, DC-VA
NEW YORK-WHITE PLAINS-WAYNE, NY-NJ
1.4
1.3
1.2
1.1
1
0.9
0.8
0.7
LOS ANGELES-LONG BEACH-GLENDALE, CA
Ratio
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 September 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.
12
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
$516.3 billion and Freddie at $497.8 billion.
Fannie Mae Mortgage-Related Investment Portfolio
Composition Over Time (Volume)
900
Current size: $516.3 billion
Current cap: $552.5 billion
Shrinkage year to date: 16.8%
800
700
$ billions
600
500
400
Mortgage loans
300
Non-agency MBS
200
100
Non-FNMA agency MBS
Jan-13
May-13
Sep-13
May-13
Sep-13
Sep-12
Sep-12
Jan-13
Jan-12
May-12
Jan-12
May-12
Sep-11
Sep-11
Jan-11
May-11
Sep-10
May-10
Jan-10
Sep-09
May-09
Jan-09
Sep-08
Jan-08
May-08
Sep-07
Jan-07
May-07
Sep-06
Jan-06
Sources: Fannie Mae and Urban Institute.
May-06
0
Fannie MBS in portfolio
Fannie Mae Mortgage-Related Investment Portfolio
Composition Over Time (Share)
50%
40%
30%
20%
10%
Jan-11
May-11
Sep-10
May-10
Jan-10
Sep-09
May-09
Jan-09
Sep-08
May-08
Jan-08
Sources: Fannie Mae and Urban Institute.
Sep-07
0%
May-07
Fannie MBS in portfolio
60%
Jan-07
Non-FNMA agency MBS
70%
Sep-06
Non-agency MBS
80%
Jan-06
Mortgage loans
90%
May-06
Less liquid assets
(mortgage loans and nonagency MBS) = 71.5%
Percentage of end balance
100%
13
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
800
700
$ billions
Current size: $497.8 billion
Current cap: $552.5 billion
Shrinkage year to date: 9.5%
600
500
400
300
Mortgage loans
200
Non-agency MBS
100
Non-FHLMC agency MBS
Jan-05
May-05
Sep-05
Jan-06
May-06
Sep-06
Jan-07
May-07
Sep-07
Jan-08
May-08
Sep-08
Jan-09
May-09
Sep-09
Jan-10
May-10
Sep-10
Jan-11
May-11
Sep-11
Jan-12
May-12
Sep-12
Jan-13
May-13
Sep-13
0
FHLMC MBS in portfolio
Sources: Freddie Mac and Urban Institute.
Freddie Mac Mortgage-Related Investment Portfolio
Composition Over Time (Share)
100%
Non-agency MBS
Non-FHLMC agency MBS
80%
70%
60%
50%
40%
30%
20%
10%
FHLMC MBS in portfolio
Sources: Freddie Mac and Urban Institute.
0%
Jan-05
May-05
Sep-05
Jan-06
May-06
Sep-06
Jan-07
May-07
Sep-07
Jan-08
May-08
Sep-08
Jan-09
May-09
Sep-09
Jan-10
May-10
Sep-10
Jan-11
May-11
Sep-11
Jan-12
May-12
Sep-12
Jan-13
May-13
Sep-13
Mortgage loans
90%
Percentage of end balance
Less liquid assets
(mortgage loans and nonagency MBS) = 59%
14
GSES UNDER CONSERVATORSHIP
EFFECTIVE GUARANTEE FEES
Effective Guarantee Fees
40
38
30
29.8
3Q13
2Q13
1Q13
4Q12
3Q12
2Q12
1Q12
4Q11
3Q11
2Q11
1Q11
4Q10
3Q10
2Q10
Sources: Fannie Mae, Freddie Mae and Urban Institute.
1Q10
0
4Q09
Freddie Mac management and gfee rate
3Q09
10
2Q09
20
Fannie Mae single-family effective
g-fee rate
1Q09
Fannie Mae single-family average
charged g-fee on new acquisitions
58.7
50
Basis points
In Q3, effective g-fees on new Fannie
acquisitions rose to 58.7 bps. Freddie
only reports the effective g-fee on the
entire book of business.
60
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
3%
1.65%
NR
BBB-sf
n/a
200
0.30%
NR
525
0%
-
n/a
3%
1.95%
NR
BBB-sf
n/a
145
0.30%
NR
425
0%
NR
n/as
$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%
$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%
$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.
