October Mortgage Credit Inches Up
Mortgage credit availability increased for the fourth straight month in October, albeit ever so slightly, the Mortgage Bankers Association reported Tuesday.
The MCAI rose by 0.1 percent to 125.7 in October; nonetheless, the index reached its highest level in six months, although well down from a year ago and by historical levels. The Conventional MCAI increased by 0.1 percent, while the Government MCAI remained essentially unchanged. Of the component indices of the Conventional MCAI, the Jumbo MCAI increased by 4.1 percent and the Conforming MCAI fell by 6.0 percent.
“Credit availability inched forward in October, but the overall index was 30 percent lower than February 2020 and close to the lowest supply of mortgage credit since 2014,” said Joel Kan, MBA Associate Vice President of Economic and Industry Forecasting. “Within the subindexes, a 4 percent increase in the jumbo index was essentially offset by a 6 percent drop in the conforming index. There was an increase in the supply of jumbo ARM and non-QM products, which drove most of the increase in the jumbo index. On the conforming side, there was a pullback in ARMs, higher LTV loans, and lower credit score products.
Kan noted 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 percent to 5 percent of applications to date in 2021. “Tight credit availability, combined with ongoing supply and affordability challenges, are significant obstacles for some prospective first-time buyers,” he said.
The report analyzes data from the ICE Mortgage Technology AllRegs® Market Clarity® business information tool. A decline in the MCAI indicates that lending standards are tightening, while increases in the index are indicative of loosening credit. The index was benchmarked to 100 in March 2012.
About the Mortgage Credit Availability Index
The MCAI provides the only standardized quantitative index 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 more than 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.
To learn more about the ICE Mortgage Technology AllRegs Market Clarity platform, visit http://answers.allregs.com/MCAI-Market-Clarity. For more information on the Mortgage Credit Availability Index, including Methodology, Frequently Asked Questions and other helpful resources, visit www.mba.org/MortgageCredit or contact MBAResearch@mba.org.