Mortgage Credit Loosens in January

According to the Mortgage Bankers Association’s (MBA) analysis of data from ICE Mortgage Technology, mortgage credit availability increased in January according to the latest Mortgage Credit Availability Index (MCAI).

The MCAI rose by 0.7% to 92.7 in January. A decline in the MCAI indicates that lending standards are tightening, while increases in the index are indicative of loosening credit. The Index was benchmarked to 100 in March 2012. The Conventional MCAI increased 1.3%, while the Government MCAI decreased by 0.0%. Of the component indices of the Conventional MCAI, the Jumbo MCAI increased by 1.9%, and the Conforming MCAI rose by 0.2%.

“There was a slight increase in credit availability in January, driven by a greater number of conventional loan program offerings. However, overall credit availability remained close to 2012 lows, and the conventional index was close to its record low in the series dating back to 2011,” said Joel Kan, MBA’s VP and Deputy Chief Economist. “Even though there was an increase in cash-out refinance programs available, credit supply overall is tight. The challenging lending environment has pushed many lenders to reduce costs by cutting back on certain aspects of their business, including exiting origination channels, which has contributed to lower credit supply.”

The Conventional, Government, Conforming, and Jumbo MCAIs are constructed using the same methodology as the Total MCAI and are designed to show relative credit risk/availability for their respective index. The primary difference between the total MCAI and the Component Indices are the population of loan programs which they examine.

The Government MCAI examines FHA/VA/USDA loan programs, while the Conventional MCAI examines non-government loan programs. The Jumbo and Conforming MCAIs are a subset of the conventional MCAI and do not include FHA, VA, or USDA loan offerings. The Jumbo MCAI examines conventional programs outside conforming loan limits, while the Conforming MCAI examines conventional loan programs that fall under conforming loan limits.

A primary market driver may have been news from the Bureau of Labor Statistics (BLS) in a time that is historically a down time in the employment sector, January 2024 reversed course and rose in a big way, as the Bureau of Labor Statistics (BLS) reported that the nation’s employment rose by 353,000 jobs in January 2024, and the unemployment rate remained at 3.7% nationwide.

The BLS found job gains occurring in professional and business services, healthcare, retail trade, and social assistance, while employment declined in the mining, quarrying, and oil and gas extraction industries.

“The strong job market is good news for the spring buying season as higher household incomes are a necessary component, but it also means that mortgage rates are not likely to drop much further at this point,” said MBA’s SVP and Chief Economist Mike Fratantoni.

Coming out of January and into the month of February, the MBA also reported that mortgage applications rose 3.7% from one week earlier, for the week ending February 2, 2024.

Freddie Mac’s latest Primary Mortgage Market Survey (PMMS) shows the 30-year fixed-rate mortgage (FRM) averaged 6.64% as of February 8, up slightly from last week when it averaged 6.63%. A year ago at this time, the 30-year FRM averaged 6.12%.

“Mortgage rates have stayed close to where they started the year, despite swings in Treasury yields because of slowing inflation offset by stronger than expected readings on the job market,” added Kan. “Rates at these levels have not prompted much of a reaction in the refinance market, as most homeowners have mortgages with much lower rates. Purchase activity has been strong to start 2024 compared to the final quarter of 2023. However, activity is still weaker than a year ago because of low housing supply.”

Sam Khater, Freddie Mac’s Chief Economist, noted, “The economy and labor market remain strong with wage growth outpacing inflation, which is keeping consumer spending robust. Meanwhile, affordability in the housing market is an ongoing issue due to continued high home prices, elevated mortgage rates and low supply of homes on the market, particularly for first-time and low-income homebuyers.”

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Eric C. Peck

Eric C. Peck

Eric C. Peck has 25-plus years’ experience covering the mortgage industry, most recently serving as Editor-in-Chief for National Mortgage Professional Magazine. He graduated from the New York Institute of Technology, where he received his B.A. in Communication Arts/Media. After graduating, he began his professional career with Videography Magazine before landing in the mortgage space. Peck has edited three published books, and has served as Copy Editor for Entrepreneur.com.
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