Mortgage credit increases in July, but remains near 2014 lows

Mortgage credit availability rebounded in July, rising 0.3% from June, but the effects of the pandemic is holding back further loosening, the Mortgage Bankers Association said.

"Even as the economic recovery is underway, overall credit supply has remained close to its lowest levels since 2014," Joel Kan, associate vice president of industry and economic forecasting, said in a press release. "Some borrowers are still in pandemic-related forbearance status, and servicers continue to work through possible resolutions for these borrowers."

July's Mortgage Credit Availability Index was 119.1, up from 118.8 in June, which itself was an 8.5% drop from May. The index remains at a level last reached in September 2020 when the index was 118.6, itself the lowest point since February 2014.

The MCAI in July 2020 was 126.9.

A month-to-month increase in jumbo programs was balanced out by lenders eliminating high loan-to-value conforming product offerings due to Trump-era policy changes at Fannie Mae and Freddie Mac, which capped purchases of “high-risk” loans.

"The elimination of more high-LTV refinance loans drove most of the 3% drop in the conforming index, but that was somewhat offset by lenders adding new refinance loan programs to help qualified, lower-income GSE borrowers," Kan said. "The bounce back in jumbo credit availability followed a sharp drop in June, as some investors renewed their interest in jumbo ARM loans for cash-out refinances and investment homes."

The conventional index rose 0.8% in July, but that followed a 17.1% month-to-month drop in June. Of the components, jumbo rose 3.8% in July but conforming fell by 3.2%. In June, the jumbo index had fallen 11.5% from the month before and the conforming index had declined by 23.5%.

Meanwhile, the government index was unchanged in July from June. It had fallen 1.4% in June from May.