The Mortgage Patch and Default Risk

first_imgHome / Daily Dose / The Mortgage Patch and Default Risk The American Enterprise Institute’s (AEI) latest Housing Market Indicators identified tightening credit. The Composite NMRI for purchase loans declined 0.4 percentage points year-over-year, the fifth month for this trend.The First-time Buyer (FTB) MRI continued to decrease led by Fannie Mae, which has been tightening since March 2019. FHA’s First-time Buyer MRI stood at 27.8% in October, down 0.7 percentage points from a year earlier.“While this change is encouraging, the decrease is coming off of very high risk levels and more needs to be done,” AEI said.AEI also analyzed housing finance reform and the patch: AEI’s report covered the impact adopting an average prime offer rate (APOR) spread rule would have compared to the Patch.According to First American, “adopting an APOR rate spread rule is worse than the Patch and would be dangerous.”“Replacing the Patch with the APOR would not provide friction to the unsustainable home price boom, particularly for entry-level buyers,” the report states.AEI also states that a safer solution than APOR would be to eliminate the 43% DTI limit applicable to QM loans and substitute a stressed Mortgage Default Rate (MDR) limit, “which actually captures risk holistically, while ensuring responsible, affordable mortgage credit availability.”As AEI says, there is a wide variation in the Mortgage Default Rate as APOR only captures risk accurately on average. According to the proposal, eliminating the 43% DTI limit applicable to QM loans and substitute a stressed Mortgage Default Rate (MDR) limit, the change would address concerns that several institutions have expressed in comment letters.For example, the Housing Policy Council recommends elimination of DTI requirement and use of rate spread as a more “holistic approach.” Urban Institute has als stated that “DTI ratio by itself does not capture credit risk comprehensively.” The Mortgage Patch and Default Risk Servicers Navigate the Post-Pandemic World 2 days ago default Finance mortgage Patch 2020-01-29 Seth Welborn Sign up for DS News Daily About Author: Seth Welborn Servicers Navigate the Post-Pandemic World 2 days ago The Best Markets For Residential Property Investors 2 days ago Data Provider Black Knight to Acquire Top of Mind 2 days ago Previous: Financial Services Committee Voices Opposition to Changes to CRA Next: Disasters and Defaults: A Retrospective Governmental Measures Target Expanded Access to Affordable Housing 2 days ago The Best Markets For Residential Property Investors 2 days ago Demand Propels Home Prices Upward 2 days agocenter_img The Week Ahead: Nearing the Forbearance Exit 2 days ago in Daily Dose, Featured, News Share Save Demand Propels Home Prices Upward 2 days ago January 29, 2020 944 Views Tagged with: default Finance mortgage Patch Data Provider Black Knight to Acquire Top of Mind 2 days ago  Print This Post Seth Welborn is a Reporter for DS News and MReport. A graduate of Harding University, he has covered numerous topics across the real estate and default servicing industries. Additionally, he has written B2B marketing copy for Dallas-based companies such as AT&T. An East Texas Native, he also works part-time as a photographer. Governmental Measures Target Expanded Access to Affordable Housing 2 days ago Related Articles Subscribelast_img read more