The likelihood that homeowners will default on their mortgages increased by 12% from a year ago and is up 54% from early 2002, according to First American CoreLogic's recently released Core Mortgage Risk Monitor (CMRM). The CMRM is a quarterly report that provides an economic forecast of the relative risk of residential mortgage loan delinquencies due to fraud propensity and collateral risk, house price dynamics and the health of the local market economy.
Although significantly higher now than during the base period of the first quarter of 2002, the Core Mortgage Risk Index is likely to continue rising nationally over the next 18 months. The primary factor driving the most recent increase in mortgage risk is the decline in home prices.
Currently, California is the state with the largest price declines, and eight of the 10 riskiest Core-Based Statistical Areas (CBSAs) nationwide are from the state. The two riskiest California CBSAs are Riverside and Los Angeles, where prices have declined roughly 25% from a year ago and the economy is struggling – particularly the labor market, with an unemployment rate that has increased by roughly two percentage points during the past year.
"While the risk index has been driven upward throughout 2007 and 2008 primarily by the acceleration of declines in home prices, there is now a geographic expansion of risk driven by fundamental economic conditions," says Mark Fleming, chief economist with First American CoreLogic. "Flat or declining wages and increasing job losses are beginning to affect the index more heavily in many markets."
Florida is the state with the second highest risk, with one city – Miami – in the top 10, and several other cities – including Fort Myers and Port St. Lucie – also have high risk factors. Dayton, Ohio, is the least risky market, according to the CMRM, and Indianapolis; Austin, Texas; Omaha, Neb.; and Wichita, Kan., are also among the five least risky markets.
To read the report in its entirety, visit www.loanperformance.com.
SOURCE: First American CoreLogic
