In July, there was a notable decrease in mortgage credit availability, as reported by the Mortgage Credit Availability Index (MCAI). This index is meticulously compiled by the Mortgage Bankers Association (MBA), which meticulously analyzes data sourced from ICE Mortgage Technology. This decline in mortgage credit availability could have potential implications for the housing market and borrowing landscape, reflecting changes in lending standards, economic conditions, and other relevant factors.
Joel Kan, Vice President and Deputy Chief Economist at the MBA, noted that mortgage credit availability reached its lowest point since 2013. Lenders opted to scale back underutilized loan programs and grappled with liquidity concerns, particularly among jumbo lenders. The reduction in origination volumes has impacted the profitability of numerous lenders, prompting them to streamline operations by offering a narrower range of loan products in order to manage costs effectively.
In July, the Mortgage Credit Availability Index (MCAI) registered a 0.3% drop to reach 96.3. A decrease in the MCAI value signifies a tightening of lending standards, while an upward movement in the index suggests a relaxation in credit criteria.
The index was established at 100 in March 2012. The Conventional MCAI saw a 0.5% decrease, whereas the Government MCAI experienced a slight 0.1% decline.
Among the constituent indices of the Conventional MCAI, the Jumbo MCAI dropped by 0.8%, while the Conforming MCAI exhibited a modest increase of 0.2%.
A significant contributor to the decrease this month was identified as a reduction in cash-out refinance loan programs, Joel Kan noted. With the average 30-year fixed mortgage rate standing at 6.94% in July, over a percentage point higher than the same month in 2022, cash-out refinance activity has been notably discouraged. Borrowers are instead shifting their focus towards home equity and consumer loans. Notably, the jumbo index experienced a third consecutive month of decline, reflecting the ongoing trend of jumbo lenders limiting the range of available loan programs.