More On The New Mortgage Markets

Increasingly, it looks like two mortgage markets are emerging from this crisis. With private lenders lending only to those with pristine credit and large down payments, and basically the government being the only lender to everyone else. The article below seems to drive that point home.

Ginnie Mae is a government agency, its mortgage-backed securities are explicitly backed by the U.S. government. Fannie Mae and Freddie Mac are public companies with something of a dual mandate to help lower income housing (and now back up the entire mortgage market) and keep shareholders happy. Fannie and Freddie were placed under government conservatorship in September. Apparently, even government conservatorship and purchases of some of Fannie and Freddie's toxic MBS portfolio isn't enough for investors. From Housing Wire, Dec. 10:

Total issuance at Ginnie Mae reached $27.1 billion in November, the government agency said earlier this week, bringing the 2008 total to $246 billion, and marking the second straight month that Ginnie Mae-issued MBS deals outpaced similar issuances at Fannie Mae (FNM) and Freddie Mac (FRE).

The government agency has seen issuance volume surge as regulators and legislators have refocused their attention on revitalizing the Federal Housing Administration (FHA) during the housing downturn, essentially turning it into the nation’s only source of mortgage liquidity for the subprime market.

Fixed issuance — which refers to MBS deals backed by fixed-rate mortgage products — in November at Ginnie Mae was $25.6 billion, while Fannie and Freddie issued $13.7 billion and $22.7 billion, respectively. November’s fixed issuance total at Ginnie was down slightly from the $27.7 billion the agency recorded in October; Fannie Mae had issued $27.1 billion in fixed-rate deals during October, eMBS data show.

Ginnie Mae has now outpaced Fannie in total issuance volume for two straight months.

Ginnie Mae-led issuance has not topped either GSE since the mid-1980s, during the aftermath of the S&L crisis that — like now — left a void in funding loans for subprime-credit borrowers.

Comments

[jepittman:]

Banks no longer have room on their balance sheets for marginal loans. Banks have always cherry picked the loans they keep and sold the rest. I really don't think all that much has changed other than the quality of the loans held has been raised. It does look like the government will be the owner of most mortgages until the credit markets trust the underwriting again. It may take awhile.

2008 Dec 13 07:37 PM