S. association of real estate finance professionals.
The MCAI fell from 110.3 to 108.3 in July, indicating lenders are more conservative about providing credit to potential home buyers. The decline was due to tighter lending requirements for government-backed loans. Fannie Mae and Freddie Mac tightened their standards for government-backed loans when underwriting them. Jumbo loan programs also had tighter credit standards than in June.
The decrease was partially offset by growth in conforming loan programs, which increased by 0.4%. This was driven primarily by lenders expanding availability of non-QM and portfolio loan programs. Some of these programs allow bigger down payments, which could open up borrowing to more potential home buyers who do not conform to traditional lending standards.
The MCAI is an important measure used by mortgage and housing industry professionals. It is used to gauge market conditions and credit availability for potential home buyers. An index score higher than 100 indicates that lenders are more likely to approve loans, putting more money in the hands of potential home buyers. Lower scores suggest that lenders are cautious about providing credit.
This decrease in the MCAI suggests that lenders are becoming more cautious about providing mortgages, making it harder for potential home buyers to secure financing. The tightening of government-backed and jumbo loan programs indicates that the difficulty of obtaining financing may be due to the risks that lenders perceive in these markets. However, the expansion of conforming loan programs and non-QM portfolios may still give some potential home buyers access to financing.
Summary: The MCAI is an index that measures the availability of credit for potential home buyers and the July report indicated a decrease from 110.3 to 108.3. This decrease in credit availability is due to lenders tightening their requirements for government-backed and jumbo loans. In contrast, there was an increase in conforming loan programs, driven mainly by non-QM loan programs and portfolio loan programs. These programs allow bigger down payments, giving access to more potential home buyers who do not meet traditional lending standards. The decrease in the MCAI suggests that lenders are becoming more cautious in providing mortgages, making it more difficult for potential home buyers to secure financing. Although the tightening of government-backed and jumbo loan programs may be due to the risks lenders perceive in these markets, the expansion of conforming loan programs and non-QM portfolios may still offer potential home buyers access to financing.
This article was contributed on Oct 24, 2023
