Current Defaults Projected 14 Percent Higher Than Average Loans Originated in the 1990s – NMP Skip to main content

Current Defaults Projected 14 Percent Higher Than Average Loans Originated in the 1990s

NationalMortgageProfessional.com
Aug 30, 2013

The UFA Default Risk Index for the third quarter of 2013 rose to 114 from last quarter’s revised 96 in University Financial Associates' baseline scenario. Under current economic conditions, investors and lenders should expect defaults on loans currently being originated to be 14 percent higher than the average of similar loans originated in the 1990s, due solely to the local and national economic environment. That’s a key finding of the latest UFA Mortgage Report by University Financial Associates of Ann Arbor, Michigan. “Most of the increased risk this quarter can be attributed to the hefty increase in mortgage rates—100 basis points in just three months! Borrowers initiating mortgages at these higher rates will have higher payment ratios and will be more likely to default if the household is stressed,” said Dennis Capozza, who is the Dale Dykema Professor of Business Administration in the Ross School of Business at the University of Michigan, and a founding principal of UFA. “At the same time, borrowers at the lower rates of earlier vintages become less likely to default. This is because their existing mortgage at the earlier favorable rate becomes a more valuable contract, since the market value of the mortgage liability falls when valued at current higher rates.” The UFA Default Risk Index measures the risk of default on newly originated prime and nonprime 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.
Published
Aug 30, 2013
Mortgage Rates Jump Back Above 5%

Freddie Mac says rates recent volatility continues.

Industry News
Aug 11, 2022
Redfin: Share Of Relocating Buyers At All-Time High In July

People are looking for less expensive and better lifestyles.

Industry News
Aug 11, 2022
Redfin Expands iBuying Business To Florida

RedfinNow, which makes cash offers for homes, now operates in 34 markets in 16 states and the District of Columbia.

Tech
Aug 11, 2022
Fannie Mae Appoints Chief Audit Executive

Cissy Yang, an experienced financial services executive, will lead the GSE’s audit strategy.

Industry News
Aug 10, 2022
Angel Oak Mortgage Reports Second Straight Quarterly Loss

Non-QM lender reported net loss of $52.1 million.

Industry News
Aug 10, 2022
loanDepot Dumping Brokers, Exits Wholesale

As company reports second straight quarterly loss, it announces plans to exit its wholesale business by Oct. 31, 2022.

Wholesale
Aug 09, 2022