While still nowhere near the uber-lax standards of the housing bubble days, mortgage lenders have loosened their loan requirements over the past six months, according to the Mortgage Bankers Association, a welcome sign for borrowers across the country.
The MBA’ Mortgage Credit Availability Index (MCAI) posted a 0.5 percent increase in May to a reading of 122.6. The index has made steady upward progress since last November when it dipped to 110.2. May’s upward tick was influenced by two factors according to MBA Chief Economist Mike Fratantoni. “Credit availability eased somewhat in May, largely as a result of increased availability of cash out refinance loans and greater availability of FHA 203K home improvement loans,” he said in a statement.
The MBA breaks down mortgage credit availability even further with its Conventional and Conforming MCAI, Government MCAI and Jumbo MCAI. Conventional Conforming both grew by 1.2 percent during the month of May, government loans were only slightly easier to come by with the index inching up 0.1 percent, but jumbo loans (those over the federal conforming loan limits) were harder to obtain with the index declining 0.1 percent.
The Index was benchmarked at a level of 100 back in March 2012. By comparison, by the end of the housing bubble in the fall of 2006, the index was as high as 850, indicating the time when everybody and anybody could get a mortgage loan.
With the bubble bursting and the onset of the financial crash, mortgage standards were severely tightened and credit became non-existent for all but the most credit-worthy. At the end of 2008, the credit index fell just below 100 and has made only incremental movement since then.
Still the six-month pattern of small increases is a sign of a mortgage market slowly returning to health and opening up to more borrowers.