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Mortgage Credit Availability Continues To Tighten

Keith Griffin
May 10, 2022
Mortgage Credit Availability Index April 2022
Overall mortgage credit availability dropped for the second straight month, according to the MBA.

Second monthly drop driven by drop in government loan credit availability.

The Mortgage Bankers Association’s Mortgage Credit Availability Index has dropped for the second consecutive month. It’s largely driven by a drop in government mortgage credit availability of 6.5%.

“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. 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,” Joel Kan, MBA’s associate vice president of economic and industry forecasting, said.

A bright spot comes in the jumbo sector. The MBA reported a slight increase. Kan said, “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.”

Overall, mortgage credit availability fell by 3.2 percent to 121.1 in April. A decline in credit availability indicates that lending standards are tightening, while increases in the index are indicative of loosening credit. The index was benchmarked to 100 in March 2012. The conventional credit availability index increased 0.7%, while the government credit availability index decreased by 6.5%. Of the component indices of the conventional index, the jumbo credit availability increased by 0.3%, and the conforming credit availability index rose by 1.2%

“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,” Kan said.

The mortgage credit availability index is calculated using several factors related to borrower eligibility (credit score, loan type, loan-to-value ratio, etc.). These metrics and underwriting criteria for over 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.

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