Seventy-two percent of millennial homebuyers this year are saving for a down payment directly from their paychecks, up from 69 percent last year, according to a March survey of 2,000 U.S. homebuyers and sellers commissioned by Redfin, the tech-powered real estate brokerage. Over 500 respondents born between 1981 and 1996 responded to the survey. Redfin compared the results with those from a similar survey commissioned in March 2018.

Redfin asked all first-time homebuyers the question: "How did you accumulate the money you need for a down payment? Select all that apply." Compared to a year earlier, every category but saving from primary earnings declined:

• Earnings from secondary job: 24% down from 36% last year.
• Cash gift from family: 18%, down from 24%
• Sold stock investments: 9%, down from 13%
• Pulled money from a retirement fund early: 7%, down from 13%
• Contributed less to retirement savings: 6%, down from 12%
• Inheritance: 6%, down from 12%

The fact that millennial homebuyers are increasingly able to save money for a down payment and becoming less reliant on non-traditional funding methods likely has to do with the fact that wage growth for American workers hit a 10-year high in February after several years when wage growth fell far short of home price growth. The combination of strong wages and the housing market stalling late last year means that more buyers are able to save for their down payment using their primary income alone.

"Unemployment is at its lowest point since 2000," said Redfin chief economist Daryl Fairweather. "Millennials have never worked in an economy this strong before, and are now finally making enough from their paychecks to save for a home. The fact that they are less often needing to rely on family members or sacrificing retirement savings to fund a home purchase is another sign that millennials are finally gaining their financial footing."

It's also notable that compared to a year ago, the share of millennial respondents who sold cryptocurrency to fund a down payment fell dramatically, from 10 percent last year to just 3 percent in 2019. This is likely due to a similarly dramatic decline in the price of the digital asset. In early 2018, Bitcoin, the most popular cryptocurrency, was trading at around $10,000 for one bitcoin. As of this past March, that had fallen to under $4,000.

The FHFA on Friday released its Progress Report that summarizes the progress Fannie and Freddie have made in achieving the FHFA’s three strategic goals of:

1. MAINTAIN, in a safe and sound manner, foreclosure prevention activities and credit availability for new and refinanced mortgages to foster liquid, efficient, competitive, and resilient national housing finance markets;
2. REDUCEtaxpayer risk through increasing the role of private capital in the mortgage market; and
3. BUILDa new single-family securitization infrastructure for use by the Enterprises and adaptable for use by other participants in the secondary market in the future.

What follows are excerpts from this report that detail the Enterprises 2018 initiatives toward achieving these goals.

Maintain

Access to Mortgage Credit for Creditworthy Borrowers.

The Enterprises engaged in a number of initiatives and pilot programs during 2018. For one, Freddie Mac implemented HomeOne, which provides a low down payment option for first-time homebuyers and a traditional rate and/or term refinance option for borrowers with at least 3 percent equity.

Fannie Mae launched a marketing strategy for lenders, realtors and borrowers to responsibly increase access to credit and raise awareness of affordable financing options.

Each enterprise also implemented a high LTV ratio refinance program to replace the Home Affordable Refinance Program (HARP), which is being retired. The new, aligned program will allow a borrower whose mortgage is already owned or securitized by the Enterprises to refinance in situations where home values have declined.

In 2018, the Enterprises focused on increasing financial incentives for lenders/seller/servicers to originate low-balance loans, increasing market awareness of available products, and reducing costs for originating and selling low-balance loans.

Finalize Post-Crisis Loss Mitigation Activities

The 2018 Scorecard required the Enterprises to continue to support access to credit for borrowers with limited English proficiency (LEP borrowers).3 During 2018, the Enterprises finalized a multiyear language access plan and worked with FHFA to create a website4 to serve as a clearinghouse for translations of mortgage-related terms and documents.

Throughout 2018, the Enterprises engaged industry stakeholders, including lenders, appraisers, and other valuation-service providers and vendors, to assess challenges related to the current appraisal process and discuss possible solutions.

During the first quarter of 2018, FHFA and the Enterprises independently contacted stakeholders to assess opportunities to work with housing finance agencies (HFAs)7 to improve access to mortgage credit across market segments. Those outreach efforts generated common themes regarding HFA products and programs, pricing, interactions with third parties, and technology. In subsequent quarters, the Enterprises and FHFA reviewed the ideas generated and identified ways to streamline, align, and improve how the Enterprises work with HFAs.

Fannie Mae sought to open opportunities for diverse borrowers8 to obtain access to credit through two products: HomeReady and HomeReady/HFA Preferred, an affordable lending product exclusively available to eligible HFAs. Both products target creditworthy low- to moderate- income borrowers. During 2018, the minority share of total applications to these programs rose to 37 percent, exceeding the 2017 level of 35 percent for HomeReady.

Finalize Post-Crisis Loss Mitigation Activities

The 2018 Scorecard called for the Enterprises to finalize post-crisis loss mitigation policies derived in earlier scorecards and to continue to support responsibly the NSI..

During 2018, the Enterprises worked to finalize aligned loss mitigation policies addressing short-term hardships, foreclosure alternatives (such as short sales and deeds-in-lieu of foreclosure), loss mitigation letters for distressed mortgage borrowers, and foreclosure timelines and compensation for servicers of distressed mortgage assets.

The Enterprises continued to responsibly support the Neighborhood Stabilization Initiative (NSI) through their ongoing strategic partnership with the National Community Stabilization Trust in 28 Metropolitan Statistical Areas (MSAs). Those MSAs continue to be characterized by comparatively large numbers of low-value real estate owned (REO) properties. The NSI program permits nonprofits to acquire deeply distressed properties in those markets, significantly reducing the Enterprises’ costs for property preservation and maintenance. The program also returns acquired properties to productive use more quickly, and, in turn, promotes neighborhood stabilization.

Fannie Mae established a number of goals in an effort to reach diverse borrowers through the NSI, including goals for NSI property dispositions to nonprofit buyers, the percent of NSI properties sold to nonprofit buyers compared to number of Fannie Mae properties available for sale through NSI (that is, the buyer take-up rate), and engagement and use of minority-, women-, and disabled-owned businesses (MWDOBs) and minority, women, and disabled (MWDs) individuals.

Assess the Mortgage Servicing Business Model

Survey respondents emphasized the need to improve alignment between the Enterprises, including alignment between Enterprise processes, automation of interactions between servicers and the Enterprises, and data quality control. In 2018, the Enterprises conducted further industry outreach and began efforts to improve their servicer-facing systems and processes. As part of those efforts, work is underway to improve Enterprise technology that supports expense reimbursement and property preservation operations. The goal of these initial efforts is to gradually improve Enterprise tools that support servicing operations.

Single-Family Rental Strategies

In response to growth in the single-family rental market and with the goal of improving the affordability of single-family rentals, FHFA approved the Enterprises’ participation in several pilot transactions involving the purchase of single-family homes by large investors through their multifamily business units. The purpose of the pilots was to understand the challenges and opportunities in the single-family rental market and determine what, if any, role the Enterprises might play. Throughout 2017 and 2018, FHFA evaluated the effects of the Enterprises’ participation on single-family rental market stability, affordability, and liquidity. FHFA’s evaluation, which included extensive outreach, determined that the Enterprises’ existing single- family investment home rental programs play an important role for small investors and that the market for larger investors has performed successfully without liquidity from the Enterprises. As a result, in August 2018, FHFA directed the Enterprises to conclude their participation in the single-family rental market beyond the existing Enterprise single-family programs — Fannie Mae’s Multiple Financed Properties to one borrower and Freddie Mac’s Investment Property Mortgages. In its announcement, FHFA recognized the potential need for long-term financing for mid-size investors that own affordable single-family rental assets, but noted that it was premature to make such a determination without more information about the effects of Enterprise participation.

Supporting Liquidity in Multifamily Workforce Housing Markets

The 2018 Scorecard required the Enterprises to explore opportunities for further supporting liquidity in the multifamily workforce housing market.9 In 2018, both Enterprises conducted research on workforce housing, engaged in outreach to industry experts, examined ongoing rental affordability challenges, and assessed the availability of capital to support workforce housing. The Enterprises also looked closely at existing state and local programs designed to preserve workforce housing. These efforts were supported by FHFA’s Workforce Housing Workshop in June 2018, which gathered key stakeholders together to discuss the Enterprises’ role in supporting workforce housing. This research and outreach, including the findings from the workshop, will help inform the Enterprises as they work to develop strategies that address the shortages of rental housing affordable to low- and moderate-income households.

Managing Multifamily Business Volume within FHFA Established Caps

In 2018, the Enterprises actively managed their loan production to ensure they did not exceed the published cap. Fannie Mae’s total multifamily finance activity for the year was approximately $65.38 billion, of which $29.76 billion fell within the cap and $35.62 billion was in the excluded categories. Freddie Mac’s total multifamily finance activity for the year was approximately $77.47 billion, of which $32.57 billion fell within the cap and $44.90 billion was in the excluded categories.

