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The FHA Share of Purchase Mortgages and the “K-shaped” Recovery

2/23/2021

 
​Assigning letters to economic recoveries (“V”, “L”, “U” etc.) has become a standard part of the economist’s toolkit for expressing a view on the nature of a particular forecast. The Covid-19 crisis has added a new letter to the lexicon, “K”. In a “K-shaped” recovery, some segment of the population experiences relatively strong growth, while others are left behind. Since housing tenure is an essential determinant of the distribution of household wealth, it is not surprising that we can clearly see this shape in the relative trends in house prices versus rents:
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The RG Pool Arrives!

2/9/2021

 
Sometimes, future trends can be seen in the weeds. In this case it’s the 12 FHA and 1 VA mortgages (out of tens of millions) that were securitized this month in Ginnie Mae pool G2 CA8080, the very first RG pool, issued by PNC Bank, delivered to the GNMII20C program. This pool type was first announced by Ginnie Mae last December 4[1], and consists entirely of loans that were bought out of pools and cured with partial claims. These are eligible for resecuritization after 6 months without a missed payment. A previous announcement was made by Ginnie Mae last June that prohibited loans in forbearance from being bought out of pools and resecuritized into any existing pool type[2]. This rule was enacted after large banks purchased a massive number of loans in forbearance and resecuritized them immediately, leading to concerns on the part of investors[3].

Is there anything interesting about these loans?
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The loans were all originated in 2011-2013, so they are pretty seasoned. Note rates range from 3.75% - 4.25%. Underwriting characteristics vary considerably, with credit scores ranging from 533 to 829, for example. While original LTV’s are generally high (8/13 greater than 90) home price appreciation over the last 8-10 years likely implies that borrowers have considerable equity.
​
More of this to come as forbearance programs begin to run out later this year.

[1] https://www.ginniemae.gov/issuers/program_guidelines/Pages/mbsguideapmslibdisppage.aspx?ParamID=117
[2] https://www.ginniemae.gov/issuers/program_guidelines/Pages/mbsguideapmslibdisppage.aspx?ParamID=109
[3] https://www.recursionco.com/blog/the-great-prepay

FHA Delinquencies

1/25/2021

 
In a recent post, we discussed the application of the FHA Neighborhood Watch dataset to understanding the market landscape for this program[1]. Peering a bit deeper, more insights can be obtained. We just updated this dataset through December so it is an opportune time to take a look at FHA loan performance.
​
First, the share of FHA loans in pools [2]continued to decline at the end of the year:
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​The loans in pools fell by about 60,000 in December while the total fell by 40,000 implying that perhaps 20,000 loans were purchased out of pools, and presumably modified as foreclosures are currently forbidden. Interestingly, the number of loans in pools new issuance with mods rose for the first time since July:
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It shows even though most of the loans are expected to be cured by partial claims, modification remains a tool to work out delinquent loans. We will have separate pieces focusing on partial claims in future posts.

Now what about delinquencies? What is the delinquency rate[3] of loans in the FHA program?
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​As servicers may buy serious delinquent loans out of pools, and banks tend to hold conventional loans not FHA loans on their balance sheet, the overall FHA delinquency rate reported by FHA Neighborhood Watch data is generally higher than that for loans in pools. When COVID-19 first struck last spring, the 30-day delinquency rate spiked, narrowing the gap with the total figure, but many of these cured as labor markets recovered. More recently, lenders have picked up the pace of purchasing delinquent loans out of pools, as they have the financial incentive to modify the loans to allow the borrowers to become current and then resecuritize them. A key question for 2021 is when forbearance programs expire, how many borrowers will be able to work with lenders to keep their homes, and how many will lose them? Stay tuned.

[1] https://www.recursionco.com/blog/fha-buyouts-and-loan-counts
[2] “In pools” means the loans were securitized by Ginnie Mae issuers
[3] The delinquency rates are calculated using the delinquent loan counts divided by total loan counts

FHA Buyouts and Loan Counts

1/8/2021

 
So once again we look at the theme of 2021 as a transition year. A lot of the year will be spent peering at the data to tease out emerging trends as we head towards the new normal.
​
The discernment of new trends requires the use of new data, and new tools. We have recently brought into the Recursion data set FHA Neighborhood Watch data, which was discussed previously in the context of partial claims[1]. These are the suspended mortgage payments for loans in forbearance that are rolled into a second lien, repaid only when the loan is extinguished. This is particularly useful for tracking the financial burden of forbearance by servicer. To accomplish this in a comprehensive manner, FHA releases this data for all endorsed loans. Using this data, we can examine trends in all loans vs those securitized in Ginnie Mae pools. Our data for the FHA Neighborhood Watch extends back only to April 2020, but the last eight months have been an interesting period in mortgage markets.
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