HOUSING FINANCE AT A GLANCE - Urban Institute

HOUSING FINANCE POLICY CENTER

HOUSING FINANCE AT A GLANCE

A MONTHLY CHARTBOOK

June 2016

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ABOUT THE CHARTBOOK

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.

We welcome feedback from our readers on how we can make At A Glance a more useful publication. Please email any comments or questions to ataglance@.

To receive regular updates from the Housing Finance Policy Center, please visit here to sign up for our bi-weekly newsletter.

HOUSING FINANCE POLICY CENTER STAFF

Laurie Goodman Center Co-Director

Alanna McCargo Center Co-Director

Ellen Seidman Senior Fellow

Jim Parrott Senior Fellow

Sheryl Pardo Associate Director of Communications

Jun Zhu Senior Financial Methodologist

Wei Li Senior Research Associate

Bing Bai Research Associate I

Karan Kaul Research Associate I

Maia Woluchem Research Associate II

Alison Rincon Center Administrator

INTRODUCTION

Wells Fargo and Chase announce new low down payment mortgage programs

Following Bank of America's February announcement of a new low down payment mortgage program (the Affordable Loan Solution, or ALS), both Wells Fargo and Chase recently announced similar programs (called yourFirstMortgage and Standard Agency 97% respectively). Like Bank of America's ALS, these new programs are targeted at first-time homebuyers and low- and moderate- income borrowers who may lack sufficient funds for a down payment or have lower credit scores. Accordingly, all three programs have lower minimum score requirements ? 660 (BofA), 620 (Wells) and 680 (Chase). Additional borrower friendly features include the ability to combine down payments with gifts and grants, homebuyer counseling, consideration of non-traditional forms of credit, and no private mortgage insurance under BofA's ALS. Wells' yourFirstMortgage offers loan options that can work with or without PMI. Wells Fargo and BofA intend to sell their loans to Fannie Mae and Freddie Mac respectively, with Self-Help stepping in to provide first-loss risk coverage in lieu private mortgage insurance. Less is known about first loss risk coverage for Chase's Standard Agency 97% except that the loans will be sold to Fannie Mae. It is also not clear whether PMI alternatives are available.

Despite being targeted at same borrower segments, there are key differences between BofA's and Wells Fargo's approaches. Wells Fargo's yourFirstMortgage consolidates multiple low down payment programs available in the secondary market, into a single primary market offering. This could reduce complexity by allowing borrowers and their agents to more easily compare conventional loan options to FHA without having to wade through a thicket of loan programs. Once qualified, Wells would determine the best backend program for selling the loan into the secondary market, with or without Self-Help's first loss coverage (loans without Self-Help coverage require PMI). BofA's ALS, in contrast is a narrower offering dependent on Self-Help's first loss coverage, which is limited by the amount of capital Self-Help can devote to the program, likely constraining scope.

There are other differences too. BofA intends to sell servicing of all ALS loans to a specialty servicer, retaining neither any interest nor any risk in the loan post-origination. Wells Fargo on the other hand, intends to retain servicing in house, suggesting more skin in the game and a vested financial interest in the long term success of the program. Lastly, Wells offers borrowers a 1/8th percent rate reduction as an incentive for completing homebuyer education. BofA's ALS requires mandatory counseling for all first time homebuyers. Chase also offers counseling.

All three programs are welcome attempts to create new lending channels to ease credit availability for LMI borrowers and first time homebuyers. These programs are also being seen as lender attempts to bypass the FHA and its heavy enforcement hammer. But as we have noted before, these programs are unlikely to offer meaningful substitutes for healthy FHA lending: the primary obstacle being FHA's huge price advantage over the GSEs (see page 33), especially at the lower end of the credit spectrum. Although Wells Fargo's 1/8th percent rate incentive will make its pricing little more competitive with FHA, the overall universe of borrowers that can save money through these programs will likely be small ? mostly clustered around the FHA/GSE breakeven line.

INSIDE THIS ISSUE

? The total value of the US Housing Market continued to rise, driven by a $487 billion increase in household equity (page 6)

? Ginnie Mae outstanding MBS securities surpassed Freddie Mac for the first time in May (page 7)

? Portfolio accounted for a larger share of first lien originations in Q1 2016 (Page 8)

? First-time homebuyer share continued to rise in March (page 17)

? Loans in serious delinquency/foreclosure declined to 3.3 percent in Q1 2016 (page 19)

? Active permanent HAMP mods declined for second straight quarter in Q1 2016 (page 28)

CONTENTS

Overview

Market Size Overview

Value of the US Residential Housing Market

6

Size of the US Residential Mortgage Market

6

Private Label Securities

7

Agency Mortgage-Backed Securities

7

Origination Volume and Composition

First Lien Origination Volume & Share

8

Mortgage Origination Product Type

Composition (All Originations & Purchase Originations Only)

9

Securitization Volume and Composition

Agency/Non-Agency Share of Residential MBS Issuance

10

Non-Agency MBS Issuance

10

Non-Agency Securitization

10

Agency Activity: Volumes and Purchase/Refi Composition

Agency Gross Issuance

11

Percent Refi at Issuance

11

State of the Market

Mortgage Origination Projections

Total Originations and Refinance Shares

12

Housing Starts and Home Sales

12

Credit Availability and Originator Profitability

Housing Credit Availability Index (HCAI)

13

Originator Profitability and Unmeasured Costs (OPUC)

