With economic projections trending downward and the Federal Reserve still telegraphing aggressive moves to rein in inflation, mortgage credit availability eroded further in September and fell to its lowest point in nine years.
The Mortgage Credit Availability Index (MCAI), a report maintained by the Mortgage Bankers Association (MBA), decreased by 5.4% in September to a reading of 102.5. A decline in the MCAI represents tightening credit criteria across the mortgage industry, while gains indicate that lenders are loosening their standards and expanding mortgage credit access.
September was the seventh straight month that the MCAI has fallen, bringing the index’s reading to its lowest level since March 2013.
“With the likelihood of a weakening economy, which would lead to an increase in delinquencies, there was a smaller appetite for lower credit-score and high LTV loan programs, along with a reduction in government streamline refinance programs,” explained Joel Kan, MBA’s associate vice president of economic and industry forecasting. “As mortgage rates have more than doubled over the past year, resulting in a drop in refinance activity, lenders have worked to reduce excess capacity and costs by eliminating underutilized loan programs.”
The overall MCAI is made up of two subindexes that track different loan types: the conventional MCAI, which decreased 4.9% month over month in September; and the government MCAI, which fell by 5.7%. The conventional index has its own component indices: the jumbo MCAI and conforming MCAI. Each of these components also backtracked, falling by 5.8% and 3.6%, respectively.
Most of the subindexes bottomed out to their lowest levels more than a year, Kan noted. The government MCAI fell to its lowest point since April 2013 after decreasing in seven of the past eight months.