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Credit Availability Up in February

Mortgage credit availability opened up for the third straight month in February, the Mortgage Bankers Association (MBA) reported in its monthly index.

MBA’s Mortgage Credit Availability Index (MCAI), a measure of borrower eligibility and underwriting criteria from more than 85 lenders, moved up half a percentage point to 113.5 last month, building on an increase of two points recorded in January.

Once again, the expansion in credit offerings in February was the result of offsetting factors, including changes in lending brought on by the Consumer Financial Protection Bureau (CFPB), said MBA chief economist Mike Fratantoni.

“Specifically, the recently implemented QM/ATR [qualified mortgage/ability-to-repay] sections of the new CFPB regulations stipulate that ARM [adjustable-rate mortgage] loans must qualify at the highest allowable rate for the first five years of the loan. As a result, many investors have discontinued loans whose interest rate adjusts after only 3 year[s] (also known as 3/1 ARMS),” Fratantoni explained.

On the other hand, “[w]hile there was significant pull-back on these 3/1 programs, lenders and investors added several new 5+ year ARM programs, including those for Jumbo loans, to their repertoire resulting in a net increase to the MCAI.”

The base level for the index is 100, a benchmark set in March 2012. Had the index existed in 2007, it would have sat at a level of roughly 800.

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