15
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 September, 2.55 percent of the Fannie
portfolio and 2.58 percent of the Freddie portfolio are seriously delinquent, down from 3.41 percent and 3.37
percent a year earlier, respectively.
Serious Delinquency Rates–Fannie Mae
16%
Percentage of total loans
14%
Single-family: Credit
enhanced
Single-family: Noncredit enhanced
12%
10%
8%
6%
5.15%
4%
2.55%
2.14%
2%
Single-family: Total
Jan-03
May-03
Sep-03
Jan-04
May-04
Sep-04
Jan-05
May-05
Sep-05
Jan-06
May-06
Sep-06
Jan-07
May-07
Sep-07
Jan-08
May-08
Sep-08
Jan-09
May-09
Sep-09
Jan-10
May-10
Sep-10
Jan-11
May-11
Sep-11
Jan-12
May-12
Sep-12
Jan-13
May-13
Sep-13
0%
Sources: Fannie Mae and Urban Institute.
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%
5.20%
5%
4%
3%
2.58%
2%
2.20%
1%
Jan-04
May-04
Sep-04
Jan-05
May-05
Sep-05
Jan-06
May-06
Sep-06
Jan-07
May-07
Sep-07
Jan-08
May-08
Sep-08
Jan-09
May-09
Sep-09
Jan-10
May-10
Sep-10
Jan-11
May-11
Sep-11
Jan-12
May-12
Sep-12
Jan-13
May-13
Sep-13
0%
Sources: Freddie Mac and Urban Institute.
16
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.
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%
2.58%
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%
0.18%
0.1%
0.05%
Sep-13
May-13
Jan-13
Sep-12
May-12
Jan-12
Sep-11
May-11
Jan-11
Sep-10
Jan-10
May-10
Sep-09
May-09
Jan-09
Sep-08
May-08
Jan-08
Sep-07
May-07
Jan-07
Sep-06
Jan-06
May-06
Sep-05
Jan-05
May-05
Sep-04
May-04
Jan-04
0.0%
Sources: Fannie Mae, Freddie Mac and Urban Institute.
Note: Serious delinquency defined as 60 days or more past due.
17
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 - Fannie
HARP refinance volume - Freddie
350
250
111
Thousands
300
200
150
169
100
50
0
2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13
Sources: FHFA Refinance Report and Urban Institute.
HARP Refinances
August 2013
Year to date
2013
Inception to
date
2012
2011
2010
Total refinances
302,373
3,340,221
18,130,561
4,750,530
3,229,066
3,604,640
Total HARP refinances
68,340
721,813
2,886,856
1,074,769
400,024
431,647
Share 80–105 LTV
62.7%
58.4%
70.0%
56.4%
85.0%
93.4%
Share 105–125 LTV
20.6%
21.6%
17.1%
22.4%
15.0%
6.6%
Share >125 LTV
16.6%
20.0%
12.9%
21.2%
0%
0%
All other streamlined
refinances
54,310
585,155
2,908,093
729,235
785,049
763,477
Sources: FHFA Refinance Report and Urban Institute.
18
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 1,383,651 eligible loans, but 32 percent are out-of-the-money because the closing cost would
exceed the long-term savings, leaving 938,771 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 7,784,892 loans in this category, 5,964,652
are in-the-money.
More than half the GSE book of business was originated after the cutoff date. Of these loans, 2,200,797 meet the
other HARP criteria, but 84 percent are out-of-the-money, leaving only 357,915 loans that, if there was a change in
the eligibility date, would be potential HARP candidates at current interest rate levels.
Total loan count
24,901,264
Loans that don't meet pay history requirement
2,058,429
Loans that meet pay history requirement:
22,842,835
Pre-June 2009 origination
9,168,543
Post-June 2009 origination
13,674,292
Loans Meeting HARP Pay History Requirements
Pre-June 2009
LTV category
In-the-money
Out-of-the-money
Total
≤80
5,964,652
1,820,240
7,784,892
>80
938,771
444,880
1,383,651
Total
6,903,423
2,265,120
9,168,543
Post-June 2009
LTV category
In-the-money
Out-of-the-money
Total
≤80
1,488,220
9,985,275
11,473,495
>80
357,915
1,842,882
2,200,797
Total
1,846,135
11,828,157
13,674,292
Sources: CoreLogic prime servicing data as of September 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.
19
MODIFICATION ACTIVITY
HAMP ACTIVITY
HAMP modification activity has tapered off as new defaults have declined. Modification success rates, however,
are improving, so the number of new active permanent mods remains fairly stable. There was a noticeable spike
in new permanent mods started and new active permanent mods in August, but both returned to normal levels in
September, at 12,635 and 3,560, respectively.
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
Sep-13
Jul-13
May-13
Mar-13
Jan-13
Nov-12
Sep-12
Jul-12
May-12
Mar-12
Jan-12
Nov-11
Sep-11
Jul-11
May-11
Mar-11
Jan-11
Nov-10
Sep-10
Jul-10
May-10
Mar-10
Jan-10
Nov-09
Sep-09
Jul-09
May-09
0
Sources: U.S. Treasury Making Home Affordable and Urban Institute.
Cumulative HAMP Modifications
All trials mods started
All permanent mods started
Active permanent mods
2,000
1,500
1,000
500
Sources: U.S. Treasury Making Home Affordable and Urban Institute.
20
Sep-13
Jul-13
May-13
Mar-13
Jan-13
Nov-12
Sep-12
Jul-12
May-12
Mar-12
Jan-12
Nov-11
Sep-11
Jul-11
May-11
Mar-11
Jan-11
Nov-10
Sep-10
Jul-10
May-10
Mar-10
Jan-10
Nov-09
Sep-09
Jul-09
0
May-09
Number of mods (thousands)
2,500
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 represents percentage of total modifications in each category.
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 represents percentage of total modifications in each category.
a. Processing constraints at some servicers prevented them from reporting specific modified term(s).
21
MODIFICATION ACTIVITY
MODIFICATIONS AND LIQUIDATIONS
Total modifications (HAMP and proprietary) are now roughly equal to total liquidations. Hope Now reports show
6,775,092 borrowers have received a modification since Q3 2007, compared with 6,743,228 liquidations in the
same period. Mods and liquidations completed in September 2013 dropped 22 percent and 13 percent from
August, respectively, reflecting fewer distressed borrowers as housing markets continue to recover.
Loan Modifications and Liquidations
1,400
1,200
Hamp permanent mods
717
1,000
600
400
200
Sources: Hope Now Reports and
Urban Institute.
Note: Total liquidations includes
both foreclosure sales and short
sales. 2013 figures are through
September.
0
2007
(Q3-Q4)
2008
2009
2010
2011
2012
Proprietary mods completed
Total liquidations
498
800
132
Number of loans (thousands)
1,600
2013
YTD
Cumulative Modifications and Liquidations
6,743
5,506
7,000
6,000
5,000
HAMP mods
4,000
Proprietary mods
Liquidations
3,000
1,268
Number of loans (thousands)
8,000
2,000
1,000
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. 2013 figures are
through September.
22
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
Year of modification
2011
Sources: OCC Mortgage Metrics Report for the Second Quarter of 2013 and Urban Institute.
23
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
GSE
Ginnie Mae
Total
Issuance
Year
GSE
Ginnie Mae
Total
2000
$360.6
$102.2
$462.8
2000
$159.8
$29.3
$189.1
2001
$885.1
$171.5
$1,056.6
2001
$367.8
-$9.9
$357.9
2002
$1,238.9
$169.0
$1,407.9
2002
$357.6
-$51.2
$306.4
2003
$1,874.9
$213.1
$2,088.0
2003
$335.0
-$77.6
$257.4
2004
$872.6
$119.2
$991.9
2004
$83.3
-$40.1
$43.2
2005
$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
(Annualized)
$1,270.5
$417.9
$1,688.4
2013
(Annualized)
$68.1
$90.3
$158.4
2013 YTD
$1,058.7
$348.3
$1,407.0
2013 YTD
$56.7
$75.3
$132.0
Sources: eMBS, Federal Reserve Bank of New York, and Urban
Institute.
Note: Year to date through October 2013. Dollar amount is in billions.
Sources: eMBS, Federal Reserve Bank of New York, and Urban
Institute.
Note: Year to date through October 2013. Dollar amount is in billions.
24
OVERVIEW
AGENCY
ISSUANCE
OVERVIEW
AGENCY GROSS AND NET ISSUANCE
AGENCY
GROSS
ISSUANCE
AND
FED
BY MONTH
PURCHASES
Monthly Gross Issuance
250
200
$ billions
While government and GSE lending
have dominated the mortgage
market since the crisis, there has
been a change in the mix. Ginnie
Mae’s share reached a peak of 28
percent of total agency issuance in
2010, and then declined; as of
October, however, its share has
once again reached the peak level.
