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Consumers Aren’t Getting Fannie, Freddie 3% Down Mortgages

For all the uproar that surrounded Fannie Mae and Freddie Mac introducing loan programs that allowed buyers to put down as little as 3% around this time last year, not many buyers are actually taking advantage of the low down payment loans, according to a new report from Black Knight Financial Services.

In Dec. 2014, Fannie and Freddie officially rolled out 97% loan-to-value products.

According to Black Knight’s report, high-LTV loans (loans with LTV’s above 95%) from the GSEs have accounted for less than 3% of the total number of high-LTV loans originated in 2015.

Overall, high-LTV loans represent only approximately 1% of the total GSE-backed originations in 2015 so far.

According to Black Knight’s report, loans insured by the FHA or the VA still account for more than 90% of the total number of high-LTV loan originations – a figure that has held steady above 90% since 2009.

And high-LTV loans account for 77% of the total number of FHA or VA loan originations as well.

According to Black Knight Data & Analytics Senior Vice President Ben Graboske, those figures were far different before the housing crisis.

“Back in 2007, the GSEs made up over 45% of high-LTV purchase originations, while FHA/VA lending made up roughly one-third,” Graboske said.

“Since 2009, FHA/VA products have made up over 90% of high-LTV purchase originations every year, and the same is true in 2015, even with the GSEs having reintroduced their own 97% LTV products,” Graboske continued. “In fact, those products have accounted for less than 3% of all high-LTV originations so far this year.”

Overall, high-LTV purchase originations were up 20% percent in the third quarter 2015, compared with an approximately 13% increase for the purchase market overall.

According to Black Knight’s data, high-LTV loans now make up 23% of the total number of purchase originations.

Additionally, Black Knight’s report showed that average credit scores are rising for FHA/VA high-LTV borrowers. According to Black Knight’s data, average credit scores for FHA/VA high-LTV borrowers are up 6 points from last year to 706.

Graboske noted that credit scores for GSE and portfolio high-LTV loans are roughly 35 points higher that the FHA/VA loans.

“We’ve actually seen annual declines in high-LTV lending among 620-660 credit scores for each of the past six months even though overall high-LTV purchase volumes have risen in each of those months,” Graboske said.

“This may be attributed to tightening credit, or it may be that the FHA’s reduced annual mortgage insurance – which FHA estimates will reduce borrowers’ mortgage payments by $900/year – has enticed some higher-credit borrowers into those FHA products,” he concluded.

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