Mortgage credit loosened the fourth straight month in October

Credit standards loosened for the fourth month in a row in October, as lenders sought to keep their volumes up while interest rates rose, according to the Mortgage Bankers Association.

The Mortgage Credit Availability Index inched up to 125.7 from 125.6 in September and 121.3 the year prior. However, it still sits far below the score of 181.3 from Feb. 2020, before it fell off a cliff when the country went into pandemic lockdown the following month. The index hit its COVID-era high point of 129.9 in May 2021.

“The overall index was 30% lower than February 2020 and close to the lowest supply of mortgage credit since 2014,” Joel Kan, the MBA's associate vice president of economic and industry forecasting, said in a press release. “Tight credit availability, combined with ongoing supply and affordability challenges, are significant obstacles for some prospective first-time buyers.”

Among the market segments, the jumbo index led all growth with a 4.1% monthly jump. An increase in the supply of jumbo ARM and non-QM products drove the index’s rise, Kan added. The conventional index merely edged up 0.1% and the government MCAI — inclusive of Federal Housing Administration, Veterans Affairs and Rural Housing Service loans — remained unchanged. Meanwhile, the conforming index fell 6%.

“On the conforming side, there was a pullback in ARMs, higher LTV loans, and lower credit score products. While there is tightening in ARM credit availability both for jumbo and conforming loans, ARM loans have accounted for a small share of loan applications, ranging from 2.5% to 5% of applications to date in 2021.”