Jay Brinkmann Vice President, Research and Economics Mortgage … · 2008. 6. 6. · FHA & VA 9% 9% Mortgage Bankers Association 6 ... Idaho Gi 2.2% 2.2% 2.1% 2.0% 2.0% Georgia North

Current State of the Housing Finance Industry

Jay BrinkmannVice President, Research and Economics

Mortgage Bankers Association

The Five Questions I Spend My Life Answering

How bad is it?

How bad is it going to get?

H l i it i t l t?How long is it going to last?

How did you guys screw up so bad?

What should be done to keep you from doing it again?again?

Mortgage Bankers Association2

Mortgage Payments Past Due 30 DaysSA, %

4. 4

4. 0

4. 4

4. 0

3. 6 3. 6

3. 2 3. 2

05009590858075

2. 8

2. 4

2. 8

2. 4


05009590858075

Sour ce: Mor tgage Banker s Association

Mortgage Foreclosures Started: United StatesSA, %

0. 8 0. 8

0. 6

0 4

0. 6

0 40. 4

0. 2

0. 4

0. 2

050095908580750. 0 0. 0


05009590858075

Sour ce: Mor tgage Banker s Association

Foreclosures Started by Loan Type (NSA)5.00

3.00

4.00

rcen

t

1.00

2.00Per

-

03 -

Q1

03 -

Q3

04 -

Q1

04 -

Q3

05 -

Q1

05 -

Q3

06 -

Q1

06 -

Q3

07 -

Q1

07 -

Q3

200

200

200

200

200

200

200

200

200

200

Prime Fixed Prime ARM Subprime FixedSubprime ARM FHA


Subprime ARM FHA

Source: MBA National Delinquency Survey

Composition of Foreclosure Starts

% of % of Loans Outstanding

Foreclosures Started

Prime Fixed 63% 18%Prime Fixed 63% 18%Prime ARM 15% 19%Subprime Fixed 6% 12%Subprime Fixed 6% 12%Subprime ARM 7% 43%FHA & VA 9% 9%



California and Florida Share of Total US

% of Prime ARM

% of Prime ARM Foreclosure

St t% of Subprime

ARM

% of Subprime ARM Foreclosure

St tARMs Starts ARMs Starts

California 25.8% 27.9% 17.3% 21.4%

Florida 10.6% 14.5% 10.8% 12.4%

Combined 36.4% 42.4% 28.1% 33.8%



Subprime ARM Foreclosure Starts

Approximate Number of Foreclosure Starts

150,000

50,000

100,000

-2005 - Q3 2006 - Q3 2007 - Q3

US (w/o CA & FL) CA & FL



Investor Property Share of Foreclosure Starts 2007 Q3

Prime ARM

Prime Fixed

Subprime ARM

Subprime Fixed All Loans

Arizona 26% 16% 21% 28% 22%

California 11% 11% 19% 20% 16%

Florida 27% 18% 21% 27% 22%

Nevada 24% 14% 20% 33% 22%

US 18% 14% 18% 28% 18%


Source: MBA

Question: How Bad Is It Going to Get?

Answer: Need to Focus on Drivers of Supply and Demand for Houses


Top-ten and Bottom-ten States in Terms of Percent Change in Population, July 2006 – July 2007(With Employment Change Nov 2006 – Nov 2007)

2.9%2.8%

2.6%2.4%

NevadaArizona

UtahIdaho

G i 2.2%2.2%

2.1%2.0%2.0%

GeorgiaNorth Carolina

TexasColoradoWyoming

1.8%

0.2%0.2%0 2%

South Carolina

MassachusettsNew JerseyConnecticut 0.2%

0.2%0.2%

0.1%0.1%

ConnecticutWest Virginia

MaineNew YorkVermont

0.0%-0.3%

-0.4%

-3.0% -2.0% -1.0% 0.0% 1.0% 2.0% 3.0% 4.0% 5.0%

OhioMichigan

Rhode Island

Employment ChangePopulation Change


Source: Census Bureau and Bureau of Labor Statistics

New Homes Available For Sale Remain at Elevated Levels

12Thousands Months

525

575

101112

Months’ Supply of New

Homes on the MarketNew Homes for Sale

(left axis)

375

425

475

789(right axis)

(left axis)

New Homes For Sale

275

325

375

456

2251980- Jan

1982- Jan

1984- Jan

1986- Jan

1988- Jan

1990- Jan

1992- Jan

1994- Jan

1996- Jan

1998- Jan

2000- Jan

2002- Jan

2004- Jan

2006- Jan

2008- Jan

3


Source: Census Bureau


Two remaining questions:

How big of a problem is the ARM rate reset issue?

