The single-family agency MBS market benefits from a set of consistent standards that allows traders and analysts to make straightforward judgments about relative value between securities. This is particularly the case for the conforming mortgage market since the single security UMBS market was launched in June 2019. The result is a market that is very liquid, supporting homeownership and affordability.
There is a very different situation in the multifamily space. The programs are very distinct across, and even within Agencies. This is particularly the case for the Ginnie Mae program, which consists of construction loans that are lines of credit that are drawn upon, and then converted to project loans. The two largest programs within the GSE multifamily space are the Fannie Mae DUS program, where losses are shared between Fannie Mae and the underwriting banks, and the Freddie K-deals, where losses are shared with investors. Both Agencies have numerous smaller programs as well with their own distinct characteristics.
In the single-family space, the unit of analysis is the mortgage. These are pooled, and pools and loans are sometimes, in turn, aggregated into CMOs (We classify highly-structured deals such as Freddie K, Q, ML, SB, etc., as CMOs, too). Investors have a complete picture of activity in this market. In the multifamily space, however, the picture is murkier. There are two reasons for this. First is the multitude of different programs across the Agencies as cited above. The second is that a consistent data set for multifamily loans across the three agencies is not easily produced, as loans are typically securitized into pools, however, Freddie tends to securitize loans directly into structures more like CMOs, such as Freddie K, Q, SBL programs. A year ago, we posted a note that described our bottom-up approach to sizing the multifamily market and validated this by comparing our calculation to similar figures obtained from the Federal Reserve Z.1 report. We are pleased to report that this approach continues to provide an accurate picture of total market size as our figures for the third quarter have consistently aligned within a margin of 0.5% for the past three years.
Recursion data was cited in an article published on December 7 in the Washington Post “The racial homeownership gap is widening. New rules might make it worse. ” The article states that more stringent capital requirements facing banks will make mortgages more expensive for cash-poor borrowers, which tend to disproportionately impact minority households.
The article goes on to say that non-bank lenders not subject to these rules have stepped in to provide mortgages as banks have reduced their presence in the market. “In 2014, four of the top five mortgage lenders were banks; in 2022, only Wells Fargo remained in the group, according to the mortgage data analysis firm Recursion.”
Recursion is pleased to provide accurate and timely data to inform the public debate on these important issues.
Some months ago, we set off to assess the impact of high interest rates on the usage of appraisal waivers. It soon became clear that we first needed to look in some detail at recent developments in the structure of the new market for appraisal modernization. In this piece, we return to the original question.
To begin we look at the landscape of loan deliveries for Freddie Mac and Fannie Mae across the suite of available approaches towards appraising property values. Below find such charts for purchase mortgages.