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 than of
refinance activity.
150
100
50
Ginnie Mae
Fannie Mae
0
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
Freddie Mac
Sources: eMBS, Federal Reserve Bank of
New York, and Urban Institute.
Fed Absorption of Agency Gross Issuance
The Fed has absorbed 48 percent of gross issuance this year. This number is expected to rise unless the Fed tapers, as
gross issuance continues to decline while net new Fed purchases remain stable.
Gross issuance
Fed purchases
250
$ billions
200
150
100
50
Sources: eMBS, Federal Reserve Bank of New York, and Urban Institute.
25
Oct-13
Apr-13
Oct-12
Apr-12
Oct-11
Apr-11
Oct-10
Apr-10
Oct-09
Apr-09
Oct-08
Apr-08
Oct-07
Apr-07
Oct-06
Apr-06
Oct-05
Apr-05
Oct-04
Apr-04
Oct-03
Apr-03
Oct-02
Apr-02
Oct-01
Apr-01
Oct-00
0
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.
26
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.
27
SPECIAL FEATURE: LOAN LEVEL CREDIT DATA FROM THE GSEs
FANNIE MAE COMPOSITION
Since 2008, the composition of loans purchased by Fannie Mae has shifted towards borrowers with higher FICO
scores. For example, 70 percent of loans originated in 2011 and 2012 were for borrowers with FICO scores
above 750, compared to 36 percent of borrowers in 2007 and 32.4 percent from 1999-2004.
Balance on 30-year, Fixed-rate, Full-doc, Amortizing Loans Only
Origination
Year
Origination
FICO
≤700
700 to 750
1999-2004
>750
Total
≤700
700 to 750
2005
>750
Total
≤700
700 to 750
2006
>750
Total
≤700
700 to 750
2007
>750
Total
≤700
700 to 750
2008
>750
Total
≤700
700 to 750
2009-2010
>750
Total
≤700
700 to 750
2011-2012
>750
Total
Total
LTV
Total
≤70
70 to 80
80 to 90
>90
10.3%
16.8%
5.0%
5.0%
37.2%
9.6%
14.4%
3.4%
3.1%
30.4%
14.1%
14.1%
2.3%
1.9%
32.4%
34.0%
45.3%
10.7%
10.0%
100.0%
13.7%
17.4%
3.8%
2.6%
37.5%
10.0%
13.5%
2.1%
1.3%
27.0%
15.9%
16.6%
1.8%
1.2%
35.5%
39.6%
47.5%
7.7%
5.2%
100.0%
13.7%
18.2%
4.0%
2.5%
38.4%
9.1%
13.8%
2.2%
1.2%
26.2%
14.3%
17.8%
2.1%
1.2%
35.3%
37.1%
49.8%
8.2%
4.9%
100.0%
11.6%
17.0%
5.9%
3.6%
38.2%
8.0%
12.8%
3.0%
1.7%
25.6%
13.8%
17.8%
2.9%
1.8%
36.3%
33.4%
47.6%
11.9%
7.0%
100.0%
8.3%
8.2%
3.4%
2.4%
22.2%
8.3%
12.8%
4.4%
2.8%
28.3%
17.5%
23.7%
5.2%
3.0%
49.4%
34.1%
44.7%
13.0%
8.2%
100.0%
4.0%
3.2%
0.3%
0.2%
7.7%
9.0%
11.9%
1.8%
0.9%
23.7%
31.1%
32.2%
3.8%
1.5%
68.6%
44.1%
47.4%
5.9%
2.7%
100.0%
2.9%
3.6%
0.5%
0.6%
7.7%
6.9%
10.7%
2.3%
2.5%
22.4%
27.4%
32.5%
5.4%
4.6%
70.0%
37.2%
46.9%
8.3%
7.7%
100.0%
36.8%
46.4%
9.4%
7.4%
100.0%
Sources: Fannie Mae and Urban Institute calculation.
28
SPECIAL FEATURE: LOAN LEVEL CREDIT DATA FROM THE GSEs
FANNIE MAE DEFAULT RATE
As you can see from the previous page, the 2007 vintage year had a similar composition to the 2004 and earlier
vintage years, but a much higher default rate due to a very unfavorable environment for home prices. Recent
originations, 2009 and later, have both pristine composition and a favorable home price environment, contributing
to very low default rates.
