Fannie’s and Freddie’s Mortgage Volume Plunged in July

Despite hopes that Fannie Mae and Freddie Mac will continue to support the U.S. mortgage market in a big way, both government-sponsored enterprises dramatically reduced their mortgage purchase activity in July.

According to new monthly numbers released this week, Fannie’s new business volume – both securitizations and portfolio purchases – tumbled an unexpectedly large 34 percent from $63.8 billion to $42.4 billion between June and July. This was one of the largest single month drops – both in terms of percent and dollar volume – ever posted by Fannie. It also made July’s activity the lowest monthly level seen by Fannie since early 2006.

The decline at Freddie Mac was even larger at 36 percent as the GSE’s new business fell from $53.7 billion in June to $34.6 billion in July. Freddie’s July mortgage activity was the lowest since January of this year.

FHA Captures 23% Share of Mortgage Market in July

The unexpectedly sharp declines in mortgage business at Fannie Mae and Freddie Mac in July helped boost FHA’s share of the mortgage market last month to a hefty 23 percent, according to preliminary numbers compiled by Inside Mortgage Finance. This compares with a second quarter 2008 market share of 13 percent and a 2007 total year market share of just 3 percent. At the current pace, FHA is on track to account for about 30 percent of all new mortgages made by the end of this year.

FHA Rolls Out Higher Premium Rates for Coming Year

In response to new legislation that requires FHA to table a new risk-based pricing scheme for one year, the agency yesterday unveiled a new higher FHA premium structure that generally hikes fees across the board. The upfront fee for most borrowers will rise from 1.50 to 1.75 percent beginning Oct. 1. Streamline refi borrowers will be rewarded with a lower fee of 1.50 percent while FHASecure delinquent borrowers will be asked to pay a higher fee of 3.00 percent. The new premium structure also requires borrowers with lower credit scores to put at least 10 percent down when obtaining a new FHA mortgage.

Non-Conforming Mortgage Market All But Vanishes in 2Q08

The non-conforming sector of the residential mortgage market, which as recently as 2006 accounted for half of all new originations, watched its fortunes continue to sour in the second quarter of 2008.

According to numbers compiled by Inside Mortgage Finance, combined jumbo, subprime, and Alt A originations accounted for just 8 percent of total mortgage activity in the most recent three-month period. The jumbo share of new loans made plummeted to only 6 percent in the quarter, while the subprime share fell to 0.5 percent and the Alt A share slipped to 1.6 percent. The conforming mortgage sector – Fannie Mae/Freddie Mac and FHA/VA – has become the only game in town for many borrowers. FHA posted the biggest market share gains of any sector in 2Q08.

Fannie and Freddie Face Another Investor Confidence Crisis

The stock prices of Fannie Mae and Freddie Mac were continuing to fall to dangerously low levels this morning, fueling speculation that the Treasury Department would soon be forced to offer more visible government support to the struggling companies. By mid morning, Fannie’s stock price had sunk to $4.93 a share while Freddie’s had fallen to $3.28 a share. This was well below the levels seen last month when Treasury was forced to step in and ask Congress for the tools necessary to bail out the two government-sponsored enterprises if needed.

This week, investor concerns centered on a perceived lack of capital at both GSEs, particularly Freddie. There was growing speculation that Treasury would announce as early as today specific government support for the GSEs in the latest effort to boost investor confidence.

Genworth Becomes Top MI as Industry’s Troubles Grow

Genworth Financial, the fourth most active private mortgage insurance company a year ago, moved into first place in the second quarter of 2008, according to numbers compiled by Inside Mortgage Finance. Genworth has successfully capitalized on the woes of other MIs, who have watched their financial positions deteriorate as mortgage-related claims and losses have mounted.

While the MI industry as a whole watched its new business volume tumble a hefty 24 percent in the first six months on a year-over-year basis, Genworth posted a huge 42 percent gain in activity. Genworth wrote $14 billion in new primary MI in the second quarter – a level that amounted to one quarter of the total business written in the three-month period.