Mortgage credit availability trending lower

by Steve Randall17 Oct 2017
The availability of mortgage credit reached a peak in the first quarter of 2017 but has since slipped back, leaving room for expansion according to a new report.

The Housing Finance Policy Center says that its credit availability index (HCAI) shows a decline from 5.4 at the start of the year to 5.1 between the start of April and the end of June.

The index measures the share of home mortgages that are likely to default and a higher score indicates that lenders are more willing to take risks.

The main reason for the decline was a shift from government loans to the portfolio channel where the lending restrictions are tighter. In the GSE and government channels, credit expanded with higher interest rates and lower refinance volumes.

The mortgage credit availability of GSE loans through Fannie Mae and Freddie Mac was at an all-time low in 2011 with an index score of 1.4 and it has since improved to 2.4.

However, the Housing Finance Policy Center says that along with the FVR channel (such as FHA and VA loans) the private-label securities (PP) channel remains at or close to record lows.

The report says that there is “significant space to expand the credit box” noting that even if the current default risk was doubled across all channels, the risk for the whole mortgage market would still be within the precrisis standard of 12.5%.

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