Mortgage credit availability attained its highest level in four months in September, based on the Mortgage Bankers Association’s (MBA) analysis of data provided by ICE Mortgage Technology.
The association noted a 0.4 percent increase in its Mortgage Credit Availability Index (MCAI) to 104.4 in September, indicating a loosening in credit availability, according to an MBA press release. The index was benchmarked to 100 in March 2012 and includes separate component indices for various loan categories.
MBA Vice President and Deputy Chief Economist Joel Kan described the impact adjustable-rate mortgage (ARM) products and the recent 25-basis-point decrease in the federal funds rate played in facilitating the uptick.
“Mortgage credit availability increased to its highest level in four months, driven by a growing supply of ARM loans, both in terms of more ARM products and broader eligibility requirements,” Kan said. “The ARM share of applications has moved higher recently because ARM loan rates remain around 80 basis points lower than fixed-rate loans. Because bank funding costs are more sensitive to Federal Reserve rate cuts than fixed-rate mortgage rates, it is not surprising to see more ARM offerings.”
MBA also reported a 0.1 percent increase in the Conventional MCAI while the Government MCAI rose by 0.8 percent. Among the component indices comprising the Conventional MCAI, the Jumbo MCAI declined by 0.1 percent and the Conforming MCAI increased by 0.7 percent.
The MCAI is calculated using various factors related to borrower eligibility (credit score, loan type, loan-to-value ratio, etc.), MBA noted. The association combines these metrics and underwriting criteria for more than 95 lenders and investors using data made available via ICE Mortgage Technology and a proprietary formula derived by MBA to calculate the MCAI, a summary measure which indicates the availability of mortgage credit at a point in time. Base period and values for total index is March 31, 2012=100; Conventional March 31, 2012=73.5; Government March 31, 2012=183.5.