Mortgage Credit Availability Falls in October

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Mortgage credit availability dropped in October due to the removal of special loan programs pertaining to real estate owned sales, according to data from the Mortgage Bankers Association.

The Mortgage Credit Availability Index decreased 2.5% to 113.2 in October, the MBA revealed. Last month, the index was 116.1 as mortgage credit availability was benchmarked to 100 in March 2012 by the Washington-based trade group.

A decline in the MCAI indicates that lending standards are tightening, while increases are indicative of a loosening of credit.

The decline was caused by the elimination of special loan programs due to the shrinking level of REO properties up for sale, said Mike Fratantoni, chief economist for the Mortgage Bankers Association.

Both the government — Federal Housing Administration, Veterans Affairs and USDA Rural Development Guaranteed home loan programs — and the conventional mortgage credit indices fell in October. The government MCAI was down less than 1%, going from 248 to 246. Meanwhile, the conventional MCAI declined 5% from 85.2 to 80.9, the MBA said.

The base period for government and conventional indices are 222 and 69, respectively.

“FHFA recently announced plans regarding efforts to expand access to conventional conforming credit through greater clarity with respect to repurchase risk and a modest expansion of higher LTV lending. These changes are not yet finalized and hence are clearly not reflected in the October data,” Fratantoni said.

The MCAI is calculated using several factors related to borrower eligibility, such as credit score, loan type, loan-to-value ratio, based on data from over 85 lenders/investors. Data from the AllRegs Market Clarity product and a proprietary formula derived by MBA are used to compute the MCAI.

 

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