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The Latest S e c on da r y M a r k e t a na ly t ic s se r v ic i ng or ig i nat ion ORIGINATION Higher LTV Ratios Pull Down Borrower Health in Q3 Rising prices hurt borrower health overall. R ecent findings released by online lender exchange LendingTree reveal that the financial health of prospective borrowers dipped in this year's third quarter after seeing a sizable improvement in the second. LendingTree's Borrower Health Report shows the national Borrower Health Score was 79.94 in the third quarter, down 1.56 points from the prior period. The score is calculated based on data for average loan-to-value ratios (LTV) and average credit scores. The company attributed the slight decline in borrower health to rising home prices, which boosted LTVs across the country to a national average of 89.8 38 | The M Report percent and put more financial pressure on potential borrowers. "Because home prices have been steadily increasing, this minor slip in the Borrower Health Score isn't necessarily unsettling," said Doug Lebda, founder and CEO of LendingTree. "In order for the housing market to maintain and improve home prices, there needs to be a growing pool of well-qualified borrowers in the market for homes." The national score also experienced a slight drag from a dip in the average credit score of prospective borrowers, which fell four points quarter-over-quarter to 636. Even with the decline, the third quarter's health score is still above the first quarter's reading of 76.44 and Q 3 2012's reading of 72.66—demonstrating that "mortgage-seekers are in relatively good health and that there is a broader trend of improving borrower qualification levels." Breaking the data down by state, Hawaii led in terms of borrower health, posting a score of 96.16, with a higher average credit score (689) offsetting a relatively higher LTV percentage: 89.66 percent. Other markets with scores above 90 include the District of Columbia (95.91), New Jersey (91.18), and California (90.59). All reported average credit scores in the 670–680 range and LTVs lower than the national average. Ledba explained the results were largely reflective of job market conditions, observing that states ranking on the list "had enough highly qualified, active borrowers to support the higher home prices." Investors Still Expect to Dominate Purchase Stats Owner-occupants just can't get in the game with lending conditions the way they are. R ising prices may be bringing some homeowners out from underwater, but tight credit will still preclude many traditional buyers from entering the market, according to a recent report from San Diego-based DataQuick, a real estate information and analytics provider. As a result, investors will continue to play a major role in the purchase market for the foreseeable future, DataQuick concluded. Observing 42 of the largest counties in the nation, DataQuick found rising home prices in all counties for the second month in a row during October.