New Data Shed Light on Agency Mortgage Originators

The secondary mortgage market is generally focused on mortgage servicers. These institutions bear substantial risk, and their strategies regarding prepayments and foreclosures impact borrower welfare and investor returns. Yet they are not the whole picture. A buyer of a mortgage pool owns a collection of loans serviced by a variety of financial institutions. However, there are borrower characteristics impacting loan performance that are out of the control of the servicer, notably the strength of underwriting beyond what is captured in disclosed statistics such as credit scores. The originators matter.
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The issue we face is that loan-level data disclosed by the Agencies does not, in any case, correspond precisely to the notion of “originator” for either the GSEs or FHA besides servicers. In the case of FHA, we see the entities that pool loans to sell in accordance with Ginnie Mae regulations, known as “issuers”. For the GSEs, this is sellers, the firms that deliver loans to Fannie Mae and Freddie Mac to securitize. The sellers and issuers may be the loan originators, but many of these loans may have been purchased from other firms (through what is known as the “wholesale channel”).

Recently, we utilized supplemental data regarding originators to enhance the information we have at our disposal to assess the valuation of Agency pools. Our ability to perform this analysis relies on our expertise in normalizing massive amounts of mortgage company information.

Stay tuned for more updates.