Reduce

Credit Risk Transfers for Single-Family Credit Guarantee Business

The Enterprises’ primary business is acquiring single-family mortgage loans from lenders, selling securities backed by those mortgages to investors, and guaranteeing the timely payment of principal and interest on the securities. To do so, the Enterprises sell the interest rate and liquidity risk associated with mortgage loans but retain the credit risk, that is, the risk of loss from non-payment by the borrowers.

The Enterprises’ credit risk transfer (CRT) programs have become a core part of the Enterprises’ single-family credit guarantee business. The programs transfer credit risk to private capital via securities issuances, insurance/reinsurance transactions, senior-subordinate securitizations, front- end lender risk sharing transactions, and other pilot transactions.10

In addition to the Enterprises’ CRT programs, their charters require loan-level credit enhancement on all loans they acquire that have loan-to-value (LTV) ratios above 80 percent. Primary mortgage insurance is the most common form of charter-eligible credit enhancement. Primary mortgage insurance, which can be paid for by the borrower, the lender, or the Enterprise, is obtained at the front-end of the mortgage transaction prior to or concurrent with acquisition of the mortgage by the Enterprise.

For 2018, FHFA established in the 2018 Scorecard an objective for the Enterprises to transfer a meaningful portion of credit risk on at least 90 percent of the UPB of their acquisitions of single-family mortgage loans targeted for credit risk transfer. Both Enterprises achieved this objective in 2018. Targeted loans include fixed-rate, non-HARP loans with terms over 20 years and LTV ratios above 60 percent. Such loans represent a substantial amount of the credit risk associated with all new loan acquisitions.

The Enterprises’ securities issuance products include Fannie Mae’s Connecticut Avenue Securities (CAS) and Freddie Mac’s Structured Agency Credit Risk (STACR) securities. Those products accounted for 64 percent of the RIF entered into by the Enterprises during 2018. These securities are issued as Enterprise debt or debt of a bankruptcy- remote trust.

In November 2018, Fannie Mae completed its first CAS offering under which the securities are issued by a third-party bankruptcy-remote trust that qualifies as a Real Estate Mortgage Investment Conduit (REMIC). The CAS REMIC structure eliminates the accounting mismatch associated with Fannie Mae’s prior direct debt issuance transactions and limits investor exposure to Fannie Mae counterparty risk. Additionally, by qualifying as a REMIC, this structure should be more attractive to domestic Real Estate Investment Trusts (REITs) and foreign investors. The reference pool for Fannie Mae’s inaugural CAS REMIC transaction consisted of total UPB of $24.3 billion and RIF of $922 million.

In the second quarter of 2018, Freddie Mac introduced STACR Trust transactions under which the securities are issued by a third-party bankruptcy-remote trust. The STACR Trust structure reduces the accounting timing mismatch associated with Freddie Mac’s prior direct debt issuance transactions and limits investor exposure to Freddie Mac counterparty risk. In 2018, Freddie Mac executed five STACR Trust transactions with total UPB of $168.2 billion and RIF of $5.1 billion.

For the insurance and reinsurancetransactions, theEnterprises purchase credit protection from insurers and diversified reinsurers (together, Participating Insurers). Participating Insurers in insurance/reinsurance transactions provide collateral to mitigate counterparty risk and are required to adhere to the Enterprises’ underwriting, loss mitigation, and claim guidelines. These provisions also significantly restrict the Participating Insurers’ right to rescind, deny, or curtail coverage. The Enterprises’ insurance/reinsurance transactions — Agency Credit Insurance Structure (ACIS) for Freddie Mac and Credit Insurance Risk Transfer (CIRT) for Fannie Mae — accounted for about 24 percent of total credit risk transfers during 2018, compared to about 22 percent in 2017. The majority of the insurance/reinsurance transactions were executed after the Enterprise acquired the loans being insured.

Front-end lender risk transfer transactions include various methods of credit risk transfer, in which an originating lender retains a portion of the credit risk associated with the loans it sells to the Enterprise. In exchange, the lender receives a reduced guarantee fee charge on the loans from the Enterprise or a monthly payment from the Enterprise or a trust. These transactions are structured so that risk is transferred prior to, or simultaneous with, Enterprise loan acquisition. To date, all front-end lender risk sharing transactions have been fully collateralized. These transactions may take a securities format, which allows the originating lender to either hold the credit risk by retaining the securities or sell the credit risk by selling the securities to credit risk investors. In 2018, both Fannie Mae and Freddie Mac completed front-end lender risk sharing transactions. Those transactions had a total UBP of $49 billion and RIF-equivalent of $1.7 billion.

