Mortgage Credit Availability Falls Due to "Technical Issue"


Credit available as measured by the Mortgage Bankers
Association’s (MBA’s) Mortgage Credit Availability Index (MCAI) appeared to
have declined in December.  Except
apparently it really didn’t.

The MCAI, by the numbers, decreased 2.4 percent to 124.3 in December.  A decline in the index should indicate that
lending standards are tightening while the opposite would be reflected in
rising number.  The apparently varied
last month.   

As Lynn
Fisher MBA’s Vice President of Research and Economics explains.  “A decline to the index is generally indicative of tightening
lending standards. However, this month, a large part of the decline was driven
by a technical issue related to implementation of affordable, low down payment,
loan programs.  Many investors
discontinued existing low down payment loan programs only to replace them with
new iterations of similar programs that were discontinued.

“This introduced
volatility into the December index reading and magnified the decline we saw
over the month. Conceptually the underwriting changes that caused these issues
represent an expansion of the credit, and are targeted at low-to-moderate
income borrowers and first time homebuyers. A similar issue also caused changes
to jumbo loan programs and had a tightening effect on the index while changes
to government lending programs (FHA and VA) had an upward/loosening impact,”
Fisher continued.

Whether the decline
reflected actual tightening or not, it was the second month in a row that the
numbers dropped.  Since the index hit a
post-recession high of 128.4 in October it has lost 4.1 points.



Of the four component
, the Conventional MCAI saw the greatest tightening (down 4.8 percent)
over the month followed by the Jumbo MCAI (down 4.2 percent), and the
Government MCAI (down 0.6 percent). The Conforming MCAI increased 0.1 percent
over the month.

The MCAI and its four
component indices are all constructed using the same methodology and are
designed to show relative credit risk/availability for their respective index
with the primary difference being the population of loans each measures.  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.

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