It was slightly easier to get a home mortgage loan in January, according to the latest data from the Mortgage Bankers Association, continuing the two-year trend of slowly loosening credit standards.
The MBA’s Mortgage Credit Availability Index (MCAI) rose 1.8 percent last month to 117.8 percent. An increase in the index means lenders are relaxing their lending standards whereas a decrease in the index indicates the lending climate is becoming more exclusive. For reference, the index was benchmarked to 100 in March 2012. The MBA believes the index reached a peak of almost 900 during the summer of 2006, the height of the housing boom.
Since the end of 2102, the MCAI has made an essentially upward climb, although at an incremental pace. The most recent increase is attributable to some changed in government-guaranteed loans, the MBA explained.
“Several new initiatives aimed at making mortgage credit more available and affordable to consumers were recently announced and resulted in a net loosening of credit over the month,” said Mike Fratantoni, MBA’s Chief Economist. “Fannie Mae and Freddie Mac announced new 97 percent LTV loan programs in December aimed at expanding access to conventional financing for new and well-qualified homebuyers. Additionally, FHA announced reductions in mortgage insurance premiums. Both of these announcements were designed to provide consumers with better access to mortgage credit.”
The government-backed loan program changes are only one component of the thawing mortgage credit market. A slowly recovering economy and improving unemployment rate as well as a clearer definition of new mortgage rules and laws have all contributed to the loosening standards over the past two years. Credit conditions are far from where they were even before the housing bubble though, with many first-time homebuyers and self-employed buyers still unable to qualify for home-loan financing.