Mortgage Credit Tightens as Bankers Adjust to Declining REO Supply

The Mortgage Bankers Association (MBA) said onrnTuesday that an anomaly was likely responsible for the slight downward shift inrnmortgage credit available in October. rnMBA’s Mortgage Credit Availably Index (MCAI) dipped 2.5 percent comparedrnto September.  The October index readingrnis 113.2.  A decline in the MCAI meansrnthat lending standards are tightening.</p

Mike Fratantoni, MBA’s Chief Economist explained that the major cause of therndecline was the removal of special loan programs that applied only to sales ofrnbank-owned real estate (REOs).  “These programs were likely discontinued due to thernshrinking level of REO properties for sale on the market,” he said.  </p

He further explained that, “FHFA recentlyrnannounced plans regarding efforts to expand access to conventional conformingrncredit through greater clarity with respect to repurchase risk and a modestrnexpansion of higher LTV lending. These changes are not yet finalized and hencernare clearly not reflected in the October data.”</p

MBA uses information from a survey of its membersrncoupled with data from the AllRegs® Market Clarity Product®.  The Index was benchmarked to 100 in Marchrn2012.

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