Mortgage Credit Availibility Ticks Up As Jumbo Loans Increase

Mortgage credit availability continues its slight upward trend, with a 0.5% increase in July, attributed primarily to a rise in the number of jumbo loan programs, according to the Mortgage Bankers Association’s latest Mortgage Credit Availability Index (MCAI) report.

The MCAI ticked up to 116.4 in July from 115.8 in June, an increase suggesting there may be a loosening of credit. Alternatively, a decline in the MCAI indicates lending standards are tightening. 

The main driver in the recent increase, MBA writes, was a rise in the number of jumbo adjustable rate mortgage (ARM) programs. Many investors added new jumbo hybrid ARM products including 5/1, 7/1, 10/1 and, in some cases, 3/1 loans.

Lenders have recently begun easing up on their pricier jumbo loan programs for the past several months, approving loans for borrowers who don’t strictly meet “usual” guidelines, such as income documentation or credit score minimums, but can compensate for what they lack in these areas in other ways. 

Jumbo loans are mortgages of $417,000 or higher in most areas, with the nonconforming threshold at $625,500 in pricier markets like New York.

An increase in the availability of high balance Federal Housing Administration (FHA) and Department of Veterans Affairs (VA) loan programs also contributed to the net loosening in July. 

Additionally, there was a slight loosening in lender criteria for several programs with respect to minimum credit scores and maximum loan-to-value (LTV) ratios, especially with FHA and VA loans, MBA writes. 

View the full MBA report here

Written by Emily Study

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