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56 | Th e M Rep o RT O r i g i nat i O n s e r v i c i n g a na ly t i c s s e c O n da r y m a r k e t SECONDARY MARKET the latest SECONDARY MARKET report: second-Home mortgage market is alive and Well Fannie Mae says second homes are on the move. s ince 1998, second-home mortgages have averaged about 4.76 percent of the total purchase market, but the share is rising, according to Fannie Mae. While the purchase market in- creased four-fold from 1998 through the bubble years, the second-home mortgage market multiplied by 15 during the same years. The second-home mortgage market did decline significantly during the housing downturn, but today, it's alive and well. In fact, while some buyers may be put off by price volatility in some states, second-home buyers are ready to take advantage of bargain prices. Florida, California, and Arizona—all hard-hit by the housing crisis—have made up 34 percent of second-home mortgages since 1998, according to Fannie Mae. While prices declined at least 40 percent in each of these states during the downturn, second- home buyers are not deterred. The second-home buyer weath- ered the financial crisis and ongo- ing recovery differently than the average homebuyer. For starters, a typical second-home buyer is older and more affluent than the average primary-home buyer. Second-home buyers are also more likely to pay in cash, and when they do take out a mortgage loan, they offer larger down pay- ments. Sixty percent of primary- home buyers' loans have loan-to- value ratios greater than 80 percent, while just 30 percent of second- home buyers fall into this category. Additionally, while the housing market has been slowly recover- ing, financial assets have shown stronger growth, helping more af- fluent Americans strengthen their economic status even further. Through 2060, Fannie Mae expects the population of adults ages 45 through 64 to grow at a slower pace than that of the overall adult population in the United States. However, "assum- ing that Americans continue to follow similar investment patterns as they age and that aspirations of second-home ownership do not wane, second homes should still occupy a significant place in the residential real estate market," according to Fannie Mae. The GSEs are currently major players in the second-home mort- gage market, originating about 60 percent of second-home mort- gages in 2013. The GSEs stepped up their share of this segment of the market during the crisis years when private label securities stepped back, but the GSEs have been shedding market share over the past few years. cOntinued On page 58 treasury Official chimes in on Housing Finance reform Treasury's Michael sTegMan Talks abouT whaT MighT work—and whaT wouldn'T. a mid calls from the Obama administra- tion for a more stable housing market—par- ticularly where affordable hous- ing is concerned—Michael Steg- man, counselor to the secretary of the Treasury for housing finance policy, called for top- down reforms that would rewire how the federal govern- ment funds and regulates both government and private-label securities. Stegman says the GSE sys- tem needs a drastic overhaul in order to better operate, fund, and regulate itself and private-label securities (a.k.a., PLS, operations). He criticized a pair of "implausible scenarios" that would either leave the GSE system to amend itself or rely on minor revisions. Neither of these approaches, he said, would achieve what the president is calling for—a mortgage mar- ket dominated by private capital backed by secure government and one that broadens the transparency and access borrowers and investors have to the mortgage process. President Obama's overarching vision is to have the secondary market, which is dominated by Fannie Mae and Freddie Mac, fund the primary market and provide greater maneuverability in the affordable housing sphere. Borrowers, though willing to risk