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GSE loan counts and volumes are running well ahead of 2014


At the midway point in the year, origination volumes and loan counts for the most popular loan types have risen dramatically over the same period in 2014.

The dollar value of the loans purchased by Fannie Mae and Freddie Mac totaled $422.7 billion through June, which is up by 57 percent compared to the first two quarters of a weak 2014. Over the same six-month period, the counts of Fannie and Freddie loans increased by 38 percent to 1.86 million loans, the government sponsored enterprises (GSEs) reported. 

The second quarter numbers, which were released in quarterly reports last week, told much the same story as in first three months of 2015. Driven by increased refinances, GSE loan activity remained far ahead of the 2014 quarterly totals.

Fannie loan count midyearIn a call with reporters, Fannie’s Chief Executive Officer Tim Mayopoulos said the uptick in refinances has obscured the picture somewhat on the pure demand for mortgages, but there has been “a slow, steady improvement with respect to housing markets.”

“I think we are starting to see a slow return to more normal conditions,” he said.

Freddie loan counts midyearMayopoulos also responded to a question from a Wall Street Journal reporter about credit availability and the penchant for lenders to add additional requirements on top of the GSE guidelines, known as credit “overlays.”

He mentioned that credit restrictions and regulations remain issues, but that FICO scores should go down and loan-to-value ratios go up as more purchase money flows into the market.

“I do think that there's a sense out there in the marketplace, among borrowers, that credit may not be available, especially for people with lower credit scores,” Mayopoulos said.

Fannie volume midyear“What we’re probably going through is a period of adjustment on the part of borrowers,” he continued. “I do think that lenders have taken some steps to take off their overlays. That's not uniform. There is variation in the marketplace. But I think you are seeing more and more lenders taking those overlays off and trying to make credit more widely available.”

As evidence of loosening credit, Mayopoulos said that more than 500 lenders are now originating loans under Fannie’s 3 percent downpayment program. He acknowledged, however, that the program’s volumes are “still pretty modest.”

Freddie Mac volumes midyear

An indicator of overall mortgage activity

GSE loans account for more than 60 percent of the overall volume, and so are a good indicator of overall mortgage activity.

Fannie and Freddie’s second quarter volumes were up 50 percent to $128.1 billion and 73 percent to $101.2 billion compared to second-quarter 2014, respectively. Fannie’s second-quarter loan counts increased by 34 percent to 573,000, and Freddie’s by nearly 60 percent to 449,000.

Volumes and counts are still running significantly lower than the strong 2013 origination numbers, however.

The increases are consistent with recent origination forecasts for the year.

 Last month, the Mortgage Bankers Association (MBA) raised its expectations for single-family volume to $1.35 trillion in 2015, up 20.5 percent from $1.12 trillion in 2014. The trade group predicted that home purchases will pick up and refinances could decline in the latter half of the year as interest rates start to rise.

MBA believes that the Federal Reserve will raise interest rates in September.

“More sales are being financed, and more applications are being approved,” MBA said in a report.  “We expect that this trend will continue into 2016 and beyond, as the broader economy and job market continue to improve.”  

Questions? Contact Victor Whitman at (425) 984-6017 or victorw@scotsmanguide.com.


 

Questions? Contact at (425) 984-6017 or victorw@scotsmanguide.com.

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