Lending Standards Tighten Slightly as QM Planning Kicks in

The Mortgage Bankers Association (MBA)rnreported the first drop in its new Mortgage Credit Availability Index (MCAI) sincernit became publicly available in June.  Thernindex for August decreased 0.7 percent to 11.5, the first decline after fourrnconsecutive months of increases.  Negativernmovement in the index signifies that lending standards are tightening.</p

The change, MBA said, was driven byrnlessening availability of loans with an interest-only feature and some lendersrnare dropping products that have loan terms that exceed 30 years.  Shifting borrower eligibility requirementsrnfor jumbo loans led to offsetting increases and decreases in the MCAI as well.  MBA said some of the changes may have markedrnearly attempts to comply with Qualified Mortgage (QM) requirements that willrnbecome effective after the first of next year.</p

While the MCAI for May 2013 was thernfirst one released by MBA the organization, paired with Allreg® publishing beganrngathering data in early 2012.  The indexrnwas benchmarked to 100 in March 2012 and, as context, MBA said had the marketrnbeen tracked in 2007 the index would have been at roughly 800.</p

“The slight decline in the MCAI in August reflected a reduction inrnthe availability of certain loan features, particularly interest-only and termsrnexceeding 30 years. As these loan features are outside of the qualifiedrnmortgage (QM) definition, these changes may reflect the beginning of QMrnimplementation, and the fact that Fannie Mae and Freddie Mac are limited to acquiringrnloans that meet the QM definition,” said Mike Fratantoni, MBA’s Vice Presidentrnof Research and Economics.

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