TheMReport — News and strategies for the evolving mortgage marketplace.
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38 | M R EP O RT O R I G I NAT I O N S E R V I C I N G DATA G O V E R N M E N T S E C O N DA R Y M A R K E T THE LATEST ORIGINATION Mortgage Credit Availability Declined in December Joel Kan, MBA's VP and Deputy Chief Economist, said, "The doubling of mortgage rates over the past year caused credit availability to shrink 18% during the same period. This pivot in the market resulted in lenders exiting certain origination channels to manage their operational costs or stop lending altogether." M ortgage credit avail- ability decreased in December accord- ing to the Mortgage Credit Availability Index (MCAI), a report from the Mortgage Bankers Association (MBA) that analyzes data from ICE Mortgage Technology. The MCAI fell by 0.1% to 103.3 in December. A decline in the MCAI indicates that lend- ing standards are tightening, while increases in the index are indicative of loosening credit. The index was benchmarked to 100 in March 2012. The Conventional MCAI decreased by 0.1%, while the Government MCAI decreased by 0.1%. Of the component indices of the Conventional MCAI, the Jumbo MCAI decreased by 0.2%, and the Conforming MCAI was unchanged. "Mortgage credit availabil- ity was mostly unchanged in December as mortgage rates remained significantly higher than the prior two years and both refinance and purchase activity slowed dramatically," said Joel Kan, MBA's VP and Deputy Chief Economist. "The doubling of mortgage rates over the past year caused credit availability to shrink 18% during the same period. This pivot in the market resulted in lenders exiting certain origination channels to manage their opera- tional costs or stop lending alto- gether, which was a main driver in the decrease in credit supply. Additionally, investors stopped of- fering many streamlined refinance programs as rates increased and the refinance market shrank. The segment of the market which showed the sharpest decline in credit availability was FHA and VA lending —which saw a 23% decline over 12 months." Conventional, Government, Conforming, and Jumbo MCAI Component Indices The MCAI fell by 0.1% to 103.3 in December. The Conventional MCAI decreased by 0.1%, while the Government MCAI decreased by 0.1%. Of the component indices of the Conventional MCAI, the Jumbo MCAI decreased by 0.2% and the Conforming MCAI was unchanged. The Conventional, Government, Conforming, and Jumbo MCAIs are constructed using the same methodology as the Total MCAI and are designed to show relative credit risk/availability for their respective index. The primary difference between the total MCAI and the Component Indices is the population of loan programs that they examine. The Government MCAI examines FHA/VA/USDA loan programs, while the Conventional MCAI examines non-government loan programs. The Jumbo and Conforming MCAIs are a subset of the conventional MCAI and do not include FHA, VA, or USDA loan offerings. The Jumbo MCAI examines conventional programs outside conforming loan limits, while the Conforming MCAI examines conventional loan pro- grams that fall under conforming loan limits.