Freddie Mac Releases Non-Standard Dataset
New Single-Family Non-Standard Dataset
Freddie Mac continues to demonstrate a commitment to data transparency through the release of a new Non-Standard Dataset (NSD). This dataset is composed of loans that have previously been excluded from the Single-Family Loan-Level Dataset (Standard Dataset or SD) for having features that do not align with Single-Family credit risk transfer (CRT) eligibility criteria, such as adjustable-rate mortgages (ARM), interest-only, credit enhancements other than primary mortgage insurance, and limited documentation. Analysis of the two datasets reveal that historical performance of the loans in the NSD differs significantly from the SD.
- Product type (i.e. ARM and interest-only) is the biggest driver of the performance difference. These loans do not perform as well as fixed-rate, fully amortizing mortgages, even when controlling for credit attributes. Please note that interest-only mortgages have not been acquired by Freddie Mac since 2010, and the ARM population has decreased dramatically since 2007.
- The loans in the NSD have less favorable credit attributes, and due to the nature of the product types (adjustable rate, interest-only/non-amortizing), the loss experience was magnified during the financial crisis.
- Severity is mostly comparable between the NSD and SD. The large difference in historical losses in the NSD is primarily driven by significantly higher defaults, as severity is only a minor contributor.