What should be done about the subprime market?


6-Month LIBOR Rates

5 005.506.00

4.004.505.00

ARM Reset Issue Is Largely

2 503.003.50

ARM Reset Issue Is Largely Going Away!

2.50

1 20

07

5 20

07

2 20

07

16 2

007

21 2

007

25 2

007

30 2

007

3 20

07

8 20

07

2 20

07

7 20

07

21 2

008

Jan

Feb

Mar

1

Apr

1

May

2

Jun

2

Jul 3

Sep

Oct

Nov

1

Dec

1

Jan

2


Subprime Originations

200

120140160180

ns

06080

100120

$ bi

llion

Subprime Lending Is G i A !

02040

20 20 20 20 20 20

Going Away!

2002

2003

2004

2005

2006

2007

Source: Inside B&C Lending


Subprime Originations as % of Total Originations

30%

20%

25%

5%

10%

15%

0%

5%

200

200

200

200

200

200002

003

004

005

006

007

Source: Inside B&C Lending and MBA Mortgage Finance Forecasts


Opportunities in 2008

Reduced competition in the mortgage industry will lead to more rational pricing and underwriting.

Well-capitalized institutions with flexible execution will dominatewill dominate.

Affordability has improved in areas where home i h f ll Th bilit t lif iprices have fallen. The ability to qualify remains a

question. FHA will grow in importance.


Change in Number of Owner- and Renter-occupied Households, Year-over-year (additive)

2000

2500 Change in owner-occupied householdsChange in renter-occupied households

Thousands of households

1000

1500

2000

0

500

-1000

-500

-1500

1990

- Q

1

1991

- Q

1

1992

- Q

1

1993

- Q

1

1994

- Q

1

1995

- Q

1

1996

- Q

1

1997

- Q

1

1998

- Q

1

1999

- Q

1

2000

- Q

1

2001

- Q

1

2002

- Q

1

2003

- Q

1

2004

- Q

1

2005

- Q

1

2006

- Q

1

2007

- Q

1


1 1 1 1 1 1 1 1 1 1 2 2 2 2 2 2 2 2

Source: Census Bureau and MBA

New and Existing Home SalesNew and Existing Home Sales

Millions of homes

8

6

8Existing New

4

2

01999 2000 2001 2002 2003 2004 2005 2006 2007 2008*

Source: Census Bureau and National Association of Realtors

Mortgage Bankers Association20*Forecast; 15% drop in existing home sales and 21% drop in new home sales

Source: Census Bureau and National Association of Realtors

Annual SingleAnnual Single--Family OriginationsFamily Originations

$ Billion

3,500

4,000

2,500

3,000

1,500

2,000

0

500

1,000

Source: Mortgage Bankers Association

01999 2000 2001 2002 2003 2004 2005 2006 2007 2008*

Purchase Refinance


Source: Mortgage Bankers Association

*Forecast: 21% drop in purchase originations and 11% drop in refinance originations

Contact Information & MBA Resources

Jay Brinkmann [email protected]

1919 Pennsylvania Ave - Washington, DC 20006202-557-2739

Research and Forecasts:htt // t b k /R h dF t /E i O tl k dF t

202 557 2739MBA homepage: www.mortgagebankers.org

http://www.mortgagebankers.org/ResearchandForecasts/EconomicOutlookandForecasts

Research Data:http://www.mortgagebankers.org/ResearchandForecasts/ProductsandSurveys

MBA Research DataNotes:http://www.mortgagebankers.org/ResearchandForecasts/EconomicOutlookandForecasts/DataNotes.htm

Research Institute for Housing America:http://www housingamerica org/sitemap htmlhttp://www.housingamerica.org/sitemap.html

Home Loan Learning Center:http://www.homeloanlearningcenter.com/default.html


MBA Newslink:http://www.mortgagebankers.org/NewsandMedia/MBANewsLink

Documents

Jay Brinkmann Vice President, Research and Economics Mortgage … · 2008. 6. 6. · FHA & VA 9% 9% Mortgage Bankers Association 6 ... Idaho Gi 2.2% 2.2% 2.1% 2.0% 2.0% Georgia North