Mortgage Credit Availability Declines Thanks to Fewer Terms over 30yrs

The Mortgage Bankers Association's (MBA) Mortgage Credit Availability Index (MCAI) indicates that lending standards tightened slightly for the second consecutive month.  The index decreased 0.7 percent to 110.7 in September.  It had declined by a similar amount in August after rising for the four previous months.  MBA first publicly released the new index in June.

A decline in the MCAI indicates that lending standards are tightening.  MBA has been tracking the loan accessibility data since early last year and benchmarked the index at 100 in March 2012.  If MCAI had been available in 2007, MBA estimates it would have been at roughly 800 because of the level and ease of available credit.  

MBA said the drop in September was largely caused by dwindling availability of loans with terms exceeding 30 years.  Shifting eligibility requirements for borrowers in jumbo loan programs largely offset each other and did not significantly affect the index.   

 "Credit availability tightened last month as more lenders removed program offerings with loan terms greater than 30 years and/or interest-only features, similar to the trend we observed last month," said Mike Fratantoni, MBA's Vice President of Research and Economics. "Just as before, we believe this reflects lenders implementation of the Ability to Repay/Qualified Mortgage regulation which comes fully into effect in January.  Offsetting this tightening has been some increased willingness to offer higher LTV loans, particularly to jumbo borrowers."

The MCAI is calculated using factors related to borrower eligibility such as credit score, loan type, loan-to-value ratios and the underwriting criteria for more than 85 lenders and investors.  The index was developed by MBA in conjunction with AllRegs® and uses its Market Clarity® product.