Conforming Share of Mortgage Market Hits 94% in Early 2009

Originations of conforming mortgages–those eligible for purchase or securitization by governmental entities–continued to grow at a brisk pace in the first quarter of 2009. In fact, the conforming share of total originations in the first three months of this year hit a record high of 94 percent, according to new numbers scheduled to be released this week by Inside Mortgage Finance. A year ago the conforming share of total originations stood at 84 percent.

The mortgage market’s ongoing dependence on FHA and Fannie Mae and Freddie Mac, combined with a big jump in refinance activity, were the primary drivers of the growth in the conforming mortgage sector. Meanwhile, jumbo mortgage activity in the nonconforming sector remained at an historically low level in the first quarter of 2009. The jumbo share of new first lien mortgage originations was 5 percent in the first quarter or about the same level found in the fourth quarter. As recently as 2007, the jumbo share of total originations was 17 percent.

New Law Gives Government More Funds to Battle Mortgage Fraud

New federal legislation signed into law by President Obama last week gives the Justice Department, HUD and the FBI more funding to step up their efforts to prosecute mortgage fraud. The latest news on both federal and state anti-mortgage fraud initiatives is the focus of a new Inside Mortgage Finance audio conference on June 4 at 3 pm EDT. Hear from state regulators, a mortgage fraud legal expert and a major
lender on what strategies are being used to combat mortgage fraud in 2009.

Click here for more info.

Broker Share of New Mortgages Continued to Slide in Early 2009

Mortgage brokers, who continue to be shunned by major lenders, private mortgage insurers and the secondary market, watched their share of new mortgages fall to a record low of just 17 percent in the first quarter of 2009, according to new numbers scheduled to be released this week by Inside Mortgage Finance. The broker share was down from 22 percent a year earlier and the record high of 31 percent set back in 2005.

Surprisingly, the retail share of new mortgage lending was also down on a year-over-year basis, dropping from 52 percent in 1Q08 to 46 percent in 1Q09. Meanwhile, the correspondent share of originations–boosted by a resurgence in community bank and credit union mortgage lending–has risen from 27 to 37 percent over the past year.

Mid-size Lenders Now Dominate Business with Mortgage Brokers

With a major shift away from buying loans from mortgage brokers by the largest banks in the country, mid-size lenders–often non-banks–are now dominating the broker business. According to the latest ranking by
Inside Mortgage Finance, only one major bank–Wells Fargo–made the top five lenders in terms of mortgage broker originations during the first quarter of 2009. Provident Funding in California was the top originator of loans acquired from brokers in the first quarter with a 14.1 percent market share, followed by Wells Fargo (13.6 percent), AmTrust Bank (10.1 percent), Taylor Bean & Whitaker (7.7 percent), and MetLife Home Loans (6.8 percent).

Private MIs Continued to Post Huge Losses in Early 2009

Despite some early signs of improvement in the mortgage market this year, the private mortgage insurance industry continued to be battered by rising defaults and claims in early 2009. And a recent surge in refinance activity has done little to boost private MI business. According to new numbers scheduled to be released this week by Inside Mortgage Finance, the six private MI firms still writing new business posted an aggregate $1.2 billion net loss on their U.S. mortgage insurance activities during the first quarter.

That was slightly better than the $1.4 billion loss posted in the fourth quarter of 2008, although there is little evidence of better times ahead. Even though Fannie Mae and Freddie Mac mortgage activity, which accounts for most of private MI business, jumped 98 percent in the first quarter, new MI volume rose only 5 percent. This was because most of the new Fannie/Freddie mortgages made in 1Q09 had loan-to-value ratios below 80 percent and didn’t require private MI.

Credit Scores on New Mortgages on the Rise in 2009

Thanks to tighter underwriting standards and a big jump in refinance activity, the average credit scores associated with getting a new mortgage are rising this year. According to numbers compiled by Inside Mortgage Finance, the average FICO score found on a new mortgage in early 2009 was above 700 –one of the highest levels ever recorded.

For new Fannie Mae and Freddie Mac loans, which accounted for roughly 60 percent of all mortgages made in the first quarter of this year, the average FICO score was a whopping 760. This was up from an average FICO of 748 in 4Q08. Even FHA, which is know for accommodating A minus type credit and has no minimum credit score requirement, reported an average FICO of 694 in February. This is well above the 660-670 level found in the latter part of 2008.