Fannie Mae Publishes Working Paper on Low Balance Lending Economics
Fannie Mae's Economics and Strategic Research and Single-Family Capital Markets teams published a working paper introducing a new methodology that estimates and decomposes lender revenue for Fannie Mae guaranteed loans. Leveraging unique data, the authors reveal noteworthy insights into the relationship between individual loan economics and lender behavior. Among the new insights, the paper illustrates that the specified pay-up is critical to improving the economics of lower balance loans for lenders, which in turn improves access to credit for underserved borrowers. This market-based dynamic highlights how investor interests can support access to homeownership for underserved borrowers and families.
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