Available credit for mortgages dropped slightly in August, an indication that lending standards are tightening, according to the Mortgage Bankers Association's (MBA) Mortgage Credit Availability Index (MCAI).
It was the first time that mortgage credit dropped since the MBA launched the index in June.
August saw credit availability dip by 0.7% to reach 111.5 on the index, the first decline after four consecutive months of increases. Negative movement in the index signifies that lending standards are tightening.
The index was benchmarked to 100 in March 2012 and if it had been tracked in 2007, would have been roughly 800.
Anything below 100 indicates that lending standards are tightening, while increases in the index are indicative of a loosening of credit.
The MBA says the dip in August was driven mainly by a reduction in the availability of loans with an interest-only feature. In addition, some lenders are dropping products that have 30-year term limits.
What's more, shifting borrower eligibility requirements for jumbo loans also led to offsetting increases and decreases in the MCAI. The MBA notes that some of the changes may be the result of lenders gearing up to comply with the Consumer Financial Protection Bureau's qualified mortgage (QM) requirements that will become effective in January.
‘The slight decline in the MCAI in August reflected a reduction in the availability of certain loan features, particularly interest-only and terms exceeding 30 years,’ says Mike Fratantoni, vice president of research and economics for the MBA. ‘As these loan features are outside of the QM definition, these changes may reflect the beginning of QM implementation, and the fact that Fannie Mae and Freddie Mac are limited to acquiring loans that meet the QM definition.’
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