On November 1, 2024 Commercial Mortgage Alert published an article “ Fannie Shifting Further From Floaters”, which discussed the impact of higher interest rates on the distribution of its multifamily issuance:
 
“Fannie has not purchased a floating-rate or fixed/float­ing hybrid multifamily loan since November 2023, according to data from Recursion. After purchasing $15.26 billion of floaters and hybrids in 2022, or 22.1% of total volume, the agency acquired just $413.2 million of floaters last year, or 0.8% of volume, according to Recursion.”
 
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Recursion has released  Macro Housing Analytics October 2024 report. Please click to READ FULL REPORT .

In a recent post, we discussed macro factors driving delinquency rates across the mortgage landscape.[1] In this brief update, we make two comments, one fundamental and the second technical: First, we look at the possibility that the relatively greater financial distress observed among FHA borrowers compared to conforming borrowers at present is due, at least in part, to the relatively higher debt service levels held in the former cohort.  Second, we perform an exercise matching FHA loan in HMDA to those in the Ginnie Mae disclosures to measure natural disasters’ impact on loan performance.

Debt and Delinquency [DQ]
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In our prior post, we noted the large differential in DQs across consumer sectors: autos, credit cards, and mortgages since interest rates began to rise in early 2022. We now have an additional quarter of data from the Federal Reserve Bank of NY which is summarized here:

With many homeowners locked into their properties by low mortgage rates, and listings for existing homes are generally low, the onus for property availability in desirable areas falls on the homebuilders with new homes. The newly released HMDA data shows the population is flowing towards areas of higher climate risk[1], with the understanding that our research covers new homes with a mortgage only. HMDA data does not come with client risk measurements. However, FHFA provides a list of census tracts as “Designated Disaster Areas (DDAs)”, which are located “in a county designated by the federal government as adversely affected by a declared major disaster under the Federal Emergency Management Agency’s (FEMA) administration, where housing assistance payments were authorized by FEMA”[2].We incorporate these into our HMDA Analyzer, which contains lender and borrower information. By so doing, we can perform complex analyses of mortgage origination in many dimensions.
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We first take a look at the heat map for 2023 DDAs provided by FHFA[3], noticing that DDAs are concentrated in coastal states, especially Florida and Texas:

On August 9, 2024, Commercial Mortgage Alert (CMA) published an article discussing the impact of a policy change instituted by Fannie Mae in late June that requires a 50-50 split on all yield spread premiums with originators, removing a threshold of $100,000 previously in place.

According to CMA, “In the five weeks through Aug. 2, the agency saw a 47.7% year-over-year decrease, to $157.2 million, in the issuance of multifamily loans with sub-$5 million balances. That compares to a 13.7% drop across all Fannie loans, according to data from Recursion Co.”​

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​Regular readers of Recursion blogs will recall that the final version of the HMDA data[1] is generally released about mid-year and contains data of interest to those looking into important issues related to the role of housing in social trends. In this post, we will focus on both borrower and geographic breakdowns by loan class as HMDA 2023 is out. To perform the socioeconomic analysis, it is often very useful to link HMDA data with outside databases from other publicly available data sources such as FHFA Duty-to-Server, or FEMA National Risk Index, that provides various characteristics at the census tract level.
 
Low-income households
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Ginnie Mae discloses low-to-moderate borrower exposure at the pool level.  Using its definition, Recursion constructed the flag in HMDA. We start by looking at the share that low-to-moderate income households obtained in purchase mortgage originations from 2014-2023[2].

For the first time in a while, second liens have come to the forefront of mortgage industry conversation. To a large degree, this is natural because of the unprecedented rise in home prices that we have experienced since the Covid shock. These seconds can be so-called “piggyback” loans that are used to keep the first lien under the conforming loan limit at origination, or they may be “closed seconds” that are used by consumers to extract equity from gains in home price valuations. This product may be superior to the other traditional form of equity extraction, cash-out refinancings, as this vehicle requires that the entirety of the original mortgage be refinanced, not just the extraction amount, often from a much lower level. Finally, while not strictly a loan, Home Equity Lines of Credit (HELOCs) are also popular for this purpose.
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Below find the share of second liens, by both loan count and by the original loan amount from HMDA[1]: