A Reversing Trend

Mortgage credit availability increased in October driven largely by an expansion in the supply of conventional credit, according to the latest data on the Mortgage Credit Availability Index (MCAI) by the MBA.

The data indicated that the MCAI during the month increased 2.5 percent to 186.7, with the conventional MCAI rising 5.5 percent and the government MCAI decreasing slightly by 0.4 percent. The MBA said that among the conventional MCAI components, the Jumbo index rose 6.3 percent while the Conforming Index increased 4.6 percent.

"Credit availability increased in October, driven largely by an expansion in the supply of conventional credit, while government credit fell slightly over the month," said Joel Kan, AVP of economic and industry forecasting at the MBA.

While the MCAI component indices are constructed using the same methodology as the primary MCAI index, they differ in the population of loan programs they examine. For example, while the government MCAI examines FHA, VA, and USDA loans, the conventional index looks at non-government loan programs.

The rise in MCAI also indicated a loosening of credit, reversing a trend from last month. A fall in the index would indicate a tightening of mortgage credit.

"Reversing a trend from last month, lenders made more conventional and low down payment programs available to prospective borrowers," Kan said. This increase in supply was likely in response to a growing number of first-time home buyers in the market, as home price appreciation has slowed and wage growth has picked up. Jumbo credit availability also expanded last month, with the jumbo index increased again to its highest level since the survey began."

The Jumbo and Conforming MCAIs are a subset of the conventional MCAI and do not include FHA, VA, or USDA loan offerings. The Jumbo MCAI examines conventional programs outside conforming loan limits while the Conforming MCAI examines conventional loan programs that fall under conforming loan limits.