The 2018 Scorecard called for the Enterprises to continue implementing FHFA-approved plans to reduce their retained portfolios. Implementing those plans shifts credit, asset liquidity, and interest rate risks from the Enterprises to private investors. Each Enterprise’s plan requires it to prioritize selling its less-liquid assets, such as non-agency securities, in a commercially reasonable manner, consistent with neighborhood stabilization. Each plan also requires that the Enterprise meet the annual cap imposed by the Senior Preferred Stock Purchase Agreement (PSPA) between the Enterprise and the Department of the Treasury, even under adverse conditions such as rising interest rates or falling house prices. The PSPA cap applicable on December 31, 2018 was $250 billion. To ensure that the PSPA cap is met even under such adverse conditions, FHFA requires each Enterprise to provide a buffer by meeting a cap that is 10 percent below the PSPA cap.

In accordance with each Enterprise’s 2018 retained portfolio plan, which were approved by FHFA in February 2018, the Enterprises made significant progress in reducing their retained portfolios during 2018. At year-end, each Enterprise’s retained portfolio was below the year-end 2018 PSPA cap of $250 billion and below FHFA’s requirement of $225 billion by December 31, 2018. As of December 31, 2018, Freddie Mac’s portfolio was approximately $218 billion, and Fannie Mae’s was approximately $179 billion, a reduction in their combined portfolios of $87 billion in 2018.

The 2017 and 2018 Scorecards required the Enterprises to evaluate private mortgage Insurer Eligibility Requirements (PMIERs) to determine whether changes or updates were appropriate. The Enterprises, under the oversight of FHFA, worked collaboratively throughout 2017 to review PMIERs, identify areas for enhancement, and analyze proposed changes. The Enterprises and FHFA solicited feedback on the proposed changes from MIs and state insurance regulators in late 2017. During 2018, the Enterprises incorporated feedback from the MIs, made additional refinements, and, after another round of MI company feedback, published PMIERs 2.0 on September 27, 2018.

Build

The third and final strategic goal of the 2014 Conservatorship Strategic Plan calls for building a new infrastructure for the securitization functions of the Enterprises that is adaptable for use by other market participants in the future. The 2018 Scorecard continued to prioritize work by the Enterprises and Common Securitization Solutions, LLC (CSS) to develop the Common Securitization Platform (CSP) and a common, Enterprise MBS. The 2018 Scorecard also required continued work to support the standardization of mortgage data. This section reviews progress on those initiatives in 2018.

Single Security Initiative and Common Securitization Platform

The CSP and Single Security Initiative (SSI) are significant, multiyear, interrelated projects that remain ongoing priorities of FHFA during conservatorship of the Enterprises. The Enterprises will use the CSP as the operational and technical platform through which they will issue and administer a common, single MBS, to be known as the Uniform Mortgage-Backed Security or UMBS. The 2018 Scorecard called for the Enterprises and CSS, the joint venture Fannie Mae and Freddie Mac established to develop and administer the CSP, to continue working with FHFA and each other to build and test the CSP. The 2018 Scorecard also called for the Enterprises to implement the changes necessary to integrate their systems and operations with the CSP, and to fully implement the SSI on the CSP in 2019. In addition, the 2018 Scorecard calls for the Enterprises and CSS to continue to work together to obtain and use input from the SSI/CSP Industry Advisory Group.

During 2018, the Enterprises and CSS completed several testing phases, including system-to- system, joint end-to-end, and tri-party end-to-end testing for Release 2 of the CSP. Testing with third-party providers and partners such as the Federal Reserve Bank of New York will continue into 2019. Testing with vendors that use and distribute securities disclosure data is also underway.

With deployment of Release 2 in June 2019, Fannie Mae and Freddie Mac will both use CSP for issuance and monthly processing of single-class UMBS backed by fixed-rate loans, single-class resecuritizations of UMBS (to be known as Supers), multiclass securities such as REMICs, and various functions that will differ by Enterprise for securities that are backed by adjustable-rate loans. Release 2 modules include Data Acceptance, Issuance Support, Bond Administration with Tax Calculations, and Disclosure.

FHFA and the Enterprises have worked together to develop processes to identify and align those Enterprise programs, policies, and practices that could materially affect prepayment speeds of UMBS issued by Fannie Mae and Freddie Mac. During 2018, FHFA started publishing quarterly Prepayment Monitoring Reports to provide transparency to market participants about the ex post alignment of Enterprise prepayment speeds.

