New conventional products broaden mortgage credit availability

Mortgage credit availability increased in October from the previous month, as mortgage lenders increased their conventional loan product offerings, according to the Mortgage Bankers Association.

While the number of government insured or guaranteed mortgage offerings continued to decline, as it has for most months since the start of 2017, the breadth of products available in the conventional market expanded for both conforming and jumbo.

October's Mortgage Credit Availability Index rose by 0.9% to 185.1 from 183.4 in September. However, this was down from 186.7 in October 2018.

"Mortgage credit availability expanded in October, driven mainly by an increase in conventional loan programs, including more for borrowers with lower credit scores, as well as for investors and second home loans," Joel Kan, the MBA's associate vice president of economic and industry forecasting, said in a press release. "Credit supply for government mortgages continued to lag, declining for the sixth straight month. Meanwhile, the jumbo credit index increased 3% to another survey-high, as that segment of the market stays resilient despite signs of a slowing economy."

This increase in product availability comes at a time when industry economists are forecasting $2 trillion in originations this year and a strong first half for loan production in 2020.

The conventional index increased 2.4% in October, and also reached a survey high. This index is further broken down into a conforming index, which rose 1.3%, and a jumbo index that was up 3.1% over the previous month.

However, the government index, which measures the availability of Federal Housing Administration, Veterans Affairs and U.S. Department of Agriculture products, fell by 0.9%. Credit availability for these products is at its tightest since the summer of 2015.

The MCAI is calculated by the MBA using loan program data from Ellie Mae's AllRegs Market Clarity database with a benchmark of 100 in March 2012. A lower index value indicates lenders are tightening their credit standards while a higher one indicates guidelines are looser.

So today's MCAI is still far below the values established using historical data for mortgage credit availability during the boom period that ended in 2006.