Fannie Mae and Freddie Mac's decision to start accepting loans with up to 97% loan-to-value (LTV) ratio resulted in a small but notable increase in mortgage credit in December, according to the Mortgage Bankers Association's (MBA) Mortgage Credit Availability Index (MCAI).
With several lenders saying they were onboard with providing 3% down payment loans for new and well-qualified home buyers following the announcement, the index jumped to a score of 115.7 in December, an increase of about 1%.
Although a 1% increase might not seem all that impressive, Mike Fratantoni, chief economist for the MBA, points out that so far only Fannie Mae has gone live with its new 97% LTV program, while Freddie Mac's program won't be rolled out until March.
Therefore, it will take more time to see how these new programs impact the market.
‘[Because] only one of the two GSEs has gone live with their updates and the resulting investor pickup can be a delayed process, the impact of this announcement may take some time to fully quantify,’ Fratantoni says in a release. ‘Furthermore, Fannie Mae had been offering 97% LTV options until late October 2013, so this is really a re-introduction, not a new trend. In addition to these new high-LTV programs, investors continued to expand their product offerings for jumbo loans.’
A decline in the MCAI, which analyzes data from the AllRegs Market Clarity product, indicates that lending standards are tightening, while increases in the index are indicative of a loosening of credit. The index was benchmarked to 100 in March 2012.
The Conventional MCAI, a sub-index that breaks out conventional mortgage credit, increased by 2.2% in December, while the Government MCAI, which isolates mortgage credit for loans backed by the government agencies, increased less than 1%.