The number of Agency purchase loans increased substantially year-over-year in May, but with that increase came a slight nudge upward for the National Mortgage Risk Index (NMRI), according to data released Monday by the American Enterprise Institute (AEI)'s International Center on Housing Risk.
The total of Agency purchase loans in the NMRI stood at about 6.2 million at the end of May following the addition of about 223,000 loans during the month – an increase of about 23 percent from May 2014.
May's NMRI stood at 12.33 percent, which was an increase of 0.4 percentage points from the prior three-month average and a jump of 0.7 percentage points from May 2014, according to AEI. The composite risk index reached a series high, as did the index for Veterans Affairs-backed loans, while the share of high-risk loans backed by the Federal Housing Administration (FHA) increased.
The first-time buyer NMRI reached a new series high of 15.66 percent in May, compared with just 8.88 percent for the Repeat Buyer NMRI, according to AEI.
The number of first-time buyer Agency purchase loans added in May totaled nearly 119,000, an increase of 28 percent from May 2014. The total of first-time buyer Agency purchase loans in the NMRI totaled 2.7 million as of the end of May. AEI cites robust first-time buyer volume driven by increasing leverage and an improving job market as the main drivers for a strong spring homebuying season.
The AEI's data for May suggest that access to credit for first-time buyers is not tight. During the month, 71 percent of first-time buyers had down payments equal or less than 5 percent and 25 percent had debt-to-income ratios or greater than 43 percent, which is the limit defined by the qualified mortgage rule. The median FICO score for first-time buyers was 706, slightly below the median of 713 for all individuals in the United States, according to AEI.
To this point, low mortgage rates and high leverage have been supporting the housing market; leverage is likely to rise further as mortgage rates normalize unless income gains pick up, AEI reported.
Also according to AEI, the FHA premium cut has boosted its market share at the expense of the Agency's most direct competitors, Fannie Mae and Rural Housing Service, and that more higher-priced homes have been purchased with riskier FHA loans.