The availability of mortgage credit for borrowers decreased slightly in the second quarter of 2015, even though the federal government had made significant efforts to expand credit access.
According to data from the Urban Institute’s House and Finance Policy Center as reported in the Housing Credit Availability Index, availability of mortgage credit dropped by 5.5 to 5.3 in the second quarter of 2015. It is important to note that credit access in general is still above the all-time low of 4.6, which happened in the third quarter of 2013.
The HCAI looks at the percentage of purchase loans likely to go into default or for those that remain unpaid after 90 days over the due date. According to the Urban Institute, a lower HCAI number indicates that lenders will not tolerate additional default loans that are instead assuming higher lending standards. A higher HCAI therefore, means that lenders are more tolerant of defaults and will ease up their lending standards.
Since September 2013, credit availability has improved by 17% for government sponsored enterprises and the government channel has increased by 7%. Credit is still tight in private label securities channels below 3% since 2013.
The majority of mortgage lenders in the market today are still applying credit requirements in a much stricter manner than what government sponsored enterprises required. Survey research from the Fannie Mae Economic and Strategic Research Group determined that nearly 40% of lenders who deliver loans to government sponsored enterprises apply credit overlays that are stricter than what the enterprises require.
Efforts to expand the availability of credit have been made on both ends of the industry. The goal is a responsible balance between greater access to mortgage financing and the viability of today’s mortgage loans while limiting risk to investors, home owners, lenders and taxpayers.
According to Fannie Mae, their goal is straightforward to make working with lenders easier so that mortgages are more accessible and affordable for home owners.
In addition to these changes, the Federal Housing Administration also debuted their supplemental performance metric which is used to determine the lending practices of FHA approved lenders so that they know more details about the kind of borrowers being served.
While it is certainly easier to get a mortgage today than it was in 2012, the first few months of 2015 do indicate that credit is tightening and that getting a mortgage is not much easier than it was in the year before. Recent market volatility has also caused some lenders to be more cautious in their approach to lending and under lending.