TheMReport

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 ORIGINATION LOCAL EDITION Fannie Mae Portfolio Sees Continuing Contraction THE GSE'S APRIL AND MAY NUMBERS REVEAL INCREASING SHRINKAGE IN UNPAID BALANCE AND DELINQUENCY RATES. DISTRICT OF COLUMBIA // Having fallen below its 2016 cap of $339.3 billion in March, Washington, D.C.-based Fannie Mae's gross mortgage portfolio contracted further in both April and May, shrinking at an annual rate of 32.0 percent in May, ac- cording to Fannie Mae's May 2016 Monthly Volume Summary. The 32 percent rate of contrac- tion in May was more than double the rate of shrinkage in April— 15.4 percent. With May's contrac- tion, the aggregate unpaid principal balance (UPB) of Fannie Mae's gross mortgage portfolio was $317.65 billion at the end of the month— down by about $10.5 billion from April, according to Fannie Mae. The portfolio has declined at an an - nual rate of 18 percent over the first five months of 2016. According to the June 2016 Chartbook from Urban Institute, "(The GSEs) are shrinking their less liquid assets (mortgage loans and non-agency MBS) at close to the same pace that they are shrinking their entire portfolio." For Fannie Mae, the gross mort - gage portfolio shrank year-over- year at the rate of 19 percent in April, compared to a 13.5 percent shrinkage rate in less liquid assets, Fannie Mae reported. Fannie Mae's total book of business, which includes the gross mortgage portfolio plus total Fannie Mae mortgage-backed securities and other guarantees minus Fannie Mae MBS in the portfolio, increased at a compound annualized rate of 0.1 percent in May up to a value of about $3.100 trillion, according to Fannie Mae. In January 2016, Fannie Mae's gross mortgage portfolio experi- enced a rare expansion, increasing at an annual rate of 5 percent. With May's contraction, the port- folio has now contracted in all but four months out of the last 70 months (since June 2010). The four months in which the portfolio ex- panded were January 2016, March 2015, January 2015, and December 2012. At the beginning of that stretch in June 2010, the amount of unpaid principal balance (UPB) of the loans in the portfolio was $818 billion. Fannie Mae's serious delin- quency rate, or the share of loans backed by Fannie Mae that were seriously delinquent, declined by two basis points from April to May down to 1.38 percent. Fannie Mae completed 6,552 loan modifi- cations in May, down from 7,097 in April. Citi Makes Progress in Paying Settlement Debt THE BANK HAS NOW PAID ABOUT ONE-THIRD OF ITS TOTAL CONSUMER RELIEF OWED. NEW YORK // Independent moni- tor Thomas J. Perrelli has credited New-York based Citi with another $208.6 million in consumer relief toward its $2.5 billion obliga- tion—an obligation set forth in a July 2014 settlement with the U.S. Department of Justice and five states for selling toxic residential mortgage-backed securities to in- vestors before the financial crisis. The amount credited to Citi in the most recent report brings the total of consumer relief provided by the bank up to $897.7 million, putting it approximately a third of the way toward its obligation. The bank has until 2018 to pay the $2.5 billion in consumer relief it agreed to in the settlement. The $208.6 million was pro - vided in four different categories covering the third quarter of 2015 (July 1 through September 30, 2015). The relief was provided in 2,654 transactions across four categories: Rate reductions or re- financings, donations to commu- nity development organizations, donations to legal services organi- zations, and donations to HUD- approved counseling agencies. The majority of the transactions—2,561 of them—were in the rate reduc- tions or refinance category. Prior to the monitor's most recent report, Perrelli had cred- ited Citi with $689.1 million in consumer relief covering 15,800 transactions. A Citi spokesperson declined to comment on the monitor's report. Citigroup settled with the DOJ and five states—California, New York, Illinois, Massachusetts, and Delaware—for a total of $7 billion in July 2014, amid claims that the bank misled investors as to the quality of the mortgage-backed se - curities it sold. The portion of the penalty that went to the DOJ was $4 billion—the largest civil pen - alty to date under the Financial Institutions Reform, Recovery and Enforcement Act (FIRREA). The monitor report was the fifth since the settlement was reached. Fannie Mae Eliminates Restructured Loan Policy LENDERS CAN NOW RELY ON EXISTING POLICY FOR REFINANCING AND MODIFIED LOANS. DISTRICT OF COLUMBIA // Fannie Mae has announced it is eliminating its restructured loan policy, which was originally introduced in September 2008 in response to the uncertainty of how restructured loans would perform after the financial crisis, according to Fannie Mae's most recent Selling Guide update. The elimination of the restruc - tured loan policy allows lenders to rely on existing policy when determining whether or not a restructured loan is eligible for de- livery under a refinance transac- tion or a modified mortgage loan, according to Fannie Mae. "Eliminating this policy pro- vides greater access to mortgage credit by enabling borrowers to refinance with more favorable rates and terms and streamline lender processes by removing re - quirements that required manual steps," Fannie Mae stated in the update. The policy was introduced the same month that Fannie Mae and Freddie Mac were taken in to conservatorship by the Federal Housing Finance Agency (FHFA), amid uncertainty of the perfor - mance of restructured loans. The policy was updated to allow a restructured mortgage to subse- quently be refinanced after the government established programs such as the Hardest Hit Fund to provide principal forgiveness relief to underwater borrowers. "In an effort to simply our eligi - bility guidelines and support the housing market, we are eliminat- ing our policy on restructured mortgages," Fannie Mae stated in the update. Fannie Mae also an - nounced its first change to its HomeReady product, incor- porating features enabling lenders to expand credit access in a "safe and responsible manner." Fannie Mae stated that a num - ber of product enhancements are planned this year as a result of continued assessments of HomeReady. The first change to HomeReady involves simplifying the way income limits are applied by establishing a single area median income limit of 100 percent. The previous limit was 80 percent or 100 percent, depending on where the property was located. The

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