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What Does an Increase in Mortgage Credit Availability Indicate?

Mortgage credit availability increased in January, according to the Mortgage Credit Availability Index (MCAI), from the Mortgage Bankers Association [1] (MBA). Data revealed an increase in MCAI from 2.3 percent to 179.0 in January.

The report noted that a decline in MCAI is indicative of tightening lending standards while an increase in the index is reflective of loosening credit. There was an increase of 4.9 percent in conventional MCAI while government MCAI remains unchanged. Of the component indices of the Conventional MCAI, the Conforming MCAI increased by 7.3 percent, and the Jumbo MCAI increased by 3.0 percent, according to the Index.   

"There was an increase in the supply of mortgage credit in January, which was a reversal from the December pullback that was caused by the end of the Home Affordable Refinance Program (HARP) and a reduction in jumbo offerings," said Joel Kan, AVP of Economic and Industry Forecasting at MBA.

The conventional, government, conforming, and jumbo MCAIs are constructed using the same methodology as the Total MCAI and are designed to show relative credit risk/availability for their respective index, the report stated. The key difference between the total MCAI and the Component Indices are the population of loan programs which they examine.

"Last month, investors and lenders added more programs to cater to lower credit score borrowers, in addition to new relief refinance programs. These relief refinance programs are not a direct replacement for HARP but do serve a similar purpose to assist borrowers who may have run into financial challenges," Kan said.   

The Total MCAI has an expanded historical series that gives perspective on credit availability going back approximately 10-years. However, these do not include conventional, government, conforming, or jumbo MCAI.

Read the full report here. [2]