HOUSING FINANCE AT A GLANCE

Transcription

1 HOUSING FINANCE POLICY CENTER HOUSING FINANCE AT A GLANCE A MONTHLY CHARTBOOK May

2 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. 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 I 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

3 INTRODUCTION The Senate Banking Committee passed a comprehensive housing finance reform bill out of committee after months of work, beginning with that of Sens. Corker and Warner, and following with that of Sens. Johnson and Crapo. They reached a broad consensus on the issues of continued availability of the 30-year fixed mortgage, the position of private capital ahead of taxpayer risk, and the importance of access and affordability. Nonetheless, they could not get the support needed to bring the bill to the Senate floor for a vote, and the effort is likely to slip into the next Congress. With that chapter closing for the moment, all eyes turned to Federal Housing Finance Agency (FHFA) director Mel Watt as he outlined his vision for the agency, Fannie Mae and Freddie Mac (the GSEs). The uncertainty around GSE reform instills the director s remarks with extra significance given the potential for an indefinite conservatorship. Two key themes from the director s speech are discussed below (a more thorough analysis is featured in a recent blog post). Improve access to credit After discussions with the GSEs and the mortgage industry, Watt announced an easing of representation and warranty standards, which determine when banks must buy back faulty loans. This put-back risk is often blamed for tight credit access (pages 14-15). The GSEs will relax payment history requirements for representation and warranty relief, provide lenders with loan-level confirmations when mortgages pass quality control reviews, and eliminate automatic repurchases when a loan s primary mortgage insurance is rescinded. These and other actions were designed to clarify lender responsibility and should hence facilitate lending to an expanded group of creditworthy borrowers. To help struggling homeowners, the FHFA announced it would pursue a targeted effort to reach underwater borrowers who still stand to benefit from the Home Affordable Refinance Program (HARP; pages 24-25), though it will not change the terms of the program. Additionally, the director announced a pilot program in Detroit that would provide a deeper and more aggressive range of pre- and post-foreclosure strategies. private sector (page 21). Future risk-share deals on the GSEs single-family book of business will continue to transfer credit risk to private capital while protecting taxpayers from bearing all losses. The FHFA also plans to deepen and diversify forthcoming deals, something we wrote about in a recent blog. Further, to ensure that mortgage insurers (page 32-33) are equipped to meet the increased demands that will come with expanded GSE risk-sharing, Watt set forth plans to formalize stronger standards for the industry. As policies around housing finance develop and evolve, we hope this Chartbook and other research products from the Housing Finance Policy Center will provide readers with the depth of knowledge to inform evidence-based, well-reasoned decision-making. We welcome feedback from our readers on how we can make At A Glance a more useful publication. Please any comments or questions to ataglance@urban.org. INSIDE THIS ISSUE First lien originations drop in Q1 2014, expected to remain low (pages 8, 12) LTV and FICO distributions continue to reflect tight credit access (page 14) Fannie g-fees rise, Freddie s decline slightly in Q (page 20) Serious delinquency drops further across all sectors (pages 18, 22-23) What kinds of loan modifications are being made? (page 27) Principal reductions continue to decline. Mortgage insurance issuance falls, FHA/VA gain share on private insurers, GSEs in Q (page 8, 31-32) Reduce taxpayer risks While his predecessor focused on contracting the GSEs footprint to facilitate the return of private capital, Director Watt has shifted the focus to maintaining the GSEs footprint while ramping up the amount of risk sold to the 3

4 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 Agency Activity: Volumes and Purchase/Refi Composition At-Issuance Balance 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 Originator Profitability 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 Home Price Indices National Year-Over-Year HPI Growth 17 Changes in CoreLogic HPI for Top MSAs 17 Negative Equity & Serious Delinquency Negative Equity Share 18 Loans in Serious Delinquency 18 GSEs under Conservatorship GSE Portfolio Wind-Down Fannie Mae Mortgage-Related Investment Portfolio 19 Freddie Mac Mortgage-Related Investment Portfolio 19 4

5 CONTENTS Effective Guarantee Fees & GSE Risk-Sharing Transactions Effective Guarantee Fees 20 Fannie Mae Upfront Loan-Level Price Adjustment 20 GSE Risk-Sharing Transactions 21 Serious Delinquency Rates Serious Delinquency Rates Fannie Mae & Freddie Mac 22 Serious Delinquency Rates Single-Family Loans & Multifamily GSE Loans 23 Refinance Activity Total HARP Refinance Volume 24 HARP Refinances 24 GSE Loans: Potential Refinances Loans Meeting HARP Pay History Requirements 25 Modification Activity HAMP Activity New HAMP Modifications 26 Cumulative HAMP Modifications 26 Modification by Type of Action and Bearer of Risk Changes in Loan Terms for Modifications 27 Type of Modification Action by Investor and Product Type 27 Modifications and Liquidations Loan Modifications and Liquidations (By Year & Cumulative) 28 Modification Redefault Rates by Bearer of the Risk Redefault Rate after Modification (12 Months & 24 Months) 29 Agency Issuance Agency Gross and Net Issuance Agency Gross Issuance 30 Agency Net Issuance 30 Agency Gross Issuance & Fed Purchases Monthly Gross Issuance 31 Fed Absorption of Agency Gross Issuance 31 Mortgage Insurance Activity MI Activity & Market Share 32 FHA MI Premiums for Typical Purchase Loan 33 Initial Monthly Payment Comparison: FHA vs. PMI 33 Related HFPC Work Publications and Events

