Mortgage Credit Availability Falls Slightly

A recent report from the Mortgage Bankers Association found that mortgage credit availability dropped slightly in August. Here are a few reasons that could indicate why:

Decreases in availability of loans that carry an interest-only feature was a big reason for the drop in the Mortgage Credit Availability Index, or MCAI. Also, lenders are dropping loan offerings in some cases with terms longer than 30 years.

Taking a closer look at the numbers we find that the MCAI dropped 0.7 percent to 111.5 in August, which is the first drop after the past four straight months of growth. This decline could reveal that lending standards are growing more stringent as MCAI increases reveal loosening credit.

“The slight decline in the MCAI in August reflected a reduction in the availability of certain loan features, particularly interest-only and terms exceeding 30 years,” said Mike Fratantoni, MBA’s vice president of Research and Economics. “As these loan features are outside of the qualified mortgage (QM) definition, these changes may reflect the beginning of QM implementation, and the fact that Fannie Mae and Freddie Mac are limited to acquiring loans that meet the QM definition.”

The MCAI was given a benchmark figure of 100 in March 2012, but if the benchmark had been set back in 2007 it would be at about 800.

As a borrower, this news might have zero impact on your ability to obtain a mortgage as this task is built on a number of individualized factors. So it’s best not to be alarmed about rising mortgage rates are tighter lending standards as if your credit is up to par then you’ll find high affordability conditions and attractive mortgage rate offerings are at your disposal.

If you’d like to learn more about your home loan options, which can include VA loans, FHA loans and conventional loans backed by Freddie Mac and Fannie Mae, contact us today.