New initiatives aimed at increasing access to credit and making it more affordable began to pay off in January according to Mike Fratantoni, the Mortgage Bankers Association's (MBA's) Chief Economist. MBA's Mortgage Credit Availability Index (MCAI) increased 1.8 percent in January, to 117.8. An increase in the index, which analyzes data from the AllRegs Market Clarity Product®, indicates that lending standards have loosened from those the previous month.
Fratantoni said, "Fannie Mae and Freddie Mac announced new 97 percent LTV loan programs in December aimed at expanding access to conventional financing for new and well-qualified homebuyer. Additionally, FHA announced reductions in mortgage insurance premiums (MIP). Both of these announcements were designed to provide consumers with better access to mortgage credit."
The MCAI has featured two components, the Conventional and the Government Mortgage Credit Availability Indices and this month MBA added two more, one measuring access to jumbo and the other to conforming loans. Fratantoni said that, "Growth in the jumbo loan market over the last few years has been a consistent and ongoing trend - with evidence of expansion on both the supply and demand sides of the market. These new component indices allow us to more precisely measure how credit availability is changing with regards to jumbo loan programs and their conforming (non-jumbo) counterparts."
All four of the components increased over the month. The Convention MCAI posted the largest increase at 3.1 percent and the Jumbo rose 1.9 percent. The Conforming index increased by 1.8 percent and the Government index which gauges FHA, VA, and USDA loan programs was up 0.9 percent.
Fratantoni said that since the announcement of the new GSE programs in December roughly 40 percent of investors have begun to offer versions of the Fannie Mae loan which became available immediately and Freddie Mac's which will be effective in March. "The conventional mortgage credit availability index increased three percent over the month as a result. Although the FHA MIP reductions went into effect January 26th, this initiative will be less likely to impact the MCAI, as it impacts pricing rather than availability of government credit.
All four component indexes are constructed using the same methodology as the Total MCAI and have the same base levels, March 2012=100.