NSMO Supporting Statement

"NATIONAL SURVEY OF MORTGAGE ORIGINATIONS"
OMB NUMBER 2590-0012
SUPPORTING STATEMENT

The Federal Housing Finance Agency (FHFA or the Agency) is seeking approval for a three-year
extension of the Paperwork Reduction Act (PRA) clearance for the National Survey of Mortgage
Originations (NSMO). OMB has assigned the NSMO control number 2590-0012, which is due to
expire on December 31, 2016. This information collection was called the "National Survey of
Mortgage Borrowers" when it was last submitted for PRA clearance in 2013. FHFA changed the
name of the survey to reflect more accurately the focus of the questions and to distinguish it more
clearly from the American Survey of Mortgage Borrowers (OMB control no. 2590-0015).
The NSMO is a recurring quarterly survey of individuals who have recently obtained a loan
secured by a first mortgage on single-family residential property. The survey questionnaire is sent
to a representative sample of approximately 6,000 recent mortgage borrowers each calendar quarter
and typically consists of between 90 and 95 multiple choice and short answer questions designed to
obtain information about borrowers' experiences in choosing and in taking out a mortgage. 1 The
NSMO is sponsored by FHFA and is one component of the National Mortgage Database Project,
an ongoing joint effort of FHFA and the Consumer Financial Protection Bureau (CFPB).
Many of the topics addressed in this Supporting Statement-in particular those relating to the
statistical methods addressed in Part B-are discussed in greater detail in the November 14, 2016
draft ofNSMO Technical Report 2.1 , prepared by FHFA's National Mortgage Database Project
staff, which is included as Attachment 2.

A. JUSTIFICATION
1. Circumstances necessitating the collection of information

Section 1324 of the Federal Housing Enterprises Financial Safety and Soundness Act of 1992
(Safety and Soundness Act) requires that FHFA prepare annually a detailed report on the
residential mortgage market activities of two of its regulated entities-the Federal National
Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie
Mac) (collectively, "the Enterprises")-and to submit that annual report to the Committee on
Banking, Housing, and Urban Affairs of the Senate and the Committee on Financial Services of the
1

A copy of the current version of the NSMO questionnaire (mailed in November 2016) is included as Attachment 1 to
this Supporting Statement. Copies of the questionnaire in both English and Spanish can also be accessed online at:
http ://www.fhfa.gov/Homeownersbuyer/Pages/National-Survey-of-Mortgage-Originations.aspx.

1

House of Representatives. 2 At a minimum, the report must: (1) address the extent to which the
Enterprises are fulfilling their statutory duties with respect to the residential mortgage markets,
including their duty to serve underserved markets; (2) aggregate and analyze relevant data on
income to assess the compliance of each Ente~rise with statutory housing goals established under
section 1331 of the Safety and Soundness Act; (3) aggregate and analyze data on income, race,
and gender by census tract and other relevant classifications, and compare such data with larger
demographic, housing, and economic trends; (4) identify the extent to which each Enterprise is
involved in mortgage purchases and secondary market activities involving subprime and
nontraditional loans; (5) compare the characteristics of subprime and nontraditional loans
purchased and securitized by each Enterprise to other loans purchased and securitized by each
Enterprise; and (6) compare the characteristics of high-cost loans purchased and securitized, but
not held in portfolio, by each Enterprise to such securitized loans that are retained in portfolio or
repurchased by the Enterprise, including such characteristics as the purchase price of the property
securing the mortgage, the loan-to-value ratio of the mortgage, the terms of the mortgage, the
creditworthiness of the borrower, and any other relevant data, as determined by the Director of
4
FHFA.
Section 1324 further requires that FHFA conduct a monthly survey to collect data needed to
adequately analyze the matters that must be addressed in the annual report. 5 In particular, the
survey must collect information on the characteristics of individual prime and subprime mortgages
and the creditworthiness and other characteristics of the borrowers on those mortgages. 6 It may
also address such other matters as the Director of FHF A deems to be appropriate. 7 The statute
requires that FHF A compile a database of timely and otherwise unavailable residential mortgage
market information obtained from the monthly survey and to make that information available to the
public.8
As a means of fulfilling these and other statutory requirements, as well as to support policymaking
and research regarding the residential mortgage markets, FHFA and CFPB j ointly established the
National Mortgage Database Project in 2012. The project is designed to provide comprehensive
information about the U.S. mortgage market based on a five percent sample ofresidential
mortgages. The project has three primary components: (1) the National Mortgage Database; (2)
the quarterly NSMO; and (3) the annual American Survey of Mortgage Borrowers (ASMB). 9
When fully complete, the National Mortgage Database will be a de-identified loan-level database
of closed-end first-lien residential mortgage loans that is representative of the market as a whole,
contains detailed loan-level information on the terms and performance of the mortgages and the
2

See 12 U.S.C. 4544(a). Congress added the requirements of section 1324 to the Safety and Soundness Act in 2008.
See Housing and Economic Recovery Act of2008, Pub. L. No. 110-289, sec. 1125, 122 Stat. 2654, 2693-95 (2008). A
copy of section 1324, as amended, is included as Attachment 3.
3
12 U.S.C. 4561.
4
See 12 U.S.C. 4544(b).
5
See 12 U.S.C. 4544(c)(l) .
6
See 12 U.S.C. 4544(c)(2)(A), (B).
7
See 12 U.S.C. 4544(c)(2)(C).
8
See 12 U.S.C. 4544(c)(3).
9
While the NSMO solicits information about the experiences of borrowers who have recently obtained a mortgage, the
ASMB solicits information on borrowers' experience with maintaining their existing mortgages. OMB has cleared the
ASMB under the PRA and assigned it control no. 2590-00 15, which expires on July 31 , 2019.

