While federal agencies are concerned about how tight mortgage lending credit standards have become since the financial market and housing industry collapse of 2008, economists at the Mortgage Bankers Association (MBA) noted a loosening of mortgage credit availability last month.
According to the MBA’s Mortgage Credit Availability Index (MCAI), a report that analyzes data from Ellie Mae’s AllRegs Market Clarity business information tool, the index increased 2.3 percent to 121.4 in March.
The MCAI is calculated using several factors related to borrower eligibility, such as credit score, loan type and loan-to-value ratio. Metrics and underwriting criteria for more than 95 lenders and investors are combined by MBA using data made available via the AllRegs Market Clarity product and a proprietary formula derived by MBA to calculate the MCAI, a summary measure which indicates the availability of mortgage credit at a point in time. The index was benchmarked to 100 in March 2012. A decline in the MCAI indicates that lending standards are tightening, while increases in the index are indicative of a loosening of credit.
MBA Chief Economist Mike Fratantoni attributed the loosening of credit to several factors, including Freddie Mac’s introduction of an 97 LTV program (Fannie Mae’s was implemented in December); additional loosening of parameters on jumbo loan programs; an increase in offerings of cash-out refinance loans; and continued expansion of the Federal Housing Administration (FHA) streamline refinance and VA Interest Rate Reduction Refinance Loan (IRRRL) programs.
“Although credit remains tight by historical standards, this increase in availability, coupled with low rates and job market strength, should lead to stronger home purchase activity this spring,” Fratantoni said.
The FHA announced last week that that it will explore “alternative” credit scoring models to expand access to mortgages for would-be homebuyers.