The Milliman Mortgage Default Index (MMDI) is a lifetime default rate estimate calculated at the loan level for a portfolio of single-family mortgages. For the purposes of this index, default is defined as a loan that is expected to become severely delinquent (i.e., 180 days or more delinquent) over the life of the loan. 1 The results of the MMDI reflect the most recent data acquisition available from Freddie Mac and Fannie Mae, with measurement dates starting from January 1, 2014.
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Key findings
The value of the MMDI for government-sponsored enterprise (GSE) acquisitions is up slightly to 2.05% for loans acquired in the second quarter (Q2) of 2025, from 2.02% for loans acquired in 2025 Q1. While results remained very consistent quarter-to-quarter, the slight increase is primarily due to slightly higher economic risk. Also of note was a single point decrease in average FICO for cash-out refinance borrowers. Figure 1 provides the quarter-end index results, segmented by purchase and refinance loans.
When reviewing quarter-over-quarter changes in the MMDI, it is important to note that the 2025 Q1 MMDI values have been restated since our last publication and were adjusted from 2.13% to 2.02%. The restatement is due to actual home price appreciation being higher than 2025 Q1 forecasts.
Figure 1: MMDI 2025 Q2 dashboard for GSE loans
Summary of trends
Over 2025 Q2, our latest MMDI results show that mortgage risk has increased slightly for GSE acquisitions. The MMDI has three components: borrower risk, underwriting risk, and economic risk. Borrower risk measures the risk of the loan becoming severely delinquent due to borrower credit quality, initial equity position, and debt-to-income ratio.
Underwriting risk measures the risk of the loan becoming severely delinquent due to mortgage product features, such as amortization type, occupancy status, and other factors. Economic risk measures the risk of the loan becoming severely delinquent due to historical and forecasted economic conditions. Economic risk was the primary driver for the change in index value quarter-to-quarter.
Borrower risk results: 2025 Q2
Borrower risk stayed steady between 2025 Q1 and 2025 Q2 at 1.43%, with purchase loans continuing to make up the bulk of originations at about 81% of total volume. While cash-out refinance borrowers experienced a single point drop in average FICO, rate or term refinance borrowers and purchase borrowers saw a slight increase in average FICO in 2025 Q2. From a high-level risk perspective, with the average loan-to-value ratio being below 80 and average FICO scores well above 700, the quality of loans continues to be strong.
Underwriting risk results: 2025 Q2
Underwriting risk represents additional risk adjustments for property and loan characteristics, such as occupancy status, amortization type, documentation types, loan term, and other adjustments. Underwriting risk remains low and is negative for purchase mortgages, which are generally full-documentation, fully amortizing loans. For refinance loans, the data are segmented into cash-out refinance loans and rate/term refinance loans.
In 2025 Q2, the volume for rate/term and cash-out refinance loans was approximately $18 billion and $17 billion, respectively ($35 billion total). Cash-out refinance mortgages have a higher risk relative to purchase loans, and rate/term refinance mortgages have a lower risk relative to purchase loans. The weighted-average underwriting risk for all refinance loans held steady at 0.29% in 2025 Q2.
Economic risk results: 2025 Q2
Economic risk is measured by looking at historical and forecasted home prices. For GSE loans, economic risk increased slightly quarter-over-quarter, from 0.58% in 2025 Q1 to 0.62% in 2025 Q2. Home price forecasts remain stable, and appreciation is projected to continue to slow to low single digits nationally over the next year.
For more information on the housing market, please refer to our recent Milliman Insight article, “Forecasting the housing market: An economic outlook of housing affordability and home prices,” available at https://www.milliman.com/en/insight/forecasting-housing-market-economic-outlook-affordability-home-prices.
This publication of the MMDI uses the most recent data available to provide timely information on credit trends.
The MMDI reflects a baseline forecast of future home prices. To the extent actual or baseline forecasts diverge from the current forecast, future publications of the MMDI will change accordingly. For more detail on the MMDI components of risk, visit milliman.com/MMDI.
About the Milliman Mortgage Default Index
Milliman is expert in analyzing complex data and building econometric models that are transparent, intuitive, and informative. We have used our expertise to assist multiple clients in developing econometric models for evaluating mortgage risk both at the point of sale and for seasoned mortgages.
The Milliman Mortgage Default Index (MMDI) uses econometric modeling to develop a dynamic model that is used by clients in multiple ways, including analyzing, monitoring, and ranking the credit quality of new production, allocating servicing sources, and developing underwriting guidelines and pricing. Because the MMDI produces a lifetime default rate estimate at the loan level, it is used by clients as a benchmarking tool in origination and servicing. The MMDI is constructed by combining three important components of mortgage risk: borrower credit quality, underwriting characteristics of the mortgage, and the economic environment presented to the mortgage. The MMDI uses a robust data set of over 30 million mortgage loans, which is updated frequently to ensure it maintains the highest level of accuracy.
Milliman is one of the largest independent consulting firms in the world and has pioneered strategies, tools, and solutions worldwide. We are recognized leaders in the markets we serve. Milliman insight reaches across global boundaries, offering specialized consulting services in mortgage banking, employee benefits, healthcare, life insurance and financial services, and property and casualty (P&C) insurance. Within these sectors, Milliman consultants serve a wide range of current and emerging markets. Clients know they can depend on us as industry experts, trusted advisers, and creative problem-solvers.
Milliman's Mortgage Practice is dedicated to providing strategic, quantitative, and other consulting services to leading organizations in the mortgage banking industry. Past and current clients include many of the nation's largest banks, private mortgage guaranty insurers, financial guaranty insurers, institutional investors, and governmental organizations.
1 For example, if the MMDI is 10%, then we expect 10% of the mortgages originated in that month to become 180 days or more delinquent over their lifetimes.