Mortgage Credit Availability Decreased in August
Mortgage credit availability decreased in August according to the Mortgage Credit Availability Index, a report from the Mortgage Bankers Association that analyzes data from Ellie Mae’s AllRegs® Market Clarity® business information tool.
The MCAI fell by 4.7 percent to 120.9 in August. A decline in the MCAI indicates that lending standards are tightening, while increases in the index indicate loosening credit. The index was benchmarked to 100 in March 2012.
The Conventional MCAI decreased 8.7 percent, while the Government MCAI decreased by 1.4 percent. Of the component indices of the Conventional MCAI, the Jumbo MCAI decreased by 8.9 percent, and the Conforming MCAI fell by 8.6 percent.
“Mortgage credit supply fell to its lowest level since March 2014, driven by a reduction in supply from both conventional and government segments of the market,” said MBA Associate Vice President of Economic and Industry Forecasting Joel Kan.
Kan noted both conforming and jumbo sub-indexes fell by almost 9 percent each, with the conforming index declining to the lowest reading since MBA’s series began in 2011. “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,” he said. “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.”
Kan said jumbo credit availability has fallen around 59 percent since the pre-pandemic months and data from MBA’s Weekly Applications Survey showed that jumbo mortgage rates stayed more than 30 basis points higher than conforming rates in August, “which is another indication of the reduced investor appetite for those loans,” he said.CONVENTIONAL, GOVERNMENT, CONFORMING AND JUMBO MCAI COMPONENT INDICES
The MCAI fell by 4.7 percent to 120.9 in August. The Conventional MCAI decreased 8.7 percent, while the Government MCAI decreased by 1.4 percent. Of the component indices of the Conventional MCAI, the Jumbo MCAI decreased by 8.9 percent, and the Conforming MCAI fell by 8.6 percent.
The Conventional, Government, Conforming and Jumbo MCAIs are constructed using the same methodology as the Total MCAI and are designed to show relative credit risk/availability for their respective index. The primary difference between the total MCAI and the Component Indices are the population of loan programs which they examine. The Government MCAI examines FHA/VA/USDA loan programs, while the Conventional MCAI examines non-government loan programs. The Jumbo and Conforming MCAIs are a subset of the conventional MCAI and do not include FHA, VA, or USDA loan offerings. The Jumbo MCAI examines conventional programs outside conforming loan limits, while the Conforming MCAI examines conventional loan programs that fall under conforming loan limits.
The Conforming and Jumbo indices have the same “base levels” as the Total MCAI (March 2012=100), while the Conventional and Government indices have adjusted “base levels” in March 2012. MBA calibrated the Conventional and Government indices to better represent where each index might fall in March 2012 (the “base period”) relative to the Total=100 benchmark.
EXPANDED HISTORICAL SERIES
The Total MCAI has an expanded historical series that gives perspective on credit availability going back approximately 10-years (expanded historical series does not include Conventional, Government, Conforming, or Jumbo MCAI). The expanded historical series covers 2004 through 2010 and was created to provide historical context to the current series by showing how credit availability has changed over the last 10 years including the housing crisis and ensuing recession. Data prior to March 31, 2011 was generated using less frequent and less complete data measured at 6-month intervals and interpolated in the months between for charting purposes. Methodology on the expanded historical series from 2004 to 2010 has not been updated.
ABOUT THE MORTGAGE CREDIT AVAILABILITY INDEX
The MCAI provides the only standardized quantitative index that is solely focused on mortgage credit.
The MCAI is calculated using several factors related to borrower eligibility (credit score, loan type, loan-to-value ratio, etc.). These metrics and underwriting criteria for over 95 lenders/investors are combined by MBA using data made available via the AllRegs® Market Clarity® product and a proprietary formula derived by MBA to calculate the MCAI, a summary measure which indicates the availability of mortgage credit at a point in time. Base period and values for total index is March 31, 2012=100; Conventional March 31, 2012=73.5; Government March 31, 2012=183.5.
The MBA updated its methodology in August 2016 which produced an updated set of index values (historically and moving forward), for more information on this updated methodology please visit www.mba.org/MortgageCredit and read the FAQ and Methodology documents. Any historical data obtained prior to August 2016 is not comparable to the current, revised index and should be replaced with the new history.
To learn more about the AllRegs Market Clarity platform click here. For more information on the Mortgage Credit Availability Index, including Methodology, Frequently Asked Questions and other helpful resources, click here or contact MBAResearch@mba.org.