Mortgage credit availability declines in November

Much of the decline in credit availability has come from government loans programs

Mortgage credit availability dropped in November, despite improvements in the labor market, according to a report released Friday by the Mortgage Bankers Association (MBA).

While there was an increase in loans that cater to self-employed borrowers, who were left in the cold by most lenders during the pandemic, that was offset by a the decline in credit availability through government loans programs.

The MBA Mortgage Credit Availability Index overall fell by 0.6% to 124.9 in November. The index benchmarks to 100 in March 2012; a higher number portends more mortgage credit availability. The Conventional MCAI increased 1.9%, while the Government MCAI declined 2.7%. Of the component indices of the conventional index, the jumbo MCAI grew by 3%, and the conforming MCAI rose by 0.2%.

Joel Kan, MBA’s associate vice president of economic and industry forecasting, said in a statement that lenders reduced their offerings of government loan programs with lower credit scores, as well as those for investment homes.

According to Kan, credit supply for jumbo loans increased for the fifth straight month, with lenders scaled back on jumbo supply at the onset of the pandemic. But, even with the recent growth, the jumbo credit availability index remains more than 40% below February 2020 levels.

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“As home-price growth continues, and mortgage rates creep higher, increased credit availability is needed for qualified borrowers looking to purchase a home – especially for first-time homebuyers, who rely heavily on government mortgage programs.”

According to the Freddie Mac’s latest PMMS survey, the average 30-year-fixed mortgage rate slipped one basis point to 3.10% for the week ending Dec. 9. A year ago at this time, the average was 2.71%, according to the report published on Thursday.

Sam Khater, Freddie Mac’s chief economist, said in a statement that going forward, the path that rates take will be directly impacted by more information about the Omicron variant as it is revealed and the overall trajectory of the pandemic. “In the meantime, rates remain low and stable, even as the nation faces declining housing affordability and low inventory.”

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