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46 FHFA DROPS OPTIMISTIC REPORT TO CONGRESS e Federal Housing Finance Agency (FHFA) released recently its exhaustive annual 2016 Report to Congress, where it highlights actions it has taken over the year to support and maintain the nation's housing industry. e 120-page report covers, amongst others: a report of the annual examination of Fannie Mae and Freddie Mac (e Enterprises), reports of annual examinations of the Federal Home Loan Banks, the results of stress tests under the Dodd-Frank Wall Street Reform Consumer Protection Act, enterprise housing goals and duty to serve, the federal home loan bank mission, and affordable housing programs, and offers regulatory guidance. Annual Examination of e Enterprises In 2016, Fannie Mae reported a net income of $12.3 billion and an annual comprehensive income of $11.7 billion, compared to a net income of $11.0 billion and a comprehensive income of $5.8 billion in 2015. Freddie Mac also showed similar year- over-year growth, with an annual net income of $7.8 billion and a comprehensive income of $7.1 billion. In 2015, the lender reported a net income of $6.4 billion and a comprehensive income of $5.8 billion. e report also found that the Enterprises earned more of their income from guarantee fees than from interest. Annual Examination of Federal Home Loan Banks (FHLBanks) FHLBanks saw impressive growth in 2016 that was bolstered by increases in advances to members. e year closed with a net income of $3.4 billion and total assets increased by $88.8 billion—9.2 percent—to $1.06 trillion. Aggregate assets were their highest since 2009. FHLBanks reside in Boston, New York, Pittsburg, Atlanta, Cincinnati, Indianapolis, Chicago, Des Moines, Dallas, Topeka, and San Francisco. Results of Stress Tests Fannie Mae in its Severely Adverse scenario predicted draws from the Treasury Department between $22.8 billion and $73.0 billion, depending on deferred tax assets. By year-end of 2015, Fannie Mae drew $116.1 billion from the Treasury, with about that much of remaining funding commitment. Freddie Mac predicted draws between $26.4 billion and $52.8 billion, depending. Year-end 2015, they had drawn $71.3 billion from the Treasury Department. Finally, all of the FHLBanks were found to be compliant with regulatory capital and leverage capital requirements for the entirety of the nine-month stress test. All 11 banks did predict a negative net income under the Severely Adverse scenario. TOTAL REFINANCE VOLUME ON A STEEP DECLINE e Federal Housing and Finance Agency released their April 2017 Refinance Report last month showing falling total refinance volume as mortgage rates in March remained higher than the lows observed in 2016. Overall, mortgage rates decreased in April with the average 30-year fixed being 4.05 percent, down from 4.20 percent in March. HARP, which was established in 2009 to help those who couldn't refinance due to decline in home value, was designed to give borrowers a chance to refinance by permitting the transfer of existing mortgage insurance to their newly refinanced loan, or allowing those without mortgage insurance on their previous loan to refinance without obtaining new coverage. HARP had 3,493 refinances in April—which brings the total refinances from the inception of the program to 3,464,589. is represented 3 percent of total refinance volume. 6 percent of the loans refinanced through HARP had a loan-to- value ratio greater than 125 percent. According to FHFA, borrowers with loan- to-value ratios greater than 105 percent accounted for 19 percent of the volume of HARP loans year-to-date through April 2017. Twenty-five percent of HARP refinances for underwater borrowers year-to-date were for shorter term 15- and 20-year mortgages, which build equity faster than traditional 30-year mortgages. Refinances through HARP represented 6 or more percent of total refinances in Nevada and Florida—double the 3 percent of total refinances nationwide over the same period. Borrowers who refinanced through HARP had a lower delinquency rate compared to borrowers eligible for HARP who did not refinance through the program, according to the FHFA. Ten states in the U.S. accounted for over 60 percent of the nation's HARP eligible loans with a refinance incentive as of December 31, 2016. ese states include Florida, Illinois, Michigan, Ohio, Georgia, Pennsylvania, New Jersey, New York, Alabama, and Puerto Rico. e national total of HARP-eligible loans with refinance incentive was 137,594. Fannie Mae Chief Economist Doug Duncan expects total home sales to rise 3.2 percent this year and total single-family mortgage originations to drop about 21 percent to $1.62 trillion, according to Fannie Mae Economic & Strategic Research Group's June 2017 Economic and Housing Outlook report. KNOW THIS

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