The May 2015 First-Time Buyer Mortgage Risk Index for agency loans reached a series record of 15.66 in May, an increase of half a percentage point from the previous three months and 1.1 percentage points from May 2014, according to data released Monday by the American Enterprise Institute's International Center on Housing Risk. The FBMRI is now 6.75 percentage points higher than the risk index for repeat homebuyers, according to AEI – and the gap has been widening.
Risk layering has largely been the cause of the higher risk on first-time buyer mortgages. About 71% of first-time buyer mortgages had a combined loan-to-value ratio of 95% or more, and 97 percent of first-time mortgage buyers had a term of 30 years. Repeat buyer mortgages are less risky than those taken out by first-time buyers due to the fact that a much smaller share of repeat buyer mortgages have a combined loan-to-value ratio higher than 95%, and a much smaller share of repeat buyers had FICO scores below 660.
A group of dozens of investors, led by BlackRock, Inc., have revived a lawsuit in a New York state court that was dismissed in a federal court last month, accusing U.S. Bank of failing in its duties as trustee for more than 743 billion dollars worth of mortgage backed securities. The claims that were revived in the state court involved 794 private-label residential mortgage-backed securities that were securitized during a three-year period immediately prior to the financial crisis, from 2004 to 2007.