Mortgage credit availability increased marginally in July following a big downturn in June, according to a report released by the the Mortgage Bankers Association on Thursday.
The MBA Mortgage Credit Availability Index overall rose by 0.3% to 119.1 in July (the index benchmarks to 100 in March 2012; a higher number portends more mortgage credit availability). The Conventional MCAI increased 0.8%, while the Government MCAI was unchanged.
Mortgage credit availability largely jumped on the strength of jumbo mortgages. Of the component indices of the conventional MCAI, the jumbo MCAI increased by 3.8% and the conforming MCAI fell by 3.2%, the MBA reported.
“Credit availability slightly increased in July, driven by an increase in jumbo loan programs,” said Joel Kan, the MBA’s associated vice president of economic and industry forecasting. “The overall gain was despite another month of pullbacks in high-LTV refinance programs due to GSE policy changes.”
According to Kan, the elimination of more high-LTV refinance loans drove most of the 3% drop in the conforming index. Lenders adding new refinance loans that target qualified, lower-income Fannie and Freddie borrowers canceled the drop in conforming mortgage credit availability.
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June of 2021 saw a pullback in jumbo ARM offerings from investors, but they spiked in July. That led to an uptick in cash-out refis and investment homes, according to Kan.
“Even as the economic recovery is underway, overall credit supply has remained close to its lowest levels since 2014,” Kan said. “Some borrowers are still in pandemic-related forbearance status, and servicers continue to work through possible resolutions for these borrowers.”
Mortgage credit availability dipped 8.5% in June to 118.8. It was the lowest MCAI level since September 2020, and followed more than six months of increasing credit supply.
Mortgage applications in the week ending Aug. 6 rose 2.8% after a strong jobs report in July. The U.S. Labor Department announced 943,000 new jobs, exceeding the forecast of 865,000. It was the highest month-to-month growth since August 2020