Mortgage-bond sales hit highest level since 2009
Sales of government-backed mortgage securities rose in November to the highest level in more than three years, stoked by a refinance boom and a rush by banks to avoid a fee increase from Fannie Mae and Freddie Mac.
Nearly $176 billion in bonds backed by fixed-rate home loans were issued in November, up from $132 billion in October and the most since $229 billion in June 2009, MortgageDaily.com reported Monday, citing the data firm eMBS Inc.
The securities were backed by government-sponsored finance companies: the Federal National Mortgage Assn., or Fannie Mae; Federal Home Loan Mortgage Corp., or Freddie Mac; and Government National Mortgage Assn., or Ginnie Mae.
Lenders sell nearly all their fixed-rate mortgages because they don’t want them on their books if interest rates rise, a situation that devastated the nation’s savings and loans when inflation rocketed in the 1970s.
Since the market for Wall Street’s private mortgage bonds imploded during the financial crisis, Fannie, Freddie and Ginnie have been essentially the only options for home-loan sales.
As part of efforts to offset huge losses, Fannie’s and Freddie’s regulator, the Federal Housing Finance Agency, decided in August that the companies would increase the fees they charge lenders for guaranteeing loans used to back mortgage securities. The fee increase was modest — 0.1% of the loan amount — but enough to motivate lenders to rush to get loans securitized before it took effect.
The high volume is also being driven by a refinance boom, produced by government support for the slowly healing housing markets. The Federal Reserve has driven down mortgage interest rates to the lowest levels on record, and a revision of the Obama administration’s Home Affordable Refinance Program, or HARP, has made it easier for current but underwater borrowers to refinance their loans.
According to newsletter publisher Inside Mortgage Finance, 6 out of every 7 home loans issued during the third quarter was a conforming mortgage, meaning eligible for sale to Fannie or Freddie. Although that’s high, the percentage of conforming loans in 2010 was even higher, at just over 90%.
Guy Cecala, chief executive of Inside Mortgage Finance, said rising home prices and falling defaults have resulted in more lenders being willing to keep jumbo mortgages — those too big to sell to Fannie or Freddie — on their books. The maximum size mortgage for a one-unit property that Fannie and Freddie can back ranges from $417,000 in less expensive markets to $625,500 in the most expensive, including much of California.
