January 2016 - Out of the Woods

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62 | TH E M R EP 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 Freddie's Portfolio Leaps for 9th Straight Month 2015 was a banner year for the enterprise, which recorded a 1.4 percent growth rate. F reddie Mac's total mortgage portfolio expanded for the ninth straight month and for the 14th time in the last 16 months in October 2015, according to its October 2015 Monthly Volume Summary. Whereas expansion for Freddie Mac's total mortgage portfolio was rare from 2010 to 2014, the year 2015 has seen almost nothing but expansion with the exception of January, which experienced con - traction at a compound annualized rate of 0.8 percent. Year-to-date through the end of October, the portfolio has expanded at an an- nualized rate of 1.4 percent. In October, the portfolio ex- panded at an annualized rate of 0.8 percent, which calculated to an over-the-month increase of $1.2 billion up to approximately $1.932 trillion. The serious delinquency rate on single-family mortgage loans backed by Freddie Mac declined by another three basis points September to October down to 1.38 percent. The share of Freddie-insured loans that are seriously delinquent is now 14 basis points below what it was in November 2008 at the start of the crisis. Single-family loans owned by Freddie Mac were seriously delinquent in October at less than half of the national rate reported by CoreLogic for September (3.4 percent). Freddie Mac's total mortgage portfolio has expanded only 21 times in the last 70 months dat - ing back to January 2010 despite October's expansion. At the begin- ning of the 15-month period (July 2014) that saw 14 months of expan- sion, the portfolio was valued at $1.895 trillion. It has expanded by about $37 billion since then. The number of homeown - ers with Freddie Mac loans who received permanent loan modifica- tions in October (4,044) increased slightly from September's total of 4,283. To date in 2015 through the end of October, 47,123 homeowners with Freddie Mac-insured loans have received a permanent loan modification—an average of about 4,712 per month. This average is down by nearly 900 from 2014's monthly average of 5,596. The aggregate unpaid principal balance (UPB) of Freddie Mac's mortgage-related investments portfolio declined by approxi - mately $11.6 billion in October, a substantially higher decline than September's $2.7 billion. Meanwhile, single-family refinance loan purchase and guarantee volume totaled $12.4 billion in October, up slightly from $12.1 billion in September. Freddie also priced its eighth and final Structured Agency Credit Risk (STACR) transaction of 2015 and released a STACR issu - ance calendar for 2016. "The issuance calendar is the next step in our efforts to be clear and transparent in our credit risk transfer offerings," said Freddie Mac VP of credit risk transfer Mike Reynolds. "The STACR program has grown from two issuances in its first year to eight this year. We expect to have eight STACR transactions in 2016, and the calendar is intended to help investors plan their allocations." The latest STACR offering, STACR Series 2015-HQA2, is priced at $590 million and includes a reference pool of single-family mortgages with an unpaid princi - pal balance (UPB) of more than $17 billion. The reference pool contains a subset of 30-year fixed-rate single-family mortgages acquired by Freddie Mac from December 1, 2014, to March 31, 2015. The LTVs of the mortgages in the reference pool range from 80 to 95 percent. Through the STACR offerings and other credit risk transfer initia - tives, Freddie Mac is successfully bringing back private investors into the single-family market and reducing the Enterprise's credit risk exposure. STACR Series 2015-HQA2 is Freddie Mac's 17th STACR transaction overall since the program began in mid-2013. With these transac - tions, along with two whole loan security (WLS) offerings and 12 agency credit insurance structure (ACIS) transactions since that time, Freddie Mac has transferred a substantial portion of credit risk on more than $385 billion in UPB of single-family mortgages. FHFA Confirms GSE 2016 Loan Limits The agency says last year's baseline won't budge for one-unit properties in most counties. T he Federal Housing Finance Agency (FHFA) announced that Fred- die Mac and Fannie Mae's maximum conforming loan limits will be largely unchanged in 2016, except some high- er-priced counties. According to the agency, the maximum conforming loan limits for mortgages acquired by the GSEs in 2016 will remain at the current level of $417,000 for one-unit properties. The FHFA noted that the Housing and Economic Recovery Act of 2008 (HERA) deemed the baseline loan limit to be $417,000. The rule also mandated that "after a period of price declines, the baseline loan limit cannot rise again until home prices return to pre-decline levels," the FHFA stated. The FHFA reported that the current loan limit of $417,000 will not change because the agency "determined that the average U.S. home value in the third quarter of this year remained below its level in the third quarter of 2007." In a letter to the FHFA, the Na- tional Association of Federal Credit Unions (NAFCU) urged the FHFA to keep the conforming loan limit at its current baseline rate of $417,000 and not let the limit drop any lower. "NAFCU believes the current 2015 limits should be kept in effect in order to avoid a disruption to the national housing market that is still recover- ing," Kavitha Subramanian, NAFCU's Regulatory Affairs Counsel, said. "NAFCU's economic research team has concluded that while home sales are widely expected to improve in 2015 as the labor market improves, the exit of many investors from the market and the lack of first-time homebuyers represent two issues of concern for the coming year. Sudden or drastic changes to the conforming loan limit rate for the enter- prises could hamper this recovery." However, the FHFA does intend to raise that number a bit in 39 counties where housing costs are a bit higher. Depending on the area's median home value, HERA will provide higher loan limits in high-cost counties, FHFA said. In 39 specific high-cost counties, where home values rose in the last year, the conforming loan limit will be increased. "Although other counties also experienced home value increases in 2015, after other elements of the HERA formula—such as the statutory ceiling and floor on limits—were accounted for, these local-area limits were left unchanged," the FHFA reported.

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