Jumbo and non-QM loans bear the brunt of stricter lending standards
Mortgage credit availability fell to a four-month low in November as lenders reduced their non-QM and jumbo loan programs, according to the Mortgage Bankers Association (MBA).
MBA’s Mortgage Credit Availability Index (MCAI) decreased 1.7% to 96.5% last month, marking the lowest level in four months.
“Overall credit availability was 7% below last year’s level, as the industry has reduced capacity in response to declining origination volume and with lenders continuing to simplify their loan offerings,” said Joel Kan, vice president and deputy chief economist at MBA.
The drop indicates tighter lending standards primarily due to lenders pulling back their jumbo and non-qualified mortgage products. According to a Federal Reserve survey, about a quarter of US banks reported stricter standards for non-QM jumbo residential loans.
Banks cited several factors that drove them to take a more cautious approach, including a less favorable economic outlook, increased risk aversion, deterioration in the credit quality of borrowers, declining collateral values, and higher funding costs.
Kan noted in the report that the conforming and government indices remained unchanged but were close to multi-year lows.
The Conventional MCAI saw a 3.6% decrease, while the Government MCAI stayed the same. Specifically, the Jumbo MCAI fell by 5.4%, with the Conforming MCAI remaining unchanged.
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