Disruptive Fintech by James Deitch

Author:James Deitch
Language: eng
Format: epub
Publisher: De Gruyter
Published: 2019-11-13T10:49:17.952000+00:00

Table 6.1:Guarantee fees and loss rate on loans from 2012 to 2016.

YEAR UNPAID

PRINCIPAL

BALANCE

($ MILLION) DEFAULT UNPAID

PRINCIPAL BALANCE

($ MILLION) LOSS RATE

(DEFAULT

DIVIDED BY UPB) APPROXIMATE

CUMULATIVE

GUARANTEE FEES

COLLECTED ($ MILLION)

2012 608,103 300 0.049% 13,313

2013 483,419 246 0.051% 9,071

2014 310,374 152 0.049% 4,587

2015 421,057 72 0.017% 5,297

2016 540,409 11 0.002% 5,010

Total 2,363,362 781 0.033% 37,278

Several executives of bank and independent mortgage bank originators stated that the GSEs have noticed that they are selling higher balance, high credit-quality loans away from the GSEs and into the private label and whole loan markets. The GSEs are said to have relayed that they expect a “representative mix” of the lender’s loan production. They don’t want “adverse selection.” Yet their pricing model has no relation to the credit risk of a large segment of loans sold to the GSEs.

Guess what? We are approaching the inflection point where the GSE business model will work, until it doesn’t. Despite reform attempts by the administration, the GSE model is a tough mess to overhaul. As Roy George, VP of Taylor Morrison Home Funding, observed, it may be too large a problem to shift in any way:

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