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Credit availability loosens slightly

MBA revises methodology to reflect new loan program types

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The Mortgage Bankers Association changed its methodology in order to more accurately determine mortgage credit availability, and discovered that instead of decreasing over the past several months, mortgage credit availability increased slightly, according to the data it analyzed from Ellie Mae’s AllRegs Market Clarity business information tool.

“In the three years since its inception, we have been monitoring the MCAI, always looking for opportunities to improve the series and provide a more accurate gauge of credit availability,” said Lynn Fisher, MBA vice president of research and economics.

“We expanded our historical series to cover over 10 years of historical data, and followed that with the introduction of four MCAI sub-indices, conventional, government, conforming, and jumbo, to help users better understand what is driving changes in the overall MCAI,” Fisher said.

As part of this change the conforming and jumbo mortgage credit availability indexes have been updated to only include conventional, non-government loan programs.

“Today we are excited to announce an updated methodology that responds more effectively to changes in the marketplace and better accounts for the frequent addition and subtraction of investor offerings,” Fisher said. “While using the exact same data, this updated methodology does a better job of reflecting new loan programs that did not exist in the base month of the index, March 2012.”

“Previously, conforming and jumbo status was determined solely by loan size,” she said. “In the new methodology, high balance FHA and VA loan programs are not included in the jumbo category.”

This change comes after last month when mortgage interest rates were nearing all-time record lows and mortgage applications were up dramatically, all thanks to the Brexit, but it was still getting harder to get a mortgage.

The MCAI increased 1% to 165.3 in July. A decline in the MCAI indicates that lending standards are tightening, while an increase shows credit is loosening. The Index was benchmarked to 100 in March 2012.

“The prior methodology had shown a tightening of credit over the past few months,” Fisher said. “The new methodology shows a modest loosening of credit availability over this time period, in line with other indicators of credit availability.”

“This is a result of new jumbo loan offerings that did not exist in our 2012 base period becoming more popular and prevalent in recent periods,” she said.

Of the four component indices, the jumbo and government MCAIs saw the greatest increase in availability as they both increased 1.3% monthly followed by the conventional MCAI, which increased 0.7%, and the conforming MCAI, which is up 0.1%.

“The overall credit availability increase in July was driven by an uptick in programs that allow for refinancing among relatively lower credit score borrowers,” Fisher said. “We observed this trend in both the conventional and government programs.”

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MCAI

(Source: Mortgage Bankers Association, powered by Ellie Mae’s AllRegs Market Clarity)

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