TheMReport

TH E M REP O RT | 63 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 for the sixth straight month in May as the enterprise's mortgage portfolio continued its decline. In its monthly volume sum- mary, Fannie revealed its total book of business contracted at a compound rate of 2.4 percent in May, slightly slower than April's negative growth rate of 2.7 per- cent. Year-to-date, the book has seen an average annualized nega- tive growth rate of 2.3 percent. As of the end of May, the book's value totaled $3.13 trillion. New business acquisitions picked up slightly, totaling $30.4 billion for the month. The company also reported an increase in mortgage portfolio purchases, which came to $13.1 billion, the highest figure so far this year. That increase was offset by sales and liquidations, which were $11.8 billion and $6.5 billion, respectively, bringing the gross portfolio's end balance down to $456.6 billion. The single-family delinquency rate in Fannie's portfolio fell again, dropping 5 basis points to 2.08 percent. Meanwhile, the multifamily serious delinquency rate fluctuated back down to 0.10 percent. Fannie Mae reported 10,606 loan modifications in May, for a total of 57,971 loan modifications in the year's first five months. Fannie Revises Forecasts on Rough First Quarter THIS ONE'S NOT AS HOPEFUL, BUT STILL INDICATES A RECOVERY IN PROGRESS. WASHINGTON, D.C. // The latest economic forecast from Fannie Mae shows that the underwhelming performance of the economy in the first three months of the year and a shrinking GDP have significantly dulled the optimism economists once had for the overall 2014 economy. Fannie stated that the rough U.S. first quarter has caused its Economic & Strategic Research Group to reduce 2014 economic growth expectations. For the year, the Group forecasts economic growth of 2.1 percent, which is half a percentage point below the 2013 pace. Fannie's sentiments were part of a "one-two punch" this week in which the Bureau of Economic Analysis released a revised (and sobering) look at the state of the nation's economy and found that real gross domestic product was down 2.9 percent in the first quarter—the fastest rate of decline in the GDP since 2009. According to Fannie, the rever- sal of an unsustainable buildup in inventory investment shaved 1.6 percentage points from GDP in the first quarter, worse than origi- nally thought. The first reports about the slumping GDP claimed a 0.6-percentage-point drag. The drop, whatever the numbers, is being blamed on disruptive weather—particularly in the East, where winter hung on much longer and with more venom than usual—and a rare drop in real exports. The tentative good news is that second-quarter activity shows signs of actual improvement, but even that sheen is dulled by the reality that any strength during the remainder of the year will not likely be enough to overcome first-quarter doldrums. Still, the industry is not pre- dicting anything terrible in the near future, and Fannie's chief economist, Doug Duncan, is keen to remind consumers and econo- mists alike that there is in fact a lot of positive happening within the morass—it's just a matter of keeping cool heads and using less hyperbole for the time being. "Consumer spending appears to have been the only real contribu- tor to growth in the first quar- ter," Duncan said. And although spending dipped again in April, it seems to have rebounded in May. "Consumers should get a boost going forward due to continued rising household net worth." Net worth is indeed rising, and at a good pace. Duncan said, however, that net worth remains well below its 2006 peak. Labor market conditions, which have showed steady-though-unspectac- ular gains, are also positive signs pointing to growth. Home price improvements have contributed to consumers' house- hold wealth, Duncan said, but over- all growth in the housing market pulled back in the first quarter, with major housing indicators coming in lower year-over-year compared to the first quarter of 2013. More-recent housing indicators were mixed, with only moder- ate improvement despite the decline in long-term interest rates. Duncan said he expects total home sales in 2014 to be about 2 percent lower than in 2013, with new home sales advancing some- where in the 12-15 percent range. Existing home sales, however, are likely to decline year over year. Business Shrinks Uninterrupted at Freddie Mac THE BOOK OF BUSINESS IS STILL LOSING PAGES. WASHINGTON, D.C. // Freddie Mac released its monthly volume summary for May 2014, tracking information on the company's mortgage-related portfolio, secu- rities issuance, risk management, delinquencies, debt activities, and other investments. The sum- mary found that overall, Freddie Mac's total mortgage portfolio decreased at an annualized rate of 2.1 percent in May. Purchases and issuances totaled $19.6 billion in May, down slightly from April's figure of $19.9 billion. As of the end of May 2014, pur- chases and issuances totaled $91.9 billion year-to-date. The company reported that its total annualized liquidation rate for May 2014 was 13.6 percent, up slightly from April's rate of 12.9 percent. The unpaid principal balance (UPB) of Freddie Mac's mort- gage-related investment portfolio decreased by approximately $6.1 billion in May.

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