In what is perhaps one of the busiest weeks for economists, Fitch Ratings is introducing the firm’s Fitch Fundamentals Index, a tool that measures the overall strength of the U.S. economy by studying various data points.

One of the areas of study is the FFI residential mortgage component score, which is now down to a “+5” rating, compared to the much higher “+10" rating it secured in the second quarter of 2013.

The falling FFI score is the result of "a slowdown in the reduction of U.S. prime residential mortgage delinquencies." Not to mention, the impact of higher borrowing costs, which are already cutting into home affordability, the Fitch FFI update explained. 

Fitch in its FFI also warns that long-term, the federal government’s efforts to reduce mortgage market involvement may derail housing gains, pushing interest rates up and adding new risks as higher rates challenge improving credit quality.

Still, Fitch remains relatively optimistic about housing.

"Year-over-year, the housing recovery has driven a 9.7% decline in Fitch’s measure of prime residential mortgages and the proportion of delinquent loans has dropped to 2009 levels," Fitch said. "A sustained improvement in home prices is expected, which translates into continued mortgage performance improvement."

The complete FFI index features scores in the '+10' to '-10' range, and measures everything from credit card performance to corporate default and ratings outlooks.

While housing may still be in recovery mode, the FFI report contains a relatively negative outlook for the entire U.S. economy.

"The FFI shows the fundamental drivers of the U.S. economy treading water right now," said Jeremy Carter, Fitch Ratings managing director. "If the political stalemate in Washington continues, or even escalates, we would expect to see a weakening of some of the fundamentals at year end."

The data mirrors this point with the entire U.S. FFI falling into neutral territory in the third quarter of 2013. Back in the second quarter, the index had a +2 score, but it has since retreated to zero, with the banking system score now in the negative and consumer credit showing signs of strain again.