The Mortgage Bankers Association released on Thursday its latest Mortgage Credit Availability Index (MCAI), which declined 16.1 percent month-over-month in March to 152.1 — the lowest level since June 2015.
The MCAI is based on data from 95 lenders and investors included in Ellie Mae’s AllRegs Market Clarity underwriting tool and considers multiple factors related to a borrower’s creditworthiness, such as their credit score, loan type, and the loan-to-value ratio. A decline in the MCAI means lending standards are tightening, the MBA said, while an increase signals loosening borrower standards.
“Mortgage credit supply decreased 16 percent in March to the lowest level since June 2015, with declines in availability across all loan types,” said Joel Kan, the MBA Association Vice President of Economic and Industry Forecasting. “There was a reduction in the availability of loans with lower credit scores and higher LTV ratios, and the largest pullback came from the jumbo and non-QM space.”
“This month’s release highlights the large retreat from jumbo and non-QM investors due to a sharp drop in liquidity,” Kan added. “Lenders are making credit criteria changes to account for the increased likelihood of forbearance and defaults, as well as higher costs.”
The Conventional MCAI, which covers non-government loan programs, decreased 24.2 percent in March. The Jumbo MCAI and Conforming MCAI dropped by 36.9 percent and 2.7 percent, respectively. Lastly, the Government MCAI that includes FHA, VA, and USDA loans declined by 6.6 percent.
The Mortgage Bankers Association’s report falls in line with Wells Fargo’s move on Monday to suspend offering jumbo loans for properties that exceed Fannie Mae and Freddie Mac’s loan limits. Both entities increased limits from $484,350 to $510,440 in January to keep up with rapidly increasing median home values.
“Due to unprecedented market conditions, Wells Fargo Home Lending is temporarily suspending the purchase of non-conforming mortgage loans from correspondent sellers, effective immediately and until business conditions stabilize,” Tom Goyda, senior vice president of consumer lending communications at Wells Fargo, said in previous Inman article.
Although other banks are currently holding onto their jumbo loan offerings, mortgage consultants say that may not last for long as financial uncertainty caused by the coronavirus pandemic is putting the mortgage and real estate industries on edge.
“Images of the financial crisis come to mind when lending in the environment we’re in right now,” C2 Financial Corporation mortgage consultant Richard Liu told Bankrate. “For self-preservation, no lender is willing to take the risk of not being able to sell a loan to a mortgage-backed security (MBS) investor.”
