Mortgage Credit Availability Rises as Job Market Improves

Since COVID-19 shocked the American economy, it has slowly shown signs of recovery as American jobs gradually return and mortgage credit availability continues to rise. 

The increase in credit availability is evident in November data from the Mortgage Credit Availability Index (MCAI), a report from the Mortgage Bankers Association (MBA), which analyzes data from Ellie Mae's AllRegs® Market Clarity® business information tool.

"Mortgage credit availability increased slightly in November to its highest level since July, as the job market improved, and the housing sector continued to show strong borrower demand," said Joel Kan, MBA's Associate Vice President of Economic and Industry Forecasting in a press release. "There was an increase in credit availability for jumbo loans, as well as loan products with low credit scores, higher LTVs, and adjustable-rate features.”

The MCAI rose by 0.7% to 122.2 in November, which indicates that lending standards have loosened. In November, the Conventional MCAI increased by 1.3%, while the Government MCAI increased by 0.3%. The MBA also reports that of the component indices of the Conventional MCAI, the Jumbo MCAI went up by 1.6%, while the Conforming MCAI increased by 0.9%.  

“Home purchase and refinance activity have remained strong in recent months, and the increased credit supply should help qualified borrowers still looking to capitalize on record-low mortgage rates,” Kan said. “However, credit availability is still more than 30% below pre-pandemic levels and close to the restricted standards seen in 2014. This has especially impacted government borrowers and first-time buyers."

MBA explains these indices: “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 primary difference between the total MCAI and the Component Indices are the population of loan programs which they examine. 

The Bankers Association adds that the “Government MCAI examines FHA/VA/USDA loan programs, while the Conventional MCAI examines non-government loan programs. The Jumbo and Conforming MCAIs are a subset of the conventional MCAI and do not include FHA, VA, or USDA loan offerings.”

Meanwhile, the Jumbo MCAI examines conventional programs that are outside of conforming loan limits. In contrast, the Conforming MCAI examines conventional loan programs that are under the umbrella of the conforming loan limits.