Loans acquired by Fannie Mae and Freddie Mac between 2001 and 2008 were of a higher quality and performed better than loans financed with private-label mortgage-backed securities (MBS) during the same time frame, the Federal Housing Finance Agency (FHFA) says in a new report.
The report, ‘Data on the Risk Characteristics and Performance of Single-Family Mortgages Originated from 2001-2008 and Financed in the Secondary Market,’ was issued to ‘inform the current discussion on the future of the housing finance system,’ the FHFA says.
The FHFA's research focuses on credit scores, loan-to-value ratios(LTVs), loan payment type and loan performance.
Eighty-four percent of single-family mortgages acquired by the GSEs from 2001 to 2008 were made to borrowers with FICO credit scores above 660, while 47% of private-label MBS loans originated during that period were made to borrowers in the same credit-score range. Thirty-two percent of private-sector loans were made to borrowers with FICO scores below 620.
Over 82% of GSE-acquired loans had LTVs at origination of 80% or less, while two-thirds of mortgages financed with private-label MBS had LTVs at or below 80%, with that share increasing from 54% in 2001 to 81% in 2008.
The pattern of LTVs decreasing over time, which the FHFA says is most pronounced for loans financed with private-label MBS, is consistent with the greater use of second liens to avoid mortgage insurance on low-down-payment mortgages.
Eighty-eight percent of the mortgages guaranteed by the GSEs during the seven-year span were fixed-rate loans. The share of fixed-rate products varied, ranging from 79% of GSE originations in 2004 to 96% in 2001.
Mortgages financed with private-label MBS, in contrast, were predominantly adjustable-rate mortgages (ARMs). These loans made up 70% of mortgages financed with private-label MBS originated between 2001 and 2008 and ranged from 53% of 2008 originations to 75% of 2004 originations.
About 5% of GSE-acquired, fixed-rate mortgages and 10% of GSE-acquired ARMs were over 90 days delinquent at some point before the end of 2009. Roughly 20% of fixed-rate mortgages and 30% of ARMs financed with private-label MBS were over 90-days delinquent at some point before year-end 2009, the FHFA says.
SOURCE: Federal Housing Finance Agency