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Think Tank Concludes Mortgage Guidelines Could Safely be Twice as Risky
Tuesday, November 3, 2020
The Urban Institute's (UI's) Housing
Finance Policy Center has updated its credit availability index (HCAI) to
reflect data for the second quarter of 2020. The Index shows a slight dip from
an adjusted 5.3 percent in the first quarter to 5.2 percent in the second
quarter. Tightening in the GSE and government channels has driven a retraction
of credit availability through the first half of 2020, as the risk in the
portfolio and private-label securitization market remains a shadow of what it
once was. The HCAI measures the percentage of
owner-occupied home purchase loans that are likely to default-that is, go
unpaid for more than 90 days past their due date. When the HCAI declines it
indicates the lenders have a greater unwillingness to tolerate defaults and they
are imposing tighter lending standards, making it harder to get a loan. A
higher HCAI indicates a higher tolerance for defaults and that lenders are
taking more risks, making it easier to get a loan.
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