MBA: Mortgage Credit Tightened In October

Posted by Patrick Barnard on November 04, 2014 No Comments
Categories : Residential Mortgage

Mortgage credit availability dropped in October, according to the Mortgage Bankers Association's (MBA) Mortgage Credit Availability Index (MCAI).

The MCAI, which analyzes data from the AllRegs Market Clarity product, decreased 2.5% to an index score of 113.2. A decline in the MCAI indicates that lending standards are tightening, while increases are indicative of loosening credit. The index was benchmarked to 100 in March 2012.

‘The major cause of the decline in the credit index in October was the removal of special loan programs which only pertain to real estate owned (REO) sales,’ says Mike Fratantoni, chief economist for the MBA, in a release. ‘These programs were likely discontinued due to the shrinking level of REO properties for sale on the market. [The Federal Housing Finance Agency] 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 loan-to-value [LTV] lending. These changes are not yet finalized and, hence, are clearly not reflected in the October data.’

The Conventional Mortgage Credit Availability Index, a subset of the MCAI, shows that mortgage credit decreased 5% in October to reach an index score of 80.9, down from 85.2 in September.

The Government Mortgage Credit Availability Index, with historical data back to 2011, decreased less than 1% in October, compared to September, to reach an index score of 246.0, down from 248.0.

The MCAI is calculated using several factors related to borrower eligibility, including credit score, loan type, LTV ratio and more. These metrics and underwriting criteria for more than 85 lenders/investors are combined with data made available via the AllRegs Market Clarity product and a proprietary formula derived by the MBA.

The base period for the conventional index is March 31, 2012 (when it was at an index score of 69); the base period for the government index is also March 31, 2012 (when it was at an index score of 222).

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