6 $ trillions $ trillions OVERVIEW MARKET SIZE OVERVIEW Home values continue to improve, with the Q Fed Flow of Funds data indicating an increase in the total value of the US residential 1-4 unit housing market to $20.41 trillion, from $20.04 trillion in Q Just under half of the market, $9.86 trillion, is mortgage debt, a very slight downtick from the previous quarter. Agency MBS make up 56.2 percent of the total, private-label securities make up 8.0 percent, and unsecuritized first liens at commercial banks, savings institutions, and credit unions make up 23.6 percent. Second liens and GSE loans in portfolio comprise the remaining 7.1 and 5.0 percent of the total, respectively. Value of the US Housing Market as of Q Size of the US Residential Mortgage Market as of Q $25 Unsecuritized first liens at commercial banks, savings institutions, credit unions $20 Fannie and Freddie loans in portfolio Agency MBS $15 Equity $10,552 Private-label securities Second liens $10 $10.0 $2.350 $5 Debt, household mortgages, Debt, Household $9,833 Mortgages $9,863 $7.5 $5.0 $0.496 $5.521 $2.5 $0 $0.0 $0.793 $0.704 Sources: Federal Reserve Flow of Funds and Urban Institute. Sources: Federal Reserve Flow of Funds, Fannie Mae, Freddie Mac and Urban Institute. 6

7 OVERVIEW MARKET SIZE OVERVIEW As of March 2014, debt in the private-label securitization market is split among prime (20.0 percent), Alt-A (44.0 percent), and subprime (36.0 percent) loans. The outstanding composition of the agency market, as of Q1 2014, is 46.5 percent Fannie Mae, 28.2 percent Freddie Mac, and 25.3 percent Ginnie Mae. 100% Private Label Securities as of March 2014; dollars in trillions 90% 80% Subprime, $ % 60% 50% Prime, $ % 30% 20% Alt-A, $ % 0% Sources: CoreLogic and Urban Institute. Agency Mortgage-Backed Securities as of March 2014; dollars in trillions 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Fannie Mae, $2.588 Freddie Mac, $1.569 Ginnie Mae, $1.410 Sources: Fannie Mae, Freddie Mac, Ginnie Mac, and Urban Institute. 7

8 OVERVIEW OVERVIEW ORIGINATION VOLUME AND COMPOSITION $ trillions Q14 1Q14 First lien originations in Q began far below their 2013 pace, totaling only $123.6 billion. The share of bank portfolio and FHA/VA originations rose to around 22 percent each, while the GSE share dropped to 54 percent from 61 percent in 2013, reflecting the curtailment of refinancing activity. The private label origination share remains less than one percent. First Lien Origination Volume and Share $4.0 $3.5 $3.0 $2.5 $2.0 $1.5 Bank portfolio PLS securitization $1.0 $0.5 $0.0 $0.30 $0.01 $0.12 $0.05 FHA/VA securitization GSE securitization 100% 90% 22.1% 80% 70% 60% 0.7% 22.9% 50% 40% 30% 20% 54.3% 10% 0% Sources: Inside Mortgage Finance and Urban Institute. 8

9 Feb-00 Aug-00 Feb-01 Aug-01 Feb-02 Aug-02 Feb-03 Aug-03 Feb-04 Aug-04 Feb-05 Aug-05 Feb-06 Aug-06 Feb-07 Aug-07 Feb-08 Aug-08 Feb-09 Aug-09 Feb-10 Aug-10 Feb-11 Aug-11 Feb-12 Aug-12 Feb-13 Aug-13 Feb-14 Feb-00 Oct-00 Jun-01 Feb-02 Oct-02 Jun-03 Feb-04 Oct-04 Jun-05 Feb-06 Oct-06 Jun-07 Feb-08 Oct-08 Jun-09 Feb-10 Oct-10 Jun-11 Feb-12 Oct-12 Jun-13 Feb-14 OVERVIEW OVERVIEW MORTGAGE MORTGAGE ORIGINATION ORIGINATION PRODUCT PRODUCT TYPE TYPE Adjustable rate mortgages (ARM) accounted for as much as 29 percent of all new originations during the peak of the recent housing bubble in 2005 (top chart). They fell to a historic low of 1 percent in 2009, and now consist of 6 percent of total originations. Fifteen-year FRMs, predominantly a refinance product, comprise 17 percent of new originations. If we exclude refinances (bottom chart), the share of 30-year FRMs in February 2014 stood at 87 percent, 15-year FRMs at 6 percent, and ARMs at 6 percent. All Originations Fixed-rate 30-year mortgage Fixed-rate 15-year mortgage Adjustable-rate mortgage Other 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Sources: CoreLogic Prime Servicing and Urban Institute. Purchase Originations Only 100% 90% 80% 70% 60% 50% 40% 30% Fixed-rate 30-year mortgage 20% Fixed-rate 15-year mortgage 10% Adjustable-rate mortgage 0% Other Sources: CoreLogic Prime Servicing and Urban Institute. 9

10 Q14 Feb-12 Mar-12 Apr-12 May-12 Jun-12 Jul-12 Aug-12 Sep-12 Oct-12 Nov-12 Dec-12 Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13 Aug-13 Sep-13 Oct-13 Nov-13 Dec-13 Jan-14 Feb-14 Mar-14 Apr $ billions $ billions YTD OVERVIEW SECURITIZATION VOLUME AND COMPOSITION Agency/Non-Agency Share of Residential MBS Issuance Non-agency single-family MBS issuance has hovered at or below 2 percent of total issuance since early 2011, and this share is even lower if re- REMICs are excluded. In the first four months of 2014, total non-agency issuance was $4.5 billion, compared to $11.4 billion over the same period in % 90% 80% 70% 60% 50% 40% 30% 20% Agency share Non-Agency share 98% 10% 0% 2% Sources: Inside Mortgage Finance and Urban Institute. Note: Year-to-date figures as of April Non-Agency MBS Issuance $1,200 $1,000 $800 $600 $400 Non-Agency Securitization 2.0 $6 $5 $4 $3 $2 $200 $0 $1 $0 Prime Subprime Alt A 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. 10

