Revised 4/11/2011[1]
Introduction
One important purpose of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank) is to reform the securitization of financial assets in the U.S.[2] To that end, the legislation requires the federal banking agencies, the Securities and Exchange Commission, the Secretary of Housing and Urban Development, and the Federal Housing Finance Agency ("the Agencies") to jointly issue regulations to require securitizers to retain an economic interest in a portion of the credit risk for residential mortgages that they use to collateralize asset-backed securities. Dodd-Frank requires the Agencies to exempt securities from this requirement that are backed only by loans with low default risk that meet a Qualified Residential Mortgage (QRM) standard.
The Agencies must jointly define what constitutes a QRM "taking into consideration underwriting and product features that historical loan performance data indicate result in a lower risk of default." To help the public consider the definition set forth in the recently published Notice of Proposed Rulemaking (“NPR”) that would implement the risk retention provision of Dodd-Frank, this data release provides historical data on loan volumes and ever-90-day[3] delinquency rates of mortgages purchased or guaranteed by Fannie Mae or Freddie Mac ("the Enterprises").
[1] This Mortgage Market Note revises and corrects the March 31, 2011 Mortgage Market Note: Qualified Residential Mortgages. Revisions were made to the final two paragraphs of text concerning the marginal ever-90-day delinquency rates resulting from small adjustments to the proposed Qualified Residential Mortgage standards, as well as the bullet point that summarizes the key finding, “Expanding QRM Definitions Would Add Loans with Much Poorer Performance”. Additional tables were also added (see Section 4c), which were not included in the prior version.
[2] See Pub. L. No. 111-203, § 941, 124 Stat. 1376, 1890-1896 (2010) of the Dodd-Frank Act. See also, S. Rep. 111-176 at 128-131 (2010) (discussing subtitle D of title IX of the Dodd-Frank Act).
[3] A mortgage is ever-90-day delinquent if it has had a payment 90 days past-due or longer, has been put into foreclosure or transferred as a deed-in-lieu of foreclosure, or has been classified as a real-estate-owned (REO) property after an unsuccessful sale at a foreclosure auction at any point in the life of the loan through September of 2010. The dataset contains monthly information on the number of days each delinquent mortgage is past due and whether loans are in foreclosure processing. However, mortgages are identified as being in REO only at the end of each quarter.