MBA Chart of the Week: Share of Investors Offering 97 LTV Conventional Affordable Loan Products
Data from MBA’s Mortgage Credit Availability Index show that despite worries about the slow uptake of affordable 97 percent loan to value conventional loan programs among borrowers and lenders, investors today are willing to buy and insure these mortgages.
Current affordable 97 LTV programs generally target households earning less than the area median income, or living in lower income or underserved areas, while meeting Qualified Mortgage and Ability to Repay standards.
In 2011, Freddie Mac discontinued its 97 LTV programs; the chart shows a commensurate decline in investor participation. Late in 2013, Fannie Mae also discontinued some of its 97 LTV programs contributing to a sharp fall-off in the supply of mortgage credit. Due to the loss of the GSE outlets, other investors who aggregate mortgages to securitize also stopped purchasing these mortgages. Most of the few remaining conventional 97 LTV programs in 2014 were related to state finance agencies.
Nearly a year later, both Fannie and Freddie announced new affordable 97 LTV programs–Fannie’s beginning in December 2014 and Freddie’s in March 2015. Aggregators, who buy mortgages from correspondents and brokers, as well as mortgage insurance companies who insure credit risk, immediately responded to the new programs, with 60 percent of investors offering these programs as of June.
Last week, MBA announced an update to the methodology of the MCAI and reported that credit availability increased in July. The press release and more information about the update can be found at https://www.mba.org/news-research-and-resources/research-and-economics/single-family-research/mortgage-credit-availability-index.
To view the Chart of the Week, click https://www.mba.org/news-research-and-resources/forecasts-data-and-reports/forecasts-and-commentary/chart-of-the-week.
(Lynn Fisher is vice president of research and economics with the Mortgage Bankers Association; she can be reached at lfisher@mba.org. Joel Kan associate vice president of economic forecasting with MBA; he can be reached at jkan@mba.org. Brennan Zubrick is senior financial reporting and data management analyst with MBA; he can be reached at bzubrick@mba.org.)