Default Rate on 30-year, Fixed-rate, Full-doc,
Amortizing Loans Only
Origination
Year
Origination
FICO
≤700
700 to 750
1999-2004
>750
Total
≤700
700 to 750
2005
>750
Total
≤700
700 to 750
2006
>750
Total
≤700
700 to 750
2007
>750
Total
≤700
700 to 750
2008
>750
Total
≤700
700 to 750
2009-2010
>750
Total
≤700
700 to 750
2011-2012
>750
Total
Total
LTV
<70
3.3%
1.0%
0.3%
1.4%
12.5%
5.4%
2.0%
6.5%
16.8%
7.7%
2.7%
9.2%
18.4%
7.8%
2.7%
9.4%
13.2%
4.5%
1.2%
4.9%
2.3%
0.5%
0.1%
0.4%
0.2%
0.0%
0.0%
0.0%
2.3%
70 to 80
4.2%
1.7%
0.7%
2.3%
16.1%
8.7%
4.1%
9.8%
21.3%
12.3%
5.6%
13.2%
22.8%
13.1%
5.8%
13.9%
16.7%
7.9%
2.8%
6.8%
3.4%
1.2%
0.4%
0.8%
0.4%
0.1%
0.0%
0.1%
3.7%
80 to 90
5.8%
2.7%
1.5%
3.9%
19.0%
11.4%
6.8%
14.0%
25.1%
15.3%
8.9%
18.5%
30.9%
19.7%
11.7%
23.3%
23.9%
13.3%
6.6%
13.4%
3.7%
1.6%
0.7%
1.2%
0.2%
0.1%
0.1%
0.1%
6.6%
>90
6.6%
2.8%
1.7%
4.5%
20.6%
11.7%
7.6%
15.2%
26.3%
15.5%
9.3%
19.4%
31.4%
18.6%
11.4%
23.3%
23.7%
12.9%
7.1%
13.9%
3.9%
1.8%
0.9%
1.5%
0.3%
0.1%
0.1%
0.1%
6.4%
Total
4.5%
1.7%
0.7%
2.4%
15.4%
7.8%
3.4%
9.1%
20.4%
11.1%
4.7%
12.4%
23.5%
12.6%
5.4%
14.1%
17.2%
8.2%
2.9%
7.6%
2.8%
1.0%
0.3%
0.6%
0.3%
0.1%
0.0%
0.1%
3.7%
Sources: Fannie Mae and Urban Institute calculation.
Note: Default rate refers to loans more than six months delinquent or disposed of via short sales, third-party sales, deeds-in-lieu of
foreclosure, or real estate owned (REO acquisitions).
29
SPECIAL FEATURE: LOAN LEVEL CREDIT DATA FROM THE GSEs
FREDDIE MAC COMPOSITION
Since 2008, the composition of loans purchased by Freddie Mac has shifted towards borrowers with higher FICO
scores. For example, 70.2 percent of loans originated in 2011 and 2012 were for borrowers with FICO scores
above 750, compared to 38.4 percent in 2007 and 33.2 percent from 1999-2004.
Balance on 30-year, Fixed-rate, Full-doc, Amortizing Loans Only
Origination
Year
Origination
FICO
≤700
700 to 750
1999-2004
>750
Total
≤700
700 to 750
2005
>750
Total
≤700
700 to 750
2006
>750
Total
≤700
700 to 750
2007
>750
Total
≤700
700 to 750
2008
>750
Total
≤700
700 to 750
2009-2010
>750
Total
≤700
700 to 750
2011-2012
>750
Total
Total
LTV
≤70
7.7%
8.9%
13.7%
30.3%
10.5%
9.3%
15.7%
35.6%
10.0%
8.2%
14.2%
32.4%
9.1%
7.4%
14.0%
30.5%
7.3%
9.1%
21.3%
37.7%
3.9%
9.3%
32.4%
45.7%
3.3%
7.5%
27.4%
38.2%
34.9%
70 to 80
16.5%
15.9%
15.5%
48.0%
17.0%
15.5%
18.8%
51.3%
17.4%
16.2%
20.6%
54.2%
15.6%
14.3%
19.2%
49.2%
8.9%
13.0%
21.3%
43.2%
3.3%
11.9%
31.0%
46.1%
3.1%
11.0%
33.8%
47.9%
48.1%
80 to 90
5.5%
3.4%
2.3%
11.2%
3.4%
2.0%
1.7%
7.1%
3.5%
1.9%
1.7%
7.2%
4.7%
2.6%
2.5%
9.9%
3.3%
3.7%
4.7%
11.8%
0.3%
1.7%
3.6%
5.6%
0.5%
1.9%
4.8%
7.2%
9.2%
>90
5.6%
3.1%
1.8%
10.5%
3.0%
1.7%
1.4%
6.0%
3.3%
1.6%
1.4%
6.3%
5.1%
2.7%
2.6%
10.5%
2.3%
2.5%
2.6%
7.4%
0.2%
0.9%
1.4%
2.5%
0.5%
2.1%
4.1%
6.8%
7.8%
Total
35.3%
31.5%
33.2%
100.0%
33.9%
28.5%
37.6%
100.0%
34.2%
27.9%
37.9%
100.0%
34.6%
27.0%
38.4%
100.0%
21.8%
28.4%
49.9%
100.0%
7.8%
23.8%
68.4%
100.0%
7.4%
22.5%
70.2%
100.0%
100.0%
Sources: Freddie Mac and Urban Institute calculation.
