Milliman analysis: Expected slowdown in home price growth driving uptick in mortgage risk in Q1 2022

Mortgage originations continue to decline in early 2022 compared to 2021 year-end

SEATTLE, Aug. 2, 2022 /PRNewswire/ -- Milliman, Inc., a premier global consulting and actuarial firm, today announced the first quarter (Q1) 2022 results of the Milliman Mortgage Default Index (MMDI), which shows the latest monthly estimate of the lifetime default risk of U.S.-backed mortgages.

During Q1 2022, the default risk for government-sponsored enterprise (GSE) acquisitions (purchased and refinanced loans backed by Freddie Mac and Fannie Mae) increased from 1.90% at 2021 year-end to 2.39% as of March 31, 2022. This means that for loans originating in Q1, the expectation is that 2.39% will become delinquent (180 days or more) over their lifetimes.

"Rising interest rates typically translate to fewer refinance loans or higher-risk refinance loans, leading to increased overall borrower risk for the GSEs," says Jonathan Glowacki, a principal at Milliman and author of the MMDI. "Combined with inflation, we're anticipating a slowdown in home price growth, which is what's driving the uptick in mortgage default risk."

GSE mortgage originations continued to decline over Q1 2022 compared to the fourth quarter of 2021. Of these mortgages, refinance loans made up more than half of originations, at about 57%, which is generally consistent with the prior quarter.  

The MMDI reflects a baseline forecast of future home prices. For more on the MMDI, go to www.milliman.com/mmdi/.

To access additional mortgage market thought leadership, go to https://www.milliman.com/en/products/milliman-m-pire.

About Milliman
Milliman is among the world's largest providers of actuarial and related products and services. The firm has consulting practices in 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. For further information, visit milliman.com.

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SOURCE Milliman, Inc.