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Tracking and Explaining Big Picture Shifts in Mortgage Risk Factors
Tuesday, December 31, 2019
The effects of low interest rates continue to echo through the mortgage markets. Those
rates can be credited, at least in part, with a change in the risk profile of
conventional home purchase loans.
According to
CoreLogic's Archana Pradhan, writing in the company's Insights blog, the
average debt-to-income ratios for those loans declined during the third quarter
of 2019 compared to a year earlier, most likely because of lower mortgage
payments. At the same time, loan to value (LTV) ratios for those loans moved higher.
Pradhan
says DTI and LTV, two of the three credit-risk attributes of borrowers, have
varied dramatically over the last 20 years. Starting in 2014 the government
sponsored enterprises (GSEs) Fannie Mae and Freddie Mac loosened their underwriting
policies to make loans more available to...
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