Key Highlights

  • According to Mortgage Bankers Association, mortgage credit availability now tightest since March 2014
  • MBA’s Mortgage Credit Availability Index down to 120.9 in August

Despite the fact that mortgage interest rates are historically low, it hasn’t been this difficult for potential homebuyers to access those rates since March 2014.

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The Mortgage Bankers Association recently reported that its Mortgage Credit Availability Index dropped -4.7% in August to 120.9. Obviously, lenders have shifted to stricter requirements since the COVID pandemic has caused the worst economic contraction this country, and in fact the world, has seen since the Great Depression.

Joel Kan, an MBA association vice president, said these strict restrictions on credit have been “…driven by a reduction in supply from both conventional and government segments of the market.”

Let’s take a look at credit availability by loan type:

 

  • Conforming MCAI tracking for Fannie Mae/Freddie Mac loans – -8.6%, the lowest availability since 2011
  • Jumbo MCAI tracking for high-balance loans – -8.9%
  • Conventional MCAI tracking for non-government backed loans – -8.7%
  • Government MCAI tracking for loans by Federal Housing Administration, Veterans Administration, Department of Agriculture – -1.4%

 Kan continued. “Credit continues to tighten because of uncertainty still looming around the health of the job market. A further reduction in loan programs (involving) low credit scores, high LTVs, and reduced documentation requirements also continued to drive the overall decline in credit availability.

Despite these extremely tight restrictions on mortgage lending, the country’s lowest mortgage rates on record is expected to push home lending to a 15-year high of $3T, forecasted the MBA. The MBA is also forecasting refinancing to reach $1.7T this year, its highest level since 2003.

 

Thanks to Mortgage Bankers Association and HousingWire.

Also read: Weekly Purchase Applications Recover as Rates Hit Record Low, Weekly Purchase Applications Recover as Rates Hit Record Low, Unlike 2008, A “Next” Recession Would NOT Yield Housing Bargains