mortgage finance SECTOR

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RESIDENTIAL MORTGAGE MARKET: SIZE & INVESTORS

Multifamily Residential Mortgages: $1.432 trillion market. GSEs, federal agencies and federal, state & local governments carry $784 billion of risk (prior to risk transfer actions). Multifamily residential mortgage assets are up 7.9% from a year ago.

Single Family Residential Mortgages: $10.905 trillion market. GSEs and federal agencies carry $6.864 trillion of risk (prior to FNMA/FHLMC risk transfer actions). Single family residential mortgage assets are up 2.6% 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 below 3.90% level. Spreads to U.S. Treasuries are wider 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 $4.7 trillion (includes home equity loans) and 43 percent share of market. The Federal Reserve is next largest with $1.593 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: $7.241 trillion outstanding - up 4.7% from year ago. $1.300 trillion issued latest twelve months through May 2019 - down 8%.

Agency MBS - Fannie Mae: $3.159 trillion outstanding - up 3.3% from year ago. $513 billion issued latest twelve months through May 2019 - down 9%.

 

Agency MBS - Freddie Mac: $2.135 trillion outstanding - up 6.3% from year ago. $400 billion issued latest twelve months through May2019 - down 1.2%.

Agency MBS - Ginnie Mae: $1.947 trillion outstanding - up 5.4% from year ago. $387 billion issued latest twelve months through May2019 - down 11%.

 

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: $1.533 trillion in agency MBS holdings - all purchased since 2008. Since balance sheet normalization program commenced in Q4 2017, MBS holdings have decreased $(250) billion, or (14.0)% since mid-September 2017.

MBS Purchases by Federal Reserve: Federal Reserve purchases of agency MBS has declined from the mid-20% level to <5% of agency MBS issuance at end of 2018; and <1% during 2019..

For all practical purposes, the Fed is no longer a participant in the newly issued 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: 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 $126 billion in Q1 2019. And community banks - < $10 billion in total assets - originated $30 billion in Q1 2019.