Fannie Mae: If Same Standards As Today, Delinquencies Would Have Been A Quarter As High

Confounded Interest ^ | 09/20/2013 | Anthony B. Sanders

[whitedog57]

Fannie Mae, the mortgage giant in conservatorship, is making a pitch to investors to purchase their risk-sharing bonds. The pitch? Fannie Mae has better standards than it did during the housing bubble.

If Fannie Mae standards during housing boom were similar to today, delinquencies would have been as little as a quarter as high, according to data in presentation posted on its website as the company woos investors for new risk-sharing notes. • 12.4% of 2007 vintage Fannie mortgages (in 60-80% LTV category) has ever been 180 days delinquent, excluding loans liquidated or delinquent in first 6 months. • 3% would have been with re-weighting to match FICO, CLTV, purpose, risk layering of Q4 2012 loans • 12% falls to 4.1% for 2006; 8.8% to 3.4% for 2005 • Fannie’s risk-sharing Connecticut Avenue Securities will be available this year, according to presentation • “Will provide ongoing investment opportunities (repeatable process)” • 3% in 2011, >4% in 2010. • Rep and warranty remedies for underwriting mistakes mean Fannie collected about $48b on a UPB basis from 2009 to Q2 2013. • Presentation and related “webinar highlights Fannie Mae’s ongoing commitment to risk management and provides greater transparency on our credit risk management practices,” Andrew Bon Salle, evp of single-family underwriting, pricing, and capital markets, says in posting on website. • Earlier: Fannie Mae Prepares Investors for Mortgage Risk-Sharing Bonds • Fannie Mae Obtains Insurance on $5 Billion Pool of Mortgages • Freddie Mac May Get Risk-Sharing Notes Rated as Lessons Learned

Here is Fannie Mae’s slide deck to investors: 091813-investor-deck.

fanniestates

True, Fannie Mae’s credit box has improved since the housing crash. And the 2004-2007 vintages performed progressively worse.

fanniehiost

If Fannie Mae standards during housing boom were similar to today, delinquencies would have been as little as a quarter as high. Does that mean that absent affordable housing goals, Fannie Mae would have weathered the financial storm?

affordgoals

I assume this data does NOT include Private Label MBS purchased by Fannie Mae, which performed relatively poorly.

Here are total mortgage delinquencies, FHA SERIOUS delinquencies and Fannie Mae SERIOUS delinquencies.

deliqnc

Not to beat a dead horse, but unless real median household income starts rising (bottom chart) …

household-income-monthly-median-growth-since-2000

[whitedog57]

And if a pig had wings, it could fly.

[KarlInOhio]

Now a trained medical professional is required to check the borrower for a pulse rather than allowing a mortgage broker to do a cursory inspection. :-P

[Raycpa]

This time Charlie Brown.

[98ZJ USMC]

What utter statistical-adjusting crap. And people believe this?

Yeesh.....

[cynwoody]

They're high.

If credit standards had been maintained, prices would not have ballooned, and even people with good credit would not have been lured into the resulting bubble in the expectation of getting bailed out by price increases.

[elkfersupper]

I dealt with FNMA when it was the standard-bearer in prudent mortgage loan underwriting.

It was turned into a tool by leftist politicians and subsequently tanked.