Credit availability reverses course as government financing tightens

Mortgage credit availability tightened in November, following a fourth-month period in which it expanded.

A Mortgage Bankers Association index measuring that availability fell by 0.6% on a net basis compared to the previous month as financing insured or guaranteed by government entities tightened 2.7%.

But while qualifying got a little tougher overall in November for entry-level buyers with lower incomes, some other prospective borrowers had an easier time of it.

“The picture was different depending on the market segment,” said Joel Kan, associate vice president of economic and industry forecasting at the Mortgage Bankers Association, in a press release.

Conventional credit index availability expanded by 1.9%, with the component representing jumbo loans accounting for the majority of the gain. The availability of conventional financing within conforming loan limits rose just 0.2%, but for jumbo loans above those limits, availability was up 3%.

While credit availability for jumbos has been expanding for five months running and was particularly fast relative to other types of loans in November, it still remains historically low, Kan said.

“Even with the recent growth in credit availability, the jumbo index remains more than 40% below February 2020 levels,” he noted.

The MBA’s Mortgage Credit Availability Index uses a scale on which 100 represents historically tight underwriting conditions in 2012. The index reflects industry data from ICE Mortgage Technology’s/Ellie Mae’s AllRegs Market Clarity product.

November’s overall index value was 124.9, down from 125.7 the previous month. Just prior to the pandemic, the overall index value was 181.3.

Although the index was in a bit of a lull in November, when the market tends to undergo a seasonal slowdown, Kan expects it could resume its rise across the board in subsequent months if the uptick in rates and housing values persists.

“As home-price growth continues, and mortgage rates creep higher, increased credit availability is needed for qualified borrowers looking to purchase a home — especially for first-time homebuyers, who rely heavily on government mortgage programs,” Kan said.





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