30
SPECIAL FEATURE: LOAN LEVEL CREDIT DATA FROM THE GSEs
FREDDIE MAC DEFAULT RATE
As you can see from the previous page, the 2007 vintage year had a similar composition to the 2004 and earlier
vintage years, but a much higher default rate due to a very unfavorable environment for home prices. Recent
originations, 2009 and later, have both pristine composition and a favorable home price environment, contributing
to very low default rates.
Default Rate on 30-year, Fixed-rate, Full-doc,
Amortizing Loans Only
Origination
Year
Origination
FICO
≤700
700 to 750
1999-2004
>750
Total
≤700
700 to 750
2005
>750
Total
≤700
700 to 750
2006
>750
Total
≤700
700 to 750
2007
>750
Total
≤700
700 to 750
2008
>750
Total
≤700
700 to 750
2009-2010
>750
Total
≤700
700 to 750
2011-2012
>750
Total
Total
LTV
≤70
2.4%
0.8%
0.3%
1.0%
9.6%
4.6%
1.6%
4.8%
12.8%
6.6%
2.2%
6.6%
13.2%
6.3%
2.2%
6.5%
9.8%
3.5%
1.0%
3.3%
1.4%
0.3%
0.1%
0.3%
0.1%
0.0%
0.0%
0.0%
2.0%
70 to 80
3.5%
1.3%
0.6%
1.8%
13.3%
7.7%
3.7%
8.1%
17.0%
10.5%
5.0%
10.5%
17.8%
11.1%
5.2%
10.9%
12.8%
6.5%
2.6%
5.9%
2.2%
0.8%
0.3%
0.6%
0.2%
0.0%
0.0%
0.0%
3.7%
80 to 90
5.3%
2.2%
1.2%
3.5%
15.6%
10.1%
5.9%
11.7%
19.6%
12.7%
7.2%
14.7%
22.2%
14.6%
8.4%
16.7%
17.6%
10.2%
5.3%
10.3%
2.5%
1.1%
0.6%
0.8%
0.1%
0.0%
0.0%
0.0%
5.9%
>90
5.8%
2.4%
1.4%
4.0%
17.0%
10.3%
6.7%
12.8%
21.4%
12.3%
7.8%
16.2%
24.1%
14.9%
9.6%
18.1%
16.7%
9.0%
5.0%
10.0%
2.6%
1.1%
0.6%
1.0%
0.3%
0.1%
0.1%
0.1%
6.7%
Total
3.9%
1.4%
0.6%
2.0%
12.7%
7.0%
3.0%
7.4%
16.5%
9.6%
4.1%
9.9%
18.1%
10.5%
4.6%
10.9%
12.9%
6.2%
2.3%
5.7%
1.8%
0.7%
0.2%
0.4%
0.2%
0.0%
0.0%
0.0%
3.5%
Sources: Freddie Mae and Urban Institute calculation.
Note: Default rate refers to loans more than six months delinquent or disposed of via short sales, third-party sales, deeds-in-lieu of
foreclosure, or real estate owned (REO acquisitions).
