Fannie Mae's Portfolio Contracts Again. Don't Expect That to Continue in the Months Ahead
Fannie Mae's mortgage investment portfolio shrank for the second straight month in February while the most recent available data showed delinquencies in loans held by the nation's largest provider of home mortgages are continuing to rise at an almost inexorable rate.
Fannie Mae's Monthly Summary for February reports that the gross mortgage portfolio declined to a value of $725.9 billion compared to $735.21 billion in January, a decrease of 14.2 percent. One year earlier the portfolio was sized at $784.72 billion, so despite many fluctuations over the year, February's figures represent an annualized one-year decrease of 31.2 percent.
The total book of business of the firm was $3.230 trillion at the end of February compared to $3.227 in January, a compound growth of 1.0 percent.
In January, the last month for which figures are available, 5.52 percent of the loans Fannie Mae guarantees were delinquent, an increase of 0.14 percent from December. In January 2009 the delinquency rate was 2.77 percent. In January the non-credit enhanced portion of the portfolio had a rate of 3.83 percent compared to 3.67 percent in December and 1.63 percent in January 2009. The delinquencies in the credit enhanced portion stood at 13.68 percent compared to 13.51 percent the month before and 7.24 percent a year earlier. Multifamily delinquencies increased from 0.63 percent in December to 0.69 percent in January. One year earlier it was 0.27 percent.
While this is the second month in a row that Fannie Mae's portfolio shrank, this will not last much longer.
On Februrary 10, Fannie Mae and Freddie Mac announced they would buyout "substantially all" loans that weNre four or more consecutive monthly payments behind. This implies the overall number and percentage of delinquent loans Fannie Mae and Freddie Mac own will increase sharply in the months to come. While most of Freddie Mac's purchases took place in March, Fannie Mae is spreading out there delinquency buyouts over the next four months with the biggest portion of purchases expected to occur in April and May.
THIS CHART gives an idea of the breakdown of delinquent loans that are soon to be bought by Fannie Mae.
For anyone wondering how big a role Fannie and Freddie will play in supporting originator selling of new new loan production. This comment from FHFA Director provides clear guidance:
"FHFA remains committed to the principle of reducing the retained portfolios as set forth in the PSPAs. Consistent with the goals of conservatorship and in accord with the recent Treasury announcement, FHFA does not expect the Enterprises to be substantial buyers or sellers of mortgages, with an important exception.
As I stated in December, the increased flexibility provided with the retained portfolio amendment may be important for maintaining the Enterprises' capacity to purchase delinquent mortgages out of guaranteed mortgage-backed security pools. Given the size of the Enterprises' current outstanding retained portfolios, and the potential volume of delinquent mortgages to be purchased out of guaranteed mortgage-backed security pools, it is my expectation that any net additions to their retained mortgage portfolios would be related to this activity."
Plain and Simple: MBS demand must come from private investors. READ MORE