US Mortgage risk increases due to growth in FHA’s market share and loan level risk

Washington, DC, May 12, 2014—American Enterprise Institutes’s National Mortgage Risk Index (NMRI) for home purchase loans hit a new series’ high of 11.89% for April, up from 11.50% in March.  The increase was due to FHA, which had higher market share and increasing loan level risk.  The FHA’s April home purchase volume was 41,756, an increase of 36% over March.  By contrast Fannie Mae and Freddie Mac had April home purchase volume of 101,050, an increase of 24% over March and down 4% from the same month last year.

Overall April purchase volume was up 27% over March, the result of the Spring buying season ramping up.

The April NMRI for FHA loans also hit a new series high of 25.12% up from 24.77% in March.

The April NMRI for Fannie Mae and Freddie Mac loans declined slightly to 5.93% from 6.00% in March.

Complete results will be presented on the monthly NMRI briefing phone call scheduled for Tuesday, May 27 at 10AM EDT.  To RSVP now, please email Emily.Rapp@AEI.org.

The NMRI score is an objective and transparent mortgage risk measure. It represents an estimated cumulative default rate for new home purchase loans under the assumption of stress conditions from 2007-2012.   An overall index level of less than 6% is indicative of conditions conducive to a stable national market.  For more information about the NMRI, please visit HousingRisk.org.

AEI’s International Center on Housing Risk produces the NMRI monthly.

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