February 2016 - The Industry's Best Kept Secret

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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 GSEs May Soon Serve More Buyers A proposed FHFA regulation would compel Freddie and Fannie to offer mortgages to three additional markets. F annie Mae and Freddie Mac may soon be made to offer mortgages for homes in underserved markets. A new rule requires the Federal Housing Finance Agency (FHFA) by federal law to issue a regulation to implement the Duty to Serve re - quirements specified in the Federal Housing Enterprises Financial Safety and Soundness Act of 1992, as amended by the Housing and Economic Recovery Act (HERA) of 2008 among both GSEs. The proposed regulation will require the GSEs to serve three un - derserved markets including manu- factured housing, affordable housing preservation, and rural markets. "The proposed rule would require the enterprises to adopt plans to improve the distribution and availability of mortgage financ - ing in a safe and sound manner for residential properties that serve very low-, low-, and moderate- income families in the three specified underserved markets," the FHFA stated in a release. As part of the newly intro - duced rule, both GSEs will have Duty to Serve credit for all transactions that involve a secondary market for mortgages on residential properties in the specified underserved markets. In addition, the FHFA said the rule would also create a method for gauging the GSEs' perfor - mance every year. FHFA's Duty to Serve Credit for Underserved Markets: • For the manufactured hous- ing market, Duty to Serve credit would be provided for eligible enterprise activities related to manufactured homes financed as real property and blanket loans for certain categories of manufac - tured housing communities. • For the affordable housing preservation market, Duty to Serve credit would be provided for eligible enterprise activities related to preserving the afford - ability of housing for renters and homebuyers, including activities under the programs specified in the Safety and Soundness Act. Duty to Serve credit would also be provided for activities related to existing small multifamily rental proper - ties, energy efficiency improve- ments on existing multifamily rental and single-family first-lien properties, shared equity homeownership programs and HUD's Choice Neighborhoods Initiative and Rental Assistance Demonstration program. • For the rural market, Duty to Serve credit would be pro- vided for eligible enterprise activities related to housing in rural areas, including activities serving the following high-needs rural regions and populations: Middle Appalachia, the Lower Mississippi Delta, colonias, mem - bers of a Native American tribe located in a Native American area, and migrant and seasonal agricultural workers. The FHFA is now accept - ing comments on the rule for a limited amount of time. Freddie Mac Expands Transparency The enterprise added millions of mortgages to its single-family, loan-level dataset in hopes of enticing more investors. F reddie Mac made its goal of attracting more investors back into the secondary mortgage market more of a reality by adding 21.5 million single-family mortgages to the government- sponsored enterprise's single- family, loan-level dataset. Prior to these additions, the data available to investors re - mained limited to loan-level data and loss data on 30-year, fixed- rate, single-family loans. With this new information, Freddie says potential investors interested in credit risk can now see loan- level data on 3.3 million, 15- and 20-year fixed-rate, single-family mortgages, originated between January 1, 2005, and December 31, 2014. In addition, the database includes 18.2 million, 30-year, fixed-rate mortgages originated between January 1, 1999, and December 31, 2014. For Freddie Mac, transparency is the key to regaining investor confidence. "Providing investors with this expanded view of credit risk for additional fixed-rate single- family mortgages will enable us to grow and evolve our credit risk offerings by expanding the products available for risk trans - fer and increasing the amount of risk transferred to the private investor," said Kevin Palmer, SVP of Credit Risk Transfer for Freddie Mac. "Releasing this data now will help give potential credit investors sufficient time to analyze Freddie Mac's actual loss performance." Investors reviewing the infor - mation will receive the follow- ing: a loan's monthly perfor- mance, credit performance, and property disposition information. The data will not include adjustable-rate mortgages, loans with balloon payments, interest- only loans, government-insured mortgages, or loans refinanced through the Home Affordable Refinance Program and other affordable or non-standard mort - gages, Freddie said. "Freddie Mac continues to look for opportunities to transfer mortgage credit risk to private investors in an economically sensible way," Palmer said when discussing the reasoning behind the new loan data. "Adding all fixed-rate products to our single- family, loan-level dataset allows us to explore other credit risk transfer opportunities." "Releasing this data now will help give potential credit investors sufficient time to analyze Freddie Mac's actual loss performance." —Kevin Palmer, Freddie Mac

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