Housing Finance At A Glance: A Monthly Chartbook: April 2015

April 2015 1 A MONTHLY CHARTBOOK HOUSING FINANCE POLICY CENTER HOUSING FINANCE AT A GLANCE ABOUT THE CHARTBOOK The Housing Finance Policy Center’s (HFPC) mission is to produce analyses and ideas that promote sound public policy, efficient markets, and access to economic opportunity in the area of housing finance. At A Glance, a monthly chartbook and data source for policymakers, academics, journalists, and others interested in the government’s role in mortgage markets, is at the heart of this mission. We welcome feedback from our readers on how we can make At A Glance a more useful publication. Please email any comments or questions to ataglance@urban.org. To receive regular updates from the Housing Finance Policy Center, please visit urban.org/center/hfpc to sign up for our bi-weekly newsletter. HOUSING FINANCE POLICY CENTER STAFF Laurie Goodman Center Director Ellen Seidman Senior Fellow Jim Parrott Senior Fellow Sheryl Pardo Associate Director of Communications Jun Zhu Senior Financial Methodologist Wei Li Senior Research Associate Bing Bai Research Associate I Karan Kaul Research Associate I Taz George Research Associate II Maia Woluchem Research Assistant Alison Rincon Center Administrator INTRODUCTION Home equity is outpacing mortgage debt Our April chartbook blog outlines three reasons why recent increases in household equity aren’t necessarily a cause for celebration. Household equity has been increasing since 2011 as house prices have grown; in contrast, household mortgage debt outstanding has fallen every year between 2007 and 2014 (page 6). When housing markets are healthy, appreciation in house prices has historically resulted in commensurate increases in mortgage debt, with new homeowners entering the market and existing homeowners “trading up” for larger homes via larger mortgages. Therefore, the recent increase in house prices without a corresponding increase in mortgage debt outstanding suggests that housing markets are far from normal. Three factors are driving this divergence between household equity and mortgage debt (i) house price growth over the last two years, (ii) extraordinarily tight credit, and (iii) strong demand for renting. FHFA’s final decision on g-fees and PMIERs On April 17th, the Federal Housing Finance Agency (FHFA) and the GSEs announced their much anticipated final decisions regarding the guarantee-fees charged by the GSEs, and the new eligibility requirements for private mortgage insurers. On the g-fee front, FHFA eliminated the Adverse Market Charge for all mortgages guaranteed by the GSEs. In order to keep these changes revenue-neutral, the FHFA instituted additional changes to g-fees based on loan amount, loan-to-value and FICO scores. On the PMIER front, the most noteworthy announcement was the decision to not allow PMIs to count future premiums towards capital requirements. Urban Institute senior fellow Jim Parrot analyzed both the g-fee and PMIER changes in greater detail in a recent issue brief. Four million loans missing due to tight credit We released a detailed analysis of the impact of tight lending standards on credit availability from 2009 to 2013. Mortgage credit is much tighter today than it was at the peak of the housing bubble in 2005 and 2006, as is both expected and appropriate. But credit is also significantly tighter than it was in 2001, a period in which credit availability was more balanced. According to our estimates, an additional 1.25 million loans would have been made in 2013 if the relatively cautious credit standards of 2001had been in place. Between 2009 and 2013, the number of “missing loans” grew from 0.5 million to 1.25 million annually, for a total of more than 4 million missing loans over five years. The GSEs’ shrinking multifamily presence According to our recent issue brief, Fannie Mae’s and Freddie Mac’s role in the multifamily market has not only shrunk significantly post-crisis, but has also dipped below the level of the early 2000s – a period in which the housing market was stable. A closer examination of the GSEs’ multifamily financing also reveals that a disproportionately large share of recent declines has come from underserved segments of the multifamily market, causing these renters to spend even more on housing or live in inadequate housing conditions. We urge the FHFA to take additional steps to prevent further shrinkage of GSEs role for underserved populations and markets. INSIDE THIS ISSUE •Non-agency MBS issuance shows signs of life (page 10) •Fannie, Freddie, and the MBA expect gains in originations; agency gross issuance rises in Q1 2015 (pages 12, 30) •Median borrower FICO score at origination is 749; median LTV is 89 (page 14) •Freddie Mac announces new $16.5 billion risk-sharing deal (page 21) •Principal reduction and deferral mods are becoming less common, while term extensions are picking up (page 27) CONTENTS Overview Market Size Overview Value of the