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» FHFA: AUGUST MARKS 19 MONTHS OF HOME PRICE GAINS The Federal Housing Finance Agency's (FHFA) House Price Index rose 0.3 percent on a seasonally adjusted monthly basis in August. On an annual basis, the index was up 8.5 percent. It was the 19th consecutive month of home price appreciation recorded by the GSEs' conservator. Prices are now 9.4 percent below their April 2007 peak, according to FHFA. Of the nine Census divisions, FHFA detected the greatest monthly price increase in the Mountain region, where prices increased 1.3 percent in August. The greatest monthly decrease recorded was a drop of 0.5 percent in the South Atlantic division, which encompasses xxxx. On a yearly basis, prices in all nine divisions were up, with the greatest increase taking place in the Pacific region—up 18.2 percent—which includes xxx. The Mountain division also reported double-digit annual gains. Price appreciation was lowest in the Middle Atlantic part of the country, but the region still pulled out a 4 percent increase across xxx. FHFA relies on price data from homes sold to or guaranteed by the GSEs for its House Price Index each month. STAT INSIGHT Average FICO Credit Score for New Single-Family Business in Q2 WHAT DOES FANNIE MAE'S NEW LTV THRESHOLD ACCOMPLISH? As of November 1, Fannie Mae ceased purchasing loans without minimum down payments of at least 5 percent. Industry experts with the Urban Institute's Housing Finance Policy Center argue this move is arbitrary and likely to provide little benefit to the GSE or to taxpayers. Fannie Mae's decision to lower its maximum threshold for loan-to-value (LTV) ratios from 97 percent to 95 percent follows a similar decision by Freddie Mac a few years ago. While neither GSE will support loans with LTVs higher than 95 percent now, the Federal Housing Administration, Veterans Administration, and U.S. Department of Agriculture do. "Fannie's policy change isn't limiting taxpayer risk—rather it's limiting options for borrowers," according to Laurie Goodman and Taz George of the Housing Finance Policy Center. "This change places yet another barrier in front of low- and moderate-income families, who are already facing a tightening credit box," the two argue. While it would seem Fannie's objective in lowering the LTV requirement is to reduce risk, the center's analysts say the action the GSE has taken is a misguided attempt at Freddie Mac = Source: Federal Housing Finance Agency minimizing risk. They stated in a blog posting, "If the intent was to reduce risk, this was a crude way to accomplish it," mainly because among loans with LTVs of 80 percent or higher, credit scores are a better default forecaster than LTV ratios. In fact, the default rate on loans with LTVs of 95 to 97 percent and high FICO scores is lower than the default rate for loans with LTVs of 90 to 95 percent and lower FICO scores, according to the Urban Institute. Goodman and George also point out that historically, Fannie Mae has purchased very few loans with LTVs in the 95 to 97 percent range. From 1999 to 2012, these loans made up less than 1 percent of Fannie Mae's purchases, and since 2005, the percentage drops even further. "We would have hoped that the rich data provided by the Great Recession would give the GSEs the confidence to underwrite higher LTV loans with compensating factors, as the importance of these factors has been well tested and documented," Goodman and George stated. "Instead, Fannie Mae has chosen to draw sharp lines around a smaller permissible credit box without accounting for compensating factors," they concluded. FREDDIE MAC PRICES SECOND STACR RISK-SHARING DEAL Fannie Mae = 756 751 VISIT US ONLINE @ DSNEWS.COM Freddie Mac priced a $630 million offering of Structured Agency Credit Risk (STACR) debt notes last month, marking the second STACR offering in which private sources—not taxpayers—took on the credit risk. "STACR is part of Freddie Mac's strategy to share credit risk with private investors while also fostering an agency credit market," said David Lowman, EVP of single-family business for the GSE. "With two successful STACR offerings under our belt, we are well on our way to having a scalable offering with regular issuances. We are pleased with the markets' acceptance of these bonds." According to Freddie Mac, about 50 broadlydiversified investors participated in the offering for the debt notes. The offering was oversubscribed and settled November 12. This year's earlier STACR offering settled in July "and was well-received by the market" as well, the GSE said. The notes were offered to the market by Barclays Capital as co-lead manager and sole bookrunner and by Morgan Stanley as co-lead manager. Nomura, RBS, and Wells Fargo each served as co-managers. 23

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