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The Effect of Large Investors on Asset Quality: Evidence from Subprime Mortgage Securities

April 4, 2014 Comments off

The Effect of Large Investors on Asset Quality: Evidence from Subprime Mortgage Securities
Source: Federal Reserve Bank of Atlanta

This paper examines how the government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac, the largest investors in subprime private-label mortgage-backed securities (PLS), influenced the risk characteristics and prices of the deals in which they participated. To identify the causal effect of the GSEs, we use the fact that PLS deals in which Fannie Mae and Freddie Mac purchased securities included separate mortgage pools: one specifically created for the GSEs and one or more others directed at other triple-A investors. Using within-deal variation, we find that the pools bought by Fannie Mae and Freddie Mac had similar ex-ante risk characteristics but performed much better ex-post relative to other mortgage pools in the same deals. These effects were concentrated in low-documentation loans and in issuers that were highly dependent on Fannie Mae and Freddie Mac. Our results extend the importance of disciplining effects of large claimholders beyond information-sensitive securities, such as equities and bank debt, to information-insensitive arm’s-length debt.

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The Effect of Transportation, Location, and Affordability Related Sustainability Features on Mortgage Default Prediction and Risk in Multifamily Rental Housing

June 27, 2013 Comments off

The Effect of Transportation, Location, and Affordability Related Sustainability Features on Mortgage Default Prediction and Risk in Multifamily Rental Housing
Source: FannieMae

In my commentary in October 2012, I discussed the first in a series of papers on the multifamily housing market that are being developed by Hoyt Advisory Services (HAS). Fannie Mae engaged HAS to conduct the research and to document their findings.

Today, the second of these papers is being published: The Effect of Transportation, Location, and Affordability Related Sustainability Features on Mortgage Default Prediction and Risk in Multifamily Rental Housing (PDF) by Dr. Gary Pivo, Professor of Urban Planning and Professor of Natural Resources and the Environment at the University of Arizona.

This paper examines the relationship between certain sustainability features and default risk in multifamily housing. With the exception of housing affordability, the features studied are a function of property location. Dr. Pivo concludes that sustainability features should be given greater consideration in the loan origination process.

Own-Rent Analysis Reveals Factors Influencing Consumers’ Decision to Buy Versus Rent a Home

August 7, 2012 Comments off

Own-Rent Analysis Reveals Factors Influencing Consumers’ Decision to Buy Versus Rent a Home
SOurce: Fannie Mae

The Fannie Mae August 2012 Own-Rent Research Brief investigates the factors that drive Americans’ intentions to own or rent their home. The study provides insights into Americans’ homeownership preferences and raises possible implications for both housing policy makers and industry players in their efforts to manage housing-related risks and to encourage consumers to make sustainable housing choices to ensure a well-functioning housing marketplace. Findings suggest:

  • Americans are affected by a mix of demographic and attitudinal drivers in making the own-rent decision.
    • It is possible that many of these drivers, especially attitudinal drivers, act as automatic or unconscious biases that lead consumers to their respective housing choices.
    • Resources to help consumers to more deliberately understand and balance these drivers may allow them to make better, more sustainable housing choices.
  • Exposure to mortgage default, perceived home value appreciation/depreciation, and self-reported underwater status are not significant factors in the models in predicting individuals’ intentions to own a home for their next move.
    • These results suggest that Americans’ aspirations to own a home are strong even facing the dramatic challenges in the housing market over the past few years.

Fannie Mae’s Latest National Housing Survey Shows Key Changes in Americans’ Attitudes Toward Housing and the Economy Over the Last Year

March 23, 2011 Comments off

Fannie Mae’s Latest National Housing Survey Shows Key Changes in Americans’ Attitudes Toward Housing and the Economy Over the Last Year
Source: Fannie Mae

Fannie Mae’s latest national housing survey finds that Americans are more confident about the stability of home prices than they were at the beginning of 2010, even though they lack confidence in the strength of the economy:

  • Seventy-eight percent of respondents believe housing prices will hold steady or increase over the next twelve months, up from 73 percent in January 2010;
  • But almost two-thirds still believe the economy is on the wrong track, virtually unchanged (61%) from the beginning of last year.

The Fannie Mae Fourth Quarter National Housing Survey, conducted between October 2010 and December 2010, polled homeowners and renters to assess their confidence in homeownership as an investment, the current state of their household finances, views on the U.S. housing finance system, and overall confidence in the economy.

“Over the course of the last year, we gained deeper insights into Americans’ confidence in the strength of the housing market and the economic recovery,” said Doug Duncan, Vice President and Chief Economist of Fannie Mae. “More Americans believe that housing prices will remain stable over the next year. We also are seeing encouraging signs in the positive attitudes toward homeownership among younger Americans, despite the severe impact of the housing crisis on Generation Y. But most respondents to our survey continue to lack confidence in the strength of the economic recovery, and they are less optimistic about their ability to buy a home in the years ahead. This sense of uncertainty is weighing on the housing recovery today and reshaping expectations for housing for the future.”

+ National Housing Survey

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