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Mortgage Credit Access Increases in June

tightenup-on-moneyConsumer access to mortgage credit increased slightly in June as criteria opened up on government-insured loans.

The Mortgage Bankers Association (MBA) reported Tuesday a 0.6 percent increase in its Mortgage Credit Availability Index (MCAI) from May to June, putting the index at 115.8.

The group links the increase in the headline index to "a slight net loosening in lender criteria regarding Federal Housing Administration (FHA) and Department of Veterans Affairs (VA) loans with respect to minimum credit scores and maximum loan-to-value (LTV) ratios."

FHA has drawn a mix of praise and criticism following the recent launch of its Homeowners Armed With Knowledge (HAWK) initiative, through which the agency seeks to provide price incentives and expand credit access for borrowers who participate in housing counseling.

Edward Pinto, resident fellow at the American Enterprise Institute and outspoken critic of FHA's current practices, says the agency is already too lax about accepting low credit scores, minimal down payments, and high debt ratios. According to Pinto's group, nearly a quarter of FHA-insured loans are at risk of default in the event of an economic downturn.

MBA's credit availability index measures changes in several factors related to borrower eligibility, including credit score and loan-to-value ratio, and combines those metrics with underwriting criteria for more than 85 lenders and investors. The index was benchmarked at 100 in March 2012.

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