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GSE loan volume surges in 2016

Interest in the most popular U.S. home mortgages surged in 2016.

The combined volume of single-family loans purchased by the government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac totaled $909.2 billion, up nearly 24 percent from the 2015 mark of $733 billion, an analysis of GSE’s annual reports shows.

FanniecountThe GSE combined loan counts for 2016 totaled 4.2 million, up more than 13 percent from the 3.7 million loans originated in 2015. 

Freddiecount17Fannie and Freddie are the most important sources of liquidity in the single-family  mortgage market. The GSEs purchase and securitize more than half of all residential loans in the U.S., making their activity an indicator of mortgage origination trends.

FannievoluOf the two GSEs, Fannie Mae saw the more significant gains over 2015.

FreddievoluFannie’s 2016 loan volume of $512.6 billion was 34 percent higher than in 2014, and its loan count rose by nearly 18 percent, to 2.5 million loans. Notably, Fannie experienced an 84 percent year-over-year surge in refinance activity in the fourth quarter, to 459,000 refis, up from 249,000 in 2015.

During a conference call with reporters last week, Fannie Chief Executive Officer Tim Mayopoulos said the company has been expanding its reach through innovations that are pushing the industry closer to a fully digital mortgage. Late last year, Fannie rolled out a suite of data-validation and underwriting products known as "Day 1 Certainty." This, he said, has helped simply the loan process by reducing  paperwork and provided clarity to lenders that have been skittish about the legal liability and buyback risk should loans default.

He also noted that the market for refinances and purchase loans was solid last year.

“Overall, I would say that we think that mortgage market conditions are good and stable, and we think they will continue to be for the foreseeable future,” Mayopoulos told reporters.

Freddie’s overall 2016 volume rose by nearly 12 percent in 2016, to $393 billion, and its loan counts were up 6 percent, to nearly 1.7 million loans.

Most analysts believe that refinance activity will drop off sharply in 2017 as interest rates rise, a factor that will lower the GSE counts as well as loan counts for other loan programs. The Mortgage Bankers Association predicted that overall single-family originations will fall to $1.56 trillion in 2017, down from $1.89 trillion in 2016. Aside from Fannie and Freddie loans, this forecast includes the government-loan programs.  

A rise in mortgage rates toward the end of the last year caused some unexpected results, said Daren Blomquist, senior vice president with Attom Data Solutions. He said purchase activity tailed off after reaching a 10-year high in the past third quarter, while refinance activity surged.

“The rise in interest rates seems to have pushed more homeowners into risk-aversion mode, [including] locking in the still relatively low interest rates before they rise further and pulling back on the leveraging of home equity,” Blomquist told Scotsman Guide News. “The recent interest rate rise has also pushed prospective buyers into risk-aversion mode, causing them to pullback in taking on purchase debt in a less certain political environment.”


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