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Mortgage Lending Standards Loosened Last Month

HELOCsLending standards overall loosened during January, the Mortgage Credit Availability Index (MCAI) from Mortgage Bankers Association (MBA) and Ellie Mae indicates.

A decline in the MCAI indicates that lending standards are tightening, while increases in the index are indicative of loosening credit. The MCAI is calculated using several factors related to borrower eligibility (credit score, loan type, loan-to-value ratio, etcetera).

The MCAI rose by 2% to 124.6 in January. The Conventional MCAI increased 4.8%, while the Government MCAI decreased by 0.1%. Of the component indices of the Conventional MCAI, the Jumbo MCAI increased by 2.2%, and the Conforming MCAI rose by 7.7%.

"The growth in credit availability in January coincides with a housing market that is poised for a strong start to the year. Improvements were driven by the conventional segment of the mortgage market, as lenders added ARM loans with lower credit score and higher LTV requirements," said Joel Kan, MBA's AVP of Economic and Industry Forecasting. "Despite ARM loans accounting for a very small share of loan applications in recent months, lenders are likely looking ahead to a strong homebuying season by expanding their product offerings."

Added Kan, "Ongoing strength in home-purchase applications and home sales continue to signal robust housing demand, even as low housing inventory remains a constraint. However, even with overall credit availability picking up in three of the past four months, credit supply is still at its tightest level since 2014."

The Total MCAI has an expanded historical series that gives perspective on credit availability from the last 10 years. It was created to provide historical context to the current series by showing how credit availability has changed, including during the housing crisis and ensuing recession.

Learn more about the MCAI at mba.org.

About Author: Christina Hughes Babb

Christina Hughes Babb is a reporter for DS News and MReport. A graduate of Southern Methodist University, she has been a reporter, editor, and publisher in the Dallas area for more than 15 years. During her 10 years at Advocate Media/Dallas Magazine, she published thousands of articles covering local politics, real estate, development, crime, the arts, entertainment, and human interest, among other topics. She has won two national Mayborn School of Journalism Ten Spurs awards for nonfiction, and has penned pieces for Texas Monthly, Salon.com, Dallas Observer, Edible, and the Dallas Morning news, among others. Contact Christina at christina.hughesbabb@thefivestar.com.
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