Mortgages More Difficult to Acquire by Dean Terrell DS News

The Urban Institute’s Housing Finance Policy Center released their Housing Credit Availability Index (HCAI) Friday, which focuses on the share of home purchases likely to default, or go unpaid for more than 90 days past their due date. The index measures GSE loans as well as the government (FVR) channel, which includes the Federal Housing Administration, the U.S. Department of Veterans Affairs, and the U.S. Department of Agriculture Rural Development. The HCAI also covers portfolio and private-label securities (PP); both FVR and PP channels remain close or at record lows.

Mortgage credit availability dropped from 5.4 percent in Q1 2017 to 5.1 percent in Q2 2017 based on data from the HCAI. A higher HCAI would indicate lenders are willing to take more risk by tolerating more defaults, while a lower HCAI would indicate the opposite, making it more difficult to get a loan. GSE loans have rebounded since Q2 2011 from 1.4 percent to 2.4 percent in Q2 2017 due to the expanded credit box for borrowers, where total risk taken on by GSE has expanded 73 percent over that time. This is cannot be said for the FVR channel where risk has remained about the same at 10.7 percent in Q2 2017 compared to its bottomed out measure of 9.6 percent in Q3 2013. The risk in the FVR channel has gone up 0.7 percent since Q1 2017.

The PP channel took higher risk during the housing bubble compared to the FVR and GSE channels, but has been stabilizing since 2013. Product risk fluctuated below 0.6 percent and borrower risk around 2.0 percent 2013. The PP channel only took a 0.19 percent product risk and total default risk taken by PP remains low at 2.1 percent in Q2 2017.

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