Changes to VA Program Spur Lower Level of Credit Availability


According to the Mortgage Bankers Association’s most recent Mortgage Credit Availability Index (MCAI) report, mortgage credit availability decreased in December 2019, falling 3.5% to 182.2.

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 government MCAI decreased by 6.1% in December, while the conventional MCAI decreased 1.4%. Of the component indices of the conventional MCAI, the jumbo MCAI decreased by 1.3%, and the conforming MCAI fell by 1.6%.

“Credit availability fell in December after three months of expansion, driven by drops in both conventional and government supply,” says Joel Kan, MBA’s associate vice president of economic and industry forecasting.

“Perhaps most noteworthy was a six percent drop in government credit supply because of changes to the Veterans Administration (VA) loan program, which eliminated loan limits for certain borrowers as of Jan 1, 2020,” he adds. “This likely prompted many investors to remove VA programs in high-cost counties from their offerings.

“There was also a reduction in streamline refinance programs, as slightly higher rates slowed the refinance market at the end of 2019,” Kan notes.

The MBA’s MCAI uses data from Ellie Mae’s AllRegs Market Clarity business information tool.

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