11 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 Jan-14 Apr-14 Percent Refi $ trillions OVERVIEW AGENCY ACTIVITY: VOLUMES AND PURCHASE/REFI COMPOSITION Agency issuance continues declining, totaling $259.5 billion in the first four months of 2014, compared to $621.9 billion for the same months a year ago. In April 2014, refinances were 43 and 50 percent of the GSEs business, down from the first quarter s average of 52 and 57 percent. The Ginnie Mae market has always been more purchase-driven, with refinance volume of 27 percent in April At-Issuance Balance $2.5 Freddie Mac Fannie Mae Ginnie Mae $2.0 $1.5 $1.0 $0.5 $ Ann. Sources: embs and Urban Institute. Note: Annualized figure based on data from April Percent Refi at Issuance 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Freddie Mac Fannie Mae Ginnie Mae Mortgage rate 9% 8% 7% 6% 5% 4% 3% 2% 1% 0% $0.24 $0.32 $0.21 Mortgage Rate Sources: embs, Freddie Mac PMMS and Urban Institute. Note: Based on at-issuance loan balance. 11

12 OVERVIEW STATE OF THE MARKET MORTGAGE ORIGINATION PROJECTIONS The sharp drop in mortgage originations in late 2013 and early 2014, combined with higher interest rates in the second half of 2013 and the Fed tapering, has led the MBA, Fannie Mae, and Freddie Mac to lower their 2014 estimates for origination activity. This reflects lower estimates of the refinance share, at 39 percent for 2014, down sharply from around 50 percent in Q and over 60 percent for full year Housing starts and existing home sales are expected to pick up slightly in Total Originations and Refinance Shares Period Originations ($ billions) Refi Share (%) Total, FNMA Total, FHLMC Total, MBA FNMA FHLMC estimate estimate estimate estimate estimate Housing Starts and Homes Sales MBA estimate 2013 Q Q Q Q Q Q Q Q Q Q Q Q FY FY FY FY FY Sources: Mortgage Bankers Association, Fannie Mae, Freddie Mac and Urban Institute. Note: Shaded boxes indicate forecasted figures. All figures are estimates for total single-family market. Column labels indicate source of estimate. The yearly averages for interest rates in 2011, 2012, and 2013 were 4.5, 3.7, and 4.0, respectively. The projected average annual rates for 2014 and 2015 range from 4.8 to 4.9, and 5.2 to 5.6, respectively. Year Housing Starts, thousands Total, FNMA estimate Total, FHLMC estimate Total, MBA estimate Total, FNMA estimate Total, FHLMC estimate Home Sales Total, MBA estimate Existing, MBA estimate New, MBA Estimate FY FY FY FY FY Sources: Mortgage Bankers Association, Fannie Mae, Freddie Mac and Urban Institute. Note: Shaded boxes indicate forecasted figures. All figures are estimates for total single-family market. Column labels indicate source of estimate. 12

13 Apr-00 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 Apr-14 Dollars per $100 loan STATE OF THE MARKET ORIGINATOR PROFITABILITY When originator profitability is high, mortgage rates tend to be less responsive to the general level of interest rates, as originators are capacity-constrained. When originator profitability is low, mortgage rates are far more responsive to the general level of interest rates. As mortgage interest rates have risen and fewer borrowers find it economical to refinance, originator profitability is lower. Originator profitability is often measured as the spread between the rate the borrower pays for the mortgage (the primary rate) and the yield on the underlying mortgage-backed security in the secondary market (the secondary rate). However, with guarantee fees 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. Originator Profitability and Unmeasured Costs (OPUC) 6 OPUC Sources: Federal Reserve Bank of New York, updated monthly and available at this link: and Urban Institute. Note: OPUC stands for "originator profits and unmeasured costs" as discussed in Fuster et al. (2013). The OPUC series is a monthly (4- week moving) average. 13

14 Feb-01 Aug-01 Feb-02 Aug-02 Feb-03 Aug-03 Feb-04 Aug-04 Feb-05 Aug-05 Feb-06 Aug-06 Feb-07 Aug-07 Feb-08 Aug-08 Feb-09 Aug-09 Feb-10 Aug-10 Feb-11 Aug-11 Feb-12 Aug-12 Feb-13 Aug-13 Feb-14 CLTV Feb-01 Aug-01 Feb-02 Aug-02 Feb-03 Aug-03 Feb-04 Aug-04 Feb-05 Aug-05 Feb-06 Aug-06 Feb-07 Aug-07 Feb-08 Aug-08 Feb-09 Aug-09 Feb-10 Aug-10 Feb-11 Aug-11 Feb-12 Aug-12 Feb-13 Aug-13 Feb-14 FICO Score STATE OF THE MARKET OVERVIEW CREDIT 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 657 as of February Prior to the housing crisis, this threshold held steady in the low 600s. LTV levels at origination remain relatively high, averaging 86.1, which reflects the large number of FHA purchase originations. Borrower FICO Score at Origination Month th percentile Mean 10th percentile Sources: CoreLogic Prime Servicing and Urban Institute. Note: Purchase-only loans. Combined LTV at Origination th percentile Mean 10th percentile Sources: CoreLogic Prime Servicing and Urban Institute. Note: Purchase-only loans. 14

