Mortgage credit availability falls to lowest point since 2013

Mortgage credit tightened in September, dropping to its lowest level since 2013, as lenders continued to reduce government-refinance and non-QM offerings, according to the Mortgage Bankers Association.

After edging down slightly in August, the MBA's Mortgage Credit Availability Index, or MCAI, a summary measure tracking home-loan products, fell 5.4% on a monthly basis to a reading of 102.5 in September. In August, the index came in at 108.3, while in September 2021, it had risen to a mark of 125.6.  

Concerns over consumer ability to repay given the current economic environment, combined with elevated interest rates, drove a pullback in credit for the seventh straight month, the MBA said.

"With the likelihood of a weakening economy, which would lead to an increase in delinquencies, there was a smaller appetite for lower credit score and high-LTV loan programs, along with a reduction in government-streamline refinance programs," said Joel Kan, MBA's vice president of economic and industry forecasting, in a press release. 

The MBA's latest originations data last week showed government-backed refinances now down by 82% on a year-over-year basis as rising interest rates have eliminated incentive for a majority of homeowners. Combined refinance and purchase volumes came in 68% lower from their pace of activity in the same week of October 2021. Non-QM programs in particular, have dealt with the impact of a slowing market this year, with sudden closures or bankruptcies of leading lenders this summer.

"As mortgage rates have more than doubled over the past year, resulting in a drop in refinance activity, lenders have worked to reduce excess capacity and costs by eliminating underutilized loan programs," Kan said.

Government credit has seen its level of availability reduced throughout 2022, declining in seven out of the last eight months. September's Government MCAI came in at its lowest since 2013, and almost every other component index tracked by the MBA also reported numbers falling to depths not seen in over a year.

The Government MCAI, which consists of products backed by the Federal Housing Administration, Department of Veterans Affairs and U.S. Department of Agriculture, decreased 5.7% from August, while the Conventional MCAI slid 4.9%. 

Meanwhile, two components of the conventional index that measure credit availability based on loan amounts posted drops as well. The Conforming MCAI, which tracks non-government offerings falling under $647,200, fell 3.6%. The Jumbo MCAI, a reading of credit availability for loans above the conforming amount, saw a larger decrease of 5.8%.

The MBA calculates the index using data aggregated by ICE Mortgage Technology. The benchmark MCAI was set to 100 in March 2012.