Lenders are courting self-employed borrowers again

Overall mortgage credit availability increased 1.5% in September, but it is far from pre-pandemic levels

Mortgage credit availability increased for the third consecutive month in September, but is still 30% below the pre-pandemic level, according to a report released Tuesday by the Mortgage Bankers Association (MBA). Much of the growth in credit availability has come from loans that cater to self-employed borrowers, who were left in the cold by most lenders during the pandemic.

The MBA Mortgage Credit Availability Index overall rose by 1.5% to 125.6 in September, the highest level since May. The index benchmarks to 100 in March 2012; a higher number portends more mortgage credit availability.

According to Joel Kan, MBA’s associate vice president of economic and industry forecasting, despite elevated rates of home-price appreciation, lenders are offering a wider range of loans to accommodate qualified buyers.

“But, even with increases in seven out of nine months thus far in 2021, total credit availability is still around 30% less than it was in February 2020,” he added.

The Conventional MCAI increased 4.5%, while the Government MCAI declined 0.7%. Of the component indices of the conventional index, the jumbo MCAI increased by 5.8%, the highest level since March 2020, and the conforming MCAI rose by 2.6%.

How brokers can help today’s unique borrower

Today, more borrowers are self-employed, work remotely and have multiple streams of income. For brokers, working with these borrowers can be complicated because they require unique processes. HousingWire recently spoke with Bill Dallas, President of Finance of America Mortgage, to discuss how brokers can leverage technology to accommodate today’s average homebuyer.

Presented by: Finance of America

“Jumbo credit availability increased with more loan programs for non-QM jumbos and loans catering to self-employed borrowers or those with non-traditional sources of income,” said Kan.

Kan added that the conforming index indicated a greater supply of loans for cash-out refinances, investor properties, and adjustable-rate mortgages (ARMs).

“Even as mortgage rates continue to rise, cash-out refinances remain an option for borrowers who have sufficient home equity and need additional cash.” 

According to the Freddie Mac’s latest PMMS survey, the average 30-year-fixed mortgage rate slipped back down to 2.99% for the week ending Oct. 7. The week before, rates had made it above the 3% mark for the first time since June.

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