mortgage finance SECTOR
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RESIDENTIAL MORTGAGE MARKET: SIZE & INVESTORS
Multifamily Residential Mortgages: $1.515 trillion market. GSEs, federal agencies and federal, state & local governments carry $795 billion of risk (prior to risk transfer actions). Multifamily residential mortgage assets are up 8.5% from a year ago.
Single Family Residential Mortgages: $10.965 trillion market. GSEs and federal agencies carry $6.908 trillion of risk (prior to FNMA/FHLMC risk transfer actions). Single family residential mortgage assets are up 2.5% from a year ago.
RESIDENTIAL MORTGAGE ORIGINATION TRENDS
MORTGAGE INTEREST RATES
Mortgage Interest Rates: Rates have risen, but remain volatile, following the Fed implementation of their plans to normalize interest rates. 30-year fixed rate has fallen recently and are now at ~3.70% level. Spreads to U.S. Treasuries are wider by approximately 25 bps when compared to historic averages.
INVESTORS IN SINGLE FAMILY RESIDENTIAL MORTGAGE ASSETS
Investors in SF Mortgage Assets - Banks: Two noteworthy trends: (1) mortgage assets held on bank balance sheets have continued downward trend and dropped to ~26%. and (2) MBS has overtaken mortgage loans as mortgage assets of choice.
Investors in Single Family Residential Mortgage Assets: Banks & thrifts remain largest investors with $4.8 trillion (includes home equity loans) and 43 percent share of market. The Federal Reserve is next largest with $1.533 trillion and 14 percent share. With announcement of normalization program, several investor groups have picked up their holdings including banks & thrifts, REITs, credit unions and foreign investors.
SECONDARY MORTGAGE MARKET - AGENCY MBS
Agency MBS: $7.344 trillion outstanding - up 4.8% from year ago. $1.409 trillion issued latest twelve months through August 2019 - up 1.5%.
Agency MBS - Fannie Mae: $3.201 trillion outstanding - up 3.6% from year ago. $551 billion issued latest twelve months through August 2019 - down 1%.
Agency MBS - Freddie Mac: $2.179 trillion outstanding - up 7.0% from year ago. $439 billion issued latest twelve months through August 2019 - up 7.8%.
Agency MBS - Ginnie Mae: $1.964 trillion outstanding - up 4.5% from year ago. $419 billion issued latest twelve months through August 2019 - down 1%.
Agency MBS - MBS Issuance Market Share: Agency MBS issuance hovers around 97 percent of all mortgage-backed securities issued during latest twelve months. PLMBS remains nominal and primarily focused on jumbo and non-prime issuance.
Agency MBS - GNMA Market Share: GNMA continues to hold to its gains in agency MBS issuance with market share at +30%. Commencing with the mortgage crisis in the Great Recession, various government programs such as FHA became key sources of mortgage products.
FEDERAL RESERVE BANK: MBS MARKET IMPACT
MBS Holdings of Federal Reserve: $1.463 trillion in agency MBS holdings - all purchased since 2008. Since balance sheet normalization program commenced in Q4 2017, MBS holdings have decreased $(319) billion, or (17.9)% since mid-September 2017.
Commencing August 2019, the Fed will allow the agency MBS portfolio to run off.
MBS Purchases by Federal Reserve: Federal Reserve purchases of agency MBS has declined from the mid-20% level, dropping to <5% of agency MBS issuance at end of 2018; and <1% during 2019..
Beginning August 2019, the Fed will no longer be purchasing newly issued agency MBS.
FHA MORTGAGE MARKET ACTIVITY
FHA Purchase Volumes: The FHA purchase volume of endorsements totaled 737 thousand for LTM fiscal Q3 2019 - down 8%. Dollar endorsements total $198 billion for LTM fiscal 2019 Q3, down ~9%.
COMMUNITY BANKS & SMALL LENDER MORTGAGE MARKET ACTIVITY
Bank Mortgage Loan Quality: Mortgage loan delinquency trends continue to decline. Small bank lenders continue to show substantially better credit quality than top 100 banking institutions.
Banking Mortgage Origination Activity: While non-bank mortgage firms originate the majority of residential mortgage loans, banks continue to have a significant, but declining, share. Banks originated mortgage loans for resale of $180 billion in YTD Q122019. And community banks - < $10 billion in total assets - originated $44 billion in YTD Q2 2019.