The MCAI fell 6.3 percent, from 176.2 in July to 165.7 in August. The index is calculated using an array of data, including credit score and loan-to-value ratios, to measure the availability of mortgage credit at a point in time.
Increasingly stringent credit standards led to the decline in availability. Despite generally lower borrowing costs, higher-credit scores were needed to qualify for loans in August, due to tightening underwriting rules.
"The summer months often bring firmer credit standards, as lenders adjust their requirements to manage risk," said Mike Fratantoni, MBA senior vice president and chief economist. "While this year's tightening was more moderate than the more dramatic pull back we saw last year, it did contribute to a decrease in the MCAI."
The Government MCAI decreased 9.8 percent in August and saw its biggest annual decline since April 2017 due to changes in loan programs offered by the Federal Housing Administration (FHA) and the Department of Veterans Affairs (VA). The FHA increased the required minimum credit score for some loan products, and VA reduced loan requirements for reservists and disabled veterans.
The Conforming MCAI also declined in August, dropping 4.4 percent. Of those components, jumbo loan programs had the biggest dip, falling 7.9 percent. By comparison, conventional loan components rose by 0.8 percent.
Meanwhile, the Jumbo MCAI saw an increase in August, rising 1.3 percent, largely due to easing credit standards for jumbo loans. Borrowers with non-traditional incomes as well as borrowers with non-traditional credit histories were able to qualify for jumbo loans in August, but at slightly higher interest rates.
Overall, mortgage credit availability dropped in August, as stricter credit standards for government and conforming loan programs drove the decline. The Jumbo MCAI saw a slight uptick, however, as banks were more accommodating to certain borrowers.
The Mortgage Credit Availability Index (MCAI) is a measure developed by the Mortgage Bankers Association (MBA) that looks at the availability of mortgage credit at a point in time. In August 2020, the MCAI decreased 6.3% from 176.2 in July to 165.7 in August. This was its lowest level since September 2019. A decrease in available credit was primarily driven by increasingly stringent credit standards.
The Government MCAI (which measures credit availability for FHA and VA loans) decreased 9.8%, due to changes in loan programs offered by the Federal Housing Administration and the Department of Veterans Affairs. For example, the FHA increased the required minimum credit score for some loan products, while the VA reduced loan requirements for reservists and veterans with disabilities. The Conforming MCAI (which covers conventional loans) also declined 4.4%. Jumbo loan programs saw the biggest drop, reaching 7.9%, as lenders became stricter about credit scores and loan-to-value ratios. In contrast, conventional loan components rose by 0.8%.
On the other hand, the Jumbo MCAI (which covers jumbo loans) saw an increase of 1.3% in August, because of more accommodating credit standards for borrowers with non-traditional incomes and credit histories. These borrowers were able to obtain jumbo loans, although typically at higher interest rates.
Overall, mortgage credit availability declined in August due to tighter credit standards and more limited loan programs for government and conforming loans. Jumbo loans saw a slight increase, as there were more options available for borrowers with non-traditional incomes and credit histories. Nonetheless, stricter credit standards remained in place, meaning that lenders in general were less willing to take on riskier borrowers.
This article was contributed on Jun 28, 2023