15 San Francisco-Redwood City-South San Francisco CA San Jose-Sunnyvale-Santa Clara CA Oakland-Hayward-Berkeley CA New York-Jersey City-White Plains NY-NJ Los Angeles-Long Beach-Glendale CA San Diego-Carlsbad CA Seattle-Bellevue-Everett WA Nassau County-Suffolk County NY Portland-Vancouver-Hillsboro OR-WA Denver-Aurora-Lakewood CO Boston MA Minneapolis-St. Paul-Bloomington MN-WI Newark NJ-PA Washington-Arlington-Alexandria DC-VA-MD-WV Tampa-St. Petersburg-Clearwater FL Chicago-Naperville-Arlington Heights IL Sacramento--Roseville--Arden-Arcade CA Charlotte-Concord-Gastonia NC-SC Pittsburgh PA Dallas-Plano-Irving TX Miami-Miami Beach-Kendall FL Riverside-San Bernardino-Ontario CA Baltimore-Columbia-Towson MD Orlando-Kissimmee-Sanford FL Kansas City MO-KS St. Louis MO-IL Las Vegas-Henderson-Paradise NV Houston-The Woodlands-Sugar Land TX Atlanta-Sandy Springs-Roswell GA Philadelphia PA Phoenix-Mesa-Scottsdale AZ Cincinnati OH-KY-IN Columbus OH Fort Worth-Arlington TX Cleveland-Elyria OH Detroit-Dearborn-Livonia MI San Antonio-New Braunfels TX FICO score STATE OF THE MARKET OVERVIEW CREDIT 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. For example, the mean origination FICO for borrowers in San Francisco- Redwood City- South San Francisco, CA is 770, while in San Antonio-New Braunfels, TX it is 716. Across all MSAs, lower average FICO scores tend to be correlated with high average LTVs, as these MSAs rely heavily on FHA/VA financing. Origination FICO and LTV by MSA 780 Mean origination FICO score Mean origination LTV LTV Sources: CoreLogic Prime Servicing as of February 2014 and Urban Institute. Note: Purchase-only loans. 15

16 Los Angeles-Long Beach-Glendale CA San Francisco-Redwood City-South San Francisco CA New York-Jersey City-White Plains NY-NJ San Jose-Sunnyvale-Santa Clara CA Portland-Vancouver-Hillsboro OR-WA Washington-Arlington-Alexandria DC-VA-MD-WV Philadelphia PA Seattle-Bellevue-Everett WA Dallas-Plano-Irving TX Phoenix-Mesa-Scottsdale AZ San Diego-Carlsbad CA Riverside-San Bernardino-Ontario CA Houston-The Woodlands-Sugar Land TX Baltimore-Columbia-Towson MD Miami-Miami Beach-Kendall FL Charlotte-Concord-Gastonia NC-SC Kansas City MO-KS Fort Worth-Arlington TX San Antonio-New Braunfels TX Newark NJ-PA Boston MA Sacramento--Roseville--Arden-Arcade CA Nassau County-Suffolk County NY Orlando-Kissimmee-Sanford FL Oakland-Hayward-Berkeley CA Denver-Aurora-Lakewood CO Minneapolis-St. Paul-Bloomington MN-WI Atlanta-Sandy Springs-Roswell GA St. Louis MO-IL Las Vegas-Henderson-Paradise NV Tampa-St. Petersburg-Clearwater FL Chicago-Naperville-Arlington Heights IL Pittsburgh PA Columbus OH Cincinnati OH-KY-IN Detroit-Dearborn-Livonia MI Cleveland-Elyria OH Ratio Feb-01 Aug-01 Feb-02 Aug-02 Feb-03 Aug-03 Feb-04 Aug-04 Feb-05 Aug-05 Feb-06 Aug-06 Feb-07 Aug-07 Feb-08 Aug-08 Feb-09 Aug-09 Feb-10 Aug-10 Feb-11 Aug-11 Feb-12 Aug-12 Feb-13 Aug-13 Feb-14 Housing prices STATE OF THE MARKET HOUSING AFFORDABILITY National Housing Affordability Over Time The maximum affordable price is the house price that a family can afford based on the following assumptions: 20 percent down payment, monthly payment of 28 percent of median family income (US Census), Freddie Mac prevailing rate for 30-year fixed-rate mortgage, and property tax and insurance at 1.75 percent of housing value. The chart shows that home prices are very affordable by historical standards, and even if interest rates rose to 6 percent, affordability would be at the long term historical average level nationwide. Affordability Adjusted for MSA-Level DTI Median sales price Max affordable price Max affordable price at 6.0% rate Sources: CoreLogic, US Census, Freddie Mac and Urban Institute. $300,000 $280,000 $260,000 $240,000 $220,000 $200,000 $180,000 $160,000 $140,000 $120,000 Credit Bubble $275,785 $238,861 $189,900 Sources: CoreLogic, US Census, Freddie Mac and Urban Institute calculations based on NAR methodology. Note: Affordability index is calculated relative to home prices in A ratio above 1 indicates higher affordability in February 2014 than in

