Mortgage credit risk in the second quarter was elevated compared to the second quarter of 2016, due mainly to an increase in condominium sales and investor purchases, according to CoreLogic’s Housing Credit Index.
However, the level of risk was about the same compared with the 2001-2003 period, which CoreLogic considers to be a normal baseline for credit risk.
The index calculates mortgage credit risk using six attributes: credit score, debt-to-income ratio (DTI), loan-to-value ratio (LTV), investor-owned status, condo/co-op share and documentation level.
In the second quarter, the index reached an overall score of 117, up 20 points from a year earlier.
The loosening was partly due to a shift in the mix of more investor and condominium loans which offset lower-risk signals from the credit score, as well as DTI and LTV attributes, CoreLogic says in its report.
“Mortgage risk for new originations increased modestly in the second quarter of 2017, but much of this rise was due to a small shift in the mix of loan types to more investor and condominium loans, which have slightly higher risk attributes,” says Frank Nothaft, chief economist for CoreLogic. “Despite the somewhat higher risk of new origination loans, purchase mortgage underwriting remains relatively clean with an average credit score of 745 and low delinquency risk.”