2

characteristics of the associated borrowers and properties, is continually updated, has an historical
component dating back to 1998, and provides a sampling frame for surveys to collect additional
information.
The core data in the National Mortgage Database are drawn from a random l-in-20 sample of all
closed-end first-lien mortgage loans outstanding at any time between January 1998 and the present
from the files of Experian, one of the three nationwide credit reporting agencies. The National
Mortgage Database currently contains data on approximately 11.6 million mortgage loans.
Between 80,000 and 100,000 mortgages, drawn from a random 1-in-20 sample ofloans newly
reported to Experian, are added each quarter. Additional information on the mortgages in the
datasets is drawn from other existing sources, including, but not limited to the Home Mortgage
Disclosure Act (HMDA) data released by the Federal Financial Institutions Examination Council
(FFIEC), property valuation models, transactional data maintained by local governments, and
administrative data files maintained by the Enterprises and by federal agencies. Mortgages are
followed in the National Mortgage Database until they terminate through prepayment (including
refinancing), foreclosure, or maturity.
The NSMO was developed to complement the National Mortgage Database by providing critical
and timely information-not available from existing sources- on the range of nontraditional and
subprime mortgage products being offered, the methods by which these mortgages are being
marketed, and the characteristics of borrowers for these types of loans. In particular, the survey
questionnaire is designed to elicit directly from mortgage borrowers information on the
characteristics of borrowers and on their experiences in finding and obtaining a mortgage loan,
including: their mortgage shopping behavior; their mortgage closing experiences; their
expectations regarding house price appreciation; and critical financial and other life events
effecting their households, such as unemployment, large medical expenses, or divorce. The survey
questions do not focus on the terms of the borrowers' mortgage loans because these fields are
available in the Experian data. However, the NSMO collects a limited amount of information on
each respondent's mortgage to verify that the Experian records and survey responses pertain to the
same mortgage.
Each wave of the NSMO is sent to the primary borrowers on about 6,000 mortgage loans, which
are drawn from a simple random sample of the 80,000 to 100,000 newly originated mortgage loans
that are added to the National Mortgage Database from the Experian files each quarter (at present,
this represents an approximately 1-in-15 sample ofloans added to the National Mortgage Database
and an approximately l-in-300 sample of all mortgage loan originations). 10 Wave 1 of the NSMO
was mailed out in April 2014, and a new wave of the survey has been conducted each quarter
since- to date, eleven quarterly waves of the survey have been completed. Initial analysis of the
data from Waves 1-3 of the survey resulted in the addition and removal of some questions and the

10

The first two waves of the survey varied from the ultimate target number of6,000 survey recipients. Wave 1 of the
survey, mailed in April 2014, included a sample of 15,000 mortgages. This was a catch-up period to cover cases
originated in 2013 and newly reported to Experian in the archives for June, September, and December 2013 . Wave 2,
mailed in June 2014, included a sample of3,000 mortgages, covering mortgage loans that were originated in 2013 and
newly-reported to Experian between January and March 2014.

3

revision of several other questions. These revisions were incorporated into the survey
questionnaire for Wave 7 of the NSMO, which was conducted in the summer of2015.
The NSMO grew out of a series of three pilot surveys that were funded and carried out by Freddie
Mac between 2010 and 2012. The NSMO questionnaire draws on the questionnaires piloted by
Freddie Mac and leverages the input of an advisory group of industry experts from government,
non-profits, advocates, trade groups, and academia.
By interagency agreement between FHFA and CFPB, FHFA has led the production and execution
of the NSM0. 11 By contract with FHFA, the conduct of the NSMO is administered through
Experian, which has subcontracted the survey administration through a competitive process to
Westat, a nationally-recognized survey vendor. 12 Westat also carries out the pre-testing of the
survey materials.
2. Use of data
FHFA views the National Mortgage Database Project as a whole, including the NSMO, as the
monthly "survey" that is required by section 1324 of the Safety and Soundness Act. Core inputs to
the National Mortgage Database, such as a regular refresh of the Experian data, occur monthly,
though NSMO itself does not. In combination with the other information in the National Mortgage
Database, the information obtained through the NSMO is used to prepare the report to Congress on
the mortgage market activities of Fannie Mae and Freddie Mac that FHFA is required to submit
under section 1324, as well as for research and analysis by FHFA and CFPB in support of their
regulatory and supervisory responsibilities related to the residential mortgage markets. The NSMO
is especially critical in ensuring that the National Mortgage Database contains uniquely
comprehensive information on the range of nontraditional and subprime mortgage products being
offered, the methods by which these mortgages are being marketed and the characteristics- and
particularly the creditworthiness- of borrowers for these types of loans. In the future, the
information may be used to provide a resource for research and analysis by other federal agencies
and by academics and other interested parties outside of the government.
FHFA will use information collected through cognitive pre-testing of survey materials to assist in
drafting and modifying the survey questions and instructions, as well as the related
communications, to read in the way that will be most readily understood by the survey respondents
and that will be most likely to elicit usable responses. Such information will also be used to help
the Agency decide on how best to organize and format the survey questionnaires.

11

An interagency agreement between FHFA and Cf PB was signed on September 12, 2012 where the costs of the
survey and the development of the National Mortgage Database are to be shared equally between the two agencies.
12
The Fair Credit Reporting Act, 15 U.S.C. 1681 et seq., requires that the survey process, because it utilizes borrower
names and addresses drawn from credit reporting agency records, must be administered through Experian in order to
maintain consumer privacy.

4

3. Use of information technology
The NSMO uses machine-readable paper questionnaires and also gives recipients the option of
completing the survey online in either English or Spanish. Completed paper questionnaires are
scanned and the responses are automatically uploaded into the electronic National Mortgage
Database.
4. Efforts to identify duplication
As explained above, the vast majority of data included in the National Mortgage Database is drawn
from existing sources- primarily, the consumer credit database maintained by Experian; the
HMDA data released by FFIEC; and administrative data in the possession ofFHFA, its regulated
entities, and other federal agencies. As described under Item #1, the NSMO questionnaire is
designed to obtain critical and timely information that is not available from existing sources. The
survey obtains this information directly from borrowers, who are likely to be the most reliable and
accessible-and, in some cases, the only-source for this information.
5. Impact on small entities
The information collection will not have a significant economic impact on a substantial number of
small entities. The survey recipients are individuals only.
6. Consequences of less frequent collection and obstacles to burden reduction
Section 1324 of the Safety and Soundness Act requires that FHFA undertake a survey of mortgage
markets on a monthly basis. 13 While the performance data on existing mortgages in the National
Mortgage Database is pulled from the Experian database on a monthly basis, newly originated
mortgages are added to the National Mortgage Database on a quarterly basis. The NSMO
questionnaires are sent to a random sample of borrowers that originated their mortgages in the year
and quarter that corresponds to the quarterly draws of newly originated mortgages from the
Experian database. One important purpose of the survey is to monitor loan origination
trends. While monthly housing surveys would provide the optimal feedback regarding these
trends, FHF A believes that quarterly surveys are sufficient.
7. Circumstances requiring special information collection
There are no special circumstances that require FHFA to conduct the information collection in a
manner inconsistent with the guidelines provided in this Item 7.
8. Solicitation of comments on information collection
In accordance with the requirements of 5 CFR 1320.8(d), FHFA published a request for public
comments regarding this information collection in the Federal Register on September 13, 2016. 14
13
14

See 12 U.S.C. 4544(c).
See 81FR62889 (Sept. 13, 2016). A copy of the 60-dayNotice is included as Attachment4.

