Mortgage credit availability plummets to six-year low: MBA

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After a small uptick in July, mortgage credit availability continued its decline, falling to the lowest point since March 2014, according to the Mortgage Bankers Association.

The MBA's Mortgage Credit Availability Index dipped 4.7% month-over-month to 120.9 in August from 126.9 in July and 181.7 from the year prior. The index went to 181.3 in February before the coronavirus took hold of the economy.

"Credit continues to tighten because of uncertainty still looming around the health of the job market, even as other data on loan applications and home sales show a sharp rebound," Joel Kan, the MBA's associate vice president of economic and industry forecasting, said in a press release. "A further reduction in loan programs with low credit scores, high LTVs and reduced documentation requirements also continued to drive the overall decline in credit availability."

All product segments took hits in August. The government MCAI — which measures Federal Housing Administration, Veterans Affairs and U.S. Department of Agriculture products — decreased by 1.4% from July, continuing an overall tightening since April 2017.

Conventional MCAI dropped 8.7% month-to-month, pulled down by declines of 8.6% in the conforming product — the component's nadir since the MBA started recording in 2011 — and 8.9% in the jumbo index.

"Jumbo credit availability has fallen around 59% since the pre-pandemic months, and data from MBA's Weekly Applications Survey showed that jumbo mortgage rates stayed over 30 basis points higher than conforming rates in August, which is another indication of the reduced investor appetite for those loans," Kan said.

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. Decreases in the index indicate stricter lending standards.

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