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16 THE STREAK CONTINUES—RISE IN GOVERNMENT SPONSORED PURCHASE LOANS CONTINUE FOR 27th MONTH Demand for government-backed purchase loans surged in early 2017 despite an uptick in mortgage rates, according to the latest National Mortgage Risk Index (NMRI) released by the AEI International Center on Housing Risk on May 1. According to the NMRI, January was the 27th month that government-guaranteed purchase loans rose in volume, jumping up 10 percent from a year earlier. e number of first- time buyers rose 11 percent. By dollars, volume was up 14 percent over the year, with RHS volume outpacing FHA volume significantly. Year over year, RHS loan count was up nearly 23 percent. Loans from Freddie Mac rose 13.3 percent, VA loans rose 13.2 percent, Fannie Mae loans jumped 10.8 percent, and FHA loans increased just 5.1 percent. is large gap is likely due to RHS' cut in mortgage insurance premiums that went into effect in October. "As expected, RHS' volume jumped immediately after its MIP cut in October 2016," the NMRI stated. "Since the cut, RHS has grown faster than FHA, its most direct competitor. In January, its growth surpassed all other agencies." Agency credit easing may be offsetting ever- rising mortgage rates, according to the NMRI, though this could create an unwanted snowball effect if allowed to continue. "As prices have been rising, dollar volume has been outgrowing count volume," the NMRI reported. "Credit easing, particularly by the FHA, is fueling this trend. is creates a vicious cycle of price appreciation and credit easing." While higher rates may not be hurting the government-backed purchase market, the NMRI shows they are having a big impact on refinancing. According to the report, by-count volume on refinances declined 40 percent since October 2016—and that's with a 1.5-ppt increase in risk. Almost half of all refinances in January were cash-outs, more than double the number four years ago. Overall risk was up slightly over the year. e composite NMRI rose 0.2 percent. Nonbank lenders took more risk than their more traditional counterparts. "A huge gap has opened up in the riskiness of purchase loans originated by banks and nonbanks," the NMRI reported. "Banks have reduced risk by shifting away from subprime borrowers and low down payment loans. In contrast, nonbanks have increased risk by lowering standards for every major risk factor, making them the preferred risk channel." According to AEI, "e National Mortgage Risk Index measures how government guaranteed loans with a first payment date in a given month would perform if subjected to the same stress as in the financial crisis that began in 2007." is iteration analyzed data on 26.2 million loans guaranteed by Fannie Mae, Freddie Mac, FHA, VA, and RHS, including 12 million purchase loans and 14.2 million refinance loans. www.assero24.com/defense The best defense for a better neighborhood Real People, Real Results