13

Credit Availability for Purchase Loans

Borrower FICO Score at Origination Month

14

Combined LTV at Origination Month

14

Origination FICO and LTV by MSA

15

Housing Affordability

National Housing Affordability Over Time

16

Affordability Adjusted for MSA-Level DTI

16

First-Time Homebuyers

First-Time Homebuyer Share

17

Comparison of First-time and Repeat Homebuyers, GSE and FHA Originations

17

Home Price Indices

National Year-Over-Year HPI Growth

18

Changes in CoreLogic HPI for Top MSAs

18

CONTENTS

Negative Equity & Serious Delinquency Negative Equity Share Loans in Serious Delinquency

GSEs under Conservatorship

GSE Portfolio Wind-Down Fannie Mae Mortgage-Related Investment Portfolio Freddie Mac Mortgage-Related Investment Portfolio

Effective Guarantee Fees & GSE Risk-Sharing Transactions Effective Guarantee Fees Fannie Mae Upfront Loan-Level Price Adjustment GSE Risk-Sharing Transactions and Spreads

Serious Delinquency Rates Serious Delinquency Rates ? Fannie Mae & Freddie Mac Serious Delinquency Rates ? Single-Family Loans & Multifamily GSE Loans

Refinance Activity Total HARP Refinance Volume

GSE Loans: Potential Refinances Loans Meeting HARP Pay History Requirements

Modification Activity

HAMP Activity New & Cumulative HAMP Modifications

Modifications and Liquidations Loan Modifications and Liquidations (By Year & Cumulative)

Agency Gross and Net Issuance Agency Gross Issuance Agency Net Issuance

Agency Issuance

Agency Gross Issuance & Fed Purchases Monthly Gross Issuance Fed Absorption of Agency Gross Issuance

Mortgage Insurance Activity MI Activity & Market Share FHA MI Premiums for Typical Purchase Loan Initial Monthly Payment Comparison: FHA vs. PMI

Publications and Events

Related HFPC Work

19 19

20 20

21 21 22-23

24 25 26 27

28 29

30 30 31 31 32 33 33

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OVERVIEW

MARKET SIZE OVERVIEW

The Federal Reserve's Flow of Funds report has consistently indicated an increasing total value of the housing market driven by growing household equity since 2012, and the trend continued according to the latest data, covering Q1 2016. Total debt and mortgages increased slightly to $10.01 trillion, while household equity increased to $13.70 trillion, bringing the total value of the housing market to $23.71 trillion. Agency MBS make up 58.5 percent of the total mortgage market, private-label securities make up 5.8 percent, and unsecuritized first liens at the GSEs, commercial banks, savings institutions, and credit unions make up 29.4 percent. Second liens comprise the remaining 6.2 percent of the total.

Value of the US Housing Market

($ trillions)

Debt, household mortgages

Household equity

Total value

25 23.7

20

15 13.7

10

10.0

5

0 2000 2001 2002 2003 2004 2005 2006 2007

Sources: Federal Reserve Flow of Funds and Urban Institute.

2008

2009

2010

2011

2012

2013

2014

2015 2021061Q61 Q1

Size of the US Residential Mortgage Market

($ trillions) 7

Agency MBS

Unsecuritized first liens

Private Label Securities

Second Liens

6

5.7

Debt,

5

household

mortgages,

4

$9,833

3

2.9

2

1

0 2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

0.6 0.5

2016 Q1

Sources: Federal Reserve Flow of Funds, Inside Mortgage Finance, Fannie Mae, Freddie Mac, eMBS and Urban Institute. Note: Unsecuritized first liens includes loans held by commercial banks, GSEs, savings institutions, and credit unions.

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OVERVIEW

MARKET SIZE OVERVIEW

As of April 2016, debt in the private-label securitization market totaled $606 billion and was split among prime (19.3 percent), Alt-A (42.1 percent), and subprime (38.6 percent) loans. In May 2016, outstanding securities in the agency market totaled $5.89 trillion and were 44.9 percent Fannie Mae, 27.6 percent Freddie Mac, and 27.6 percent Ginnie Mae. May 2016 is the first month Ginnie Mae has had more outstanding securities than Freddie Mac.

Private-Label Securities by Product Type

($ trillions) 1

Alt-A

Subprime

Prime

0.8

0.6

0.4 0.26 0.23

0.2 0.12

0 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Sources: CoreLogic and Urban Institute.

April 2016

Agency Mortgage-Backed Securities

($ trillions) 7

Fannie Mae

Freddie Mac

Ginnie Mae

Total

6

5.9

5

4

3 2.6

2

1.6

1

0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Sources: eMBS and Urban Institute.

May 2016

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OVERVIEW

ORIGINATION VOLUME AND COMPOSITION

First Lien Origination Volume

First lien originations in the first quarter of 2016 totaled approximately $380 billion. The share of portfolio originations rose to 33 percent, while the GSE share dropped to 44 percent from 46 in 2015. With credit risk so benign, and g-fess relatively high, banks are willing to hold more of the risk. FHA/VA originations account for another 23 percent, and the private label originations account for 0.8 percent.

($ trillions)

GSE securitization

FHA/VA securitization

PLS securitization

Portfolio

$4.0

$3.5

$3.0

$2.5

$2.0

$1.5

$1.0

$0.5

$0.0

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Sources: Inside Mortgage Finance and Urban Institute.

Q1

$0.525 $0.013

$0.405 $0.793

(Share, percent)

100% 90%

32.7%

80%

70%

0.8%

60%

22.8%

50%

40%

30%

43.8%

20%

10%

0% 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Q1

Sources: Inside Mortgage Finance and Urban Institute.

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