MBA: Offsetting Factors Led to Slight Improvement in Credit Access

Investors slightly expanded their loan offerings and switched to longer-term products in response to new mortgage regulations the Mortgage Bankers Association (MBA) said today.  As a result, credit availability expanded slightly in February.

MBA's Mortgage Credit Availability Index (MCAI) increased 0.44 percent from 113.0 in January to 113.5 in February.  This follows an increase of 1.85 percent in January as the Consumer Financial Protection Agency's (CFPB) Qualified Mortgage (QM) and Ability to Repay (ATR) regulations went into effect. A decline in the MCAI indicates that lending standards are tightening, while increases in the Index are indicative of a loosening of credit. 

MBA's Chief Economist Mike Fratantoni said this was the third straight month that credit offerings had expanded slightly because of offsetting factors.  "Specifically, the recently implemented QM/ATR sections of the new CFPB regulations stipulate that ARM loans must qualify at the highest allowable rate for the first five years of the loan.  As a result, many investors have discontinued loans whose interest rate adjusts after only 3 year (also known as 3/1 ARMS).  While there was significant pull-back on these 3/1 programs, lenders and investors added several new 5+ year ARM programs, including those for Jumbo loans, to their repertoire resulting in a net increase to the MCAI."

The MCAI was benchmarked to 100 in March 2012.  MBA said that had the MCAI had been tracked in 2007, it would have been at a level of roughly 800, indicating the credit was much more available at that time.  MBA produces the index using data from the AllRegs® Market Clarity® product.