​In March 2020, both Fannie Mae and Freddie Mac began to release information regarding “Property Valuation Method” in their loan-level data releases. Based on the availability of this flag, Recursion Co has developed the GSE Property Inspection Waiver Monthly Report to reflect mortgage underwriting trends in this area, beginning in early October.
 
Below are some sample contents of the report. Recursion has programmed the appraisal waiver eligibility guidelines for each GSE into its Cohort Analyzer. The following charts show the shares of PIW loans for each state by loan purpose. For GSE newly issued loans, the West Coast has an overall higher PIW share than the East Coast.

​The report also provides information about PIW usage. The onset of the Covid-19 pandemic has resulted in an accelerating trend for loans with appraisal waivers across all loan purposes.

​If you would like to learn more details about Recursion’s GSE Property Inspection Waiver Report, please contact inquiry@recursionco.com.

U.S. Treasury yields ticked up last week, prompting speculation about how yields might change going forward.
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In the article “Point/Counterpoint: The Case for Low Interest Rates”, Liz Moyer and Peter Nurse from Investing.com take opposite sides of the issue, with Moyer arguing that rates are likely to stay low, and Nurse arguing that the economic recovery and stimulus programs set the stage for rates to rise.
In the article, Recursion’s Chief Research Officer, Richard Koss, commented on the implications of secular shifts in the economy caused by the COVID-19 crisis, noting that these shifts don’t support predictions of a big increase in yields.
 
Read the full article at the following link:
https://www.investing.com/news/economy/pointcounterpoint-the-case-for-low-interest-rates-2266938
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In a recent post[1], we discussed how changes in pool rules at Ginnie Mae resulted in surging prepayments in their securities. Last week, the fine folks at DebtWire picked up this story and discussed innovations being proposed to finance this activity at Credit Suisse[2].
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The risks posed in the new age of COVID-19 can only be met by financial and technological innovation. We’re pleased to see DebtWire acknowledge our contribution to formulating an effective response.

In “FHFA’s Capital Rule is a Step Backward”, Jim Parrott, Bob Ryan, and Mark Zandi comment on the FHFA’s recently proposed capital rule for Fannie Mae and Freddie Mac, which requires the two entities to hold capital at least equal to a certain percentage of their total assets [1]. The authors conclude that this proposed framework would lead to higher mortgage rates, lower market share for the GSEs, higher GSE credit risk exposure, and a less stable housing finance system.
 
The authors used Recursion data to demonstrate the impact of mortgage rate changes under the proposed capital framework on mortgage market shares.
 
The paper is accessible through the link below:
https://www.economy.com/getlocalq=298f7a13834466aa81c0b495a99f6bbc&app=eccafile

A new paper by Pedro Gete at IE Business School and Michael Rehrer at the University of California San Diego entitled “Mortgage Securitization and Shadow Bank Lending” identifies a channel through which prices for FHA-insured loans rise relative to those insured by the GSE’s as the result of a change in a financial regulation. This relative price hike provides an incentive for credit-constrained nonbanks to increase their lending relative to banks by expanding their activity to less credit-worthy borrowers. A key metric utilized to measure the degree of credit loosening is median credit score. Calculation of this statistic requires the availability of the kind of big data digital tools in the cloud to order the millions of loans involved that are available to Recursion Co customers.

​Congratulations to them for exceptional research!
 
The paper will be appearing in the Journal of Financial Studies and can be found here:
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2921691

Recursion data featured in today's Commercial Mortgage Alert - Fed slows down purchasing siting market condition improves.

【Debtwire】S&P/Case-Shiller Home Price Indices futures have been a lonely corner of activity for the CME Group over the past decade, perhaps as home values have been reliable gainers amid falling unemployment, growth in the number of households, and a dearth of available homes. Now, the abrupt shift in the US economic outlook might draw attention to the derivatives, according to one market maker.