Mortgage Credit Availability Decreased in December

According to the Mortgage Bankers Association’s (MBA) Mortgage Credit Availability Index (MCAI) report, which analyzes data from the ICE Mortgage Technology, mortgage credit availability decreased in December. The index has declined in nine out of the past ten months.

The MCAI fell by 0.1% to a reading of 103.3 in December. The MBA notes that a decline in the MCAI indicates that lending standards are tightening, while increases in the index are indicative of loosening credit. The index was benchmarked to 100 in March 2012.

The Conventional MCAI declined 0.1%, while the Government MCAI decreased by 0.1%. Of the component indices of the Conventional MCAI, the Jumbo MCAI decreased by 0.2%, and the Conforming MCAI remained unchanged.

Providing additional background and his analysis, Joel Kan, MBA’s Vice President and Deputy Chief Economist, said:

“Mortgage credit availability was mostly unchanged in December as mortgage rates remained significantly higher than the prior two years and both refinance and purchase activity slowed dramatically. The doubling of mortgage rates over the past year caused credit availability to shrink 18 percent during the same period. This pivot in the market resulted in lenders exiting certain origination channels to manage their operational costs or stop lending altogether, which was a main driver in the decrease in credit supply. Additionally, investors stopped offering many streamlined refinance programs as rates increased and the refinance market shrank. The segment of the market which showed the sharpest decline in credit availability was FHA and VA lending, which saw a 23 percent decline over 12 months.”