Mortgage Debt Outstanding Expands On Growing Originations


According to the Household Debt and Credit Report released by the Federal Reserve Bank of New York, aggregate household debt outstanding totaled $12.252 trillion in the first quarter of 2016, 2.4%, $401 billion, greater than its level of one year ago.

The report found that non-housing related debt outstanding (auto loans, credit cards, student loans and other debt) increased year-over-year by 7.2%, $228 billion. Meanwhile, housing-related debt (mortgages and home equity lines of credit) rose by a combined amount of 2.0%, $173 billion. However, the growth in housing-related debt reflected a 2.4%, $198 billion, increase in mortgage debt outstanding. Home equity lines of credit fell by 4.9%, $25 billion.

The expansion in mortgage debt outstanding partly reflected an increase in mortgage originations. According to the release, after falling by 42.5% in the first quarter of 2014, the dollar value of mortgage originations has since risen on a four-quarter basis for two consecutive years. The total amount of mortgage originations in the first quarter of 2015, $368 billion, was 11.0% above its level in the first quarter of 2014, $332 billion, and the total amount of mortgage originations in the first quarter of 2016, $389 billion, was 5.5% greater than its level in the first quarter of 2015. After dropping to a low of $1.31 trillion for all of 2014, mortgage originations rose by 34.5% to 1.76 trillion in 2015.


Of course, not all originations remain on the balance sheet of mortgage lenders. Instead, information provided by Fannie Mae shows that, the largest portion of mortgages are sold to the government-sponsored enterprises, Fannie Mae and Freddie Mac. Fannie Mae surveys the mortgage lenders with which it does business and the results are communicated through its Mortgage Lender Sentiment Survey. The results represent averages across the group.


As shown in Figure 2 above, across all mortgage lenders on average, 48% of mortgage originations are sold to the GSEs, both Fannie Mae and Freddie Mac combined, and another 20% of mortgage originations are retained in their own portfolio. Meanwhile, equal shares, 15% of mortgage originations, are whole loan sales to non-GSEs or go to Ginnie Mae. A small proportion of mortgages are packaged as private labels securities and sold to investors.

Mortgage execution differs somewhat by type of mortgage lender, depository institutions, credit unions, and mortgage banks. Although the largest proportion of mortgages across all three types of mortgage lenders are ultimately sold to the GSEs, the destination receiving the second largest share of mortgages varies. Depository institutions and, to a greater extent, credit unions are next more likely to retain mortgages on their own portfolio, but mortgages at mortgage banks tend to go to Ginnie Mae.


As illustrated by Figure 3 above, on average 52% of mortgages at depository institutions are sold to the GSEs and 25% of mortgages are retained in their own portfolio. A smaller portion of mortgages go to Ginnie Mae or are whole loan sales to non-GSEs. Similarly, credit unions sell the largest percentage of their mortgages, 47%, to the GSEs, but they retain an even larger percentage, 44%, in their own portfolio as compared to depository institutions. Additionally, a much smaller share of mortgages at credit unions, relative to depository institutions, go to Ginnie Mae or are whole loan sales to non-GSEs.

Mortgage banks also sell the largest share of their mortgages to the GSEs, 44%. However, they only retain 1% of their mortgages. Since mortgage banks typically do not hold loans in portfolio, but originate and sell into the secondary market, then the 1% were probably loans in process of delivery. Instead, mortgages at mortgage banks are more likely to go to Ginnie Mae or are executed as whole loan sales to non-GSEs. Combined, more than half, 53%, of mortgages originated by mortgage banks either go to Ginnie Mae or are whole loan sales to non-GSEs.

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