5

The 60-day comment period closed on November 14, 2016. FHFA received two comment letters,
one of which recommended revisions to the content of the survey questionnaire and the other of
15
which recommended measures to increase survey response rates. FHFA has carefully considered
each of the suggested revisions, but, as explained below, has decided not to implement any of those
suggestions at this time.
The first comment letter was from an individual who has served in various capacities with a
community association trade group and who is the president of a company that provides online
technology in support of the sale, resale, finance, and refinance of homes in community
associations. 16 The letter asserts that certain questions in the NSMO questionnaire "fail to
adequately and effectively recognize" the role of community associations in U.S. home ownership
and that, as a result, data from the NSMO regarding community associations "has nominal heuristic
and statistical value at best." It suggests adding several questions to the NSMO questionnaire, and
revising several existing questions, to elicit more information relevant to community associations.
Specifically, the letter first suggests revising Question 60 to elicit more specific information on the
type of property that is associated with the respondent's mortgage and adding two questions as to
whether the respondent's property is in a community association and, if so, the specific type of
community association. FHFA believes that, while such questions could be suitable for a survey
that focuses on housing structure, they would not be appropriate for the NSMO, which focuses on
consumers' experience in seeking and obtaining a residential mortgage loan. 17 The commenter
also suggests adding a question to elicit information on the respondent's level of familiarity with
various types of community association fees. Again, such a question would be beyond the scope of
the NSMO, which does not attempt to capture information on the cost of a mortgage or on fees paid
at origination or over the life of the mortgage.
Finally the letter suggests revising the answer choices for Questions 7, 39, and 50 to allow
respondents to indicate, respectively: whether they used any of the proceeds from a refinance to
pay community association fees; whether and to what extent community association documents or
officials may have provided them with information about mortgages or mortgage lenders; and
whether and to what extent they sought input about their mortgage loan closing documents from
officials of a community association. FHFA notes that each of those questions permits a
respondent to choose "other" and to write in a specific answer if none of the other answer choices
are applicable. To date, none of the questions have elicited an "other" response in the vein of any
of the answer choices that the commenter suggests adding. Accordingly, FHFA does not see a
need to revise any of the questions in the manner suggested.
The second comment letter, from a law school professor, states that the NSMO is very important to
understanding the health of the mortgage market and agrees that the collection is necessary for the
proper performance of FHFA functions. However, it also expresses a concern that, given the
15

Copies of these comment letters are included as Attachment 5.
The letter explains that community associations are "housing management organizations that are an out-growth of
traditional subdivision and zoning controls" and include condominiums, cooperatives, and planned communities.
17
Both the American Housing Survey (sponsored jointly by the Department of Housing and Urban Development and
the Census Bureau) and the American Community Survey (sponsored by the Census Bureau) would be more
appropriate vehicles for eliciting such information.
16

6

length of the survey questionnaire, those recipients who ultimately decide to respond will not be
representative of the typical borrower. It suggests two ways of encouraging a response from
recipients who might otherwise be reluctant to take the time to complete the survey: (1) providing
a greater incentive; and (2) allowing recipients the option of completing a shorter version of the
questionnaire.
FHFA agrees that non-response bias (the bias that results when respondents differ systematically
from non-respondents) is an important concern and the Agency has spent, and continues to spend,
significant time considering ways to increase response rates and to mitigate the effects of nonresponse bias. In developing the NSMO, the Agency consulted with Dr. Don Dillman and Dr.
Mick Couper, two of the foremost experts on conducting consumer surveys. Both experts
recommended an up-front payment of five dollars as the most effective way of incentivizing survey
recipients to respond and FHF A adopted this recommendation. In addition, based on the results of
the Freddie Mac pilot surveys and the first seven waves of the NSMO, Drs. Dillman and Couper
also evaluated the expected effect on the response rate of increasing or decreasing the number of
questions and the length of the questionnaire. Both experts have opined that shortening the
questionnaire would not significantly increase the response rate.
With respect to the mitigation of non-response bias when analyzing survey responses, FHFA has
followed best practices of survey sampling analysis. The response to question 3 in part B of this
Supporting Statement includes a detailed discussion of the "non-response weighting" method used
for the NSMO. As explained there, the availability in the National Mortgage Database of extensive
credit and administrative data on both responding and non-responding borrowers gives FHF A the
ability to construct non-response weights with more accuracy than is possible for most surveys.
In addition to soliciting public comments, FHFA has sought input on the survey materials through
pre-testing. As part of the continuing development of the NSMO, the survey subcontractor,
Westat, has conducted cognitive tests of individual borrowers to pretest. The insights gained from
such testing assists FHF A in designing the questionnaire that encourages recipients to answer the
survey questions and to provide useful data on their experiences with shopping for and taking out
mortgage loans. In order to avoid any violation of the PRA, Westat has limited such pre-testing to
no more than nine individuals in any year. FHFA is requesting OMB clearance for the pre-testing
of the NSMO materials so that cognitive tests may be conducted with 10 or more participants
annually while remaining in compliance with the PRA.

9. Provision of payments or gifts to respondents
Survey recipients will receive a cash payment of five dollars as an inducement to complete and
return the NSMO questionnaire. Recipients who fail to respond to the first two survey solicitations
may receive an additional cash inducement of a similar amount.
Each cognitive pre-testing participant may receive approximately fifty dollars as an incentive
payment.

