Credit standards tighten slightly

by MPA10 Sep 2013

Mortgage credit availability edged down slightly in August as lending standards tightened, according to a report by the Mortgage Bankers Association.

The MBA’s Mortgage Credit Availability Index (MCAI) slipped 0.7% in August, the association announced Monday.  The MCAI is calculated using factors including borrower credit score, loan type and loan-to-value ratio.

Last month’s dip in the MCAI was the first drop after four straight months of increases. A decline in the MCAI indicates tightening credit standards, according to MBA. The slide may also reflect the beginning of the implementation of the qualified mortgage rule, which limits the type of mortgages that can be acquired by Fannie Mae and Freddie Mac, according to Mike Fratantoni, MBA’s vice president of research and economics.

“The slight decline in the MCAI in August reflected a reduction in the availability of certain loan features, particularly interest-only and terms exceeding 30 years,” Fratantoni said. “As these loan features are outside of the qualified mortgage definition, these changes may reflect the beginning of QM implementation, and the fact that Fannie Mae and Freddie Mac are limited to acquiring loans that meet the QM definition.”

Shifting borrower requirements for jumbo mortgages – home loans with amounts that exceed the limits set by Fannie and Freddie - also contributed to the change.

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