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Loss Severity on Residential Mortgages: Evidence from Freddie Mac's Newest Data (Policy Briefs)
Laurie Goodman, Jun Zhu

In this brief, new loan-level data recently released by Freddie Mac on more than 17 million single-family mortgages are analyzed to reveal a range of new and useful insights into the ultimate financial losses associated with a loan after it experiences a credit event. Conclusions described include mortgage insurance significantly lowers loss severities and the preset severity schedule currently in place is reasonable for loans with a loan-to-value (LTV) ratio of 60–80 but too high for deals backed by higher-LTV loans. We also find that small loans have higher severity than larger loans, that real-estate-owned (REO) sales have higher severity than short sales, and that there is no stable relationship between the state of origination and severity. Finally, we review the components of loss—liquidation value and expenses—and find that the latter contributes significantly to the ultimate loss.

Posted to Web: February 01, 2015Publication Date: February 01, 2015

Housing Finance At A Glance: A Monthly Chartbook : January 2015 (Fact Sheet / Data at a Glance)
Laurie Goodman, Ellen Seidman, Jim Parrott, Sheryl Pardo, Jun Zhu, Wei Li, Bing Bai, Karan Kaul, Taz George, Maia Woluchem, Alison Rincon

The January edition of At A Glance, the Housing Finance Policy Center’s reference guide for mortgage and housing market data, includes a comparison of FHA and conventional high-LTV lending fees, updated origination forecasts from the GSEs and MBA, and the latest measures of credit availability nationally and by metropolitan area.

Posted to Web: January 20, 2015Publication Date: January 20, 2015

The Federal Housing Finance Agency's Federal Home Loan Bank Members Proposal Overshoots the Mark (Policy Briefs)
Laurie Goodman, Jim Parrott, Karan Kaul

This brief examines the Federal Housing Finance Agency's proposed rule to prohibit captive insurers from becoming Federal Home Loan Bank (FHLB) members, a move which will essentially ban real estate investment trusts (REITs) from becoming FHLB members. Our analysis reviews the proposal's economic and practical considerations and concludes that any safety and soundness concerns pertaining to REITs and captive insurers can be effectively mitigated through existing regulation. Ultimately, we urge FHFA to take a more integrated view of the purpose REITs serve within the broader mortgage market, how captive insurers facilitate that purpose, and suggest alternatives for addressing the Agency's concerns.

Posted to Web: January 13, 2015Publication Date: January 13, 2015

A review and critique of the 2014 actuarial assessment of FHA's Mutual Mortgage Insurance Fund (Research Brief)
Laurie Goodman

The 2014 actuarial assessment of the Federal Housing Administration’s main funding source for its loan insurance program – the Mutual Mortgage Insurance Fund (MMI)- reveals that the FHA’s financial situation is much improved but not as strong as last year’s predictions suggested it would be. This HFPC analysis lays out the methods used in the actuarial report and explains why the MMI’s current status should have no impact on the decision as to whether to lower premiums.

Posted to Web: January 06, 2015Publication Date: January 06, 2015

Servicing Is an Underappreciated Constraint on Credit Access (Research Brief)
Laurie Goodman

The heightened and uncertain cost of servicing delinquent mortgage loans is a significant, although underappreciated, constraint on access to credit. Lenders can price loans to reflect the anticipated servicing costs, but it is very difficult to price for the uncertain costs of default servicing. The penalties resulting from not meeting the GSE and FHA timelines, along with restrictive and anachronistic limits on reasonable foreclosure expenses, create uncertainties that are difficult to quantify and price for. The result: lenders forgo lending to borrowers more likely to go delinquent. The FHFA has made great strides with recent changes to compensatory fees, but more needs to be done. Servicing delinquent FHA loans presents an even greater challenge. To expand the tight credit box, these servicing issues must be addressed.

Posted to Web: December 16, 2014Publication Date: December 16, 2014

Housing Finance At A Glance: A Monthly Chartbook : December 2014 (Fact Sheet / Data at a Glance)
Laurie Goodman, Ellen Seidman, Jim Parrott, Sheryl Pardo, Jun Zhu, Wei Li, Bing Bai, Taz George, Maia Woluchem, Alison Rincon

This month’s edition of At A Glance, the Housing Finance Policy Center’s reference guide for mortgage and housing market data, includes updated indicators of credit availability, a breakdown of the composition of the US Housing Market from the Federal Reserve Flow of Funds report, and details of the latest GSE risk-sharing deals.

Posted to Web: December 16, 2014Publication Date: December 16, 2014

What Counts: Harnessing Data for America's Communities (Book)
Naomi Cytron, Kathryn L.S. Pettit, G. Thomas Kingsley, David J. Erickson, Ellen Seidman

Today’s unprecedented availability of data and capacity for analysis provide powerful new tools for broadening opportunity. In a series of essays from some of the nation’s most innovative social entrepreneurs and data experts, What Counts: Harnessing Data for America’s Communities challenges policymakers, funders and practitioners across sectors to rethink how they use data to address social issues such as poverty, health, and education.

Posted to Web: December 10, 2014Publication Date: December 10, 2014

A Better Measure of Mortgage Application Denial Rates (Research Report)
Wei Li, Laurie Goodman

The Housing Finance Policy Center’s new measure of the rate at which mortgage applications are denied – the real denial rate (RDR)– improves upon existing denial rate measures by considering only low-credit-profile applicants. The RDR better tracks trends in credit accessibility over time and reveals that the conventional channel has had a consistently tighter credit box over time than the government channel. The RDR also shows much smaller racial and ethnic distinctions in mortgage denial rates over time than are shown by the traditional measure.

Posted to Web: December 02, 2014Publication Date: December 02, 2014

Measuring Mortgage Credit Availability Using Ex-Ante Probability of Default (Research Report)
Wei Li, Laurie Goodman

The Housing Finance Policy Center’s new measure of credit availability--the HCAI--improves upon existing measures of credit availability by calculating with great specificity how much actual risk the market is taking at any given point in time. The HCAI is extremely robust and objective and produces intuitive results because it takes several borrower’s characteristics as well as loan characteristics into account and is weighted for the likelihood of economic downturns. It is also completely transparent.

Posted to Web: November 18, 2014Publication Date: November 18, 2014

Do Homeownership and Rent Subsidies Protect Individuals from Material Hardship? (Research Brief)
Robert I. Lerman, Sisi Zhang

Homeowners and subsidized renters experience significantly lower material hardship than unsubsidized renters, even after taking account of income, income variability, race, education, and family structure. Homeownership conveys more protection against hardship than do rent subsidies. Using the Survey of Income and Program Participation, we estimate the likelihood of experiencing any material hardship is about 9.2 percent lower for subsidized renters and 24.5 percent lower for homeowners. Even homeowners who bought just before the recent crash in home prices experienced less hardship than unsubsidized renters. White, black, and Hispanic homeowners all suffer less material hardship than their renting counterparts (whether subsidized or unsubsidized). This reduction is most pronounced among Hispanic families.

Posted to Web: November 18, 2014Publication Date: November 18, 2014

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