7

10. Assurance of confidentiality
With respect to the confidentiality of survey responses, the cover letter that accompanies each
NSMO questionnaire contains the following statement:
This survey is voluntary and we ask that you not identify yourself in any way
when you return your questionnaire in the enclosed postage-paid return envelope.
The code numbers on the survey are there to aid in processing and keep track of
returned surveys. No names or other identifying information is ever included in
the data.
18

The questionnaire itself contains a statement, required by the Privacy Act, infonning recipients
that "[s ]ubmission of the survey authorizes FHFA to collect the information provided and to
disclose it as set forth" in the current System of Records Notice (SORN) for the National Mortgage
Database. 19 The questionnaire also instructs recipients not to include their names or addresses
when completing the questionnaire.
Section 1324 of the Safety and Soundness Act authorizes FHFA to modify the mortgage data
released to the public as necessary to ensure that it contains no "representation of information that
pennits the identity of a borrower to which the information relates to be reasonably inferred by
either direct or indirect means." 2 For each sampled loan and its associated borrower(s), Experian
provides its survey subcontractor, Westat, with the identifying information it needs to administer
the survey. However, the data on borrowers and loans that is accessible to FHF A, CFPB, and any
other authorized user of the National Mortgage Database, including data obtained through the
NSMO, does not include any direct identifying information such as borrowers' names, addresses,
or Social Security numbers or the name of any financial institution.

°

Westat mails a survey questionnaire to the borrower(s) on each sampled mortgage loan at the
property address associated with that mortgage. It then uses an encrypted key to track the surveys
so that it can compile and maintain the survey opt-out list and identify non-responders to whom it
must send follow-up correspondence. All returned questionnaires and any non-delivered mail are
sent directly to Westat, not to FHFA, CFPB, or Experian. To maintain the de-identified nature of
the data and the confidentiality of the survey responses, Westat purges all responses of any
identifying information before providing the collected information to FHFA's National Mortgage
Database Project staff for further processing (which is described in Part B of this Supporting
Statement).
Similarly, while Westat knows the identity of the cognitive pre-testing participants, that
information is not conveyed to FHFA and is not included in the National Mortgage Database in any
form .
18

5 U.S.C. 552a.
See 80 FR 52275 (Aug. 28, 2015). A copy of the current SORN for the National Mortgage Database is included as
Attachment 6. FHFA is in the process of developing a revised SORN, which it expects to publish in late 2016 or early
2017.
20
See 12 U.S.C. 4544(c)(3), (4).
19

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11. Questions of a sensitive nature
Of the 93 questions on the most recent iteration of the survey questionnaire, approximately 20-25
might be considered to be of a sensitive nature by particular borrowers. Questions that FHFA has
identified as potentially sensitive include those requesting information on loan terms, purchase
price, household income and other sources of funds, employment status, level of education, age,
sex, race, ethnicity, and marital status.
Each of those questions is designed to elicit infonnation that FHF A is required by statute to collect
or that is otherwise essential to fulfilling the purposes of the NSMO and the National Mortgage
Database Project as a whole. While FHFA understands that some survey recipients will be
reluctant to answer questions about these potentially sensitive topics, the Agency believes that
others will look upon doing so as an opportunity to express themselves about issues of concern to
them.

12. Estimates of the hour burden of the information collection
This information collection comprises two components: (I) conducting the survey; and (II) pretesting survey questionnaires and related materials through the use of cognitive testing. FHFA
estimates that the total annualized hour burden imposed upon members of the public by this
information collection will be 12,030 hours: 12,000 hours associated with conducting the survey
and 30 hours associated with pre-testing the survey materials. Because the survey recipients and
cognitive testing participants are individuals only, there are no hourly costs associated with the
burden estimates. The overall burden estimates are based on the following calculations:
I.

Conducting the Survey

The estimated annualized hour burden associated with conducting the NSMO is 12,000 hours. The
NSMO questionnaire will be sent to 6,000 recipients quarterly. Although, based on historical
experience, the Agency expects that only 30 to 35 percent of those surveys will be returned, it has
assumed that all of the surveys will be returned for purposes of this burden calculation. Based on
the reported experience of respondents to prior NSMO questionnaires, FHFA estimates that it will
take each respondent 30 minutes to complete the survey, including the gathering of necessary
materials to respond to the questions.
Recipients read and complete survey questionnaire and return the completed form to the survey
subcontractor:

•
•
•
•

•

Completion time per recipient:
Survey mail-outs annually:
Recipients per survey:
Total recipients annually:
Total hours annually:

0.5 hours
4
6,000
24,000
12,000 hours

9

II. Pre-Testing o(Survev Materials

The estimated annualized hour burden associated with the pre-testing of the survey materials is 30
hours.
Selected individuals participate in cognitive testing to pre-test the survey questionnaire and
related materials:
•
•
•

Time per participant:
Total participants annually:
Total hours annually:

1 hour
30
30 hours

13. Estimated total annualized cost burden to respondents
FHFA has not identified any costs to respondents.
14. Estimated cost to the federal government
The estimated annual burden to the federal government is $480,000 and 400 hours, calculated as
follows:
FHF A analyst embeds NSMO data into a query-based electronic database and carries out data
cleaning, imputation, and non-response bias weighting:
•
•
•
•
•

Processing time per survey:
Total surveys annually:
Total hours:
Hourly rate:
Total cost:

100 hours
4

400
$75 (includes salary, benefits, and overhead)
$30,000

In addition, approximately $450,000 will be paid annually to the contractor hired to conduct the
surveys. Of this, approximately $215,000 will be attributable to the cash incentive payments to
survey recipients; approximately $60,000 will be for printing costs; and approximately $50,000
will be for postage costs.
$30,000 (hourly cost) + $450,000 (paid to subcontractor) = $480,000.
15. Reasons for change in burden
FHFA has decreased the estimated total annual burden hours to 12,030 from the 14,000 that were
shown in the Supporting Statement submitted in connection with the 2013 clearance of this
information collection. In 2013, FHFA estimated that the NSMO questionnaire would be sent to
7,000 recipients every quarter. Item #12 in this Supporting Statement reflects the fact that the
survey has been, and will continue to be, sent to 6,000 recipients per quarter. This resulted in a
decrease of2,000 hours- from 14,000 to 12,000- in the annual burden associated with the
10

conduct of the survey. The additional 30 hours in the current burden estimate relate to the pretesting of the survey questions, for which FHFA did not request clearance in 2013.

