Mortgage credit availability decreased slightly in August; however, there was some loosening in certain segments of the purchase market, according to the Mortgage Bankers Association's (MBA) Mortgage Credit Availability Index (MCAI).
Although the MCAI fell from an index score of 116.4 in July to 116.1 in August – a drop of 0.3 percentage points – ‘lenders instituted additional offerings of loan programs like the Federal Housing Administration [FHA] 203(k) home improvement program and one-time-close programs for financing new construction,’ which helped offset the tightening of credit in other programs, Michael Fratantoni, chief economist for the MBA, reports.
The FHA 203(k) loan allows borrowers to include renovation expenses in their loan amount. One-time-close loans streamline the purchase and financing of new construction.
A decline in the MCAI 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 MBA recently segmented the report into separate sections covering conventional and government mortgages. For August, both the conventional MCAI and government MCAI decreased less than one percentage point.
The MCAI is calculated using several factors related to borrower eligibility, including credit score, loan type and loan-to-value ratio. These metrics and underwriting criteria for more than 85 lenders and investors are combined by the MBA using data made available via the AllRegs Market Clarity product and a proprietary formula.