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Mortgage credit availability up in January, though lenders remain wary of risk

Mortgage credit availability increased in January, matching the momentum carried over into 2021 by the hot housing market.

The Mortgage Credit Availability Index (MCA) maintained by the Mortgage Bankers Association (MBA) increased by 2% in January, reaching a reading of 124.6. Growth in the index signals that lending criteria are loosening, while index declines indicate tightening credit standards.

“The growth in credit availability in January coincides with a housing market that is poised for a strong start to the year. Improvements were driven by the conventional segment of the mortgage market, as lenders added ARM loans with lower credit score and higher LTV requirements,” said Joel Kan, associate vice president of economic and industry forecasting for the MVA. “Despite ARM loans accounting for a very small share of loan applications in recent months, lenders are likely looking ahead to a strong home buying season by expanding their product offerings.”

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Indeed, the Conventional MCAI sub-index of the overall MCAI rose 4.8%, driven by a 7.7% increase in its conforming component index. The other half of the Conventional MCAI, the Jumbo MCAI, also increased, climbing by 2.2%.

The Government MCAI sub-index of the overall MCAI increased 4.8%.

Kan did note that, despite growth in the MCAI in three of the past four months, the economic impacts of the COVID-19 pandemic continue to keep lenders wary of risk. Credit supply remains at its lowest level since 2014, and the MCAI is way down from its recent peak of 189.8 set in June of 2019.

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