16. Plans for tabulation, statistical analysis and publication
On May 27, 2016, FHFA and CFPB released NSMO Technical Report 16-01 , the first report on
data collected through the NSMO that has been made available to the public. The report is
available on FHF A' s website21 and a copy is also included with this Supporting Statement as
Attachment 7.
NSMO Technical Report 16-01 presents aggregate data from the 6,062 responses to the first year
of the NSMO- specifically, those pertaining to borrowers who obtained a mortgage in 2013 and
whose loans were reported to Experian by September 2014. Thus, the report provides an overview
of the mortgage market and borrowers ' experiences in 2013. These unweighted responses were
about one-third of the sample drawn from mortgages originated in 2013 . It is intended to be the
first in a series of annual reports on new mortgage borrowers based on the NSMO.
The 48 page report is organized into thirteen sections, as follows:
•
•
•
•
•
•
•
•

•
•

Section one gives an overview of the NSMO and of the report itself.
Section two compares the 2013 NSMO data with 2013 HMDA data.
Section three presents the overall profile of survey respondents in 2013 , including their
demographic characteristics and what kind of mortgages they obtained.
Sections four through seven describe how the 2013 borrowers shopped for their mortgages
and the application and closing processes.
Section eight presents borrowers ' mortgage outcomes and measures of their satisfaction in
the mortgage application and closing process.
Section nine considers borrowers' opinions on financial responsibility.
Section ten examines borrowers' opinions on the neighborhood where they obtained their
mortgage.
Sections eleven and twelve discuss 2013 mortgage borrower's expectations for house
prices, neighborhood desirability, and their own financial circumstances over the next
couple of years.
Section thirteen describes the anticipated next steps regarding the release of NSMO data.
The Appendix provides details on the overall National Mortgage Database Project and the
sample frame and data preparation procedures for the NSMO.

The report contains 28 tables presenting data in tabulated form. The analytical techniques used in
preparing the data for Report 16-01 are discussed in detail in Part B of this Supporting Statement,
as well as in the Appendix to the report and in the draft ofNSMO Technical Report 2.1
(Attachment 2).

21

See https://www.fufa.gov/PolicyProgramsResearch/Programs/Pages/National-Mortgage-Database.aspx.

11

Going forward, FHFA and CFPB plan to publish similar NSMO Technical Reports annually, with
each presenting NSMO data pertaining to borrowers who obtained a mortgage during a particular.
calendar year. The agencies are currently preparing the report on data for sampled loans originated
in 2014, which is expected to be released in early 2017. The agencies expect to release reports on
NSMO data for loans originated in 2015 and subsequent years approximately 24 months after the
end of the calendar year to which the data pertains.

17. If seeking approval to not display the expiration date for OMB approval of the
information collection, explain the reasons why display would be inappropriate
FHFA will display the expiration date for OMB approval.

18. Explain each exception to the topics of the certification statement identified in
"certification for paperwork reduction act submission."
There are no exceptions to the topics of the certification statement identified in the " Certification
for Paperwork Reduction Act Submission."

12

B. COLLECTIONS OF INFORMATION INVOLVING STATISTICAL METHODS
Question 1. Describe (including a numerical estimate) the potential respondent universe
and any sampling or other respondent selection methods to be used. Data on the
number of entities (e.g., establishments, State and local government units, households,
or persons) in the universe covered by the collection and in the corresponding sample
are to be provided in tabular form for the universe as a whole and for each of the strata
in the proposed sample. Indicate expected response rates for the collection as a whole.
If the collection had been conducted previously, include the actual response rate
achieved during the last collection.
The NSMO represents a universe of 6 to 9 million recently originated closed-end first-lien
mortgage loans on single-family residential property that are reported to Experian annually. A 1in-20 simple random sample of those mortgages are added to the National Mortgage Database each
quarter, resulting in approximately 80,000 to 100,000 loans being added quarterly and 320,000 to
400,000 loans being added annually. For each of the twelve quarterly waves of the NSMO that
have been mailed to date, FHFA has selected an approximately 1-in-15 random sample ofloans
from one or more recent quarterly updates of the National Mortgage Database. This represents an
approximately 1-in-300 sample of the universe as a whole.
111

For each quarterly survey since Wave 8 (mailed in the 4 quarter of 2015), FHFA has randomly
selected a sample of approximately 6,000 mortgage loans from those reported to Experian during
the preceding quarter and newly added to the National Mortgage Database, with the additional
conditions that the loans must have been reported to Experian within a year of origination and that
the borrowers must not have been selected for an earlier NSMO survey. The reporting and
origination criteria that applied to the selection of sample loans for Waves 1-7 of the NSMO varied
somewhat from the criteria that is currently used. Those criteria are shown in Table 1 below.
TABLE 1
Reporting And Origination Criteria Applying to Selection of Sample Loans for NSMO Waves 1-11
Originated:

Wave

Mailed

Reported between:

1

2014 lQ

4/1/2013 and 12/31/2013

In 2013

2

2014 2Q

1/1/2014 and 3/31/2014

In 2013

3

2014 3Q

4/1/2014 and 6/30/2014
1/1/2014 and 6/30/2014

In 2013, but no more than 1 year prior to being reported
---- - .
- - - - In 2014

4

2014 4Q

7/1/2014 and 9/30/2014

No more than 1 year prior to being reported

5

2015 lQ

10/1/2014 and 12/31/2014

6

2015 2Q

1/1/2015 and 3/31/2015

In 2014, but no more than 1 year prior to being reported

1/1/2015 and 3/31/2015

In 2015

4/1/2015 and 6/30/2015

No more than 1 year prior to being reported

1/1/2014 and 6/30/2014

In 2014, but no more than 1 year prior to being reported
(these criteria applied to mortgage on properties in "remote
rural" counties only)

-

7

----- ----

No more than 1 year prior to being reported

- - - --1- - - - - - - - --

2015 3Q

13

--- · - - - - - - - - - - ---1

After the sample is selected, Experian eliminates any potential respondents who have previously
opted out of the NSM022 or who are deemed not to have legitimate addresses or names. 23 This
typically results in somewhat fewer than 6,000 surveys being mailed out in any given quarter. As
shown in Table 2 below, the overall response rate for the eleven waves of the NSMO that have
been completed to date has been 34.3 percent, with the individual waves achieving response rates
of between 30.2 percent and 38.6 percent.

