February was a strong month in terms of availability of mortgage credit and volume of mortgage applications for new homes, according to separate indices by the Mortgage Bankers Association (MBA).
The MBA’s Mortgage Credit Availability Index ( MCAI) showed increased access to mortgage credit for the whole of February, especially for government-backed loans and conforming loans. The number of purchase mortgage applications per the MBA’s Builder Application Survey ( BAS) also grew in February, resulting in higher sales estimates.
In February, Lenders Relax Mortgage Credit Standards
Overall mortgage credit availability in February rose 0.4% to 177.8 per the MBA. This increase indicates that lenders are loosening up their credit standards where any decline would mean a tightening of lending standards.
The MCAI is made up of four component indices: government, conforming, conventional and jumbo indices. Among the four component indices, it was the government mortgage credit availability index that showed the highest increase during the subject month.
Take a look at their numbers as of February:
- Government MCAI – an increase of 2.3%. Government MCAI covers loans insured or backed by the Federal Housing Administration, the U.S. Department of Veterans Affairs, and the U.S. Department of Agriculture (RHS).
- Conforming MCAI – an increase of 0.1%. Conforming MCAI refers to conventional loans that conform to mortgage standards set by Fannie Mae and Freddie Mac.
- Conventional MCAI – a decrease of 2.%. Conventional MCAI consists of loans not insured or guaranteed by the federal government.
- Jumbo MCAI – a decrease of 4.4%. Jumbo MCAI consists of conventional loans whose loan amounts exceed the conforming mortgage limits.
MBA Vice President of Research and Economics Lynn Fisher explained: “Credit availability loosened slightly in February, due to the net result of two countervailing movements. The supply of credit increased as more investors offered affordable low down payment mortgages and streamlined documentation loans guaranteed by the Federal Housing Administration and the Veterans Administration.
“However, the impact of that increase on the overall index was partially offset by the first downturn in the availability of jumbo credit in a year due to the consolidation of some jumbo programs.”
The MCAI utilized the data provided by Ellie Mae’s AllRegs® Market Clarity® business intelligence tool. Borrower eligibility factors like loan type, loan-to-value ratio, and credit score were used to compute the mortgage credit availability index, together with the underwriting criteria used by more than 95 lenders/investors.
Mortgage Applications Rise in February
The volume of mortgage applications to finance new homes rose in February with 2.2% compared to the same month last year, the MBA data revealed. Between February and January of this year, the number of mortgage applications grew by 16%.
The most popular mortgage in February was conventional loans that got the biggest share of 66.5%, followed by FHA loans with 18.6%, VA loans with 13.6%, and USDA loans with 1.3%. In February, homebuyers took out larger loans averaging $330,208 compared to $329,806 taken out in January.
“The Builder Application Index posted a modest annual gain in February 2017. The bar was high as last February was a particularly strong month for applications, as was March 2016. The surprisingly strong employment numbers for the beginning of 2017 suggest that demand for new homes should continue to grow this year,” Ms. Fisher noted in the accompanying press statement.
The MBA estimated the seasonally adjusted annual rate of single-family home sales in February at 586,000 units. This showed a 4.3% increase from January’s 562,000 units. The MBA projected 51,000 new home unit sales (on an unadjusted basis) in February, a 15.9% leap from January new home sales of 44,000 units.
MBA’s Builder Application Survey is based on the application volume of U.S. homebuilders’ mortgage subsidiaries.