Mortgage Data Standardization

In 2018, the Enterprises continued collaborating with the mortgage industry to develop and implement uniform data standards for single-family mortgage loans. This effort included the electronic collection of the Uniform Closing Disclosure Dataset (UCD), continuing implementation of the redesigned Uniform Residential Loan Application (URLA), and new specifications for each Enterprises’ Automated Underwriting System (AUS). In addition, the Enterprises assessed and, as appropriate, began to implement strategies to redesign the Uniform Appraisal Dataset (UAD) and appraisal forms.

The Enterprises began accepting electronic delivery of the Borrower Closing Disclosure from lenders delivering loans dated on or after September 25, 2017. As of June 25, 2018, the Enterprises mandated that both data and the Borrower Closing Disclosure be submitted electronically at loan delivery. Also in June, the Enterprises updated the UCD requirements for seller data to address industry concerns by limiting the seller data contained only on the Borrower Closing Disclosure. The Enterprises set an effective date of June 24, 2019 for the mandatory electronic delivery of the Seller data. The Enterprises also published information on how the TILA/RESPA Integrated Disclosure (TRID) rule that became mandatory on October 1, 2018 would affect the UCD. Both Enterprises published the updated UCD Delivery Specification and supporting documents in December 2018 to support the Seller data and TRID changes.

After announcing updates to the URLA in December 2015, the Enterprises published implementation timelines, the redesigned URLA form, and the Uniform Loan Application Dataset (ULAD) specifications at the end of 2017. To operationalize these changes, the Enterprises worked together and developed new specifications for their automated underwriting systems. The major focus during 2018 was providing the support needed for the mortgage industry to be ready to test new AUS specifications beginning January 2019. Use of the redesigned URLA form begins on a voluntary, as able, basis in July 2019. The Enterprises established a joint advisory group in July 2018 to address mapping and implementation issues related to the redesigned URLA and ULAD. The advisory group includes lenders, vendors, and document providers. To assist lenders, vendors, and document providers in adapting to the new specifications, the Enterprises published updates providing new and updated sample forms, AUS specifications, and detailed implementation guidance. The Enterprises also provided webinars that highlight key differences between the old and new URLA sections, and eLearning on how to implement the new AUS specifications.

In May 2018, the Enterprises announced a multi-year initiative to redesign and update UAD and residential appraisal forms. The redesign aims to align the appraisal dataset with the industry-standard Mortgage Industry Standards Maintenance Organization (MISMO) Reference Model. Additionally, the initiative seeks to explore options and make recommendations regarding changes to the UAD and appraisal forms to support emerging technologies, data updates, and appraisal process modernization.

During 2018, the Enterprises conducted extensive outreach to understand stakeholder concerns and solicit suggestions for data elements and forms. To ensure a comprehensive appraisal forms dataset, the Enterprises began mapping all appraisal forms not included in the original 2011 UAD to the MISMO Reference Model. In 2019, continuing industry outreach will help identify a comprehensive dataset around which to build an updated appraisal specification and reports.

Mortgage Servicing leader with 35 years of experience joins as Senior Vice President, Consumer Lending

Visionet Systems Inc., a global technology and services provider to the US mortgage industry, announced today that the company has hired Martin Foster, a mortgage servicing leader with 35 years of industry experience.

[caption id="attachment_12087" align="alignleft" width="287"] Martin Foster, Visionet[/caption]

"We are committed to provide value to clients and keep innovating in the mortgage services and products space. Martin’s experience in the industry will be pivotal for us to further our offerings in the mortgage space,” said Arshad Masood, CEO at Visionet Systems. “Martin will help Visionet to grow its digital technology offerings to the mortgage industry and expand its mortgage business.”

With 35 years of industry experience, Martin brings with him a deep and vast array of knowledge in all aspects of Servicing & Post Closing, project management and the digital transformation of mortgage operations. He has spent much of his career working with investment banks, financial institutions and credit unions, developing long-lasting relationships and providing compliant, value-added solutions to industry leading lending institutions.

Martin has held senior leadership roles at PHH Mortgage, Countrywide Home Loans, and Shearson Lehman Mortgage Inc. He has delivered tremendous value to his clients helping them meet their key performance objectives of increasing efficiencies, lowering costs and ensuring regulatory compliance.

Speaking about his new role, Martin said, “We are in a time of technological change in the mortgage industry, and Visionet’s technology-led solution holds the key to several industry challenges. I am confident that our collaboration will create significant value for our clientele.”