Mortgage lenders tightened underwriting standards in June, undoing much of the easing seen over the past six months as initial fears about the long-term impacts of the pandemic began to wane.

Mortgage lenders tightened underwriting standards in June, undoing much of the easing seen over the last six months as initial fears about the long-term impacts of the pandemic began to wane.

That’s according to an index gauging mortgage credibility compiled by the Mortgage Bankers Association (MBA), which showed credit availability dropping to its lowest level since September 2020.

The Mortgage Bankers Associations’ Mortgage Credit Availability Index (MCAI) fell by 8.5 percent to 118.8 in June. Source: Mortgage Bankers Association.

The tightening was largely attributable to restrictions on refinancing mortgages with high loan-to-value ratios put in place by Fannie Mae and Freddie Mac in consultation with their federal regulator, the Federal Housing Finance Agency (FHFA), in order to comply with the Consumer Financial Protection Bureau’s revised qualified mortgage rule, said the MBA’s Joel Kan.

Credit availability for all types of mortgages fell by 8.5 percent in June, while availability for conventional, conforming mortgages eligible for purchase by Fannie and Freddie fell by 23.5 percent.

Joel Kan

“We did see the addition of refinance programs designed to reduce costs for lower income borrowers, but the full impact of those new loan programs remains to be seen,” Kan said in a statement. “In addition to the tightening in supply from the policy change, there was also a pullback in jumbo ARM offerings, which contributed to the lowest supply of jumbo credit since February 2021.”

In the months ahead, homeowners may have a greater incentive to refinance their mortgages. The FHFA announced on July 16 that beginning Aug. 1, Fannie and Freddie will no longer have to charge lenders a 50-basis point refinancing fee.

The fee, equal to $500 on every $100,000 refinanced, was intended to help the mortgage giants cover at least $6 billion in anticipated losses due to the pandemic. The FHFA has determined the fee is no longer needed, since most borrowers who stopped making payments on their loans during the pandemic are no longer in forbearance.

On the other hand, new limits federal regulators have placed on Fannie and Freddie’s purchases of loans secured by second homes and investment properties are thought to be a contributing factor in the recent decline in demand for those homes.

Email Matt Carter

Show Comments Hide Comments

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
Black Friday starts now! We've got great deals on Inman Connect New York in-person and virtual tickets. Register now×
Cyber Week Sale: Get 1 year of Inman Select for $75.SUBSCRIBE×
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