Mortgage credit availability hits a 6-year low

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Mortgage credit availability has tightened to the lowest level in six years as looming doubts about the strength of a coronavirus-impacted housing market caused originators' appetite for risk to wane.

The Mortgage Banker Association's Mortgage Credit Availability Index slid for the sixth consecutive month, falling 3.1% to 129.3 in May from 133.5 in April and 189.5 the year before. This is the tightest credit's become since June 2014.

Moves by the GSEs have likely contributed to the tightening of credit since, in early May, Fannie Mae and Freddie Mac suspended bulk sales and limited their remaining secondary market purchases in order to curb negative financial impacts from the pandemic.

"Mortgage lenders in May responded accordingly to the increased risk and uncertainty in the economy," Joel Kan, the MBA's associate vice president of economic and industry forecasting, said in a press release. "There was a reduction in supply across all loan types, driven by further pullback in investors' appetites for loan programs with low credit scores and high LTVs. Credit tightening was observed at both ends of the market, with less availability of low down payment programs designed for first-time homebuyers, as well as for conforming and nonconforming jumbo loans."

By product segment, the conventional MCAI fell 5.7% from April, driven by a 6.9% drop in the conforming product component, while the jumbo index declined 4.4%.

Meanwhile, the government MCAI, which measures Federal Housing Administration, Veterans Affairs and U.S. Department of Agriculture products, fell by 0.8%. Government mortgage credit availability has tightened most months since April 2017.

The MBA calculates MCAI using loan program data from Ellie Mae's AllRegs Market Clarity database with a benchmarked value of 100 based on conditions in March 2012.

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Underwriting Mortgage Bankers Association Coronavirus Credit quality GSEs Qualified Mortgages Jumbo mortgages FHA Secondary market