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13
THE CREDIT BELT
TIGHTENS ONCE
AGAIN
e Urban Institute's Housing Finance
Policy Center released their Housing Credit
Availability Index (HCAI) in October, which
focuses on the share of home purchases likely
to default, or go unpaid for more than 90
days past their due date. e index measures
GSE loans, as well as the government (FVR)
channel, which includes the Federal Housing
Administration, the U.S. Department of
Veterans Affairs, and the U.S. Department of
Agriculture Rural Development. e HCAI
also covers portfolio and private-label securities
(PP); both FVR and PP channels remain close
or at record lows.
Mortgage credit availability dropped from
5.4 percent in Q1 2017 to 5.1 percent in Q2 2017
based on data from the HCAI. A higher HCAI
would indicate lenders are willing to take more
risk by tolerating more defaults, while a lower
HCAI would indicate the opposite, making
it more difficult to get a loan. GSE loans have
rebounded since Q2 2011 from 1.4 percent to 2.4
percent in Q2 2017 due to the expanded credit
box for borrowers, where total risk taken on by
GSE has expanded 73 percent over that time.
is cannot be said for the FVR channel where
risk has remained about the same at 10.7 percent
in Q2 2017 compared to its bottomed- out
measure of 9.6 percent in Q 3 2013. e risk in
the FVR channel has gone up 0.7 percent since
Q1 2017.
e PP channel took higher risk during the
housing bubble compared to the FVR and GSE
channels, but has been stabilizing since 2013.
Product risk fluctuated below 0.6 percent and
borrower risk around 2.0 percent in 2013. e
PP channel only took a 0.19 percent product risk
and total default risk taken by PP remains low at
2.1 percent in Q2 2017.
