Mortgage Credit Availability in U.S. Increases in July
According to the Mortgage Credit Availability Index (MCAI) report from the Mortgage Bankers Association, mortgage credit availability in the U.S. increased in July 2015.
The MCAI increased 2.9 percent to 125.5 in July. A decline in the MCAI indicates that lending standards are tightening, while increases in the index are indicative of a loosening of credit. The index was benchmarked to 100 in March 2012. Of the four component indices, the Conventional MCAI saw the greatest loosening (up 5.2 percent over the month) followed by the Jumbo MCAI (up 4.7 percent), the Government MCAI (up 0.9 percent), and the Conforming MCAI (up 0.4 percent).
"Credit availability increased in July, mainly driven by higher-balance loan programs," said Mike Fratantoni, MBA's Chief Economist. "Many investors are fine tuning their cash-out refinance requirements to meet increasing borrower demand for home equity financing. Some investors increased the availability of low down payment loans."
CONVENTIONAL, GOVERNMENT, CONFORMING, AND JUMBO MCAI COMPONENT INDICES
MBA now reports on five total measures of credit availability as part of the monthly MCAI release: the Total Mortgage Credit Availability Index, the Conventional Mortgage Credit Availability Index, the Government Mortgage Credit Availability Index, the Conforming Mortgage Credit Availability Index, and the Jumbo Mortgage Credit Availability Index, with historical data back to 2011.
Of the four component indices, the Conventional MCAI saw the greatest loosening (up 5.2 percent over the month) followed by the Jumbo MCAI (up 4.7 percent), the Government MCAI (up 0.9 percent), and the Conforming MCAI (up 0.4 percent).
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 are the population of loan programs which they examine. The Government MCAI examines FHA/VA/USDA loan programs, while the Conventional MCAI examines non-government loan programs. Similarly, the Jumbo MCAI examines everything flagged as "Jumbo" while the Conforming MCAI examines loan programs that fall under conforming loan limits.
The Conforming and Jumbo indices have the same "base levels" as the Total MCAI (March 2012=100), while the Conventional and Government indices have adjusted "base levels" in March 2012. Using data from the MCAI and the Weekly Applications Survey, MBA calibrated the Conventional and Government indices to better represent where each index might fall in March 2012 (the "base period") relative to the Total=100 benchmark.