Fannie Mae and Freddie Mac turned in a solid gain in single-family production during the third quarter of 2018, according to an exclusive ranking and analysis by Inside Mortgage Finance.

The two government-sponsored enterprises issued $213.81 billion of new single-family mortgage-backed securities during the third quarter, a solid 10.4 percent increase from the previous three-month period. At $592.02 billion in production through the first nine months of the year, they were still off 5.8 percent from the same period in 2017.

Not surprisingly, all of the gain came from the purchase-mortgage market. Fannie and Freddie securitized $152.56 billion of purchase-money home loans during the third quarter, up 23.4 percent from the previous period. And on a year-to-date basis, GSE purchase-mortgage activity was up 9.0 percent from the first nine months of 2017.

Purchase mortgages accounted for 71.4 percent of third-quarter GSE business and reached a 72.8 percent share in September. Fannie’s purchase-loan business jumped 29.9 percent from the second to the third quarter; Freddie’s was up 15.4 percent.

The GSE refi market was down sharply. Just $55.90 billion of refinance loans were securitized by the two, a 15.5 percent decline from the second quarter.

Fannie’s single-family MBS activity was up 16.8 percent from the second quarter, while Freddie managed just a 1.9 percent increase. That left Freddie with a 39.2 percent share of the two-horse GSE market during the third quarter after it had driven its share up to 42.5 percent in the previous period.

Average loan characteristics didn’t change much in the third quarter. Average credit scores inched slightly higher for GSE purchase loans and fell 2.9 points for refi loans. Average loan-to-value ratios were marginally lower in both categories.

But the increase in GSE business with debt-to-income ratios exceeding 43.0 percent persisted in the third quarter. Some 29.8 percent of Fannie/Freddie loan acquisitions fell in this category, the so-called GSE patch that extends qualified-mortgage status to mortgages that have DTI ratios that exceed the normal 43.0 percent cap for QM treatment.

In the third quarter of 2017, just 19.0 percent of Fannie/Freddie business had DTI ratios in that range. The special QM rule for the GSEs is slated to last until January 2021 – it would end sooner if Fannie and Freddie are taken out of conservatorship – but Trump administration officials have support-ed leveling the DTI playing field.

That could mean changing the QM rule – a lengthy regulatory process that could take over a year – or imposing new restrictions under the conservatorships, which could be done quickly.