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the latest Or ig i nat ion SECONDARY MARKET Freddie Fading se r v ic i ng As talk continues to heat up concerning the GSEs eventual exit from the industry, Freddie Mac's business dwindles. s e c on da r y m a r k e t a na ly t ic s F Fannie Mae Warns Against Celebrating at Halftime The GSE thinks the recent economic indicators are a step in the right direction, but cautions that consumers will still feel the pinch in their wallets for a while. L ast month's uptick in consumer confidence suggests consumers may not be too concerned about pending impacts of fiscal policy, but Fannie Mae predicts they will nonetheless feel some financial tightening during the next few months. Several economic indicators are trending positively right now, but the GSE's March economic forecast warns the pending sequestration and the effects of higher Social Security taxes may dampen some of the current progress. On the other hand, the GSE continues to see housing as a bright spot in the economy—one 72 | The M Report that is unlikely to darken in the near future. Jobs, consumer confidence, and the stock market have all been on the rise, and the manufacturing and service industries are experiencing growth "at a healthy pace," according to Fannie Mae. All of this led the GSE to believe "the first quarter will be stronger than we originally thought" and furthermore led the enterprise to abandon any prediction of a recession "anytime soon." Recent job growth may be dented by the government sequester as some employees are laid off or incur furloughs, and incomes and consumer spending, both of which dipped at the start of the year, may remain slow in the next few months. However, Fannie Mae predicts economic growth to expand in the second half of this year, reaching 2.1 percent for the year overall. "[W]e see some improvement in our outlook for growth this year, primarily because of continued strength in the housing market," Fannie Mae said. The sector continues to improve with rising prices "helping to boost household net worth and providing support to consumers amid ongoing fiscal tightening," according to the GSE. reddie Mac's total mortgage portfolio continued to shrink in February, contracting at an annualized rate of 4.1 percent. February saw approximately $42.9 billion in purchases and issuances for the mortgage giant, slightly down from $43.1 billion in January and about 20.5 percent above last February's $35.6 billion. However, nearly $50 billion of business was sold or liquidated, resulting in a net $6.7 billion decrease. As of the end of February, the portfolio's ending balance was about $1.94 trillion, down from $1.95 trillion previously. Freddie Mac's record of mortgage-related securities and other guarantees also shrank, declining at an annualized rate of 0.9 percent (compared to January's negative rate of 2.5 percent). Single-family refinance-loan purchase and guarantee volume was $35.1 billion, representing 82 percent of total mortgage portfolio purchases or issuances. Relief refinance mortgages comprised about 30 percent of February's total refinance volume based on unpaid principal balance. At the same time, single-family delinquency declined, tumbling from a rate of 3.2 percent in January to 3.15 percent in February. The multifamily delinquency rate fell as well, dropping to 0.16 percent from 0.18 percent previously. All told, 6,686 loan modifications were performed in February, bringing the year-todate total to 14,102.