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» LOW MORTGAGE RATES REINFORCE STRENGTH OF FEBRUARY HARP REFIS Refinances through the government's Home Affordable Refinance Program (HARP) remained strong as mortgage rates held near record-low levels in February, according to the Federal Housing Finance Agency's (FHFA) refinance report. In February, 97,738 Fannie Mae and Freddie Mac loans were refinanced under the program, bringing the total to 2.3 million since HARP's April 2009 inception. FHFA also reported HARP refinances accounted for 21 percent of total refi volume in February. Of the program's 2.3 million total refinances, about 2 million were for primary residences, 233,000 for investment properties, and more than 75,000 for second homes. Underwater borrowers also continued to represent a large share of total HARP refinance volume. During the first two months of this year, borrowers with loanto-value ratios (LTVs) beyond 105 percent accounted for nearly half (45 percent) of all HARP refinances, according to FHFA data. In Nevada, Arizona, and Florida, the share was even greater, with underwater borrowers representing 65 percent or more of HARP volume during January and February. And in California and Georgia, the share of HARP refis for underwater borrowers was 58 percent and 50 percent, respectively. Out of the 195,327 total HARP refis completed year-to-date through February, 45,453 were for borrowers who were deeply underwater, or had LTVs greater than 125 percent. Among the underwater borrowers refinanced, 18 percent opted for shorter-term 15- and 20-year mortgages in order to build equity faster than with traditional 30-year mortgages. HARP, which was set to expire at the end of this year, will live on for two more years after FHFA granted an extension of the program to December 31, 2015. STAT INSIGHT 18M+ Single-family mortgages included in Fannie Mae's initial release of loan-level credit performance data in late April. VISIT US ONLINE @ DSNEWS.COM FREDDIE MAC RECORDS ITS 2ND LARGEST PROFIT IN Q1 Freddie Mac's first-quarter earnings came in slightly ahead of last year's final quarter, the company revealed in its quarterly filing. First-quarter net income at Freddie Mac was $4.6 billion, barely above the $4.5 billion recorded in Q 4 2012 but well above the $577 million in last year's first quarter—and the second largest in company history. While Fannie Mae hasn't yet released its first-quarter earnings, the company reported record profits in the fourth quarter (and in 2012 as a whole). The latest reports from both enterprises illustrate how the ongoing recovery has contributed to growth. Through the end of March, Freddie Mac provided—through purchases and issuances—approximately $138 billion in liquidity to the housing market (with $132 billion going toward single-family purchases and issuances and $6 billion going to the multifamily sector). According to the filing, refinance loan purchase accounted for about $111 billion of the company's single-family volume during Q1, while purchase mortgages made up the remaining $21 billion. Relief refinance mortgages (including those originated through the Home Affordable Refinance Program) accounted for $33 billion. Credit quality also continues to improve. As of the end of Q1, loans originated in 2009-2013 made up 5.5 percent of Freddie Mac's credit losses. As expected, loans originated in 2005-2008 made up the vast majority—84.9 percent—of losses. The single-family serious delinquency rate was 3.03 percent as of March 31, down significantly from 3.25 percent at the end of 2012. The multifamily delinquency rate was 0.16 percent, down slightly from 0.19 percent as of December 31. FHFA DIRECTS GSES TO LIMIT PURCHASES TO QM LOANS The Federal Housing Finance Agency (FHFA) directed Fannie Mae and Freddie Mac to limit future loan purchases to those that meet the Consumer Financial Protection Bureau's (CFPB) criteria for a qualified mortgage (QM), including those that meet the special or temporary QM definition and loans that are exempt from the CFPB's ability-to-repay rule. FHFA said beginning January 10, 2014, the GSEs will no longer purchase loans subject to the CFPB's ability-to-repay rule if those loans are not fully amortizing, have terms of longer than 30 years, or include points and fees in excess of 3 percent. CFPB handed down those guidelines earlier this year as part of its efforts to protect borrowers and assure lenders they can operate safely. "Adoption of these new limitations by Fannie Mae and Freddie Mac is in keeping with FHFA's goal of gradually contracting their market footprint and protecting borrowers and taxpayers," FHFA stated. Fannie Mae and Freddie Mac will continue to purchase loans that meet the underwriting and delivery eligibility requirements outlined in their selling guides, including loans processed through their automated underwriting systems and those with debt-to-income ratios (DTIs) of greater than 43 percent. Loans with DTIs above 43 percent fall outside the QM classification unless they are eligible for purchase by the GSEs under the special or temporary QM definition. KNOW THIS As of June 1, Fannie Mae ceased utilizing its Retained Attorney Network for defaultrelated legal services. Freddie Mac extended the sunset date of its Designated Counsel Program to August 1 in some cases. Source: Source: Fannie Mae 25

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