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Th e M Rep o RT | 37 O r i g i nat i O n s e r v i c i n g a na ly t i c s s e c O n da r y m a r k e t ORIGINATION the latest First-time Buyer index reveals mortgage loans are getting riskier higher LTV ratios are partially to blame. t he April 2015 First-Time Buyer Mortgage Risk Index (FBMRI) for Agency loans increased by nearly a full percentage point year-over-year, up to 15.28 percent, indicating those mortgage loans are moving deeper into the high- risk category, according to data released by the American Enter- prise Institute (AEI)'s International Center on Housing Risk. Risk layering is largely re- sponsible for the increase in risk on mortgage loans taken out by first-time buyers, according to AEI. Seventy percent of first-time mortgage buyers in April 2015 had a combined LTV ratio of 95 percent or more and 97 percent of them had a 30-year term. Without substantial home price apprecia- tion, the low down payment and slow amortization makes it likely that these first-time buyers will have very little equity in their homes for many years. Also contributing to the higher risk among first-time buyers is that approximately one-fifth of them fit the traditional definition of subprime mortgages (a FICO score below 660) and about one-fourth of them had total debt-to-income ratios higher than 43 percent, which is the limit de- fined by the Qualified Mortgage rule, according to AEI. "The first-time buyer MRI hit a series high of 15.28 percent in April, moving deeper into the high-risk loan category," said Edward Pinto, co-director of AEI's International Center on Housing Risk. "This growing leverage puts the housing market at risk given interest rates are at historically low levels and American households are facing increasingly sharp swings in income and expenses." The Agency index for first- time buyers in April (57.9 per- cent) was 6.5 percentage points higher than the index for repeat buyers, according to AEI. Repeat mortgage buyers are often less risky because a smaller share of repeat buyers have a FICO score below 660 and a much smaller share have a combined LTV ratio of above 95 percent. The First-Time Buyer Mortgage Share Index (FBMSI) increased by 1.1 percentage points year-over- year in April, up to 57.9 percent, which indicated that first-time buyers accounted for 57.9 percent of primary owner-occupied home purchase mortgages with a gov- ernment guarantee. The combined share of first-time buyers for both government-guaranteed and pri- vate sector mortgages also rose in April by a full percentage point, up to 52.2 percent, according to AEI. Both the combined index and the first-time buyer share index showed little change in the last two years outside of seasonal trends, which was contrary to the findings of the annual National Association of Realtors (NAR) survey issued in November, which showed a sharp decline in first-time home buyer share dur- ing the same period. "A recent Urban Institute study of first-time buyers confirms the results we have been reporting for some time," said Stephen Oliner, co-director of AEI's International Center on Housing Risk. "These results are contrary to the drop in the first-time buyer share shown by the NAR measure." The overall number of pri- mary owner-occupied purchase mortgages sent to first-time buyers (the Agency FTB loan count) increased year-over-year for the six-month period from November 2014 to April 2015 by 8-and-a-half percent, up to 577,000. The number was reported at 532,000 for the same six-month period a year earlier.