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Mortgage credit availability tightened in May

Availability dropped by 3.1% in May

Mortgage credit availability dropped in May, a consequence of a tougher mortgage landscape that has resulted in lender consolidation as well as high rates and limited inventory that has stretched consumer budgets.  

The monthly Mortgage Credit Availability Index fell by 3.1% to 96.5 last month, according to the Mortgage Bankers Association. A decline of the index, benchmarked to 100 in March 2012, indicates that lending standards are tightening while an increase suggests loosening credit.

“Mortgage credit availability decreased for the third consecutive month, as the industry continued to see more consolidation and reduced capacity as a result of the tougher market,” Joel Kan, MBA’s associate vice president of economic and industry forecasting, said in a statement. “With this decline in availability, the MCAI is now at its lowest level since January 2013.”

While the Conventional MCAI, which does not include loans backed by the government, decreased 2.3%, the Government MCAI, which examines FHA, VA, and USDA loan programs, fell by 3.8%.

Of the two component indices of the conventional index, the Jumbo MCAI fell by 1.5% and the Conforming MCAI dropped by 3.9%.

The jumbo index had its first contraction in three months, as some depositories assess the impact of recent deposit outflows and reduce their appetite for jumbo loans, Kan said.

Wells Fargo, a formerly important jumbo mortgage lender, is reducing its home lending footprint, and JPMorgan Chase’s acquisition of First Republic Bank will result in the discontinuation of its popular jumbo mortgage program.

The drop in mortgage credit availability follows a spike in mortgage rates during the month of May, which rose to 6.43%, according to Freddie Mac.

Single-family home prices also rose to about $450,000 in May, according to data from Altos Research, up from around $443,000 in April.

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