The Mortgage Credit Availability Index (MCAI) fell by 3.5% in December, according to the Mortgage Bankers Association.
The Conventional MCAI dropped 1.4%, while the Government MCAI decreased by 6.1%. Of all the component indices, the Jumbo MCAI fell by 1.3% and the Conforming MCAI declined by 1.6%.
"Credit availability fell in December after three months of expansion, driven by drops in both conventional and government supply," said Joel Kan, MBA's AVP of Economic and Industry Forecasting. "Perhaps most noteworthy was a 6 percent drop in government credit supply because of changes to the Veterans Administration (VA) loan program, which eliminated loan limits for certain borrowers as of January 1, 2020.
“This likely prompted many investors to remove VA programs in high-cost counties from their offerings. There was also a reduction in a streamline refinance programs, as slightly higher rates slowed the refinance market at the end of 2019."
A study of weekly mortgage applications by the MBA for the week ending January 3 revealed that the share of mortgage applications fell 1.5% from the number of submissions counted just two weeks prior.
These statistics were measured by the Market Composite Index, which accounts for all mortgage loan application volume.
MBA SVP and Chief Economist Mike Fratantoni suggested tensions in the Middle East contributed to the drop in applications.
“Mortgage rates dropped last week, as investors sought safety in U.S. Treasury securities as a result of the events in the Middle East, with the 30-year fixed mortgage rate declining to its lowest level (3.91%) since early October,” he said.
Freddie Mac’s latest Primary Mortgage Market Survey found that the 30-year fixed-rate mortgage fell to 3.64% from the prior week’s 3.72%.
“Mortgage rates fell to the lowest level in thirteen weeks, as investors sought the quality and safety of the U.S. Treasury fixed income markets. The drop in mortgage rates, combined with the strong labor market, should propel a continued rise in homebuyer demand,” said Sam Khater, Freddie Mac’s Chief Economist.