Mortgage credit availability falls to another recent low

Mortgage credit availability continued to recede in September, falling to its lowest level since February 2014, according to the Mortgage Bankers Association (MBA).

The MBA’s Mortgage Credit Availability Index (MCAI) dropped 1.9% to a reading of 118.6, falling below the recent low of 120.9 set the month prior. The MCAI was benchmarked to a reading of 100 in March 2012; a drop in the MCAI signifies tightening credit criteria, while increases in the index indicate that lenders are loosening their standards.

One of the overall MCAI’s two sub-indices, the Government MCAI, actually grew by 1.4%. But the overall MCAI’s other half, the Conventional MCAI, fell by 6.1%.

The decline, according to MBA Associate Vice President of Economic and Industry Forecasting Joel Kan, came partly due to a 9.5% retreat in the Conforming MCAI, a component index of the Conventional MCAI.

“This reduction was the result of lenders discontinuing conforming ARM loan offerings in advance of the September 30, 2020, application deadline for GSE-eligible, LIBOR-indexed ARM loans,” said Kan. “Across all loan types, there continues to be fewer low credit score and high-LTV loan programs.”

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The Jumbo MCAI — the other component index of the Conventional MCAI — also receded, falling by 2.1%.

The MCAI has now decreased in six of the past seven months (as well as in each of the three previous months before that timeframe, pre-pandemic), signaling that lending institutions are continuing to show restraint in their standards despite the housing market’s resilience throughout the COVID-19 crisis.

The housing market overall is on strong footing, but the data show that lenders are being cautious,” Kan said, “given the spike in mortgage delinquency rates in the second quarter, as well as the ongoing economic uncertainty.”


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