Mortgage

Mortgage credit tightened in September, MBA says

“Lenders are being more cautious,” says MBA’s Kan

Mortgage credit in September was the tightest since February 2014 as a weak economy prompted lenders to raise standards, the Mortgage Bankers Association said in a report on Thursday.

The group’s Mortgage Credit Availability Index fell 1.9% to 118.6 last month, indicating stricter requirements to get loans. The index plunged from record highs seen in late 2019 after the COVID-19 pandemic caused the sharpest economic contraction since the Great Depression.

“The housing market overall is on strong footing, but the data show that lenders are being cautious, given the spike in mortgage delinquency rates in the second quarter, as well as the ongoing economic uncertainty,” said Joel Kan, an MBA associate vice president.

Some of the reduction in credit availability was due to lenders discontinuing adjustable-rate mortgages benchmarked to the London Interbank Offer Rate, or LIBOR, Kan said. LIBOR is being phased out almost a decade after regulators discovered traders were manipulating the rate set by Britain’s biggest banks.

In addition, lenders have been reducing the availability of loans to borrowers with small down payments and low credit scores, Kan said.

“Across all loan types, there continues to be fewer low credit score and high-LTV loan programs,” Kan said, referring to loan-to-value, or the size of the mortgage compared to the value of the property.

The U.S. economy contracted 31% in the second quarter, compared to a year earlier, as the nation struggled to contain the worst public health crisis in more than a century. It was the sharpest contraction of GDP since the Great Depression, according to the Bureau of Economic Analysis.

Leave a comment

Most Popular Articles

The housing market faced uncertainty in March, but now ‘it’s a circus’

The housing market faced a lot of uncertainty when COVID-19 caused the real estate industry to pause under shut-downs, but low interest rates and the desire for more space have turned this year into a boom time for real estate agents.

Oct 21, 2020 By

Latest Articles

The housing bubble boys blew it in 2020

The NAR existing home sales report released today blew out all estimates with 6,540,000 in existing home sales. This epic headline punctured any bubbles the 2020 bubble boys had left in their arsenal. But before we get too excited, keep in mind we are still down 0.2% year to date compared to 2019 levels. Still, this seems like a booming housing market, right?

Oct 22, 2020 By
3d rendering of a row of luxury townhouses along a street

Log In

Forgot Password?

Don't have an account? Please