Skip to main content

UFA Default Risk Index finds wave of default risk beginning to subside

NationalMortgageProfessional.com
May 24, 2010

The University Financial Associates (UFA) Default Risk Index for the second quarter of 2010 has dropped to 182, half the peak level of 362 set in 2007. The Index illustrates the important role that local economic conditions have played in this credit cycle, since loan, borrower and collateral characteristics are held constant over time in the Index. If, as some observers expect, inflation spikes due to excessive monetary ease, nominal house prices will be higher and defaults will be lower. Under current economic conditions, investors and lenders should expect defaults on loans currently being originated to be 82 percent higher than the average of loans originated in the 1990s, but much less than the worst vintages of this cycle (2006-2008). That’s a key finding of the latest UFA Mortgage Report by University Financial Associates of Ann Arbor, Mich. Figure 1: The UFA Default Risk Index stands at 182, estimating the risk of default on newly originated mortgages (both prime and non-prime) at 82 percent higher than the average of the 1990s, but much less than the worst vintages of this cycle (2006-2008). “Although default risks remain elevated, the index is steadily returning to pre-bubble levels,” said Dennis Capozza, who is the Dykema Professor of Business Administration in the Ross School of Business at the University of Michigan, and a founding principal of UFA. “The worst vintages of this mortgage cycle are behind us. However, a return of the default risk index to pre-bubble levels is still several years away.” The UFA Default Risk Index measures the risk of default on newly originated prime and non-prime mortgages. UFA’s analysis is based on a “constant-quality” loan, that is, a loan with the same borrower, loan and collateral characteristics. The Index reflects only the changes in current and expected future economic conditions, which are much less favorable currently than in prior years. For more information, visit www.ufanet.com/nmr.htm or www.ufanet.com/FSLocation.htm.
Published
May 24, 2010
Williston Financial Group, Doma Strike Deal

WFG is set to acquire Doma’s title operations, including operation centers in the Northern and Central California.

May 24, 2023
Mat Ishbia Takes A Charge At NBA Playoff Game

UWM CEO and majority owner of the Phoenix Suns involved in scuffle with Denver center Nikola Jokic

May 08, 2023
The Pitfalls Of Cash-Out Refinancing In A Rising Interest Rate Environment

Second-lien home equity loans are a far better way to take out cash

May 02, 2023
NEW YORK: How To Conquer - Not Fear - The Empire State

Roadblocks are many but payoff is worth it

May 01, 2023
RCN Capital Opens LA Office

Expansion marks lender's continued success.

Apr 26, 2023
Trigger Lead Legislation Renews Debate Over Consumer Choice

Borrowers can protect themselves from unsolicited lenders, but they could be doing themselves a disfavor

Apr 20, 2023