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A key measure of lending behaviors shows the number of risky mortgages rose in September as housing agencies fail to compensate for high debt-to-income ratios. The American Enterprise Institute's National Mortgage Risk Index, released Monday, rose to 11.4 percent in September. Last month’s index was little changed from the revised average of the previous three months and nearly 1 percentage point higher than a year ago.
In keeping with recent trends, the index measuring risk for FHA loans was the highest, sitting at just under 24 percent percent—nearly quadruple the 6 percent threshold AEI considers to be stable. Meanwhile, the newly added VA index had a risk rating of 11.2 percent, slightly below the composite index. The stressed default rate for loans purchased by Fannie and Freddie remained just on the stable side at 6 percent.
Home price appreciation decelerated further in August, with some of the once-hottest cities of the recovery now showing monthly declines. On a monthly basis, the S&P Case-Shiller National Index showed a non-seasonally adjusted 0.2 percent increase from July to August, down from a 0.6 percent improvement in the July report. The narrower 10- and 20-city indices posted the same results. As of August, S&P Dow Jones Indices reports that average home prices across the country are back to their levels in spring 2005.
