Mortgage Default Risk Falls ..again


Where is the Housing marker heading next

Housing Market

Housing trend for 2014

Mortgage  default risk falls as measured by the American Enterprise Institute’s (AEI) International Center on Housing Riskfell slightly from January to February, though certain market segments continue to see a rise in potential problem loans.

AEI’s National Mortgage Risk Index (NMRI), a measure of loans’ default risk under stressful conditions, retreated to 11.6 percent last month from January’s reading of 11.8 percent. To gauge where February’s index lies historically, 1990 vintage loans would have an estimated index value of 6 percent, while riskier 2007 loans would be up at 19 percent.

Fannie Mae and Freddie Mac inched up one-tenth of a percentage point to 5.9 percent, while the Federal Housing Administration’s (FHA) risk index moved up the same amount to 24.5 percent.

An index value of less than 6 is “indicative of conditions conducive to a stable market,” AEI says.

At the local level, all states registered index values above the 6 percent line, with only Hawaii coming in below 7 percent. Most states have a composite index between 9.5 and 13 percent, AEI reports, though a few at the high end of the spectrum—such as Mississippi—remain in the mid-teens.

“Most of this variation is really a result of whether a state has a high or a low concentration of FHA loans,” said Stephen Oliner, resident scholar for AEI and also co-director of the Center on Housing Risk. Oliner offers as an example California and Texas, the two states with the largest FHA markets and which each have risk indices above 10 percent.


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