The Mortgage Bankers Association has teamed up with AllRegs, Eagan, Minn., to create an index that measures the supply of mortgage credit at the outer boundaries of the spectrum, not if credit terms are tightening or loosening, said MBA vice president of research and economics Mike Fratantoni.
The Mortgage Credit Availability Index looks at what is available in the marketplace, but not whether any of those lenders are actually making those kinds of loans, he said during a teleconference.
The index is a risk-weighted average calculation of seven characteristics with the data coming from AllRegs Market Clarity database.
Those are product type, interest only versus non-interest only, loan purpose, loan term, documentation type, loan-to-value ratio and occupancy, and LTV and credit score.
Jeffrey Hoerster, president and chief operating officer of AllRegs, said Market Clarity has been evolving since 2004. It contains information on some 3,200 products from 85 lenders. The
The index does not specifically look at what type of investor is offering the product, although it does capture information on what is available across various sectors, Fratantoni said. During the presentation, he combined information from MBA’s
This means more jumbo products (products not available from conforming investors) are available.
The presentation also gave a historic note, which showed that the index if it had been around during boom period of 2006 and 2007, with myriad types of nonconforming products available, would have been between 750 and 850.
MCAI’s base index was set at 100 for March 2012. There is no economic reason for this, Fratantoni said; it was just when MBA settled on the methodology.
May is the most recent period for which the MCAI is available. It is at 108.87, up from 108.56 in April and 108.01 in March.
Fratantoni said three groups could benefit from analyzing this data. The first is lenders; he explained prepayment speeds are impacted by the availability of credit, so they can use the MCAI to predict servicing run-off. It also lets them benchmark how they make credit available to their borrowers versus the competition (whether they are tighter or looser).
Next are the policymakers, who can see on an empirical basis how their policies impact the availability of mortgage credit to consumers.
Finally there are economists and other researchers, who “will provide a benefit in terms of its ability to capture credit trends, a vitally important component of the macroeconomic environment,” said Fratantoni.
