TheMReport — News and strategies for the evolving mortgage marketplace.
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28 | Th e M Rep o RT o r i g i nat i o n s e r v i c i n g a na ly t i c s s e c o n da r y M a r k e t ORIGINATION the latest Mortgage credit availability Unchanged in september The latest data shows that recent gains have stalled. a ccess to mortgage credit remained unchanged in Septem- ber following a slight tightening in August, according to a leading measure. The Mortgage Bankers Association's (MBA) Mortgage Credit Availability Index was flat at 116.1 for the month, the group reported. The gauge is calculated based on borrower eligibility met- rics nationwide and underwriting criteria for more than 85 lenders and investors. At its current level, the index points to a slightly looser credit market now compared to when it was benchmarked in March 2012. MBA's monthly measures show credit access expanded in six of the first nine months of 2014, even as more stringent rules governing lending have taken hold. While experts argue there's been little evidence of this year's wave of regulatory changes making a significant impact on mortgage volumes, 85 percent of senior lending executives still say the current environment is too restric- tive for most consumers to secure a home loan. In its September index, MBA reported a slight decline in credit availability for government- insured loans, which was offset by a minor increase in availabil- ity for conventional mortgages. Benchmarks for those indices were also set in March 2012, with the conventional measure based at 69 and the government measure based at 222, reflecting a sizable slant toward government loan programs. low appraisals not at Fault for slow Housing recovery Report dismisses the notion that appraisals are a major hurdle. d espite complaints from Realtors that low appraisals are disrupt- ing home sales, a new analysis from FNC Inc. argues that valuations have had little impact in the delayed housing recovery. As home values have made a rapid ascent in the past few years, those on the sales side point to lagging appraisal models as a major hurdle to finalizing transac- tions. In a 2012 study, the National Association of Realtors found a combined 35 percent of members surveyed reported delayed, rene- gotiated, or even canceled sales contracts as a result of lower-than- expected valuations. In a newly released report, however, FNC maintains that despite anecdotal reports, "there is no strong evidence that low appraisal valuations contributed to mortgages falling through." Examining a sample of apprais- als done this year, the company reported that nearly nine in 10 purchase loan appraisals "provide a value opinion that supports the transaction price," with an estimated 27.6 percent valuing at contract price and 61.4 percent coming in above contract. Out of those homes appraised at values below contract price, only 10.2 percent have been short by 1 percent or more year-to- date—well within the typical 10–12 percent range, the company says. At the same time, the share of above-contract appraisals valued at more than 1 percent of the home's contract price year-to- date is 40.4 percent—a statistic FNC calls "puzzling." "If [the] market is relatively efficient in setting prices, below- contract and above-contract appraisals are expected to occur with similar frequencies," the firm said in its report. In other findings, FNC report- ed results were consistent across all price tiers, with approximate- ly 90 percent of purchase loans appraised at or above contract all-around. Breaking down the results, however, low-tier properties appear much more likely to be appraised significantly above contract, with nearly one-third of homes priced at $150,000 or lower appraised above contract by 3 percent or more compared with only 13.3 percent of proper- ties priced above $500,000. "If [the] market is relatively efficient in setting prices, below-contract and above- contract appraisals are expected to occur with similar frequencies."