Credit availability gets tighter

by MPA10 Oct 2013

Mortgage credit availability tightened in September for the second month in a row as lenders began to implement new government regulations, according to data from the Mortgage Bankers Association.

MBA’s Mortgage Credit Availability Index dropped 0.7% to 110.7 last month. A decline in the index represents tightening credit, while an increase indicates that lending standards are becoming looser. In March of 2012, the index was set at 100. Had the index been tracked in 2007, it would have been set at 800 to indicate the higher availability of credit at that time, according to MBA.

The September decrease was driven by a drop in the availability of loans with terms greater than 30 years and changing borrower eligibility requirements, MPA reported. The tightening credit may also reflect the early implementation of new lending rules established by the Consumer Financial Protection Bureau, according to Mike Fratantoni, MBA’s vice president of research and economics.

“Credit availability tightened last month as more lenders removed program offerings with loan terms greater than 30 years and/or interest-only features, similar to the trend we observed last month,” Fratantoni said. “Just as before, we believe this reflects lenders’ implementation of the Ability to Repay/Qualified Mortgage regulation which comes fully into effect in January. Offsetting this tightening has been some increased willingness to offer higher LTV loans, particularly to jumbo borrowers.”

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