17 Year-over-year growth rate 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 Mar-14 STATE OF THE MARKET HOME PRICE INDICES National Year-Over-Year HPI Growth The strong year-over-year house price growth through 2013 has continued for the first quarter of 2014, as indicated by both the repeated sales HPI from CoreLogic and hedonic index from Zillow. 20% 15% 10% 5% 0% -5% -10% -15% -20% CoreLogic HPI year-over-year Zillow HVI year-over-year 11.1% 5.7% Sources: CoreLogic, Zillow and Urban Institute. Changes in CoreLogic HPI for Top MSAs Despite rising 24.7 percent from the trough, national house prices still must grow 19.1 percent to reach pre-crisis peak levels. At the MSA level, three of the top 15 MSAs have reached their peak HPI Houston, TX; Dallas, TX; and Denver, CO. One MSA particularly hard hit by the boom and bust Riverside, CA would need to rise more than 50 percent to return to its peak. MSA 2000 to peak HPI changes (%) Peak to trough Trough to current % Rise needed to achieve peak United States New York-Jersey City-White Plains NY-NJ Los Angeles-Long Beach-Glendale CA Chicago-Naperville-Arlington Heights IL Atlanta-Sandy Springs-Roswell GA Washington-Arlington-Alexandria DC-VA-MD-WV Houston-The Woodlands-Sugar Land TX Phoenix-Mesa-Scottsdale AZ Riverside-San Bernardino-Ontario CA Dallas-Plano-Irving TX Minneapolis-St. Paul-Bloomington MN-WI Seattle-Bellevue-Everett WA Denver-Aurora-Lakewood CO Baltimore-Columbia-Towson MD San Diego-Carlsbad CA Anaheim-Santa Ana-Irvine CA Sources: CoreLogic HPIs as of March 2014 and Urban Institute. Note: This table includes the largest 15 Metropolitan areas by mortgage count. 17

18 OVERVIEW STATE OF THE MARKET NEGATIVE EQUITY & SERIOUS DELINQUENCY 3Q09 4Q09 1Q10 2Q10 3Q10 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 1Q14 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 Negative Equity Share With housing prices appreciating through 2013, residential properties in negative equity (LTV greater than 100) as a share of all residential properties with a mortgage has dropped to 13.3 percent. Residential properties in near negative equity (LTV between 95 and 100) comprise another 3.3 percent. 35% 30% 25% Negative equity Near negative equity 20% 15% 10% 16.6% 13.3% 5% 0% Sources: CoreLogic and Urban Institute. Note: CoreLogic negative equity rate is the percent of all residential properties with a mortgage with greater than 100 percent current LTV. Loans near negative equity refer to loans above 95 percent current LTV. Loans in Serious Delinquency/Foreclosure Serious delinquencies and foreclosures continue to decline with the housing recovery, but remain quite high relative to the early 2000s. Loans 90 days delinquent or in foreclosure totaled 5.0% in the first quarter of 2014, down from 6.4% for the same quarter a year earlier. 12% Percent of loans 90 days delinquent or in 10% foreclosure Percent of loans in foreclosure Percent of loans 90 days delinquent 8% 6% 4% 2% 0% 5.0% 2.7% 2.4% Sources: Mortgage Bankers Association and Urban Institute. 18

19 Jun-06 Sep-06 Dec-06 Mar-07 Jun-07 Sep-07 Dec-07 Mar-08 Jun-08 Sep-08 Dec-08 Mar-09 Jun-09 Sep-09 Dec-09 Mar-10 Jun-10 Sep-10 Dec-10 Mar-11 Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 Sep-12 Dec-12 Mar-13 Jun-13 Sep-13 Dec-13 Mar-14 $ billions Jun-06 Sep-06 Dec-06 Mar-07 Jun-07 Sep-07 Dec-07 Mar-08 Jun-08 Sep-08 Dec-08 Mar-09 Jun-09 Sep-09 Dec-09 Mar-10 Jun-10 Sep-10 Dec-10 Mar-11 Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 Sep-12 Dec-12 Mar-13 Jun-13 Sep-13 Dec-13 Mar-14 $ billions GSES UNDER CONSERVATORSHIP GSE PORTFOLIO WIND-DOWN Freddie and Fannie continue to rapidly shrink their portfolio. Year over year, Fannie has contracted by 21.7%, and Freddie Mac by 18.7%. As of March 2014, they were both below their year-end 2014 portfolio cap. They are shrinking their less liquid assets at close to the same pace that they are shrinking their entire portfolio. Fannie Mae Mortgage-Related Investment Portfolio Composition Current size: $467.7 billion Current cap: $ billion Shrinkage year-over-year: 21.7% Shrinkage in non-liquid assets year-over-year: 17.6% Mortgage loans Non-agency MBS Non-FNMA agency MBS Fannie MBS in portfolio Sources: Fannie Mae and Urban Institute Freddie Mac Mortgage-Related Investment Portfolio Composition Current size: $434.4 billion Current cap: $ billion Shrinkage year-over-year: 18.7% Shrinkage in non-liquid assets year-over-year: 21.3% Mortgage loans Non-agency MBS Non-FHLMC agency MBS FHLMC MBS in portfolio Sources: Freddie Mac and Urban Institute 19

20 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 GSES UNDER CONSERVATORSHIP GSES UNDER CONSERVATORSHIP EFFECTIVE GUARANTEE FEES AND GSE RISK-SHARING TRANSACTIONS Effective Guaranty Fees Fannie s average charged g-fee on new single-family originations was 63 bps in Q1 2014, up from 61.2 in the previous quarter, and 54.4 a year earlier. This is a marked increase over 2012 (39.9 bps) and 2011 (28.8 bps), and has contributed to the GSEs strong profits. Fannie s 2014 loan-level price adjustments (LLPAs) are shown in the second table. The 25 bp Adverse Market Delivery Charge has been added to these upfront numbers. Fannie Mae single-family average charged g- fee on new acquisitions Fannie Mae single-family effective g-fee rate Freddie Mac management and g-fee rate Sources: Fannie Mae, Freddie Mae and Urban Institute. Note: Freddie only reports the effective g-fee on the entire book of business. Fannie Mae Upfront Loan-Level Price Adjustments (LLPAs) Credit Score > % 0.250% 0.250% 0.500% 0.500% 0.500% 0.500% % 0.250% 0.500% 0.750% 0.750% 0.750% 0.750% % 0.750% 1.000% 1.250% 1.250% 1.250% 1.250% % 0.750% 1.500% 2.000% 1.750% 1.500% 1.500% % 1.250% 2.250% 2.750% 3.000% 2.500% 2.500% % 1.500% 2.750% 3.250% 3.500% 3.000% 3.000% % 1.750% 3.250% 3.250% 3.500% 3.500% 3.500% < % 1.750% 3.250% 3.250% 3.500% 3.500% 3.500% Product Feature (Cumulative) Investment Property 1.750% 1.750% 1.750% 3.000% 3.750% N/A N/A 2-unit property 1.000% 1.000% 1.000% 1.000% 1.000% N/A N/A 2-4 unit property 1.000% 1.000% 1.000% 1.000% 1.000% N/A N/A Condominiums 0.000% 0.000% 0.000% 0.750% 0.750% 0.750% 0.750% Sources: Fannie Mae and Urban Institute. Note: Adverse Market Delivery Charge (AMDC) of 0.250% has been added to the LLPA numbers in the matrix by LTV and credit score. Freddie Mac charges very comparable LLPAs. LTV

