Credit availability falls in July despite jumbo index peaking

Register now

Jumbo loan product availability continued climbing and reached an all-time high in July, but it wasn't enough to stop overall credit standards from tightening, according to the Mortgage Bankers Association.

With default risks rising and mortgage rates falling, lenders pulled back available credit in the market. After leveling off in June, the MBA's Mortgage Credit Availability Index declined 0.4% to 189. This is the index's lowest level since April, but compared to a year ago, the index is up 4.9 points.

"Credit availability in July decreased overall, driven by declines in the conforming and government indices. Conditions tightened some for borrowers with high loan-to-value ratios and lower credit scores," Joel Kan, the MBA’s associate vice president of economic and industry forecasting, said in a press release.

"One outlier was the jumbo index, which increased to its highest level since the inception of this survey in 2012. The decline in the government index resulted from a pullback by investors in government high-balance and streamlined refinance products."

The MCAI's conventional component edged up 0.1% from June, as the jumbo segment rose 0.7%. The government MCAI fell 1% and the conforming component decreased 0.8%.

A decline in the MCAI represents a tightening of standards and an increase suggests credit is loosening. The index is calculated by the MBA using loan program data from Ellie Mae's AllRegs Market Clarity database. That database had a benchmark of 100 established in March 2012.

While the credit availability has generally been higher than it was in 2012 — especially through the first half of 2019 — it pales in comparison to the boom period of 2006. Before the housing bubble popped, the index approached 900.

For reprint and licensing requests for this article, click here.
Underwriting Jumbo mortgages Mortgage rates Housing affordability Credit scores Purchase Mortgage Bankers Association Ellie Mae