Legal Seminar, Chicago, IL

HOUSING CREDIT AVAILABILITY INDEX CREDIT BOX Government Channel

The total default risk the government channel is willing to take bottomed out at 9.6 percent in Q3 2013. It has fluctuated at or above that number since then. In the past nine quarters since Q4 2016, the risk in the government channel has increased from 9.9 to 11.8 percent, the highest level since 2009, but still about half the pre-bubble level of 19 to 23 percent.

Percent

25

Total default risk

Product risk

20

15

10

Borrower risk

5

0

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Q4 2018

Portfolio and Private Label Securities Channels

The portfolio and private-label securities channels collectively experienced a substantial increase in product and total default risk during the bubble. This was followed by a sharp decline post-crisis. Borrower risk increased in the Q4 2018, driven primarily by a decline in FICO scores and an increase in high-LTV lending. Total risk in the PP channel was 3.1 percent in Q4 2018, up from 2.4 the previous quarter. This is the highest level since 2012 and driven largely by the expansion of “non-QM” lending in the private-label securitization market.

Percent

Total default risk

25

20

15

Product risk

10

5

Borrower risk

0

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Q4 2018

14

Sources: eMBS, CoreLogic, HMDA, IMF, and Urban Institute. Note : Default is defined as 90 days or more delinquent at any point. Last updated April 2019.