TABLE 2
Size of Universe, Size of Surveyed Sample Size, Number of Responses &
Rate of Response for Each NSMO Wave
NSMO

Wave

Quarter
Mailed

Loans Meeting Criteria in
Table 1
#Reported
to Experian

#Added
to NMDB

Surveys Mailed & Returned

#
Mailed

Returned

#

%

1

201410

6,963,160

348,158

15,000

5,793

38.6%

2

2014 20

888,420

44,421

3,000

1,076

35.9%

3

2014 30

1,685,760

84,288

5,992

2,073

34.6%

4

201440

1,527,740

76,387

5,795

2,020

34.9%

5

2015 10

1,465,380

73,269

5,925

2,089

35.3%

6

2015 20

1,057,940

52,897

4,428

1,489

33.6%

7

2015 3Q

2,182,960

109,148

7,359

2,494

33.9%

8

2015 4Q

1,961,820

98,091

5,820

1,875

32.2%

9

2016 lQ

1,753,860

87,693

5,756

1,824

31.7%

10

2016 2Q

1,519,620

75,981

5,788

1,765

30.5%

11

2016 3Q

1,669,620

83,481

5,733

1,733

30.2%

22,676,280

1,133,914

70,596

24,231

34.3%

Totals

Returned survey questionnaires and on-line responses are evaluated to determine the usable
responses. Four criteria are used to eliminate unusable responses.
The first criterion is a "no" response to Question 1 ("Within the past 18 months or so, did you take
out or co-sign for a mortgage loan including any refinance of an existing mortgage?"). Question 1
is used as a screener question to confinn that the survey respondent took out a mortgage during the
reporting period (which Experian records suggest that they did). In Wave 1, a surprisingly high
number of respondents-764 out of 5,793-said that they had not taken out a mortgage recently.
An analysis of those responses suggested that some respondents who had refinanced their mortgage
22

During the first eight weeks of each wave, Experian maintains a NSMO call center to address any questions by
respondents. This call center also allows respondents to opt out of the current survey, as well as any future surveys.
23
Industry guidance (Metro 2\!l' Industry Standards for Credit Reporting) requires that servicers must supply a billing
address for each borrower on all trade lines, including mortgages. Experian generally uses these borrower billing
addresses as the survey mailing address.

14

did not consider the loan to be a new mortgage. Consequently, in Wave 2, the wording of Question
1 was changed to add the phrase "including any refinance of an existing mortgage." With this
change, the share of "no" responses to Question 1 decreased from 13 percent to 8 percent.
The second exclusion criterion eliminates breakoffs, defined as those questionnaires for which the
respondent did not answer almost all questions from Question 50 through the end, or answered less
than 50 percent of the questions overall.
The third criterion excludes questionnaires for which respondents provided information on the
wrong loan. The sampling frame is tied to a particular loan associated with the borrower. The
questionnaire, however, does not refer explicitly to that loan; instead, it asks respondents who have
taken out multiple loans during the reference period to report on the "most recent refinance or new
mortgage." In some instances this is not the sample loan. This was a particular problem in Wave 1
which had a longer reference period than subsequent waves. 24 Also, some respondents who have
refinanced their mortgage reported on the original home purchase mortgage loan rather than on the
refinance. Finally, in some instances it may become apparent that the survey was sent to the wrong
person, in that the responses bear no resemblance to the sample loan features as characterized by
Experian records. In each of these circumstances, the survey questionnaire is removed from the
data set used for analysis.
The fourth criterion excludes questionnaires completed by respondents whose sample loans are
removed from the National Mortgage Database after the survey has been executed. Loans may be
removed either because they were deemed to have duplicate trade lines (i.e. , two or more survey
recipients are co-borrowers on the same sampled loan) or because the sample loan has been
determined to be a second lien, and not a first lien, mortgage. In some instances, the survey
response itself may lead to the removal of the questionnaire under this criterion, if margin notes or
comments made by the respondent indicate that the loan was a second lien. This was a particular
problem in Wave 4, during which a higher-than-usual number of questionnaires were determined to
have related to second mortgage loans and had to be excluded. 25
The elimination of returned questionnaires meeting any of the above criteria resulted in an overall
usable response rate of 30.1 percent for Waves 1-7 of the NSMO (this analysis has not yet been
completed for Waves 8-11). Table 3 below summarizes the results of this analysis for Waves 1-7
and shows the number of questionnaires excluded based on each of the four criteria.

24

Wave 1 of the survey, mailed in April 2014, included a sample of 15,000 mortgages. This was a catch up period to
cover cases originated in 2013 and newly reported to Experian in the archives for June, September, and December
2013.
25
At that time, faulty selection criteria had resulted in a significant number of second mortgage loans in the Experian
files being pulled into the National Mortgage Database. When this was discovered, these loans were removed and the
selection criterion was corrected.

