Fannie Mae (FNMA)

[navycmdr]

Share of Fannie and Freddie loans to first-time buyers reaches new high

New ICE origination data offers interesting takeaways on FTHBs
(FTHBs - first-time homebuyers )

March 04, 2024 - Arnie Aurellano



With originations sinking to a 30-year low in 2023, first-time homebuyers
(FTHBs) made up an all-time high 47% of all purchase mortgages backed by the
government-sponsored enterprises in 2023, Intercontinental Exchange (ICE) reported.

Just 4.3 million mortgages were originated last year, the fewest on record
in the 30 years ICE has been keeping track. More than 80% of those were
purchase loans, helping push FTHBs to 44% of overall agency securities
issuance — a particularly high share.

“Since 1995, only two quarters have seen fewer than 1 million first lien
mortgages originated,” said Andy Walden, vice president of enterprise
research strategy. “The first was Q1 2023, and Q4 the second. Looking
back, last year’s market was dominated by purchase lending, with
loans to buy homes making up 82% of a historically low number of
originations.

“While it remains a tough market for prospective purchasers, our
MBS (mortgage-backed securities) agency securities database
revealed that first-time homebuyers actually made up 55% of all
agency purchase mortgages last year. That’s the highest share
in the 10 years we’ve been tracking the metric.”

Thirty-nine percent of all government-sponsored enterprise
(GSE) securitizations in 2023 were FTHB purchase loans.
That’s at least 12 percentage points higher than any other
vintage in the past 10 years.

“The market in which these folks purchased their first home
was one of record house prices, ballooning down payments,
rising rates and elevated DTIs,” Walden said. “Given record
exposure to first-time homebuyer loans, it’ll be worth watching
the performance of this cohort very closely moving forward,
particularly for those invested in 2023 agency MBS.”

Predictably, FTHBs have generally lower credit scores than
repeat buyers. This holds true in conventional purchase loans,
where the average first-timer has a score nine points lower
than the average repeat homebuyer, and in VA purchases,
where that gap widens to 23 points. But ICE’s data reveals
that among FHA loans, FTHBs and repeat buyers largely carry
the same average scores. And interestingly, while first-time
buyers have higher front-end debt-to-income ratio
(based exclusively on housing expenses) than repeat buyers,
their back-end DTIs (which take all other recurring expenses
into account) are actually comparable. First-time buyers spend
a larger share of income on housing, but typically pay less on other
forms of debt.