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Now Below 2016 Cap, Fannie Mae Portfolio Shrinks Further

Fannie Mae BHWith the value of Fannie Mae's gross mortgage portfolio having going under its cap for 2016 in March, the value of the portfolio sank even further in April, contracting at an annual rate of 15.4 percent, according to Fannie Mae's April 2016 Monthly Volume Summary [1].

The contraction resulted in the unpaid principal balance of the portfolio shrinking by about $4.29 billion, down to about $328.03 billion. The portfolio has contracted at an average annual rate of 14.1 percent for the first four months of 2016. The cap for 2016 is $339.3 billion.

According to the May 2016 Chartbook from Urban Institute [2], “(The GSEs) are shrinking their less liquid assets (mortgage loans and non-agency MBS) at close to the same pace that they are shrinking their entire portfolio. The GSEs will have no trouble meeting their portfolio size limits for 2016: even though it is early in the year, Fannie Mae is already underneath their year-end 2016 portfolio cap.”

Fannie Mae's fellow GSE, Freddie Mac, fell below the 2016 cap in April.

In January, Fannie Mae’s gross mortgage portfolio experienced a rare expansion, increasing at an annual rate of 5 percent. With April's contraction, the portfolio has now contracted in all but four months out of the last 70 months (since June 2010). The four months in which the portfolio expanded were January 2016, March 2015, January 2015, and December 2012. At the beginning of that stretch in June 2010, the amount of unpaid principal balance (UPB) of the loans in the portfolio was $818 billion.

Fannie Mae's total book of business, which includes the gross mortgage portfolio plus total Fannie Mae mortgage-backed securities and other guarantees minus Fannie Mae MBS in the portfolio, declined at a compound annualized rate of 0.5 percent in April up to a value of about $3.110 trillion, according to Fannie Mae.

The serious delinquency rate on Fannie Mae-backed loans fell by four basis points from March to April down to 1.40 percent, and Fannie Mae completed 7,097 loans during the month.

Click here [1] to view the complete Monthly Volume Summary for April.