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36 WHAT'S HAPPENING TO MORTGAGE DEFAULT RISKS? e UFA Default Risk Index, which measures the risk of default on newly originated nonprime mortgages, climbed seven points between Q 4 2017 and Q1 2018, hitting 108. According to the latest UFA Mortgage Report released by University Financial Associates of Ann Arbor, Michigan, that means lenders should expect mortgage defaults to be 8 percent higher than the average of similar loans originated in the 1990s. UFA bases their analysis on "constant- quality" loans, meaning loans with "the same borrower, loan, and collateral characteristics." UFA releases the Default Risk Index on a quarterly basis, evaluating U.S. economic conditions and how they are likely to impact future default rates, as well as "prepayments, loss recoveries, and loan values for nonprime loans." "Overall default risks are similar to the prior quarter with favorable monetary conditions and falling unemployment rates offsetting the friction from higher house prices," said Dennis Capozza, Professor Emeritus of Finance in the Ross School of Business at the University of Michigan, and a Founding Principal of UFA. "Continuing political uncertainty and a new Federal Reserve chairman provide the backdrop for future changes in mortgage risk levels. e Fed has indicated that more increases in interest rates should be expected this year." According to data released by the S&P/ Experian Consumer Credit Default Indices, the default rate for first mortgages inched higher between December 2017 and January 2018, increasing from 0.68 percent to 0.72 percent. is put it exactly where it had been a year previously in January 2017. How does this compare to mortgage delinquency rates? According to January mortgage performance data from Black Knight Inc., mortgage delinquencies dropped 8.6 percent between December and January but remained up year-over-year—1.6 percent higher than in January 2017. Black Knight also noted the ongoing impact of 2017's hurricane season, with 146,000 loans in some stage of delinquency as a result of Hurricanes Harvey and Irma, 132,000 of which are now seriously delinquent. Per Black Knight, the top 5 states in terms of 90+ days delinquent percentage were Florida (3.96 percent), Mississippi (3.37 percent), Louisiana (2.68 percent), Texas (2.33 percent), and Alabama (2.13 percent). HOME BIDDING SIGHT-UNSEEN? An increasing number of homebuyers are making offers for homes without first seeing them in person, according to an analysis by online brokers Redfin. e study, which surveyed 1503 respondents who purchased a home in the last one year in November and December 2017, found that 35 percent of people who bought a house last year made an offer without seeing it in person, showing an increase from 33 percent in May 2017 and 19 percent in June 2016. It found that millennials were even more likely to make an offer on a home sight-unseen with 45 percent of millennials surveyed saying that they had made an offer on the home before seeing it, reflecting their comfort on relying on online information about homes for sales and neighborhoods. In fact, the study found that many buyers who can't get to tour a home right away because they are busy or relocating rely on online tools such as virtual tours, online maps, housing apps, statistics, and online reviews to understand the subtler aspects of the neighborhood where they plan to live. Regionally, homebuyers in Los Angeles were most likely to bid on a home before seeing it, the survey indicated, with more than half (57 percent) of the respondents in this area saying that they had successfully made an offer on a home they had not seen in person. Los Angeles' neighbors, San Diego and San Francisco with 46 percent and 44 percent respectively were other hot Californian markets where homebuyers put a bid before actually seeing the home. e study found that the prevalence of foreign investors in Los Angeles might have played a role in the popularity of sight-unseen offers. Apart from the competitive California markets, this trend was also prevalent in Chicago, Austin, Denver, Washington, D.C., Phoenix, Portland, and Sacramento.