Mortgage credit tightens for first time in four months

After three straight months of increasing home lending credit availability, it tightened in November largely due to companies pulling back on jumbo offerings amid falling affordability, the Mortgage Bankers Association said.

The MBA's Mortgage Credit Availability Index, or MCAI, dropped 1.7% between October and November to a reading of 96.5. In the two previous months, the index had risen to 98.2 and 97.2. The MCAI took an even steeper fall from its November 2022 level, declining 6.7% from 103.4. The index was benchmarked to 100 in early 2012 to reflect conditions following the Great Financial Crisis.

"Credit availability in November declined to its lowest level in four months, driven by reduced offerings of non-QM and jumbo loan programs," said Joel Kan, MBA vice president and deputy chief economist, in a press release.

Meanwhile, volumes of conforming and government loan products on the market came in mostly flat compared to October but still remained near multiyear lows.

Overall credit availability over the past year has diminished "as the industry has reduced capacity in response to declining origination volume and lenders continuing to simplify their loan offerings," Kan said. 

Among different loan types that make up the full MCAI, government product availability saw no change month to month following an 0.3% increase in October. The conventional index, though, declined 3.6%, almost entirely due to the pullback in jumbo offerings, coming after a 1.7% uptick one month prior.

Of the two subindices that make up the conventional index, the jumbo MCAI fell 5.4% in November, compared to a 2.7% rise a month earlier. The conforming metric was unchanged for the second consecutive month, the MBA said.  

The pullback of jumbo and non-QM availability in November came as borrower enthusiasm  faded in the wake of interest rate jumps the previous month, which helped to drive originations activity down to its lowest level since 1995, according to MBA's weekly survey of lenders. The surge in rates contributed to the most unaffordable period for new home buyers since the spring as well.

Meanwhile, last month also saw the announcement from Citizens Bank that it planned to cease wholesale lending entirely on Dec. 6. Jumbo lending is more prevalent among depository institutions than nonbanks. The fall season has also seen the exits of some smaller banks across the country from home lending. 

But signs began emerging in early November showing borrowers returning to the housing market. Inventory opened up more than expected, and investor worries about the health of the U.S. economy eased, pushing rates downward in recent weeks.

The MBA's MCAI is determined through analysis of industry data provided by ICE Mortgage Technology, applying several factors, including credit scores and loan types, to determine lending availability at a given point in time.