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44 DEFAULTS DECLINE EVEN AS CREDIT EXPANDS With the latest foreclosure levels returning to a decline after an unusual spike in October, it is only natural that the mortgage default rate stayed consistent with the month before as well as decreased from the year prior, according to the November S&P/Experian Consumer Credit Default Indices report, measured by changes in consumer credit defaults. Specifically, the first mortgage default rate stayed at a steady 0.70, consistent with the month prior. Compared to data from the previous year, this rate decreased by 12 basis points. "Recent data paint a picture of a strong economy, and lower consumer credit defaults reflect this," said David M. Blitzer, Managing Director and Chairman of the Index Committee at S&P Dow Jones Indices. "Default rates are modestly lower than a year ago, even as continued strength in home sales, auto sales, and retail sales are supporting expanded use of consumer credit. Money market rates rose after Election Day, the Fed raised the target range for the Fed funds rate last week, and has indicated that further increases lie ahead. e favorable default trends are likely to be tested in 2017 as interest rates rise." According to the report, three of the five major cities experienced a decrease in default rates during the month of November. Particularly, Dallas had the largest decrease (10 basis point from the month prior) landing at 0.66 percent. e report also indicates that New York saw a default rate decline of two basis points to 0.91 percent and Chicago saw a one basis point drop to 0.96 percent from the previous month. In contrast, the report indicated that Miami's default rate spiked to 1.44 percent. is was an increase of 38 basis points, setting a 12-month high and, according to the report, is unmatched in Miami since January 2013. "Among the five cities regularly tracked in this report, Miami has consistently shown the highest default rate," Blitzer said. "One factor may be that home prices rising in Miami and mortgages are the largest portion of the city composite rate. While Dallas home prices are rising faster than Miami, Dallas prices fell far less in the housing bust and have rebounded to new all-time highs. Miami home prices remain more than 20 percent below the highs set in 2006." FHFA FINAL RULE BRINGS WELCOME NEWS FOR NON-BANK SERVICERS e Federal Housing Finance Agency (FHFA) announced the issuance of the Acquired Member Assets (AMA) Final Rule to reorganize and relocate the current regulation governing the Federal Home Loan Banks' AMA programs. "I think the main outcome is first to address something we had to because of Dodd- Frank," said Fred Graham, Deputy Director for Federal Home Loan Bank Regulation. "is was taking the references to NRSRO ratings out of the rule." e FHFA said that as required by the Dodd-Frank Wall Street Reform and Consumer Protection Act, this final rule removes and replaces references in the current regulation to, and requirements based on, ratings issued by a Nationally Recognized Statistical Ratings Organization (NRSRO). "We also made a couple of changes that bring the rule more in line with what is going on in the mortgage market. is includes taking into account the fact that a lot of servicing is done by non-banks," said Graham. "At one time, the servicing from AMA had to be done by members and that is not practical given the change in the landscape of the mortgage market. e rule addresses that as well." Further, according to the announcement, the AMA final rule provides a Federal Home Loan Bank greater flexibility in choosing the model it can use to estimate the credit enhancement required for AMA loans. According to FHFA, the final rule also adds a provision allowing a Federal Home Loan Bank to authorize the transfer of mortgage servicing rights on AMA loans to any institution, including a nonmember of the Federal Home Loan Bank System. Another key feature of the final rule is the allowance of the Federal Home Loan Banks to acquire mortgage loans that exceed the conforming loan limits if they are guaranteed or insured by a department or agency of the U.S. government. "e final rule excludes a proposed provision that would have eliminated the use of private, loan-level, supplemental mortgage insurance (SMI) in the member credit enhancement structure required by the AMA regulation, but does require Banks to establish financial and operational standards that insurers must meet to be qualified to provide insurance on AMA loans," added the FHFA. Finally, the final rule, which became effective on January 18, deletes some obsolete provisions from the previous regulation, and clarifies certain other provisions.

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