Lending Standards Tighten Slightly as QM Planning Kicks in
The Mortgage Bankers Association (MBA) reported the first drop in its new Mortgage Credit Availability Index (MCAI) since it became publicly available in June. The index for August decreased 0.7 percent to 11.5, the first decline after four consecutive months of increases. Negative movement in the index signifies that lending standards are tightening.
The change, MBA said, was driven by lessening availability of loans with an interest-only feature and some lenders are dropping products that have loan terms that exceed 30 years. Shifting borrower eligibility requirements for jumbo loans led to offsetting increases and decreases in the MCAI as well. MBA said some of the changes may have marked early attempts to comply with Qualified Mortgage (QM) requirements that will become effective after the first of next year.
While the MCAI for May 2013 was the first one released by MBA the organization, paired with Allreg® publishing began gathering data in early 2012. The index was benchmarked to 100 in March 2012 and, as context, MBA said had the market been tracked in 2007 the index would have been at roughly 800.
"The slight decline in the MCAI in August reflected a reduction in the availability of certain loan features, particularly interest-only and terms exceeding 30 years. As these loan features are outside of the qualified mortgage (QM) definition, these changes may reflect the beginning of QM implementation, and the fact that Fannie Mae and Freddie Mac are limited to acquiring loans that meet the QM definition," said Mike Fratantoni, MBA's Vice President of Research and Economics.