15

TABLE 3
Usable Responses from NSMO Waves 1-7
NSMO
Surveys
Mailed

Surveys
Returned

Answered
"No" to
Ql

Didn't
Finish
Survey

Wrong
Loan

Duplicate
or HELOC

Usable
Responses

Wave

Quarter
Mailed

1

201410

15,000

5,793

748

129

218

57

4,641

2

2014 20

3,000

1,076

86

16

40

10

924

3

2014 30

5,992

2,073

114

36

65

18

1,840

4

2014 40

5,795

2,020

88

46

67

153

1,666

5

201510

5,925

2,089

86

46

64

26

1,867

6

2015 20

4,428

1,489

78

29

53

102

1,227

7

2015 30

7,359

2,494

156

75

112

29

2,122

Totals

47,499

17,034

1,356

377

619

395

14,287

Percentages

100.0%

35.9%

2.9%

0.8%

1.3%

0.8%

30.1%

Question 2. Describe the procedures for the collection of information, including:
• Statistical methodology for stratification and sample selection,
• Estimation procedure,
• Degree of accuracy needed for the pur pose described in the justification,
• Unusual problems requiring specialized sampling procedures, and
• Any use of periodic (less frequently than annual) data collection cycles to reduce
burden.
Data for the NSMO is collected through a single-blind mail survey format. The survey' s sample
selection is discussed earlier in Question 1. The NSMO is a simple, random sample of mortgage
originations and is not stratified. Alternatives designed for stratifying, clustering, or cut-off
samples were not considered. While subpopulations are of interest, the key purpose of the survey
is to gather information on the origination characteristics of the sampled borrowers. No estimation
procedures are needed in interpreting the survey responses. Similarly, no hypotheses are being
tested and no unusual problems exist that require specialized sampling procedures.
Question 3. Describe methods to maximize response rates and to deal with issues of nonresponse. The accuracy and reliability of information collected must be shown to be
adequate for intended uses. For collections based on sampling, a special justification
must be provided for any collection that will not yield "reliable" data that can be
generalized to the universe studied.

Methods Used to Maximize Response Rates

After achieving a response rate of just 12 percent on its initial pilot survey in 2010, Freddie Mac
retained Dr. Don A. Dillman of Washington State University, a leading expert in mail survey
16

methods, to provide input on ways to maximize response rate. Dr. Dillman provided
recommendations in three critical areas: (1) the execution/implementation of the survey; (2) the
communications package; and (3) the questionnaire content and format. Freddie Mac adopted Dr.
Dillman's recommendations in these areas and, in the second and third pilot surveys, achieved
response rates of 60 and 45 percent, respectively. FHFA adopted those recommendations for the
NSMO and continues to consult with Dr. Dillman, among others, in developing the survey.
One important recommendation, which FHFA adopted for the NSMO, was to have four planned
mail contacts with the survey recipients. The first contact consists of the questionnaire, an upfront
five dollar incentive, and a cover letter. The second contact, a reminder letter sent to all recipients,
occurs in the second week of implementation. The third contact, in the fifth week, is sent only to
non-responders and includes a second reminder letter, another copy of the questionnaire, and a
second five dollar incentive. The final contact, a third reminder letter, is sent in the seventh week
to non-responders only. A due date for returning the survey questionnaire is included in the last
mailing, which closes the communication loop with all survey recipients. 26
FHF A also adopted two recommendations regarding the communications package. First, all
communications have a friendly tone and reflect a personal and sincere request for help. All
correspondence is signed by a senior official of both FHFA and CFPB and includes contact
information for authenticity. Second, each questionnaire is mailed in a plain white envelope so as
not be mistaken for "junk mail."
To further increase response rates, survey recipients are given the option of completing the survey
online in either English or Spanish. The first mailing contains an insert, in both English and
Spanish, which informs recipients of these options and provides the web addresses to access the
appropriate electronic versions of the survey.
Data editing
The survey responses, once delivered to FHFA's National Mortgage Database Project staff, are
subjected to thorough editing and review. The initial phase consists of standard data editingcorrecting numbers reported in the wrong units, changing answers in responses based on margin
notes and comments, assigning responses for questions with open-ended "other" responses, dealing
with multiple responses to a question that calls for only one response, and deciding how to handle
situations where respondents followed the wrong skip pattern.
Initial examination of the survey responses from Waves 1 through 4 of the NSMO indicated that
certain questions may have been misunderstood or misinterpreted more frequently than others. It
also appeared that some respondents with sample loans secured by investment property may have
provided information on their primary residence property and neighborhood rather than that of their
investment property. FHFA addressed these problems by making some changes to the
questionnaire for Wave 7 based on the June 2015 archive.

26

Copies of the four letters (in both English and Spanish) comprising the NSMO communications package used for the
November 2016 survey mailing are included as Attachment 8.

17

One advantage that the NSMO has over other surveys is the availability of credit and
administrative data that can be used to assist in the editing and imputation processes. The National
Mortgage Database draws such data from four primary sources: (1) credit data on the sample loans
from Experian; (2) data on the survey respondents collected by Experian from other data sources,
including loan servicers and data companies; (3) data from matches to administrative loan and
property files; and (4) data from matches to HMDA files. Currently, only matches to Fannie Mae
and Freddie Mac administrative files and HMDA data through calendar year 2015 are available and
have been used. In the future, additional information from further HMDA and administrative and
property file matches will be available for this purpose. The credit and administrative data are used
to determine which borrower in the Experian data corresponds to the survey respondent (and
spouse/partner of the respondent) and to infer the loan the respondent had in mind when answering
the survey. These data are also useful in determining if respondents correctly identified their loan
as a home purchase loan or a refinance.

Imputation
After editing and cleaning the survey response data, National Mortgage Database Project staff
impute missing responses using statistical models estimated based on credit and administrative data
and answers to other questions in the survey. In order to preserve the original responses, the raw
responses are retained ("Q" variables) with missing responses coded as such. A parallel set of
variables ("X" variables) are constructed where all missing responses are imputed. Each instance
in which an X variable differs from its comparable Q variable is recorded by a shadow variable
("J" variables) that indicate the method and reason for which the change was made. Missing
responses typically total about 3 to 5 percent for most questions and only in a few instances were
more than 10 percent. The X variables are not created when a directly comparable credit or
administrative variable is available for all respondents (e.g., loan amount, loan payment, number of
co-signers) as comparable credit or administrative variables can be used in lieu of survey responses
in analysis.
Key demographic variables (age, gender, education, ethnicity, and income) are imputed first. For
these variables, high quality administrative data are generally available and can be used directly to
impute a value for the X variable. For example, lender-reported information provides high quality
data on age. Administrative data, which are currently available for Fannie Mae and Freddie Mac
loans originated in 2013, 2014, and 2015, provide reliable information on race, income, and interest
rate. HMDA data, which are currently available for loans originated in 2013, 2014, and 2015,
provide reliable information on race, income, and gender.
Comparable credit or administrative information is not available, however, for most survey
variables. For these variables, missing values are imputed statistically using an iterative process.
More specifically, individual statistical models are developed for each question that used the key
demographic variables as well as credit or administrative data such as loan amount and credit score
as regressors in linear probability, logistic, or cell-based models (since almost all variables in the
survey are categorical). Each imputed value incorporates both a predicted value from the model as
well as a random component that reflects the accuracy of the imputation model. Variables are
imputed in order, with higher-order variables that dictate a skip-pattern imputed first, before the
variables conditioned on the pattern are imputed. Once the first round of imputations is completed,
18

the process is repeated with expanded models that incorporate some of the newly imputed variables
as regressors for other variables. Iterating in this way ensures that correlations among the imputed
values will better reflect correlations among observations where responses were available.
Non-Response Weighting

