The trend continues as mortgage credit availability once again loosened in July as more conventional programs became available.

The Mortgage Bankers Association tracks mortgage credit through its Mortgage Credit Availability Index, which analyzes data from Ellie Mae’s AllRegs Market Clarity business information tool. The index is calculated using several factors related to borrower eligibility (credit score, loan type, loan-to-value ratio, etc.).

The latest report from the MBA found that the MCAI increased 0.3% to 179.0 in July.

As a point of reference, the index was benchmarked to 100 in March 2012. A decline in the MCAI indicates that lending standards are tightening, while increases in the index are indicative of loosening credit.

The chart below displays the mortgage credit availability since June 2011, showing a gradual increase over the years.  

Click to enlarge


(Source: MBA)

The MBA then break down mortgage credit even further and tracks four component indices.

The Jumbo MCAI recorded the greatest increase in availability over the month (up 2.7%), followed by the Conventional MCAI (up 1.5%), and the Conforming MCAI (up 0.3%).

Meanwhile, the Government MCAI (0.6%) decreased from last month.

Lynn Fisher, MBA’s vice president of research and economics, shed light on the data and explained that mortgage credit availability increased slightly in July, driven by increased availability of conventional programs.

“Many agency eligible loan programs have been updated so that underwriting parameters for adjustable rate mortgages (ARMs) more closely align with their existing fixed rate counterparts,” said Fisher. “In many cases this means higher loan to value ratios on existing ARMs loan programs, which exerted an upward pressure on the MCAI.”

She added that this change affected conforming loan programs as well as agency jumbo programs, which focus on loans in high cost areas that exceed the baseline conforming loan limit of $424,000 but which are still eligible for purchase by the GSEs.