Mortgagor privacy and the economics of refinance lending (when it eventually returns) are a mere data terms of use restriction away from being blown w

Reverse Engineering Finance (FKA John's Musings)

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2024-12-30 20:30:02

Mortgagor privacy and the economics of refinance lending (when it eventually returns) are a mere data terms of use restriction away from being blown wide open. The prepayment anticipation abilities of Mortgage-Backed Securities (“MBS”) traders/investors are about to be significantly enhanced, if they haven’t been already from those in the know. All made possible by publicly available data sets (albeit terms of use restricted).

Over the past couple of months, I have downloaded records for most of the countries outstanding mortgages, roughly 39 million of them. This data comes directly from the issuers/backers/guarantors of Mortgage-Backed Securities (“MBS”), specifically Ginnie Mae (“GNMA”) for FHA and VA loans, and Fannie Mae (“FNMA”) and Freddie Mac (“FHLMC”) for conventional loans. This loan level data for loans in outstanding MBS pools includes core characteristics about the loan (think amount, term, interest rate, property state, often times who originated it etc.) and some additional characteristics provided to help MBS investors evaluate prepayment and default risk 1 such as loan to value at origination, borrower credit score at origination, and the debt to income ratio for the borrower at origination. This data is updated every month including whether the loan is current or slipping into delinquency. On a side note, I do this and everything I will describe below, not in the cloud or on some expensive and fancy server, but rather on an hp “business” desktop that could be bought on Black Friday for 800 bucks. Big data just doesn’t seem so big anymore.

I have also downloaded every Home Mortgage Disclosure Act (“HMDA”) record for FHA, VA, and conventional mortgages originated since HMDA data collection started in 2018 through 2023 2. So not all currently outstanding mortgages have a corresponding HMDA record, but most of them do.

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