In the NSMO, two types of non-response may occur. The first type is unit non-response, which
occurs when data is not obtained for the sample unit-i.e., a respondent chooses not to participate
in the survey. The second type is item non-response, which occurs when a respondent fails to
answer one or more questions on the survey. To correct for these biases, National Mortgage
Database Project staff create non-response adjustment weights and apply them to the survey
responses.
Because little is typically known about survey non-responders, the statistical models used to
construct non-response weights are quite simplistic. Compared with many other surveys, however,
the NSMO has extensive credit and administrative data on both responding and non-responding
borrowers that can be used to estimate non-response weights with more accuracy.
Sample non-response weights are estimated with logistic models separately for each sample wave
and within a wave for: loans with a single borrower versus those with multiple borrowers; and
loans with a HMDA match versus those without a HMDA match. The models estimate the
probability of getting a usable response for each wave of the survey. The predictive equations have
had pseudo-R-square values ranging from 0.0530 to 0.5103. The largest pseudo-R-square values
were for models estimated on data from Wave 7, which had a smaller number of 2014 observations
than other waves. This value was notably higher than the pseudo-R-square values for earlier
waves. Through Wave 6 the largest pseudo-R-square was 0.2219. Key predictive variables
included are: the loan amount; borrower age; median income of borrowers; census tract of the
sample loan as captured in the HMDA data; an indicator of investor status; and, if matched to
HMDA data, whether it was a home purchase or refinance loan, whether a borrower kept a loan at
the same time the sample loan was taken out (an indicator of multiple loans), and a measure of the
number of days from loan origination to sending out the survey. The models also control for credit
score, for geography using Census Divisions, and for demographic characteristics using Experian's
marketing-type variables on family composition, race, ethnicity, gender, and educational
attainment.
The model's predicted probabilities ofresponse are grouped into quintiles. The average of the
response rates from each of these five groups is used to calculate a response weight as the inverse
of these five average rates. Once within-wave sample non-response weights are estimated, they are
multiplied by the wave sample weight to provide an overall weight.
Table 4, below, demonstrates the effect of differential sampling weights for Waves 1-7 of the
NSMO. Column one shows the distribution among various demographic and loan categories of the
raw survey responses. Column two provides the distribution using estimated overall weights.
Column three shows the average overall weight for each category.

19

Table 4
Survey Sample Weights, Waves 1-7 for 2013 and 2014 Originations (Excludes Remote Rural)
Unweighted
Percentage

Weighted
Percentage

Average
Weight

Loan Category

Purchase, First-Time Homeowner

9.0

10.0

1210

33 .6

32.1

1035

Purchase, Seasonal Home

1.7

1.3

833

Purchase, Relative Home

0.8

0.6

882

Purchase, Investment Home

2.4

2.3

1033

Refin ance, Homeowner Cashout

16.0

15.8

1072

Refinance, Homeowner Regular

32.4

33.8

1130

Refinance, Seasonal Home

0.8

0.7

947

Refinance, Relative Home

0.5

0.4

996

Refinance, Investor Home

2.9

3.0

1127

100.0

100.0

3.7

3.5

1036

Purchase, Repeat Homeowner

Loan Size

$50,000 or Less
$50,001 to $150,000

38.8

39.3

1096

$150,001 to $300,000

38.7

38.4

1077

More than $300,000

18.8

18.8

1083

100.0

100.0

5.4

4.9

994

18.0

17.2

1038

6.0

6.2

1130

70.7

71.7

1099

100.0

100.0

Lower than 620

3.6

4.8

1440

620 to 6 39

3.0

3.7

1345

640 to 659

4.7

5.8

1343

660 t o 679

5.3

6.1

1252

680 to 699

6.3

7.0

1202

700 to 719

7.5

8.2

1183

720 to 739

9.3

9.9

1156

60.4

54.5

980

100.0

100.0

Mortgage Term to Maturity

Less than 15 Years
15 Years
15 to 30 Years
30 Years or More

Respondent Credit Score

740 or High er

20

Question 4. Describe any tests of procedures or methods to be undertaken. Testing is
encouraged as an effective means of refining collections of information to minimize
burden and improve utility. Tests must be approved if they call for answers to
identical questions from 10 or more respondents. A proposed test or set of tests may
be submitted for approval separately or in combination with the main collection of
information.
FHFA will use infomrntion collected from the cognitive testing participants to assist the Agency in
drafting and modifying the survey questions and instructions, as well as the related
communications, to read in the way that will be most readily understood by the survey respondents
and that will be most likely to elicit usable responses. Such information will also be used to help
the Agency decide how best to organize and format the survey questionnaire. A copy of the most
recent version ofFHFA's NSMO cognitive testing guidance document (or "Talk Track"), which
was provided to Westat on October 28, 2016, is included as Attachment 9.

Question 5. Provide the name and telephone number of individuals consulted on
statistical aspects of the design and the name of the agency unit, contractor(s),
grantee(s), or other person(s) who will actually collect and/or analyze the information
for the agency.
The names of and contact information for individual stakeholders from FHFA, CFPB, Freddie
Mac, and Experian, including those who were consulted on statistical aspects of the design and
who will analyze the data, appear in the list included as Attachment 10. FHFA also consulted with
the following:
Dr. Mick P. Couper
Survey Research Center and the Institute for Social Research
University of Michigan
426 Thompson Street
Ann Arbor, MI 48104
(734) 647-3577
Dr. Don A. Dillman
Department of Sociology and the Social & Economic Sciences Research Center
Washington State University
Pullman, WA 99164-4014
(509) 335-1511
The subcontractor hired by Experian to carry out the survey and the cognitive testing is:
Westat
1600 Research Blvd,
Rockville, MD 20850

21