Credit standards tighten as lenders pull back on government programs, even as the non-QM segment finds a foothold
Mortgage credit availability fell to its lowest point since December 2025 in June, as lenders curtailed offerings across government loan programs and tightened standards for borrowers with weaker credit profiles.
The Mortgage Bankers Association's (MBA) Mortgage Credit Availability Index (MCAI) — which analyzes data from ICE Mortgage Technology — declined 2.0% in June to 105.8.
The index is benchmarked to 100 from March 2012, with declines indicating tighter lending standards and increases signaling broader credit access.
The pullback was concentrated in the government segment. The Government MCAI fell 4.6%, reflecting a significant retreat from FHA and VA streamline refinance programs, particularly those serving high loan-to-value (LTV) and low credit score borrowers.
The Conventional MCAI also slipped, down 0.1%, while the Conforming MCAI fell 2.2%.
"A contraction in government loan programs accounted for a significant share of the June decrease, as lenders pulled back on FHA and VA streamline refinance loan programs, particularly those for high LTV and low credit score borrowers. The jumbo index increased slightly, supported by new non-QM programs, which is consistent with other market data showing a larger non-QM share of originations," said Joel Kan, CMB, vice president and deputy chief economist at the MBA.
Government programs bear the brunt
The scale of the government-side retreat is notable. While the MCAI's overall decline of 2.0% may appear incremental, the Government MCAI's 4.6% drop signals a more pronounced shift in lender risk appetite, one driven partly by rising delinquency rates and a softening labor market.
Lenders appear to be recalibrating their exposure to borrowers at the margins of eligibility, pulling back streamline options that have historically offered one of the most accessible paths to refinancing for FHA and VA borrowers.
For mortgage brokers, the practical effect is narrower product availability precisely for clients who tend to need it most. Borrowers with lower credit scores and high LTVs — many of whom entered the market with government-backed financing — face a more restrictive landscape heading into the second half of 2026.
Brokers working these segments may find themselves increasingly reliant on education and advocacy to guide clients toward what remains available, rather than defaulting to streamline options that lenders are now deemphasizing.
Non-QM continues to fill the gap
Not all movement was downward. The Jumbo MCAI edged up 0.6%, aided by an expansion of non-qualified mortgage (non-QM) programs. That figure reflects a broader market dynamic that has been gaining momentum throughout 2026: as conforming and government channels tighten, the non-QM segment is absorbing an increasing share of demand.
According to Optimal Blue's June 2026 Market Advantage mortgage data report, non-QM loans accounted for 9% of total lock volume in June, 1.4 percentage points higher than a year ago.
Bank of America Securities projects non-QM originations will reach $175 billion in 2026, up from $108 billion in 2025, driven by debt-service-coverage ratio (DSCR) and investor loan products.
For brokers who have built or are building capacity in the non-QM channel, the June MCAI data reinforces the case for product diversification. Borrowers pushed out of FHA and VA streamline programs by tightened standards may still qualify under alternative documentation frameworks — bank statement loans, profit-and-loss statement programs, or DSCR products for investors.
Stay updated with the freshest mortgage news. Get exclusive interviews, breaking news, and industry events in your inbox, and always be the first to know by subscribing to our FREE daily newsletter.
