As refinancing volumes generally declined through 2021 and buyers snapped up homes despite
The company’s mortgage default index — a benchmark measuring delinquency probability over the lifetime of a loan through a combination of borrower, economic and underwriting risks — jumped to 8.75% in the second quarter of 2021 from 7.41% in the first quarter and 6.64% annually for Ginnie Mae loans. For mortgages backed by Fannie Mae and Freddie Mac, the index rose to 1.48% from 1.19% quarter-over-quarter and 1.14% year-over-year. Ginnie loans — which consist of Federal Housing Administration, Department of Veterans Affairs and U.S. Department of Agriculture Rural Housing Service products — typically have lower credit scores and higher loan-to-value ratios by comparison.
Refinancings, usually featuring relatively lower average LTVs, typically come with lower risk. However, with
"We've been seeing default risk climb throughout the first half of 2021, driven primarily by increased economic and borrower risk for new purchase loans," Jonathan Glowacki, principal at Milliman and author of the MMDI, said in a press release. "While today's housing market faintly echoes that of 2007, before the global financial crisis, we see a number of important key factors that differentiate this increase in default risk."
The Ginnie Mae-backed purchase share of mortgage volume shot up to 53.39% in the second quarter from 36.87% in the first and 47.48% in the second quarter of 2020. Meanwhile, GSE-sponsored purchases grew to 33.51% in 2Q from 24.6% in 1Q and 25.84% in 2Q 2020.
