Access to mortgage credit availability is tight. This has been the case since the Great Recession and has only incrementally loosened since. The Mortgage Credit Availability Index (MCAI) increased by a modest 0.1% in October to 125.7.
MCAI Components are calculated using factors that evaluate borrower eligibility. These factors include, but are not limited to, credit score, loan type, debt-to-income ratio, loan-to-value ratio, and more. The calculations serve as measures which indicate the availability of mortgage credit at a point in time.
Generally speaking, a decline in the MCAI indicates that lending standards are shrinking, while increases are emblematic of loosening credit. The MCAI is made up of four parts: Conventional, Government, Jumbo, and Conforming lending standards – All of which have not experienced any significant changes over the past few years.
As of October, the Conventional MCAI increased 0.1%, Government MCAI was unchanged, the Jumbo MCAI increased by 4.1%, and the Conforming MCAI fell by 6%.
What does this mean?
The substantial increase in the jumbo index was driven by an increase in the supply of jumbo ARM and non-qualified mortgage products. Adversely, on the conforming side we saw a decrease in ARM’s, higher loan to value loans, and lower credit scores. Essentially, the lending standards that contributed to the housing crisis in the past have not become less stringent, which indicates that the housing market momentum is based on strong macroeconomic fundamentals.