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86 I N D U S T R Y I N S I G H T / B R E N T C H A N D L E R e last 12 months have seen home-equity wealth and house- price appreciation rise to their highest values in more than a decade as the U.S. economy continues its slow, steady march toward recovery. At the same time, factors such as all-time-high student debt, a weak job market, tighter lending standards, and record-low housing inventory have conspired to lock first-time homebuyers out of the market—or have they? It's a narrative that rang true as recently as last year, but according to American Enterprise Institute research analyst Tobias Peter, the story is changing. Now, Peter says, we are in the midst of a boom in first-time homebuyer activity driven by the introduction of low down- payment loan products and heavy utilization of lender- and government-funded down-payment assistance programs. At first blush, this seems like great news for the mortgage industry. After all, accessing the untapped potential of the millennial home- buying market has been a topic of focus among industry leaders and policymakers for years. But could this new wave of first-time homebuyer activity be putting us on a path back to the kind of lending we saw in the run-up to the housing bust—and the flood of defaults we saw in its wake? If so, what can lenders and servicers do to prepare? GROWING APPETITE FOR LAYERED RISK e National Mortgage Risk Index (NMRI), published monthly by the American Enterprise Institute's International Center on Housing Risk, estimates how many of today's mortgages would be likely to default in the event of a financial crisis similar to what we experienced in 2007. Specifically, it compares current government-backed loans to the performance of loans with the same risk profiles a decade ago. e overall NMRI has been climbing steadily for nearly three years straight, and a subindex called the First-Time Buyer Mortgage Risk Index (FBRMI) reached an all-time high of 15.8 percent in April. According to the index's authors, one in five first-time homebuyers now has a FICO score below 660, three in 10 have a debt-to-income ratio greater than 43 percent, and seven out of 10 make a down payment of 5 percent or less. ese figures are even more concerning when one considers that they are already outdated. e NMRI has a three-month lag time, so the most recent data—released May 30—is from February. A number of recent and Analyzing borrowers' asset data is key to fast-tracking servicers' decision to pursue either repayment or foreclosure. ONE WAY OR THE OTHER

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