Mortgage credit loosens on more refi product offerings

The amount of mortgage credit provided by lenders loosened in February compared with the previous month because of an increase in refinance offerings, the Mortgage Bankers Association said.

"Mortgage credit availability remains quite tight – near the lowest levels in MBA's survey – even as application volume lags last year's pace and as the industry continues to reduce capacity," Joel Kan, deputy chief economist, said in a press release. "Despite these factors, credit criteria remain conservative."

This is the second consecutive month of relative loosening by lenders of underwriting criteria.

Its Mortgage Credit Availability Index rose by 0.2% compared with January to 92.9 from 92.7, but that is still well below the benchmark value of 100 established in March 2012, a period when lenders were still not as freely offering loan programs as they did a few years prior.

The degree to which products have become restricted is exemplified in the index value of 100.1 reached last year, in February 2023. It was the lowest in a decade.

"There was a slight increase in credit availability for refinance loan programs last month," Kan explained. "The purchase market, however, continues to be impacted by supply and affordability constraints, due to higher mortgage rates."

Its Weekly Application Survey for March 1 reported an 8.1% week-to-week increase in the refinance index.

The MCAI is split into conventional and government indices; it is calculated using program data from ICE Mortgage Technology. The conventional portion increased by 0.5%, as its conforming component rose by 1.6% and the jumbo segment was up by 0.1%.

The government index was "essentially unchanged," MBA said.

The rise in refi programs is likely tied to an increase in rate lock activity for these loans, which while also still low, has picked up in recent weeks, according to a daily report issued by Optimal Blue.

As of March 5, cash-out rate locks were up 26.7% over the past four weeks, while rate and term refi activity was up 35.4% in that same period, and 57.4% during the prior seven days.

Optimal Blue's Market Volume Index for cash-out refis rose to 9 as of March 5 from 8 in January. For rate-and-term, it was flat at 6.

The refi share was 14%, down from 17% in January, the Optimal Blue data showed. That is because the purchase MVI leaped to 92 from 64.