Milliman analysis: Mortgage default risk remains low despite continued affordability pressure

Purchase volume continues to decrease, but quality of loans remains strong

Milliman, Inc., a premier global consulting and actuarial firm, today announced the fourth quarter (Q4) 2023 results of the Milliman Mortgage Default Index (MMDI), which shows Milliman’s latest monthly estimate of the lifetime serious delinquency rates (180 days +) of U.S.-backed mortgages.

While mortgage delinquency risk increased to 2.71% for loans acquired in Q4 2023, compared to 2.62% for loans acquired during Q23 2023, delinquency risk remains low despite pressure on housing affordability. The increase in the MMDI is primarily due to the projected slowing, and slight decrease in some markets, of home price appreciation.

Looking at the components of default risk between 2023 Q3 and Q4, borrower risk remained level at 1.48%, with purchase loans making up about 88% of total volume. Underwriting risk, which represents additional risk adjustments for property and loan characteristics, remains low and is negative for purchase mortgages. Economic risk, measured by looking at historical and forecasted home prices, increased quarter over quarter, from 1.16% in Q3 2023 to 1.24% in Q4 2023.

“Mortgage underwriting remains strong, despite the interest rate-environment and continued home price appreciation putting pressure on housing affordability,” said Jonathan Glowacki, a principal at Milliman and co-author of the MMDI.

The MMDI reflects a baseline forecast of future home prices. When reviewing quarter-over-quarter changes in the MMDI, it is important to note that the 2023 Q3 MMDI values have been restated since our last publication. For more on the MMDI, go to www.milliman.com/mmdi. To access additional mortgage market thought-leadership, analytics, and technology go to https://www.milliman.com/en/products/milliman-m-pire.

About Milliman

Milliman is among the world's largest providers of actuarial, risk management, and technology solutions. Our consulting and advanced analytics capabilities encompass healthcare, property & casualty insurance, life insurance and financial services, and employee benefits. Founded in 1947, Milliman is an independent firm with offices in major cities around the globe. Visit us at milliman.com.

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