The Pulse

Mortgage Risk Rate Continues To Increase In Q2 2022 With Heavy Cash-Out Refinance Volume

Historically riskier cash-out refinance loans made up nearly three-quarters of refinance originations in Q2

The Milliman Mortgage Default Index shows the latest monthly estimate of the lifetime default risk of U.S.-backed mortgages.

SEATTLE, Sept. 1, 2022 /PRNewswire/ — Milliman, Inc., a premier global consulting and actuarial firm, today announced the second quarter (Q2) 2022 results of the Milliman Mortgage Default Index (MMDI).

The default risk for government-sponsored enterprise (GSE) acquisitions (purchased and refinanced loans backed by Freddie Mac and Fannie Mae) increased from a rate of 2.28% for mortgage loans originating in Q1 to 2.78% for loans originating in Q2 2022. This means that for mortgage loans originating in Q2, the expectation is that 2.78% will become delinquent (180 days or more) over their lifetimes.

The volume of refinance mortgages continued to decline in Q2 2022 compared to Q1, likely the result of increasing interest rates. Mortgage refinance volume has dropped steadily since its all-time high in 2021, when interest rates were at historic lows. Along with the decline in volume, the makeup of refinance loans has changed compared to the year prior. Cash-out refinance loan volume increased from 34% of all refinance originations in 2021, to 74% in Q2 2022.

“Cash-out refinance loans historically have higher default rates compared to rate-and-term refinancing,” says Jonathan Glowacki, a principal at Milliman and author of the MMDI. “In 2022, there’s been an increase in cash-out refinance originations compared to the prior year, which is a contributing factor in the increased mortgage default risk we’re seeing.”

The MMDI reflects a baseline forecast of future home prices. For more on the MMDI, visit here.

To access additional mortgage market thought leadership, visit here.




About Milliman
Milliman is among the world’s largest providers of actuarial and related products and services. The firm has consulting practices in healthcare, property & casualty insurance, life insurance and financial services, and employee benefits. Founded in 1947, Milliman is an independent firm with offices in major cities around the globe. For further information, visit