21 GSES UNDER CONSERVATORSHIP GSE RISK-SHARING TRANSACTIONS Class Amount ($ millions) Tranche Thickness (%) CE (%) Rating Initial Spread (bps) Fannie Mae: Connecticut Avenue Securities (CAS) 2013-C01 October 24, 2013 A-H $25, NR - M-1, M-1H, Total $337.5, $23.7, $ , 0.09, F: BBB-sf 200 M-2, M-2H, Total $337.5, $23.7, $ , 0.09, NR 525 B-H $ NR - Reference Pool Size $26, Fannie Mae: CAS 2014-C01 January 14, 2014 A-H $ NR - M-1, M-1H, Total $375, $20.7, $ , 0.07, F: BBB-sf; M: Baa2 160 M-2, M-2H, Total $375, $20.7, $ , 0.07, NR 440 B-H $ NR - Reference Pool Size $29, Freddie Mac: Structured Agency Credit Risk (STACR) Debt Notes, Series 2013-DN1 July 24, 2013 A-H $21, NR - M-1, M-1H, Total $250.0, $54.9, $ , 0.09, NR 340 M-2, M-2H, Total $250.0, $54.9, $ , 0.09, NR 715 B-H $ NR - Reference Pool Size $22, Freddie Mac: STACR Debt Notes, Series 2013-DN2 November 12, 2013 A-H $34, NR - M-1, M-1H, Total $245.0, $125.9, $ , 0.36, F: BBB-sf; M: Baa1 145 M-2, M-2H, Total $385.0, $197.9, $ , 0.56, NR 425 B-H $ NR - Reference Pool Size $35, Freddie Mac: STACR Debt Notes, Series 2014-DN1 February 6, 2014 A-H $30, NR - M-1, M-1H, Total $155.6, $84.4, $ , 0.35, M: A1(sf); K: A(sf) NR M-2, M-2H, Total $233.4, $126.6, $ , 0.53, M: Baa1(sf); K:BBB(sf) NR M-3, M-3H, Total $264.5, $143.5, $ , 0.60, NR NR B-H $ NR - Reference Pool Size $32, Freddie Mac: STACR Debt Notes, Series 2014-DN2 April 2, 2014 A-H $26, NR - M-1, M-1H, Total $230.0, $51.5, $ , 0.18, F: Asf; K: A(sf) 85 M-2, M-2H, Total $345.0, $77.2, $ , 0.27, F: BBB (sf); K: BBB (sf) 165 M-3, M-3H, Total $391.0, $87.5, $ , 0.31, NR 360 B-H $ NR - Reference Pool Size $28, Sources: Fannie Mae, Freddie Mac and Urban Institute. Note: Classes A-H, M-1H, M-2H, and B-H are reference tranches only. These classes are not issued or sold. The risk is retained by Fannie Mae and Freddie Mac. CE = credit enhancement. Under Ratings, F = Fitch, M = Moody s, and K = Kroll Bond Ratings. 21

22 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 Mar-14 Percentage of total loans 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 Mar-14 Percentage of total loans OVERVIEW SERIOUS GSES UNDER CONSERVATORSHIP DELINQUENCY RATES AT THE SERIOUS GSEs DELINQUENCY 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 March 2014, 2.19 percent of the Fannie portfolio and 2.2 percent of the Freddie portfolio were seriously delinquent, down from 3.02 percent and 3.03 percent a year earlier, respectively. Serious Delinquency Rates Fannie Mae 16% 14% 12% 10% 8% Single-family: Noncredit enhanced Single-family: Credit enhanced Single-family: Total 6% 4% 2% 0% 4.27% 2.19% 1.85% Sources: Fannie Mae and Urban Institute. Serious Delinquency Rates Freddie Mac Single-family: Noncredit enhanced Single-family: Credit enhanced Single-family: Total 10% 9% 8% 7% 6% 5% 4% 3% 2% 1% 0% 4.40% 2.20% 1.89% Sources: Freddie Mac and Urban Institute. 22

23 Mar-04 Jul-04 Nov-04 Mar-05 Jul-05 Nov-05 Mar-06 Jul-06 Nov-06 Mar-07 Jul-07 Nov-07 Mar-08 Jul-08 Nov-08 Mar-09 Jul-09 Nov-09 Mar-10 Jul-10 Nov-10 Mar-11 Jul-11 Nov-11 Mar-12 Jul-12 Nov-12 Mar-13 Jul-13 Nov-13 Mar-14 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 4Q13 1Q14 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 FHA delinquencies are declining from a higher relative starting point. GSE multifamily delinquencies are also declining, although they never reached problematic levels. Serious Delinquency Rates Single-Family Loans 10% 9% 8% 7% 6% 5% 4% 3% 2% 1% 0% FHA Fannie Mae Freddie Mac 6.65% 2.20% 2.19% Sources: Fannie Mae, Freddie Mac, MBA Delinquency Survey and Urban Institute. Note: Serious delinquency rate is the number of loans 90 days or more past due or in the foreclosure process, divided by the total loan count.. Serious Delinquency Rates Multifamily GSE Loans Fannie Mae Freddie Mac 0.9% 0.8% 0.7% 0.6% 0.5% 0.4% 0.3% 0.2% 0.1% 0.0% 0.10% 0.04% Sources: Fannie Mae, Freddie Mac and Urban Institute. Note: Multifamily serious delinquency rate is the unpaid balance of loans 60 days or more past due, divided by the total unpaid balance. 23

