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Those who have been financially unscathed by the coronavirus pandemic might be tempted to resume their search for a new home now that the initial panic has subsided and interest rates have sunk to historic lows. But one caveat of the current market is the availability of mortgage credit, which has dried up as wary lenders tighten up credit score and down payment requirements.
The Mortgage Bankers Association (MBA) has released its Mortgage Credit Availability Index (MCAI) for the month of April, recording a 12.2 percent decline over the previous 31-day period to 133.5. The lower the index gets, the harder it is to qualify for a mortgage home loan, and the MCAI hasn’t sunk to these depths since December 2014 when the nation was still recovering from the 2008 housing crash.
Source: Mortgage Bankers Association; Powered by Ellie Mae’s AllRegs® Market Clarity®
The MCAI for jumbo loans, which are used to finance high-priced homes and are deemed riskier because they aren’t backed by the government, plummeted 22.6 percent. The Conventional MCAI, including mortgage loans from private lenders like banks and credit unions, dipped 15.2 percent.
Loans guaranteed by Fannie Mae and Freddie Mac experienced smaller declines — the Government MCAI (i.e. FHA/VA/USDA loan programs) decreased by 9.5 percent. The MCAI for conforming loans, which are conventional loans that meet Federal Housing Finance Agency requirements, dropped by 7.1 percent.
Source: Mortgage Bankers Association; Powered by Ellie Mae’s AllRegs® Market Clarity®
“The abrupt weakening of the economy and job market — and the uncertainty in the outlook — drove credit availability down in April for the second consecutive month,” said Joel Kan, MBA’s Associate Vice President of Economic and Industry Forecasting.
“The overall index fell to its lowest level since December 2014, and the sub-indexes pointed to tightened credit supply for all loan types. The decline was largely driven by lenders dropping many low credit score and [high loan-to-value] programs, as well as further reduction in jumbo and [non-qualified mortgage] products.”
