Milliman: Mortgage Default Risk Inches Up

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Milliman, Seattle, said its Milliman Mortgage Default Index shows a slight increase in the lifetime serious delinquency rate (for homes 180-plus days delinquent) for U.S.-backed mortgages.

The MMDI figure climbed to 2.13% in the first quarter from 2.05% in late 2024.

The Milliman Mortgage Default Index is a lifetime default rate estimate calculated at the loan level for a portfolio of single-family mortgages. The index defines default as a loan that is expected to become severely delinquent over the life of the loan.

Default risk for GSE loans inched up due to both an increase in economic risk (from 0.64% to 0.68%) and borrower risk (1.40% to 1.43%) during the first quarter, the report said. (In the context of the MMDI, borrower risk is the risk of a loan becoming seriously delinquent due to borrower credit quality, initial equity position, and debt-to-income ratio. Economic risk is measured by looking at historical and forecasted home prices.)

“In early 2025, GSE acquisitions had slightly higher DTI and loan-to-value ratios compared to the prior quarter, and a slightly lower average FICO score, meaning borrowers were taking on more debt compared to prior quarters,” said Jonathan Glowacki, a principal at Milliman and co-author of the MMDI report. “While the quality of purchase loans continues to be strong, we’ll be monitoring how economic turbulence may impact borrower risk for government-sponsored loans.”

Milliman noted that fourth-quarter 2024 MMDI values were restated to account for higher-than-forecasted home price appreciation. The MMDI relies on a baseline forecast of future home prices, and as projections and real-world conditions change, the values in subsequent publications adjust accordingly.