St Casimirs Mortgage Minute

FHFA Report Highlights Results of GSEs' Nonperforming Loan Sales

The Federal Housing Finance Agency's first report on the sales of nonperforming loans (NPL) owned by Fannie Mae and Freddie Mac shows that only 24 percent of the 8,849 loans sold before June 30, 2015, were resolved, about half through foreclosures. However, the report also reveals that a significant percentage of loans sold to investors had better outcomes than nonperforming loans in the portfolios of Fannie and Freddie. Eight months after the loans were sold, 21 percent of the borrowers avoided foreclosure while 16 percent went into foreclosure, compared with 14 percent of borrowers of loans held in government-sponsored enterprise (GSE) portfolios who avoided foreclosure and 20 percent who went into foreclosure, according to the report. "What that says is the NPL sales are better at avoiding foreclosure and resolving loans more quickly than leaving the severely delinquent loans in GSE portfolios," says Laurie Goodman, co-director of the Housing Finance Policy Center at the Urban Institute. Goodman notes that investors buying nonperforming loans have incentives to offer principal reductions and more flexibility in modifying loans than GSE servicers.

From "FHFA Report Highlights Results of GSEs' Nonperforming Loan Sales"
American Banker (07/05/16) Collins, Brian

Jumbo Mortgages Play Larger Role at U.S. Banks

Some lenders continue to increase jumbo mortgage lending in response to regulatory pressure and other challenges since the mortgage crisis. High-dollar home loans rose to 24 percent of mortgage approvals at six of the largest U.S. banks — JPMorgan Chase, Bank of America, Citigroup, Wells Fargo, PNC Financial Services Group, and SunTrust Banks — in 2015 from 21 percent the year before, according to an analysis of federal home loan data. In 2012, jumbo loans accounted for just 12 percent of all mortgage approvals at the six banks. Jumbos are attractive to lenders because they typically go to borrowers who have high credit scores, big down payments, and low default rates. Moreover, jumbos are not linked to government programs that help back home loans — programs that cost banks tens of billions of dollars in fines after the financial crisis. The focus on jumbos has contributed to a decline in lending to black and Hispanic borrowers because people in those groups rarely receive jumbos.

From "Jumbo Mortgages Play Larger Role at U.S. Banks"
Wall Street Journal (07/05/16) P. C1 Ensign, Rachel Louise