Mortgage credit drops to lowest level since September

Mortgage credit availability dipped 8.5% in June to 118.8 — indicating that lending standards are tightening, per the Mortgage Bankers Association’s Mortgage Credit Availability Index.

It’s the lowest MCAI level — which uses 100 as a benchmark — since September of 2020, and ends more than six months of increasing credit supply, according to Joel Kan, MBA’s associate vice president of economic and industry forecasting.

“Mortgage credit has not recovered since the sharp downturn in the first half of 2020,” Kan said. “The reduction in credit availability came as a result of GSE policy changes — which reduced the availability of high LTV refinance loans, impacting both conforming loans and GSE-eligible high balance loans.”

The conventional MCAI decreased 17.1%, and the government MCAI decreased by 1.4%. Of the component indices of the conventional MCAI, the Jumbo MCAI decreased by 11.5%, and the conforming MCAI that tracks loans backed by Fannie Mae and Freddie Mac fell by 23.5%. 

Kan added that the “full impact” of new loan programs remains to be seen.

“In addition to the tightening in supply from the policy change, there was also a pullback in jumbo ARM offerings, which contributed to the lowest supply of Jumbo credit since February 2021.” he said.

After weeks of mortgage application decreases, the MBA reported yesterday that total applications had increased a whopping 16% in one week, driven by a dip in mortgage rates and an incentive for homeowners to lock in a refi.

On the purchase side, the sheer amount of bidding wars decreased from May to June, per a study released this week from Redfin, as more homes for sale have slowly hit the market in the past month. Overall inventory is still low, of course, but a cooling of the market could lead to more would-be buyers and an increase in mortgage applications soon, experts said.

At this time last year, the Jumbo loan index was 54% lower than it had been in February 2020. Securing a jumbo loan was the most difficult it had been in four years, according to MBA data. But a flourishing housing market gave way to jumbos from a host of lenders, including Rocket Mortgage and United Wholesale Mortgage.

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