There was a slightly higher mortgage credit risk in the first three months of 2017 with the risk for new loans similar to the early 2000s
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There was a slightly higher mortgage credit risk in the first three months of 2017 with the risk for new loans similar to the early 2000s.
CoreLogic’s Housing Credit Risk Index includes factors such as borrower credit score, debt-to-income (DTI) ratio and loan-to-value (LTV) ratio. In Q1 2017 it was up 3.6 points from a year earlier to 105.6, just below the level from 2001-2003 which is considered a normal baseline for credit risk.
“Mortgage rates during the first quarter of 2017 were up about 0.5 percentage points from a year earlier,” said Dr. Frank Nothaft, chief economist for CoreLogic.
“Since 2009, for every one-half percentage point increase in mortgage rates, the average credit score on refinance borrowers has dipped by 9 points, and this pattern will likely continue if mortgage rates move higher. That is because when rates rise, applications drop off and loan officers spend more time with the applicants that have less-than-perfect credit scores, require more documentation or have unique property issues,” Northaft explained.
The figures reveal that the average credit score for borrowers increased 7 percentage points year-over-year to 741 in the first quarter of 2017 and those with scores under 640 was just 3%, compared to 25% in 2001.
There was little change over the year for DTI at 36% while LTV slipped to 85.9%, down 1.7 percentage points.
There was a slight increase in the share of mortgage loans that were for investor-occupiers (5% vs. 4% a year earlier); and in the share of loans that were secured by a condominium or a co-op building (12% vs. 10% a year earlier).
Low or no-documentation mortgage loans were just 3% of the market, up from 2% a year earlier.