31
SPECIAL FEATURE: LOAN LEVEL CREDIT DATA FROM THE GSEs
DEFAULT RATE BY VINTAGE YEAR
With cleaner books of business and the housing recovery underway, default rates for the GSEs are much lower
than they were just a few years ago. For Fannie Mae and Freddie Mac’s 1999-2003 vintages, cumulative defaults
total around 2 percent, while cumulate defaults for the 2007 vintage are above 14 percent and 11 percent
respectively. For both Fannie Mae and Freddie Mac, cumulative defaults from 2009-10 and 2011-12 are on pace
to fall below pre-2003 levels, totaling about a 0.05 percent default rate for Fannie Mae and 0.02 percent for
Freddie Mac, compared to 0.42 and 0.17 percent respectively.
Fannie Mae Cumulative Default Rate by Vintage Year
16%
2007
Percent of loans in default
14%
2006
12%
10%
2005
2008
8%
6%
2004
4%
1999-2003
2%
2011-12
2009-10
0
5
9
13
17
21
25
29
33
37
41
45
49
53
57
61
65
69
73
77
81
85
89
93
97
101
105
109
113
117
121
125
129
133
137
141
145
149
153
157
161
168
0%
Loan age in months
Sources: Fannie Mae and Urban Institute.
Freddie Mac Cumulative Default Rate by Vintage Year
Percent of loans in default
12%
2007
2006
10%
2005
8%
2008
6%
2004
4%
1999-2003
2%
2011-12
2009-10
1
5
9
13
17
21
25
29
33
37
41
45
49
53
57
61
65
69
73
77
81
85
89
93
97
101
105
109
113
117
121
125
129
133
137
141
145
149
153
157
161
165
0%
Loan age in months
Sources: Freddie Mac credit database and Urban Institute.
Note: Default is defined as more than six months delinquent or disposed of via short sales, third-party sales, deed-in-lieu of foreclosure,
or real estate owned (REO acquisitions).
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
November 19, 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
Lunchtime Data Talk
On December 9, 2013, we welcome David Crowe, Chief Economist and Senior Vice President, National
Association of Home Builders and Lawrence Yun, Chief Economist and Senior Vice President of Research,
National Association of Realtors to discuss home sales, affordability, and realtor/builder activity. Additional event
information will be posted to our website shortly.
Blog Posts
Past Events
Let's rethink housing affordability
Authors: Taz George and Lan Shi
November 13, 2013
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
Ten reasons housing finance policy might keep
you up at night
Author: Lionel Foster
October 31, 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),
Seizing homes to save communities
Author: Pamela Lee
Laurie Goodman (Center Director, Housing Finance Policy
October 30, 2013
Center, Urban Institute), Rolf Pendall (Center Director,
Metropolitan Housing and Communities Policy Center,
QRM, alternative QRM: loan default rates
Urban Institute), Signe-Mary McKernan (Senior Fellow and
Authors: Laurie Goodman, Ellen Seidman, Jun Zhu
Co-Director, Opportunity and Ownership Program, Urban
October 7, 2013
Institute), Eric Toder (Institute Fellow and Co-Director,
Urban-Brookings Tax Policy Center) and Jim Parrot (Senior
QRM vs. alternative QRM: quantifying the comparison Fellow, Urban Institute).
Authors: Laurie Goodman, Ellen Seidman, Jun Zhu
October 24, 2013
October 7, 2013
Lunchtime Data Talk: Mortgage Origination Data—
What HMDA data say about the state of the mortgage Pricing and Volume: More than You Ever Wanted to
market
Know
Author: Ellen Seidman
Presenters: Frank Nothaft (Chief Economist, Freddie Mac)
October 1, 2013
and Michael Fratantoni (Vice President, Single Family
Research and Policy Development, Mortgage Bankers
Fannie Mae reduces its max LTV to 95: Does the data Association)
support the move?
October 16, 2013
Authors: Laurie Goodman, Taz George
Lunchtime Data Talk: Home Price Indices: Appreciating
September 24, 2013
the Differences
HARP has been a huge success; further action on the Presenters: Mark Fleming (Chief Economist, CoreLogic)
refinancing front is unlikely
and Stan Humphries (Chief Economist, Zillow)
Author: Laurie Goodman
September 16, 2013
August 12, 2013
34
The Housing Finance Policy Center (HFPC) was established to provide timely, impartial data and analysis, and to educate policymakers and
the public on how the housing finance system affects households, communities and the broader economy. The goal of the Center is to
produce analyses and ideas that foster sound public policy, efficient markets, and economic opportunity.
Copyright © November 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