TheMReport

62 | 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 LOCAL EDITION Watt: Skepticism Holding Down HARP Numbers SCAM-WARY HOMEOWNERS DON'T THINK HARP IS THE REAL DEAL. ILLINOIS // In a town hall- style meeting in Chicago last month, Mel Watt, director of the Federal Housing Finance Agency (FHFA), blamed fear of being taken in by a scam for the reluctance of eligible homeowners to take advantage of the Home Affordable Refinance program (HARP). "We are down to the people who don't believe this is a credible program," Watt said in a meeting with community groups and hous- ing counseling agencies at a Chicago Public Library branch. "We've got approximately $72 million that we'd like to give away in this metropoli- tan area. People won't come in and say 'I want that money.'" According to an FHFA report, the number of homeown- ers refinancing monthly through HARP has dropped nationally to just less than 20,000 loans in April 2014, down year-over-year from almost 107,000 in April 2013. The FHFA contends that, on average, homeowners who refinance through HARP are sav- ing $191 per month by lowering their interest rates. HARP allows homeowners to refinance whether or not they owe more on the home than it is actually worth. The Chicago event was highly anticipated due to speculation that Watt would announce an- other extension for the program, which is currently set to expire in December of 2015. Watt did not address any exten- sion of the program, but instead announced that Chicago was going to be the second city admit- ted into the federal government's pilot Neighborhood Stabilization Initiative intended to assist home- owners who are behind on their mortgages, help neighborhoods recover, and reduce the inventory of REO properties held by Fannie Mae and Freddie Mac. Detroit, the first city in the program, was admitted in May. The FHFA estimates that hundreds of thousands of citizens nationwide, including 36,000 in the City of Chicago alone, are eligible to benefit from HARP but have yet to step forward. Officials have noted that as interest rates rise, the incentive to participate fades. With more promotional events scheduled in the coming months in cities around the nation, the campaign continues to get as many eligible homeowners as possible to refinance through HARP before an interest rate in- crease shrinks the eligibility pool. Ginnie Mae on Track to Surpass Freddie THE 'YOUNGER COUSIN' OF FANNIE AND FREDDIE IS GROWING UP FAST. WASHINGTON, D.C. // Things are going well for Ginnie Mae. In early July, the Urban Institute (UI) issued a report finding that, based on the latest numbers, Ginnie's book of business is now at $1.5 trillion—a rate of growth that has tripled over the last seven years. What this means is that at its current rate of growth, Ginnie Mae will soon surpass Freddie Mac as the silver medalist in the single-family mortgage securiti- zation platform game, remaining behind only Fannie Mae. Not being a GSE (Ginnie deals only in government-backed loans) has, according to UI, been a key factor in stabilizing the post-recession market. In the recession's wake, the share of loans insured by the government increased rapidly. Accordingly, Ginnie's single-family securitiza- tion sector (its largest) grew at a much faster pace than the GSEs. If Ginnie keeps growing at its current pace, it will overtake Freddie Mac within a year as the second-largest single-family securiti- zation platform, the report stated. UI's cheerleading of Ginnie's growth goes beyond the raw numbers. Today's private-label securitization market remains a shadow of its former self. Bank portfolio holdings are a smaller share of total originations than even before the recession, UI reported. Into the void stepped the federal government to pick up most of the difference through explicit government in- surance and guarantees through the FHA, VA, and the Rural Housing Service. The FHA has been the main source of mort- gage loans for borrowers with shaky credit, and the number of those with credit issues soared as the recession lingered. Without Ginnie and its full- faith and credit guarantee, UI reported, "the government insur- ance programs could not have played such a critical counter- cyclical role, and the downturn in home prices would have been much more severe." UI credits Ginnie with luring investors, both foreign and domestic, to take the chance of buying properties when times were at their worst. "Ginnie Mae may be the GSEs' less-famous cousin," the report concluded, "but its tremendous value cannot be disputed." The sentiments are not mere PR and not at all new. Back in 2009, when the recession was burrow- ing deeper, the Wall Street Journal predicted that FHA and Ginnie would overtake the GSEs. The Journal's growth predictions, it turned out, were incredibly accu- rate as well. As for when Ginnie will surpass Fannie, no one is yet sure. But it no longer seems out of the question to think it will hap- pen before too long. Fannie's Book Shrinks for Sixth Straight Month WITH WINDING DOWN THE GSEs AS THE ULTIMATE GOAL, A SMALLER BOOK MAY BE A GOOD THING. WASHINGTON, D.C. // Fannie Mae's book of business shrank "The important question is: how much further will prices and rents "We've got approximately $72 million that we'd like to give away in this metropolitan area. People won't come in and say 'I want that money.'" —Mel Watt,FHFA

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