Exploratory Analytics: Exploring Acquisition Characteristics

Task outline

The main acquisition characteristics considered to in this module are:

- Original Interest Rate
- Original UPB
- Original Loan to Value Ratio (LTV)
- Borrower Credit Score at Origination
- Debt-To-Income (DTI) 
- Loan Purpose
- Property Type

Other acquisition characteristics, also worth of exploration, include: Original Combined Loan to Value Ratio (CLTV), Co-Borrower Credit Score at Origination, Mortgage Insurance Type, Mortgage Insurance Percentage, Channel, Number of Borrowers, Number of Units, Occupancy Status, First Time Home Buyer Indicator, Relocation Mortgage Indicator, and Special Eligibility Program.

Examine the questions below using the data sample of 30 year fixed-rate mortgages acquired by Fannie Mae during the period 2000-2014. The

  1. The sub-prime mortgage crises (2007-2009) was precipitated by a rise in sub-prime mortgage lending in the preceding few years. Explore the dataset to identify any marked changes in mortgage acquisition characteristics before and after the crisis period.

  2. The interest rate of 30-year fixed-rate mortgages changes over time according to various economic conditions. The changes have significant implications for home buyers and for the mortgage industry as a whole. One record of historical mortgage interest rates is the The Primary Mortgage Market Survey (PMMS) conducted by Freddie Mac, a government sponsored enterprise similar to Fannie Mae, since 1970. Using annual averages, compare the 30-year fixed-rate interest rates with the average interest rates in the Fannie Mae acquisition dataset. Are there any discrepancies between the two time series?1

  3. Explain carefully the increase in the number of loans in the period 2000-2003 in terms of changes of interest rates during that period.

  4. Which States / Zip Codes had the highest/lowest mortgage interest rates? Which States / Zip Codes had the highest/lowest mortgage principal balances at origination?

  5. Comment on whether the mortgages in the dataset conformed strictly to the Eligibility Matrix.

Footnotes

  1. Freddie Mac has recently decided to base their PMMS on data collected from loan applications submitted to Freddie Mac instead of conducting an actual survey…↩︎