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54 DEFAULT RISK INDEX HITS HIGHEST LEVEL IN TWO YEARS November's mortgage default risk index was reported at 11.69 percent, its highest level in two years, according to a briefing released by the American Enterprise Institute's International Center on Housing Risk. e November default risk index crept upward by 0.4 percentage points from October, when it was reported at 11.29 percent. e goal of the index is to measure the default risk of mortgages by comparing recently originated loans to those with a 2007 vintage and determining what percentage of the more recently originated loans would fail under conditions similar to those during the 2007 housing crisis, according to the briefing. AEI scholars Edward Pinto and Stephen Oliner, the authors of the index, estimate that even though the index is at a two-year high, it is close to half of its 2007 level during the height of the crisis. ey estimate the index would have been about 19 percent during 2007, while a reading in a stable market would be about 6 percent —matching mortgage risk levels from the early 1990s. e index is comprised of an average of three months of readings and measures default risk for mortgages backed by various federal government programs and by Fannie Mae and Freddie Mac. e index included about 208,000 new loans for November and is comprised of 5.06 million loans total, according to the briefing. e most risky loans were those backed by the Federal Housing Administration (FHA), which registered an index reading of 24.26 percent for November (an increase from 24.17 percent in October). e Department of Veterans Affairs (VA) index reading was at 11.44 percent, according to the briefing. Pinto and Oliner noted that risk for FHA loans would be substantially lower (9 percentage points) if those loans used the same underwriting criteria as the VA, namely the calculation of residual income. A composite of Fannie Mae and Freddie Mac loans earned a score of 6.12 percent for November's index, a slight increase from October's reading of 6.06, according to the briefing. A slowdown in large-bank mortgage lending activity means an increase in the share of mortgage risk for non-bank mortgage lenders in November, according to the briefing. Non-bank– originated loans, which accounted for about 53 percent of November's origination activity, had a default risk index reading of 13.5 percent. By comparison, large banks accounted for about 30 percent of originations and registered a reading of 10.5 percent on the index, the briefing reported. No state was below the "stable market" index reading of 6 percent for November, according to the briefing. e states with the three lowest readings were Hawaii (8.9 percent), Vermont (9.1 percent), and Oregon (9.3 percent). e three states with the highest readings were Mississippi (14.5 percent), Louisiana (13.7 percent), and West Virginia (13.2 percent). Nineteen states had readings higher than the national average of 11.69 percent. HUD SECRETARY VOWS TO MAKE GREATEST USE OF ALLOTTED RESOURCES IN 2015 U.S. Department of Housing and Ur- ban Development (HUD) Secretary, Julián Castro, says the department will continue to focus on its top priorities in 2015 with the $45 bil- lion budget allotted as part of the Consolidated and Further Continuing Appropriations Act of 2015, despite the lack of funding for some key HUD initiatives. Among those priorities are securing sustain- able housing for American individuals and families, preserving rental house assistance for poor Americans, ending homelessness, protect- ing people from discrimination in housing, and helping neighborhoods become more resilient from natural disasters, according to a release from HUD. "HUD is the department of opportunity. We support millions of Americans with the housing they need to succeed, and we invest in making communities economically strong and inclusive," Castro said. "Our mission isn't a republican or a democratic issue—it's an American issue. As needs for our services have gone up in states, cities, and counties across the country, HUD's resources have gone down. As we have time and time again, we'll continue to find creative ways to have the greatest impact with the resources we have available so that we can continue ex- panding opportunity for all." Two of HUD's key initiatives that will continue under the budget allotted in fiscal year 2015 are the Choice Neighborhoods Initiative, a program that puts $80 million toward revital- izing neighborhoods decimated by blight and transforming distressed properties in those neighborhoods into sustainable, mixed-income housing; and allowing tribal lands access to the HUD-Veterans Affairs Supportive Housing (VASH) program, expanding the program to veterans living in Indian country, supporting an additional 10,000 housing vouchers with critical support from the VA. HUD's goal is to elimi- nate veteran homelessness by the end of 2015. "It is unacceptable that after their service and sacrifice, too many of our veterans find them- selves living without a roof over their heads," Castro said. "e expansion of HUD-VASH to include Indian country is a significant step for- ward in reducing homelessness among veterans. ese vouchers will help communities build on the progress of reducing homelessness among veterans by a third in just four years, providing targeted assistance to those in need to ensure that every veteran has a home." One of the key HUD initiatives not sup- ported by the new budget is ending chronic homelessness in 2016. HUD had been seeking $301 million in homeless assistance grants for FY 2015 in order to develop housing for those experi- encing chronic homelessness, but the department did not receive the full $301 million request. Another key initiative that will be put on hold for at least a year is the Homeowners Armed With Knowledge (HAWK) program, which is a pilot program introduced in 2014 to further incorporate housing counseling into the home, buying process for new homebuyers who are purchasing a home with Federal Housing Administration (FHA)-insured financing. "Over the last few years, FHA has proposed a number of steps to better serve borrowers and lenders in an ongoing effort to expand credit access and ultimately continue moving the economy in a positive direction," said Biniam Gebre, acting FHA commissioner and assistant secretary for housing. "We are disappointed programs that could have served many families will not be permitted under the bill." The most risky loans were those backed by the Federal Housing Administration (FHA), which registered an index reading of 24.26 percent for November.

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