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.

taooicip1390817252892158029

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?”

Show Comments Hide Comments
Sign up for Inman’s Morning Headlines
What you need to know to start your day with all the latest industry developments
By submitting your email address, you agree to receive marketing emails from Inman.
Success!
Thank you for subscribing to Morning Headlines.
Back to top
Only 3 days left to register for Inman Connect Las Vegas before prices go up! Don't miss the premier event for real estate pros.Register Now ×
Limited Time Offer: Get 1 year of Inman Select for $199SUBSCRIBE×
Log in
If you created your account with Google or Facebook
Don't have an account?
Forgot your password?
No Problem

Simply enter the email address you used to create your account and click "Reset Password". You will receive additional instructions via email.

Forgot your username? If so please contact customer support at (510) 658-9252

Password Reset Confirmation

Password Reset Instructions have been sent to

Subscribe to The Weekender
Get the week's leading headlines delivered straight to your inbox.
Top headlines from around the real estate industry. Breaking news as it happens.
15 stories covering tech, special reports, video and opinion.
Unique features from hacker profiles to portal watch and video interviews.
Unique features from hacker profiles to portal watch and video interviews.
It looks like you’re already a Select Member!
To subscribe to exclusive newsletters, visit your email preferences in the account settings.
Up-to-the-minute news and interviews in your inbox, ticket discounts for Inman events and more
1-Step CheckoutPay with a credit card
By continuing, you agree to Inman’s Terms of Use and Privacy Policy.

You will be charged . Your subscription will automatically renew for on . For more details on our payment terms and how to cancel, click here.

Interested in a group subscription?
Finish setting up your subscription
×