Updated July 16, 2019
Download the data (Excel file)
The Housing Finance Policy Center’s latest credit availability index (HCAI) shows that mortgage credit availability increased to 5.95 percent in the first quarter of 2019 (Q1 2019), up marginally from the previous quarter. This is the highest level since 2013. This quarter’s increase was caused by an increase in risk taken in the portfolio and private-label securities channel. Credit also expanded in both the GSE and government channels, but by a smaller margin.
The HCAI measures the percentage of owner-occupied home purchase loans that are likely to default—that is, go unpaid for more than 90 days past their due date. A lower HCAI indicates that lenders are unwilling to tolerate defaults and are imposing tighter lending standards, making it harder to get a loan. A higher HCAI indicates that lenders are willing to tolerate defaults and are taking more risks, making it easier to get a loan.
Mortgage credit availability in the GSE channel—Fannie Mae and Freddie Mac— has been increasing steadily since the financial crisis. In Q3 2018, the index reached 3 percent for the first time since 2008, and has continued to increase in the following two quarters, reaching 3.1 percent in Q1 2019. The government channel (FVR) increased to 12.1 percent, the highest level since 2009. The FVR channel includes the Federal Housing Administration, the US Department of Veterans Affairs, and the US Department of Agriculture’s Rural Development program. The portfolio and private-label securities channel increased to 3.1 percent, the highest level since 2012.
Significant space remains to safely expand the credit box. If the current default risk was doubled across all channels, risk would still be well within the pre-crisis standard of 12.5 percent from 2001 to 2003 for the whole mortgage market.
We will publish an updated HCAI for Q2 2019 on October 14, 2019 .
HCAI by Channels
The GSE market has expanded the credit box for borrowers more effectively than the FVR government channel has in recent years. The downward trend of credit availability in the GSE channel began a reversal in Q2 2011. From Q2 2011 to Q1 2019, the total risk taken by the GSE channel has more than doubled, from 1.4 percent to 3.1 percent.
The total default risk the government loan channel is willing to take bottomed out at 9.6 percent in Q3 2013. It has fluctuated at or above that number since then. In the past ten quarters starting in Q4 2016, the risk in the government channel has risen significantly from 9.9 to 12.1 percent, the highest level since 2009, but still around half the pre-bubble level of 19 – 23 percent.
Portfolio and Private-Label Securities Loans
The portfolio and private-label securities (PP) channel took on more product risk than the FVR and GSE channels during the bubble. After the crisis, the channel’s product and borrower risks dropped sharply. The numbers have stabilized since 2013, with product risk fluctuating below 0.6 percent and borrower risk around 2.0 percent. Borrower risk increased in the first quarter of 2019, reaching 3.1 percent, driven primarily a decline in FICO scores and an increase in high-LTV lending.