Continuing an upward trend, mortgage credit availability rose in May compared to the month before, according to a new index from the Mortgage Bankers Association and mortgage information provider AllRegs.

The Mortgage Credit Availability Index, announced today, is designed to gauge whether overall mortgage credit is more or less available month to month by factoring in current mortgage underwriting criteria from more than 85 lenders or investors, including credit score, loan type, and loan-to-value ratio. The MCAI is the only standardized quantitative index that is solely focused on mortgage credit, the companies said.

The index will provide lenders, policymakers and researchers with a window into mortgage credit availability trends and how they may be impacted by policy changes, said Mike Fratantoni, MBA’s vice president of research and economics, in a statement.

The MCAI rose to 108.9 in May from 108.6 in April. The survey is benchmarked to an index value of 100 in March 2012, indicating that a value above 100 represents more availability of mortgage credit and a value of below 100 represents less availability due to tightening lending standards.

By comparison, the index would have stood at about 800 in 2007 “due to the availability of low-doc, no-doc, stated-income and interest-only loans, and significant cash-out refinance activities,” the companies said.

Availability is trending close to levels seen in 2011 and indicates higher availability than seen in 2012, the companies said. MBA and AllRegs have tracked the index continuously back to May 2011.


The recent rise in availability is partially a result of some investors lowering their requirements in regard to minimum credit score, the companies said. And largely due to participation in the Home Affordable Refinance Program, loan programs that allow for loan-to-value ratios of more than 95 percent have been on the rise, they added.

“HARP lending continues to be an important component of the market. The availability of these very high-LTV loans is one of the factors leading to the MCAI showing an increase over the past year,” Fratantoni said.

Rising mortgage rates may also spur lenders to loosen their underwriting standards as the lucrative market for refinancings dries up.

Rising mortgage rates reduce the incentive for homeowners to refinance. The MBA expects refinancings will account for only about 1 in 3 mortgages originated next year, down from about 3 in 4 during the downturn.

Lenders that can’t fill the resulting void in their business by originating more purchase loans will have to downsize.

Speaking this month at the National Association of Real Estate Editors’ spring meeting in Atlanta, Mark Fleming, chief economist for real estate data and analytics firm CoreLogic, said increased competition for purchase loans may result in an “expansion of the credit box.”

Fannie Mae Chief Economist Doug Duncan told Bloomberg that while some lenders will downsize, he also expects competition for purchase loans to heat up.

“Companies, if they want to stay in business, they’re going to compete,” Duncan told Bloomberg.

As the pressure to offer more exotic loans grows, Fleming said, “the question will be: Have we learned our lesson in the industry?”

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