Mortgage Credit Availability Shrinks in January

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 January. This marks the tenth drop in the past eleven months.

The MCAI fell by 0.1% to a reading of 103.2 in January. 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 0.3%, while the Government MCAI was unchanged. Of the component indices of the Conventional MCAI, the Jumbo MCAI decreased by 0.4%, while the Conforming MCAI remained unchanged.

Commenting on the MCAI for January, Joel Kan, MBA’s Vice President and Deputy Chief Economist, said:

“Mortgage credit availability was essentially unchanged in January and remained close to its lowest level since 2013. Similar to December, the availability of credit has been driven lower by declining originations and shrinking industry capacity as lenders streamlined their operations to cope with lower volumes. Additionally, as mortgage rates declined over the past month, the share of adjustable-rate mortgages has fallen—consistent with a slight pullback in ARM offering in this month’s results. However, there has been a revival in mortgage application activity over the past months and our forecast is for rates to continue to decline and housing activity—including home sales and home construction—gradually pick up as we approach the spring homebuying season. These developments could potentially change the credit availability landscape in the months ahead.”