The default risk on newly originated nonprime mortgage loans "remains at elevated levels," according to a quarterly report from University Financial Associates.The risk has risen by over 30% since 1998 as a result of a slowing economy, according to UFA's quarterly report. "The risk is rising because the accommodating interest rate policy of the Fed is not sufficient to offset the eroding prospects for both the consumer and the underlying housing collateral," said Dennis Capozza, professor of finance at the University of Michigan and a principal in UFA. The report analyzes the risk of future default for loans that are being originated today.
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