24 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q Thousands 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. Despite these factors, HARP recently crossed a milestone of 3 million refinances since Q2 2009, accounting for about 16 percent of all GSE refinances in this period. As a result of the large volume of refi activity, the pool of eligible loans remaining is now much lower. Total HARP Refinance Volume 350 HARP Refinance Volume - Fannie HARP Refinance Volume - Freddie Sources: FHFA Refinance Report and Urban Institute. HARP Refinances February 2014 Year-to-date 2014 Inception to date Total refinances 127, ,746 19,137,997 4,081,911 4,750,530 3,229,066 Total HARP refinances 26,964 56,938 3,114, ,914 1,074, ,024 Share LTV 70.3% 69.9% 69.8% 56.4% 56.4% 85.0% Share LTV 18.1% 18.1% 17.3% 22.4% 22.4% 15.0% Share >125 LTV 11.7% 12.0% 13.0% 21.2% 21% 0% All other streamlined refinances 29,233 58,262 3,311, , , ,049 Sources: FHFA Refinance Report and Urban Institute. 24

25 OVERVIEW GSES UNDER LOANS: CONSERVATORSHIP DISTRIBUTION OF POTENTIAL GSE LOANS: REFINANCES POTENTIAL REFINANCES To qualify for HARP, a loan must be originated before the June 2009 cutoff date, have a marked-to-market loan-tovalue (MTM LTV) ratio above 80, and have no more than one delinquent payment in the past year and none in the past six months. There are 1,230,621 eligible loans, but 41 percent are out-of-the-money because the closing cost would exceed the long-term savings, leaving 722,038 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 7,152,250 loans in this category, 5,037,493 are in-the-money. More than two-thirds of the GSE book of business that meets the pay history requirements was originated after the June 2009 cutoff. FHFA director Mel Watt announced recently that they are not planning to extend the date, as too few borrowers (369,271 by our estimate) would benefit from the change. Total loan count 26,818,296 Loans that do not meet pay history requirement 976,112 Loans that meet pay history requirement: 25,842,184 Pre-June 2009 origination 8,382,871 Post-June 2009 origination 17,459,313 Loans Meeting HARP Pay History Requirements Pre-June 2009 LTV category In-the-money Out-of-the-money Total 80 5,037,493 2,114,757 7,152,250 >80 722, ,583 1,230,621 Total 5,759,531 2,623,340 8,382,871 Post-June 2009 LTV category In-the-money Out-of-the-money Total 80 1,186,749 13,092,484 14,279,233 >80 369,271 2,810,809 3,180,080 Total 1,556,020 15,903,293 17,459,313 Sources: CoreLogic prime servicing data as of March Note: Figures are scaled up from source data to account for data coverage of the GSE active loan market (based on MBS data from embs). Stripped box indicates HARP-eligible loans that are in-the-money. 25

26 Mar-09 Jun-09 Sep-09 Dec-09 Mar-10 Jun-10 Sep-10 Dec-10 Mar-11 Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 Sep-12 Dec-12 Mar-13 Jun-13 Sep-13 Dec-13 Mar-14 Number of mods (millions) Mar-09 Jun-09 Sep-09 Dec-09 Mar-10 Jun-10 Sep-10 Dec-10 Mar-11 Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 Sep-12 Dec-12 Mar-13 Jun-13 Sep-13 Dec-13 Mar-14 Number of mods (thousands) MODIFICATION ACTIVITY HAMP ACTIVITY New HAMP trial mods have tapered off as new defaults have declined. Meanwhile, modification success rates are improving, so the number of new permanent modifications remains stable at 13,000 in February and March New HAMP Modifications New trial mods started New permanent mods started New active permanent mods Sources: U.S. Treasury Making Home Affordable and Urban Institute. Cumulative HAMP Modifications 2.5 All trials mods started All permanent mods started Active permanent mods Sources: U.S. Treasury Making Home Affordable and Urban Institute. 26

27 OVERVIEW MODIFICATION ACTIVITY BY TYPE OF ACTION AND MODIFICATION BY BEARER BY OF TYPE RISK OF ACTION AND BEARER OF RISK The share of principal reduction modifications peaked at 20 percent in December 2012 before dropping in This is to be expected, as increasing home prices have increased equity, reducing the need for principal reduction and making such modifications less likely to be net-present-value positive. Portfolio loans are the most likely candidates for principal reduction, followed by private investor loans, because the GSEs and FHA/VA generally do not allow this type of modification. Changes in Loan Terms for Modifications 9/30/12 12/31/12 03/31/13 6/30/13 9/30/13 12/31/13 One quarter % change One year % change Capitalization Rate Reduction Rate Freeze Term Extension Principal Reduction Principal Deferral Not Reported* Sources: OCC Mortgage Metrics Report for the Fourth 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. *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 Rate freeze Term extension Principal reduction Principal deferral Not reported* Sources: OCC Mortgage Metrics Report for the Fourth 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. *Processing constraints at some servicers prevented them from reporting specific modified term(s). 27

