Mortgage credit availability that jumped from six-month lows in June to four-year highs in July dipped slightly in August but remained resilient overall, the Mortgage Bankers Association (MBA) said Thursday.
The MBA’s Mortgage Credit Availability Index (MCAI), which tracks changes in credit underwriting conditions, fell 1% to 107.3 last month, reflecting a pullback in jumbo loan programs that had fueled the expansion of the index one month earlier.
Jumbo mortgages are typically categorized as non-qualified mortgage (non-QM) products because the loan amounts exceed the conventional conforming limits allowed under Fannie Mae, Freddie Mac and Ginnie Mae underwriting guidelines.
“Credit availability decreased in August, as lenders reduced their offerings of loan programs that require flexible documentation, along with cash-out refinance loans,” noted Joel Kan, deputy chief economist at the MBA, adding that “many of these loan programs had jumbo features.”
Refinance mortgage demand plunged overall in August as average mortgage rates for 30-year fixed-rate loans ended the month around 6.8%, roughly 20 basis points higher than where they began July.
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Mortgage rates that have remained higher than year-ago levels since late July have done little to loosen underwriting conditions for Fannie and Freddie loans, however.
Using data from ICE Mortgage Technology, the MCAI gauges access to mortgage financing based on variables including credit score and loan-to-value ratios relative to the loan programs and structures being actively offered by lenders. The index rises when lending conditions loosen and falls when they tighten.
“The conforming index was unchanged and remained in a narrow range as conforming lending standards and loan offerings continue to be conservative,” added Kan about August conditions.
Overall, the conventional index tracking mortgage programs approved by Fannie and Freddie declined 1.8%, while the component index tracking government mortgage access was unchanged over the month. Across the component indexes of the conventional MCAI, the jumbo index declined by 2.5% and the conforming index was unchanged.
