As Lending Standards Tighten, Mortgage Credit Availability Index Drops to a 5-year Low
Mortgage Bankers Association (MBA) after analyzing data from Ellie Mae’s AllRegs® Market Clarity® business information tool reported that the Mortgage Credit Availability Index (MCAI) in April dropped to the lowest level since December 2014.
The decline is MCAI shows the tightening of lending standards showing decreased availability of mortgages for potential borrowers. The MCAI index fell by 12.2% to an index of 133.5.
The rate of decline in the last 2 months is the sharpest in over a decade. As evidenced by the chart below, the MCAI fell for every product category. The Conventional MCAI decreased 15.2 percent, while the Government MCAI decreased by 9.5 percent. The two sub-components of the Conventional MCAI, the Jumbo MCAI, and the Conforming MCAI decreased by 22.6 percent and 7.1 percent respectively.
Because of the sudden and drastic weakening of employment and economy, lenders have recently shied away from offering any loan program that they perceive as remotely risky – Cash out loans, Investment Property Loans, Loans to borrowers with low credit score, Jumbo loans, and Non-Qualified-Mortgage (Non-QM) loans which helped borrowers qualify with alternate income documents other than just W2s and Tax Returns.
At Arcus Lending, we still continue to offer most of these products. As a mortgage broker, we get to work with tens of lenders/investors which help us offer a wider range of mortgage products than a regular lender.