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34 OWNERS SIT TIGHT ON HOME EQUITY irty-year fixed mortgages fell to their lowest point in over a year, and tappable equity fell for the second consecutive quarter, according to the latest Mortgage Monitor report from Black Knight. However, Black Knight noted that the decline in equity shouldn't impact the market as a whole. "After reaching a high of $6.06 trillion in Q2 2018, tappable equity has since fallen by $348 billion, with $229 billion of that total coming in the fourth quarter alone," said Ben Graboske, President of Black Knight's Data and Analytics division. "Once again, the decline is being driven by falling home prices in some of the nation's most expensive markets. In California—where the average home price fell by $14,600 over the last six months of 2018—tappable equity fell by more than $200 billion over that same time period, making up more than 60% of the total national decline. Keep in mind, though, that despite this pullback, California continues to hold 37% of all the tappable equity in the country, and six-and-a-half times as much as Texas, the next closest state. It's also important to note that upwards of 80% of the national equity loss was among homeowners who had more than 20% equity in their homes. So while the decline does reduce the borrowing power available to these homeowners, it does not represent a significant increase in equity stress on the market as a whole." "e fact is," Graboske continued, "homeowners have been tapping equity less and less." According to Graboske, equity withdrawals were down 16% year-over-year in February. Black Knight also found that total foreclosure starts declined in February, down by 19.5%, a slightly stronger decline than the 10-year 14% month-over-month average. However, Black Knight noted that delinquencies increased in February, the first increase for the month in 12 years and only the second such increase in 15 years, including 2008 to 2010 when double-digit annual increases were the norm. THREE THINGS IMPACTING HOUSING e government-sponsored enterprises' (GSEs) move towards single security, the Federal Housing Administration's (FHA's) credit box changes, and the low supply of homes available for sale are three trends that will likely shape the mortgage market in 2019 and beyond, according to the Urban Institute's latest Monthly Chartbook. e GSEs' Move Toward UMBS While the nonagency share of mortgage securitizations has increased gradually over the years, from 1.8% in 2016 to 4.4% in 2018, it has seen an uptick since February 2019, inching upwards to 7.15%, the report revealed. Nonagency securitization volume totaled $95.2 billion for 2018, a 41% increase over 2017. e FHFA recently issued the final rule on its move toward a single security, which is likely to have a far-reaching impact on the mortgage market in 2019 and beyond, the report indicated. is initiative will unify Fannie Mae and Freddie Mac's currently separate mortgage- backed securities (MBS) into a single, comingled security, called unified mortgage- backed security (UMBS). e final rule requires the GSEs to align their policies, programs, and practices that can impact cash- flows to holders of to-be-announced TBA- eligible MBS. "e market had anticipated these actions, and the price differential between Fannie and Freddie securities had converged some time ago; prior to discussions on the UMBS, Freddie Mac needed to subsidize its security to the detriment of taxpayers," the report stated. e Chartbook also indicated that the volume of Alt-A and subprime securitization showed the largest growth within the private label securitization (PLS) market with subprime securitizations more than doubling and Alt-A securitizations more than quadrupling from 2017 to 2018. is indicated a distinct "change in the mix" of PLS, the report indicated. FHA's Credit Box Announcement e second factor that is likely to impact borrowers and lenders is the FHA's changes to its credit box. e recent announcement is aimed at mitigating FHA's concerns about endorsing mortgages with higher risk characteristics. One of the key changes announced by the FHA is to refer certain higher-risk mortgages for manual underwriting, which is more labor intensive and costly for lenders. According to the report, while it is too early to tell whether this will discourage lenders from originating the affected mortgages and to what degree, the Urban Institute will be "monitoring the credit characteristics of new FHA originations to identify the impact of this change to credit availability." Housing Supply Issues Finally, even as the first lien origination volume for the full year of 2018 finished at $1.63 trillion, down from $1.81 trillion in 2017, a recent pullback in rates, the start of the homebuying season, and a continued strong economy are likely to spur increased demand for homes again. However, the report indicated that housing supply has been trending downward throughout 2018, and though it increased month-over-month in February, inventory was still lower than in previous years. It, therefore, remains to be seen "whether months' supply will continue its downward trend in 2019" and how that would impact the demand for homes.