Fannie and Freddie Business Jumps 80% in Second Quarter

Riding a strong refinancing wave, Fannie Mae and Freddie Mac watched their new business volume soar 80 percent between the first and second quarters to reach a near-record $463 billion in 2Q09, a new Inside Mortgage Finance analysis reveals. This was up 53 percent from year ago levels and represented the highest quarterly government-sponsored enterprise volume seen since the refi boom of 2003.

Significantly, two-thirds of the GSE business in the second quarter came from Fannie Mae, which saw nearly $100 billion in seasoned loan securitizations during the three-month period. Among the major trends seen in the GSE market in the second quarter was low loan-to-value ratios and high average credit scores. These trends were more pronounced in Freddie’s 2Q09 business where the average LTV on new business fell to 66 percent while the average FICO rose to 764.

Tougher Mortgage Underwriting Limiting New Home Sales

This year’s tougher mortgage underwriting environment is clearly limiting home sales –particularly among first-time homebuyers– a new Inside Mortgage Finance- sponsored study reveals. Down payment and credit score requirements, which are much more stringent than they were a year ago, were cited as among the biggest obstacles facing first-time homebuyers this summer. A somewhat new impediment to both first-time homebuyers and current homeowners in buying a home are appraisal problems, according to the report. The new research is based on a nationwide survey of more than 1,500 real estate agents conducted by Campbell Surveys last month.

For further information on the new study, contact John Campbell at (202) 363-2069 or john@campbellsurveys.com.

Distressed Properties Now Account for Two-Thirds of Home Sales

An ongoing flood of mortgage defaults and foreclosures is dramatically changing the home sale landscape in the U.S. According to preliminary results from a new nationwide survey of housing conditions sponsored by Inside Mortgage Finance, nearly two-thirds of all home sale transactions now involve some sort of distressed properties. This is way up from the just over 50 percent level found just four months ago.

The new research, based on a survey of more than 1,500 real estate agents conducted by Campbell Surveys, found that nearly half of the current home sale market involved real estate owned (REO). Of the REO being sold, more than half now consist of damaged homes in need of repair. The study also found that only about 14 percent of current home sales involve so-called short sales. This was actually down from a 19 percent level found earlier this year. For further information on the new study, contact John Campbell at (202) 363-2069 or john@campbellsurveys.com.

Top Direct Lenders Account for Smaller Piece of Mortgage Origination Pie

Wells Fargo, Bank of America and Chase Home Finance were the dominant forces in the home loan business in early 2009, but a still solid correspondent market left plenty of room for other lenders to find their niche. The big three in mortgage originations accounted for over half (52.0 percent) of total residential loan production during the first quarter of this year, but their combined share of direct originations–counting just retail and wholesale broker business they funded directly–was a significantly lower 29.8 percent. According to a new Inside Mortgage Finance ranking slated to be published this week, Wells was the top direct mortgage originator with a 15 percent market share, followed by BofA with 9 percent and Chase with 4 percent.

2Q09 Mortgage Originations Expected to Top $700 Billion

With one week still left, the second quarter of 2009 is shaping up to be a very big period for mortgage volume. According to new numbers compiled by Inside Mortgage Finance, some $548.1 billion in agency MBS already has been produced this quarter–making 2Q09 the third largest quarter ever. This near-record agency MBS issuance is expected to translate into more than $700 billion in mortgage originations for the second quarter. This would mark a 57 percent jump from the first quarter when $445 billion in loans were made, according to Inside Mortgage Finance.

While the second quarter is expected to end with a bang in terms of total mortgage activity, less clear is what will happen in the third quarter as the impact of higher mortgage rates starts to be felt. The Mortgage Bankers Association this week reduced its mortgage origination forecast for the full year to $2.1 trillion. That would mean that third and fourth quarter mortgage originations will average only about $500 billion per quarter in the second half.

Increased Loss Mitigation Failing to Keep Pace with Defaults, Foreclosures

The Federal Housing Finance Agency reported yesterday that Fannie Mae and Freddie Mac significantly stepped up their foreclosure prevention activities in the first  quarter of 2009. But those efforts failed to keep pace with both the jump in serious delinquencies and foreclosures started with government-sponsored enterprise mortgages during the three-month period. The latest FHFA numbers show that completed actions to prevent foreclosure–including loan modifications–rose to 86,600 at the GSEs. But those numbers were dwarfed by the rise in 60 days or more delinquent loans (173,700) and the huge jump in foreclosures started on Fannie/Freddie loans in the first quarter (243,800).

Inside Mortgage Finance is hosting an audio conference on the latest loss mitigation efforts tomorrow, Thursday June 25, at 3 pm EDT. Click here for more info.