mortgage finance SECTOR
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RESIDENTIAL MORTGAGE MARKET: SIZE & INVESTORS
Multifamily Residential Mortgages: $1.416 trillion market. GSEs, federal agencies and federal, state & local governments carry $778 billion of risk (prior to risk transfer actions). Multifamily residential mortgage assets are up 8.1% from a year ago.
Single Family Residential Mortgages: $10.882 trillion market. GSEs and federal agencies carry $6.829 trillion of risk (prior to FNMA/FHLMC risk transfer actions). Single family residential mortgage assets are up 2.7% 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 is at approximately 4.10% level. Spreads to U.S. Treasuries are slightly better than 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 $4.6 trillion (includes home equity loans) and 43 percent share of market. The Federal Reserve is next largest with over $1.637 trillion and 15 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: $7.192 trillion outstanding - up 4.7% from year ago. $1.273 trillion issued latest twelve months through March 2019 - down 9.5%.
Agency MBS - Fannie Mae: $3.145 trillion outstanding - up 3.2% from year ago. $508 billion issued latest twelve months through March 2019 - down 10.4%.
Agency MBS - Freddie Mac: $2.108 trillion outstanding - up 5.8% from year ago. $383 billion issued latest twelve months through March 2019 - down 3.3%.
Agency MBS - Ginnie Mae: $1.939 trillion outstanding - up 6.0% from year ago. $382 billion issued latest twelve months through March 2019 - down 14.0%.
Agency MBS - MBS Issuance Market Share: Agency MBS issuance hovers around 96 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: $1.575 trillion in agency MBS holdings - all purchased since 2008. Since balance sheet normalization program commenced in Q4 2017, MBS holdings have decreased $(207) billion, or (11.6)% since mid-September 2017.
MBS Purchases by Federal Reserve: Federal Reserve purchases of agency MBS has declined from the mid-20% level to <10% of agency MBS issuance year-to-date 2018; and <5% in recent months. Less than $1 billion of agency MBS securities purchased by Fed for latest three months compared to $61 billion for same period one year ago. And the Fed’s market share of MBS issuance has fallen from 17% to less than 1% for those three month periods.
For all practical purposes, the Fed is no longer a participant in the agency MBS market.
FHA MORTGAGE MARKET ACTIVITY
FHA Purchase Volumes: The FHA purchase volume of endorsements totaled 742 thousand for LTM fiscal Q2 2019 - down 18%. Dollar endorsements total $155 billion for LTM fiscal 2019 Q2.
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: Banks continue to have a significant share of mortgage originations, although declining. Banks originated mortgage loans for resale of $158 billion in Q4 2018. And community banks - < $10 billion in total assets - originated $47 billion in Q4 2018.