An analysis of the first in a wave of loans that were modified after the financial crisis suggests that interest rate resets required by the Home Affordable Modification Program are not causing a spike in delinquencies. The predominant loan mod completed under HAMP reduced a borrower’s interest rate to as low as 2.00 percent for five years, then required a yearly 1.00 percentage point increase to the interest rate until reaching the primary mortgage rate in effect at the time of the mod ...
In hopes of ending a credit scoring system monopoly, Reps. Ed Royce, R-CA, and Terri Sewell, D-AL, recently introduced H.R. 4211, a bill that lets the GSEs consider alternative credit scoring models when deciding which mortgages to purchase. “The GSEs' use of a single credit score is an unfair practice that stifles competition and innovation in credit scoring,” said Royce. He added that breaking up the credit score monopoly at Fannie and Freddie will also assist them in managing their credit risk and decreases the potential for another taxpayer bailout. The Federal Housing Finance Agency directed the GSEs to look into the potential of alternative forms of credit scoring earlier this year.
The GSEs’ low-downpayment product still lacks any strong momentum but has witnessed modest growth since it was launched earlier this year. The FHA/VA maintains its place as the preferred product for borrowers in need of downpayment assistance. Ginnie Mae has accounted for 94.5 percent of purchase mortgages with loan-to-value ratios ranging from 95.1 percent to 97.0 percent that were securitized by the three agencies during the first 11 months of 2015, according to an analysis by affiliated publication Inside Mortgage Finance of loan-level data on agency mortgage-backed securities. Because LTV data is not available for all loans in Ginnie MBS, the agency’s actual share of these high-LTV loans is likely somewhat higher.
Fannie Mae and Freddie Mac both said they plan to ramp up their credit risk transfers in 2016 and explore more types of transactions. Representatives from the GSEs and FHFA spoke on a Securities Industry and Financial Markets Association risk-sharing panel last week in New York. This goes in line with Fannie’s and Freddie’s recently released 2016 scorecard in which the Federal Housing Finance Agency directed the GSEs to transfer credit risk on at least 90 percent of the unpaid balance of newly acquired mortgages. Laurel Davis, a Fannie vice president, said the GSE wants to continue to grow its investor base and added that Fannie was recently in Australia talking to potential investors.
For the first time in two decades, the Uniform Residential Loan Application form will get a makeover.The redesign is intended to give lenders and borrowers a more useful and consumer-friendly experience, according to Fannie Mae and Freddie Mac, who said the changes are expected to be completed by the summer of 2016. The GSEs are going to update the URLA to collect more relevant and useful information to help lenders make better underwriting decisions. Moreover, the new form will define a mortgage industry standards maintenance organization (MISMO) compliant dataset that supports the URLA. “Given the mortgage industry’s many changes over the years, along with the GSEs’ changes to underwriting policies and eligibility requirements, the...
Fannie Mae is reaching out to the last of the pack of borrowers looking to modify their loans and announced a policy change to its Servicing Management Default Underwriter tool that is aimed at qualifying more borrowers for foreclosure prevention assistance. Servicers use the tool to determine what foreclosure prevention options are available to help a borrower facing financial difficulty. The change requires servicers to now calculate the borrower’s full mortgage obligation, including the outstanding principal balance, past due interest and other arrearages, to determine eligibility for a Fannie Mae Standard Modification or Streamlined Modification. Prior to the change, only the outstanding principal balance was used.
The supply of home mortgage debt outstanding increased by 0.5 percent during the third quarter of 2015, following a similar modest gain during the previous period. A total of $9.952 trillion of single-family mortgage debt was outstanding at the end of September, according to a Federal Reserve report released late last week. It represented a second consecutive quarterly increase, something the mortgage servicing market has struggled to accomplish during the long contraction that started back in 2008. Most of the increase came...[Includes one data table]
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