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Fannie Mae Reports Shifts in Delinquency Rates

Fannie Mae’s latest monthly summary revealed a decrease in single-family serious delinquencies. Fannie Mae’s Conventional Single-Family Serious Delinquency Rate decreased 3 basis points to 0.67% in July. Additionally, the Multifamily Serious Delinquency Rate increased 2 basis points to 0.07% in July.

Fannie’s Guaranty Book of Business increased at a compound annualized rate of 6.8% in July, to $3,247,222 million, composed of $3,084,197 million in MBS, excluding the portion backed by Freddie Mac securities, and other guarantees, and $163,025 million in mortgage loans.

Freddie Mac recorded the lowest fixed-rate mortgage since November 2016 in August, with the 30-year fixed mortgage rate averaged 3.55% as of August 22. 

The 30-year FRM declined by 0.5 percentage points from the previous week’s rate of 3.60%. The 15-year FRM and 5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) declined as well, down to 3.03% and 3.35%, respectively.

“The drop in mortgage rates continues to stimulate the real estate market and the economy,” said Sam Khater, Freddie Mac’s Chief Economist. “Home purchase demand is up 5% from a year ago and has noticeably strengthened since the early summer months, while refinances surged to their highest share in three and a half years. Households that refinanced in the second quarter of 2019 will save an average of $1,700 a year, which is equivalent to about $140 each month.”

While lower mortgage rates may influence some potential buyers to move ahead, inventory continues to stifle the market. Data from Fannie Mae's Economic and Strategic Research Group found that limited inventory, especially for affordable housing, continued to remain a challenge for homebuyers. This, despite Fannie Mae's latest Home Purchase Sentiment Index suggesting strong homebuyer interest after recording a new survey high in July.

“Mortgage rates are approaching the lowest level in recent decades, and as they have moved lower more and more homeowners are finding incentive to refinance,” said Doug Duncan, SVP and Chief Economist at Fannie Mae.. “We estimate that 35% of outstanding mortgages are now ‘in the money,’ meaning borrowers may realize significant cost savings by refinancing; as such, we expect the share of refinance originations to grow through the remainder of the year.”

About Author: Steve Gaenzler

Steve Gaenzler is co-founder and managing principal, of Five Bridges Advisors, a Radian company. Gaenzler has more than 25-years of experience in the mortgage and capital markets. Prior to founding Five Bridges, Gaenzler spent his entire career within the U.S. capital markets divisions of financial institutions and GSEs.
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