Higher Rates Lead to Slight Gains in Credit Access

Mortgage credit loosened a bit last month but the Mortgage Bankers Association’s (MBA’s) Mortgage Credit Availability Index (MCAI) which measures credit access remains well below pre-pandemic levels which often topped 180. MBA says the index gained 0.8 percent to a 125.9 reading in December. A decline in the MCAI indicates that lending standards are tightening, while increases in the index are indicative of loosening credit. The December reading was the highest since March 2020. The index began a precipitous eight-month slide in February 2020 as lenders tightened underwriting in anticipation of a COVID-19 induced housing crises. The index stabilized in the summer of 2020 but has not improved significantly since then.

 The index, which analyzes data from a proprietary Ellie Mae business information tool, has four components, all of which moved higher in December. The Conventional MCAI increased 0.8 percent, while the Government MCAI increased by 0.7 percent. Of the component indices of the Conventional MCAI, the Jumbo MCAI increased by 0.6 percent, and the Conforming MCAI rose by 1.1 percent.

 “Credit supply increased in December, with growth across both conventional and government segments of the market. The overall credit index increased to its highest level since May 2021, but remained 30 percent below its pre-pandemic level,” said Joel Kan, MBA’s Associate Vice President of Economic and Industry Forecasting. “December’s growth was driven by more ARM and lower credit score loan programs, which was likely due to a combination of the rising rate environment and affordability challenges. Lenders expanded offerings to qualified borrowers who were the most impacted by these market conditions. Additionally, there was an increase in government streamline refinance programs to aid borrowers still looking to refinance before rates rise even more.”

 Added Kan, “The overall supply of mortgage credit only grew around 3 percent compared to the same month a year ago, with a 34 percent increase in jumbo credit availability contributing to most of that growth. Government credit supply, as well as conforming credit, saw tightening last year.”

The MCAI and each of its components are calculated using several factors related to borrower eligibility (credit score, loan type, loan-to-value ratio, etc.). These metrics and underwriting criteria for over 95 lenders/investors are combined by MBA using data made available via a proprietary product from Ellie Mae. The resulting calculations are summary measures which indicate the availability of mortgage credit at a point in time. Base period and values for total index is March 31, 2012=100; Conventional March 31, 2012=73.5; Government March 31, 2012=183.5.