28 Number of loans (millions) Number of loans (thousands) MODIFICATION ACTIVITY MODIFICATIONS AND LIQUIDATIONS Total modifications (HAMP and proprietary) are now roughly equal to total liquidations. Hope Now reports show 7,045,753 borrowers have received a modification since Q3 2007, compared with 7,082,771 liquidations in the same period. We expect to see sharp declines in both liquidation and modification activity in In February and March, foreclosures and short sales dropped to their lowest totals since Loan Modifications and Liquidations 1,600 1,400 1,200 1, HAMP mods Proprietary mods Liquidations (Q3-Q4) (Ann.) Sources: Hope Now Reports and Urban Institute. Note: Liquidations includes both foreclosure sales and short sales. Annualized figure based on data from March Cumulative Modifications and Liquidations HAMP mods Proprietary mods Liquidations (Q3-Q4) YTD Sources: Hope Now Reports and Urban Institute. Note: Liquidations includes both foreclosure sales and short sales. Year-to-date figure as of March

29 Redefault rate Redefault rate 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 Fannie Mae Freddie Mac Government-guaranteed Private Portfolio Loans Overall 80% 70% 60% 50% 40% 30% 20% 10% 0% Year of modification Sources: OCC Mortgage Metrics Report for the Fourth Quarter of 2013 and Urban Institute. Redefault Rate 24 Months after Modification 80% 70% 60% Fannie Mae Freddie Mac Government-guaranteed Private Portfolio loans Overall 50% 40% 30% 20% 10% 0% Year of modification Sources: OCC Mortgage Metrics Report for the Fourth Quarter of 2013 and Urban Institute. 29

30 AGENCY ISSUANCE AGENCY GROSS AND NET ISSUANCE While newly issued agency securities (agency gross issuance) had been robust in 2013, much of the issuance has been driven by refinancing. As that activity has fallen off with rising interest rates, new issuance has fallen off as well. Agency gross issuance totaled 68.4 billion in April 2014, a 56 percent decline year-over-year. Net issuance, which excludes repayments, prepayments, and refinances on outstanding mortgages, remains low and dominated by Ginnie Mae. This is unsurprising, given the increased role of FHA and VA after the crisis. Agency Gross Issuance Agency Net Issuance Issuance Year GSEs Ginnie Mae Total Issuance Year GSE Ginnie Mae Total 2000 $360.6 $102.2 $ $885.1 $171.5 $1, $1,238.9 $169.0 $1, $1,874.9 $213.1 $2, $872.6 $119.2 $ $893.9 $81.4 $ $853.0 $76.7 $ $1,066.2 $94.9 $1, $911.4 $267.6 $1, $1,280.0 $451.3 $1, $1,003.5 $390.7 $1, $879.3 $315.3 $1, $1,288.8 $405.0 $1, $1,176.6 $393.6 $1, YTD $179.5 $80.0 $ (Ann.) $538.4 $240.1 $ $159.8 $29.3 $ $ $9.9 $ $ $51.2 $ $ $77.6 $ $83.3 -$40.1 $ $ $42.2 $ $313.6 $0.3 $ $514.7 $30.9 $ $314.3 $196.4 $ $249.5 $257.4 $ $305.5 $ $ $133.4 $149.4 $ $46.5 $118.4 $ $66.5 $85.8 $ YTD -$7.4 $16.8 $ (Ann.) -$22.1 $50.5 $28.3 Sources: embs and Urban Institute. Note: Dollar amounts are in billions. Year-to-date figure as of April 2014 Sources: embs and Urban Institute. Note: Dollar amounts are in billions. Year-to-date figure as of April

31 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 Apr-14 $ billions 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 Apr-14 $ billions OVERVIEW OVERVIEW AGENCY ISSUANCE GROSS AND NET ISSUANCE AGENCY BY MONTH GROSS ISSUANCE & FED PURCHASES Monthly Gross Issuance While government and GSE lending have dominated the mortgage market since the crisis, there has been a change in the mix. The Ginnie Mae share reached a peak of 28 percent of total agency issuance in 2010, and that share declined to 25 percent in It has begun to rise as we move from a refinance market to a purchase market. April 2014 showed a Ginnie Mae share of 31.8 percent. Ginnie Mae Fannie Mae Freddie Mac Sources: embs, Federal Reserve Bank of New York and Urban Institute. Fed Absorption of Agency Gross Issuance In 2013, the Fed absorbed nearly 50 percent of the year's gross issuance. In Q1, 2014, the Fed began to taper, but gross issuance dropped even more. As a result, the Fed bought 74 percent of the total gross issuance. In April, total Fed purchases declined slightly to $41.60 billion, while gross issuance ticked up to 68.4 billion, resulting in 61 percent for the Fed absorption of gross issuance, roughly same as the 2013 Q4 s 63 percent Gross issuance Total Fed purchases Sources: embs, Federal Reserve Bank of New York and Urban Institute. 31

32 38.3% 37.9% 23.8% 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 $ billions AGENCY ISSUANCE MORTGAGE INSURANCE ACTIVITY MI Activity Private mortgage insurers lost market share in Q1 2014, dropping to 38.2 percent from 41.2 percent in the previous quarter. Overall mortgage insurance activity declined to just over $80 billion, compared to $155 billion in Q and $105 billion in Q The decline in the MI share and the increase in the FHA share is due to less refinance activity. VA FHA $180 $160 $140 $120 $100 $80 $60 $40 $20 $0 $31 $31 $20 Total private primary MI Sources: Inside Mortgage Finance and Urban Institute. MI Market Share Total private primary MI FHA VA 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Q14 Sources: Inside Mortgage Finance and Urban Institute. 32