Fannie Mae : Understanding Borrower Behavior and Characteristics in 2007 vs 2019

This project analyzes and compares borrower behavior and characteristics between the years 2007 and 2019, focusing on key financial metrics such as credit scores, interest rates, debt to income ratios, and loan to value ratios. By examining data from these two distinct periods—2007 during financial instability and 2019 just before the COVID-19 pandemic—this analysis provides insights into how market conditions impact borrower risk profiles. The findings can help Fannie Mae improve risk assessments, predict defaulters, and refine policy development for better market adaptation. Visualizations and interactive charts are included to highlight the differences and trends in borrower behavior over these years.

The analysis focuses on two distinct periods:

• 2007: A year of financial instability.
• 2019: A year just before the onset of COVID-19.

Key Findings

• Defaulters: In 2007, 9% of borrowers defaulted compared to only 0.2% in 2019.
• Credit Scores: Defaulters have lower credit scores than non-defaulters. Average credit scores were higher in 2019.
• Interest Rates: Higher credit scores are associated with lower interest rates. Interest rates were generally higher in 2007.
• Debt to Income Ratio: Borrowers had a higher median DTI in 2007, indicating higher financial stress.
• Loan to Value Ratio: The average LTV for refinancing was lower than for purchasing in both years.

Visualizations

The project includes several visualizations to illustrate these findings:

• Figure 1: Percentage of defaulters in 2007 and 2019.
• Figure 2: Comparison of credit scores between defaulters and non-defaulters.
• Figure 3: Relationship between credit scores and interest rates.
• Figure 4: Median DTI ratios in 2007 and 2019.
• Figure 5: LTV ratios for purchase vs. refinance purposes.

Conclusion

The analysis reveals that borrower behavior was riskier in 2007 than in 2019. Financial stress and default risks were higher in 2007, whereas borrowers had higher credit scores and lower interest rates in 2019. These insights can help Fannie Mae make informed decisions regarding risk management and policy development.