The Urban Institute (UI) releases a
regular report, Housing Finance at a
Glance
, a “chartbook” loaded with charts and commentary on mortgage
activity
. Much of the May chartbook’s material, is retrospective, reaching back
as far as Q4 2019 where there is a time lag in data collection. Much of it, residential
construction data, home price indices, negative equity reports, etc., has been
covered by MND from original sources, but we have cherry-picked a few items
that may have otherwise escaped your and our notice.

The total value of the housing market, as
outlined in the Federal Reserve’s Flow of Fund Report has gradually increased
since 2012, driven primarily by growing home equity. The Q4 2019 numbers show
that while total home equity was steady this during that quarter at $19.7
trillion, mortgage debt outstanding grew slightly from $11.1 trillion in Q3 to
$11.2 trillion in Q4, bringing the total value of the housing market to $30.9
trillion. This is 20.7 percent higher than the pre-crisis peak in 2006. Agency
MBS account for 61.6 percent of the total mortgage debt outstanding,
private-label securities make up 3.9 percent, and unsecuritized first liens 30.0
percent. Home equity loans comprise the remaining 4.5 percent of the total.

 

 

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Nonbank agency originations have also been
rising steadily since the housing recovery really took hold in 2013 and by April
of this year this nonbank share stood at 70 percent. The GinnieMae nonbank
share has been consistently higher than the GSEs, rising slightly in April 2020
to 87 percent. Fannie and Freddie’s nonbank shares grew to 66 and 62 percent,
respectively (note that these numbers can be volatile on a month-to-month
basis.) Ginnie Mae, Fannie Mae and Freddie Mac all have higher nonbank
origination shares for refi activity than for purchase activity.

 

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Credit
access heading into the COVID-19 pandemic was already tight, especially for
those with lower FICO scores
. The March 2020 data reflect mortgage application
activity in January and February, before any pandemic impact and the median
FICO for purchase loans was about 40 points higher than the pre-housing crisis
level of around 700. The 10th percentile, which represents the lower bound of
creditworthiness to qualify for a mortgage, was 647 in this data, high compared
to low-600s pre-bubble. The median LTV at origination of 95 percent also
remains high, reflecting the rise of FHA and VA lending. Although current
median DTI of 39 percent exceeds the pre-bubble level of 36 percent, higher
FICO scores serve as a strong compensating factor.

 

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With
the Fannie Mae and Freddie Mac portfolios well below the $250 billion size they
were required to reach by year end 2018, the strategies of the two GSEs have
diverged. Fannie is continuing to shrink its portfolio; it contracted by 12.7
percent between March 2019 and March 2020. By contrast,  Freddie has held its portfolio constant; it
has actually increased by 0.9 percent over the same period. Both GSEs are
continuing to shrink their less liquid assets (mortgage loans, non-agency MBS).

 

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Fannie
Mae’s average g-fees on new acquisitions rose from 57.0 bps in Q4 2019 to 59.4
bps in Q1 2020 while Freddie Mac’s rose from 58.0 bps to 59.0 bps. The gap
between the two sets of fees was only 0.4 bps in Q1 2020, the smallest since Q4
2016. Today’s g-fees are markedly higher than g-fee levels in 2011 and 2012 and
have contributed to the GSEs’ earnings.

 

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Overall
mortgage insurance activity via the FHA, VA and private insurers increased by
93.1 percent
between the first quarters of 2019 and 2020, even as the private insurance
numbers declined. The total value of that insurance grew to $259 billion in the
first quarter of 2020 from $134 billion a year earlier. In the first quarter of
2020, the value of private mortgage insurance written decreased by $15.88
billion compared to the previous (Q4 2019) quarter while that written by FHA
and the VA increased by $3.32 billion and $6.89 billion, respectively. During
that period, the VA share grew from 29.1 to 31.9 percent and the FHA share
increased from 28.6 to 30.0 percent. The private mortgage insurers’ share fell
significantly, from 42.3 to 36.3 percent compared to the previous quarter.

 

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By Jann Swanson , dated 2020-06-01 11:16:32

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Courtesy of Mortgage News Daily

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