UPDATE: Fannie Gross Mortgage Portfolio Shrank 19.2% In April
May 29 2009 - 4:18PM
Dow Jones News
Fannie Mae (FNM) saw its volume of refinanced mortgages drop in
April to $45.5 billion from a high of $77 billion in March, its
largest since 2003, according to a monthly report released
Friday.
The mortgage giant's investment portfolio shrank again, this
time by 19.2%, keeping its total balance at $770.062 billion, well
short of the curbs set by its regulator, according to the report
from the company.
"Fannie's lack of portfolio growth was driven by the relative
richness of mortgages versus agency debt," said Margaret Kerins,
agency debt strategist with RBS, adding that discretionary growth
will be a continuing trend for the company.
The mortgage company, which is under government conservatorship,
expects to see its refinancing volumes stay at elevated levels as
mortgage rates remain low, and the government widens the
eligibility of refinanceable loans under its Making Home Affordable
Program.
Meanwhile, the mortgage finance company said its delinquency
rate rose to 3.15% in March from 2.96% in February, according to
the report. This compares to a delinquency rate of 1.06% in January
2008.
The company says these numbers are elevated as a result of its
moratorium on foreclosures that ended in March.
Market participants say that even though these numbers are still
low compared to the averages on other kinds of mortgages, it
represents an increased stress on the company from its mortgage
holdings. These numbers are expected to rise as the unemployment
rate continues to tick upward, and job losses drag even
credit-worthy borrowers into missing payments.
On the business front, Fannie committed to buy nearly $4.9
billion of mortgage bonds in April, down from its net commitments
of nearly $5.4 billion in March.
Over the past couple of months, the roles of Freddie Mac (FRE)
and its sibling Fannie in the mortgage market have diminished as
both the U.S. Treasury and the Federal Reserve have emerged as
backstop buyers with deep pockets.
However, market participants still keep tabs on Fannie and
Freddie's portfolios as an indication of their financial health,
and their ability to continue to play a role as both guarantors and
buyers of mortgage bonds.
Meanwhile, Fannie Mae's total book of business declined at an
annualized compound rate of 2.6% in April.
Total Fannie Mae issuance of mortgage bonds increased to $56
billion in April, down from $87.8 billion in March.
Issuance of Fannie Mae securities and other guarantees decreased
at a compounded annualized rate of nearly 1% during the month.
Fannie's duration gap, a measure of the portfolio's sensitivity
to interest rates, averaged negative one month in April.
Freddie and Fannie are chartered by Congress to buy mortgages
from lenders, freeing them to make more loans.
They repackage the mortgages as securities and sell them again.
Both also hold on to large quantities of mortgage securities,
profiting from the difference between the interest rates they pay
and the cost of debt issued to fund their purchases.
-By Prabha Natarajan, Dow Jones Newswires; 201-938-5071;
prabha.natarajan@dowjones.com