The latest Mortgage Credit Availability Index (MCAI) from the Mortgage Bankers Association (MBA) revealed that mortgage credit availability decreased in August, with the index dropping by 0.5% compared to July.

That brought the MCAI’s reading to 108.3% for the month. The index was benchmarked to 100 in March 2012; a drop in the index reading indicates that credit standards are tightening while increases suggest that lenders are loosening credit criteria.

Of the MCAI component indices, the government loan index was flat while the conventional index fell 1% from July to August. The conventional MCAI’s components, comprised of the jumbo and conforming indices, declined by a respective 0.7% and 1.2%.

“Mortgage credit availability declined slightly in August as investors reduced their offerings of ARM and non-QM loan programs,” said Joel Kan, MBA’s associate vice president of economic and industry forecasting.

“With overall origination volume expected to shrink in 2022, some lenders continue to streamline their operations by dropping certain loan programs to simplify their offerings. Additionally, with a worsening economic outlook and signs of cooling in home-price growth, the appetite for riskier loan programs has been reduced.”

Interestingly, Kan said, the negative movement in credit availability during August was somewhat offset by a slight increase in new home equity line of credit (HELOC) products.

“With aggregate home equity still at elevated levels, HELOCs could benefit borrowers who might not want to give up on their current low mortgage rate but do want to utilize their home equity to support other spending plans,” he said.