Mortgage credit availability tightened in December, falling 2.6%, as lenders reduced loan programs and tightened documentation requirements, according to data released Thursday by the Mortgage Bankers Association (MBA).

The decline reverses gains made in the previous two months and pushes the Mortgage Credit Availability Index (MCAI) to 104.7, its lowest level in three months.

While credit availability remains higher on a year-over-year basis compared to the end of 2024, the report highlighted a significant contraction in the conforming mortgage space, with that specific index falling to its lowest level since the survey began in 2011.

The MCAI, which analyzes data from ICE Mortgage Technology, was benchmarked to 100 in March 2012. A decline in the index indicates that lending standards are tightening, while an increase signals a loosening of credit.

“Mortgage credit availability increased on an annual basis in December due to increased loan program offerings and industry capacity compared to the end of 2024,” Joel Kan, MBA vice president and deputy chief economist, wrote in the report. “However, on a monthly basis, credit supply declined to its lowest level in three months, with tightening in both conventional and government loan offerings.”

According to Kan, the December decrease was driven by a reduction in specific loan programs, including adjustable-rate mortgages (ARMs) and cash-out refinances. The MBA also noted a tightening in documentation requirements during the period as a factor.

The tightening was observed across all component indexes. The Conventional MCAI, which tracks non-government loan programs, decreased 3.6% in December. Within that category, the Jumbo MCAI tumbled by 3.6%, while the Conforming MCAI fell by 3.8%. 

The drop in Conforming MCAI, which tracks loans that meet the guidelines and loan limits of Fannie Mae and Freddie Mac, is particularly notable, as it marks a new low for the index since its inception more than a decade ago. This suggests that borrowers seeking standard conforming loans may be facing the strictest credit parameters in years, despite the broader annual recovery in availability mentioned by Kan.

The Government MCAI — which examines loans backed by the Federal Housing Administration, Department of Veteran Affairs and U.S. Department of Agriculture — also saw a decline, sliding 1.4% over the month.