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FHFA compares credit quality at GSEs private entities
WASHINGTON (9/15/10)--The Federal Housing Finance Agency (FHFA) released data on Fannie Mae and Freddie Mac that favorably compares the credit quality and performance of the loans they acquired to loans financed with “private-label” mortgage-backed securities (MBS). The data revealed that while 5% of fixed-rate and 10% of adjustable-rate mortgages acquired by Fannie and Freddie exceeded 90 days of delinquency, roughly 20% of fixed-rate mortgages and 30% of adjustable-rate mortgages financed by private labels were over 90-days delinquent. The FHFA found that 84% of the single-family mortgages acquired by Fannie and Freddie between 2001 and 2008 were made to borrowers with credit scores above 660, while 47% of loans made to MBSs were above that level. Loan-to-Value (LTV) ratios were 80% or lower for 82% of the loans acquired by Fannie and Freddie, while 66% of the loans financed by MBSs had ratios at or below that level. “A pattern of decreasing LTV ratios over time, most pronounced for loans financed with private-label MBSs, is consistent with the greater use of second liens to avoid mortgage insurance on low-down-payment mortgages, a practice that was increasingly common into 2007 and that contributed to the unusually poor performance of loans with low LTV ratios relative to past experience,” the FHFA added. For the full FHFA release, use the resource link.
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