Mortgage credit availability stabilizes - MBA

Lender downsizing keeps lending standards restrictive amid heightened mortgage rates

Mortgage credit availability stabilizes - MBA

Mortgage credit availability remained relatively unchanged in April as lenders continued to downsize their mortgage programs.

The Mortgage Credit Availability Index (MCAI), a measure of lender underwriting criteria, rose 0.1% to 94 last month, according to new data released Tuesday by the Mortgage Bankers Association.

While an increase signals somewhat looser credit conditions, MBA deputy chief economist Joel Kan said the index – benchmarked to 100 in March 2012 – remained close to lows last seen over a decade ago.

“Mortgage credit availability was little changed in April, with credit categories such as conventional, conforming, and jumbo seeing very small monthly gains,” Kan said in the report. “The supply of credit has stabilized, expanding slightly over the past four months but remaining close to 2012 lows.”

Within the composite index, availability of conventional mortgage credit rose 0.3%, split between equal 0.3% increases for both conforming and jumbo loan categories. Changes in government-backed loan availability like FHA and VA loans were essentially flat at 0.0% from March.

The MCAI is a summary measure tracking the credit criteria of over 95 wholesale and investor-based mortgage lenders. A decline signals lenders are tightening standards, while an increase points to easing credit.

Kan explained that mortgage lenders are still retrenching amid slowing demand and profitability pressures from the elevated mortgage rate environment.

Read more: Are homebuyers now undaunted by high mortgage rates?

“Lenders continue to reduce capacity, with mortgage rates still above 7% and origination volume moving at a slow pace,” he said. “Even with challenging affordability conditions and fairly strong housing demand, credit remains tight, and housing supply is low.”

The modest credit thaw last month did briefly unlock some pent-up borrower demand. Mortgage applications bounced back 2.6% after three consecutive weeks of declines, thanks to a temporary pullback in mortgage rates that week.

The conventional 30-year rate fell 11 basis points, and the FHA rate plunged 17 basis points to 6.92%, dipping below 7% for the first time in three weeks.

“Treasury rates and mortgage rates fell last week on the news of a slowing job market, with wage growth at the slowest pace since 2021, and the Federal Reserve’s announced plans to ease quantitative tightening in June and to maintain its view that another rate hike is unlikely,” said MBA chief economist Mike Fratantoni.

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