The Mortgage Bankers Association (MBA) reported a decrease in mortgage credit availability for the month of January according to the Mortgage Credit Availability Index (MCAI), a report that analyzes ICE Mortgage Technology data.
Several factors related to a borrower’s eligibility are taken into account when calculating MCAI such as loan type, loan-to-value ratio, credit score, etc. As a result of combining these metrics and underwriting criteria for more than 95 lenders/investors, MBA calculates the MCAI, a summary measure that indicates the availability of mortgage credit at a point in time, using data available through the AllRegs Market Clarity product and a proprietary formula developed by MBA.
There was a 0.1% drop in the MCAI in January to 103.2. Decreases in the index indicate that lending standards have tightened, while increases indicate that lending standards have loosened. March 2012 marked the benchmark of the index at 100. Government MCAI remained unchanged, while the Conventional MCAI decreased by 0.3%. Among the Conventional MCAI component indices, there was a decrease in the Jumbo MCAI by 0.4%, and there was no change in the Conforming MCAI.
The availability of mortgage credit remained unchanged and close to its lowest level since 2013 in January, according to MBA’s Vice President and Deputy Chief Economist, Joel Kan. As lenders have streamlined their operations to cope with lower volumes, credit availability has declined similar to December 2022 due to declining originations and shrinking capacity in the industry. Additionally, the share of adjustable-rate mortgages has fallen over the past month as mortgage rates have declined – consistent with a slight decrease in ARM offerings. The application activity for mortgages has increased in the last month, and their forecast indicates rates will continue to decline and that housing activity – including home sales and new construction – will gradually rise as the spring homebuying season approaches. Credit availability may change in the months ahead as a result of these developments.