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Mortgage Credit Availability Dips for Second Consecutive Month

The Mortgage Bankers Association (MBA) found that mortgage credit availability decreased in April, according to the Mortgage Credit Availability Index (MCAI), a report from the MBA that analyzes data from ICE Mortgage Technology.

The MBA found the MCAI dropping by 3.2% in April, to a reading of 121.1. A decline in the MCAI indicates that lending standards are tightening, while any increases in the MCAI is a sign of loosening credit standards. The MCAI was benchmarked to 100 in March 2012.

“Mortgage credit availability fell for the second month in a row, as lenders reacted to the jump in mortgage rates over the past two months,” said Joel Kan, MBA’s Associate VP of Economic and Industry Forecasting. “With the rate/term refinance business drying up, lenders have reduced the availability of government streamline refinancing programs, which are no longer as relevant of an option for many borrowers.”

As Kan noted, refi business is subsiding, as the MBA reported the refinance share of overall mortgage activity dropping to 32.4% of total applications this week, down from 33.9% the previous week.

By loan type, the Conventional MCAI rose 0.7%, while the Government MCAI decreased by 6.5%. Of the component indices of the Conventional MCAI, the Jumbo MCAI increased by 0.3%, and the Conforming MCAI rose by 1.2%.

Kan added, “The Conventional Index slightly increased, as lenders added more ARM programs to help borrowers overcome higher rates and home prices. The ARM share in MBA’s Weekly Applications Survey has also increased this year, but it is still low when compared to the mid-2000s. Furthermore, credit availability is much tighter than it was then, both in terms of credit requirements and the types of loans offered.”

Added Kan, “Jumbo lenders are somewhat loosening credit criteria, and jumbo rates have increased less than conforming rates this year, offering more opportunities for jumbo borrowers looking to purchase a home.”

The MBA’s MCAI is calculated using several factors related to borrower eligibility (credit score, loan type, loan-to-value ratio, etc.). These metrics and underwriting criteria for more than 95 lenders/investors are combined by MBA using data made available via ICE Mortgage Technology and a proprietary formula derived by MBA to calculate the MCAI, a summary measure which indicates the availability of mortgage credit at a point in time. Base period and values for total Index is March 31, 2012=100; Conventional March 31, 2012=73.5; Government March 31, 2012=183.5.

About Author: Eric C. Peck

Eric C. Peck has 20-plus years’ experience covering the mortgage industry, he most recently served as Editor-in-Chief for The Mortgage Press and National Mortgage Professional Magazine. Peck graduated from the New York Institute of Technology where he received his B.A. in Communication Arts/Media. After graduating, he began his professional career with Videography Magazine before landing in the mortgage space. Peck has edited three published books and has served as Copy Editor for Entrepreneur.com.

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