RiskSpan VQI: Current Underwriting Standards – September 2018
Build-Up of VQIThe following chart illustrates how each of the following risk layers contributes to the overall VQI:
- Loans with low credit scores (FICO scores below 660)
- Loans with high loan-to-value ratios (over 80 percent)
- Loans with subordinate liens
- Loans with only one borrower
- Cash-out refinance loans
- Loans secured by multi-unit properties
- Loans secured by investment properties
- Loans with high debt-to-income ratios (over 45%)
- Loans underwritten based on reduced documentation
- Adjustable rate loans
Analytical and Data AssumptionsPopulation assumptions:
- Issuance Data for Fannie Mae and Freddie Mac.
- Loans originated more than three months prior to issuance are excluded because the index is meant to reflect current market conditions.
- Loans likely to have been originated through the HARP program, as identified by LTV, MI coverage percentage, and loan purpose are also excluded. These loans do not represent credit availability in the market, as they likely would not have been originated today if not for the existence of HARP.
- Freddie Mac data goes back to December 2005. Fannie Mae data only goes back to December 2014.
- Certain Freddie Mac data fields were missing prior to June 2008.
————————————————————————————————————————————– Note: The analysis in this blog post was developed using RiskSpan’s Edge Platform. The RiskSpan Edge Platform is a module-based data management, modeling, and predictive analytics software platform for loans and fixed-income securities. Click here to learn more.