Credit crunch reflects reduced appetite for riskier loan programs.
Mortgage credit supply saw a slight decline of 0.5% in August as investors trimmed their ARM and non-QM loan offerings.
The Mortgage Credit Availability Index (MCAI) dipped 0.5% last month to 108.3, according to the Mortgage Bankers Association. The drop in the index – benchmarked to 100 in March 2012 – indicates that lending standards are tightening, while increases signal a loosening of credit.
“With overall origination volume expected to shrink in 2022, some lenders continue to streamline their operations by dropping certain loan programs to simplify their offerings,” explained Joel Kan, associate vice president of economic and industry forecasting at MBA. “Additionally, with a worsening economic outlook and signs of cooling in home-price growth, the appetite for riskier loan programs has been reduced.”
Black Knight last week saw a significant drop in annual house price appreciation, down 0.77% to 14.5%. Kan, however, highlighted a small increase in the supply of new HELOC products, which slightly offset those trends.
“With aggregate home equity still at elevated levels, HELOCs could benefit borrowers who might not want to give up on their current, low mortgage rate but do want to utilize their home equity to support other spending plans,” he said.
Credit availability of conventional mortgages decreased by 1%, while the supply of government loans remained virtually unchanged. Of the component indices of the Conventional MCAI, the Jumbo index dropped by 0.7%, and the conforming MCAI fell by 1.2%.