Fannie Mae’s 3-percent down-payment policy was met with praise and skepticism in equal parts, but how has it impacted housing?

It was last October when Fannie Mae announced that, in an effort to broaden credit access, it would lower its down-payment threshold and begin guaranteeing mortgages with 3 percent down payments.

News of Fannie’s decision inspired strong responses from both sides of the housing aisle. On the advocate side, some (including FHFA Director Mel Watt) argued that lowering the threshold would increase homeownership opportunities for Millennials and first-time homebuyers; on the critical side, others argued that 3-percent down payments would inevitably lead to the same risky mortgages that created the housing bubble.

But now, courtesy of new research from Black Knight, we have an idea of how Fannie’s policy impacted the mortgage markets – and it turns out that both sides were wrong.

First, here is a graph showing the market share for different lending agencies, regarding mortgages with LTVs of more than 95 percent, through August 2015:

The key year, as the graph demonstrates, was 2007. That was when GSE marketshare in low-down-payment mortgages collapsed from 46.52 percent to just 8.35 percent, while the FHA’s share skyrocketed from 32.54 percent to 81.48 percent; since then, GSE market share has not risen above 3 percent, while the FHA’s share has not fallen below 90 percent.

From that perspective, Fannie’s new down payment policy clearly failed to inspire more low-down-payment mortgages, but that is only half the story. Here is another graph, one that focuses specifically on GSE marketshare since 2006:

Although the GSE’s marketshare remains a fraction of what it once was at 2.29 percent this year, that is still a jump of 166.3 percent from 2014’s marketshare of 0.86 percent; so yes, the overall marketshare is low, but Fannie’s policy at least boosted lending relative to its record lows.

Economic Inhibitors to the Mortgage Market

There are two explanations for why the GSE’s marketshare remains low – high credit standards and shaky consumer finances.

Lending standards have been strict since the start of the downturn, and Black Knight’s data confirmed that they remained high through the summer. Nearly half of all low-down-payment mortgages had credit scores of at least 700, while of the GSE mortgages, 52.2 percent had credit scores of at least 740.

But more importantly, a formidable number of U.S. consumers simply lack the necessary finances to buy a home, a fact that has been continually reinforced by research. Just last week, The Pew Trust reported that one in three American households have no savings, while 25 percent have less than $400 in savings; furthermore, while white households have adequate savings to cover a month’s worth of income, Hispanic and black households can only cover 12 days and five days, respectively.

Whether it be GoBankingRates, Bankrate, NeighborWorks or even the Federal Reserve, there is considerable research documenting the troubled financial state of most American households, and as we predicted in our coverage last year of Fannie’s announcement, not even a 3 percent down payment seems to have been enough to overcome that reality.