In Mortgage Winter, affordability is job one for housing policy. In our most recent quarterly macro report, we noted that the share of loans with buydowns posted significant increases across all three agencies in the second half of 2023[1]. To see how widespread these sorts of supportive actions are, we look at down payment assistance (DPA) programs.

To start, the GSEs only allow downpayment assistance through specified second lien programs: “Community Seconds” for Fannie Mae[2] and “Affordable Seconds” for Freddie Mac[3]. While there are technical differences between programs, they are second liens funded by an approved list of government agencies, nonprofits, and private sector lenders. The liens are subordinate to the first mortgage and face various limits on combined LTV (CLTV) and note rates. These liens are neither securitized by the Enterprises nor directly reported in the data disclosures. However, we could identify those (we call it “piggyback”) by looking for loans with the original combined LTV higher than its original LTV.
​
Below find the number of owner-occupied loans containing “piggyback” liens for the HFA programs, the low-income programs (FNM “Home Ready” and FHL “Home Possible”), and other[4]:

Back in 2021, we wrote a comment on the properties of the GSE Special Eligibility Programs designed to provide lower income households with access to mortgages (HomeReady for Fannie Mae and Home Possible for Freddie Mac)[1]. Given the increasing policy focus on the provision of credit to these households[2], it is appropriate for investors to look at the investment opportunities in this area. In this note, we look at the performance of HomeReady/Home Possible Program loans (referred as Low-Income Program in the following) vs. non-special-eligibility program loans, as measured by one month CPR, controlling coupon and vintage. We focus on just two such cohorts, 1.5% and 2.0% coupon pools of 2021 vintage. By loan count, the share of Low-Income Program loans in these pools by agency for May 2022 is:

Recently, the GSE’s Fannie Mae and Freddie Mac released loan-level data associated with their “Special Eligibility Programs” that look to extend credit to low-income borrowers. As housing policy is increasingly focused on providing this market segment access to this market segment, this data will prove useful to housing analysts looking to assess the effectiveness of these programs as well as to traders looking to understand the impact on the performance of MBS containing these loans.

Briefly, each agency has three programs. There are many differences in details between the programs.

1. Low down-payment programs. Designed for low-income households with limited savings for a down payment, with flexibilities for down payment sources.
   1. FannieMae: Home Ready[1]
   2. Freddie Mac: Home Possible[2]
2. Loans underwritten by Housing Finance Agencies (HFAs)[3]
   1. FannieMae: HFA Preferred[4]
   2. Freddie Mac: HFA Advantage[5]
3. Refi programs for low-income borrowers
   1. FannieMae: Refi Now[6]
   2. Freddie Mac: Refi Possible[7]

​As the refi programs are relatively new and volumes are small, in this post we focus on the first two. For convenience, we refer to the first as the “Low-Income Programs” and the second the “HFA Programs”.
Below find the market share of Home Ready and Home Possible out of total volumes for their respective Agencies by loan count: