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61 September 2025 J O U R N A L themortgagepoint.com September 2025 » linquency remained constant for almost all debt kinds. Due to the restart of report- ing outstanding student loans, the rate at which balances moved from current to delinquent increased once more. All debt categories had a range of transitions into serious delinquency: student loans increased significantly, mortgages and HELOCs marginally in- creased, and credit card and vehicle loans remained mostly unchanged. ECONOMIC UNCERTAINTY DRIVING MORTGAGE DEFAULT RISK HIGHER A ccording to the Q1 2025 results of the Milliman Mortgage Default Index (MMDI), recently released by Milliman, Inc., the lifetime significant delinquency rate (for resi- dences that are 180 days or more past due for U.S.-backed mortgages has slightly increased. The MMDI increased to 2.13% in Q1 2025 from 2.05% in Q4 2024. Both an increase in borrower risk (1.40% to 1.43%) and economic risk (from 0.64% to 0.68%) contributed to the slight increase in default risk for GSE loans during Q1 2025. Borrower risk, as defined by the MMDI, is the chance that a loan will become significantly past due, owing to factors such as the borrower's credit quality, initial equity position, and debt- to-income (DTI) ratio. Key Findings From the MMDI— National • For loans obtained in Q1 2025, the MMDI value for government-spon- sored enterprise (GSE) acquisitions increased somewhat to 2.13% from 2.05% for loans obtained in Q4 2024. • The increase was primarily caused by slightly lower average FICO scores, slightly higher average loan- to-value (LTV) and debt-to-income (DTI) ratios, and somewhat higher economic risk. • The main cause of the quarterly variation in the index value was borrower risk. Note: Home values, both past and pro- jected, are used to gauge economic risk. "In early 2025, GSE acquisitions had slightly higher DTI and loan-to-value (LTV) ratios compared to the prior quarter, and a slightly lower average FICO score, meaning borrowers were taking on more debt compared to prior quarters," said Jonathan Glowacki, a Principal at Milliman and Co-Author of the MMDI. "While the quality of purchase loans continues to be strong, we'll be monitoring how economic turbulence may impact borrower risk for government-sponsored loans." Underwriting Risk Remains Low in Q1 Additional risk adjustments for loan and property attributes, including loan term, paperwork type, occupancy status, amortization type, and other changes, are represented by underwriting risk. Purchase mortgages, which are often fully amortized, well-documented loans, have a negative underwriting risk and remain low. The statistics for refinance loans are divided into two categories: rate/term refi- nance loans and cash-out refinance loans. Rate/term and cash-out refinance loan volumes in 2025 Q1 were roughly $18 billion and $16 billion, respectively, for a total of $34 billion. Rate/term refinance mortgages are less risky than purchase loans, but cash-out refinance mortgages are riskier than purchase loans. In 2025 Q1, the weighted-average underwriting risk for refinance loans was 0.30%, up from 0.24% in 2024 Q4. Additionally, economic risk for GSE loans rose slightly from 2024 Q4 to 2025 Q1, rising from 0.64% to 0.68%. Forecasts for home prices are unchanged; for the coming year, appreciation is expected to decrease to low single digits nationwide. Note that Q4 2024 MMDI numbers have been updated to reflect high- er-than-expected home price apprecia- tion when examining Q1 2025 data. The MMDI is based on a baseline estimate of future home prices, and its values are up- dated in later releases to reflect changes in projections and actual circumstances. "While the quality of purchase loans continues to be strong, we'll be monitoring how economic turbulence may impact borrower risk for government- sponsored loans." —Jonathan Glowacki, Principal, Milliman