Q3 2025
Updated February 17, 2025
Default Risk taken by the Mortgage Market, 1999 to Q3 2024
The Urban Institute’s Housing Credit Availability Index (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.
The latest HCAI stood at 4.8 percent in Q3 2024, this is lower than a year ago and the previous quarter, which suggests more difficulty getting a loan. Tighter credit standards from Q3 2023 to Q3 2024 reflect a decrease in default risk. This shift was reflected across all lending streams as credit standards for GSE, government, and portfolios and private-label securities tightened over the period.
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.
HCAI by Channels
GSE Loans
The trend toward greater credit availability in the GSE channel began in Q2 2011. From Q2 2011 to Q1 2019, the total risk taken by the GSE channel more than doubled, from 1.4 percent to 3.1 percent. This is still very modest by pre-crisis standards. However, accelerated tightening throughout 2020, induced by market conditions due to COVID-19 and stay-at-home orders, drove down credit risk to 2.6 percent in Q4 2020 where it has largely remained. In Q3 2024, credit availability stood at 2.4 percent, down marginally from 2.5 percent in Q3 2023.
Default Risk Taken by the Government-Sponsored Enterprise Channel, 1999-Q3 2024
Government Loans
The total default risk the government loan channel is willing to take bottomed out at 9.6 percent in Q3 2013. It fluctuated in a narrow range at or above that number for three years. In the eleven quarters from Q4 2016 to Q1 2019, the risk in the government channel increased from 9.9 to 12.1 percent but has since receded. The government channel stands at 9.8 percent in Q3 2024; close to the all-time low and well below the pre-bubble range of 19.0 to 23.0 percent.
Default Risk Taken by the Government Channel, 1999-Q3 2024
Portfolio and Private-Label Securities Loans
The portfolio and private-label securities (PP) channel took on more product risk than the government 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 well below 0.5 percent and total risk largely in the range of 2.3-3.4 percent. Since 2022, default risk has increased from 2.6 to 3.0 percent in Q3 2024 but remains a shadow of the default risk taken prior to the 2008 foreclosure crisis.
Default Risk Taken by the Portfolio and Private Label Securities Channel, 1998-Q2 2024
