The availability of mortgage credit in March crashed to the lowest level since June 2015, led by a pull-back in jumbo and non-QM lending, according to the Mortgage Bankers Association.
The trade group’s monthly Mortgage Credit Availability Index plummeted by 16.1% to 152.1 last month, MBA said on Thursday.
The Conventional index, meaning loans not backed by the government, decreased 24.2%, while the Conforming index that includes loans bought by Fannie Mae and Freddie Mac dipped by 2.7%, MBA said. The Jumbo index experienced a 36.9% freefall and the Government index that includes loans backed by the Federal Housing Administration and the Department of Veterans Affairs took a 6.6% downturn.
“There was a reduction in the availability of loans with lower credit scores and higher LTV ratios, and the largest pullback came from the jumbo and non-QM space,” said Joel Kan, MBA associate vice president of economic and industry forecasting.
Lenders are pulling back as the economic shutdown aimed at stemming the spread of COVID-19 spiked concern that borrowers wouldn’t be able to pay their bills, Kan said.
“This month’s release highlights the large retreat from jumbo and non-QM investors due to a sharp drop in liquidity,” Kan said. “Lenders are making credit criteria changes to account for the increased likelihood of forbearance and defaults, as well as higher costs.”