Mortgage Credit Risk Increased in Q2 2017

Housing Credit Insights Trends Through Q2 2017

The CoreLogic Housing Credit Index is a robust credit index that measures mortgage credit risk using six mortgage credit attributes. The HCI spans more than 15 years, covers all loan products in both the prime and subprime lending segments and includes all 50 states and the District of Columbia, permitting peak to trough business cycle comparisons across the U.S.

The CoreLogic Housing Credit Index (HCI) measures the variation in mortgage credit risk attributes and uses loan attributes from mortgage loan servicing data that are combined in a principal component analysis (PCA) model. PCA can be used to reduce a complex data set (e.g., mortgage loan characteristics) to a lower dimension to reveal properties that underlie the data set.

 

The HCI combines six mortgage credit risk attributes, including borrower credit score, loan-to-value (LTV) ratio, debt-to-income (DTI) ratio, documentation level (full documentation of a borrower’s economic conditions or incomplete levels of documentation, including no documentation), status of investor-owned (whether property is a non-owner-occupied investment or owner-occupied primary residence and second home), and property type (whether property is a condominium or co-op). It spans more than 15 years, covers all loan products in both the prime and subprime lending segments and includes all 50 states and the District of Columbia, permitting peak-to-peak and trough-to-trough business cycle comparisons across the U.S. The CoreLogic Loan-Level Market Analytics data include loan-level information, both current and historical, from servicers on active first-lien mortgages in the U.S. and the Non-Agency Residential Mortgage Backed Securities (RMBS) data include loan-level information from the securitizers. In addition, CoreLogic public records data for the origination share by loan type (conventional conforming, government, jumbo) were used to adjust the combined servicing and securities data to assure that it reflects primary market shares. These changes across different dimensions are reflected in the HCI. A rising HCI indicates increasing credit risk and a declining HCI indicates decreasing credit risk.